John wenman, merchandising manager at goodmark’s stationery store, is setting the price for craft fountainpens. the pens cost him $5 each. the store’s usual markup is 50 percent over cost that suggests that johnshould set the price at $7.50. however, to make this price seem like an unusually good bargain, john begins byoffering the pen at $10. he realizes that he won’t be able to sell many pens at this inflated price, but he doesn'tcare. john holds the price at $10 for only a few days, and then cuts it to the usual level—$7.50—and advertises: "terrific bargain on craft pens. were $10, now only $7.50! "note: the test the ftc sets up for "former" price comparisons is, "if the former price is the actual, bona fide priceat which the article was offered to the public on a regular basis for a reasonably substantial period of time, it provides a legitimate basis for the advertising of a price comparison."

1. if consumers perceive craft pens to be a good value at $10, is it fair for goodmark’s to sell the pen at thatprice?
2. is john’s price setting approach ethical? is it legal? explain.
3. how would you have set and advertised the craft pen’s price? would you have used a cost-plus approach orsome other method? explain.