Deck 17: Pricing in Retailing

Question 1

Manufacturers and wholesalers can legally control retail prices by ________.

A) charging price-cutting retailers higher prices
B) limiting sales to interstate commerce
C) using consignment selling
D) refusing to sell to price-cutting retailers

Answer 1

C

Question 2

Retailers typically use loss leaders to ________.

A) increase store traffic
B) switch customers to other goods with higher profit margins
C) increase their bargaining power with select suppliers
D) practice opportunistic buying

Answer 2

A

Question 3

In vertical price fixing,________.

A) channel members conspire to set retail prices at given levels
B) channel members agree not to sell merchandise below their cost
C) retailers have no intention of selling advertised goods
D) manufacturers or wholesalers are able to control the retail prices of their goods and services

Answer 3

D

Question 4

Price discrimination is legal under the Robinson-Patman Act when ________.

A) different brand names are placed on a product
B) lower prices are offered in the form of favorable purchase terms (such as credit allowances)
C) a large customer threatens to cancel an order unless the seller reduces its price
D) price differences are equal to or less than a supplier's cost savings

Question 5

Price elasticity of demand is negative since ________.

A) consumers are generally price conscious
B) quantities sold decline as prices increase
C) there are few status-oriented consumers
D) most retailers use markup pricing

Question 6

In predatory pricing,large retailers attempt to destroy smaller retailers by ________.

A) vertical integration
B) conspiring with manufacturers to refuse to sell to smaller retailers
C) selling goods at very low prices (sometimes even below cost)
D) providing free warranties with selected goods

Question 7

A retailer typically has no intention of selling a promoted good or service in ________.

A) unit pricing
B) item price removal
C) price discrimination
D) bait-and-switch advertising

Question 8

Price-discrimination legislation is designed to limit the ability of ________.

A) retailers to charge less than a manufacturer's or wholesaler's suggested list price
B) manufacturers and wholesalers to grant large discounts or favorable terms to large retailers when the discount could not be justified by cost savings
C) manufacturers, wholesalers, and retailers from conspiring to fix retail prices
D) manufacturers from setting artificially low prices with the intent of destroying competition

Question 9

Individual retailers have no control over the setting of retail prices in ________.

A) deregulated market pricing
B) market pricing
C) administered pricing
D) government-controlled pricing

Question 10

When the price elasticity of demand is high and prices go up,total ________.

A) revenues stay the same
B) revenues decline
C) revenues increase
D) profits increase

Question 11

Horizontal price fixing involves an agreement ________.

A) to charge retail firms lower prices in areas with an undesirable competitor
B) by any channel member not to sell merchandise below cost
C) among manufacturers, among wholesalers, or among retailers to set prices
D) by retailers to charge the price level suggested by manufacturers or wholesalers

Question 12

A relatively small percentage change in the price of a computer results in large percentage changes in the number of units purchased for a retailer.The price elasticity of demand for computers can be described as ________.

A) price elastic
B) unitary elasticity
C) price inelastic
D) low

Question 13

The intent of vertical price-fixing legislation was to protect ________.

A) large retail chains
B) small manufacturers
C) small, full-service retailers
D) final consumers

Question 14

When the price elasticity of demand is unitary and prices go down,total ________.

A) revenues stay the same
B) revenues decline
C) revenues increase
D) profits increase

Question 15

Item price removal enables supermarkets to ________.

A) mark prices for goods on shelves or signs and not on individual items
B) charge the higher of two prices, if two prices are on a single package
C) sell goods for below cost if they are matching a nearby competitor
D) selectively mark prices on "key" items only

Question 16

In price guarantees,a manufacturer protects a retailer by ________.

A) indemnifying it for any antitrust action against the firm caused by the manufacturer's illegal action
B) refunding the difference if a retailer must lower its retail price
C) offering to sell its private-label merchandise if required
D) refusing to sell to price-cutting retailers

Question 17

Unit pricing laws are necessary because of ________.

