Exam 17: Pricing Concepts

SCENARIOS Continental Lite In the mid-1990s,Continental Airlines chose to compete head-on with Southwest Airlines by launching Continental Lite,an alternative low-fare commercial airline passenger operation.Top executives at Continental had expected its no-frills operation to break even within a year of its inception,but the airline fell short of the goal.A source close to the company explained it by saying,"Its costs were too high,and its revenues were too low." Some observers criticized Continental's marketing efforts.When the no-frills service was first launched,it lacked a distinct name or identity,missing its chance to make a splash.Then Continental tried to sell three "brands" at once--Lite,a new premium service,and its more traditional long-haul domestic flights.As one rival expressed it,"You cannot be all things to all people." -Refer to the American Girl Doll.You can buy a doll at Wal-Mart for $5.99.The high price of the American Girl doll is used to promote a high-quality image.The American Girl uses a _____ pricing strategy.

A bakery supply catalog sells 5-pound bags of moist apricots and cranberries,sweet dates,bits of pineapple,and candied cherries to be used in fruitcakes.Each bag costs $24.95.If the price of cranberries were to increase by 5 percent,it would have no effect on the price of the fruit mix because cranberries are only one of several fruits in the package.The demand for cranberries for this particular use is:

SCENARIOS Continental Lite In the mid-1990s,Continental Airlines chose to compete head-on with Southwest Airlines by launching Continental Lite,an alternative low-fare commercial airline passenger operation.Top executives at Continental had expected its no-frills operation to break even within a year of its inception,but the airline fell short of the goal.A source close to the company explained it by saying,"Its costs were too high,and its revenues were too low." Some observers criticized Continental's marketing efforts.When the no-frills service was first launched,it lacked a distinct name or identity,missing its chance to make a splash.Then Continental tried to sell three "brands" at once--Lite,a new premium service,and its more traditional long-haul domestic flights.As one rival expressed it,"You cannot be all things to all people." -Refer to Specialty Cakes.To set the price of her cakes,Cecilia simply doubles her costs,which often include several hours of labor and expensive raw materials.This method of price setting is called:

Revenue:

Under which of the following conditions will companies with low market share be most likely to fail?

List the three types of elasticity of demand.What would the demand curve for each look like when graphed?

Amanti Lighting sells a lamp kit for making personalized lighting.The company sells each lamp kit for $22.The average variable cost for each lamp kit is $13,and the total annual fixed costs for plant operation is $78,300.What is the break-even point in units?

How has the use of the Internet reduced "menu costs?'

SCENARIOS Continental Lite In the mid-1990s,Continental Airlines chose to compete head-on with Southwest Airlines by launching Continental Lite,an alternative low-fare commercial airline passenger operation.Top executives at Continental had expected its no-frills operation to break even within a year of its inception,but the airline fell short of the goal.A source close to the company explained it by saying,"Its costs were too high,and its revenues were too low." Some observers criticized Continental's marketing efforts.When the no-frills service was first launched,it lacked a distinct name or identity,missing its chance to make a splash.Then Continental tried to sell three "brands" at once--Lite,a new premium service,and its more traditional long-haul domestic flights.As one rival expressed it,"You cannot be all things to all people." -Refer to Consumer Buying Habits.To compete against the private labels,the significant brands can upgrade products to distinguish them from private labels and advertise their brands more aggressively than ever.Most of the ads will feature cents-off coupons.This pricing strategy clearly involves manipulation of:

The dimensions of quality that are important to consumers include:

Most demand curves slope:

The most popular method used by wholesalers and retailers in establishing a sales price is _____ pricing.

Hostlight Industries operate a chain of moderately-priced motels across the United States.There are many businesses that compete with them for tourist dollars,and some nights during the tourist season their motels are only half full.Other nights,they have to turn away guests because there are no vacancies.Assuming the quality of the room and the services provided by the motels remain the same,Hostlight Industries could use _____ to fill unused rooms.

_____ is defined as the quantity of product offered to the market by suppliers at various prices for a specified period.

At a price of $6 each,314 people want to buy sun visors designed especially for volunteers at the Peachtree Road Race,and only 314 such shirts were available.In this example,a state of _____ has been achieved.

What is marginal revenue? Based on the provided schedule from the Chesapeake Bay Swing Company,at which quantity should Chesapeake Bay producing additional swings?

_____ measures the overall effectiveness of management in generating profits with its available assets.

An event planner wants to determine a price for a package of garland of silk flowers.Its cost is $7.00 per 6-foot length.She desires a markup of 30 percent based on selling price.Which of the following is closest to the price she should charge her customers?

Which of the following describes a disadvantage associated with markup pricing?

The typical break-even model assumes a given fixed cost and a: