Deck 11: Pricing Products and Services

Question 1

Which of the following is an example of a price?

A) college tuition
B) operating costs
C) liquidity
D) value
E) stockholders' equity

Answer 1

A

Question 2

All of the following statements about price are true except which?

A) Small changes in price can have big effects on both the number of units sold and company profit.
B) The price for a product or service must earn a profit for the company.
C) For most products and services, there is an agreed-upon price range set by makers.
D) The price must be right-in the sense that customers must be willing to pay it.
E) The price must generate enough sales dollars to pay for the cost of developing, producing, and marketing the product.

Answer 2

C

Question 3

Barter is the practice of exchanging products and services for other products and services rather than for

A) value.
B) ideas.
C) promises.
D) tariffs.
E) money.

Answer 3

E

Question 4

Tara is enrolled for spring semester at college.The tuition is $6,000,but she has a scholarship for $1,000 as well as a work-study grant of $1 ,500.The health fees and student activity fees are $150 for the semester.What is the final price that Tara will pay for the spring semester?

A) $2,500
B) $2,650
C) $3,150
D) $3,650
E) $6,150

Question 5

To accommodate the changes in the book selling market,publishers changed their pricing approach so that

A) rebates could be paid to the bookstores.
B) readers would pay more so that distributors would continue to profit.
C) distributors would no longer make a profit on every e-book sold.
D) distributors would get a commission on every e-book sold.
E) eventually e-books would be free to distribute.

Question 6

Susan O'Rourke hired an attorney to represent her in a court case involving an auto accident.The attorney charged O'Rourke a $2,000 retainer fee for her services.Terry Thomas needed a haircut; the local stylist charged him $12 for his services.Aaron Mathison mowed his neighbor's lawn; in exchange,the neighbor repaired Mathison's gutters.The attorney fees paid by O'Rourke,the $12 charged by the hair stylist,and the exchange of lawn mowing for gutter repair are all examples of

A) premiums.
B) barter.
C) the profit motive.
D) price.
E) outlays.

Question 7

According to the price equation,a product's or service's final price equals its list price minus incentives and allowances plus

A) profits.
B) commissions.
C) trade-ins.
D) extra fees.
E) taxes.

Question 8

With the introduction of a revised pricing policy for e-books,distributors could still set their own retail prices,but with a restriction.Distributors could set prices below a publisher's retail list price as long as the discount

A) was no more than 15%.
B) exceeded the profit expected by the publisher.
C) did not exceed the commission received from a publisher.
D) would not result in prices lower than for equivalent hard copy books.
E) would not result in a price below cost.

Question 9

Amazon wanted lower retail prices for e-books to

A) lower royalties to authors.
B) eliminate distributors.
C) raise prices overall for printed books.
D) undermine its rival, Barnes & Noble.
E) build its e-book business.

Question 10

According to the price equation,final price equals list price minus __________ plus extra fees.

A) profits
B) commissions
C) trade-ins
D) taxes
E) incentives and allowances

Question 11

Price refers to

A) the value assigned to the exchange of products and services for other products and services.
B) the value judgment made by both the buyer and seller regarding an item's worth.
C) the money or other considerations (including other products and services) exchanged for the ownership or use of a product or service.
D) the value assessed for the benefits of using a product or service.
E) the highest monetary value a customer is willing to pay for a product or service.

Question 12

According to the price equation,final price equals __________ minus incentives and allowances plus extra fees.

A) salaries
B) the list price
C) profits
D) trade-ins
E) taxes

Question 13

The money or other considerations (including other products and services)exchanged for the ownership or use of a product or service is referred to as

A) a fee.
B) value.
C) remuneration.
D) a price.
E) an exchange rate.

Question 14

The use of special fees and surcharges is driven by consumers' zeal for __________ combined with the ease of making price comparisons on the Internet.

A) readily accessible information
B) low prices
C) quality
D) value
E) warranties

Question 15

A company that manages apartments decides to buy 15 new dishwashers at a list price of $550 each as replacements for old dishwashers in a small apartment complex it owns.Because the company is buying more than 10 dishwashers,it is eligible for a $150-per-unit quantity discount.Financing charges total $20 per unit.The company gets $10 per dishwasher for the 15 dishwashers traded in.What is the final price the company will pay for each dishwasher?

