Question 1

The big problem with average-cost pricing is that:

Accepted Answer

A)  fixed costs are hard to estimate. 
B)  it ignores the firm's demand curve. 
C)  it doesn't consider the effect of variable costs. 
D)  there is no way to include a desired profit per unit. 
E)  None of these alternatives is correct. 
A)  fixed costs are hard to estimate. 
B)  it ignores the firm's demand curve. 
C)  it doesn't consider the effect of variable costs. 
D)  there is no way to include a desired profit per unit. 
E)  None of these alternatives is correct.

Question 2

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 3

A publisher needed one of its best-selling authors to fly from his home in Richmond, Virginia to Chicago, Illinois in order to start a publicity campaign for the author's new book. The author could have taken a flight to Detroit, Michigan, changed planes, and then flew on to Chicago for about half the price of a non-stop flight from Richmond to Chicago. However, he chose the non-stop flight. He became less price sensitive because of:

Accepted Answer

A)  The availability of substitutes. 
B)  The fact that someone else was paying the bill. 
C)  The significance of the end benefit. 
D)  The size of the total expenditure. 
E)  The sunken investment he had made. 
A)  The availability of substitutes. 
B)  The fact that someone else was paying the bill. 
C)  The significance of the end benefit. 
D)  The size of the total expenditure. 
E)  The sunken investment he had made.

Question 4

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 5

A low stockturn rate

Accepted Answer

A)  is extremely good for profits. 
B)  decreases inventory carrying cost. 
C)  ties up working capital. 
D)  is usually linked with very low markups. 
E)  is typical of fresh fruits and vegetables. 
A)  is extremely good for profits. 
B)  decreases inventory carrying cost. 
C)  ties up working capital. 
D)  is usually linked with very low markups. 
E)  is typical of fresh fruits and vegetables.

Question 6

If a manager sells more than was expected when average-cost pricing was used to set a price, the firm will lose money.

Accepted Answer

A) True 
 B)False

Question 7

High markups on a product could lead to low profits when

Accepted Answer

A)  competitors have higher markups. 
B)  there are no substitutes. 
C)  demand is inelastic. 
D)  sales dip due to high prices. 
E)  supply is inelastic. 
A)  competitors have higher markups. 
B)  there are no substitutes. 
C)  demand is inelastic. 
D)  sales dip due to high prices. 
E)  supply is inelastic.

Question 8

"Demand-backward" pricing:

Accepted Answer

A)  starts with an acceptable final consumer price and works backward to what producers can charge. 
B)  ignores demand estimates. 
C)  is only sensible when the channel captain is a large retailer. 
D)  is an average-cost pricing approach. 
E)  None of these alternatives is correct. 
A)  starts with an acceptable final consumer price and works backward to what producers can charge. 
B)  ignores demand estimates. 
C)  is only sensible when the channel captain is a large retailer. 
D)  is an average-cost pricing approach. 
E)  None of these alternatives is correct.

Question 9

The sum of those costs that do not change in total--no matter how much is produced--is called:

Accepted Answer

A)  total fixed cost. 
B)  total cost. 
C)  total variable cost. 
D)  total direct cost. 
E)  None of these is a good answer. 
A)  total fixed cost. 
B)  total cost. 
C)  total variable cost. 
D)  total direct cost. 
E)  None of these is a good answer.

Question 10

Break-even analysis is particularly accurate because it recognizes that the demand curve is downward sloping.

Accepted Answer

A) True 
 B)False

Question 11

The stockturn rate is

Accepted Answer

A)  the firm's ability to meet its short-term financial obligations. 
B)  the number of days that credit sales remains in receivables. 
C)  the number of times the average inventory is sold in a year. 
D)  the difference between net sales and cost of goods sold. 
E)  the ratio of sales to inventory. 
A)  the firm's ability to meet its short-term financial obligations. 
B)  the number of days that credit sales remains in receivables. 
C)  the number of times the average inventory is sold in a year. 
D)  the difference between net sales and cost of goods sold. 
E)  the ratio of sales to inventory.

