Question 1

Even if a firm's average variable cost remains constant per unit, its average cost will increase as output increases.

Accepted Answer

A) True 
 B)False

Question 2

Spruce Pine Mfg. Co. has total fixed costs of $300,000 a year. The owner estimates that average variable costs for its product will be about $30 next year. The selling price to wholesalers will be $50. The break-even point is:

Accepted Answer

A)  6,000 units. 
B)  10,000 units. 
C)  12,000 units. 
D)  15,000 units. 
E)  None of these alternatives is correct. 
A)  6,000 units. 
B)  10,000 units. 
C)  12,000 units. 
D)  15,000 units. 
E)  None of these alternatives is correct.

Question 3

An intermediary seeking high profits should:

Accepted Answer

A)  use the lowest markup that will still cover selling expenses. 
B)  use price lining. 
C)  use high markups. 
D)  choose the markup which maximizes turnover. 
E)  try to find the markup level related to the most profitable price. 
A)  use the lowest markup that will still cover selling expenses. 
B)  use price lining. 
C)  use high markups. 
D)  choose the markup which maximizes turnover. 
E)  try to find the markup level related to the most profitable price.

Question 4

If a profit-oriented marketing manager doesn't know the exact shape of the firm's demand curve, marginal analysis:

Accepted Answer

A)  is useless. 
B)  may be useful anyway-because a profitable region usually surrounds the best price. 
C)  will suggest the same price as break-even analysis. 
D)  suggests that the only sensible approach is to follow the market leader. 
E)  None of these alternatives is true. 
A)  is useless. 
B)  may be useful anyway-because a profitable region usually surrounds the best price. 
C)  will suggest the same price as break-even analysis. 
D)  suggests that the only sensible approach is to follow the market leader. 
E)  None of these alternatives is true.

Question 5

"Full-line pricing" is setting prices for a whole line of products.

Accepted Answer

A) True 
 B)False

Question 6

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 7

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 these alternatives are correct. 
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 these alternatives are correct.

Question 8

The price per unit is $1.00. The average variable cost per unit is 60 cents. The total fixed cost is $20,000. Compute the break-even point.

Accepted Answer

A)  75,000 units 
B)  50,000 units 
C)  20,000 units 
D)  33,334 units 
E)  40,000 units 
A)  75,000 units 
B)  50,000 units 
C)  20,000 units 
D)  33,334 units 
E)  40,000 units

Question 9

The Horizons Cycle Shop bought 3 motorcycles for $2,100, and sold each one for $1,000. The markup percent was:

Accepted Answer

A)  33 1/3. 
B)  30. 
C)  142. 
D)  50. 
E)  There is not enough information to tell. 
A)  33 1/3. 
B)  30. 
C)  142. 
D)  50. 
E)  There is not enough information to tell.

Question 10

A marketing manager has just estimated that her firm's marginal revenue will become negative if a proposed price cut is made. This means that:

Accepted Answer

A)  demand must be very elastic. 
B)  marginal cost must be negative already. 
C)  the firm is in pure competition. 
D)  more units may be sold-but total revenue will be less than it would be at the higher price. 
E)  None of these-a firm's marginal revenue can't be negative. 
A)  demand must be very elastic. 
B)  marginal cost must be negative already. 
C)  the firm is in pure competition. 
D)  more units may be sold-but total revenue will be less than it would be at the higher price. 
E)  None of these-a firm's marginal revenue can't be negative.

Question 11

Regarding markups and turnover:

Accepted Answer

A)  high markups usually lead to high profits. 
B)  speeding turnover usually decreases profits. 
C)  items sold at low markups (e.g., 20 percent) cannot be profitable. 
D)  depending on the industry-a stockturn rate of 1 or 2 may be quite profitable. 
E)  All of these alternatives are correct. 
A)  high markups usually lead to high profits. 
B)  speeding turnover usually decreases profits. 
C)  items sold at low markups (e.g., 20 percent) cannot be profitable. 
D)  depending on the industry-a stockturn rate of 1 or 2 may be quite profitable. 
E)  All of these alternatives are correct.

Question 12

Which of the following statements is true about average cost-pricing?

Accepted Answer

A)  It can result in losses if actual sales are higher than expected. 
B)  It is more profitable if actual sales are lower than expected. 
C)  It does not take the demand curve into account when setting prices. 
D)  It works better in practice than it does in theory. 
E)  It can be used to set a price without an estimate of the quantity to be sold. 
A)  It can result in losses if actual sales are higher than expected. 
B)  It is more profitable if actual sales are lower than expected. 
C)  It does not take the demand curve into account when setting prices. 
D)  It works better in practice than it does in theory. 
E)  It can be used to set a price without an estimate of the quantity to be sold.

Question 13

A major problem with average-cost pricing is that it does not allow for cost variations at different levels of output.

Accepted Answer

A) True 
 B)False

Question 14

Marginal revenue is always positive.

