Question 1

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 2

Ignoring demand is the major weakness of average-cost pricing.

Accepted Answer

A) True 
 B)False

Question 3

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 4

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)  profits will grow continually beyond the break-even point. 
E)  All of these are assumptions of a typical break-even analysis. 
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)  profits will grow continually beyond the break-even point. 
E)  All of these are assumptions of a typical break-even analysis.

Question 5

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? 
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?

Question 6

Total variable cost:

Accepted Answer

A)  is zero when the quantity produced is zero. 
B)  is the sum of those changing expenses that are closely related to output. 
C)  may increase as the quantity produced is increased. 
D)  All of these alternatives are correct. 
A)  is zero when the quantity produced is zero. 
B)  is the sum of those changing expenses that are closely related to output. 
C)  may increase as the quantity produced is increased. 
D)  All of these alternatives are correct.

Question 7

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)  total profit just equals total cost. 
D)  total cost just equals total revenue. 
E)  None of these alternatives is correct. 
A)  maximum profit is earned. 
B)  total variable cost just equals total revenue. 
C)  total profit just equals total cost. 
D)  total cost just equals total revenue. 
E)  None of these alternatives is correct.

Question 8

The total fixed costs are $10,000, and the average variable cost per unit is $3. For a production volume of 10,000 units, the average cost per unit is

Accepted Answer

A)  $3.00 
B)  $1.00 
C)  $4.00 
D)  $3.30 
E)  $10.00 
A)  $3.00 
B)  $1.00 
C)  $4.00 
D)  $3.30 
E)  $10.00

Question 9

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 10

Michael Soles-owner of Soles Shoe Store-recently discovered that shoe stores in his trading area have an average markup of 40 percent. Upon investigation, Michael found that his average markup is $15 on shoes that he sells for $45. This suggests that:

Accepted Answer

A)  Michael has higher-than-average costs. 
B)  Michael is pricing his products higher than his competitors. 
C)  Michael is taking a smaller average markup than his competitors. 
D)  Michael has a relatively high stockturn rate. 
E)  Michael's markups in dollar amounts are about the same as his competitors. 
A)  Michael has higher-than-average costs. 
B)  Michael is pricing his products higher than his competitors. 
C)  Michael is taking a smaller average markup than his competitors. 
D)  Michael has a relatively high stockturn rate. 
E)  Michael's markups in dollar amounts are about the same as his competitors.

Question 11

Some retailers commonly use prices that end in certain numbers. They seem to assume that their customers see prices with these numbers as substantially lower. This is:

Accepted Answer

A)  odd-even pricing. 
B)  demand-backward pricing. 
C)  leader pricing. 
D)  prestige pricing. 
E)  psychological pricing. 
A)  odd-even pricing. 
B)  demand-backward pricing. 
C)  leader pricing. 
D)  prestige pricing. 
E)  psychological pricing.

Question 12

A firm using sequential price reductions starts with a high price but plans to reduce that price step-by-step until its product is sold out.

Accepted Answer

A) True 
 B)False

Question 13

Break-even charts usually assume that:

Accepted Answer

A)  total cost and total revenue curves are straight lines. 
B)  profits will grow continually beyond the break-even point. 
C)  the break-even point is reached when total cost just equals total revenue. 
D)  any quantity can be sold at the assumed price. 
E)  All of these are assumptions of break-even charts. 
A)  total cost and total revenue curves are straight lines. 
B)  profits will grow continually beyond the break-even point. 
C)  the break-even point is reached when total cost just equals total revenue. 
D)  any quantity can be sold at the assumed price. 
E)  All of these are assumptions of break-even charts.

Question 14

Average-cost pricing:

Accepted Answer

A)  May be very profitable if actual sales are higher than expected. 
B)  May lose money for the firm if actual sales are less than expected. 
C)  Does not take demand into account in setting prices. 
D)  Is simple in theory but often fails in practice. 
E)  All of these alternatives are correct. 
A)  May be very profitable if actual sales are higher than expected. 
B)  May lose money for the firm if actual sales are less than expected. 
C)  Does not take demand into account in setting prices. 
D)  Is simple in theory but often fails in practice. 
E)  All of these alternatives are correct.