A) $390
B) $400
C) $410
D) $430
E) $730

Question 16

From a marketing viewpoint,__________ is the money or other considerations (including other products and services)exchanged for the ownership or use of a product or service.

A) value
B) price
C) barter
D) currency
E) a tariff

Question 17

The practice of exchanging products and services for other products and services rather than for money is referred to as

A) barter.
B) reciprocal pricing.
C) virtual pricing.
D) balance of payments.
E) value-pricing.

Question 18

Insurance premiums,entrance fees,train fares,and organization dues are all examples of

A) premiums.
B) barter.
C) profit.
D) price.
E) outlays.

Question 19

The use of special fees and surcharges is driven by consumers' zeal for low prices and

A) the ease of making price comparisons on the Internet.
B) value, the idea of getting more for their money.
C) the need for extra accessories.
D) avoiding state sales taxes from Internet purchases.
E) a dislike of price haggling or negotiating.

Question 20

All of the following are alternate names for price except which?

A) a premium
B) barter
C) tuition
D) a commission
E) profit

Question 21

Most consumers realize that the quality of diamonds varies,and most believe the higher the price of a diamond,the higher its quality.This is an example of price influencing the perception of overall quality and therefore __________ to consumers.

A) acceptable cost
B) perceptual investment
C) barter potential
D) return on investment
E) value

Question 22

A major grocery chain pays its baggers a regular hourly wage.The baggers not only pack the groceries,but they also will take customers' groceries to their car,regardless of the weather.The baggers are not permitted to accept tips,even if they are offered.The consumer will experience this shopping experience as

A) pricing enhancement.
B) societal pricing.
C) revenue sharing.
D) value-pricing.
E) cost-plus pricing.

Question 23

Which of the following statements is most accurate?

A) For some products, price influences the perception of overall quality, and ultimately value, to consumers.
B) A consumer's view of a product's value depends almost entirely on external assessments of quality.
C) A consumer's view of value is a function of his or her education and income.
D) Price plays only a small part in a consumer's perceived value of a product or service.
E) Price plays a large role in assessing value but a very minor role in assessing quality.

Question 24

The ratio of __________ to price is referred to as value.

A) prestige rating
B) perceived benefits
C) costs
D) perceived quality
E) profits

Question 25

Many cosmetology schools allow their advanced students to style hair for "real-world" clients for a reduced fee.The students benefit from the experience,the clients get a less expensive haircut,and the school is able to provide students with additional training without costing it anything; in fact,they even profit from it.This is an example of

A) value-pricing.
B) societal pricing.
C) revenue sharing.
D) barter.
E) cost-assist pricing.

Question 26

If you know the contents and price of a McDonald's Extra Value Meal,it may serve as __________ to you when you visit other fast food restaurants and consider the purchase of a meal option there.

A) a marginal analysis
B) a profit equation
C) a reference value
D) a break-even analysis
E) price elasticity of demand

Question 27

The practice of simultaneously increasing product and service benefits while maintaining or decreasing price is referred to as

A) value-pricing.
B) customer-value pricing.
C) competitive pricing.
D) cost pricing.
E) demand pricing.

Question 28

In the purchase of the sugar substitute Splenda,you may compare it to something you know about like real sugar.Although Splenda is more expensive than sugar,it is purchased by many consumers because it contains no calories.This situation involves the consumer considering

A) a marginal analysis.
B) a profit equation.
C) a break-even analysis.
D) price elasticity of demand.
E) a reference value.

Question 29

Creative marketers engage in value-pricing,which is the practice of simultaneously increasing product and service benefits while

A) increasing costs.
B) increasing price.
C) increasing advertising.
D) decreasing costs.
E) maintaining or decreasing price.

Question 30

The ratio of perceived benefits to __________ is referred to as value.

