Deck 11: Pricing Concepts and Strategies: Establishing Value

Question 1

The maximizing profits strategy primarily relies on:

A)advertising theory.
B)management theory.
C)marketing theory.
D)relativity theory.
E)economic theory.

Answer 1

E

Question 2

Which of the following is true of pricing based on competitor-oriented strategies?

A)Value is only implicitly considered in this type of strategies.
B)Prices are decided based on the value perceived by customers.
C)Prices for new products are always low to reduce competition.
D)Products are priced to ensure a standard return on investment.
E)A profit margin is set, which determines the price of products.

Answer 2

A

Question 3

Those products whose demand curves are positively related, such that they rise or fall together, are called:

A)substitute products.
B)complementary products.
C)inverse products.
D)convenience products.
E)prestige products.

Answer 3

B

Question 4

Which of the following is NOT true about pricing?

A)It is the only element of marketing mix that generate revenue
B)Implementing a good pricing strategy is challenging but can last effective for a very long time.
C)Price is broader than the money customers pay to purchase a product.
D)Price is one of the most important factors in customer purchase decisions
E)Pricing decisions should be viewed as opportunity to create value for customers.

Question 5

The followings are critical components of pricing strategies EXCEPT:

A)Promotions
B)Objectives
C)Competitions
D)Costs
E)Customers

Question 6

Slate Inc.is the parent company of five brands.Slate decides that all the products under every brand must make a 20 percent gain margin in the upcoming financial year.This is an example of:

A)profit orientation.
B)customer orientation.
C)sales orientation.
D)cost orientation.
E)competitor orientation.

Question 7

Which of the following shows how many units of a product or service consumers will request for during a specific period of time at different prices?

A)A supply graph
B)The break-even point
C)The input-output ratio
D)A demand curve
E)A workflow analysis

Question 8

Amazon selling its Kindle product at a price lower than the cost in a hope that customers will choose Kindle over competitors and purchase eBooks later on.Amazon pricing objective in this case is most likely to be:

A)Profit orientation
B)Sales orientation
C)Long term orientation
D)Customer orientation
E)Competitive parity

Question 9

Blue Corp., a company that manufactures high quality mobile phones, is set to launch a new series of tablets.In order to reduce competition and increase the demand for the new products, the company launches them at a very low price.Blue's objective is most likely to be:

A)sales orientation.
B)customer orientation.
C)profit orientation.
D)quality orientation.
E)competitor orientation.

Question 10

What is implemented by firms that focus on the rate at which their profits are generated relative to their investments rather than the absolute level of profits?

A)Maximizing profits strategy
B)Target return pricing strategy
C)Value-based strategy
D)Competitive parity strategy
E)Target profit pricing strategy

Question 11

A wealthy industrialist purchases a Van Gogh painting for his new home.He pays $140 million to procure this piece of work.In this case, the painting is an example of a(n):

A)consumer good.
B)prestige product.
C)utility product.
D)convenience product.
E)standard product.

Question 12

The usual pricing strategy implemented by firms when they have a particular gain goal as their overriding concern is the:

A)market penetration strategy.
B)target return pricing strategy.
C)improvement value strategy.
D)competitive parity strategy.
E)target profit pricing strategy.

Question 13

A company specializing in bathroom fittings offers state-of-the-art products.The products are highly priced, and the company is aware that sales will be limited.The main objective is to enhance its reputation and image and thereby increase the company's value in the minds of consumers.This is an example of:

A)sales orientation.
B)customer orientation.
C)profit orientation.
D)cost orientation.
E)competitor orientation.

Question 14

Those products for which changes in demand are negatively related are called:

A)substitute products.
B)complementary products.
C)parallel products.
D)convenience products.
E)standard products.

Question 15

A firm with a company objective that can be implemented by focusing on target return pricing is using a:

A)sales orientation.
B)customer orientation.
C)profit orientation.
D)demand orientation.
E)competitor orientation.

Question 16

When determining its pricing strategy, if a firm is willing to let profits suffer in order to increase its customer base, the company objective is most likely to be:

A)sales oriented.
B)customer oriented.
C)profit oriented.
D)cost oriented.
E)quality oriented.

