Question 1

All customers have the same reference price for the same basic type of purchase.

Accepted Answer

A) True 
 B)False

Question 2

Leader prices are the "specials" on certain products that are advertised regularly to give an image of low prices.

Accepted Answer

A) True 
 B)False

Question 3

Regarding full-line pricing,which of the following statements is true?

Accepted Answer

A) A good marketing manager usually tries to price products in a line so that the prices will seem logically related and make sense to target customers. 
B) The marketing manager should try to cover all costs on the whole product line. 
C) Most customers seem to feel that prices in a product line should be somewhat related to cost. 
D) Not all companies that make a line of products must use full-line pricing. 
E) All these statements are true. 
A) A good marketing manager usually tries to price products in a line so that the prices will seem logically related and make sense to target customers. 
B) The marketing manager should try to cover all costs on the whole product line. 
C) Most customers seem to feel that prices in a product line should be somewhat related to cost. 
D) Not all companies that make a line of products must use full-line pricing. 
E) All these statements are true.

Question 4

A supermarket is bound to expect a higher stockturn rate for fresh fruits and vegetables than for soaps and detergents.

Accepted Answer

A) True 
 B)False

Question 5

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 Robinson's Sporting Goods charges for an SPI basketball?

Accepted Answer

A) $10.00 
B) $15.00 
C) $15.75 
D) $20.80 
E) None of these answers is correct. 
A) $10.00 
B) $15.00 
C) $15.75 
D) $20.80 
E) None of these answers is correct.

Question 6

________ is setting a few price levels for a product line and then marking all items at these prices.

Accepted Answer

A) Price following 
B) Bait pricing 
C) Odd-even pricing 
D) Price lining 
E) Price leading 
A) Price following 
B) Bait pricing 
C) Odd-even pricing 
D) Price lining 
E) Price leading

Question 7

A firm in monopolistic competition with a down-sloping demand curve

Accepted Answer

A) does not have to worry about price competition,due to the nature of its demand curve. 
B) can use marginal analysis to help it maximize profits. 
C) will have to charge the market price,which is set by the intersection of industry supply and demand. 
D) could use marginal analysis to compare alternatives-but this would not help in pricing because this method focuses on selling one more unit and therefore ignores total profitability. 
E) could use average-cost pricing to consider a range of profitable prices. 
A) does not have to worry about price competition,due to the nature of its demand curve. 
B) can use marginal analysis to help it maximize profits. 
C) will have to charge the market price,which is set by the intersection of industry supply and demand. 
D) could use marginal analysis to compare alternatives-but this would not help in pricing because this method focuses on selling one more unit and therefore ignores total profitability. 
E) could use average-cost pricing to consider a range of profitable prices.

Question 8

The greater the total expenditure,the less price sensitive customers are.

Accepted Answer

A) True 
 B)False

Question 9

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 service organization's average cost for the printed tennis balls it buys from Sports Depot?

Accepted Answer

A) $0.50 
B) $0.75 
C) $0.95 
D) $1.50 
E) $2.00 
A) $0.50 
B) $0.75 
C) $0.95 
D) $1.50 
E) $2.00

Question 10

The price that maximizes profit is the one that results in the greatest difference between

Accepted Answer

A) total cost and total fixed cost. 
B) total revenue and total cost. 
C) average cost and average variable cost. 
D) total revenue and average variable cost. 
E) total revenue and average fixed cost. 
A) total cost and total fixed cost. 
B) total revenue and total cost. 
C) average cost and average variable cost. 
D) total revenue and average variable cost. 
E) total revenue and average fixed cost.

Question 11

Break-even charts usually assume that

Accepted Answer

A) total cost and total revenue curves are straight lines. 
B) profits will grow continually beyond the break-even point. 
C) the break-even point is reached when total cost just equals total revenue. 
D) any quantity can be sold at the assumed price. 
E) All these answers are correct. 
A) total cost and total revenue curves are straight lines. 
B) profits will grow continually beyond the break-even point. 
C) the break-even point is reached when total cost just equals total revenue. 
D) any quantity can be sold at the assumed price. 
E) All these answers are correct.

Question 12

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.
Randy Todd wants to use marginal analysis to price the new tennis racquets,but he doesn't know the exact shape of the firm's demand curve.Under these circumstances marginal analysis

Accepted Answer

A) is useless. 
B) may be useful anyway,because a profitable region usually surrounds the best price. 
C) will suggest the same price as break-even analysis. 
D) suggests that the only sensible approach is to follow the market leader. 
E) None of these answers is correct. 
A) is useless. 
B) may be useful anyway,because a profitable region usually surrounds the best price. 
C) will suggest the same price as break-even analysis. 
D) suggests that the only sensible approach is to follow the market leader. 
E) None of these answers is correct.

Question 13

Which of the following applies to value in use pricing?

