Question 1

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

Accepted Answer

A) True 
 B)False

Question 2

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 3

Regarding break-even analysis, a good marketing manager knows that:

Accepted Answer

A)  a high fixed-cost contribution per unit will lead to high profits. 
B)  assuming a straight-line total revenue curve incorrectly suggests that any quantity can be sold at the assumed price. 
C)  break-even analysis is useless for comparing pricing alternatives. 
D)  the usual straight-line total cost curve applies only when economies of scale exist. 
E)  All of these alternatives are correct. 
A)  a high fixed-cost contribution per unit will lead to high profits. 
B)  assuming a straight-line total revenue curve incorrectly suggests that any quantity can be sold at the assumed price. 
C)  break-even analysis is useless for comparing pricing alternatives. 
D)  the usual straight-line total cost curve applies only when economies of scale exist. 
E)  All of these alternatives are correct.

Question 4

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.
If SPI uses average-cost pricing, a big problem will be:

Accepted Answer

A)  it ignores the demand curve for its products. 
B)  fixed costs are too hard to estimate. 
C)  the effects of variable costs are ignored. 
D)  the desired profit cannot be included. 
A)  it ignores the demand curve for its products. 
B)  fixed costs are too hard to estimate. 
C)  the effects of variable costs are ignored. 
D)  the desired profit cannot be included.

Question 5

A retailer who advertises a low price on an item-with no intent to sell that item-but only to attract customers to try to sell more expensive products is using:

Accepted Answer

A)  full-line pricing. 
B)  leader pricing. 
C)  odd-even pricing. 
D)  psychological pricing. 
E)  bait pricing. 
A)  full-line pricing. 
B)  leader pricing. 
C)  odd-even pricing. 
D)  psychological pricing. 
E)  bait pricing.

Question 6

"Average-cost pricing":

Accepted Answer

A)  will result in losses if actual sales are much higher than expected. 
B)  might cause a firm to charge too high or too low a price-and reduce its profits. 
C)  usually assumes the firm will sell a larger quantity than the year before. 
D)  cannot be profitable-because it ignores demand. 
E)  All of these alternatives are correct. 
A)  will result in losses if actual sales are much higher than expected. 
B)  might cause a firm to charge too high or too low a price-and reduce its profits. 
C)  usually assumes the firm will sell a larger quantity than the year before. 
D)  cannot be profitable-because it ignores demand. 
E)  All of these alternatives are correct.

Question 7

The sum of those costs that do not change in total-no matter how much is produced-is called:

Accepted Answer

A)  total fixed cost. 
B)  total cost. 
C)  total variable cost. 
D)  total direct cost. 
E)  None of these is a good answer. 
A)  total fixed cost. 
B)  total cost. 
C)  total variable cost. 
D)  total direct cost. 
E)  None of these is a good answer.

Question 8

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 9

A "markup chain" can be used to calculate the price structure in a whole channel.

Accepted Answer

A) True 
 B)False

Question 10

What is the best pricing tool marketers have for looking at costs and revenue at the same time?

Accepted Answer

A)  Break-even analysis 
B)  Markdown approach 
C)  Average-cost pricing method 
D)  Marginal analysis 
E)  Markup approach 
A)  Break-even analysis 
B)  Markdown approach 
C)  Average-cost pricing method 
D)  Marginal analysis 
E)  Markup approach

Question 11

A firm's "break-even point" is that point where:

Accepted Answer

A)  maximum profit is earned. 
B)  total variable cost just equals total revenue. 
C)  total profit just equals total cost. 
D)  total cost just equals total revenue. 
E)  None of these alternatives is correct. 
A)  maximum profit is earned. 
B)  total variable cost just equals total revenue. 
C)  total profit just equals total cost. 
D)  total cost just equals total revenue. 
E)  None of these alternatives is correct.

Question 12

If a retailer's annual stockturn rate shifted to 20 from 5, then selling products costing $100,000 would require ______________ rather than $20,000 in working capital to carry the needed inventory.

Accepted Answer

A)  $10,000 
B)  $80,000 
C)  $8,000 
D)  $500 
E)  $5,000 
A)  $10,000 
B)  $80,000 
C)  $8,000 
D)  $500 
E)  $5,000

Question 13

A high stockturn rate:

Accepted Answer

A)  is only possible with a low markup percent. 
B)  is likely to result in low profits. 
C)  reduces the inventory investment and can improve profits. 
D)  increases the space needed for inventory. 
E)  None of these alternatives is correct. 
A)  is only possible with a low markup percent. 
B)  is likely to result in low profits. 
C)  reduces the inventory investment and can improve profits. 
D)  increases the space needed for inventory. 
E)  None of these alternatives is correct.

