Deck 10: Price: What Is the Value Proposition Worth

Question 1

Which of the following statements about price is true?

A) Pricing is the least important marketing mix element.
B) Price is always a monetary value.
C) Price can mean exchange of nonmonetary goods or services.
D) Most consumers believe price has little influence on their purchase decisions.
E) Pricing is unaffected by changes in the business cycle.

Answer 1

C

Question 2

What are the advantages of digital currencies such as Bitcoin?

Answer 2

Digital currencies such as Bitcoin have several advantages. They eliminate the threat of credit card fraud. They also provide lower-income consumers without bank accounts access to more affordable financial transactions. They can be sent anywhere in the world in a few minutes.

Question 3

________ is the assignment of value, or the amount a consumer must give to receive a product.

A) Profit
B) Exchange
C) Price
D) Demand
E) Yield

Answer 3

C

Question 4

Virtual currencies that use cryptography for security are also called ________.

A) blockchains
B) barters
C) digital currencies
D) freemiums
E) loss-leaders

Question 5

Market share is a measure of the profit margin yielded through a specific brand.

Question 6

The value of something we give up in order to obtain something else is referred to as a(n) ________.

A) transformation cost
B) opportunity cost
C) exchange
D) variable cost
E) marginal cost

Question 7

Which of the following is a measure of customers' sensitivity to changes in price?

A) liquidity ratio
B) break-even point
C) price elasticity of demand
D) marginal analysis
E) basing-point

Question 8

In price planning, a firm would be most likely to set a profit objective for which of the following products?

A) a commodity such as coal
B) toothpaste
C) a fad such as fidget spinners
D) lightbulbs
E) construction materials

Question 9

When Home Depot stores entered the Canadian market, there were already stores providing similar services and products. To get people to try Home Depot, the chain deliberately sold merchandise below the price that the Canadians were used to. What type of pricing objective did Home Depot use?

A) market share
B) profit
C) competitive effect
D) customer satisfaction
E) image enhancement

Question 10

Unlike other currencies, Bitcoin is not controlled by a single government entity, such as the U.S. Treasury.

Question 11

Why are prestige products often an exception to the law of demand?

A) The demand curve for prestige products slopes downward and to the right.
B) Increasing the price of prestige products can make them seem more desirable.
C) Demand for prestige products often is greater than supply.
D) Prestige products such as diamonds, sapphires, and emeralds are nonrenewable resources.
E) Customers are more aware of any price changes to prestige products.

Question 12

The price of a product refers to monetary cost but not nonmonetary cost.

Question 13

According to the law of demand, which of the following is true?

A) If prices decrease, customers will buy more.
B) Customers are not aware of small price changes.
C) The effect on demand from changes in price cannot be accurately predicted.
D) Demand equals supply.
E) If prices increase, customers will buy more.

Question 14

A company that intends to maintain low-end pricing policies to make the market unattractive for its competitors is using which of the following pricing objectives in its price planning?

A) sales
B) profit
C) break-even
D) competitive effect
E) customer satisfaction

Question 15

Which of the following is true about the demand curve?

A) It is used to illustrate the effect of price on the quantity supplied.
B) It is always graphically depicted by a straight line.
C) It shows the quantity of product customers will buy in a market during a period of time even if other factors change.
D) It usually slopes upward and to the right.
E) It shows the relationship between product demand and product price.

Question 16

The first step in planning how to price a product is to develop pricing objectives.

Question 17

Explain how prestige products may relate to some customers' feelings of self-worth. What is an example of a prestige product?

Question 18

Explain the concept of opportunity cost, giving at least one example from your life.

Question 19

What is the first step a marketer should take to estimate a product's potential sales?

A) determine maximum production levels
B) conduct a survey of buyers' intentions
C) estimate total demand for the product in the market
D) determine how to expand market share
E) predict the company's market share

Question 20

When setting prices, a leading manufacturer of nutritional supplements decided to institute a pricing strategy that would support a five percent increase in sales over the next three years. What type of pricing objective has the company set?

