Question 1

Average fixed costs:

Accepted Answer

A)  increase as the quantity produced increases. 
B)  decline for a while as output increases and then begin to rise again. 
C)  decrease steadily as output increases. 
D)  are less than average variable costs at all output levels. 
E)  None of these alternatives is correct. 
A)  increase as the quantity produced increases. 
B)  decline for a while as output increases and then begin to rise again. 
C)  decrease steadily as output increases. 
D)  are less than average variable costs at all output levels. 
E)  None of these alternatives is correct. C

Question 2

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 these alternatives is correct. 
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 these alternatives is correct. B

Question 3

Regarding pricing:

Accepted Answer

A)  the use of prestige and psychological pricing shows that most retailers do not consider demand when setting prices. 
B)  bait pricing tries to attract customers on the high end of a demand curve. 
C)  the FTC considers bait pricing a deceptive act and has banned its use in interstate commerce. 
D)  leader-priced items are priced very low to get customers into the store-not to sell these items. 
E)  All of these alternatives are correct. 
A)  the use of prestige and psychological pricing shows that most retailers do not consider demand when setting prices. 
B)  bait pricing tries to attract customers on the high end of a demand curve. 
C)  the FTC considers bait pricing a deceptive act and has banned its use in interstate commerce. 
D)  leader-priced items are priced very low to get customers into the store-not to sell these items. 
E)  All of these alternatives are correct. C

Question 4

Break-even analysis usually:

Accepted Answer

A)  makes it appear that any quantity can be sold at the assumed price. 
B)  suggests that profits will decrease rapidly as sales volume increases beyond the break-even point. 
C)  is quite accurate in maximizing profit. 
D)  assumes a U-shaped average variable cost curve. 
E)  None of these alternatives is correct. 
A)  makes it appear that any quantity can be sold at the assumed price. 
B)  suggests that profits will decrease rapidly as sales volume increases beyond the break-even point. 
C)  is quite accurate in maximizing profit. 
D)  assumes a U-shaped average variable cost curve. 
E)  None of these alternatives is correct.

Question 5

Customers are likely to be less price sensitive when:

Accepted Answer

A)  it is easy to compare prices. 
B)  someone else pays the bill. 
C)  the total expenditure is high. 
D)  there are substitutes available. 
E)  their share of the cost is high. 
A)  it is easy to compare prices. 
B)  someone else pays the bill. 
C)  the total expenditure is high. 
D)  there are substitutes available. 
E)  their share of the cost is high.

Question 6

The quarterly operating statement for a firm gives the following information: Number of pieces manufactured: 100
Number of pieces sold: 100
Total cost of goods sold: $800
Average cost of single piece: $5
Net sales: $1,000
It can be inferred that the firm's gross margin is _____.

Accepted Answer

A)  $92 
B)  $2 
C)  $1800 
D)  $200 
E)  $1818 
A)  $92 
B)  $2 
C)  $1800 
D)  $200 
E)  $1818

Question 7

Which of the following pricing tools combines both, the cost-oriented price setting approach as well as the demand-oriented price setting approach?

Accepted Answer

A)  Break-even analysis 
B)  Average-cost pricing 
C)  Markup pricing 
D)  Marginal analysis 
E)  Price sensitivity 
A)  Break-even analysis 
B)  Average-cost pricing 
C)  Markup pricing 
D)  Marginal analysis 
E)  Price sensitivity

Question 8

Walgreens Drugstores buys a bottle of shampoo from a wholesaler for $3.25 and then places it on a shelf with a price tag of $4.64. What is Walgreens' markup on selling price (expressed as a percent)?

Accepted Answer

A)  20 percent 
B)  26 percent 
C)  30 percent 
D)  43 percent 
E)  48 percent 
A)  20 percent 
B)  26 percent 
C)  30 percent 
D)  43 percent 
E)  48 percent

Question 9

At break-even point (BEP),

Accepted Answer

A)  the firm's total revenue will equal its variable costs. 
B)  the firm's total sales will equal its total production. 
C)  the firm's total cost will equal its total revenue. 
D)  the firm's total profits will equal its total cost. 
E)  the firm's total variable costs equal its total fixed cost. 
A)  the firm's total revenue will equal its variable costs. 
B)  the firm's total sales will equal its total production. 
C)  the firm's total cost will equal its total revenue. 
D)  the firm's total profits will equal its total cost. 
E)  the firm's total variable costs equal its total fixed cost.

Question 10

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 these alternatives is correct. 
A)  $32.00. 
B)  $56.00. 
C)  $48.00. 
D)  $30.00. 
E)  None of these alternatives is correct.

Question 11

Average-cost pricing works best in situations where demand conditions do not change a lot.

Accepted Answer

A) True 
 B)False

Question 12

The price most consumers expect to pay for a product is called the leader price.

Accepted Answer

A) True 
 B)False

Question 13

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 these alternatives is correct. 
A)  $10.00 
B)  $15.00 
C)  $15.75 
D)  $20.80 
E)  None of these alternatives is correct.

Question 14

A firm with a stockturn rate of 5 sells products that cost it $100,000. Its annual inventory carrying cost is about 20 percent of the inventory value. What is its annual inventory carrying cost?

Accepted Answer

A)  $5,000 
B)  $4,000 
C)  $8,000 
D)  $20,000 
E)  $100,000 
A)  $5,000 
B)  $4,000 
C)  $8,000 
D)  $20,000 
E)  $100,000

Question 15

A firm's total cost increases only when its variable cost increases.

