Question 1

The change in a company's total cost from producing one more unit is called:

Accepted Answer

A)  average total cost. 
B)  marginal cost. 
C)  average fixed cost. 
D)  variable cost. 
E)  average variable cost. 
A)  average total cost. 
B)  marginal cost. 
C)  average fixed cost. 
D)  variable cost. 
E)  average variable cost.

Question 2

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)  the target return on investment is earned. 
D)  total cost just equals total revenue. 
E)  Both C and D are true. 
A)  maximum profit is earned. 
B)  total variable cost just equals total revenue. 
C)  the target return on investment is earned. 
D)  total cost just equals total revenue. 
E)  Both C and D are true.

Question 3

A _____ is a dollar amount added to the cost of products to get the selling price.

Accepted Answer

A)  markup 
B)  rebate 
C)  list price 
D)  spiff 
E)  deal 
A)  markup 
B)  rebate 
C)  list price 
D)  spiff 
E)  deal

Question 4

Setting prices by adding a "reasonable" markup to a firm's average cost is called:

Accepted Answer

A)  break-even pricing. 
B)  add-on pricing. 
C)  target-return pricing. 
D)  average-cost pricing. 
E)  marginal analysis. 
A)  break-even pricing. 
B)  add-on pricing. 
C)  target-return pricing. 
D)  average-cost pricing. 
E)  marginal analysis.

Question 5

Leader pricing:

Accepted Answer

A)  seeks a big profit on the leader items. 
B)  is usually used for a retailer's major product line--to give it a competitive advantage. 
C)  is different from bait pricing in that the marketing manager really expects to sell leader priced items. 
D)  assumes that some part of the demand curve is upward sloping to the right. 
E)  is banned in interstate commerce. 
A)  seeks a big profit on the leader items. 
B)  is usually used for a retailer's major product line--to give it a competitive advantage. 
C)  is different from bait pricing in that the marketing manager really expects to sell leader priced items. 
D)  assumes that some part of the demand curve is upward sloping to the right. 
E)  is banned in interstate commerce.

Question 6

In oligopolies, a price leader usually emerges and sets a price for all to follow.

Accepted Answer

A) True 
 B)False

Question 7

A "price leader" in an oligopoly should know that:

Accepted Answer

A)  all firms in this product-market probably will have the same costs. 
B)  setting the price at the level of the kink will maximize profits. 
C)  competitors are sure to raise their prices if he raises his price. 
D)  All of the above. 
E)  None of the above. 
A)  all firms in this product-market probably will have the same costs. 
B)  setting the price at the level of the kink will maximize profits. 
C)  competitors are sure to raise their prices if he raises his price. 
D)  All of the above. 
E)  None of the above.

Question 8

As output increases, average cost decreases continually because

Accepted Answer

A)  average variable cost per unit is increasing. 
B)  average fixed cost per unit is decreasing. 
C)  total variable cost is increasing. 
D)  total variable cost is decreasing. 
E)  total fixed cost is reducing. 
A)  average variable cost per unit is increasing. 
B)  average fixed cost per unit is decreasing. 
C)  total variable cost is increasing. 
D)  total variable cost is decreasing. 
E)  total fixed cost is reducing.

Question 9

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 10

Demand-backward pricing is commonly used by producers of consumer products, especially shopping products such as women's clothing and appliances.

Accepted Answer

A) True 
 B)False

Question 11

Marginal analysis focuses on the changes in average fixed cost per unit and average variable cost from selling one more unit to find the most profitable price and quantity.

Accepted Answer

A) True 
 B)False

Question 12

An advantage of average-cost pricing is that it considers competitors' costs and prices.

Accepted Answer

A) True 
 B)False

Question 13

A company has total fixed cost of $120,000. Its variable cost per unit is $2.00 and its price per unit is $3.50. The break-even point in units is:

Accepted Answer

A)  60,000. 
B)  80,000. 
C)  34,286. 
D)  21,818. 
E)  Cannot be determined from the information provided. 
A)  60,000. 
B)  80,000. 
C)  34,286. 
D)  21,818. 
E)  Cannot be determined from the information provided.