Question 17

The pricing orientation that explicitly invokes the concept of value for the users of the product and in which prices are set to match the users' expectations is called:

A)sales orientation.
B)customer orientation.
C)profit orientation.
D)market share orientation.
E)competitor orientation.

Question 18

A company objective that is based on the premise that the firm should measure itself primarily against its rivals is:

A)sales oriented.
B)customer oriented.
C)profit oriented.
D)cost oriented.
E)competitor oriented.

Question 19

A company launches a new car in the luxury segment.It studies the quality and price of other luxury cars available in the market and ensures that the price and features of the new launch are similar to the existing cars.The company's objectives are most likely to be:

A)sales oriented
B)customer oriented.
C)profit oriented.
D)cost oriented.
E)competitor oriented.

Question 20

Which of the following refers to those products that consumers purchase for status rather than functionality?

A)Consumer goods
B)Prestige products
C)Utility products
D)Convenience products
E)Standard products

Question 21

When many firms sell closely related but not homogeneous products, it is called:

A)pure competition.
B)price engagement.
C)monopolistic competition.
D)oligopsony.
E)monopsony.

Question 22

A situation in the market that occurs when two or more firms compete primarily by lowering their prices is referred to as:

A)pure competition.
B)vertical price fixing.
C)horizontal price fixing.
D)price negotiation.
E)price war.

Question 23

Which of the following is NOT true of the break-even point?

A)It represents the point where a firm's profits is equal to zero.
B)It represents the point where a firm's revenue is equal total costs
C)It represents the point where the sales revenue equals the total costs of a product.
D)It represents the number of units required to be produced to meet the annual profit goal.
E)It represents the number of units required to cover both variable and fix costs.

Question 24

Megan was an assistant manager in a firm when she had bought a Hyundai Accent L hatchback.After she was promoted to the position of a senior manager with a big pay raise, she bought a Volvo S80.This is an example of the:

A)substitution effect.
B)pricing effect.
C)supply effect.
D)demand effect.
E)income effect.

Question 25

Which of the following occurs when only a few firms providing a particular product or service dominate a market?

A)Duopoly
B)Monopsony
C)Oligopoly
D)Monopoly
E)Oligopsony

Question 26

Which of the following occurs when only one firm provides the product or service in a particular industry?

A)Duopoly
B)Monopsony
C)Oligopoly
D)Monopoly
E)Oligopsony

Question 27

A fall in the price of gas leads to an increased demand for cars in the market.In this context, gas and car are examples of:

A)substitute products.
B)complementary products.
C)alternate products.
D)luxury products.
E)prestige products.

Question 28

What is contribution per unit for Joe's store?

A)$100
B)$500
C)$10
D)$50
E)$20

Question 29

How many units should Joe sells to break even?

A)0
B)500
C)50
D)100
E)1000

Question 30

The change in the quantity of a product demanded by consumers because of a change in their earnings is called the:

A)substitution effect.
B)experience curve effect.
C)leader pricing effect.
D)markdown effect.
E)income effect.

Question 31

The price excluding the variable costs per unit is referred to as the:

A)total cost per unit.
B)fluctuating cost per unit.
C)contribution per unit.
D)average cost per unit.
E)rebatable cost per unit.

Question 32

Mike wants to set up a factory to manufacture roller skates.He plans to employ a hundred people in his factory.Mike's primary expenses include rent, utilities, insurance, administrative salaries (for executives and higher-level managers), and depreciation of the physical plant and equipment.The expenses for raw material and labour to make the skates constitute the:

A)standard costs.
B)variable costs.
C)rebate.
D)improvement value.
E)fixed costs.

Question 33

The expenses that change depending on production volume are called the:

A)standard costs.
B)variable costs.
C)rebatable expenses.
D)promotional expenses.
E)fixed costs.

Question 34

Consumers' ability to replace the focal brand with other products is called:

A)the substitution effect.
B)the markdown effect.
C)the experience curve effect.
D)the competitive parity effect.
E)the income effect.