A) profit
B) sales
C) competitive effect
D) market-based
E) value

Question 21

Many people rely on a prescription drug to control their cholesterol. An increase in the price of the drug would have little effect on the quantity demanded because there are no substitutes for the drug and because people who take it have no choice but to continue taking it if they wish to stay healthy. The demand for the cholesterol drug is ________.

A) elastic
B) inelastic
C) cross-elastic
D) supply-driven
E) asymmetrical

Question 22

Sellers should know that the less elastic the demand for their product, the more advantageous it is for them to ________.

A) drop the price
B) raise the price
C) maintain the price
D) discontinue the item
E) bundle the item with another product

Question 23

In a market with ________, the market consists of many buyers and a few sellers who are likely to have similar pricing.

A) pure competition
B) monopolistic competition
C) oligopolistic competition
D) vertical integration
E) inflation

Question 24

In a market with ________, there are many sellers, each offering a slightly different product. Firms can differentiate products and focus on nonprice competition.

A) pure competition
B) monopolistic competition
C) oligopolistic competition
D) vertical integration
E) inflation

Question 25

To determine the break-even point, a firm needs to first do which of the following?

A) determine what percentage of the market it wants
B) determine the point at which supply equals demand
C) calculate the contribution per unit
D) conduct an environmental audit
E) determine total market share

Question 26

How is the price elasticity of demand calculated?

A) averaging previous demand levels with new demand levels
B) dividing percentage change in quantity demanded by percentage change in price
C) dividing the new quantity demanded by the percentage change in price times 100
D) multiplying the percentage change in quantity demanded by the percentage change in price
E) dividing the percentage change in price by the percentage change in quantity demanded

Question 27

When Joe's Coffee Nook raised the price of a latte, Joe noticed a substantial change in his daily latte sales. A price reduction caused his sales to increase. From this information, you can assume the demand for lattes is ________.

A) static
B) supply-driven
C) cross-elastic
D) elastic
E) inelastic

Question 28

Which of the following statements about the break-even point is true?

A) It is used to determine how many more units need to be sold to increase market share by a specific amount.
B) It is a technique used to calculate fixed costs.
C) It determines the amount of retained earnings a company will have during an accounting period.
D) It is a technique marketers use to examine the relationship between supply and demand.
E) It is calculated using contribution per unit costs and total fixed costs.

Question 29

If a product has a close substitute, its demand will likely be ________.

A) inelastic
B) elastic
C) cross-elastic
D) fixed
E) break-even

Question 30

Break-even analysis is used to examine the relationship between ________.

A) fixed costs and variable costs
B) costs and contributions
C) costs and price
D) demand and costs
E) demand and profits

Question 31

The changes in prices of other products affect the demand for an item. This is a phenomenon called ________.

A) cross-elasticity of demand
B) complementary elasticity
C) interdependent elasticity
D) substitute demand
E) variable demand

Question 32

________ are the per-unit costs of production that will fluctuate depending on how many units or individual products a firm produces.

A) Fixed costs
B) Variable costs
C) Average fixed costs
D) Marginal costs
E) Everyday costs

Question 33

When setting prices, a company must consider factors in its pricing environment. ________ such as the business cycle, economic growth, and consumer confidence can have a significant impact on the firm's pricing strategies.

A) Consumer trends
B) Economic trends
C) Competitors' responses
D) Regulations
E) Market structures

Question 34

Uber and Airbnb are both examples of the consumer trend of ________.

A) recession
B) price lining
C) the sharing economy
D) shopping for control
E) keystoning

Question 35

________ do not vary with the number of units produced.

A) Liquidity costs
B) Fixed costs
C) Variable costs
D) Marginal costs
E) Everyday costs

Question 36

Which of the following occurs when price is inelastic?

