Question 1

Price lining allows a firm to appeal to distinct market segments with product/price alternatives that are clearly differentiated from each other.

Accepted Answer

A) True 
 B)False

Question 2

A firm requires funds for further expansion and has excellent patent protection. A suitable new-product pricing strategy is

Accepted Answer

A)  price lining. 
B)  flexible pricing. 
C)  penetration pricing. 
D)  skimming pricing. 
A)  price lining. 
B)  flexible pricing. 
C)  penetration pricing. 
D)  skimming pricing.

Question 3

Like any planning activity, a pricing strategy begins with a clear statement of objectives and ends with an adaptive or corrective mechanism.

Accepted Answer

A) True 
 B)False

Question 4

According to the price-quality association,

Accepted Answer

A)  consumers have price floors but not price ceilings. 
B)  subjective prices do not influence purchase behavior. 
C)  consumers may believe that high prices represent high quality and that low prices represent low quality. 
D)  using loss leaders will increase store traffic and sales. 
A)  consumers have price floors but not price ceilings. 
B)  subjective prices do not influence purchase behavior. 
C)  consumers may believe that high prices represent high quality and that low prices represent low quality. 
D)  using loss leaders will increase store traffic and sales.

Question 5

Modified break-even analysis differs from traditional break-even analysis in that it

Accepted Answer

A)  assumes multiple channels are involved in the sale of a good or service. 
B)  evaluates consumers' price elasticity when computing total revenue at different price levels. 
C)  neatly divides all expenses into fixed and variables costs. 
D)  considers channel members' profit requirements and costs. 
A)  assumes multiple channels are involved in the sale of a good or service. 
B)  evaluates consumers' price elasticity when computing total revenue at different price levels. 
C)  neatly divides all expenses into fixed and variables costs. 
D)  considers channel members' profit requirements and costs.

Question 6

An independent channel member's gross margin is often unaffected by which of the following?

Accepted Answer

A)  Markdown 
B)  Surcharge 
C)  Rebate 
D)  Additional markup 
A)  Markdown 
B)  Surcharge 
C)  Rebate 
D)  Additional markup

Question 7

A firm's average total costs are $25; its marginal costs per unit are $15. Its price-floor price is any amount over $25.00.

Accepted Answer

A) True 
 B)False

Question 8

Price-floor pricing is most likely to be used when a firm has

Accepted Answer

A)  high capital costs. 
B)  high levels of overall competition. 
C)  a nondifferentiated good or service. 
D)  excess (unused) capacity. 
A)  high capital costs. 
B)  high levels of overall competition. 
C)  a nondifferentiated good or service. 
D)  excess (unused) capacity.

Question 9

A research study indicates a large market segment exists for a new product, but that this segment is highly price elastic. An appropriate pricing strategy is

Accepted Answer

A)  penetration pricing. 
B)  skimming pricing. 
C)  price lining. 
D)  a broad price policy. 
A)  penetration pricing. 
B)  skimming pricing. 
C)  price lining. 
D)  a broad price policy.

Question 10

The lowest price at which it is worthwhile for a company to increase the amount of goods and services it makes available for sale can be determined via

Accepted Answer

A)  price-floor pricing. 
B)  cost-plus pricing. 
C)  markup pricing. 
D)  target pricing. 
A)  price-floor pricing. 
B)  cost-plus pricing. 
C)  markup pricing. 
D)  target pricing.

Question 11

Manufacturers that want to have a one-price policy for all their consumers should utilize

Accepted Answer

A)  uniform delivered pricing. 
B)  FOB mill (factory) pricing. 
C)  zone pricing. 
D)  base-point pricing. 
A)  uniform delivered pricing. 
B)  FOB mill (factory) pricing. 
C)  zone pricing. 
D)  base-point pricing.

Question 12

a.	Differentiate between demand-minus and chain-markup pricing.
b. What should a manufacturer do if its actual product cost is 10 percent more than the computed maximum product cost (using the chain-markup pricing formula)?

Accepted Answer

a. Demand-minus pricing and chain-markup

Question 13

As applied to airlines, yield management pricing needs to carefully evaluate the tradeoff of additional revenues from low-priced seats that would otherwise be vacant with the

Accepted Answer

A)  potential loss in revenues if the low-priced seats could be sold at full fare. 
B)  drop in the number of flights per day from a given airport. 
C)  drop in customer service associated with a high volume of customers. 
D)  added costs of filling otherwise vacant seats. 
A)  potential loss in revenues if the low-priced seats could be sold at full fare. 
B)  drop in the number of flights per day from a given airport. 
C)  drop in customer service associated with a high volume of customers. 
D)  added costs of filling otherwise vacant seats.

Question 14

Which of these concepts suggests that consumers may not buy goods or services when prices are considered too low?

Accepted Answer

A)  Price lining 
B)  Prestige pricing 
C)  Leader pricing 
D)  Price bundling 
A)  Price lining 
B)  Prestige pricing 
C)  Leader pricing 
D)  Price bundling

Question 15

A firm has introduced a new microwave oven that also serves as a convection oven. The oven has been acclaimed by food critics, has received much publicity, and has no direct competition. What is the most appropriate pricing strategy for the firm?

Accepted Answer

A)  Penetration 
B)  Skimming 
C)  One-price policy 
D)  Price lining 
A)  Penetration 
B)  Skimming 
C)  One-price policy 
D)  Price lining

Question 16

A firm relying on cost-based pricing techniques needs accurate records. In some cases, costs for products and product lines may have to be allocated on the basis of arbitrary decisions.

Accepted Answer

A) True 
 B)False

Question 17

The price set in price-floor pricing should be based on an analysis of a firm's average total costs.

Accepted Answer

A) True 
 B)False

Question 18

A firm sets its prices after studying consumer desires and the range of prices that are acceptable to its target market. This approach illustrates ___ pricing.

Accepted Answer

A)  cost-based 
B)  competition-based 
C)  price-floor 
D)  demand-based 
A)  cost-based 
B)  competition-based 
C)  price-floor 
D)  demand-based

Question 19

Prestige pricing is a special case of price lining.

Accepted Answer

A) True 
 B)False

Question 20

A machinery manufacturer wants to compensate salespeople on the basis of the gross profit margin (selling price less merchandise cost) for each sales transaction. What pricing technique should the firm utilize?

Accepted Answer

A)  Price lining 
B)  Odd pricing 
C)  Variable pricing 
D)  One-price policy 
A)  Price lining 
B)  Odd pricing 
C)  Variable pricing 
D)  One-price policy

Exam 21: Developing and Applying a Pricing Strategy

Price lining allows a firm to appeal to distinct market segments with product/price alternatives that are clearly differentiated from each other.

A firm requires funds for further expansion and has excellent patent protection. A suitable new-product pricing strategy is

Like any planning activity, a pricing strategy begins with a clear statement of objectives and ends with an adaptive or corrective mechanism.

According to the price-quality association,

Modified break-even analysis differs from traditional break-even analysis in that it

An independent channel member's gross margin is often unaffected by which of the following?

A firm's average total costs are $25; its marginal costs per unit are $15. Its price-floor price is any amount over $25.00.

Price-floor pricing is most likely to be used when a firm has

A research study indicates a large market segment exists for a new product, but that this segment is highly price elastic. An appropriate pricing strategy is

The lowest price at which it is worthwhile for a company to increase the amount of goods and services it makes available for sale can be determined via

Manufacturers that want to have a one-price policy for all their consumers should utilize

a. Differentiate between demand-minus and chain-markup pricing. b. What should a manufacturer do if its actual product cost is 10 percent more than the computed maximum product cost (using the chain-markup pricing formula)?

As applied to airlines, yield management pricing needs to carefully evaluate the tradeoff of additional revenues from low-priced seats that would otherwise be vacant with the

Which of these concepts suggests that consumers may not buy goods or services when prices are considered too low?

A firm has introduced a new microwave oven that also serves as a convection oven. The oven has been acclaimed by food critics, has received much publicity, and has no direct competition. What is the most appropriate pricing strategy for the firm?

A firm relying on cost-based pricing techniques needs accurate records. In some cases, costs for products and product lines may have to be allocated on the basis of arbitrary decisions.

The price set in price-floor pricing should be based on an analysis of a firm's average total costs.

A firm sets its prices after studying consumer desires and the range of prices that are acceptable to its target market. This approach illustrates ___ pricing.

Prestige pricing is a special case of price lining.

A machinery manufacturer wants to compensate salespeople on the basis of the gross profit margin (selling price less merchandise cost) for each sales transaction. What pricing technique should the firm utilize?

Marketing Today

The Environment in Which Marketing Operates

Developing and Enacting Strategic Marketing Plans

Information for Marketing Decisions

Societal, Ethical, and Consumer Issues

Global Aspects of Marketing

Marketing and the Internet

Final Consumers

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Developing a Target Market Strategy

Basic Concepts in Product Planning

Goods Versus Services Marketing

Conceiving, Developing, and Managing Products

Value Chain Management and Logistics

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Personal Selling and Sales Promotion

Considerations in Price Planning

Pulling It All Together: Integrating and Analyzing the Marketing Plan

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