Faced with growing competition from cheaper rivals, Starbucks Corp. is selling small cups of drip coffee for $1 with free refills as part of a test in its hometown. That's about 50 cents less than the Seattle-based coffee retailer normally charges for an "short" 8 oz. cup of joe, though prices vary from store to store. The suggested retail price for a small 12 oz. premium roast at McDonald's is $1.07, and at Dunkin' Donuts it's $1.39 for a 10 oz. small, the companies said Wednesday.

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Starbucks would not say when the test began, how many stores are part of it, whether it's considering a similar promotion for any other brews or whether any new test markets are on the horizon. "Testing is a way of life for us, as we are constantly looking for new ways to connect with the customer and provide the best Starbucks experience," the statement said. Starbucks shares rose $1.42, or 7.6 percent, to close at $20.09 on Wednesday. The stock has traded between $17.66 and $35.67 over the past year.