A) Price and revenue change in the same direction.
B) Revenues decrease when price increases.
C) Revenue is unaffected by price changes.
D) Quantity demanded increases when price increases.
E) The demand curve is more horizontal.

Question 37

Which of the following consumer trends is a response to the frequent reports of terrorism and political unrest?

A) buying time
B) vertical integration
C) the sharing economy
D) shopping for control
E) keystoning

Question 38

Each member of a channel of distribution adds a ________ to create the price at which they will sell the product.

A) break-even point
B) percentage of sales
C) list price
D) markup
E) contribution per unit

Question 39

In a ________, consumers become more price-sensitive, switching brands to get better prices and reducing their consumption.

A) sharing economy
B) monopolistic market structure
C) recession
D) price war
E) keystoning pricing structure

Question 40

The manufacturer's suggested retail price is also referred to as the ________.

A) break-even price
B) marginal price
C) list price
D) markup
E) markdown

Question 41

Businesses within a purely competitive market have few opportunities to raise or lower their prices.

Question 42

Describe what a demand curve is and explain how it helps marketers make decisions.

Question 43

Which of the following is an advantage of using cost-based pricing methods?

A) They consider external factors such as competition.
B) They include consideration of the effects of demand.
C) They are relatively simple to calculate.
D) They simplify the process of accurately estimating cost.
E) They take the product life cycle into consideration.

Question 44

When setting prices, the company must consider its external pricing environment. Describe three components of the pricing environment and how they affect businesses.

Question 45

Which of the following is an example of a variable cost for an amusement park?

A) salary of the park manager
B) food cart supplies
C) liability insurance
D) interest on the property's mortgage
E) property taxes

Question 46

One anticipated result of The Tax Cuts and Job Acts of 2017 is companies moving jobs and investments outside of the United States.

Question 47

Inflation may cause marketers to decide to either raise or decrease their prices.

Question 48

In which type of pricing is the selling price based on an estimate of volume or quantity a firm can sell in different markets at different prices?

A) value
B) keystoning
C) demand-based
D) penetration
E) congestion

Question 49

Variable costs for producing textbooks include the price of paper.

Question 50

A break-even analysis helps marketers understand the relationship between price and demand.

Question 51

How does the contribution per unit relate to the process of determining the break-even point?

Question 52

The most common cost-based approach to pricing is ________.

A) demand-based pricing
B) psychological pricing
C) yield management pricing
D) cost-plus pricing
E) high/low pricing

Question 53

When products are complements, an increase in the price of one decreases the demand for the other.

Question 54

For a company that manufactures plastic signs, the printing press to make the signs, the manager's salary, and the utilities are all examples of ________.

A) fixed costs
B) average fixed costs
C) variable costs
D) marginal costs
E) everyday costs

Question 55

Explain the difference between elastic demand and inelastic demand.

Question 56

If demand is elastic, will sellers consider lowering their prices? Explain your answer.

Question 57

As a manufacturer increases price, the ________ drops.

A) target
B) break-even point
C) marginal revenue
D) total cost
E) variable cost

Question 58

What is vertical integration, and how does it affect a retailer's pricing?

Question 59

A demand curve never appears on a graph as a straight line.

Question 60

The Credit Card Responsibility and Disclosure Act and the Affordable Care Act are both examples of government regulations that directly affect prices.

Question 61

Trade or functional discounts are offered by manufacturers to which of the following?

A) channel intermediaries who perform various marketing functions
B) consumers who earn a price reduction for buying in bulk
C) intermediaries who pay their bills before they are due
D) manufacturers that agree to exclusive distribution contracts
E) the government market and other organizations that require bid proposals

Question 62

Which pricing tactic calls for offering three similar products, one that is lower priced and less attractive and two that are comparable but more expensive?

A) peak load pricing
B) decoy pricing
C) bottom-of-the-pyramid pricing
D) keystoning
E) high/low pricing

Question 63

________ refers to the sale of two or more goods or services as a single package for one price.

A) Two-part pricing
B) Captive pricing
C) Price bundling
D) Decoy pricing
E) Trial pricing

Question 64

Which of the following should be true for a skimming price to be successful?

