Question 1

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. E

Question 2

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 these alternatives are correct. 
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 these alternatives are correct. E

Question 3

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. A

Question 4

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 5

Which of the following observations is true?

Accepted Answer

A)  The break-even point can also be figured in dollars. 
B)  For a single price, multiple break-even points are possible. 
C)  Beyond the break-even point, profits will grow continually. 
D)  At break-even point, a firm will cover only its variable costs. 
E)  At break-even point, a firm will cover only its fixed costs. 
A)  The break-even point can also be figured in dollars. 
B)  For a single price, multiple break-even points are possible. 
C)  Beyond the break-even point, profits will grow continually. 
D)  At break-even point, a firm will cover only its variable costs. 
E)  At break-even point, a firm will cover only its fixed costs.

Question 6

Prestige pricing involves setting a rather high price because the product has a normal down-sloping demand curve.

Accepted Answer

A) True 
 B)False

Question 7

_____ involves setting one price for a set of products.

Accepted Answer

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

Question 8

"Demand-backward pricing" involves a producer estimating an acceptable final consumer price and working backward to determine what the producer can charge in the channel.

Accepted Answer

A) True 
 B)False

Question 9

Good Health Co. has set a suggested retail list price of $40 on its new vitamin tablets on the assumption that its target market will find the product attractive at this price. From this suggested retail list price, Good Health has subtracted its usual chain of markups for wholesalers and retailers to obtain its own selling price of $17. This is:

Accepted Answer

A)  demand-backward pricing. 
B)  full-line pricing. 
C)  average-cost pricing. 
D)  odd-even pricing. 
E)  prestige pricing. 
A)  demand-backward pricing. 
B)  full-line pricing. 
C)  average-cost pricing. 
D)  odd-even pricing. 
E)  prestige pricing.

Question 10

A CVS drugstore that is trying to attract customers by advertising a special bargain price on a popular brand of cold remedy during the cold season is using:

Accepted Answer

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

Question 11

If a retailer adds a 25-cent markup to a product which costs the retailer $1.00, then according to the text the retailer's markup is 20 percent.

Accepted Answer

A) True 
 B)False

Question 12

With bid pricing, it is best for the bidder to use the same overhead and profit rates on all jobs since that will make it easy to estimate costs and eventually will increase profits.

Accepted Answer

A) True 
 B)False

Question 13

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.
If SPI produces tennis racquets, how many racquets must it sell at $40 to break even?

Accepted Answer

A)  50,000 
B)  60,000 
C)  75,000 
D)  100,000 
E)  none of these alternatives is correct. 
A)  50,000 
B)  60,000 
C)  75,000 
D)  100,000 
E)  none of these alternatives is correct.

Question 14

Gabriella Sax believes that customers in her dress shop find certain prices very appealing. Between these price levels, all prices are seen as roughly the same--and price cuts in these ranges generally do not increase the quantity sold (i.e., the demand curve tends to drop vertically within these price ranges). Therefore, Sax prices her items as close as possible to the top of each such price range. This is:

Accepted Answer

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

Question 15

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.
SPI pays its salespeople a commission on each product they sell. The commission is:

Accepted Answer

A)  part of the total cost -- but not specifically a fixed or a variable cost. 
B)  part of the total fixed cost. 
C)  not included in figuring average cost. 
D)  a variable cost. 
E)  none of these alternatives is correct. 
A)  part of the total cost -- but not specifically a fixed or a variable cost. 
B)  part of the total fixed cost. 
C)  not included in figuring average cost. 
D)  a variable cost. 
E)  none of these alternatives is correct.

Question 16

The idea that people will pay extra for "quality" and status is the idea behind

Accepted Answer

A)  price lining. 
B)  average cost approaches to pricing. 
C)  penetration skimming. 
D)  prestige pricing. 
E)  psychological pricing. 
A)  price lining. 
B)  average cost approaches to pricing. 
C)  penetration skimming. 
D)  prestige pricing. 
E)  psychological pricing.

Question 17

Identify a disadvantage of break-even analysis.

