Question 1

Changes in total cost depend on variations in total variable cost,since total fixed cost stays the same.

Accepted Answer

A) True 
 B)False

Question 2

The idea that people will pay extra for "quality" and status is the idea behind

Accepted Answer

A) price lining. 
B) average-cost approaches to pricing. 
C) penetration skimming. 
D) prestige pricing. 
E) psychological pricing. 
A) price lining. 
B) average-cost approaches to pricing. 
C) penetration skimming. 
D) prestige pricing. 
E) psychological pricing.

Question 3

Which of the following would NOT be included in a firm's total variable cost?

Accepted Answer

A) outgoing freight 
B) packaging materials 
C) depreciation on buildings 
D) expenses for parts 
E) sales commissions 
A) outgoing freight 
B) packaging materials 
C) depreciation on buildings 
D) expenses for parts 
E) sales commissions

Question 4

Customers are likely to be less price sensitive

Accepted Answer

A) the greater the total expenditure. 
B) the greater their share of the cost. 
C) the greater the significance of the end benefit. 
D) the more easily prices can be compared. 
E) the greater the availability of substitutes. 
A) the greater the total expenditure. 
B) the greater their share of the cost. 
C) the greater the significance of the end benefit. 
D) the more easily prices can be compared. 
E) the greater the availability of substitutes.

Question 5

If a retailer adds a 25-cent markup to a product that costs the retailer $1.00,then according to the text the retailer's markup is 20 percent.

Accepted Answer

A) True 
 B)False

Question 6

One major difference between leader pricing and bait pricing is that bait pricing is criticized as unethical,while leader pricing is not.

Accepted Answer

A) True 
 B)False

Question 7

A producer with only one product has total fixed costs of $15,000 per month.In addition,it cost the producer $100 in variable costs to produce each unit of her product (raw materials and direct labor cost).The producer charges her wholesalers $125 per unit.How many units of the product does the producer have to sell each month in order to break even?

Accepted Answer

A) 450 units 
B) 500 units 
C) 550 units 
D) 600 units 
E) 650 units 
A) 450 units 
B) 500 units 
C) 550 units 
D) 600 units 
E) 650 units

Question 8

CenturyLink attracts residential customers by setting one monthly fee for high-speed Internet,cable TV,and long-distance phone services that is $40 less than the price of purchasing these three services separately.This is an example of

Accepted Answer

A) reference pricing. 
B) price lining. 
C) bundling 
D) leader pricing 
E) demand-backward pricing 
A) reference pricing. 
B) price lining. 
C) bundling 
D) leader pricing 
E) demand-backward pricing

Question 9

A markup is the dollar amount added to the cost of products to get the selling price.

Accepted Answer

A) True 
 B)False

Question 10

The major weakness of average-cost pricing is that it

Accepted Answer

A) ignores likely customer demand at different prices. 
B) usually leads to losses instead of profits. 
C) always results in a profit that is less than expected. 
D) is too hard for most managers to use. 
E) All of these are major weaknesses of average-cost pricing. 
A) ignores likely customer demand at different prices. 
B) usually leads to losses instead of profits. 
C) always results in a profit that is less than expected. 
D) is too hard for most managers to use. 
E) All of these are major weaknesses of average-cost pricing.

Question 11

Psychological pricing involves setting prices that end in certain numbers,while odd-even pricing is setting prices that have special appeal to target customers.

Accepted Answer

A) True 
 B)False

Question 12

The production cost of an automobile component is $45.The producer takes a 10 percent markup and sells the product to the wholesaler.What is the wholesaler's cost?

Accepted Answer

A) $45 
B) $5 
C) $10 
D) $50 
E) $60 
A) $45 
B) $5 
C) $10 
D) $50 
E) $60

Question 13

Ignoring demand is the major weakness of average-cost pricing.

Accepted Answer

A) True 
 B)False

Question 14

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.
What is the final selling price Sports Depot charges for an SPI basketball?

Accepted Answer

A) $10.00 
B) $12.00 
C) $12.50 
D) $15.00 
E) $18.00 
A) $10.00 
B) $12.00 
C) $12.50 
D) $15.00 
E) $18.00

Question 15

Average-cost pricing works best in situations where demand conditions do not change a lot.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following pricing approaches should be used by a profit-oriented retailer if its demand curve is down-sloping to the right for a while but then actually bends back to the left at lower prices?

Accepted Answer

A) psychological pricing 
B) prestige pricing 
C) average-cost pricing 
D) bait pricing 
E) penetration pricing 
A) psychological pricing 
B) prestige pricing 
C) average-cost pricing 
D) bait pricing 
E) penetration pricing

Question 17

Total fixed cost

Accepted Answer

A) is dependent on production volumes. 
B) stays the same even if production stops temporarily. 
C) includes wages and sales commissions. 
D) is the sum of average fixed costs and variable overheads. 
E) is dependent on minor changes in output volume. 
A) is dependent on production volumes. 
B) stays the same even if production stops temporarily. 
C) includes wages and sales commissions. 
D) is the sum of average fixed costs and variable overheads. 
E) is dependent on minor changes in output volume.

Question 18

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.
If SPI produces tennis racquets,how many racquets must it sell at $40 to break even?

Accepted Answer

A) 50,000 
B) 60,000 
C) 75,000 
D) 100,000 
E) None of these answers is correct. 
A) 50,000 
B) 60,000 
C) 75,000 
D) 100,000 
E) None of these answers is correct.

