1. Refer to Appendix 2, Marketing by the Numbers, to answer the following questions. If JCPenney’s cost for a piece of jewelry is $50 and it was marked up five times the cost, what is the “high” retail price? What is the “low” sales price if the price is reduced 60 percent off the “regular” price? What is JCPenney’s markup percentage on cost at this price? What is its markup percentage on the “low” selling price?

“High-low” pricing is popular with retailers but considered deceptive by some. Using this practice, retailers set initial prices very high for a short period and then discount the merchandise for the majority of the selling season. Critics complain that the supposed discounted price is in reality the regular price. For example, in the 1990s, the North Carolina Attorney General’s office charged JCPenney with inflating regular prices for jewelry and then dropping the prices—advertising discounts up to 60 percent off “regular” prices. In reality, JCPenney was selling the jewelry at a typical industry markup.