Accepted Answer

A) How much profit will the firm make? 
B) How much will the customer save? 
C) What does a competitor offer? 
D) How much can the customer afford? 
A) How much profit will the firm make? 
B) How much will the customer save? 
C) What does a competitor offer? 
D) How much can the customer afford?

Question 14

Total cost

Accepted Answer

A) increases directly with increases in total variable cost. 
B) is zero at zero output. 
C) is fixed in total no matter how much is produced. 
D) increases directly with increases in total fixed cost. 
E) None of these answers is correct. 
A) increases directly with increases in total variable cost. 
B) is zero at zero output. 
C) is fixed in total no matter how much is produced. 
D) increases directly with increases in total fixed cost. 
E) None of these answers is correct.

Question 15

High Meadow Mfg.Co.sold its product through wholesalers and retailers-allowing the wholesalers a markup of 25 percent and retailers a markup of 40 percent.If the retail selling price is $100 and the manufacturer's cost is $30,what markup-in dollars-did High Meadow receive on the sale of this product?

Accepted Answer

A) $5.00 
B) $13.50 
C) $15.00 
D) $10.00 
E) $20.00 
A) $5.00 
B) $13.50 
C) $15.00 
D) $10.00 
E) $20.00

Question 16

There is only one price that will be profitable for firms with down-sloping demand curves.

Accepted Answer

A) True 
 B)False

Question 17

A supermarket runs an ad for a gallon of milk in the local newspaper at a price that many consumers will recognize as a low price.This is an example of

Accepted Answer

A) reference pricing. 
B) price lining. 
C) bundle pricing. 
D) leader pricing. 
E) bait pricing. 
A) reference pricing. 
B) price lining. 
C) bundle pricing. 
D) leader pricing. 
E) bait pricing.

Question 18

Firms with high markups and low turnover rates may earn lower profits than firms with low markups and high turnover rates.

Accepted Answer

A) True 
 B)False

Question 19

A tire retailer is advertising a very low price on a popular size of tire.When a customer comes into the store,the clerk says the low-priced item is sold out and tries to convince the customer to buy the top-of-the-line model-claiming the low-priced model would not have been a very good buy even at the low price.This is an example of

Accepted Answer

A) leader pricing. 
B) full-line pricing. 
C) value in use pricing. 
D) price lining. 
E) bait pricing. 
A) leader pricing. 
B) full-line pricing. 
C) value in use pricing. 
D) price lining. 
E) bait pricing.

Question 20

Best Buy sets its prices below other electronics stores in its service area and generally attracts more customers than the others.Best Buy apparently hopes to earn a profit by

Accepted Answer

A) achieving status quo pricing objectives. 
B) setting prices based on "value in use." 
C) relying on a high margin percentage. 
D) setting prices based on a cost-oriented approach. 
E) achieving a high stockturn rate. 
A) achieving status quo pricing objectives. 
B) setting prices based on "value in use." 
C) relying on a high margin percentage. 
D) setting prices based on a cost-oriented approach. 
E) achieving a high stockturn rate.

All customers have the same reference price for the same basic type of purchase.

Leader prices are the "specials" on certain products that are advertised regularly to give an image of low prices.

Regarding full-line pricing,which of the following statements is true?

A supermarket is bound to expect a higher stockturn rate for fresh fruits and vegetables than for soaps and detergents.

________ is setting a few price levels for a product line and then marking all items at these prices.

A firm in monopolistic competition with a down-sloping demand curve

The greater the total expenditure,the less price sensitive customers are.

The price that maximizes profit is the one that results in the greatest difference between

Break-even charts usually assume that

Which of the following applies to value in use pricing?

Total cost

There is only one price that will be profitable for firms with down-sloping demand curves.

A supermarket runs an ad for a gallon of milk in the local newspaper at a price that many consumers will recognize as a low price.This is an example of

Firms with high markups and low turnover rates may earn lower profits than firms with low markups and high turnover rates.

Best Buy sets its prices below other electronics stores in its service area and generally attracts more customers than the others.Best Buy apparently hopes to earn a profit by

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

All customers have the same reference price for the same basic type of purchase.

Leader prices are the "specials" on certain products that are advertised regularly to give an image of low prices.

Regarding full-line pricing,which of the following statements is true?

A supermarket is bound to expect a higher stockturn rate for fresh fruits and vegetables than for soaps and detergents.

________ is setting a few price levels for a product line and then marking all items at these prices.

A firm in monopolistic competition with a down-sloping demand curve

The greater the total expenditure,the less price sensitive customers are.

The price that maximizes profit is the one that results in the greatest difference between

Break-even charts usually assume that

Which of the following applies to value in use pricing?

Total cost

There is only one price that will be profitable for firms with down-sloping demand curves.

A supermarket runs an ad for a gallon of milk in the local newspaper at a price that many consumers will recognize as a low price.This is an example of

Firms with high markups and low turnover rates may earn lower profits than firms with low markups and high turnover rates.

Best Buy sets its prices below other electronics stores in its service area and generally attracts more customers than the others.Best Buy apparently hopes to earn a profit by

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