A) deceptive price advertising by retailers
B) scanning and the Universal Product Code
C) item-price removal by supermarket chains
D) the presence of many different-sized packages

Question 18

In selling against the brand,________.

A) manufacturer brands are given secondary shelf-space locations
B) retailers require slotting allowances from manufacturers for shelf space
C) retailers disparage manufacturer brands
D) retailers charge artificially high prices on manufacturer brands in order to sell their own private labels

Question 19

Which strategy does not enable a retailer to control retail prices?

A) stocking private brands
B) selling gray market goods
C) selling pre-sold manufacturer brands
D) centralizing purchases with few manufacturers

Question 20

The sensitivity of consumers to price changes is measured by the ________.

A) law of demand
B) sales to price coefficient
C) coefficient of elasticity
D) price elasticity of demand

Question 21

Markups in retailing are typically computed on the basis of ________.

A) merchandise cost
B) merchandise cost plus freight
C) retail selling price
D) retail selling price plus freight

Question 22

Price elasticity is ________ when the urgency for a purchase is low and the number of acceptable substitutes is high.

A) inelastic
B) elastic
C) unitary
D) positive

Question 23

Total demand for a movie drops from 400 to 350 units when a theater operator increases the ticket price for a popular movie from $7 to $9.Price elasticity of demand (expressed as a positive number)equals ________.

A) 0.125
B) 0.53
C) 0.67
D) 2.50

Question 24

A retailer sells men's suits for $179,$229,$309,and $359.This illustrates ________.

A) price lining
B) leader pricing
C) odd pricing
D) bait advertising

Question 25

The most widely practiced retail pricing technique is ________.

A) cost-oriented pricing
B) prestige pricing
C) competition-oriented pricing
D) demand-oriented pricing

Question 26

Market penetration is an appropriate strategy when ________.

A) a retailer seeks to attract consumers less concerned with price and more concerned with service, assortment, and status
B) new competitors are unlikely to enter the market
C) low prices discourage actual and potential competition
D) early recovery of cash is a goal of the retailer

Question 27

When a stationery store increases its price for a popular computer notebook from $1,000 to $1,250,its quantity demanded decreases from 400 to 250 per month.Its price elasticity of demand (expressed as a positive number)equals ________.

A) 1.11
B) 2.07
C) 2.30
D) 2.50

Question 28

An aggressive low-price strategy designed to sell a high volume of goods is ________.

A) market skimming pricing
B) market penetration pricing
C) the price-quality association
D) markup pricing

Question 29

A negatively-sloped demand curve means that ________.

A) the price elasticity of demand is negative
B) demand is elastic
C) demand is inelastic
D) demand is unitary

Question 30

A retailer able to develop a strongly differentiated retail mix can utilize ________.

A) pricing at the market
B) pricing below the market
C) deregulated market pricing
D) administered pricing

Question 31

The price floor represents the ________.

A) highest price a consumer will pay
B) lowest acceptable price to a retailer
C) lowest competitor's price
D) lowest minimum price that is legal according to sales-below-cost laws

Question 32

Which pricing strategy seeks to stabilize demand throughout the year?

A) variable pricing
B) everyday low pricing (EDLP)
C) one-price policy
D) flexible pricing

Question 33

A major advantage of an early markdown policy is that ________.

A) consumer interest is heightened during storewide clearances
B) merchandise offered for sale is fresh
C) goods can be resold during next season without any need for a price reduction
D) the retailer has greater opportunity to sell the good

Question 34

A retailer that seeks to alter prices to reflect fluctuations in costs or consumer demand should practice ________.

A) variable pricing
B) customary pricing
C) a one-price policy
D) price lining

Question 35

The difference between initial markups and maintained markups is due to ________.

A) different terms offered to larger customers
B) seasonal discounts
C) markdowns, added markups, shortages, and discounts
D) revisions in planned profits

Question 36

Which of the following suggests that too low a price may hinder demand?

A) bait advertising
B) sales-below-cost laws
C) prestige pricing
D) predatory pricing laws

Question 37

Direct product profitability (DPP)is an example of ________.

