Exam 13: Pricing Products and Services

The pricing model in the text has six distinct steps in the pricing process. In which step would a firm do their price elasticity estimation?

Which of the following statements about cost-oriented approaches is true?

Jane Westerlund owns a picture-framing shop, The Caplow Co. The average price she receives for a picture she frames for a customer is $120. This price must cover her average costs for a typical framed picture of $5 for glass, $2 for matting, and $13 for the frame, and $30 for the labour involved. She must also cover monthly expenses of $1,000 for rent and insurance, $200 for heat and electricity, $500 for advertising, and $3,500 for her salary. Westerlund is considering buying an automatic mat-cutting machine in order to reduce the number of hours of direct labour required to produce a framed picture. In considering this purchase, she should recognize it will ________ Caplow's variable cost and ________Caplow's fixed cost.

Southern gardeners have a preconceived idea on what they will pay for pine bark mulch that they buy at their local gardening supply store to keep the weeds down in their gardens. If the price being charged is not within a narrow range that they feel is appropriate, they will make substitutions-newspaper, grass clippings, or some other kind of ground covering. When pricing pine bark mulch, a garden supply retailer should use:

John's Ice Cream Company purchases milk and cream from a local dairy farm. The dairy farm's standard pricing policy is 60 days to receive full payment. However, they offer a 5 percent discount on the total purchase price if John's Ice Cream Company pays the full amount (less discount)within 30 days. This is an example of offering:

Bob Biltmore owns dozens of very successful print shops throughout the Prairie Provinces. Biltmore's shops specialize in low-cost black and white copies and feature user-friendly machines consumers can easily operate. In recent months, Biltmore has noticed many more competitors in the areas where his stores are located. In an attempt to eliminate the competition, Biltmore has decided to charge a very low price for his black and white copies, a price so low his competitors will be forced out of business. After the competition has been driven out, Biltmore plans to raise the price of his copies. Biltmore is planning to engage in the illegal practice of:

Inelastic demand exists when:

The Dollar Giant retail store implemented a policy that nothing will be above $1.00, even if they end up selling the item below cost. This strategy is referred to as:

Prada and Gucci products most likely use which pricing strategy?

Gerber supplies a specially formulated product free of charge to children who cannot tolerate foods based on cow's milk. This is a _________pricing objective.

When purchasing which one of the following products would you be likely to receive a seasonal discount?

Most consumers expect a litre of milk to cost anywhere between $1-$3 dollars depending on if it is organic or not. Knowing this consumer expectation, a new dairy will probably charge consumers within this price range for their milk. This new dairy is engaging in:

A company that manages apartments decides to buy 17 new dishwashers at a list price of $750 each as replacements for old dishwashers in a small apartment complex it owns. Because the company is buying more than 10 dishwashers, it is eligible for a $150 per unit quantity discount. Financing charges total $20 per unit. The company gets $10 per dishwasher for the 17 dishwashers traded in. What is the actual price the company will pay for each dishwasher?

The marketing director for a(n)_________is most likely to believe, "The purpose of advertising is to increase demand for the product class."

Different brands within a company's product line generally have different profit margins; higher price lines have higher profit margins. For example, Nike Variety tennis shoes have variable costs of $6 and sell for $24; whereas, Nike Wimbledon tennis shoes have variable costs of $10 and sell for $48. It must be true that:

Price discrimination is:

An electronics retailer, "Buy Less" has a price tag on a home theatre system. The price tag has $500.00 crossed out and a new price of $350.00 is shown on the tag. Which deceptive practice should the retailer be careful not to violate based on this example?

The pricing model in the text has six distinct steps in the pricing process. Setting a list price of $129.99 for a new printer would be completed in which step?

Which cost-based pricing method entails adding a fixed percentage to the cost of all items in a specific product class?

If competitive market circumstances are such that there is some leader-follower price competition, some product differentiation, and the purpose of advertising is to inform, but avoid price competition, then___________ must exist in the industry.