Exam 17: Price Setting in the Business World

An automobile manufacturer charges a higher price for its "hybrid" car that runs on both electricity and gasoline than it charges for a car that runs on only gasoline. The manufacturer contends that the consumer will save money with the hybrid car in the long run because the money saved on gasoline will more than cover the price differential between the hybrid car and a regular car. This manufacturer is using:

There is only one price that will be profitable for firms with down-sloping demand curves.

A tire retailer is advertising a very low price on a popular size tire. When a customer comes into the store, the clerk says the low-priced item is sold out, and tries to convince the customer to buy the top-of-the-line model--claiming the low priced model is not a very good buy even at the low price. This is an example of:

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?

Auctions have not proved very effective in determining how much potential customers will (or will not) pay for a product.

Most firms in the business world set their prices using:

Different firms in the same line of business are likely to use the same markup percent:

Sellers sometimes take the auction approach and adapt it by using sequential price reductions over time. When or where is this approach most commonly used?

Walgreens Drugstores advertises that its Tylenol prices are "the lowest in town" in order to stimulate sales of other products along with Tylenol. This is an example of:

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

The text says "markups":

Break-even analysis evaluates whether the firm will be able to cover all its costs with a particular price.

The sole objective of leader pricing is to sell large quantities of the leader items.

Price lining:

It costs a producer $400 to manufacture a product that is distributed through wholesalers and retailers. The markups at the producer, wholesaler, and retailer levels are 20%, 20% and 50%, respectively. The wholesaler's selling price for the product is __________, and the retailer's selling price is ___________.

_____ is setting a few price levels for a product line and then marking all items at these prices.

If a supermarket runs an ad for a gallon of milk in the local newspaper at a price that many consumers will recognize as a low price for this product, this is an example of:

The sequence of markups firms use at different levels in a channel is referred to as a

Which of the following observations concerning a "reference price" is true?