Question 1

Which of the following prices is most likely to be seen if a firm is using odd-even pricing?

Accepted Answer

A)  $9.00 
B)  $2.03 
C)  $6.60 
D)  $99.95 
E)  $100.00 
A)  $9.00 
B)  $2.03 
C)  $6.60 
D)  $99.95 
E)  $100.00

Question 2

Most retailers and wholesalers set prices by using a different markup percent for each different product carried.

Accepted Answer

A) True 
 B)False

Question 3

A typical break-even analysis assumes that:

Accepted Answer

A)  the total revenue curve is a straight line. 
B)  the demand curve faced by the firm is horizontal. 
C)  the average variable cost is the same at different levels of output. 
D)  All of the above. 
E)  None of the above. 
A)  the total revenue curve is a straight line. 
B)  the demand curve faced by the firm is horizontal. 
C)  the average variable cost is the same at different levels of output. 
D)  All of the above. 
E)  None of the above.

Question 4

Customers are likely to be more price sensitive when:

Accepted Answer

A)  the total expenditure is great. 
B)  they have to pay the bill themselves. 
C)  the end benefit isn't very significant. 
D)  they haven't yet spent any money related to the purchase. 
E)  All of the above. 
A)  the total expenditure is great. 
B)  they have to pay the bill themselves. 
C)  the end benefit isn't very significant. 
D)  they haven't yet spent any money related to the purchase. 
E)  All of the above.

Question 5

A good marketing manager for a producer knows that the most profitable price and level of output:

Accepted Answer

A)  is where the positive difference between the total revenue and total cost curves is the greatest. 
B)  is where the difference between marginal revenue and marginal cost is the greatest. 
C)  is where total revenue equals total cost. 
D)  is where marginal revenue is maximized. 
E)  Both A and C are true. 
A)  is where the positive difference between the total revenue and total cost curves is the greatest. 
B)  is where the difference between marginal revenue and marginal cost is the greatest. 
C)  is where total revenue equals total cost. 
D)  is where marginal revenue is maximized. 
E)  Both A and C are true.

Question 6

Given the following data, compute the BEP in DOLLARS: Selling price = $2.00
Variable cost = $1.00
Fixed cost = $150,000

Accepted Answer

A)  $300,000 
B)  $400,000 
C)  $100,000 
D)  $200,000 
E)  $50,000 
A)  $300,000 
B)  $400,000 
C)  $100,000 
D)  $200,000 
E)  $50,000

Question 7

A "markup chain" can be used to calculate the price structure in a whole channel.

Accepted Answer

A) True 
 B)False

Question 8

The sole objective of leader pricing is to sell large quantities of the leader items.

Accepted Answer

A) True 
 B)False

Question 9

"Demand-backward" pricing:

Accepted Answer

A)  starts with an acceptable final consumer price and works backward to what producers can charge. 
B)  ignores demand estimates. 
C)  is only sensible when the channel captain is a large retailer. 
D)  is an average-cost pricing approach. 
E)  All of the above. 
A)  starts with an acceptable final consumer price and works backward to what producers can charge. 
B)  ignores demand estimates. 
C)  is only sensible when the channel captain is a large retailer. 
D)  is an average-cost pricing approach. 
E)  All of the above.

Question 10

There is only one price that will be profitable for firms with down-sloping demand curves.

Accepted Answer

A) True 
 B)False

Question 11

A paving contractor wants to work on road construction contracts administered and paid for by the state government. The contractor submits a sealed proposal to the state department of transportation for each construction job. The proposal contains a description of how the contractor will fulfill the specifications for the job at a specified price. The contractor is engaging in:

Accepted Answer

A)  Odd-even pricing. 
B)  Prestige pricing. 
C)  Leader pricing. 
D)  Bid pricing. 
E)  Price lining. 
A)  Odd-even pricing. 
B)  Prestige pricing. 
C)  Leader pricing. 
D)  Bid pricing. 
E)  Price lining.

Question 12

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 service organization's average cost for the printed tennis balls it buys from Sports Depot?

Accepted Answer

A)  $.50 
B)  $.75 
C)  $.95 
D)  $1.50 
E)  $2.00 
A)  $.50 
B)  $.75 
C)  $.95 
D)  $1.50 
E)  $2.00

Question 13

Trying to find the most profitable price and quantity to produce:

Accepted Answer

A)  requires average-cost pricing. 
B)  requires an estimate of the firm's demand curve. 
C)  is easy once the average fixed cost is known. 
D)  is only sensible if demand estimates are exact. 
E)  All of the above are true. 
A)  requires average-cost pricing. 
B)  requires an estimate of the firm's demand curve. 
C)  is easy once the average fixed cost is known. 
D)  is only sensible if demand estimates are exact. 
E)  All of the above are true.