Accepted Answer

A)  It cannot be used to determine the break-even point in dollars. 
B)  It is not helpful for evaluating what might happen to profits in different market environments. 
C)  It does not consider the effect of price on the quantity that consumers will want. 
D)  It is not helpful for evaluating alternatives. 
E)  It is an extremely complicated method. 
A)  It cannot be used to determine the break-even point in dollars. 
B)  It is not helpful for evaluating what might happen to profits in different market environments. 
C)  It does not consider the effect of price on the quantity that consumers will want. 
D)  It is not helpful for evaluating alternatives. 
E)  It is an extremely complicated method.

Question 18

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

Accepted Answer

A) True 
 B)False

Question 19

Total fixed cost

Accepted Answer

A)  is dependent on production volumes. 
B)  stays the same even if production stops temporarily. 
C)  includes wages and sales commissions. 
D)  is the sum of average fixed costs and variable overheads. 
E)  is dependent on minor changes in output volume. 
A)  is dependent on production volumes. 
B)  stays the same even if production stops temporarily. 
C)  includes wages and sales commissions. 
D)  is the sum of average fixed costs and variable overheads. 
E)  is dependent on minor changes in output volume.

Question 20

A standard markup is often set close to the firm's

Accepted Answer

A)  gross margin. 
B)  net profits. 
C)  overheads. 
D)  operating costs. 
E)  competitors' costs. 
A)  gross margin. 
B)  net profits. 
C)  overheads. 
D)  operating costs. 
E)  competitors' costs.

Average-cost pricing:

Customers are likely to be more price sensitive when:

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:

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:

Which of the following observations is true?

Prestige pricing involves setting a rather high price because the product has a normal down-sloping demand curve.

_____ involves setting one price for a set of products.

"Demand-backward pricing" involves a producer estimating an acceptable final consumer price and working backward to determine what the producer can charge in the channel.

A CVS drugstore that is trying to attract customers by advertising a special bargain price on a popular brand of cold remedy during the cold season is using:

If a retailer adds a 25-cent markup to a product which costs the retailer $1.00, then according to the text the retailer's markup is 20 percent.

With bid pricing, it is best for the bidder to use the same overhead and profit rates on all jobs since that will make it easy to estimate costs and eventually will increase profits.

The idea that people will pay extra for "quality" and status is the idea behind

Identify a disadvantage of break-even analysis.

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

Total fixed cost

A standard markup is often set close to the firm's

Marketing39s 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

Promotion - Introduction to Integrated Marketing Communications

Personal Selling and Customer Service

Advertising, Publicity, and Sales Promotion

Pricing Objectives and Policies

Ethical Marketing in a Consumer-Oriented World: Appraisal and Challenges

Economics Fundamentals

Marketing Arithmetic

Filters

Exam 17: Price Setting in the Business World

Average-cost pricing:

Customers are likely to be more price sensitive when:

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:

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:

Which of the following observations is true?

Prestige pricing involves setting a rather high price because the product has a normal down-sloping demand curve.

_____ involves setting one price for a set of products.

"Demand-backward pricing" involves a producer estimating an acceptable final consumer price and working backward to determine what the producer can charge in the channel.

A CVS drugstore that is trying to attract customers by advertising a special bargain price on a popular brand of cold remedy during the cold season is using:

If a retailer adds a 25-cent markup to a product which costs the retailer $1.00, then according to the text the retailer's markup is 20 percent.

With bid pricing, it is best for the bidder to use the same overhead and profit rates on all jobs since that will make it easy to estimate costs and eventually will increase profits.

The idea that people will pay extra for "quality" and status is the idea behind

Identify a disadvantage of break-even analysis.

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

Total fixed cost

A standard markup is often set close to the firm's

Marketing39s 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

Promotion - Introduction to Integrated Marketing Communications

Personal Selling and Customer Service

Advertising, Publicity, and Sales Promotion

Pricing Objectives and Policies

Ethical Marketing in a Consumer-Oriented World: Appraisal and Challenges

Economics Fundamentals

Marketing Arithmetic

Filters