Deck 11: Pricing the Product

Question 1

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

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

Answer 1

A

Question 2

With the flexibility to adjust prices on a wide range of goods based on demand that the Internet offers,some companies are reversing the fixed pricing trend and using .

A)dynamic pricing
B)reference pricing
C)psychological pricing
D)promotional pricing
E)geographical pricing

Answer 2

A

Question 3

From a marketer's point of view,price lining is a way to do which of the following?

A)make the business more socially responsible
B)pass shipping costs on to consumers
C)control supply
D)maximize profits
E)eliminate price elasticity concerns

Answer 3

D

Question 4

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

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

Question 5

In a market with ,the market consists of many buyers and a few sellers who are highly sensitive to each other's pricing and typically use very similar pricing.

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

Question 6

A(n)occurs when customers decide that two different brands of pain reliever have the same product quality because they have basically the same product characteristics and similar prices.

A)bundling effect
B)contrast effect
C)clouding effect
D)assimilation effect
E)price- placebo effect

Question 7

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

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

Question 8

In a(n),all of the buyers know the highest price bid at any point in time.

A)reverse auction
B)dynamic auction
C)open auction
D)price- lining auction
E)reserve auction

Question 9

When a ski and snowboarding shop offers a price reduction to customers who buy during off- peak periods throughout the year,the firm is giving a(n)_ discount.

A)seasonal
B)annual
C)trade
D)allowance
E)functional

Question 10

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

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

Question 11

The break- even point is the point at which .

A)the production of one more unit will not increase profit
B)demand equals supply
C)the total revenue and total costs lines intersect
D)a firm's profit goal is reached
E)the company can pay all of its long- term debt

Question 12

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

Question 13

lets marketers look at cost and demand at the same time and identifies the output and the price that will generate the maximum profit.

A)Competitive analysis
B)Marginal analysis
C)SWOT analysis
D)Supply- demand analysis
E)Break- even analysis

Question 14

As a result of the ,Rick decided the candy priced at $2.50 per pound could not be nearly as good as the candy priced at $9.50 per pound.

A)reference effect
B)fair price effect
C)contrast effect
D)clouding effect
E)assimilation effect

Question 15

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

A)consumers who earn a price reduction for buying in bulk
B)channel intermediaries who perform wholesaling tasks that the manufacturer would otherwise have to perform
C)manufacturers that agree to exclusive distribution contracts
D)intermediaries such as financing institutions as a cost of doing business with them
E)the government market and other organizations that require bid proposals

Question 16

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

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

Question 17

By using ,a company deliberately sets a low price with the intention of driving its competition out of business.

A)predatory pricing
B)loss leader pricing
C)price- fixing
D)contrast pricing
E)price lining

Question 18

Whether a firm sells to businesses or directly to consumers,most pricing structures are built around which of the following?

A)distribution costs
B)sales promotions
C)list prices
D)trade discounts
E)channel length

Question 19

The most common cost- based approach to pricing is .

A)cost- plus pricing
B)psychological pricing
C)yield management pricing
D)cost- minus pricing
E)demand- based pricing

Question 20

Which of the following is NOT a type of pricing objective?

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

Question 21

Enforcing laws against is complicated because practices are similar to the legal practice of "trading up."

A)placebo- effect pricing
B)bait- and- switch tactics
C)prestige pricing
D)price- bundling
E)captive pricing

Question 22

When Circuit Town Electronics sets its televisions at three price levels of $699,$899,and $1,099,it is most likely using _ _.

A)skimming pricing
B)penetration pricing
C)price fixing
D)loss leader pricing
E)price lining

Question 23

Lawyers,accountants,and other professionals typically price by adding a standard markup for profit.This is known as .

A)cost- plus pricing
B)value pricing
C)target costing
D)penetration pricing
E)break- even pricing

Question 24

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

Question 25

One of the most important opportunities offered by the Internet is _ ,where the price can easily be adjusted to meet changes in the marketplace.

A)captive pricing
B)price bundling
C)dynamic pricing
D)basing- point pricing
E)freenomics

Question 26

Bonnie has enough money to either buy a used car or to pay for an international marketing class that will spend three weeks visiting companies in Europe.She needs the car to get to work and to class.However,she is planning on a career in international marketing,and the trip would allow her to start networking.She will incur whether she buys the car or takes the class.

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

Question 27

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)sales
B)value
C)competitive effect
D)cost- plus
E)profit

Question 28

The idea of externalities,meaning that the more people you get to participate in a market,the more profitable it is,is the basis of .

A)freenomics
B)price sensitivity
C)e- commerce
D)dynamic pricing
E)reserve pricing

Question 29

A skim pricing strategy would likely be most effective in selling which of the following?

