Exam 13: Pricing Concepts for Establishing Value

A major hotel chain found that if they were to reduce the cost of the ice cream they currently served they would be able to save over 400 employees jobs.Therefore,they switched from a high priced brand of ice cream to a more moderate priced ice cream.This is known as the:

In general,prices should not be based on costs because:

Customers purchase prestige products or services for the status of owning the products,not just for the functionality.These products may not follow a typical demand curve if:

Julia wants her firm's gourmet snacks to be the leading brand in the U.S.market.When adopting a pricing strategy designed to gain market share,she should remember that:

A strategy of setting prices based on how customers develop their perceptions of value can often be the most effective pricing strategy,especially if the strategy:

Why are price wars more common in oligopolies than in pure competition markets?

Diana owns a boutique specializing in ball gowns.Sales are stable and Diana feels it is time she had a 20% increase in her salary.If Diana takes this increase in compensation,it will decrease the breakeven quantity of gowns she needs to sell on a monthly basis.

Break-even analysis is useful because it allows managers to:

Small business consultants are constantly admonishing would-be entrepreneurs,"Beware of the overhead." Use break-even analysis first with an overhead of $100,000 and second with an overhead of $200,000,and a contribution per unit of $50 to demonstrate this admonition.

Raymond estimates the fixed costs associated with opening a new bank branch are $500,000.He estimates the branch will attract 1,000 new customers who will cost $50 / year to service each of their accounts.He also expects to generate $100,000 in fees annually from these accounts.What will be the total cost of opening the new branch and remaining open for one year?

Near the end of the summer season,Sergio still has a large inventory of bathing suits.He needs to sell them rather than holding them over till next season,because colors and styles often change.He plans to offer them at 30 percent off the retail price.Sergio hopes that demand for bathing suits at the end of the season is:

Using "keystoning" as a pricing strategy:

The fact that more consumers are buying prestige items like Rolex watches and Mercedes-Benz cars and are,at the same time,shopping more at low-priced discount stores is called:

In _______________,many firms provide similar products that are considered substitutes for each other.

Variable costs change with:

How can brand loyalty affect the price elasticity of demand for a firm's products?

In U.S.markets,there are many substitute products for Fruit Loops cereal,suggesting the price elasticity of demand for Fruit Loops is elastic.

In which of the following levels of competition does one firm control the industry and restrict competition?

Ferrari and Lamborghini are manufacturers of very expensive automobiles.Their limited edition cars often sell for $300,000 or more.For most consumers,these are prestige products,and demand is likely to be:

Health clubs often use a low,introductory offer price to get people to join their club.These low prices represent a ______________ pricing strategy.