Question 1

Which of the following costs do not change with an increase in output?

Accepted Answer

A)  Total variable cost 
B)  Total fixed cost 
C)  Total cost 
D)  Average total cost per unit 
E)  Average fixed cost per unit 
A)  Total variable cost 
B)  Total fixed cost 
C)  Total cost 
D)  Average total cost per unit 
E)  Average fixed cost per unit

Question 2

Average-cost pricing

Accepted Answer

A)  always results in a profit that is less than what was expected. 
B)  will work out as expected when the firm's actual average fixed cost per unit is what was estimated when prices were set. 
C)  sets the price at the point where average fixed cost is equal to average variable cost. 
D)  ignores variable costs. 
E)  is the only way to ensure that the firm will set a profitable price. 
A)  always results in a profit that is less than what was expected. 
B)  will work out as expected when the firm's actual average fixed cost per unit is what was estimated when prices were set. 
C)  sets the price at the point where average fixed cost is equal to average variable cost. 
D)  ignores variable costs. 
E)  is the only way to ensure that the firm will set a profitable price.

Question 3

In a typical break-even analysis, a firm's fixed-cost contribution per unit:

Accepted Answer

A)  is the assumed selling price per unit minus the variable cost per unit. 
B)  is the assumed selling price per unit minus the average fixed cost. 
C)  usually decreases as the quantity produced increases. 
D)  is total fixed cost divided by the quantity produced. 
E)  usually increases as the quantity produced increases. 
A)  is the assumed selling price per unit minus the variable cost per unit. 
B)  is the assumed selling price per unit minus the average fixed cost. 
C)  usually decreases as the quantity produced increases. 
D)  is total fixed cost divided by the quantity produced. 
E)  usually increases as the quantity produced increases.

Question 4

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 5

The typical markup (percent) is the:

Accepted Answer

A)  cost of an item divided by its selling price--times 100. 
B)  selling price minus the cost of the item, divided by the cost of the item--times 100. 
C)  selling price of an item, divided by its cost--times 100. 
D)  selling price minus the cost of the item, divided by the selling price--times 100. 
E)  selling price minus the cost of the item, divided by the average fixed cost--times 100. 
A)  cost of an item divided by its selling price--times 100. 
B)  selling price minus the cost of the item, divided by the cost of the item--times 100. 
C)  selling price of an item, divided by its cost--times 100. 
D)  selling price minus the cost of the item, divided by the selling price--times 100. 
E)  selling price minus the cost of the item, divided by the average fixed cost--times 100.

Question 6

Which of the following would NOT be included in a producer's total fixed cost?

Accepted Answer

A)  Rent 
B)  Property taxes 
C)  Insurance 
D)  Depreciation 
E)  Component parts 
A)  Rent 
B)  Property taxes 
C)  Insurance 
D)  Depreciation 
E)  Component parts

Question 7

Product-bundle pricing may encourage customers to spend more and buy products that they would not buy otherwise.

Accepted Answer

A) True 
 B)False

Question 8

A supermarket is bound to expect a higher stockturn for fresh fruits and vegetables compared to soaps and detergents.

Accepted Answer

A) True 
 B)False

Question 9

Total fixed costs do not change when output increases.

Accepted Answer

A) True 
 B)False

Question 10

Demand estimates are required for demand-backward pricing to be successful.

Accepted Answer

A) True 
 B)False

Question 11

A sales rep is paid a commission on each product sold. The commission is:

Accepted Answer

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

Question 12

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 13

Which of the following pricing approaches should be used by a profit-oriented retailer if its demand curve is down-sloping to the right for awhile--but then actually bends back to the left at lower prices?

Accepted Answer

A)  Psychological pricing 
B)  Prestige pricing 
C)  Average-cost pricing 
D)  Bait pricing 
E)  Penetration pricing 
A)  Psychological pricing 
B)  Prestige pricing 
C)  Average-cost pricing 
D)  Bait pricing 
E)  Penetration pricing

Question 14

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 15

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

Accepted Answer

A) True 
 B)False

Question 16

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.
The pricing approach Sports Depot uses to price its baseball gloves is called:

Accepted Answer

A)  odd-even pricing. 
B)  value in use pricing. 
C)  prestige pricing. 
D)  bait pricing. 
E)  price lining. 
A)  odd-even pricing. 
B)  value in use pricing. 
C)  prestige pricing. 
D)  bait pricing. 
E)  price lining.

Question 17

Even if a manager's estimate of a demand curve is not exact, there is usually a profitable range around the price that would maximize profit.

Accepted Answer

A) True 
 B)False

Question 18

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 19

Which of the following observations is false?

Accepted Answer

A)  Competition needs to be considered when adding in overhead and profit for a bid price. 
B)  Some sellers fake their records to make costs seem higher than they really are. 
C)  Negotiated price is a price set based on bargaining between the buyer and seller. 
D)  Negotiated pricing is rare in situations where the marketing mix is adjusted for each customer. 
E)  Negotiated pricing is a demand-oriented approach. 
A)  Competition needs to be considered when adding in overhead and profit for a bid price. 
B)  Some sellers fake their records to make costs seem higher than they really are. 
C)  Negotiated price is a price set based on bargaining between the buyer and seller. 
D)  Negotiated pricing is rare in situations where the marketing mix is adjusted for each customer. 
E)  Negotiated pricing is a demand-oriented approach.

Question 20

The greater the total expenditure, the less price sensitive customers are.

Accepted Answer

A) True 
 B)False

Which of the following costs do not change with an increase in output?

Average-cost pricing

In a typical break-even analysis, a firm's fixed-cost contribution per unit:

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.

The typical markup (percent) is the:

Which of the following would NOT be included in a producer's total fixed cost?

Product-bundle pricing may encourage customers to spend more and buy products that they would not buy otherwise.

A supermarket is bound to expect a higher stockturn for fresh fruits and vegetables compared to soaps and detergents.

Total fixed costs do not change when output increases.

Demand estimates are required for demand-backward pricing to be successful.

A sales rep is paid a commission on each product sold. The commission is:

A typical break-even analysis assumes that:

Which of the following pricing approaches should be used by a profit-oriented retailer if its demand curve is down-sloping to the right for awhile--but then actually bends back to the left at lower prices?

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.

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

Even if a manager's estimate of a demand curve is not exact, there is usually a profitable range around the price that would maximize profit.

As output increases, average cost decreases continually because

Which of the following observations is false?

The greater the total expenditure, the less price sensitive customers are.

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

Which of the following costs do not change with an increase in output?

Average-cost pricing

In a typical break-even analysis, a firm's fixed-cost contribution per unit:

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.

The typical markup (percent) is the:

Which of the following would NOT be included in a producer's total fixed cost?

Product-bundle pricing may encourage customers to spend more and buy products that they would not buy otherwise.

A supermarket is bound to expect a higher stockturn for fresh fruits and vegetables compared to soaps and detergents.

Total fixed costs do not change when output increases.

Demand estimates are required for demand-backward pricing to be successful.

A sales rep is paid a commission on each product sold. The commission is:

A typical break-even analysis assumes that:

Which of the following pricing approaches should be used by a profit-oriented retailer if its demand curve is down-sloping to the right for awhile--but then actually bends back to the left at lower prices?

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.

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

Even if a manager's estimate of a demand curve is not exact, there is usually a profitable range around the price that would maximize profit.

As output increases, average cost decreases continually because

Which of the following observations is false?

The greater the total expenditure, the less price sensitive customers are.

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