Question 35

What would be the fixed cost of Joe's store?

A)$100,000
B)$50,000
C)$10,000
D)$5,000
E)$1000

Question 36

A local popular coffee shop has increased its regular coffee price by 15% and observed decrease in demand of 5%.The demand for the regular coffee at this coffee shop is:

A)Elastic
B)Inelastic
C)Break even
D)Could be either elastic or inelastic
E)Prestige

Question 37

The fall in the price of coffee in the market led to a fall in the demand for tea.In this context, coffee and tea are examples of:

A)substitute products.
B)complementary products.
C)luxury products.
D)convenience products.
E)standard products.

Question 38

Jeff is a hockey player who uses hockey sticks manufactured by Teal Inc.Teal increases the price of hockey sticks, so Jeff switches to another brand offering the same quality of hockey sticks at a lower price.This change in brand is an example of the:

A)substitution effect.
B)complementary effect.
C)supply effect.
D)demand effect.
E)income effect.

Question 39

Those expenses that remain essentially at the same level, regardless of any changes in the volume of production, are called:

A)rebatable expenses.
B)variable costs.
C)unit costs.
D)marginal costs.
E)fixed costs.

Question 40

What is the selling price at Joe's store?

A)$100
B)$1000
C)$500
D)$50
E)$100,000

Question 41

A strategy of selling a new product or service at a high price that innovators and early adopters are willing to pay to obtain is called:

A)price fixing.
B)price skimming.
C)price discrimination.
D)bait and switch.
E)predatory pricing.

Question 42

The pattern of buying both premium and low-priced merchandise or patronizing both expensive, status- and price-oriented retailers is called:

A)prestige shopping.
B)wholesale shopping.
C)grey-market shopping.
D)cross-shopping.
E)premium shopping.

Question 43

A strategy companies use to emphasize the continuity of their retail prices at a level somewhere between the regular, nonsale price and the deep-discount sale prices their competitors may offer is called:

A)everyday low pricing.
B)external reference price.
C)high/low pricing.
D)market penetration pricing.
E)price skimming.

Question 44

A method for setting prices that determines the total expense of possessing a product over its useful life is called the:

A)improvement value method.
B)supply-based method.
C)demand-based method.
D)premium pricing method.
E)cost of ownership method.

Question 45

Telecommunication industry in Canada is controlled by handful companies, therefore, the competition is:

A)Monopoly
B)Pure competition
C)Oligopoly
D)Monopolistic competition
E)Gray market

Question 46

A car company introduces a new car in the market.It maintains a low introductory price to reach the middle-income group.The main objective of the company is to build sales and profits quickly.This is an example of:

A)everyday low pricing.
B)external reference price.
C)high/low pricing.
D)market penetration pricing.
E)internal reference price.

Question 47

A store that sells childrens' clothes reduces its prices drastically during promotional sales.This is an example of:

A)everyday low pricing.
B)external reference price.
C)high/low pricing.
D)market penetration pricing.
E)value-based pricing.

Question 48

When a market legally circumvents authorized channels of distribution to sell goods at prices lower than those intended by the manufacturer, it is called a:

A)black market.
B)pure competition market.
C)monopoly market.
D)grey market.
E)monopsonic market.

Question 49

Which of the following pricing strategies sets the initial price low for the introduction of a new product or service, with the objective of building sales, market share, and profits quickly?

A)Market development pricing
B)Market extension pricing
C)Market establishment pricing
D)Market testing pricing
E)Market penetration pricing

Question 50

As the number of tourists in a village increases during Christmas, the hotels in the locality temporarily increase the rates of accommodation to make profit.This is an example of:

A)price skimming.
B)external reference pricing.
C)high/low pricing.
D)market penetration pricing.
E)odd pricing.

Question 51

When different companies sell commodity products that consumers perceive as substitutable, this is called:

A)pure competition.
B)price engagement.
C)monopolistic competition.
D)oligopolistic competition.
E)noncompetitive marketing.

