Question 1

Which of the following pricing tools combines both, the cost-oriented price setting approach as well as the demand-oriented price setting approach?

Accepted Answer

A)  Break-even analysis 
B)  Average-cost pricing 
C)  Markup pricing 
D)  Marginal analysis 
E)  Price sensitivity 
A)  Break-even analysis 
B)  Average-cost pricing 
C)  Markup pricing 
D)  Marginal analysis 
E)  Price sensitivity

Question 2

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

Accepted Answer

A) True 
 B)False

Question 3

Customers are likely to be more price sensitive when:

Accepted Answer

A)  the total expenditure is great. 
B)  they have to pay the bill themselves. 
C)  the end benefit isn't very significant. 
D)  they haven't yet spent any money related to the purchase. 
E)  All of these alternatives are correct. 
A)  the total expenditure is great. 
B)  they have to pay the bill themselves. 
C)  the end benefit isn't very significant. 
D)  they haven't yet spent any money related to the purchase. 
E)  All of these alternatives are correct.

Question 4

Identify a disadvantage of break-even analysis.

Accepted Answer

A)  It cannot be used to determine the break-even point in dollars. 
B)  It is not helpful for evaluating what might happen to profits in different market environments. 
C)  It does not consider the effect of price on the quantity that consumers will want. 
D)  It is not helpful for evaluating alternatives. 
E)  It is an extremely complicated method. 
A)  It cannot be used to determine the break-even point in dollars. 
B)  It is not helpful for evaluating what might happen to profits in different market environments. 
C)  It does not consider the effect of price on the quantity that consumers will want. 
D)  It is not helpful for evaluating alternatives. 
E)  It is an extremely complicated method.

Question 5

At zero output, total variable cost is zero.

Accepted Answer

A) True 
 B)False

Question 6

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 his product (raw materials and direct labor cost). The producer charges his wholesalers $125 per unit. What is the sales amount to break even?

Accepted Answer

A)  $70,000 
B)  $75,000 
C)  $80,000 
D)  $85,000 
E)  $90,000 
A)  $70,000 
B)  $75,000 
C)  $80,000 
D)  $85,000 
E)  $90,000

Question 7

Different firms in the same line of business are likely to use the same markup percent:

Accepted Answer

A)  because they all want to have the same selling price. 
B)  because this is a government requirement. 
C)  because they are likely to have similar operating expenses. 
D)  because this is what is acceptable to manufacturers. 
E)  only if they are in pure competition. 
A)  because they all want to have the same selling price. 
B)  because this is a government requirement. 
C)  because they are likely to have similar operating expenses. 
D)  because this is what is acceptable to manufacturers. 
E)  only if they are in pure competition.

Question 8

Regarding bid pricing:

Accepted Answer

A)  the same overhead charges and profit rates should apply to all bids-to avoid legal problems. 
B)  most firms should try to bid for as many jobs as possible-to spread risk. 
C)  all business buyers are legally required to accept the lowest bid-if they ask for bids. 
D)  the big problem for sellers is estimating all the costs-including the variable and fixed costs-that apply to a particular job. 
E)  All of these alternatives are correct. 
A)  the same overhead charges and profit rates should apply to all bids-to avoid legal problems. 
B)  most firms should try to bid for as many jobs as possible-to spread risk. 
C)  all business buyers are legally required to accept the lowest bid-if they ask for bids. 
D)  the big problem for sellers is estimating all the costs-including the variable and fixed costs-that apply to a particular job. 
E)  All of these alternatives are correct.

Question 9

Some retailers commonly use prices that end in certain numbers. They seem to assume that their customers see prices with these numbers as substantially lower. This is:

Accepted Answer

A)  odd-even pricing. 
B)  demand-backward pricing. 
C)  leader pricing. 
D)  prestige pricing. 
E)  psychological pricing. 
A)  odd-even pricing. 
B)  demand-backward pricing. 
C)  leader pricing. 
D)  prestige pricing. 
E)  psychological pricing.

Question 10

Regarding markups and turnover:

Accepted Answer

A)  high markups usually lead to high profits. 
B)  speeding turnover usually decreases profits. 
C)  items sold at low markups (e.g., 20 percent) cannot be profitable. 
D)  depending on the industry-a stockturn rate of 1 or 2 may be quite profitable. 
E)  All of these alternatives are correct. 
A)  high markups usually lead to high profits. 
B)  speeding turnover usually decreases profits. 
C)  items sold at low markups (e.g., 20 percent) cannot be profitable. 
D)  depending on the industry-a stockturn rate of 1 or 2 may be quite profitable. 
E)  All of these alternatives are correct.

Question 11

Which of the following observations is true?

Accepted Answer

A)  The break-even point can also be figured in dollars. 
B)  For a single price, multiple break-even points are possible. 
C)  Beyond the break-even point, profits will grow continually. 
D)  At break-even point, a firm will cover only its variable costs. 
E)  At break-even point, a firm will cover only its fixed costs. 
A)  The break-even point can also be figured in dollars. 
B)  For a single price, multiple break-even points are possible. 
C)  Beyond the break-even point, profits will grow continually. 
D)  At break-even point, a firm will cover only its variable costs. 
E)  At break-even point, a firm will cover only its fixed costs.

Question 12

If a manager sells more than was expected when average-cost pricing was used to set a price, the firm will lose money.