A) price
B) prestige
C) perceived quality
D) profits
E) perceived costs

Question 31

A reference value is developed by the consumer through

A) considering the amount of time and energy a consumer puts into the purchase process.
B) judging similar items used by the consumer's peers.
C) performing a careful break-even analysis.
D) comparing the costs and benefits of substitute items.
E) examining the true difference between customers' "needs" and "wants."

Question 32

Creative marketers engage in value-pricing,which is the practice of simultaneously __________ while maintaining or decreasing price.

A) promoting specific product and service benefits
B) increasing product and service benefits
C) decreasing profit
D) analyzing benefits
E) decreasing cost

Question 33

When Pizza Hut announced it was going to add 25 percent more toppings to its Meat Lover's line of pizzas without increasing prices,consumers benefitted from an increase in what?

A) cost
B) appearance
C) value
D) price
E) quality

Question 34

Value-pricing refers to

A) the ratio of perceived benefits to price.
B) the money or other considerations exchanged for the ownership or use of a product or service.
C) the practice of simultaneously increasing product and service benefits while maintaining or decreasing price.
D) the ratio of price to perceived benefits.
E) list price minus incentives and allowances plus extra fees.

Question 35

To increase value,marketers may __________,decrease price,or do both.

A) decrease benefits
B) increase benefits
C) increase price
D) increase advertising
E) do nothing and let the perceived value of the item increase as it matures in the life cycle

Question 36

The ratio of perceived benefits to price is referred to as

A) the price-quality relationship.
B) customer-value pricing.
C) value-added pricing.
D) value analysis.
E) value.

Question 37

If a McDonald's menu board advertises Mini Meals under $3,McDonald's is most likely using which type of pricing strategy?

A) predatory pricing
B) value-pricing
C) loss-leader pricing
D) odd-even pricing
E) barter

Question 38

To increase value the most,marketers should

A) decrease benefits.
B) decrease benefits and increase price.
C) decrease price and increase benefits.
D) decrease price and decrease benefits.
E) hold the price steady and let the perceived value of the item increase as it matures in its life cycle.

Question 39

A reference value involves comparing the costs and benefits of

A) substitute items.
B) items of equal or greater value.
C) products with which a consumer is familiar and items the consumer has not seen or used before.
D) items from one particular manufacturer or distributor.
E) intangible items.

Question 40

Suppose you want to buy a Tesla Model S,the world's leading all-electric,zero-emission car that has a 265-mile range and can be recharged in three hours.The Tesla Model S Performance model has a list price of $87,500.However,you want several options (Performance Plus Package,red multi-coat armor paint,Tech Package,Sound Studio Package,home charging station,performance wheels,and others)that will cost $17,500.An extended warranty will add an additional $5,000.However,if you put $50,000 down now and finance the balance over the next year,you will receive a dealer rebate of $5,000 off the list price.The dealer will give you a $7,000 trade-in allowance for your 2008 Honda Civic DX four-door sedan.In addition,you will have to pay a state sales tax of $10,000,an auto registration fee of $1,000 to the state,and a $1,000 destination charge to ship and prep the car.But because the Tesla Model S is an alternative energy vehicle,you qualify for a $2,500 state rebate and a $7,500 federal tax credit! Finally,your total finance charge is $7,000.Applying the price equation,what is your final price for the Tesla Model S?

A) $57,000
B) $68,000
C) $87,500
D) $107,000
E) $151,000

Question 41

Skimming pricing is a strategy that introduces a new or innovative product by

A) following a price elastic strategy.
B) creating multiple price points.
C) setting a high initial price.
D) setting a low initial price.
E) setting the price at the average of competitors' prices.

Question 42

There are several factors that predict when a skimming pricing policy is likely to be most effective,including situations in which

A) consumers tend to be price-sensitive.
B) enough prospective customers are willing to buy immediately at a high initial price to make these sales profitable.
C) leadership is expecting to meet high sales unit goals.
D) a lower price will significantly reduce unit costs.
E) consumers perceive your product to be similar to other products in the market.