A) a variable markup policy
B) pricing at the market
C) administered pricing
D) unit pricing

Question 38

The difference between horizontal price fixing and vertical price fixing is based on ________.

A) whether the channel members are at the same level
B) the legality of the resulting prices
C) the effect on final selling prices
D) whether collusion is involved

Question 39

In which pricing technique does a retailer advertise and sell key items in the product assortment at less than the usual profit margin?

A) price lining
B) leader pricing
C) odd pricing
D) bait-and-switch advertising

Question 40

The opposite of setting prices by negotiation or bargaining is ________.

A) leader pricing
B) odd pricing
C) customary pricing
D) a one-price policy

Question 41

Administered pricing utilizes ________.

A) nonprice competition
B) price guarantees
C) quantity and seasonal discounts
D) bargaining power

Question 42

A key difference between a loss leader and leader pricing is based upon whether ________.

A) the goods are sold above cost
B) bait advertising is used as part of the retailer's strategy
C) sufficient customer traffic is generated
D) competing retailers are hurt by the action

Question 43

A jewelry store has been offered a special price on estate jewelry.A typical 14-karat pin costs the jeweler $350 and can retail at $595.What markup at retail will the jeweler obtain?

A) 20.0 percent
B) 36.4 percent
C) 41.2 percent
D) 57.1 percent

Question 44

A close-out retailer can purchase a discontinued digital camera for $79 and wants to obtain a 40 percent markup at retail.What retail price should be charged?

A) $82.60
B) $98.33
C) $119.00
D) $131.67

Question 45

At which price does the retailer maximize total sales revenue? Selling Price Quantity Demanded
(in $) (in units)
7 11,000
8 9,500
9 9,000
10 8,000

A) $7.00
B) $8.00
C) $9.00
D) $10.00

Question 46

Administered pricing can be used in association with ________.

A) market penetration
B) price wars
C) market skimming
D) elastic demand

Question 47

The Robinson-Patman Act was developed to ________.

A) provide lower prices to final consumers
B) make price conspiracies between channel members illegal
C) allow smaller retailers to receive similar prices to large retail chains that had high bargaining power
D) limit price competition among retailers

Question 48

Many manufacturers feel that vertical price fixing should be legal since it protects ________.

A) large chain organizations
B) final consumers seeking lower prices
C) manufacturers seeking large promotional budgets for innovative products
D) a brand's image that may be hurt from repeated price cutting by retailers

Question 49

A 25 percent markup at cost equals what markup at retail?

A) 10 percent
B) 15 percent
C) 20 percent
D) 40 percent

Question 50

Loss leaders are viewed as being particularly attractive by many retailers since they ________.

A) generate consumer store traffic throughout the store
B) ultimately destroy small, marginal competitors
C) are legal
D) are not forms of deceptive advertising according to FTC guidelines

Question 51

A 60 percent markup at retail equals what markup at cost?

A) 52 percent
B) 60 percent
C) 150 percent
D) 200 percent

Question 52

A market penetration strategy should be used when consumer price elasticity of demand is ________.

A) negative
B) inelastic
C) elastic
D) unitary

Question 53

A retailer has the least control over retail price setting in ________.

A) a price war
B) a regulated pricing situation
C) an administered pricing situation
D) market pricing

Question 54

A market penetration strategy should be used when a retailer ________.

A) believes in the price-quality association
B) seeks to maximize profits
C) seeks to maximize sales
D) seeks to differentiate its offerings through superior customer service

Question 55

A golf specialty store desires a minimum 40 percent markup for all of its golf sets and accessories.The retailer feels that a popular golf set should retail at $895.What is the maximum price the retailer can pay for the set?

A) $358.00
B) $398.00
C) $537.00
D) $577.00

Question 56

A key difference between loss leaders and bait-and-switch advertising is based upon whether ________.

A) the strategy is legal
B) competitors are hurt by the offer
C) the retailer intends to sell the advertised good or service
D) ample store traffic is created by the strategy

Question 57

A retailer has exclusive distribution for a new product in its market area,views the market as price inelastic,and desires an early-recovery-of-cash objective.What pricing strategy should it pursue?

