Question 1

An intermediary seeking high profits should:

Accepted Answer

A)  use the lowest markup that will still cover selling expenses. 
B)  use price lining. 
C)  use high markups. 
D)  choose the markup which maximizes turnover. 
E)  try to find the markup level related to the most profitable price. 
A)  use the lowest markup that will still cover selling expenses. 
B)  use price lining. 
C)  use high markups. 
D)  choose the markup which maximizes turnover. 
E)  try to find the markup level related to the most profitable price.

Question 2

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 awhile--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 3

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, 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.
-SPI pays its salespeople a commission on each product they sell. The commission is:

Accepted Answer

A)  part of the total cost -- but not specifically a fixed or a variable cost. 
B)  part of the total fixed cost. 
C)  not included in figuring average cost. 
D)  a variable cost. 
E)  none of the above is true. 
A)  part of the total cost -- but not specifically a fixed or a variable cost. 
B)  part of the total fixed cost. 
C)  not included in figuring average cost. 
D)  a variable cost. 
E)  none of the above is true.

Question 4

Sam's Club purchases a 24-pack of bottled water from a wholesaler for $3.85 and wants a markup of 25 percent. What is the price that Sam's Club charges its customers?

Accepted Answer

A)  $4.25 
B)  $4.75 
C)  $4.95 
D)  $5.13 
E)  $5.75 
A)  $4.25 
B)  $4.75 
C)  $4.95 
D)  $5.13 
E)  $5.75

Question 5

Marketing managers wish they knew more about price sensitivity, but so far marketing research has been little help in identifying factors that influence customers.

Accepted Answer

A) True 
 B)False

Question 6

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 7

Average fixed cost goes down as output decreases.

Accepted Answer

A) True 
 B)False

Question 8

A low stockturn decreases inventory carrying cost and frees up working capital.

Accepted Answer

A) True 
 B)False

Question 9

If a producer selects an output level and price where marginal revenue is equal to marginal cost:

Accepted Answer

A)  marginal profit will be at its maximum. 
B)  total revenue will be at a maximum. 
C)  profits will continue to grow beyond this break-even point. 
D)  profit will be maximized. 
E)  any increase in price will cause marginal revenue to go negative. 
A)  marginal profit will be at its maximum. 
B)  total revenue will be at a maximum. 
C)  profits will continue to grow beyond this break-even point. 
D)  profit will be maximized. 
E)  any increase in price will cause marginal revenue to go negative.

Question 10

When Nintendo sets a relatively low price on its game units to stimulate more demand for its game cartridges, it is using

Accepted Answer

A)  complementary product pricing. 
B)  product-bundle pricing. 
C)  price lining. 
D)  bait pricing. 
E)  cost plus pricing. 
A)  complementary product pricing. 
B)  product-bundle pricing. 
C)  price lining. 
D)  bait pricing. 
E)  cost plus pricing.

Question 11

Leader pricing is normally used with products for which consumers do have a specific reference price.

Accepted Answer

A) True 
 B)False

Question 12

The text says "markup" means percent of:

Accepted Answer

A)  "mark-on." 
B)  selling price--unless otherwise stated. 
C)  fixed cost. 
D)  delivered cost--unless otherwise stated. 
E)  cost of sales. 
A)  "mark-on." 
B)  selling price--unless otherwise stated. 
C)  fixed cost. 
D)  delivered cost--unless otherwise stated. 
E)  cost of sales.

Question 13

A CVS drugstore that is trying to attract customers by advertising a special bargain price on a popular brand of cold remedy during the cold season is using:

Accepted Answer

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

Question 14

The main advantage that marginal analysis has over most other popular pricing methods is that it:

Accepted Answer

A)  Considers both fixed and variable costs. 
B)  Takes into account the break-even point. 
C)  Allows managers to evaluate pricing alternatives. 
D)  Takes into account both costs and demand. 
E)  Incorporates the markup chain. 
A)  Considers both fixed and variable costs. 
B)  Takes into account the break-even point. 
C)  Allows managers to evaluate pricing alternatives. 
D)  Takes into account both costs and demand. 
E)  Incorporates the markup chain.

Question 15

A company has total fixed cost of $400,000. Its fixed- cost contribution per unit is $10.00, and its price per unit is $5.00. What is the break-even point in sales dollars?