Question 14

A computer store regularly advertises a very low price for a well-known brand of disks. When the customers come in, however, the salespeople point out the disadvantages of this particular brand and try to persuade them to buy other disks at much higher prices. This retailer is using:

Accepted Answer

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

Question 15

Competition needs to be considered when adding in overhead and profit for a bid price.

Accepted Answer

A) True 
 B)False

Question 16

Blue Ridge Weavers wants to set its selling price on an item so that the retail list price will be $50--taking into account the usual markups of 10 percent at wholesale and 30 percent at retail. At what price should Blue Ridge Weavers sell the item?

Accepted Answer

A)  $32.50 
B)  $31.50 
C)  $35.00 
D)  $34.00 
E)  $38.00 
A)  $32.50 
B)  $31.50 
C)  $35.00 
D)  $34.00 
E)  $38.00

Question 17

The major disadvantage of price lining is that it is complicated for both clerks and customers.

Accepted Answer

A) True 
 B)False

Question 18

If a supermarket runs an ad for a gallon of milk in the local newspaper at a price that many consumers will recognize as a low price for this product, this is an example of:

Accepted Answer

A)  Reference pricing 
B)  Price lining 
C)  Bundle pricing 
D)  Leader pricing 
E)  Bait pricing 
A)  Reference pricing 
B)  Price lining 
C)  Bundle pricing 
D)  Leader pricing 
E)  Bait pricing

Question 19

Value in use pricing

Accepted Answer

A)  does not vary from one product to another. 
B)  sets a price that will capture some of what customers will save by substituting the firm's product for the one currently being used. 
C)  merely sets the price at what customers expect to pay. 
D)  sets a rather high price to suggest high quality or high status. 
E)  is determined by online auctions. 
A)  does not vary from one product to another. 
B)  sets a price that will capture some of what customers will save by substituting the firm's product for the one currently being used. 
C)  merely sets the price at what customers expect to pay. 
D)  sets a rather high price to suggest high quality or high status. 
E)  is determined by online auctions.

Question 20

A firm in monopolistic competition has "marginal revenue" which:

Accepted Answer

A)  is always greater than its marginal cost. 
B)  is always shown above its related down-sloping demand curve when plotted on a graph. 
C)  is the change in total revenue which results from the sale of one more unit of a product. 
D)  is always positive (i.e., greater than zero). 
E)  All of the above. 
A)  is always greater than its marginal cost. 
B)  is always shown above its related down-sloping demand curve when plotted on a graph. 
C)  is the change in total revenue which results from the sale of one more unit of a product. 
D)  is always positive (i.e., greater than zero). 
E)  All of the above.

Exam 18: Price Setting in the Business World

Which of the following prices is most likely to be seen if a firm is using odd-even pricing?

Most retailers and wholesalers set prices by using a different markup percent for each different product carried.

A typical break-even analysis assumes that:

Customers are likely to be more price sensitive when:

A good marketing manager for a producer knows that the most profitable price and level of output:

Given the following data, compute the BEP in DOLLARS: Selling price = $2.00 Variable cost = $1.00 Fixed cost = $150,000

A "markup chain" can be used to calculate the price structure in a whole channel.

The sole objective of leader pricing is to sell large quantities of the leader items.

"Demand-backward" pricing:

There is only one price that will be profitable for firms with down-sloping demand curves.

Trying to find the most profitable price and quantity to produce:

A computer store regularly advertises a very low price for a well-known brand of disks. When the customers come in, however, the salespeople point out the disadvantages of this particular brand and try to persuade them to buy other disks at much higher prices. This retailer is using:

Competition needs to be considered when adding in overhead and profit for a bid price.

Blue Ridge Weavers wants to set its selling price on an item so that the retail list price will be $50--taking into account the usual markups of 10 percent at wholesale and 30 percent at retail. At what price should Blue Ridge Weavers sell the item?

The major disadvantage of price lining is that it is complicated for both clerks and customers.

If a supermarket runs an ad for a gallon of milk in the local newspaper at a price that many consumers will recognize as a low price for this product, this is an example of:

Value in use pricing

A firm in monopolistic competition has "marginal revenue" which:

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