A) Target consumers are price sensitive.
B) Supply exceeds demand.
C) Demand is stable.
D) The producer uses intensive distribution.
E) There is little chance that competitors can quickly enter the market.

Question 65

Which of the following is an example of a pricing strategy that focuses on customers' needs?

A) price leadership
B) everyday low pricing
C) distribution-based pricing
D) keystoning
E) skimming

Question 66

Using ________, marketers charge different prices to different customers in order to manage capacity and maximize revenue.

A) yield management pricing
B) keystoning
C) high/low pricing
D) promo pricing
E) congestion pricing

Question 67

With target costing, marketers first ________ and then ________.

A) build the marketing mix; identify the target market
B) segment and identify target markets; set different prices for each market
C) design the product; determine its cost based on target profits
D) use skimming pricing; use penetration pricing
E) determine a selling price market segments will pay; target costs to ensure that the price is met

Question 68

Which of the following is a cost-plus pricing strategy through which a retailer doubles the cost of the item to determine the price?

A) congestion pricing
B) target-costing
C) skimming
D) keystoning
E) price leadership

Question 69

When the seller takes on part or all of the cost of shipping, it is called ________.

A) freight absorption
B) F.O.B. factory
C) F.O.B. origin
D) uniform delivered
E) two-part pricing

Question 70

Another name for F.O.B. factory pricing is ________ pricing.

A) captive
B) CIF pricing
C) F.O.B. origin
D) F.O.B. delivered
E) freight absorption pricing

Question 71

Using ________, a company raises the price of its product as demand goes up and lowers it as demand declines.

A) price skimming
B) decoy pricing
C) surge pricing
D) keystoning
E) high/low pricing

Question 72

________ is a pricing tactic a firm uses for two products that work only when used together. The firm sells one item at a very low price and then makes its profit on the second high-margin item.

A) Two-part pricing
B) Price bundling
C) Captive pricing
D) Decoy pricing
E) Keystoning

Question 73

A new product carries a low price for a limited period of time to attract customers in what type of pricing strategy?

A) price skimming
B) trial pricing
C) penetration pricing
D) specialty pricing
E) price bundling

Question 74

A firm is using a(n) ________ strategy when it introduces a product at a very low price to gain market share early on.

A) skimming price
B) trial pricing
C) intensive pricing
D) penetration pricing
E) high/low

Question 75

Which of the following is a reason that a marketer would choose a penetration pricing strategy?

A) to ensure the company has the ability to increase prices once demand decreases
B) to focus on the rapid achievement of profit objectives
C) to appeal to different consumer segments with different levels of price sensitivity
D) to create markets for highly technical products
E) to discourage competition from entering the market

Question 76

A retailer that uses the list price for products but runs frequent promotions that heavily discount some products is using which type of pricing strategy?

A) price skimming
B) trial pricing
C) penetration pricing
D) peak load pricing
E) high/low pricing

Question 77

Which of the following is a form of demand-based pricing?

A) price bundling
B) congestion pricing
C) variable pricing
D) everyday low pricing
E) price leadership

Question 78

With ________, the seller pays both the cost of loading and transporting the product to the customer.

A) freight absorption pricing
B) peak load pricing
C) F.O.B. origin pricing
D) F.O.B. delivered pricing
E) F.O.B. factory pricing

Question 79

A firm is using ________ when it charges a high, premium price for a new product with the intention of reducing the price in the future.

A) a skimming pricing strategy
B) trial pricing
C) price segmentation
D) penetration pricing
E) prestige pricing

Question 80

When a company charges the same rate to ship a product regardless of location, it is using which form of pricing?

A) freight absorption
B) F.O.B. factory
C) F.O.B. origin
D) uniform delivered
E) F.O.B. delivered