Question 52

The method in which a manager must estimate how much more, or less, consumers are willing to pay for a product relative to other comparable products is called the:

A)improvement value method.
B)supply-based method.
C)price skimming method.
D)premium pricing method.
E)cost of ownership method.

Question 53

Jared's, an exclusive deli, marked down its smoked sausages from $9.99 to $6.99 in a prominently displayed poster at its smoked meats section.When consumers viewed the sale price, they tended to pick more smoked sausages than they required.This is an example of strategy using:

A)everyday low price.
B)external reference price.
C)high/low pricing.
D)market penetration pricing.
E)rebates.

Question 54

Ochre Inc.had marked its refrigerators at $729.94 as the original price.This was close to the standard price for refrigerators of the same quality in the market.Later, the price is brought down to $650.99.A customer compares Ochre's marked-down price with the original price and perceives an increased value.This is an example of:

A)everyday low pricing.
B)external reference price.
C)high/low pricing.
D)market penetration pricing.
E)price skimming.

Question 55

A pricing strategy that relies on the promotion of sales, during which prices are temporarily reduced to encourage purchases, is called:

A)everyday low pricing.
B)price skimming.
C)high/low pricing.
D)market penetration pricing.
E)odd pricing.

Question 56

Which of the following approaches attempts to reflect how a firm wants consumers to interpret its products relative to the offerings of rival companies?

A)Cost-based pricing method
B)Value-based pricing method
C)Competitor-based pricing method
D)Supply-based pricing method
E)Demand-based pricing method

Question 57

Which of the following pricing methods focuses on the overall worth of the product offering as perceived by consumers, who compare it what they need to sacrifice in order to acquire the product?

A)Cost-based pricing methods
B)Value-based pricing methods
C)Competitor-based pricing methods
D)Supply-based pricing methods
E)Demand-based pricing methods

Question 58

Which of the following pricing methods determine the final price to charge without recognizing the role that consumers or competitors' prices play in the marketplace?

A)Cost-based pricing method
B)Value-based pricing method
C)Competitor-based pricing method
D)Supply-based pricing method
E)Demand-based pricing method

Question 59

A company sells shoes at a price somewhere between the regular, nonsale price and the deep-discount sale prices that its competitors may offer.This is an example of:

A)everyday low pricing.
B)external reference pricing.
C)high/low pricing.
D)price skimming.
E)odd pricing.

Question 60

Blue Corp., a laptop manufacturer, introduces a new model in the market.Since the target audience for this product is students, Blue Corp.launches the model at a low price.The main objective of the company is to build sales and profits quickly.This is an example of:

A)everyday low pricing.
B)external reference price.
C)high/low pricing.
D)market penetration pricing.
E)internal reference price.

Question 61

Which of the following, when presented by a consumer, provides him or her instant savings?

A)Rebates
B)Size discounts
C)Odd prices
D)Coupons
E)Cumulative quantity discounts

Question 62

A confectionery company pays a fee to a retailer to place its products near the checkout counter.By doing so, the confectionery company hopes to tempt customers to make impulse purchases.In this example, the fee paid to the retailer is a(n):

A)markdown.
B)advertising allowance.
C)odd price.
D)listing allowance.
E)rebate.

Question 63

A company advertises that winter pullovers and jackets will be sold at half price if they are ordered before September 30.This is an example of a(n):

A)seasonal discount.
B)advertising allowance.
C)odd pricing.
D)listing allowance.
E)rebates.

Question 64

A shoe manufacturer produces shoes for customers in the middle-range segment and the upper-range segment.It also has shoes in between these segments, at different prices, to represent distinct differences in quality.This is an example of:

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

Question 65

A store that sells hockey equipment offers a discount if a customer also buys a pair of skates.The combined purchase costs less than it would cost the customer to buy the products individually.This is an example of:

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

Question 66

A car manufacturer offers cars in the luxury segment.It establishes a price floor and a price ceiling for its entire line of cars and then sets a few other price points in between to represent distinct differences in quality.It helps the manufacturer to satisfy a wide range of tastes and budgets.This is an example of:

A)markdown.
B)price bundling.
C)price lining.
D)leader pricing.
E)listing allowance.