A)shampoo and bath soap
B)any convenience item
C)anything easily copied by competitors
D)an electronic device which involved a great deal of research and development to bring to market
E)most items at EDLP retailers such as Wal- Mart

Question 30

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

A)Total costs; fixed; variable costs
B)Break- even costs; fixed; total costs
C)Variable costs; fixed; total costs
D)Fixed costs; variable; total costs
E)Fixed costs; total; variable costs

Question 31

Which of the following statements about marginal analysis is true?

A)An important factor in marginal analysis is predicting demand,which is an exact science.
B)Marginal analysis is typically a straightforward procedure to apply in real- life situations.
C)The cost of producing a unit beyond the point when marginal cost equals marginal revenue is much less than the revenue from the sale of that unit.
D)Marginal revenue is also the demand curve,so it represents the amount customers will buy at different prices.
E)Profit is maximized at the point at which marginal cost is exactly equal to marginal revenue.

Question 32

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

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

Question 33

Often consumers base their perception of price on what they perceive to be the customary or .

A)reference price
B)list price
C)dynamic price
D)fair price
E)target price

Question 34

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

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

Question 35

Which of the following allow shoppers to bid on everything from bobble heads to health- and- fitness equipment?

A)reverse auctions
B)list prices
C)shopbots
D)on- line auctions
E)freenomics

Question 36

The Robinson- Patman Act does NOT include regulations .

A)that apply to resellers
B)that prohibit selling the same product to different retailers at different prices
C)that prohibit price discrimination in interstate commerce
D)that prohibit offering such "extras" as discounts,rebates,premiums,and coupons to some but not all customers
E)that protect final consumers

Question 37

Bayer AG agreed to pay $46 million as part of a law settlement for conspiring with Archer- Daniels- Midland (ADM)to keep prices of citric acid at a certain level.These two international companies were guilty of _ _.

A)price discrimination
B)price- fixing
C)skimming pricing
D)predatory pricing
E)price lining

Question 38

In some states,unfair trade practices acts _.

A)control the sale of agricultural products and raw materials
B)ban the use of price lining
C)regulate the markups used by various industries
D)ban the use of loss leader pricing
E)regulate all forms of psychological pricing

Question 39

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

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

Question 40

Manufacturers of which of the following would be most likely to use freight absorption pricing?

A)laptop computers
B)chocolate candy
C)repair parts for vacuum cleaners
D)furniture polish
E)feline flea prevention medication

Question 41

The method of setting prices in which marketers total all the costs for the product and then add an amount to arrive at the selling price is called .

A)target costing
B)yield management pricing
C)supply- based pricing
D)demand- based pricing
E)cost- plus pricing

Question 42

In a market with ,there are many sellers each offering a slightly different product over a range of prices.

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

Question 43

As a manufacturer increases price,the drops.

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

Question 44

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

A)F)O.B.factory pricing
B)basing- point pricing
C)F)O.B.origin pricing
D)uniform delivered pricing
E)F)O.B.delivered pricing

Question 45

Valeo Fashions has just introduced a new line of fashion dresses for teens.They will initially enter the market at high prices in a strategy.

A)penetration pricing
B)yield management pricing
C)price leadership
D)skim pricing
E)value pricing

Question 46

The two specific forms of demand- based pricing are .

A)fixed pricing and variable pricing
B)price bundling and captive pricing
C)price leadership and everyday low pricing
D)price skimming and penetration pricing
E)target costing and yield management pricing

Question 47

Which of the following is true about noncumulative quantity discounts?

A)They encourage large single orders.
B)They encourage small,regularly spaced orders.
C)They encourage a strong relationship between buyer and seller.
D)They typically involve giving the buyer a credit to use against future orders.
E)They are based on a total quantity purchased within a set time period.

Question 48

Under 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)target costing
B)penetration
C)demand- based
D)capacity management
E)distribution- based

Question 49

Some retailers advertise items at very low prices or even below cost just to get customers into the store.The rationale for implementing this strategy is the belief that once a customer is in the store she will buy the advertised item as well as other items at regular prices.

A)bait- and- switch
B)loss leader pricing
C)price lining
D)predatory pricing
E)dynamic pricing

Question 50

With target costing,marketers will first and then _.

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

Question 51

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

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

Question 52

A(n)strategy is implemented when a store places two similar items next to each other,highlighting the fact that the price of one item is slightly lower than that of the other item.

A)assimilation effect
B)price- placebo effect
C)contrast effect
D)skimming price
E)penetration pricing

Question 53

Why do marketers consider prestige products to be an exception to the law of demand?

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

Question 54

Which of the following is true about the demand curve?

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

Question 55

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

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

Question 56

Fixed costs _ as the number of units produced increases.