Accepted Answer

A)  $200,000. 
B)  $2,000,000. 
C)  $4,000,000. 
D)  $800,000. 
E)  Cannot be determined from the information provided. 
A)  $200,000. 
B)  $2,000,000. 
C)  $4,000,000. 
D)  $800,000. 
E)  Cannot be determined from the information provided.

Question 16

A retail store advertises an SLR digital camera for $350. Once bargain hunters come to the store, salespeople point out the disadvantages of the low-priced camera and try to convince them to trade up to a better, and more expensive, unit. This is an example of

Accepted Answer

A)  price following. 
B)  bait pricing. 
C)  odd-even pricing. 
D)  low pricing. 
E)  everyday low pricing. 
A)  price following. 
B)  bait pricing. 
C)  odd-even pricing. 
D)  low pricing. 
E)  everyday low pricing.

Question 17

A retailer pays a wholesaler $24.00 for an item and then sells it with a 25 percent markup. The retailer's selling price is:

Accepted Answer

A)  $32.00. 
B)  $56.00. 
C)  $48.00. 
D)  $30.00. 
E)  None of the above. 
A)  $32.00. 
B)  $56.00. 
C)  $48.00. 
D)  $30.00. 
E)  None of the above.

Question 18

Break-even analysis

Accepted Answer

A)  can be adapted to evaluate the quantity that needs to be sold to earn a target profit--by adding the target profit to fixed costs. 
B)  may result in a "break-even" quantity that it would be impossible to sell at the assumed price. 
C)  focuses on the contribution of each unit sold to the reduction of fixed costs. 
D)  All of the above are true. 
E)  None of the above is true. 
A)  can be adapted to evaluate the quantity that needs to be sold to earn a target profit--by adding the target profit to fixed costs. 
B)  may result in a "break-even" quantity that it would be impossible to sell at the assumed price. 
C)  focuses on the contribution of each unit sold to the reduction of fixed costs. 
D)  All of the above are true. 
E)  None of the above is true.

Question 19

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.

Question 20

Total variable cost:

Accepted Answer

A)  is zero when the quantity produced is zero. 
B)  is the sum of those changing expenses that are closely related to output. 
C)  may decrease as the quantity produced is increased. 
D)  All of the above are true. 
E)  Both A and B are true. 
A)  is zero when the quantity produced is zero. 
B)  is the sum of those changing expenses that are closely related to output. 
C)  may decrease as the quantity produced is increased. 
D)  All of the above are true. 
E)  Both A and B are true.

Exam 18: Price Setting in the Business World

An intermediary seeking high profits should:

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 awhile--but then actually bends back to the left at lower prices?

Sam's Club purchases a 24-pack of bottled water from a wholesaler for $3.85 and wants a markup of 25 percent. What is the price that Sam's Club charges its customers?

Marketing managers wish they knew more about price sensitivity, but so far marketing research has been little help in identifying factors that influence customers.

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

Average fixed cost goes down as output decreases.

A low stockturn decreases inventory carrying cost and frees up working capital.

If a producer selects an output level and price where marginal revenue is equal to marginal cost:

When Nintendo sets a relatively low price on its game units to stimulate more demand for its game cartridges, it is using

Leader pricing is normally used with products for which consumers do have a specific reference price.

The text says "markup" means percent of:

A CVS drugstore that is trying to attract customers by advertising a special bargain price on a popular brand of cold remedy during the cold season is using:

The main advantage that marginal analysis has over most other popular pricing methods is that it:

A company has total fixed cost of $400,000. Its fixed- cost contribution per unit is $10.00, and its price per unit is $5.00. What is the break-even point in sales dollars?

A retail store advertises an SLR digital camera for $350. Once bargain hunters come to the store, salespeople point out the disadvantages of the low-priced camera and try to convince them to trade up to a better, and more expensive, unit. This is an example of

A retailer pays a wholesaler $24.00 for an item and then sells it with a 25 percent markup. The retailer's selling price is:

Break-even analysis

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

Total variable cost:

Marketings Value to Consumers, Firms, and Society

Marketing Strategy Planning

Evaluating Opportunities in the Changing Marketing Environment

Focusing Marketing Strategy With Segmentation and Positioning

Demographic Dimensions of Global Consumer Markets

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

Implementing and Controlling Marketing Plans: Evolution and Revolution

Managing Marketings Link With Other Functional Areas

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

Economics Fundamentals

Marketing Arithmetic

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