Question 19

Customers tend to be more price sensitive

Accepted Answer

A) the greater the total expenditure. 
B) when someone else pays the bill. 
C) when someone else shares the cost. 
D) the greater the significance of the end benefit of the purchase. 
E) the lower the total expenditure. 
A) the greater the total expenditure. 
B) when someone else pays the bill. 
C) when someone else shares the cost. 
D) the greater the significance of the end benefit of the purchase. 
E) the lower the total expenditure.

Question 20

Which of the following is an example of a variable cost for a producer?

Accepted Answer

A) depreciation 
B) managers' salaries 
C) rent 
D) packaging materials 
E) property taxes 
A) depreciation 
B) managers' salaries 
C) rent 
D) packaging materials 
E) property taxes

Changes in total cost depend on variations in total variable cost,since total fixed cost stays the same.

The idea that people will pay extra for "quality" and status is the idea behind

Which of the following would NOT be included in a firm's total variable cost?

Customers are likely to be less price sensitive

If a retailer adds a 25-cent markup to a product that costs the retailer $1.00,then according to the text the retailer's markup is 20 percent.

One major difference between leader pricing and bait pricing is that bait pricing is criticized as unethical,while leader pricing is not.

CenturyLink attracts residential customers by setting one monthly fee for high-speed Internet,cable TV,and long-distance phone services that is $40 less than the price of purchasing these three services separately.This is an example of

A markup is the dollar amount added to the cost of products to get the selling price.

The major weakness of average-cost pricing is that it

Psychological pricing involves setting prices that end in certain numbers,while odd-even pricing is setting prices that have special appeal to target customers.

The production cost of an automobile component is $45.The producer takes a 10 percent markup and sells the product to the wholesaler.What is the wholesaler's cost?

Ignoring demand is the major weakness of average-cost pricing.

Average-cost pricing works best in situations where demand conditions do not change a lot.

Which of the following pricing approaches should be used by a profit-oriented retailer if its demand curve is down-sloping to the right for a while but then actually bends back to the left at lower prices?

Total fixed cost

Customers tend to be more price sensitive

Which of the following is an example of a variable cost for a producer?

Marketings Value to Consumers, Firms, and Society

Marketing Strategy Planning

Evaluating Opportunities in the Changing Market Environment

Focusing Marketing Strategy With Segmentation and Positioning

Final Consumers and Their Buying Behavior

Business and Organizational Customers and Their Buying Behavior

Improving Decisions With Marketing Information

Elements of Product Planning for Goods and Services

Product Management and New-Product Development

Place and Development of Channel Systems

Distribution Customer Service and Logistics

Retailers, Wholesalers, and Their Strategy Planning

Promotionintroduction to Integrated Marketing Communications

Personal Selling and Customer Service

Advertising and Sales Promotion

Publicity: Promotion Using Earned Media, Owned Media, and Social Media

Pricing Objectives and Policies

Ethical Marketing in a Consumer-Oriented World: Appraisal and Challenges

Filters

Exam 18: Price Setting in the Business World

Changes in total cost depend on variations in total variable cost,since total fixed cost stays the same.

The idea that people will pay extra for "quality" and status is the idea behind

Which of the following would NOT be included in a firm's total variable cost?

Customers are likely to be less price sensitive

If a retailer adds a 25-cent markup to a product that costs the retailer $1.00,then according to the text the retailer's markup is 20 percent.

One major difference between leader pricing and bait pricing is that bait pricing is criticized as unethical,while leader pricing is not.

CenturyLink attracts residential customers by setting one monthly fee for high-speed Internet,cable TV,and long-distance phone services that is $40 less than the price of purchasing these three services separately.This is an example of

A markup is the dollar amount added to the cost of products to get the selling price.

The major weakness of average-cost pricing is that it

Psychological pricing involves setting prices that end in certain numbers,while odd-even pricing is setting prices that have special appeal to target customers.

The production cost of an automobile component is $45.The producer takes a 10 percent markup and sells the product to the wholesaler.What is the wholesaler's cost?

Ignoring demand is the major weakness of average-cost pricing.

Average-cost pricing works best in situations where demand conditions do not change a lot.

Which of the following pricing approaches should be used by a profit-oriented retailer if its demand curve is down-sloping to the right for a while but then actually bends back to the left at lower prices?

Total fixed cost

Customers tend to be more price sensitive

Which of the following is an example of a variable cost for a producer?

Marketings Value to Consumers, Firms, and Society

Marketing Strategy Planning

Evaluating Opportunities in the Changing Market Environment

Focusing Marketing Strategy With Segmentation and Positioning

Final Consumers and Their Buying Behavior

Business and Organizational Customers and Their Buying Behavior

Improving Decisions With Marketing Information

Elements of Product Planning for Goods and Services

Product Management and New-Product Development

Place and Development of Channel Systems

Distribution Customer Service and Logistics

Retailers, Wholesalers, and Their Strategy Planning

Promotionintroduction to Integrated Marketing Communications

Personal Selling and Customer Service

Advertising and Sales Promotion

Publicity: Promotion Using Earned Media, Owned Media, and Social Media

Pricing Objectives and Policies

Ethical Marketing in a Consumer-Oriented World: Appraisal and Challenges

Filters