Question 14

The Horizons Cycle Shop bought 3 motorcycles for $2,100, and sold each one for $1,000. The markup percent was:

Accepted Answer

A)  33 1/3. 
B)  30. 
C)  142. 
D)  50. 
E)  There is not enough information to tell. 
A)  33 1/3. 
B)  30. 
C)  142. 
D)  50. 
E)  There is not enough information to tell.

Question 15

Which of the following is an example of a fixed cost?

Accepted Answer

A)  Wages 
B)  Outgoing freight 
C)  Depreciation 
D)  Sales commissions 
E)  Packaging material expense 
A)  Wages 
B)  Outgoing freight 
C)  Depreciation 
D)  Sales commissions 
E)  Packaging material expense

Question 16

Gabriella Sax believes that customers in her dress shop find certain prices very appealing. Between these price levels, all prices are seen as roughly the same-and price cuts in these ranges generally do not increase the quantity sold (i.e., the demand curve tends to drop vertically within these price ranges). Therefore, Sax prices her items as close as possible to the top of each such price range. This is:

Accepted Answer

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

Question 17

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

Accepted Answer

A) True 
 B)False

Question 18

Most firms in the business world set their prices using:

Accepted Answer

A)  federal price guidelines. 
B)  demand-oriented price setting. 
C)  cost-oriented price setting. 
D)  supply and demand analysis. 
E)  marginal analysis. 
A)  federal price guidelines. 
B)  demand-oriented price setting. 
C)  cost-oriented price setting. 
D)  supply and demand analysis. 
E)  marginal analysis.

Question 19

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 20

A large supermarket chain purchases a box of cereal from a food wholesaler. If the supermarket chain uses a markup of 20 percent on its selling price of $2.85, what is the price the supermarket chain paid the food wholesaler?

Accepted Answer

A)  $2.12 
B)  $2.28 
C)  $2.45 
D)  $2.55 
E)  $2.67 
A)  $2.12 
B)  $2.28 
C)  $2.45 
D)  $2.55 
E)  $2.67

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

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

Regarding break-even analysis, a good marketing manager knows that:

A retailer who advertises a low price on an item-with no intent to sell that item-but only to attract customers to try to sell more expensive products is using:

"Average-cost pricing":

The sum of those costs that do not change in total-no matter how much is produced-is called:

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

A "markup chain" can be used to calculate the price structure in a whole channel.

What is the best pricing tool marketers have for looking at costs and revenue at the same time?

A firm's "break-even point" is that point where:

If a retailer's annual stockturn rate shifted to 20 from 5, then selling products costing $100,000 would require ______________ rather than $20,000 in working capital to carry the needed inventory.

A high stockturn rate:

The Horizons Cycle Shop bought 3 motorcycles for $2,100, and sold each one for $1,000. The markup percent was:

Which of the following is an example of a fixed cost?

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

Most firms in the business world set their prices using:

Which of the following applies to "value in use pricing?"

A large supermarket chain purchases a box of cereal from a food wholesaler. If the supermarket chain uses a markup of 20 percent on its selling price of $2.85, what is the price the supermarket chain paid the food wholesaler?

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

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

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

Regarding break-even analysis, a good marketing manager knows that:

A retailer who advertises a low price on an item-with no intent to sell that item-but only to attract customers to try to sell more expensive products is using:

"Average-cost pricing":

The sum of those costs that do not change in total-no matter how much is produced-is called:

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

A "markup chain" can be used to calculate the price structure in a whole channel.

What is the best pricing tool marketers have for looking at costs and revenue at the same time?

A firm's "break-even point" is that point where:

If a retailer's annual stockturn rate shifted to 20 from 5, then selling products costing $100,000 would require ______________ rather than $20,000 in working capital to carry the needed inventory.

A high stockturn rate:

The Horizons Cycle Shop bought 3 motorcycles for $2,100, and sold each one for $1,000. The markup percent was:

Which of the following is an example of a fixed cost?

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

Most firms in the business world set their prices using:

Which of the following applies to "value in use pricing?"

A large supermarket chain purchases a box of cereal from a food wholesaler. If the supermarket chain uses a markup of 20 percent on its selling price of $2.85, what is the price the supermarket chain paid the food wholesaler?

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