Scenario 1.2 Use the Following to Answer the Questions

question 94

Multiple Choice

Scenario 1.2
Use the following to answer the questions.
Paws and Claws Hotel is a full service pet salon and boarding kennel. Paws and Claws has an interactive website where customers can directly book a grooming appointment, obedience class, or overnight accommodations for their dog or cat. Paws and Claws has several unexpected services, such as a 600-square-foot swimming pool, complete with slide and dog-friendly graduated steps to help them exit the pool. Customers can also drop their dog or cat off each morning for pet day care. Paws and Claws has a pick-up and delivery service, webcams in every kennel so that pet families can view their pets while away, and pet "furniture" so that the cats and dogs can lie on sofas just like at home. Paws and Claws is also open 24 hours a day, 365 days each year so that customers can pick up their pet at any time.
The cost for an overnight stay at Paws and Claws averages $50, compared to competing kennels at about $30. The day care costs are $25 for either a dog or cat. The majority of Paws and Claws' competitors don't offer the day care service, and require a two-day minimum for overnight stays.
Informal discussions with customers led to the addition of pet day care and 24-hour hours of operation. Previously, Paws and Claws was more interested in competing based on its prices.
Refer to Scenario 1.2. Paws and Claws' addition of unexpected services, pick-up and delivery, and 24-hour access while charging a higher price than its competition is best described as which type of value?

• A) Value = monetary price - customer benefits.
• B) Value = customer costs - customer benefits
• C) Value = customer benefits - customer costs.
• D) Value = customer benefits - monetary price.
• E) Value = customer benefits - time and effort.

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Definitions:

Edgeworth Box

A diagram used in microeconomics to show the distribution of resources between two consumers on a two-good world, demonstrating how trade can lead to Pareto improvements.

Utility Function

A mathematical representation that ranks individuals' preferences for bundles of goods or services, indicating levels of satisfaction.

Competitive Equilibrium

A situation in a market where the demand for goods equals the supply of goods, resulting in an equilibrium price and quantity that clears the market.

Utility Function

A function that captures the level of satisfaction or happiness that consumers derive from consuming various combinations of goods and services.