Question 1

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 2

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.
What is the final selling price Sports Depot charges for a SPI basketball?

Accepted Answer

A)  $10.00 
B)  $12.00 
C)  $12.50 
D)  $15.00 
E)  $18.00 
A)  $10.00 
B)  $12.00 
C)  $12.50 
D)  $15.00 
E)  $18.00

Question 3

If a firm's average variable cost is constant per unit, then the firm's average cost decreases continually as output increases because average fixed cost decreases continually.

Accepted Answer

A) True 
 B)False

Question 4

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.

Question 5

A good marketing manager for a producer knows that the most profitable price and level of output:

Accepted Answer

A)  is where the positive difference between the total revenue and total cost curves is the greatest. 
B)  is where the firm's profit is the same as that of its competitors. 
C)  is where total revenue equals total cost. 
D)  is where total profit equals total cost. 
E)  None of these alternatives is correct. 
A)  is where the positive difference between the total revenue and total cost curves is the greatest. 
B)  is where the firm's profit is the same as that of its competitors. 
C)  is where total revenue equals total cost. 
D)  is where total profit equals total cost. 
E)  None of these alternatives is correct.

Question 6

Most retailers and wholesalers set prices by using a different markup percent for each different product carried.

Accepted Answer

A) True 
 B)False

Question 7

A regional manager for a chain of auto parts stores visits one of the stores in the chain. He looks in the store's warehouse and finds about 100 cases of motor oil that have been sitting in the warehouse for over one year. Upon inspection, he finds that in each case, one of the twelve cans of oil has leaked, thus soaking through the box and making the case unfit for sale. The regional manager instructs the store manager to unpack all of the cases, discard the leaking cans, clean up the remaining cans, and to contact the oil company for new boxes. He tells the store manager to repackage the remaining cans in the new boxes and to sell the cases to customers at the retailer's cost with no added markup. He explains to the store manager that moving this inventory will not result in immediate profit, but that it will benefit the store by improving the:

Accepted Answer

A)  Markup. 
B)  Markup rate. 
C)  Markup percent. 
D)  Stockturn rate. 
E)  Break-even point. 
A)  Markup. 
B)  Markup rate. 
C)  Markup percent. 
D)  Stockturn rate. 
E)  Break-even point.

Question 8

Setting prices by adding a "reasonable" markup to a firm's average cost is called:

Accepted Answer

A)  break-even pricing. 
B)  add-on pricing. 
C)  target-return pricing. 
D)  average-cost pricing. 
E)  marginal analysis. 
A)  break-even pricing. 
B)  add-on pricing. 
C)  target-return pricing. 
D)  average-cost pricing. 
E)  marginal analysis.

Question 9

By definition, a markup of $1 on a cost of $2 translates to a markup of 40 percent.

Accepted Answer

A) True 
 B)False

Question 10

In marginal analysis, the most profitable price is the price at which:

Accepted Answer

A)  Profit is based on competitive pricing. 
B)  Total revenue and total cost are equal. 
C)  The difference between total revenue and total cost is greatest. 
D)  Total profit and total cost are equal. 
E)  None of these is a good answer. 
A)  Profit is based on competitive pricing. 
B)  Total revenue and total cost are equal. 
C)  The difference between total revenue and total cost is greatest. 
D)  Total profit and total cost are equal. 
E)  None of these is a good answer.

Question 11

Marginal analysis:

Accepted Answer

A)  can be very useful if a firm's pricing objective is profit maximization. 
B)  focuses on the last unit which will be sold. 
C)  can be used to find the most profitable price and quantity. 
D)  can help find the price that results in the greatest difference between total revenue and total cost. 
E)  All of these alternatives are correct. 
A)  can be very useful if a firm's pricing objective is profit maximization. 
B)  focuses on the last unit which will be sold. 
C)  can be used to find the most profitable price and quantity. 
D)  can help find the price that results in the greatest difference between total revenue and total cost. 
E)  All of these alternatives are correct.

Question 12

The major weakness of "average-cost pricing" is that:

Accepted Answer

A)  it ignores likely customer demand at different prices. 
B)  it usually leads to losses instead of profits. 
C)  it always results in a profit that is less than expected. 
D)  it is too hard for most managers to use. 
E)  All of these are major weaknesses of "average-cost pricing." 
A)  it ignores likely customer demand at different prices. 
B)  it usually leads to losses instead of profits. 
C)  it always results in a profit that is less than expected. 
D)  it is too hard for most managers to use. 
E)  All of these are major weaknesses of "average-cost pricing."

