Deck 9: Developing New Products and Managing the Product

Question 1

In retail settings,________ involves charging a constant low price with few or no temporary price discounts.

A)high-low pricing
B)target return pricing
C)cost-plus pricing
D)everyday low pricing (EDLP)
E)penetration pricing

Answer 1

D

Question 2

When there is price competition,many companies adopt ________ rather than cutting prices to match competitors.

A)pricing power
B)value-added pricing strategies
C)fixed costs
D)price elasticity
E)image pricing

Answer 2

B

Question 3

A company faces fixed costs of $100 000 and variable costs of $8.00\unit.They plan to directly sell their product to the market for $12.00.How many units must they produce and sell to break even?

A)20 000
B)25 000
C)40 000
D)50 000
E)not enough information to calculate

Answer 3

B

Question 4

Costs that do not vary with production or sales level are referred to as ________ costs.

A)fixed
B)variable
C)target
D)total
E)unit

Question 5

Product costs set a(n)________ to a product's price.

A)demand curve
B)experience curve
C)floor
D)ceiling
E)breakeven cost

Question 6

In retail settings,________ involves charging higher prices on an everyday basis but running frequent promotions to lower prices temporarily on selected items.

A)high-low pricing
B)target return pricing
C)cost-plus pricing
D)everyday low pricing (EDLP)
E)penetration pricing

Question 7

Which of the following is NOT an example of value-based pricing?

A)a less expensive version of an established brand
B)re-design of existing brand to offer increased quality at a fair price
C)lesser value offered at rock-bottom prices
D)everyday low prices
E)setting prices based on production costs plus a fair margin

Question 8

Rent,electricity and executive salaries are examples of ________ costs.

A)fixed
B)variable
C)total
D)accumulated
E)marketing

Question 9

________ is the amount of money charged for a product or service.

A)Experience curve
B)Demand curve
C)Price
D)Wage
E)Salary

Question 10

Xbox 360 decides to add a free subscription to XBOX magazine with every game bought in an effort to differentiate its offering from PS3 games.This is an example of ________.

A)good-value pricing
B)add-on pricing
C)product-support pricing
D)value-added pricing
E)cost-based pricing

Question 11

Consumer perceptions of the product's value set the ________ for prices.

A)demand curve
B)floor
C)ceiling
D)variable cost
E)image

Question 12

________ uses buyers' perceptions of what a product is worth,not the seller's cost,as the key to pricing.

A)Value-based pricing
B)Target return pricing
C)Variable costs
D)Price elasticity
E)Product image

Question 13

The Sydney Opera House charges different prices for seats in different areas of the concert hall,even though the costs of supplying these seats are the same.What is this form of pricing called?

A)location-based pricing
B)price skimming
C)functional pricing
D)customer-segment pricing
E)dynamic pricing

Question 14

Price is the only element in the marketing mix that produces ________.

A)revenue
B)variable costs
C)expenses
D)fixed costs
E)stability

Question 15

Fixed costs ________ as the number of units produced increases.

A)decrease
B)increase
C)divide in half
D)remain the same
E)increase at a diminishing rate

Question 16

Costs that vary directly with the level of production are referred to as ________ costs.

A)fixed
B)variable
C)target
D)total
E)unit

Question 17

In ________,price is considered along with the other marketing mix variables before the marketing program is set.

A)target return pricing
B)value-based pricing
C)variable costs
D)price elasticity
E)cost-based pricing

Question 18

Measuring ________ can be difficult.A company might conduct surveys or experiments to test this in the different products they offer.

A)target returns
B)fixed costs
C)perceived value
D)breakeven pricing
E)variable costs

Question 19

With ________ pricing,price is set to match consumers' perceptions of product value.

A)variable cost
B)cost-plus
C)cost-based
D)value-based
E)everyday low

Question 20

________ pricing involves setting prices based on the costs for producing,distributing and selling the product,plus a target profit.

A)Variable cost
B)Cost-plus
C)Cost-based
D)Good-value
E)Value-added

Question 21

Value-based pricing is the reverse of cost-based pricing.

Question 22

EDLP is very similar to high-low pricing.

Question 23

Which of the following statements about a breakeven chart is true?

A)It is used to determine how the customer-perceived value changes with value-added pricing.
B)It is a tool used to calculate fixed costs.
C)It shows the level of earnings a company has during an accounting period.
D)It is a tool marketers use to examine the relationship between supply and demand.
E)It uses variable costs,the unit price and fixed costs.

Question 24

The simplest pricing method is breakeven pricing,which involves determining the price at which costs will be covered.

Question 25

Product costs set a floor to a product's price;consumer perceptions of the product's value set the ceiling.

Question 26

________ are the sum of the ________ and ________ for any given level of production.

A)Fixed costs;variable;total costs
B)Fixed costs;total;variable costs
C)Variable costs;fixed;total costs
D)Total costs;fixed;variable costs
E)Breakeven costs;fixed;total costs

Question 27

Pricing that involves setting prices based on competitors' strategies,costs,prices and market offerings is known as ________.

