Deck 13: Pricing Strategies

Question 1

It is most accurate to say that fair prices are those consumers perceive as ________.

A) being based on cost
B) being based on demand
C) fixed
D) variable
E) offering good value

Answer 1

E

Question 2

A company's profit is equal to its ________ minus its ________.

A) markup; total costs
B) revenue; total costs
C) markup; fixed costs
D) revenue; variable costs
E) profit margin; variable costs

Answer 2

B

Question 3

In a(n) ________ market structure, there are several sellers, each having slightly different products with unique customer benefits.

A) monopoly
B) oligopoly
C) monopolistic competition
D) pure competition
E) natural competition

Answer 3

C

Question 4

Costs that are directly attributable to the production of a product or delivery of a service are referred to as ________.

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

Question 5

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 6

________ is a company's ability to set a high price without a significant deterioration in market share.

A) Variable cost
B) Pricing power
C) Target cost
D) Fixed cost
E) Unit cost

Question 7

A product's ________ is the difference between its price and total cost per unit.

A) markup
B) revenue
C) profit margin
D) cost-based margin
E) incremental cost

Question 8

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

A) It is used to determine how much production experience a company must have to achieve desired efficiencies.
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 variable costs, the unit price, and fixed costs.

Question 9

The price-quality ratio describes which of the following relationships?

A) Higher-priced products are assumed to have a lower quality.
B) Higher-priced products are assumed to be in greater demand.
C) Higher-priced products are assumed to be in lesser demand.
D) Lower-priced products are assumed to have lesser quality.
E) Lower-priced products are assumed to have greater quality.

Question 10

________ establishes a price based on the cost to manufacture a product or deliver a service.

A) Value-based pricing
B) Fixed cost pricing
C) Cost-based pricing
D) A skimming price
E) Price bundling

Question 11

As a marketer increases a product's price, the ________ drops.

A) target
B) break-even point
C) cost-plus pricing
D) total cost
E) markup

Question 12

The break-even volume 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 13

Under which market structure does a single seller have the most control over pricing?

A) monopoly
B) oligopoly
C) monopolistic competition
D) pure competition
E) natural competition

Question 14

________ is the exchange value of a product or service in the marketplace.

A) Utility
B) Tangibility
C) Price
D) Wage
E) Salary

Question 15

In a(n) ________ market structure, a small group of companies share pricing power sufficient to set the marketplace price for their products or services.

A) monopoly
B) oligopoly
C) monopolistic competition
D) pure competition
E) natural competition

Question 16

Of the elements of the marketing mix, ________ is most closely linked with revenue.

A) price
B) promotion
C) product
D) place
E) positioning

Question 17

A contribution margin is defined as ________.

A) the difference between variable costs and fixed costs
B) the difference between demand with promotions and without promotions
C) the perceived value added by marketing mix elements
D) the gap between price and fixed cost
E) the gap between price and variable cost

Question 18

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 markup to the cost of the product. This approach to pricing is called ________.

A) penetration pricing
B) fixed cost pricing
C) cost-plus pricing
D) variable pricing
E) skimming pricing

Question 19

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

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

Question 20

In a(n) ________ market structure, there are many sellers with very similar products who have no significant pricing power.

A) monopoly
B) oligopoly
C) monopolistic competition
D) pure competition
E) natural competition

Question 21

Which of the following is a drawback of cost-based pricing?

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) Without a standard markup, consumers don't know when they are being overcharged.

Question 22

If demand is highly responsive to a change in price, we say the demand is ________.

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

Question 23

________ 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) List pricing
E) Promotional pricing

Question 24

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

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

Question 25

A ________ is the result of a back-and-forth discussion between a buyer and seller about the final price of a product or service.

A) request for quote
B) competitive bid
C) price quote
D) negotiated price
E) loss-leader price

Question 26

The practice of ________ involves a firm injuring competition by charging different prices to different members of its distribution channel.

A) price fixing
B) price lining
C) price bundling
D) deceptive pricing
E) price discrimination

Question 27

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

A) Price elasticity
B) Break-even pricing
C) The experience curve
D) Target costing
E) Cost transparency

Question 28

A(n) ________ is a limit on the amount of a product that can be imported into a country.

A) quota
B) exchange rate
C) tariff
D) antidumping law
E) antitrust rate

Question 29

A company that sets prices of its exports low with the intention of harming local manufacturers or producers would most likely be found in violation of ________.

A) quotas
B) exchange rates
C) tariffs
D) antidumping laws
E) antitrust rates

Question 30

The ________ Act created the regulatory body that investigates unfair trade practices.

A) Federal Trade Commission
B) Clayton
C) Sherman Antitrust
D) Consumer Protection
E) Robinson-Patman

Question 31

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

A) elasticity
B) volume
C) profitability
D) meeting competition
E) prestige

Question 32

Ascot Tires has decided to decrease its prices. The company can expect that ________ for their product will increase.