A) market pricing
B) price competition
C) market penetration
D) market skimming

Question 58

Selling against the brand and private labels are two strategies retailers use to ________.

A) increase consumer price elasticity
B) create nonprice competition
C) generate price competition
D) assert channel power

Question 59

A retailer has planned operating expenses of 44 percent of planned sales and a planned profit of 6 percent of sales.What markup percentage at retail does the retailer require?

A) 38 percent
B) 44 percent
C) 50 percent
D) The answer cannot be determined based on the information provided.

Question 60

The key difference between bait-and-switch advertising and "trading the customer up" to a more expensive substitute is that in "trading the customer up," the advertised low-price good ________.

A) is sold below cost
B) is available for sale at the advertised price
C) is disparaged
D) must be specially ordered

Question 61

A market skimming strategy is most appropriate when customers are highly insensitive to price and when the retailer seeks high profit per unit.

Question 62

An item originally priced at $75.00 is raised to $90.00 based upon unanticipated demand.The addition to retail percentage is ________.

A) 16.7 percent
B) 20 percent
C) 23 percent
D) 25 percent

Question 63

Psychological pricing is concerned with consumer perceptions of retail price.

Question 64

The most intensive cost analysis on a product basis occurs with ________.

A) price lining
B) variable pricing
C) direct product profitability
D) a variable markup policy

Question 65

If total revenue increases when prices increase,the price elasticity of demand is inelastic.

Question 66

A stationery retailer generally prices portable computers using a 30 percent markup.The retailer expects to sell 100 portable computers at the 30 percent markup.How many units would it have to sell at a 10 percent increase in price from the original price to maintain the same gross profit?

A) 75
B) 80
C) 82
D) 125

Question 67

With loss leaders,the retailer has no intention of selling the advertised item at the advertised price.

Question 68

Manufacturers seek to reduce extreme shifts in demand due to stocking up by wholesalers,retailers,and final consumers through ________.

A) a one-price policy
B) leader pricing
C) everyday low pricing (EDLP)
D) customary pricing

Question 69

Economic consumers are more price elastic than personalizing consumers.

Question 70

The demand curve may not be negatively sloped throughout its range in ________.

A) variable pricing
B) odd pricing
C) flexible pricing
D) a one-price policy

Question 71

A computer retailer generally prices portable computers using a 25 percent markup.The firm expects to sell 100 portable computers at the 25 percent markup.How many units would it have to sell at a 15 percent discount from the original price to maintain the same gross profit?

A) 115
B) 167
C) 250
D) The answer cannot be determined from the information provided.

Question 72

Unit pricing requires that retailers list the price of each item in a conspicuous location on the item.

Question 73

The major difference between an initial markup and a maintained markup is that the maintained markup reflects ________.

A) actual (not planned) retail operating expenses
B) planned (not actual) retail operating expenses
C) planned shortages and overages
D) actual prices received and actual shortages

Question 74

Horizontal price fixing refers to the ability of manufacturers and wholesalers to set final retail selling prices.

Question 75

An item originally priced at $50.00 is reduced to $29.95.The off-retail markdown percentage is approximately ________.

A) 20 percent
B) 40 percent
C) 60 percent
D) 66 percent

Question 76

An early markdown policy can be assured through the use of a(n)________.

A) off-retail markdown percentage plan
B) price-adjustment plan
C) stock-shortage control plan
D) automatic markdown plan

Question 77

The Robinson-Patman Act allows price discrimination when the products sold to competing retailers are physically different.

Question 78

The Robinson Patman Act strove to curb the bargaining power of large retail chains.

Question 79

Some of the legal difficulties associated with the Robinson-Patman Act can be avoided through use of ________.

A) a one-price policy
B) variable markup pricing
C) the price-quality association
D) customary pricing

Question 80

High brand loyalty,an excellent location,and strong customer service allow a retailer to utilize market pricing.