Accepted Answer

A) True 
 B)False

Question 13

"Stockturn rate" means:

Accepted Answer

A)  the number of days required to sell a given output of products. 
B)  the amount of time needed to sell every item in a retailer's inventory. 
C)  the number of times the average inventory is sold in a year. 
D)  the rate at which products enter and leave an intermediary's establishment. 
E)  None of these is a good definition of "stockturn rate." 
A)  the number of days required to sell a given output of products. 
B)  the amount of time needed to sell every item in a retailer's inventory. 
C)  the number of times the average inventory is sold in a year. 
D)  the rate at which products enter and leave an intermediary's establishment. 
E)  None of these is a good definition of "stockturn rate."

Question 14

Average cost is obtained by dividing:

Accepted Answer

A)  total fixed cost by the related quantity. 
B)  marginal cost by marginal revenue. 
C)  total cost by the related quantity. 
D)  average fixed cost and average variable cost by the quantity produced. 
E)  total variable cost by the related quantity. 
A)  total fixed cost by the related quantity. 
B)  marginal cost by marginal revenue. 
C)  total cost by the related quantity. 
D)  average fixed cost and average variable cost by the quantity produced. 
E)  total variable cost by the related quantity.

Question 15

If a firm's average variable cost is constant per unit, then the firm's average cost decreases continually as output increases because average fixed cost decreases continually.

Accepted Answer

A) True 
 B)False

Question 16

If 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 for this product, 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 17

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 18

Sellers sometimes take the auction approach and adapt it by using sequential price reductions over time. When or where is this approach most commonly used?

Accepted Answer

A)  With products that have a short life 
B)  When the product supply is unlimited 
C)  With heavy equipment manufacturing machinery 
D)  With products that have extremely low inventory costs 
E)  When competition is absent 
A)  With products that have a short life 
B)  When the product supply is unlimited 
C)  With heavy equipment manufacturing machinery 
D)  With products that have extremely low inventory costs 
E)  When competition is absent

Question 19

In marginal analysis, the most profitable price is the price at which:

Accepted Answer

A)  Profit is based on competitive pricing. 
B)  Total revenue and total cost are equal. 
C)  The difference between total revenue and total cost is greatest. 
D)  Total profit and total cost are equal. 
E)  None of these is a good answer. 
A)  Profit is based on competitive pricing. 
B)  Total revenue and total cost are equal. 
C)  The difference between total revenue and total cost is greatest. 
D)  Total profit and total cost are equal. 
E)  None of these is a good answer.

Question 20

Use this information for question 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, only uses 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 of its baseball gloves at $20, $40, or $60-with no prices in between. There are three big bins - one for each price point.
Todd 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.
Todd is not certain if Sports Depot 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, if Sports Depot sells the racquet at a lower than normal price other retailers might decide to carry it.
What is the final selling price Robinson's Sporting Goods charges for a SPI basketball?

Accepted Answer

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

Which of the following pricing tools combines both, the cost-oriented price setting approach as well as the demand-oriented price setting approach?

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

Customers are likely to be more price sensitive when:

Identify a disadvantage of break-even analysis.

At zero output, total variable cost is zero.

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 his product (raw materials and direct labor cost). The producer charges his wholesalers $125 per unit. What is the sales amount to break even?

Different firms in the same line of business are likely to use the same markup percent:

Regarding bid pricing:

Some retailers commonly use prices that end in certain numbers. They seem to assume that their customers see prices with these numbers as substantially lower. This is:

Regarding markups and turnover:

Which of the following observations is true?

If a manager sells more than was expected when average-cost pricing was used to set a price, the firm will lose money.

"Stockturn rate" means:

Average cost is obtained by dividing:

If a firm's average variable cost is constant per unit, then the firm's average cost decreases continually as output increases because average fixed cost decreases continually.

If 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 for this product, this is an example of:

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

Sellers sometimes take the auction approach and adapt it by using sequential price reductions over time. When or where is this approach most commonly used?

In marginal analysis, the most profitable price is the price at which:

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

Promotion-Introduction to Integrated Marketing Communications

Personal Selling and Customer Service

Advertising, Publicity, and Sales Promotion

Pricing Objectives and Policies

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

Filters

Exam 17: Price Setting in the Business World

Which of the following pricing tools combines both, the cost-oriented price setting approach as well as the demand-oriented price setting approach?

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

Customers are likely to be more price sensitive when:

Identify a disadvantage of break-even analysis.

At zero output, total variable cost is zero.

Different firms in the same line of business are likely to use the same markup percent:

Regarding bid pricing:

Some retailers commonly use prices that end in certain numbers. They seem to assume that their customers see prices with these numbers as substantially lower. This is:

Regarding markups and turnover:

Which of the following observations is true?

If a manager sells more than was expected when average-cost pricing was used to set a price, the firm will lose money.

"Stockturn rate" means:

Average cost is obtained by dividing:

If a firm's average variable cost is constant per unit, then the firm's average cost decreases continually as output increases because average fixed cost decreases continually.

If 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 for this product, this is an example of:

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

Sellers sometimes take the auction approach and adapt it by using sequential price reductions over time. When or where is this approach most commonly used?

In marginal analysis, the most profitable price is the price at which:

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

Promotion-Introduction to Integrated Marketing Communications

Personal Selling and Customer Service

Advertising, Publicity, and Sales Promotion

Pricing Objectives and Policies

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

Filters