A)remain the same
B)increase at a diminishing rate
C)vary
D)decrease
E)increase

Question 57

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

A)F)O.B destination
B)F)O.B.delivered
C)F)O.B.origin
D)basing- point
E)captive

Question 58

When a company charges the same rate to ship a product anywhere in the United States,it is using which form of geographic pricing?

A)F)O.B.factory
B)F)O.B.origin
C)F)O.B.delivered
D)uniform delivered
E)basing- point

Question 59

A local restaurant sells lunch entrees for $7.95,$9.95,and $11.95.From this information,you can infer the restaurant uses which of the following?

A)dynamic pricing and price lining
B)reference pricing and value pricing
C)dynamic pricing and loss leader pricing
D)price discrimination
E)odd pricing and price lining

Question 60

When demand is ,increases in price result in increases in total revenues,while decreases in price result in decreases in total revenue.

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

Question 61

A firm is using a(n)strategy when it introduces a product at a very low price to encourage rapid product adoption.

A)penetration pricing
B)intensive pricing
C)skimming pricing
D)competitive pricing
E)price bundling

Question 62

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)value pricing
B)a skimming price
C)prestige pricing
D)trial pricing
E)penetration pricing

Question 63

When consumers are unable to judge the quality of a product through examination or prior experience,they usually do which of the following and assume that the higher- priced product is the higher- quality product?

A)experience an assimilation effect
B)make a price- quality inference
C)depend on an internal reference price
D)experience a price- placebo effect
E)assess the fair price

Question 64

Which of the following is a set price or price range in consumers' minds that they refer to in evaluating a product's price?

A)captive price
B)value price
C)internal reference price
D)suggested retail price
E)dynamic price

Question 65

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

Question 66

The average price Xerox charged when it introduced the first stand- alone fax machine was $12,700.This premium price was a way for Xerox to recoup some of the research and development costs that went into production.Xerox used .

A)target costing
B)penetration pricing
C)a skimming price
D)prestige pricing
E)a trial price

Question 67

Which of the following occurs when price is inelastic?

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

Question 68

is the value customers give up to obtain a desired product.

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

Question 69

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

A)Supply should exceed demand.
B)There should be little chance that competitors can quickly enter the market.
C)Demand must be stable.
D)Target consumers should be price sensitive.
E)The producer should use intensive distribution.

Question 70

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)specialty pricing
C)price bundling
D)penetration pricing
E)trial pricing

Question 71

Which of the following occurs when manufacturers or wholesalers attempt to force retailers to charge a certain price for their products?

A)vertical price fixing
B)assimilation pricing
C)internal reference pricing
D)horizontal price fixing
E)predatory pricing

Question 72

Consumers usually perceive higher- priced products as .

A)having high quality
B)out of reach for all but the wealthy
C)having low profit margins
D)having cost- based prices
E)being in the introductory stage of the product life cycle

Question 73

Joe Bergerson makes and sells maple racks for cooling cakes and cookies.Joe knows that it costs $15 to make one rack,and he wants to earn a 25 percent profit on each rack.Which approach to pricing is Joe most likely to use?

A)value pricing
B)demand- based pricing
C)yield management pricing
D)target costing
E)cost- plus pricing

Question 74

A business using price lining is doing which of the following?

A)trying to recoup its research and development costs for a new product
B)using price points to determine its pricing strategy
C)engaging in potentially unethical pricing
D)trying to avoid the use of psychological pricing,which may be negatively received by customers
E)attempting to attain a large market share before any competitors can enter the marketplace

Question 75

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

Question 76

Savings for You,a discount retail chain,is highly competitive.When entering a new market,Savings for You often cuts prices so deeply that it sells below costs,effectively pushing smaller companies with less purchasing power out of the market.Savings for You is most at risk of being accused of _.

A)loss leader pricing
B)deceptive pricing
C)predatory pricing
D)price- fixing
E)skimming prices

Question 77

Federal legislation on price- fixing requires that sellers set their prices .

A)consistently throughout a region
B)based on their fixed and variable costs
C)to achieve a specified profit margin
D)consistently with all customers
E)without communication with competitors

Question 78

Which of the following statements about price is true?

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

Question 79

When setting prices,a company must consider factors in its pricing environment.,including factors such as boom or recession,inflation,and interest rates,can have a strong impact on the firm's pricing strategies.

A)Consumer trends
B)The demand curve
C)Economic trends
D)Target costing
E)Competitors' responses

Question 80

When a beverage maker came out with a new drink and priced it at half price for a month to attract buyers,the company was using a _ _ strategy.

A)skim pricing
B)everyday low price
C)penetration pricing
D)trial pricing
E)price leadership