Question 15

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)  markdown pricing. 
E)  None of these considers the concept of elasticity of demand. 
A)  break-even pricing. 
B)  average-cost pricing. 
C)  markup pricing. 
D)  markdown pricing. 
E)  None of these considers the concept of elasticity of demand.

Question 16

If Radio Shack offers several models of clock radios at each $5 increment between $19.95 and $49.95, it is probably practicing odd-even pricing.

Accepted Answer

A) True 
 B)False

Question 17

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

Accepted Answer

A) True 
 B)False

Question 18

A major advantage of average-cost pricing is that it assumes costs remain constant at different levels of output.

Accepted Answer

A) True 
 B)False

Question 19

A retailer buys a particular product for $4. To make a profit, the retailer adds $2 to cover operating expenses and provide a profit. The percentage markup on the $6 selling price is

Accepted Answer

A)  50 percent. 
B)  33.33 percent. 
C)  100 percent. 
D)  20 percent. 
E)  25 percent. 
A)  50 percent. 
B)  33.33 percent. 
C)  100 percent. 
D)  20 percent. 
E)  25 percent.

Question 20

The "rule for maximizing profit" is that a producer should set a price such that:

Accepted Answer

A)  the difference between marginal revenue and marginal cost is the greatest. 
B)  marginal revenue is at a maximum. 
C)  average cost is at a minimum. 
D)  marginal profit is maximized. 
E)  marginal cost is just less than or equal to marginal revenue. 
A)  the difference between marginal revenue and marginal cost is the greatest. 
B)  marginal revenue is at a maximum. 
C)  average cost is at a minimum. 
D)  marginal profit is maximized. 
E)  marginal cost is just less than or equal to marginal revenue.

As output increases, average cost decreases continually because

Ignoring demand is the major weakness of average-cost pricing.

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

A typical break-even analysis assumes that:

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

Total variable cost:

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

The total fixed costs are $10,000, and the average variable cost per unit is $3. For a production volume of 10,000 units, the average cost per unit is

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

Michael Soles-owner of Soles Shoe Store-recently discovered that shoe stores in his trading area have an average markup of 40 percent. Upon investigation, Michael found that his average markup is $15 on shoes that he sells for $45. This suggests that:

Some retailers commonly use prices that end in certain numbers. They seem to assume that their customers see prices with these numbers as substantially lower. This is:

A firm using sequential price reductions starts with a high price but plans to reduce that price step-by-step until its product is sold out.

Break-even charts usually assume that:

Average-cost pricing:

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

If Radio Shack offers several models of clock radios at each $5 increment between $19.95 and $49.95, it is probably practicing odd-even pricing.

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

A major advantage of average-cost pricing is that it assumes costs remain constant at different levels of output.

A retailer buys a particular product for $4. To make a profit, the retailer adds $2 to cover operating expenses and provide a profit. The percentage markup on the $6 selling price is

The "rule for maximizing profit" is that a producer should set a price such that:

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

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Exam 17: Price Setting in the Business World

As output increases, average cost decreases continually because

Ignoring demand is the major weakness of average-cost pricing.

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

A typical break-even analysis assumes that:

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

Total variable cost:

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

The total fixed costs are $10,000, and the average variable cost per unit is $3. For a production volume of 10,000 units, the average cost per unit is

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

Michael Soles-owner of Soles Shoe Store-recently discovered that shoe stores in his trading area have an average markup of 40 percent. Upon investigation, Michael found that his average markup is $15 on shoes that he sells for $45. This suggests that:

Some retailers commonly use prices that end in certain numbers. They seem to assume that their customers see prices with these numbers as substantially lower. This is:

A firm using sequential price reductions starts with a high price but plans to reduce that price step-by-step until its product is sold out.

Break-even charts usually assume that:

Average-cost pricing:

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

If Radio Shack offers several models of clock radios at each $5 increment between $19.95 and $49.95, it is probably practicing odd-even pricing.

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

A major advantage of average-cost pricing is that it assumes costs remain constant at different levels of output.

A retailer buys a particular product for $4. To make a profit, the retailer adds $2 to cover operating expenses and provide a profit. The percentage markup on the $6 selling price is

The "rule for maximizing profit" is that a producer should set a price such that:

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