HBS CORE Economics for Managers Module 1: Foundation of Customer Demand Written Exam.

HBS CORE Economics for Managers
Module 1: Foundation of Customer
Demand Written Exam.

Why is a benchmark important? - CORRECT ANSWER For firms to know if they are pricing well they
neeed to compare to something



WTP (willingness to pay) - CORRECT ANSWER The maximum price you are willing to pay



What is a price above your WTP considered? - CORRECT ANSWER An irrational decision



Are price and WTP the same? - CORRECT ANSWER Not at all



How to start comparing pricing to other firms - CORRECT ANSWER Start w/ your own WTP then see why
exactly your WTP differs from others.



Does a price of $1 mean a WTP of $1? - CORRECT ANSWER It means a WTP of at least a $1



Extrinsic - CORRECT ANSWER Things you can determine w/o asking (Age,Gender,Income, Education)



intrinsic - CORRECT ANSWER Someones risk tolerance, passion (past behavior can help determine
intrinsic factors)



What is the relationship determine Market Value of a company and WTP? - CORRECT ANSWER If no new
shares are issued then they are equal



What does the rectangle under the demand curve represent? - CORRECT ANSWER Revenue