Question 67

A clothing line company promises a large price reduction to its wholesalers if they feature the company's goods in their promotional campaigns.This is an example of a(n):

A)seasonal discount.
B)advertising allowance.
C)odd price.
D)listing allowance.
E)cash discount.

Question 68

Purple Corp., a retailer selling air conditioners, aims to sell 5,000 air conditioners in a year.If Purple reaches this target, the manufacturer will offer a discount on every air conditioner bought by the retailer during that year.This is an example of a(n):

A)seasonal discount.
B)quantity discount.
C)odd price.
D)price bundling.
E)markdown.

Question 69

Books Inc.is an online seller of books.It ships its books to different parts of the world.When it delivers its shipments, it charges customers based on the zone in which they are located.This is an example of:

A)price bundling.
B)geographic pricing.
C)an allowance.
D)leader pricing.
E)premium pricing.

Question 70

A supermarket offers a 1-litre milk carton, a 2-litre milk carton, and a 3-litre milk jug at $3.50, $6.25, and $9.00, respectively.Thus, the larger the quantity bought, the lower the cost.This is an example of a:

A)rebate.
B)size discount.
C)markdown.
D)coupon.
E)quality discount.

Question 71

A store advertises a pair of shoes at $79.99 with a cash-back offer of $20.The refund is made by the manufacturer.This is an example of a:

A)rebate.
B)size discount.
C)markdown.
D)coupon.
E)quality discount.

Question 72

A dairy farm sells milk to a confectionery company.The dairy offers the company a reduction of 10 percent on the total amount of the invoice if the company settles the amount within a period of 7 days instead of the usual 30 days.This is an example of a(n):

A)seasonal discount.
B)listing allowance.
C)cumulative quantity discount.
D)rebate.
E)cash discount.

Question 73

A newly opened supermarket offers vegetables at reduced prices so as to attract customers.The idea behind lowering the prices is that the customers who visit the supermarket to purchase these vegetables at lower costs are more likely to purchase other items offered in the supermarket.This pricing tactic is an example of:

A)price fixing.
B)price bundling.
C)price lining.
D)leader pricing.
E)listing allowance.

Question 74

A shoe store gets a 30 percent discount from the manufacturer when it places an order worth $5000.The discount increases when the order worth increases.This is an example of a(n):

A)seasonal discount.
B)cumulative quantity discount.
C)allowance.
D)noncumulative quantity discount.
E)cash discount.

Question 75

A department store offers a discount if a shirt is purchased with a pair of trousers.The combined purchase would cost less than it would cost the customer to purchase the two individually.This is an example of:

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

Question 76

A furniture manufacturing company in Canada delivers goods to its customers in Europe.The shipping company that delivers the goods to customers charges the same irrespective of the country in which the customer is located.This is an example of:

A)geographic pricing.
B)price bundling.
C)price lining.
D)leader pricing.
E)uniform delivered pricing.

Question 77

A home decor company in the United States delivers goods to its customers in Europe.The shipping company that delivers the goods to the customers has divided the continent into five different zones and charges according to the rate prevalent in each of these zones.This is an example of:

A)geographic pricing.
B)price bundling.
C)price lining.
D)leader pricing.
E)uniform delivered pricing.

Question 78

A company selling air conditioners finds that sales begin to decrease at the end of summer.The company then reduces the price of air conditioners to get rid of the slow-moving merchandise.This is an example of a:

A)rebate.
B)size discount.
C)markdown.
D)coupon.
E)quantity discount.

Question 79

Ray Inc., a shoe manufacturer, pays a good amount to a department store to allow it to display its shoes in the store's window where they are likely to attract a lot of attention from customers.The money paid by Ray's to the department store is an example of a(n):

A)premium price.
B)markdown.
C)listing allowance.
D)rebatable expense.
E)improvement value expense.

Question 80

A department store announces 30 percent off the price of Christmas trees if the trees are bought before December 1.This is an example of:

A)a quantity discount.
B)geographic pricing.
C)an allowance.
D)a seasonal discount.
E)uniform delivered pricing.