Deck 9: Pricing

Question 1

Identify the correct formula for the calculation of price elasticity of demand.

A)E = percent change in price/percent change in demand
B)E = percent change in demand/percent change in price
C)E = percent change in demand/percent change in supply
D)E = percent change in supply/percent change in demand

Answer 1

B

Question 2

Which of the following statements is true regarding the first-degree of price discrimination?

A)It is changing the price of a product due to inflation.
B)It occurs when competitors charge different prices for similar products in the same market segment.
C)It involves charging different prices to segments of the market according to their price elasticity or sensitivity.
D)It refers to the strategy of charging a higher price for a product at the time of introduction and then gradually decreasing its price.

Answer 2

C

Question 3

Because more competition implies greater convergence on a standard price,a large number of suppliers in a product category most likely results in:

A)narrower price bands.
B)increased price transparency.
C)broader price bands.
D)increase in the sales of the product.

Answer 3

A

Question 4

The concept of "value-in-use" is a useful method of estimating customer value for:

A)consumer electronic products.
B)industrial products.
C)convenience products.
D)fast moving consumer goods.

Question 5

Charging different prices to different segments according to their price elasticity or sensitivity is commonly known as:

A)price segmentation.
B)price differentiation.
C)price discrimination.
D)price preference.

Question 6

Identify the approach where the benefits of the product are put in monetary terms such as time savings,less use of materials,or less downtime.

A)value pricing
B)pricing to value
C)value-in-use
D)price discrimination

Question 7

Which of the following is the the maximum price someone is willing to pay for a product?

A)external price
B)reservation price
C)internal price
D)reference price

Question 8

As the price of a product gets closer to customer value,

A)price elasticity will decrease.
B)price elasticity will be unaffected.
C)price elasticity will increase.
D)product will become perfectly inelastic.

Question 9

Which of the following best describes a trend in business to purchase a service from an outside vendor to replace the company's operation?

A)insourcing
B)outsourcing
C)joint venture
D)horizontal integration

Question 10

When the absolute value of price elasticity of demand is ________,the category is price elastic.

A)less than 1
B)equal to 0
C)greater than 1
D)equal to 1

Question 11

Which of the following is most likely a reason of why some categories have large numbers of product variants?

A)to reduce price visibility
B)to keep competitors from getting shelf space
C)to increase product recall
D)to enhance the brand image

Question 12

Price variations within a product category are called:

A)price slots.
B)price ranges.
C)price groups.
D)price bands.

Question 13

Which of the following approaches to calculating customer value creates a scale that puts survey responses in monetary terms?

A)dollarmetric method
B)chi square testing
C)conjoint analysis
D)regression analysis

Question 14

In this situation,the manager has set a price that is higher than the target market is willing to pay.The customer looks at this situation as a bad deal and,unless the company has a monopoly or some other kind of market power,does not buy.Identify the situation.

A)perceived value > price > cost
B)price > cost > perceived value
C)price > perceived value > cost
D)perceived value > cost > price

Question 15

With regard to price elasticity,if a product's price is low to the point where there is considerable value left for the customer (a good deal),an increase in price will:

A)decrease the market share of the product.
B)not have much impact.
C)decrease customer purchase.
D)increase brand equity.

Question 16

Which of the following best describes setting a price at the level determined to represent the customer's perceived value for your product?

A)pricing to value
B)quality pricing
C)value pricing
D)price discrimination

Question 17

What a product or service is worth to a customer is the:

A)brand value.
B)customer value.
C)profit potential.
D)market potential.

Question 18

This scenario clearly represents a failure.Usually,such products are weeded out in the new-product development process.If not,they are ultimately withdrawn from the market.Identify this scenario.

A)perceived value > price > cost
B)perceived value > cost > price
C)price > perceived value > cost
D)price > cost > perceived value

Question 19

Strategically pricing below customer value is called:

A)price skimming.
B)value pricing.
C)pricing to value.
D)price discrimination.

Question 20

Which of the following statements is true about perceived value?

A)A single perceived value exists in the marketplace.
B)When the price of a product is higher than the perceived value,it is known as value pricing.
C)Perceived value is always relative.
D)Perceived value is standard across customers with similar purchasing power.

Question 21

Which of the following pricing strategies is used to gain as much market share as possible?

A)penetration pricing
B)skimming
C)prestige pricing
D)competitive pricing

Question 22

Identify the phenomenon in which the conventional functional relationship assumed is that unit costs are a decreasing function of accumulated experience,or production volume.

A)the regression curve
B)the experience curve
C)the Chasm model
D)Parfitt-Collins model

Question 23

Costs such as the corporate jet and the president's salary are examples of:

A)development costs.
B)variable costs.
C)direct fixed costs.
D)overhead costs.

Question 24

Full cost plus some target margin are used to set price in a:

A)customer-driven firm.
B)nonmarket-driven firm.
C)market-driven firm.
D)share-driven firm.