Accepted Answer

A) True 
 B)False

Question 16

TopKnotch Mfg. Co. has a production cost of $280. It sells its product to a wholesaler for $400. The wholesaler then sells the item to retailers for $500 and the retailers sell the item for $1,000. Which of the following is true about this "markup chain?"

Accepted Answer

A)  The wholesaler's markup is 25 percent. 
B)  The manufacturer is taking a markup of 30 percent. 
C)  The retailers' markup is 100 percent. 
D)  None of these alternatives is true for this markup chain. 
A)  The wholesaler's markup is 25 percent. 
B)  The manufacturer is taking a markup of 30 percent. 
C)  The retailers' markup is 100 percent. 
D)  None of these alternatives is true for this markup chain.

Question 17

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 18

Break-even analysis evaluates whether the firm will be able to cover all its costs with a particular price.

Accepted Answer

A) True 
 B)False

Question 19

Wilson sells a basketball to a wholesaler for $16, and the wholesaler applies a 20 percent markup. A retailer then applies a 33.3 percent markup. The final selling price is:

Accepted Answer

A)  $24.53. 
B)  $30.00. 
C)  $25.59. 
D)  $28.00. 
E)  Cannot be determined from the information given. 
A)  $24.53. 
B)  $30.00. 
C)  $25.59. 
D)  $28.00. 
E)  Cannot be determined from the information given.

Question 20

Average fixed cost goes down as output decreases.

Accepted Answer

A) True 
 B)False

Average fixed costs:

The big problem with average-cost pricing is that:

Regarding pricing:

Break-even analysis usually:

Customers are likely to be less price sensitive when:

The quarterly operating statement for a firm gives the following information: Number of pieces manufactured: 100 Number of pieces sold: 100 Total cost of goods sold: $800 Average cost of single piece: $5 Net sales: $1,000 It can be inferred that the firm's gross margin is _____.

Which of the following pricing tools combines both, the cost-oriented price setting approach as well as the demand-oriented price setting approach?

Walgreens Drugstores buys a bottle of shampoo from a wholesaler for $3.25 and then places it on a shelf with a price tag of $4.64. What is Walgreens' markup on selling price (expressed as a percent)?

At break-even point (BEP),

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:

Average-cost pricing works best in situations where demand conditions do not change a lot.

The price most consumers expect to pay for a product is called the leader price.

A firm with a stockturn rate of 5 sells products that cost it $100,000. Its annual inventory carrying cost is about 20 percent of the inventory value. What is its annual inventory carrying cost?

A firm's total cost increases only when its variable cost increases.

TopKnotch Mfg. Co. has a production cost of $280. It sells its product to a wholesaler for $400. The wholesaler then sells the item to retailers for $500 and the retailers sell the item for $1,000. Which of the following is true about this "markup chain?"

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

Break-even analysis evaluates whether the firm will be able to cover all its costs with a particular price.

Wilson sells a basketball to a wholesaler for $16, and the wholesaler applies a 20 percent markup. A retailer then applies a 33.3 percent markup. The final selling price is:

Average fixed cost goes down as output decreases.

Marketings Value to Consumers, Firms, and Society

Marketing Strategy Planning

Evaluating Opportunities in the Changing Marketing Environment

Focusing Marketing Strategy With Segmentation and Positioning

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

Promotionintroduction 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

Filters

Exam 17: Price Setting in the Business World

Average fixed costs:

The big problem with average-cost pricing is that:

Regarding pricing:

Break-even analysis usually:

Customers are likely to be less price sensitive when:

The quarterly operating statement for a firm gives the following information: Number of pieces manufactured: 100 Number of pieces sold: 100 Total cost of goods sold: $800 Average cost of single piece: $5 Net sales: $1,000 It can be inferred that the firm's gross margin is _____.

Which of the following pricing tools combines both, the cost-oriented price setting approach as well as the demand-oriented price setting approach?

Walgreens Drugstores buys a bottle of shampoo from a wholesaler for $3.25 and then places it on a shelf with a price tag of $4.64. What is Walgreens' markup on selling price (expressed as a percent)?

At break-even point (BEP),

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:

Average-cost pricing works best in situations where demand conditions do not change a lot.

The price most consumers expect to pay for a product is called the leader price.

A firm with a stockturn rate of 5 sells products that cost it $100,000. Its annual inventory carrying cost is about 20 percent of the inventory value. What is its annual inventory carrying cost?

A firm's total cost increases only when its variable cost increases.

TopKnotch Mfg. Co. has a production cost of $280. It sells its product to a wholesaler for $400. The wholesaler then sells the item to retailers for $500 and the retailers sell the item for $1,000. Which of the following is true about this "markup chain?"

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

Break-even analysis evaluates whether the firm will be able to cover all its costs with a particular price.

Wilson sells a basketball to a wholesaler for $16, and the wholesaler applies a 20 percent markup. A retailer then applies a 33.3 percent markup. The final selling price is:

Average fixed cost goes down as output decreases.

Marketings Value to Consumers, Firms, and Society

Marketing Strategy Planning

Evaluating Opportunities in the Changing Marketing Environment

Focusing Marketing Strategy With Segmentation and Positioning

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

Promotionintroduction 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

Filters