Accepted Answer

A) True 
 B)False

Question 15

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

Accepted Answer

A) True 
 B)False

Question 16

If a retailer's annual stockturn rate shifted to 20 from 5, then selling products costing $100,000 would require ______________ rather than $20,000 in working capital to carry the needed inventory.

Accepted Answer

A)  $10,000 
B)  $80,000 
C)  $8,000 
D)  $500 
E)  $5,000 
A)  $10,000 
B)  $80,000 
C)  $8,000 
D)  $500 
E)  $5,000

Question 17

Mark is trying to determine his firm's average cost per unit of production. He finds that the cost for all labor and materials is $80,000 and fixed overhead expenses are $40,000. If the company produces 20,000 items in the time period, the average cost is

Accepted Answer

A)  $12. 
B)  $2. 
C)  $6. 
D)  $4. 
E)  $10. 
A)  $12. 
B)  $2. 
C)  $6. 
D)  $4. 
E)  $10.

Question 18

The production cost of an automobile component is $45. The producer takes a 10 percent markup and sells the product to the wholesaler. What is the wholesaler's cost?

Accepted Answer

A)  $45 
B)  $5 
C)  $10 
D)  $50 
E)  $60 
A)  $45 
B)  $5 
C)  $10 
D)  $50 
E)  $60

Question 19

At the point where marginal revenue (MR) equals marginal cost (MC), marginal profit is near zero.

Accepted Answer

A) True 
 B)False

Question 20

The Federal Trade Commission encourages bait pricing because it reduces the prices that consumers pay for products.

Accepted Answer

A) True 
 B)False

Even if a firm's average variable cost remains constant per unit, its average cost will increase as output increases.

Spruce Pine Mfg. Co. has total fixed costs of $300,000 a year. The owner estimates that average variable costs for its product will be about $30 next year. The selling price to wholesalers will be $50. The break-even point is:

An intermediary seeking high profits should:

If a profit-oriented marketing manager doesn't know the exact shape of the firm's demand curve, marginal analysis:

"Full-line pricing" is setting prices for a whole line of products.

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.

Price lining:

The price per unit is $1.00. The average variable cost per unit is 60 cents. The total fixed cost is $20,000. Compute the break-even point.

The Horizons Cycle Shop bought 3 motorcycles for $2,100, and sold each one for $1,000. The markup percent was:

A marketing manager has just estimated that her firm's marginal revenue will become negative if a proposed price cut is made. This means that:

Regarding markups and turnover:

Which of the following statements is true about average cost-pricing?

A major problem with average-cost pricing is that it does not allow for cost variations at different levels of output.

Marginal revenue is always positive.

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

If a retailer's annual stockturn rate shifted to 20 from 5, then selling products costing $100,000 would require ______________ rather than $20,000 in working capital to carry the needed inventory.

Mark is trying to determine his firm's average cost per unit of production. He finds that the cost for all labor and materials is $80,000 and fixed overhead expenses are $40,000. If the company produces 20,000 items in the time period, the average cost is

The production cost of an automobile component is $45. The producer takes a 10 percent markup and sells the product to the wholesaler. What is the wholesaler's cost?

At the point where marginal revenue (MR) equals marginal cost (MC), marginal profit is near zero.

The Federal Trade Commission encourages bait pricing because it reduces the prices that consumers pay for products.

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

Even if a firm's average variable cost remains constant per unit, its average cost will increase as output increases.

Spruce Pine Mfg. Co. has total fixed costs of $300,000 a year. The owner estimates that average variable costs for its product will be about $30 next year. The selling price to wholesalers will be $50. The break-even point is:

An intermediary seeking high profits should:

If a profit-oriented marketing manager doesn't know the exact shape of the firm's demand curve, marginal analysis:

"Full-line pricing" is setting prices for a whole line of products.

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.

Price lining:

The price per unit is $1.00. The average variable cost per unit is 60 cents. The total fixed cost is $20,000. Compute the break-even point.

The Horizons Cycle Shop bought 3 motorcycles for $2,100, and sold each one for $1,000. The markup percent was:

A marketing manager has just estimated that her firm's marginal revenue will become negative if a proposed price cut is made. This means that:

Regarding markups and turnover:

Which of the following statements is true about average cost-pricing?

A major problem with average-cost pricing is that it does not allow for cost variations at different levels of output.

Marginal revenue is always positive.

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

If a retailer's annual stockturn rate shifted to 20 from 5, then selling products costing $100,000 would require ______________ rather than $20,000 in working capital to carry the needed inventory.

Mark is trying to determine his firm's average cost per unit of production. He finds that the cost for all labor and materials is $80,000 and fixed overhead expenses are $40,000. If the company produces 20,000 items in the time period, the average cost is

The production cost of an automobile component is $45. The producer takes a 10 percent markup and sells the product to the wholesaler. What is the wholesaler's cost?

At the point where marginal revenue (MR) equals marginal cost (MC), marginal profit is near zero.

The Federal Trade Commission encourages bait pricing because it reduces the prices that consumers pay for products.

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