Question 14

Break-even analysis can show:

Accepted Answer

A)  which prices will not be profitable. 
B)  the most profitable price for a firm's product. 
C)  how the firm's variable cost per unit will drop as output rises. 
D)  the firm's most profitable output level. 
E)  when a firm should cut its price to increase sales. 
A)  which prices will not be profitable. 
B)  the most profitable price for a firm's product. 
C)  how the firm's variable cost per unit will drop as output rises. 
D)  the firm's most profitable output level. 
E)  when a firm should cut its price to increase sales.

Question 15

Marginal analysis:

Accepted Answer

A)  can be very useful if a firm's pricing objective is profit maximization. 
B)  focuses on the last unit which will be sold. 
C)  can be used to find the most profitable price and quantity. 
D)  can help find where marginal revenue and marginal cost are equal. 
E)  All of the above. 
A)  can be very useful if a firm's pricing objective is profit maximization. 
B)  focuses on the last unit which will be sold. 
C)  can be used to find the most profitable price and quantity. 
D)  can help find where marginal revenue and marginal cost are equal. 
E)  All of the above.

Question 16

"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)  All of the above. 
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)  All of the above.

Question 17

Break-even analysis

Accepted Answer

A)  assumes that the demand curve is perfectly horizontal at the selling price. 
B)  reveals the price that will earn the highest profit. 
C)  cannot be used for comparing several different alternatives (for example, assuming different prices). 
D)  all of the above. 
E)  none of the above. 
A)  assumes that the demand curve is perfectly horizontal at the selling price. 
B)  reveals the price that will earn the highest profit. 
C)  cannot be used for comparing several different alternatives (for example, assuming different prices). 
D)  all of the above. 
E)  none of the above.

Question 18

The idea that people will pay extra for "quality" and status is the idea behind

Accepted Answer

A)  price lining. 
B)  average cost approaches to pricing. 
C)  penetration skimming. 
D)  prestige pricing. 
E)  psychological pricing. 
A)  price lining. 
B)  average cost approaches to pricing. 
C)  penetration skimming. 
D)  prestige pricing. 
E)  psychological pricing.

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? 
E)  What is break-even pricing? 
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? 
E)  What is break-even pricing?

Question 20

Vanguard Corp. uses target return pricing and is hoping to earn a 20 percent return on its investment of $1 million during the coming year. Vanguard sold 30,000 units last year and hopes the same quantity will be sold this year. If Vanguard has fixed costs of $250,000 and variable costs of $10 per unit, what price should the firm set to achieve its target return?

Accepted Answer

A)  $58.30 
B)  $60.00 
C)  $20.00 
D)  $30.00 
E)  $25.00 
A)  $58.30 
B)  $60.00 
C)  $20.00 
D)  $30.00 
E)  $25.00

Exam 18: Price Setting in the Business World

The change in a company's total cost from producing one more unit is called:

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

A _____ is a dollar amount added to the cost of products to get the selling price.

Setting prices by adding a "reasonable" markup to a firm's average cost is called:

Leader pricing:

In oligopolies, a price leader usually emerges and sets a price for all to follow.

A "price leader" in an oligopoly should know that:

As output increases, average cost decreases continually because

Average cost is obtained by dividing:

Demand-backward pricing is commonly used by producers of consumer products, especially shopping products such as women's clothing and appliances.

Marginal analysis focuses on the changes in average fixed cost per unit and average variable cost from selling one more unit to find the most profitable price and quantity.

An advantage of average-cost pricing is that it considers competitors' costs and prices.

A company has total fixed cost of $120,000. Its variable cost per unit is $2.00 and its price per unit is $3.50. The break-even point in units is:

Break-even analysis can show:

Marginal analysis:

"Stockturn rate" means:

Break-even analysis

The idea that people will pay extra for "quality" and status is the idea behind

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

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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