Question 1

Setting a few price levels for a product line and then marking all items at these price levels is:

Accepted Answer

A)  leader pricing. 
B)  price lining. 
C)  product-bundle pricing. 
D)  penetration pricing. 
E)  odd-even pricing. 
A)  leader pricing. 
B)  price lining. 
C)  product-bundle pricing. 
D)  penetration pricing. 
E)  odd-even pricing.

Question 2

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 3

Which of the following statements concerning "negotiated price" is FALSE?

Accepted Answer

A)  The negotiated price is set by bargaining between the buyer and the seller. 
B)  Negotiated pricing is not a demand-oriented approach. 
C)  Bargaining may involve the whole marketing mix, not just the price level. 
D)  Sellers must know their costs to negotiate effectively. 
E)  None of the above is false. 
A)  The negotiated price is set by bargaining between the buyer and the seller. 
B)  Negotiated pricing is not a demand-oriented approach. 
C)  Bargaining may involve the whole marketing mix, not just the price level. 
D)  Sellers must know their costs to negotiate effectively. 
E)  None of the above is false.

Question 4

Auctions have not proved very effective in determining how much potential customers will (or will not) pay for a product.

Accepted Answer

A) True 
 B)False

Question 5

With regard to bid pricing, a marketing manager should be aware that:

Accepted Answer

A)  the same overhead charges and profit rates usually apply to all bids. 
B)  bids are usually based on inspection. 
C)  a big problem is estimating all the costs--including the variable and fixed costs that apply to a particular job. 
D)  e-commerce is of little use in bid pricing. 
E)  all of the above are correct. 
A)  the same overhead charges and profit rates usually apply to all bids. 
B)  bids are usually based on inspection. 
C)  a big problem is estimating all the costs--including the variable and fixed costs that apply to a particular job. 
D)  e-commerce is of little use in bid pricing. 
E)  all of the above are correct.

Question 6

If a service firm sets a specific price for each possible job--rather than setting a price which applies for all potential customers--it is most likely using:

Accepted Answer

A)  product-bundle pricing. 
B)  a one-price policy. 
C)  price lining. 
D)  average-cost pricing. 
E)  bid pricing. 
A)  product-bundle pricing. 
B)  a one-price policy. 
C)  price lining. 
D)  average-cost pricing. 
E)  bid pricing.

Question 7

The number of times an intermediary's average inventory is sold in a year is called the:

Accepted Answer

A)  stockturn rate. 
B)  asset factor. 
C)  inventory ratio. 
D)  markup ratio. 
E)  ROI (return on inventory). 
A)  stockturn rate. 
B)  asset factor. 
C)  inventory ratio. 
D)  markup ratio. 
E)  ROI (return on inventory).

Question 8

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 9

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

Question 10

Value in use pricing considers what a customer will save by buying a product.

Accepted Answer

A) True 
 B)False

Question 11

Bid pricing is offering a specific price for each possible job, rather than setting a price that applies to all potential customers.

Accepted Answer

A) True 
 B)False

Question 12

Items with lower markups may be more profitable--if the stockturn is higher.

Accepted Answer

A) True 
 B)False

Question 13

All of the following observations concerning markups are true except

Accepted Answer

A)  they guide pricing by intermediaries. 
B)  they are used by most retailers and wholesalers to set prices. 
C)  they are a cost-oriented price setting approach. 
D)  they are usually stated as dollar amounts. 
E)  they are related to selling price for convenience. 
A)  they guide pricing by intermediaries. 
B)  they are used by most retailers and wholesalers to set prices. 
C)  they are a cost-oriented price setting approach. 
D)  they are usually stated as dollar amounts. 
E)  they are related to selling price for convenience.

Question 14

At zero output, total variable cost is

Accepted Answer

A)  higher than total fixed cost. 
B)  equal to total fixed cost. 
C)  unity. 
D)  zero. 
E)  substantial. 
A)  higher than total fixed cost. 
B)  equal to total fixed cost. 
C)  unity. 
D)  zero. 
E)  substantial.

Question 15

_____ is setting a few price levels for a product line and then marking all items at these prices.

Accepted Answer

A)  Price following 
B)  Bait pricing 
C)  Odd-even pricing 
D)  Price lining 
E)  Price leading 
A)  Price following 
B)  Bait pricing 
C)  Odd-even pricing 
D)  Price lining 
E)  Price leading

Question 16

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)  Target return approach 
C)  Average-cost pricing method 
D)  Marginal analysis 
E)  Standard markup method 
A)  Break-even analysis 
B)  Target return approach 
C)  Average-cost pricing method 
D)  Marginal analysis 
E)  Standard markup method

Question 17

If a company raises its price per unit, but keeps total fixed cost and variable cost per unit the same, the break-even point will be lower.

Accepted Answer

A) True 
 B)False

Question 18

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.
-How could Randy Todd use break-even analysis with his tennis racquet decision?

Accepted Answer

A)  To reveal the combination of quantity and price that gives the highest profit. 
B)  To set the most profitable price. 
C)  To estimate future sales. 
D)  To compare the breakeven quantity for different prices with the likely level of demand. 
E)  To determine Wholesale Supply's likely selling price. 
A)  To reveal the combination of quantity and price that gives the highest profit. 
B)  To set the most profitable price. 
C)  To estimate future sales. 
D)  To compare the breakeven quantity for different prices with the likely level of demand. 
E)  To determine Wholesale Supply's likely selling price.

Question 19

The greater the total expenditure, the less price sensitive customers are.

Accepted Answer

A) True 
 B)False

Question 20

Price lining:

Accepted Answer

A)  is quite similar to prestige pricing. 
B)  can simplify both buying and selling. 
C)  tends to reduce turnover rates. 
D)  results in larger inventories. 
E)  All of the above. 
A)  is quite similar to prestige pricing. 
B)  can simplify both buying and selling. 
C)  tends to reduce turnover rates. 
D)  results in larger inventories. 
E)  All of the above.

Exam 18: Price Setting in the Business World

Setting a few price levels for a product line and then marking all items at these price levels is:

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

Which of the following statements concerning "negotiated price" is FALSE?

Auctions have not proved very effective in determining how much potential customers will (or will not) pay for a product.

With regard to bid pricing, a marketing manager should be aware that:

If a service firm sets a specific price for each possible job--rather than setting a price which applies for all potential customers--it is most likely using:

The number of times an intermediary's average inventory is sold in a year is called the:

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:

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?

Value in use pricing considers what a customer will save by buying a product.

Bid pricing is offering a specific price for each possible job, rather than setting a price that applies to all potential customers.

Items with lower markups may be more profitable--if the stockturn is higher.

All of the following observations concerning markups are true except

At zero output, total variable cost is

_____ is setting a few price levels for a product line and then marking all items at these prices.

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

If a company raises its price per unit, but keeps total fixed cost and variable cost per unit the same, the break-even point will be lower.

The greater the total expenditure, the less price sensitive customers are.

Price lining:

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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