Question 43

Skimming pricing refers to

A) setting the lowest initial price possible when introducing a new or innovative product in order to "skim" sales from competitors.
B) setting the highest initial price that customers who really desire the product are willing to pay.
C) setting a low initial price on a new product to appeal immediately to the mass market.
D) the practice of replacing promotional allowances with higher manufacturer list prices.
E) setting a high price so that quality- or status-conscious consumers will be attracted to the product and buy it.

Question 44

Demand-oriented approaches weigh factors that underlie expected __________ more heavily than such factors as cost,profit,and competition when selecting a price level.

A) total revenue
B) stakeholder concerns
C) prevailing prices
D) product substitutes
E) customer tastes

Question 45

All of the following are demand-oriented approaches to selecting an approximate price level except which?

A) odd-even
B) yield management
C) bundle
D) loss leader
E) prestige

Question 46

A firm's profit equation equals

A) Total cost + Total revenue or [(Fixed cost + Variable cost) + (Unit price * Quantity sold)].
B) Total revenue - Total cost or [(Unit price * Quantity sold) - (Fixed cost + Variable cost)].
C) Total cost - Marginal cost or [(Fixed cost + Variable cost) - (Unit price * Quantity sold)].
D) Total cost - Variable cost or [(Fixed cost + Variable cost) - (Unit price *Quantity sold)].
E) Total revenue / Total cost or [(Unit price * Quantity sold) / (Fixed cost + Variable cost)].

Question 47

Figure 11-2
Figure 11-2 represents the four approaches to selecting an appropriate price level.Box D includes customary and loss leader so it represents which approach?

A) competition-oriented approach
B) cost-oriented approach
C) profit-oriented approach
D) results-oriented approach
E) demand-oriented approach

Question 48

Calculate a firm's profit using the following information: the unit price (P)for a product is $40; the quantity sold (Q)is 2,000; the fixed cost (FC)is $50,000; and the variable cost (VC)is $20 ,000.

A) $10,000
B) $50,000
C) $110,000
D) $150,000
E) cannot be determined with the information provided

Question 49

A manufacturer of a portable digital HD camera is considering a skimming pricing strategy for its new product.Which of the following conditions would argue against using a skimming pricing strategy for the camera?

A) There will be a large potential market, even if the product is sold at a high price.
B) Technological problems still exist for competitors; their products are not equivalent.
C) Increasing the volume sold reduces production costs substantially.
D) Consumers perceive a strong price-quality relationship for this product.
E) Many consumers in the target market are innovators.

Question 50

The formula Total revenue - Total cost,or [(Unit price * Quantity sold)- (Fixed cost + Variable cost)],represents

A) the value equation.
B) the sales ratio.
C) average revenue.
D) the break-even point.
E) the profit equation.

Question 51

Figure 11-2
Figure 11-2 represents the four approaches to selecting an appropriate price level.Box A represents which approach?

A) cost-oriented approach
B) profit-oriented approach
C) competition-oriented approach
D) demand-oriented approach
E) results-oriented approach

Question 52

Figure 11-2
Figure 11-2 represents the four approaches to selecting an appropriate price level.Box B includes standard markup and cost-plus so it represents which approach?

A) demand-oriented approach
B) profit-oriented approach
C) competition-oriented approach
D) results-oriented approach
E) cost-oriented approach

Question 53

Skimming pricing is considered to be a __________ approach to pricing.

A) demand-oriented
B) cost-oriented
C) profit-oriented
D) competition-oriented
E) service-oriented

Question 54

A skimming pricing policy is likely to be most effective when

A) consumers perceive the company's product to be similar to other products on the market.
B) a lower price will significantly lower fixed costs.
C) the company's product is easily and quickly duplicated.
D) consumers tend to be price-sensitive.
E) the high initial price will not attract competitors.

Question 55

Setting the highest initial price,that customers who really desire the product are willing to pay,when introducing a new or innovative product is referred to as a(n)

A) skimming strategy.
B) penetration strategy.
C) price-lining strategy.
D) experience-curve pricing strategy.
E) prestige pricing strategy.