A) cost-plus pricing
B) value-based pricing
C) demand
D) the experience curve
E) competition

Question 33

The less ________ the demand, the ________ it pays for the seller to raise the price.

A) determined; less
B) elastic; more
C) elastic; less
D) constant; more
E) fixed; more

Question 34

Some retailers advertise items at very low prices or even below cost just to get customers into the store. This ________ strategy is prohibited in some states.

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

Question 35

The Pure Drug Company produces insulin, a product with a very stable demand, even though the price has changed several times in the past two years. Insulin is a product with ________ demand.

A) joint
B) service
C) inelastic
D) elastic
E) fluctuating

Question 36

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 37

Price elasticity of demand is ________ divided by ________.

A) percent change in quantity demanded; percent change in price
B) demand; price
C) percent change in price; percent change in quantity demanded
D) the going price; the asking price
E) perceived value; perceived costs

Question 38

The projected sales for a product or service for any price customers are willing to pay is charted by the ________.

A) demand curve
B) variable cost
C) target cost
D) break-even pricing
E) experience curve

Question 39

Under the ________, it is illegal to discuss prices with a competitor.

A) Sherman Antitrust Act
B) Clayton Act
C) Robinson-Patman Act
D) Wheeler-Lea Act
E) Federal Trade Commission Act

Question 40

A(n) ________ is a schedule of fees a country applies to goods and services from foreign countries.

A) quota
B) exchange rate
C) tariff
D) loss-leader price
E) antitrust rate

Question 41

In a(n) ________, a buyer communicates specifications for the product and the exact price he or she is willing to pay.

A) storefront price
B) online price
C) forward auction
D) reverse auction
E) clickthrough fee

Question 42

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

Question 43

If demand falls by 1 percent when price is increased by 2 percent, then ________.

A) elasticity is -1/2
B) demand is inelastic
C) demand is elastic
D) buyers are not price sensitive
E) A and B

Question 44

Which of the following is NOT a price adjustment strategy a marketer might use to lower the actual price paid by customers, while leaving the sticker price intact?

A) cash discount
B) quantity discount
C) trade-in
D) versioning
E) rebate

Question 45

ABC Enterprises sold 9,000 units @ $2.99/unit in July. The firm sold 9,000 units @ $4.29/unit in August. This illustrates a(n)________ price.

A) derived
B) negotiated
C) fluctuating
D) elastic
E) inelastic

Question 46

In Vin del Mar, Chile, there are a dozen stores specializing in selling the same quality of seafood products on one street. An individual store dare not charge more than the going price without the risk of losing business to the other stores that are selling the fish at a common price. This is an example of what type of market?

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

Question 47

A firm is using ________ when it charges a high price for a new product with the intention of maximizing revenue.

A) a skimming price
B) trial pricing
C) loss leader pricing
D) penetration pricing
E) promotion pricing

Question 48

Demand would most likely be inelastic for which of the following?

A) lamb chops and t-bone steaks
B) gourmet cheese
C) symphony tickets
D) luxury watches
E) basic necessities

Question 49

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

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

Question 50

A firm is using a(n) ________ strategy when it introduces a product at a very low price to quickly generate sales volume or market segment penetration.

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

Question 51

Consumers usually perceive higher-priced products as ________.

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

Question 52

Using the practice of ________, a product's price can easily be adjusted to meet changes in the marketplace.

A) captive pricing
B) dynamic pricing
C) promotion pricing
D) price bundling
E) price lining

Question 53

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

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

Question 54

Ecstasy Pharmaceuticals faces fixed costs of $1,000,000 with manufacturing its new drug. The company sells the drug in bottles of 50 pills for $10.00. The company estimates that it must sell 200,000 bottles to break even. What is the total cost to produce a bottle of 50 pills?

A) $2.50
B) $5.00
C) $6.00
D) $7.50
E) not enough information to calculate

Question 55

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) price discrimination
B) odd pricing and price lining
C) dynamic pricing and price lining
D) cost-based pricing and loss-leader pricing
E) dynamic pricing and loss leader pricing

Question 56

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 57

As production workers become better organized and more familiar with equipment, the average cost per unit decreases. This is called the ________.

A) demand curve
B) experience curve
C) skimming cost
D) penetration cost
E) marginal utility

Question 58

The ________ of a product line is the price below which all products in the line will be priced.

A) price ceiling
B) dynamic price
C) price floor
D) price lining
E) online price

Question 59

A number of top fashion-modeling agencies would most likely be charged with ________ for jointly determining what commissions they would charge for models.

A) prestige pricing
B) price lining
C) price bundling
D) dynamic pricing
E) price fixing

Question 60

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 stable.
D) The producer should use intensive distribution.
E) The product has clear, meaningful advantages over alternatives in the market.

