Question 1

The big problem with average-cost pricing is that:

Accepted Answer

A)  fixed costs are hard to estimate. 
B)  it ignores the firm's demand curve. 
C)  it doesn't consider the effect of variable costs. 
D)  there is no way to include a desired profit per unit. 
E)  None of the above is true. 
A)  fixed costs are hard to estimate. 
B)  it ignores the firm's demand curve. 
C)  it doesn't consider the effect of variable costs. 
D)  there is no way to include a desired profit per unit. 
E)  None of the above is true.

Question 2

Online auctions (on the Internet) are becoming very popular as a way to determine how much customers are willing to pay for a product.

Accepted Answer

A) True 
 B)False

Question 3

Alex's Knot Shop prices its ties at $5 intervals from $10 to $25 because most customers find these prices appealing and easier to compare. This is:

Accepted Answer

A)  prestige pricing. 
B)  penetration pricing. 
C)  price lining. 
D)  odd-even pricing. 
E)  value in use pricing. 
A)  prestige pricing. 
B)  penetration pricing. 
C)  price lining. 
D)  odd-even pricing. 
E)  value in use pricing.

Question 4

Which of the following observations is true?

Accepted Answer

A)  It is possible to include a target profit in break-even analysis. 
B)  For a single price, multiple break-even points are possible. 
C)  Break-even point cannot be expressed in dollars. 
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)  It is possible to include a target profit in break-even analysis. 
B)  For a single price, multiple break-even points are possible. 
C)  Break-even point cannot be expressed in dollars. 
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 5

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 6

Henry has classified the following items under variable costs. Which item has he classified incorrectly?

Accepted Answer

A)  Expenses for parts 
B)  Wages 
C)  Outgoing freight 
D)  Property taxes 
E)  Packaging material expense 
A)  Expenses for parts 
B)  Wages 
C)  Outgoing freight 
D)  Property taxes 
E)  Packaging material expense

Question 7

Total fixed costs do not change when output increases.

Accepted Answer

A) True 
 B)False

Question 8

"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 the above. 
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 the above.

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, 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 the above. 
A)  $10.00 
B)  $15.00 
C)  $15.75 
D)  $20.80 
E)  None of the above.

Question 10

Which of the following pricing approaches specifically considers the concept of elasticity of demand?

Accepted Answer

A)  break-even pricing. 
B)  average-cost pricing. 
C)  markup pricing. 
D)  target return pricing. 
E)  None of the above. 
A)  break-even pricing. 
B)  average-cost pricing. 
C)  markup pricing. 
D)  target return pricing. 
E)  None of the above.

Question 11

Good Health Co. has set a suggested retail list price of $40 on its new vitamin tablets on the assumption that its target market will find the product attractive at this price. From this suggested retail list price, Good Health has subtracted its usual chain of markups for wholesalers and retailers to obtain its own selling price of $17. This is:

Accepted Answer

A)  demand-backward pricing. 
B)  full-line pricing. 
C)  average-cost pricing. 
D)  odd-even pricing. 
E)  prestige pricing. 
A)  demand-backward pricing. 
B)  full-line pricing. 
C)  average-cost pricing. 
D)  odd-even pricing. 
E)  prestige pricing.

Question 12

"Marginal cost" is:

Accepted Answer

A)  always less than average variable cost. 
B)  more affected by fixed costs than by variable costs. 
C)  the change in total cost that results from producing one more unit. 
D)  All of the above. 
E)  None of the above. 
A)  always less than average variable cost. 
B)  more affected by fixed costs than by variable costs. 
C)  the change in total cost that results from producing one more unit. 
D)  All of the above. 
E)  None of the above.

Question 13

Marginal revenue is always positive.

Accepted Answer

A) True 
 B)False

Question 14

Sequential price reductions and clearance sales are the same thing.

Accepted Answer

A) True 
 B)False

Question 15

An automobile manufacturer charges a higher price for its "hybrid" car that runs on both electricity and gasoline than it charges for a car that runs on only gasoline. The manufacturer contends that the consumer will save money with the hybrid car in the long run because the money saved on gasoline will more than cover the price differential between the hybrid car and a regular car. This manufacturer is using:

Accepted Answer

A)  Price leadership. 
B)  Price lining. 
C)  Value in use pricing. 
D)  Psychological pricing. 
E)  Reference pricing. 
A)  Price leadership. 
B)  Price lining. 
C)  Value in use pricing. 
D)  Psychological pricing. 
E)  Reference pricing.

Question 16

Which of the following statements concerning "reference prices" is FALSE?

Accepted Answer

A)  A reference price is the price consumers expect to pay for an item. 
B)  Retailers sometimes want consumers to use the manufacturer's list price as the reference price even though their actual retail selling price is lower. 
C)  Different customers may have different reference prices for the same type of purchase. 
D)  Leader pricing is normally used with products for which consumers do not have a specific reference price. 
E)  None of the above is false. 
A)  A reference price is the price consumers expect to pay for an item. 
B)  Retailers sometimes want consumers to use the manufacturer's list price as the reference price even though their actual retail selling price is lower. 
C)  Different customers may have different reference prices for the same type of purchase. 
D)  Leader pricing is normally used with products for which consumers do not have a specific reference price. 
E)  None of the above is false.

The big problem with average-cost pricing is that:

Online auctions (on the Internet) are becoming very popular as a way to determine how much customers are willing to pay for a product.

Alex's Knot Shop prices its ties at $5 intervals from $10 to $25 because most customers find these prices appealing and easier to compare. This is:

Which of the following observations is true?

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?

Henry has classified the following items under variable costs. Which item has he classified incorrectly?

Total fixed costs do not change when output increases.

"Average-cost pricing":

Which of the following pricing approaches specifically considers the concept of elasticity of demand?

"Marginal cost" is:

Marginal revenue is always positive.

Sequential price reductions and clearance sales are the same thing.

Which of the following statements concerning "reference prices" is FALSE?

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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Exam 18: Price Setting in the Business World

The big problem with average-cost pricing is that:

Online auctions (on the Internet) are becoming very popular as a way to determine how much customers are willing to pay for a product.

Alex's Knot Shop prices its ties at $5 intervals from $10 to $25 because most customers find these prices appealing and easier to compare. This is:

Which of the following observations is true?

Henry has classified the following items under variable costs. Which item has he classified incorrectly?

Total fixed costs do not change when output increases.

"Average-cost pricing":

Which of the following pricing approaches specifically considers the concept of elasticity of demand?

"Marginal cost" is:

Marginal revenue is always positive.

Sequential price reductions and clearance sales are the same thing.

Which of the following statements concerning "reference prices" is FALSE?

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

Filters