Question 56

________ = (Unit price * Quantity sold)- Total cost.

A) Total revenue
B) Variable cost
C) Net present value
D) Profit
E) Break-even point

Question 57

Which of the following statements about the price-setting process is most accurate?

A) When selecting a strategy for setting an initial price, it doesn't matter which one you use as long as you stick with it.
B) Sometimes pricing strategies overlap, and a seasoned marketer will consider several strategies when choosing an approximate price level.
C) Demand-oriented pricing approaches rely heavily on competitors' prices.
D) Skimming pricing is a competition-oriented pricing strategy.
E) Penetration pricing is the best pricing strategy for companies trying to meet the goals of a profit-oriented pricing approach.

Question 58

The key to setting a final price for a product is finding an approximate price level to use as a reasonable starting point.Which of the following is one of four common approaches to selecting an approximate price level?

A) cost-oriented
B) cause-oriented
C) revenue-oriented
D) stakeholder-oriented
E) distribution-oriented

Question 59

According to the profit equation,profit equals

A) Total cost + Total revenue.
B) Total revenue - Total cost.
C) Marginal revenue - Marginal cost.
D) Price * Quantity.
E) Total revenue + Marginal cost.

Question 60

Figure 11-2
Figure 11-2 represents the four approaches to selecting an appropriate price level.Box C includes target profit and target return on sales so it represents which approach?

A) demand-oriented approach
B) profit-oriented approach
C) competition-oriented approach
D) cost-oriented approach
E) results-oriented approach

Question 61

In some cases,penetration pricing may follow which pricing strategy?

A) experience curve
B) target ROI
C) odd-even
D) above market
E) skimming

Question 62

Penetration pricing is considered to be a __________ approach to pricing.

A) demand-oriented
B) cost-oriented
C) profit-oriented
D) competition-oriented
E) service-oriented

Question 63

When Amazon introduced the Kindle Fire tablet device at $199 while Apple was selling the lowest price iPad for $499,Amazon was using a __________ pricing strategy.

A) skimming
B) price lining
C) BOGO
D) penetration
E) loss-leader

Question 64

When Hallmark cards introduced a line of 99-cent cards (about half the price of the previously least expensive cards it sold),the greeting card company was trying to appeal to a mass market that was price-sensitive.Hallmark was using a(n)__________ pricing strategy.

A) prestige
B) skimming
C) target ROI
D) penetration
E) experience-curve

Question 65

In response to Duracell's introduction of the Duracell Ultra battery,Energizer introduced an Advanced Formula battery.But unlike Duracell,Energizer priced its batteries at a low initial price,believing that consumers were too price sensitive to pay more in this category.In this case,Energizer used

A) penetration pricing.
B) prestige pricing.
C) skimming pricing.
D) price lining.
E) cost-plus-fixed-fee pricing.

Question 66

In response to Duracell's introduction of the Duracell Ultra battery,Energizer introduced an Advanced Formula battery.But unlike Duracell,Energizer priced its battery at a low initial price to attract the mass market.Was Energizer's pricing strategy to take market share from Duracell a success?

A) No, because consumers are price-insensitive when it comes to batteries.
B) Yes, because of the positive association with the "Energizer Bunny" marketing campaign.
C) No, because consumers suspected inferior quality due to the low price.
D) Yes, because consumers typically respond positively to cost-plus pricing.
E) Yes, because the demand for batteries has unitary elasticity.

Question 67

The first Apple iPhone was introduced in 2007 at an initial price of $600.People waited in line overnight so they could be one of the first to own this unique smartphone.Which pricing strategy did Apple use to help recoup its costs for developing the smartphone?

A)penetration pricing
B)experience curve pricing
C)customary pricing
D)skimming pricing
E)target pricing

Question 68

Which of the following statements about penetration pricing is most accurate?

A) Penetration pricing is a profit-oriented approach to pricing.
B) Penetration pricing is a cost-oriented pricing method.
C) Penetration pricing encourages competitors to enter a market.
D) Penetration pricing is more effective in a marketplace with price-sensitive consumers.
E) Penetration pricing usually precedes a skimming pricing.

Question 69

Penetration pricing is intended to appeal to which market?

A) highly selective, quality-seeking consumers
B) price-insensitive markets
C) specialty product markets
D) the same markets as those targeted with a skimming pricing strategy
E) the mass market

Question 70

Prestige pricing refers to

A) charging different prices to different buyers for goods of like grade and quality.
B) setting a low initial price on a new product to appeal immediately to the mass market odd-even pricing.
C) setting a market price for a product or product class based on a subjective feel for the competitors' price or market price.
D) setting a high price so that quality- or status-conscious consumers will be attracted to the product and buy it.
E) setting a price that is dictated by tradition, a standardized channel of distribution, or other competitive factors.

Question 71

The pricing strategy that is almost the exact opposite of skimming pricing is

A) target pricing.
B) penetration pricing.
C) price lining.
D) odd-even pricing.
E) prestige pricing.

Question 72

Prestige pricing is considered to be a __________ approach to pricing.

A) demand-oriented
B) cost-oriented
C) profit-oriented
D) competition-oriented
E) service-oriented

Question 73

The manufacturer of a new kind of fat-free ice cream that has the consistency and taste of regular ice cream is thinking of using a penetration pricing strategy for its new product.Which of the following conditions would argue against using a penetration pricing strategy for the tasty dessert treat?

A) The ice cream market is highly conservative.
B) Economies of scale in production would be substantial.
C) Retailers are not willing to carry new brands of ice cream in the already overcrowded category.
D) Once the initial price is set, it is nearly impossible to lower the price without alienating early buyers.
E) The ice cream market exhibits inelastic demand over a fairly broad range of prices.

Question 74

The latest in appliance technology allows your refrigerator to send messages to your smart phone and even photos of the interior to remind you of what you need to pick up at the store.Taking advantage of strong consumer demand for technology-enabled products,marketers set prices for these refrigerators at thousands above other models.These marketers are using a __________ pricing strategy.

A) skimming
B) penetration
C) loss leader
D) price lining
E) bundle

Question 75

Wrigley recently introduced a new flavor of Orbit brand sugar-free chewing gum-mint mojito.The introductory price was low so that it quickly created loyal customers for the flavor.In this example,Wrigley used

A) skimming pricing.
B) penetration pricing.
C) price lining.
D) odd-even pricing.
E) loss-leader pricing.

Question 76

In some cases,penetration pricing may follow skimming pricing.The skimming pricing would help __________ and the penetration pricing would help __________.

A) increase market share; attract price-insensitive customers
B) attract price-sensitive customers; increase market share
C) recoup initial research and development costs; increase market share
D) recoup initial research and development costs; improve firm reputation
E) increase market share; attract price insensitive customers

Question 77

Several factors indicate that a penetration pricing policy would most likely be effective when introducing a new product,including situations in which

A) lowering the price has only a minor effect on increasing the sales volume and reducing the unit cost.
B) the high initial price will not attract competitors.
C) customers interpret the high price as signifying high quality.
D) enough prospective customers are willing to buy immediately at the high initial price to make these sales profitable.
E) many segments of the market are price-sensitive.

Question 78

A penetration pricing policy is most likely to be effective when

A) lowering the price has only a minor effect on increasing the sales volume and reducing the unit cost.
B) the high initial price will not attract competitors.
C) a low initial price discourages competitors from entering the market.
D) customers interpret the high price as signifying high quality.
E) enough prospective customers are willing to buy immediately at the high initial price to make these sales profitable.

Question 79

Penetration pricing refers to

A) charging different prices to different buyers for goods of like grade and quality.
B) setting the highest initial price that customers really desiring the product are willing to pay.
C) setting a low initial price on a new product to appeal immediately to the mass market.
D) setting a market price for a product or product class based on a subjective feel for the competitors' prices or market price.
E) setting prices a few dollars or cents under an even number.

Question 80

Setting a high price so that quality- or status-conscious consumers will be attracted to the product and buy it is referred to as

A) skimming pricing.
B) status pricing.
C) price lining.
D) value pricing.
E) prestige pricing.