Question 25

________ are spread out over many years and sometimes different products.

A)Development costs
B)Overhead costs
C)Variable costs
D)Direct fixed costs

Question 26

Development costs are best described as:

A)costs that are associated with individual products that do not vary with sales volume.
B)expenses involved in bringing new products to the market.
C)costs that must ultimately be covered by revenues from individual products,but are not associated with any one product.
D)the per-unit costs of making the product or delivering the service.

Question 27

This method is an alternative to survey-based methods and takes place in a real environment.It tries to obtain actual market data after manipulating price in different markets.Identify this method.

A)dollarmetric method
B)conjoint analysis
C)field experimental method
D)delphi method

Question 28

Which of the following statements is true about variable costs?

A)The corporate jet expenditure is an example of a variable cost.
B)These costs must be recovered by the price.
C)The marketing manager's salary is an example of a variable cost.
D)These costs are independent of sales volume.

Question 29

Which of the following statements is true regarding a direct fixed cost?

A)The corporate jet expenditure is an example of a direct fixed cost.
B)These costs are not associated with individual products.
C)These costs do not vary with sales volume.
D)These costs are spread out over many years and sometimes different products.

Question 30

Which of the following strategies entails giving most of the value to the customer and keeping a small margin?

A)penetration pricing
B)skimming
C)prestige pricing
D)competitive pricing

Question 31

Which of the following describes the per-unit cost of making the product or delivering the service?

A)development costs
B)variable costs
C)direct fixed costs
D)fixed costs

Question 32

Costs,such as the marketing manager's salary and product-related advertising and promotion expenses,are examples of:

A)development costs.
B)variable costs.
C)direct fixed costs.
D)overhead costs.

Question 33

Which of the following best describes the costs that must ultimately be covered by revenues from individual products,but are not associated with any one product?

A)development costs
B)variable costs
C)direct fixed costs
D)overhead costs

Question 34

An understanding of the cost structure of the market provides marketing managers with:

A)an idea of how low some competitors can price.
B)the demographics of target markets.
C)the behavioral segmentation of target markets.
D)an accurate idea of customers' willingness to pay.

Question 35

Identify the pricing strategy that is useful for preventing competitive entry.

A)pricing to value
B)investment pricing
C)penetration pricing
D)prestige pricing

Question 36

Purchasing a competitor's product and taking it apart,studying the cost of the components,and packaging describes the process of:

A)outsourcing.
B)reverse engineering.
C)insourcing.
D)horizontal integration.

Question 37

If there is no legal way to keep competitors out of the market,these costs must be viewed as sunk costs that do not affect decision making after the product is introduced into the market.Identify the type of cost being discussed.

A)development cost
B)variable cost
C)direct fixed cost
D)overhead cost

Question 38

Market share pricing is also known as:

A)competitive pricing.
B)investment pricing.
C)penetration pricing.
D)skimming.

Question 39

Which of the following is a concern for marketing managers when price is used as a cost-recovery mechanism?

A)a mismatch between price and customers' perceptions of value
B)ignoring market segmentation
C)independence against competitors' prices
D)implementation of development costs

Question 40

Which of the following is a marketing research method that uses theoretical profiles or concepts to determine how customers value different levels of product attributes?

A)regression analysis
B)cluster analysis
C)dollarmetric method
D)conjoint analysis

Question 41

Which of the following best describes the pricing objective typically used by regulated utilities such as gas and electricity?

A)penetration pricing
B)skimming
C)investment pricing
D)competitive pricing

Question 42

Internal reference prices are formed from advertising,past purchasing experience,and so on,and are often called ________ because the customer considers them the actual prices of the products in a category.

A)competitive prices
B)perceived prices
C)price points
D)ceiling prices

Question 43

Which of the following pricing objectives describes a situation where the marketer attempts to price the product at the market average or match a particular brand's price?

A)penetration pricing
B)pricing for stability
C)return on investment pricing
D)competitive pricing

Question 44

Identify the approach that integrates a set of products and offers them in a package that is usually lower in price than the sum of the prices of the individual components.

A)price bundling
B)product-line pricing
C)complementary pricing
D)penetration pricing

Question 45

________ goods are products that you have to try before assessing its quality.

A)Convenience
B)Shopping
C)Experience
D)Durable

Question 46

If the quality of a product or service is difficult to evaluate even after you have purchased and used the product or service,the product falls under the category of:

A)experience goods.
B)shopping goods.
C)convenience goods.
D)credence goods.

Question 47

In the retail business,the reference price is often listed on the sales tag as the:

A)original price.
B)reduced price.
C)marked-down price.
D)sale price.

Question 48

Which of the following best describes a situation when penetration pricing should be used?

A)when the product has a strong competitive advantage
B)when a large segment of the customer base is price-sensitive
C)when the perceived quality depends on price
D)when there is a little chance of competition in near future

Question 49

High buyer power tends to ________ prices and high supplier power ________ the floor beneath which prices cannot be set.

A)inflate;raises
B)inflate;lowers
C)depress;raises
D)depress;lowers

Question 50

The opposite of the penetration pricing is:

A)value pricing.
B)skimming.
C)market share pricing.
D)competitive pricing.

Question 51

A ________ is any standard of comparison against which an observed potential transaction or purchase price is compared.

A)ceiling price
B)competitive price
C)price point
D)reference price

Question 52

Which of the following describes establishing a price that provides the rate of return demanded by senior management?

A)skimming
B)return on sales pricing
C)penetration pricing
D)competitive pricing

Question 53

Telephone rates for large users such as telemarketing firms and banks fall under this category.Identify this pricing objective category.

A)penetration pricing
B)pricing for stability
C)investment pricing
D)competitive pricing

Question 54

Which of the following pricing objectives is appropriate when customers have not been persuaded that significant differences exist among the competitors and that they view the product as a commodity?

A)investment pricing
B)pricing for stability
C)competitive pricing
D)prestige pricing

Question 55

When Microsoft introduced the Xbox videogame console in 2001,the company priced it at $299,exactly the same price as Sony's PlayStation 2,the market leader.Identify this pricing strategy.

A)penetration pricing
B)skimming
C)competitive pricing
D)investment pricing

Question 56

Which of the following pricing objectives is useful only when the product has a monopoly or near monopoly position so that the market will produce the needed sales volume at the price set?

A)penetration pricing
B)skimming
C)investment pricing
D)competitive pricing

Question 57

Skimming is also known as ________ pricing.

A)competitive
B)investment
C)penetration
D)prestige

Question 58

Which of the following describes a situation when skimming should be used?

A)when experience or scale effects lead to a favorable volume-cost relationship
B)when there is a strong price-perceived quality relationship
C)when a large segment of the customer base is price-sensitive
D)when the company wants to build significant market share

Question 59

Which of the following pricing strategies is the most appropriate when costs are not related to volume and managers are less concerned about building significant market share?

A)penetration pricing
B)skimming
C)market share pricing
D)competitive pricing

Question 60

Identify the concept related to the psychological aspects of price.

A)skimming price
B)reference price
C)prestige price
D)penetration price

Question 61

A disposable diaper company prices its newborn disposable diapers higher than later-stage diapers to take advantage of new parents' concerns and concomitant extreme price insensitivity.This is an example of:

A)prestige pricing.
B)penetration pricing.
C)complementary pricing.
D)congestion pricing.

Question 62

Strategically pricing below customer value is often called pricing to value.

Question 63

A customer,in determining what a product or service is worth,considers the cost of producing the product or the service.

Question 64

Charging different prices to different segments according to their price elasticity or sensitivity is known as price discrimination.

Question 65

Price elasticity of demand is the percent change in demand divided by a percent change in price.

Question 66

The ________ approach involves offering both a high-priced and a low-priced brand that would result in brands at multiple price tiers.

A)congestion pricing
B)price bundling
C)complementary pricing
D)product-line pricing

Question 67

Perceived value is always relative.

Question 68

There is no single perceived value in the marketplace.

Question 69

Identify the strategy that allows customers to choose the option that best suits their level of usage.

A)second market discounting
B)value pricing
C)periodic discounting
D)per-use pricing

Question 70

Which of the following pricing tactics applies to products that are used together when one of the products is a consumable that must be replenished continually?

A)price bundling
B)congestion pricing
C)complementary pricing
D)second market discounting

Question 71

Theater tickets cost more on weekends.This is an example of:

A)penetration pricing.
B)complementary pricing.
C)periodic discounting.
D)value pricing.

Question 72

More competition implies greater divergence on a standard price.

Question 73

Reservation price is the most someone is willing to pay for a product.

Question 74

The senior citizen discounts given at movie theaters and quantity discounts on personal computers given to large customers are examples of:

A)price bundling.
B)complementary pricing.
C)price discrimination.
D)value pricing.

Question 75

Identify the strategy that involves selling the extra production at a discount to a market separate from the main market.

A)second-market discounting
B)penetration pricing
C)competitive pricing
D)periodic discounting

Question 76

Which of the following statements is true about value pricing?

A)It is also known as penetration pricing.
B)It gives customers more value than they expect for the price paid.
C)It gives the seller most of the value-cost difference.
D)It implies low price alone.

Question 77

________ pricing gives customers more value than they expect for the price paid.

A)Penetration
B)Value
C)Prestige
D)Investment

Question 78

A larger number of suppliers within a product category results in a broader price band.

Question 79

Identify the main advantage of the Web as an auction site.

A)the size of the audience
B)the ease of processing the order
C)the availability of different sites
D)the speed of access

Question 80

Strategy decisions do not lead to a specific price-setting rule;rather,they give general guidelines for whether a price should be low or high.