A)competition-based pricing
B)target return pricing
C)fixed cost
D)penetration pricing
E)price skimming

Question 28

Price is one of the most flexible marketing mix elements.

Question 29

Which of the following is a cost-oriented pricing approach?

A)value-based pricing
B)going-rate pricing
C)breakeven pricing
D)good-value pricing
E)A and C

Question 30

Which of the following is the main problem with breakeven analysis?

A)It fails to consider customer value and the relationship between price and demand.
B)It fails to consider the impact of sales volume on price.
C)The method of estimating breakeven point is highly arbitrary.
D)Variable costs cannot be estimated accurately.
E)Neither fixed nor variable costs can be accurately estimated.

Question 31

The simplest pricing method is ________.

A)value-based pricing
B)going-rate and sealed-bid pricing
C)cost-plus pricing
D)breakeven analysis
E)target return pricing

Question 32

Demand and consumer value perceptions set the floor for prices.

Question 33

General Motors prices its automobiles to achieve a 15 to 20 per cent profit on its investment.This approach is called ________.

A)value-based pricing
B)going-rate pricing
C)cost-plus pricing
D)low-price image
E)target return pricing

Question 34

Prices have a direct impact on a company's bottom line.

Question 35

The company designs what it considers to be a good product,totals the expenses of making the product and sets a price that adds a standard mark-up to the cost of the product.This approach to pricing is called ________ pricing.

A)value-based
B)fixed cost
C)cost-plus
D)variable
E)skimming

Question 36

Overhead cost is another term for variable cost.

Question 37

Which of the following presents the strongest reason that mark-up pricing generally does NOT make sense?

A)Sellers earn a fair return on their investment.
B)By tying the price to cost,sellers simplify pricing.
C)When all firms in the industry use this pricing method,prices tend to be similar.
D)This method ignores demand.
E)With a standard mark-up,consumers know when they are being overcharged.

Question 38

Cost-based pricing relies on consumer perception of value to drive pricing.

Question 39

Value-based pricing is being used when costs vary directly with the level of product.

Question 40

Breakeven pricing,or a variation called ________,is when the firm tries to determine the price at which it will break even or make the profit it is seeking.

A)competition-based pricing
B)target return pricing
C)fixed cost
D)value-based pricing
E)customer-based pricing

Question 41

It is important to remember that '________ value' is not the same as '________ price'.

Question 42

A product or service's ________ is the sum of all the values that consumers give up to gain the benefits of having or using the product or service.

Question 43

Which of the following is an external factor that affects pricing decisions?

A)the wages of production workers
B)the economy
C)the salaries of management
D)profit objectives
E)the company's marketing strategy

Question 44

________ power refers to a company's ability or power to escape price competition and to justify higher prices and margins.

Question 45

Which of the following is an external factor that affects pricing decisions?

A)the salaries of production management
B)competition
C)the salaries of finance management
D)overall pricing objectives
E)the company's overall marketing strategy

Question 46

With target costing,marketers will first ________ and then ________.

A)build the marketing mix;identify the target market
B)identify the target market;build the marketing mix
C)design the product;determine its cost
D)use skimming pricing;use penetrating pricing
E)determine a selling price;target costs to ensure that the price is met

Question 47

________ that influence pricing decisions include the nature of the market and demand.

A)Internal factors
B)Elasticity factors
C)External factors
D)Target factors
E)Domestic factors

Question 48

A breakeven chart shows the total cost and total revenue expected at various sales volume levels.

Question 49

Under ________,the market consists of a few sellers who are highly sensitive to each other's pricing and marketing strategies.

A)pure competition
B)monopolistic competition
C)oligopolistic competition
D)a pure monopoly
E)capitalism

Question 50

When companies set prices,the government and social concerns are two ________ affecting pricing decisions.

A)external factors
B)internal factors
C)economic conditions
D)demand curves
E)temporary influences

Question 51

Price setting is usually determined by ________ in large companies.

A)top management
B)divisional managers
C)product-line managers
D)purchasing departments
E)both B and C

Question 52

________ pricing involves charging higher prices on an everyday basis but running frequent promotions to lower prices temporarily on selected items.

Question 53

Under ________,the market consists of many buyers and sellers trading in a uniform commodity such as wheat,copper or financial securities.

A)pure competition
B)monopolistic competition
C)oligopolistic competition
D)a pure monopoly
E)anti-trust agreements

Question 54

When microwave ovens were being developed in the 1980s,they represented such a radical concept that the company was unsure about pricing.Early prototypes were large,cumbersome and would need a price tag of thousands of dollars simply to breakeven.With remarkable insight,a new divisional manager took over the project and issued the development team with a very clear design brief.The new microwave was to be shaped like an air-conditioner,should look like an oven,have buttons like an oven and be priced around the same as a conventional oven (at the time around $500).The company would not commercialise until the development team could design a microwave at this price.This is an example of which type of costing?