Question 12

According to the text, the two basic approaches to price setting are

Accepted Answer

A)  supply-oriented and demand-oriented price setting. 
B)  cost-oriented and demand-oriented price setting. 
C)  sales-oriented and profit-oriented price setting. 
D)  cost-oriented and profit-oriented price setting. 
E)  average-cost pricing and break-even analysis. 
A)  supply-oriented and demand-oriented price setting. 
B)  cost-oriented and demand-oriented price setting. 
C)  sales-oriented and profit-oriented price setting. 
D)  cost-oriented and profit-oriented price setting. 
E)  average-cost pricing and break-even analysis.

Question 13

Leader pricing:

Accepted Answer

A)  seeks a big profit on the leader items. 
B)  is usually used for a retailer's major product line--to give it a competitive advantage. 
C)  is different from bait pricing in that the marketing manager really expects to sell leader priced items. 
D)  assumes that some part of the demand curve is upward sloping to the right. 
E)  is banned in interstate commerce. 
A)  seeks a big profit on the leader items. 
B)  is usually used for a retailer's major product line--to give it a competitive advantage. 
C)  is different from bait pricing in that the marketing manager really expects to sell leader priced items. 
D)  assumes that some part of the demand curve is upward sloping to the right. 
E)  is banned in interstate commerce.

Question 14

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 15

A paving contractor wants to work on road construction contracts administered and paid for by the state government. The contractor submits a sealed proposal to the state department of transportation for each construction job. The proposal contains a description of how the contractor will fulfill the specifications for the job at a specified price. The contractor is engaging in:

Accepted Answer

A)  Odd-even pricing. 
B)  Prestige pricing. 
C)  Leader pricing. 
D)  Bid pricing. 
E)  Price lining. 
A)  Odd-even pricing. 
B)  Prestige pricing. 
C)  Leader pricing. 
D)  Bid pricing. 
E)  Price lining.

Question 16

A high stockturn rate:

Accepted Answer

A)  is only possible with a low markup percent. 
B)  is likely to result in low profits. 
C)  reduces the inventory investment and can improve profits. 
D)  increases the space needed for inventory. 
E)  None of these alternatives is correct. 
A)  is only possible with a low markup percent. 
B)  is likely to result in low profits. 
C)  reduces the inventory investment and can improve profits. 
D)  increases the space needed for inventory. 
E)  None of these alternatives is correct.

Question 17

Given the following data, compute the BEP in units: Selling price = $2.00
Variable cost = $0.75
Fixed cost = $250,000

Accepted Answer

A)  333,334 
B)  200,000 
C)  125,000 
D)  400,000 
E)  Cannot be determined with this information. 
A)  333,334 
B)  200,000 
C)  125,000 
D)  400,000 
E)  Cannot be determined with this information.

Question 18

Firms with high markups and low turnover rates may earn lower profits than firms with low markups and high turnover rates.

Accepted Answer

A) True 
 B)False

Question 19

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 20

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

The big problem with average-cost pricing is that:

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

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

A low stockturn rate

If a manager sells more than was expected when average-cost pricing was used to set a price, the firm will lose money.

High markups on a product could lead to low profits when

"Demand-backward" pricing:

The sum of those costs that do not change in total--no matter how much is produced--is called:

Break-even analysis is particularly accurate because it recognizes that the demand curve is downward sloping.

The stockturn rate is

According to the text, the two basic approaches to price setting are

Leader pricing:

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

A high stockturn rate:

Given the following data, compute the BEP in units: Selling price = $2.00 Variable cost = $0.75 Fixed cost = $250,000

Firms with high markups and low turnover rates may earn lower profits than firms with low markups and high turnover rates.

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

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.

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

The big problem with average-cost pricing is that:

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

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

A low stockturn rate

If a manager sells more than was expected when average-cost pricing was used to set a price, the firm will lose money.

High markups on a product could lead to low profits when

"Demand-backward" pricing:

The sum of those costs that do not change in total--no matter how much is produced--is called:

Break-even analysis is particularly accurate because it recognizes that the demand curve is downward sloping.

The stockturn rate is

According to the text, the two basic approaches to price setting are

Leader pricing:

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

A high stockturn rate:

Given the following data, compute the BEP in units: Selling price = $2.00 Variable cost = $0.75 Fixed cost = $250,000

Firms with high markups and low turnover rates may earn lower profits than firms with low markups and high turnover rates.

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

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.

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