Exam 18: Price Setting in the Business World

Which of the following decrease(s)with increasing output?

A certain item has a production cost of $24.The manufacturer takes a 25 percent markup,the wholesaler takes a 20 percent markup,and the retailer takes a 50 percent markup.The item therefore has a retail selling price of $80.

In order to stand apart,the airline Fly High Air offers low airfares and heavy seasonal discounts.However,it charges its passengers for in-flight meals,water,and baggage service,while its competitors offer these services for free.Fly High Air is following a(n)________ pricing strategy.

The stockturn rate is the number of times the average inventory must turn over to make a profit in a given year.

Radio Shack offers several models of clock radios at each $5 increment between $19.95 and $49.95.Radio Shack is apparently practicing odd-even pricing.

Value in use pricing

The Roulette Corporation,a video game manufacturer,sets a single price for a set of 5 video games,a video game console,and a pair of speakers.This pricing strategy is called

The typical markup (percent)is the

Most retailers and wholesalers set prices by using a different markup percent for each different product carried.

The Federal Trade Commission encourages bait pricing because it reduces the prices that consumers pay for products.

A computer store regularly advertises a very low price for a well-known brand of computer monitor.When the customers come in,however,the salespeople point out the disadvantages of this particular brand and try to persuade them to buy other computer monitors at much higher prices.This retailer is using

It costs a producer $400 to manufacture a product that is distributed through wholesalers and retailers.The markups at the producer,wholesaler,and retailer levels are 20 percent,20 percent,and 50 percent,respectively.The wholesaler's selling price for the product is ________,and the retailer's selling price is ________.

A CVS drugstore that is trying to attract customers by advertising a special bargain price on a popular brand of cold remedy during the cold season is using

Break-even analysis can be useful for

Retailers of which of the following products would likely have the highest stockturn rate?

Use this information for questions that refer to the Sporting Products,Inc.(SPI)case. Randy Todd,marketing manager for Sporting Products,Inc.(SPI),is thinking about how changes taking place among retailers in his channel might impact his strategy. SPI sells the products it produces through wholesalers and retailers.For example,SPI sells basketballs to Wholesale Supply for $8.00.Wholesale Supply uses a 20 percent markup,and most of its "sport shop" retailer customers,like Robinson's Sporting Goods,use a 33 percent markup to arrive at the price they charge final consumers.However,one fast-growing retail chain,Sports Depot,uses only a 20 percent markup for basketballs,even though it pays Wholesale Supply the same price as other retailers.Furthermore,Sports Depot occasionally lowers the price of basketballs and sells them at cost,to draw customers into its stores and stimulate sales of its pricey basketball shoes. Sports Depot is also using other pricing approaches that are different from the sports shops that usually handle SPI products.For example,Sports Depot prices all its baseball gloves at $20,$40,or $60-with no prices in between.There are three big bins,one for each price point. Randy is also curious about how Sports Depot's new strategy to increase sales of tennis balls will work out.The basic idea is to sell tennis balls in large quantities to nonprofit groups,who resell the balls to raise money.For example,a service organization at a local college bought 2,000 tennis balls printed with the college logo.Sports Depot charged $.50 each for the tennis balls,plus a $500 one-time charge for the stamp to print the logo.The service group plans to resell the tennis balls for $2.50 each and contribute the profits to a shelter for the homeless. Randy is not certain if Sports Depot's ideas will affect SPI's plans.For example,SPI is considering adding tennis racquets to the lines it produces.This would require a $500,000 addition to its factory,as well as the purchase of new equipment that costs $1,000,000.The variable cost to produce a tennis racquet would be $20,but Todd thinks that SPI could sell the racquet at a wholesale price of $40 each.That would allow most retailers to add their normal markup and make a profit.However,Sports Depot may sells the racquet at a lower than normal price. The pricing approach Sports Depot uses to price its baseball gloves is called

A retail store advertises an SLR digital camera for $350.Once bargain hunters come to the store,salespeople point out the disadvantages of the low-priced camera and try to convince them to trade up to a better,and more expensive,unit.This is an example of the use of

A good marketing manager for a producer knows that the most profitable price and level of output is where

When Nintendo sets a relatively low price on its game units to stimulate more demand for its game cartridges,it is using

A cutlery manufacturer producer produces 200 units of output at a total cost of $1,500.If total variable costs are $500,the average variable cost (per unit)is