A)variable costing
B)cost-plus
C)target costing
D)standard mark up
E)None of the above.

Question 55

Of the following,a company would be LEAST likely to set prices low to ________.

A)prevent competition from entering the market
B)stabilise the market
C)create excitement for a product
D)prepare for an easy exit from a market
E)match a competitor

Question 56

Under ________,the market consists of many buyers and sellers who trade over a range of prices rather than a single market price.

A)pure competition
B)monopolistic competition
C)oligopolistic competition
D)a pure monopoly
E)socialism

Question 57

In Lima,Peru,20 stores specialising in selling the same quality and brand of wheat products are located on one street.An individual seller cannot charge more than the going price without the risk of losing business to the other stores.This is an example of what type of market?

A)pure competition
B)monopolistic competition
C)oligopolistic competition
D)pure monopoly
E)socialist

Question 58

An important type of good-value pricing at the retail level is ________,and it involves charging a constant,everyday low price with few or no temporary price discounts.

Question 59

Price setting is usually determined by ________ in small companies.

A)top management
B)marketing departments
C)sales departments
D)divisional managers
E)cross-functional teams

Question 60

Swatch surveyed the market and identified an unserved segment of watch buyers.Using these results,they created a watch at a price consumers were willing to pay.The unorthodox order of this marketing mix decision is an example of ________.

A)competition-based pricing
B)cost-plus pricing
C)target costing
D)value-based pricing
E)penetration pricing

Question 61

Environmental elements that affect pricing decisions are categorised as external factors.

Question 62

Each of the following economic factors can have a strong impact on a firm's pricing strategy EXCEPT ________.

A)an economic boom
B)the reseller's reaction to price changes
C)an economic recession
D)inflation
E)interest rates

Question 63

The relationship between the price charged and the resulting demand level can be shown as the ________.

A)demand curve
B)variable cost
C)target cost
D)breakeven chart
E)experience curve

Question 64

A company sets not a single price,but rather a ________ that covers different items in its line that change over time as products move through their life-cycles and environmental conditions change.

A)pricing by-product
B)pricing structure
C)pricing loop
D)pricing cycle
E)pricing bundle

Question 65

________ costs are those that do not vary with production or sales levels.

Question 66

If demand changes greatly with a small change in product price,the demand is inelastic.

Question 67

Under pure competition,the market consists of one or a few buyers and sellers.

Question 68

In a pure monopoly,the market consists of one seller.

Question 69

With an understanding of price elasticity,sellers should know that the less elastic the demand for their product is,the more advantageous it is for them to ________.

A)drop the price
B)raise the price
C)leave the price where it is
D)discontinue the item
E)bundle the product with another product

Question 70

Which of the following would NOT support a market-skimming policy for a new product?

A)The product's quality and image must support its higher price.
B)Enough buyers must want the product at that price.
C)Competitors are not able to undercut the high price.
D)Competitors can enter the market easily.
E)The cost of producing a smaller volume is not so high that it negates the advantage of charging more per unit.

Question 71

During difficult economic times,companies are often tempted to cut prices.However,any decision to cut prices should raise a number of important questions.Which of the following is NOT a question that would normally be considered when confronted with a decision to lower prices?

A)Will deep discounts tarnish the brand?
B)How will prices be raised when the economy improves?
C)How will the company deal with narrower margins?
D)How much promotional support is required to communicate lower prices?
E)How will the competitors react?

Question 72

A company should set prices that will allow ________ to receive a fair profit.

A)resellers
B)producers
C)consumers
D)the elderly
E)competitors

Question 73

If demand changes greatly with a small change in price,we say the demand is ________.

A)inelastic
B)variable
C)elastic
D)value-based
E)fixed

Question 74

Companies facing the challenge of setting prices for the first time can choose between two broad strategies: market-penetration pricing and ________.

A)market-level pricing
B)market-competitive pricing
C)market-skimming pricing
D)market-price lining
E)market-price filling

Question 75

Target costing reverses the usual marketing process.

Question 76

The demand curve shows the number of units the market will buy in a given time period at different prices that might be charged.In normal cases,the higher the price,the higher the demand.

Question 77

Adding a standard mark-up to the cost of the product is known as cost-________ pricing.

Question 78

In industrial markets,salespeople outrank top management in determining the sales price of products,as well as pricing objectives and policies.

Question 79

If demand hardly changes with a small change in price,we say the demand is ________.

A)variable
B)inelastic
C)value-based
D)at breakeven pricing
E)market penetrating

Question 80

________ describes how responsive demand will be to a change in price.

A)Price elasticity
B)Breakeven pricing
C)The breakeven chart
D)Target costing
E)Supply