Deck 10: Price: What Is the Value Proposition Worth

Question 1

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

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

Answer 1

A

Question 2

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.

Answer 2

A

Question 3

Application fees, tuition, and fines are all examples of prices.

Answer 3

True

Question 4

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 5

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 Beanie Babies
D) lightbulbs
E) construction materials

Question 6

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 7

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

Question 8

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.

Question 9

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 10

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 11

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) cost-plus
E) value

Question 12

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 13

Market share is a measure of the profit margin a firm yields with a specific brand.

Question 14

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

Question 15

What are the advantages of digital currencies such as Bitcoin?

Question 16

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 17

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

Question 18

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

Question 19

________ 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

Question 20

Exchanges of nonmonetary value do not involve a price.

Question 21

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 22

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 23

The break-even point is the point at which ________.

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

Question 24

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 25

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) eating greener
D) shopping for control
E) keystoning

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 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 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

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

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

Question 30

________ 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 31

Which of the following is an external influence 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 32

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 33

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 34

________ 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 35

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 36

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 37

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 38

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 39

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 40

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

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

Question 41

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) across-elastic
D) elastic
E) inelastic

Question 42

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

Question 43

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 44

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

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

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

Question 47

A company in an industry characterized by monopolistic competition is most likely to adopt status quo pricing objectives.

Question 48

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 49

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

Question 50

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

Question 51

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

Question 52

To determine the break-even point, a firm first needs to calculate the contribution per unit. What does this mean?

Question 53

Explain the difference between elastic demand and inelastic demand.

Question 54

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

Question 55

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 56

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

Question 57

Variable costs for producing textbooks include the price of paper.

Question 58

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

Question 59

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 60

As a manufacturer increases price, the ________ drops.

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

Question 61

A list price is also referred to as a ________.

A) captive price
B) bundled price
C) channel price
D) suggested retail price
E) basing-point price

Question 62

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 63

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) peak load

Question 64

Two forms of demand-based pricing are ________.

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

Question 65

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) price skimming
B) decoy pricing
C) Bottom of the Pyramid pricing
D) keystoning
E) high/low pricing

Question 66

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

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

Question 67

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 68

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 69

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

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

Question 70

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 71

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 72

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 make accurate cost estimating a simple process.
E) They take the product life cycle into consideration.

Question 73

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) trial pricing

Question 74

________ 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 75

When a company charges the same rate to ship a product anywhere in the United States, 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

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

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 78

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

Question 79

________ 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 80

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