Question 61

Refer to the scenario below to answer the following questions. Alden Manufacturing produces small kitchen appliances blenders, hand mixers, and electric skillets under the brand name First Generation. Alden attempts to target newlyweds and first-time home buyers with this brand. Considering that most young households have limited financial resources, Alden has used break-even analysis and analysis of the demand curve to determine pricing. "In doing this," Milt Alden stated, "we have better control over keeping price right in line with customers." Alden manufactures a three-speed blender, its top seller, and a five-speed blender. The hand mixers are manufactured in two styles a small hand-held mixer with two rotating beaters and a similar style that comes with an optional stand and attached mixing bowl. Alden's temperature-controlled skillets are manufactured in one style with three color options. "Our product offerings are narrower," Milt Alden added, "but our line workers know each product like the back of their hands. This allows us to produce superior products while holding our prices low."
Milt Alden says that his line workers "know each product like the back of their hands," and that this knowledge helps the company keep its prices low. This indicates that Alden Manufacturing most likely uses which of the following strategies?

A) cost-plus pricing
B) skimming prices
C) the experience curve
D) break-even pricing
E) prestige pricing

Question 62

Of the components of the marketing mix, pricing is the most heavily regulated by federal law.

Question 63

Refer to the scenario below to answer the following questions. Alden Manufacturing produces small kitchen appliances blenders, hand mixers, and electric skillets under the brand name First Generation. Alden attempts to target newlyweds and first-time home buyers with this brand. Considering that most young households have limited financial resources, Alden has used break-even analysis and analysis of the demand curve to determine pricing. "In doing this," Milt Alden stated, "we have better control over keeping price right in line with customers." Alden manufactures a three-speed blender, its top seller, and a five-speed blender. The hand mixers are manufactured in two styles a small hand-held mixer with two rotating beaters and a similar style that comes with an optional stand and attached mixing bowl. Alden's temperature-controlled skillets are manufactured in one style with three color options. "Our product offerings are narrower," Milt Alden added, "but our line workers know each product like the back of their hands. This allows us to produce superior products while holding our prices low."
A retail store that carries Alden's products advertised a special low price on the company's three-speed blender. Customers who came to the retail store looking for the three-speed blender were told that the item was out of stock and were encouraged to buy the higher-priced five-speed blender. The retailer would most likely be accused of ________.

A) predatory pricing
B) price discrimination
C) loss-leader pricing
D) bait-and-switch pricing
E) price fixing

Question 64

One sign of the increasing level of competition in today's marketplace is the increasing failure rates of both start-up and long-standing businesses.

Question 65

Promotional pricing is a form of deceptive pricing that is illegal in many states.

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) a skimming price
B) a trial price
C) penetration pricing
D) bundle pricing
E) loss-leader pricing

Question 67

A powerful brand is more price elastic than a weak brand in the same product category.

Question 68

In a monopolistic competition market structure, individual firms have almost no pricing power.

Question 69

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

Question 70

Value Meal Deals at a fast food restaurant in which you get a sandwich, fries, and a drink for one price are an example of price bundling.

Question 71

A markup and a margin both refer to the difference between a final price and unit cost.

Question 72

A marketer can influence exchange rates to create international pricing advantages.

Question 73

The values of currencies on the global capital market are constantly changing.

Question 74

In the competitive bidding process, all bids should be blind so communication between buyer and sellers remains confidential.

Question 75

Refer to the scenario below to answer the following questions. Alden Manufacturing produces small kitchen appliances blenders, hand mixers, and electric skillets under the brand name First Generation. Alden attempts to target newlyweds and first-time home buyers with this brand. Considering that most young households have limited financial resources, Alden has used break-even analysis and analysis of the demand curve to determine pricing. "In doing this," Milt Alden stated, "we have better control over keeping price right in line with customers." Alden manufactures a three-speed blender, its top seller, and a five-speed blender. The hand mixers are manufactured in two styles a small hand-held mixer with two rotating beaters and a similar style that comes with an optional stand and attached mixing bowl. Alden's temperature-controlled skillets are manufactured in one style with three color options. "Our product offerings are narrower," Milt Alden added, "but our line workers know each product like the back of their hands. This allows us to produce superior products while holding our prices low."
If Alden raises the price on the handheld mixer by 2 percent and quantity demanded falls by 10 percent, what is the price elasticity of demand?

A) -5
B) -8
C) -12
D) 5
E) 12

Question 76

Johnson Boats wants to introduce a new model of boat into mature markets in highly developed countries with the goal of quickly gaining mass-market share. As a consultant, you should recommend a ________ pricing strategy.

A) skimming
B) penetration
C) price leadership
D) cost-plus
E) dynamic

Question 77

Whenever any competitor in a market raises or lowers its price, the value of every other product in that specific market is affected.

Question 78

A marketer conducting online sales needs to consider varying clickthrough fees in calculating the incremental cost of an online sale.

Question 79

Marketers can use information from a break-even analysis to identify at what volume product sales will become profitable.

Question 80

Storefront pricing is also known as offline pricing.