Question 13

Setting a few price levels for a product line and then marking all items at these price levels is:

Accepted Answer

A)  leader pricing. 
B)  price lining. 
C)  product-bundle pricing. 
D)  penetration pricing. 
E)  odd-even pricing. 
A)  leader pricing. 
B)  price lining. 
C)  product-bundle pricing. 
D)  penetration pricing. 
E)  odd-even pricing.

Question 14

A retail store advertises an SLR digital camera for $350. Once bargain hunters come to the store, salespeople point out the disadvantages of the low-priced camera and try to convince them to trade up to a better, and more expensive, unit. This is an example of

Accepted Answer

A)  price following. 
B)  bait pricing. 
C)  odd-even pricing. 
D)  low pricing. 
E)  everyday low pricing. 
A)  price following. 
B)  bait pricing. 
C)  odd-even pricing. 
D)  low pricing. 
E)  everyday low 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.
By pricing below other retailers, Sports Depot apparently:

Accepted Answer

A)  hopes to achieve status quo pricing objectives. 
B)  wants to set prices based on "value in use." 
C)  relies on a high margin percent. 
D)  sees this as an oligopoly market. 
E)  expects a high stockturn rate. 
A)  hopes to achieve status quo pricing objectives. 
B)  wants to set prices based on "value in use." 
C)  relies on a high margin percent. 
D)  sees this as an oligopoly market. 
E)  expects a high stockturn rate.

Question 16

Average fixed cost goes down as output decreases.

Accepted Answer

A) True 
 B)False

Question 17

If a firm's total fixed cost is $400,000 and its fixed cost contribution per unit is $10, its break-even in units is:

Accepted Answer

A)  30,000. 
B)  40,000 
C)  10,000. 
D)  20,000. 
E)  Cannot be determined with this information. 
A)  30,000. 
B)  40,000 
C)  10,000. 
D)  20,000. 
E)  Cannot be determined with this information.

Question 18

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

Accepted Answer

A) True 
 B)False

Question 19

A markup is the dollar amount added to the cost of products to get the selling price.

Accepted Answer

A) True 
 B)False

Question 20

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

Accepted Answer

A) True 
 B)False

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

If a firm's average variable cost is constant per unit, then the firm's average cost decreases continually as output increases because average fixed cost decreases continually.

Average fixed costs:

A good marketing manager for a producer knows that the most profitable price and level of output:

Most retailers and wholesalers set prices by using a different markup percent for each different product carried.

Setting prices by adding a "reasonable" markup to a firm's average cost is called:

By definition, a markup of $1 on a cost of $2 translates to a markup of 40 percent.

In marginal analysis, the most profitable price is the price at which:

Marginal analysis:

The major weakness of "average-cost pricing" is that:

Setting a few price levels for a product line and then marking all items at these price levels is:

A retail store advertises an SLR digital camera for $350. Once bargain hunters come to the store, salespeople point out the disadvantages of the low-priced camera and try to convince them to trade up to a better, and more expensive, unit. This is an example of

Average fixed cost goes down as output decreases.

If a firm's total fixed cost is $400,000 and its fixed cost contribution per unit is $10, its break-even in units is:

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

A markup is the dollar amount added to the cost of products to get the selling price.

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

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

If a firm's average variable cost is constant per unit, then the firm's average cost decreases continually as output increases because average fixed cost decreases continually.

Average fixed costs:

A good marketing manager for a producer knows that the most profitable price and level of output:

Most retailers and wholesalers set prices by using a different markup percent for each different product carried.

Setting prices by adding a "reasonable" markup to a firm's average cost is called:

By definition, a markup of $1 on a cost of $2 translates to a markup of 40 percent.

In marginal analysis, the most profitable price is the price at which:

Marginal analysis:

The major weakness of "average-cost pricing" is that:

Setting a few price levels for a product line and then marking all items at these price levels is:

A retail store advertises an SLR digital camera for $350. Once bargain hunters come to the store, salespeople point out the disadvantages of the low-priced camera and try to convince them to trade up to a better, and more expensive, unit. This is an example of

Average fixed cost goes down as output decreases.

If a firm's total fixed cost is $400,000 and its fixed cost contribution per unit is $10, its break-even in units is:

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

A markup is the dollar amount added to the cost of products to get the selling price.

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

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