Deck 16: Pricing Concepts

Question 1

Which of the following BEST describes revenue?

A) It equals price minus costs.
B) It equals quantity sold times profit margin.
C) It equals price of goods times quantity sold.
D) It equals return on investment.

Answer 1

C

Question 2

Hal Macini,owner of Evergreen Landscaping,is more interested in earning customer goodwill than striving for maximum profit.He determines his prices by maintaining the company's profitability at a level that gives him a good living but will never make him a rich man.What is Macini basing his pricing policy on?

A) creating the most sales possible
B) maintaining stable sales levels
C) earning satisfactory profits
D) decreasing consumer demand

Answer 2

C

Question 3

A company using market share pricing has what type of pricing objective?

A) profit-oriented
B) demand-oriented
C) supply-oriented
D) sales-oriented

Answer 3

D

Question 4

At the end of February,the Hearts and Flowers store reduced the price on all of its Valentine's Day's candy by 50 percent in order to liquidate this inventory.What type of pricing strategy is being used in this example?

A) target return on investment
B) satisfactory profit
C) sales maximization
D) profit maximization

Question 5

The pricing policy used by Middleton Industries,manufacturer of Renaissance charms for bracelets and necklaces,is to set prices so that its retail prices are as high as the market will tolerate.Additionally,Middleton strives to keep its costs at an industry low by using silver and gold overlays over charms made of cheap base metal.This is an example of what type of policy?

A) profit maximization
B) market share pricing
C) demand-oriented
D) sales maximization

Question 6

What is an organization using when it sets its prices so that total revenue is as large as possible relative to total costs?

A) sales maximization
B) profit maximization
C) status quo pricing
D) market share pricing

Question 7

If a company's pricing objective is to meet the competition or to maintain existing prices,what type of pricing is it using?

A) status quo
B) target return on investment
C) market share
D) head-on

Question 8

Trident makes luxury bicycles.Its target market has been people who willingly pay $1,000 or more for their bicycles,and it acknowledges that its prices are high.Trident has lowered prices to target customers who want a good bike but who can't or won't spend $1,000 for one.Trident is most likely using what type of pricing objective?

A) status quo or satisfactory profits
B) profit maximization or target return on investment
C) demand-oriented or supply-oriented
D) market share or sales maximization

Question 9

Which of the following pay for every activity of the company?

A) investments
B) prices
C) revenues
D) profits

Question 10

Sunny Florist is a flower shop that has recently moved to a new,larger location.At this new location,it has been unable to attract sufficient customers.Bonita Cho,its owner,does not have the cash to pay the current loan installment due on the building and inventory.Cho has decided to reduce all merchandise prices by at least 50 percent for a weekend sale so she can at least make her loan payment.Her pricing objective can be classified as which of the following?

A) satisfactory profits
B) asset maximization
C) sales maximization
D) market share maximization

Question 11

According to the text,how is price best described?

A) the cost in dollars for a good or service as set by the producer
B) the value of a barter good in an exchange
C) money exchanged for a good or service
D) the perceived value of a good or service

Question 12

As a short-term pricing objective,which of the following can be effectively used on a temporary basis to sell off excessive inventory?

A) profit-oriented pricing
B) market share pricing
C) profit maximization
D) sales maximization

Question 13

The Fenton Company produces memorial bricks,which veterans' organizations,Chambers of Commerce,and other service organizations sell as fund raisers.The company has a target return on investment of 13 percent.This means that the Fenton Company has what type of pricing objective?

A) sales maximization
B) status quo
C) market share maximization
D) profit-oriented

Question 14

What is money left over after paying for company activities?

A) a current asset
B) return on investment
C) a contribution margin
D) profit

Question 15

Mickaela McAuliffe wants to open a store to sell quilting supplies.She cannot decide whether to base her store's pricing objectives on market share,dollar sales,or unit sales.Regardless of which she chooses,how can her firm's pricing objective be categorized?

A) as profit-oriented
B) as cost-oriented
C) as sales-oriented
D) as status quo

Question 16

According to the text,which of the following statements about price is true?

A) Price and revenue are synonyms.
B) Price is not necessarily based on the satisfaction consumers receive from a product.
C) High prices result in high profits.
D) Price always equals some monetary figure.

Question 17

Under which of the following conditions will companies with low market share be most likely to fail?

A) competing in an industry requiring market power and economies of scale
B) competing in a slow-growth industry
C) competing in an industry with few product changes
D) competing in an industry that makes frequently purchased items

Question 18

For convenience,pricing objectives can be divided into three categories.What are they?

A) perceived,actual,and unique-situational
B) profit-oriented,sales-oriented,and status quo
C) monopolistic,fixed,and variable
D) refundable,competitive,and attainable

Question 19

What measures the overall effectiveness of management in generating profits with its available assets?

A) return on investment
B) efficiency maximization
C) target-on-sales
D) retained earnings

Question 20

Why are marketing managers finding it more difficult to set prices in today's environment?

A) Inflationary and recessionary periods have made customers less price sensitive.
B) Fewer dealer and generic brands are available because the competition has been eliminated.
C) Marketing managers are finding it difficult to compare prices between suppliers.
D) The high rate of new product introductions has led to careful re-evaluation by consumers.

Question 21

Benito is the manager of a souvenir shop in Panama City,Florida.He has decided to graph the demand per week for fresh orange juice because its price varies as the supply of fresh oranges varies.The graph indicates a demand schedule that slopes downward and to the right.This graph indicates that the quantity of juice demanded increases as which of the following occurs?

A) price decreases
B) cost increases
C) price increases
D) supply increases

Question 22

What occurs when an increase in sales exactly offsets a decrease in price so that total revenue remains exactly the same?

A) highly elastic demand
B) fixed elasticity
C) inelastic demand
D) unitary elasticity

Question 23

Aviary Industries produces and markets unfinished birdhouses to craft retailers.When graphed,the demand schedule for its birdhouses is a straight line.If one birdhouse costs $20,5,000 unfinished houses are sold.At $25,4,500 birdhouses are sold.How many birdhouses will be sold if the price per house is increased to $30?

A) 3,750
B) 3,500
C) 4,250
D) 4,000

Question 24

Which of the following statements describes an advantage of status quo pricing?

A) Status quo pricing causes price wars.
B) Status quo pricing requires little planning.
C) Status quo pricing is derived from actual costs of manufacturing.
D) Status quo pricing maintains the organization's differential advantage.

Question 25

Autumn Fair sells reusable plastic stencils for use in decorating.When graphed,the demand schedule for Autumn Fair brand stencils forms a straight line.If at $3 per stencil,500 stencils are demanded,and at $4 per stencil,450 stencils are ordered,how many will be ordered at a price of $6 per stencil?

A) 333
B) 350
C) 400
D) 375

Question 26

What is the term for the quantity of a product that will be offered to the market by suppliers at various prices for a specified period?

A) supply
B) equity
C) demand
D) inventory

Question 27

When Richard opened The Kite Hut,he charged $7 for kites and could not keep up with demand.The Kite Hut has raised the price to $10,and now Richard is still selling all the kites he carries,but he is not forced to reorder on a daily basis.The $10 price is probably which of the following?

A) a price equilibrium
B) an inelastic price
C) a symmetrical price
D) an inventory equalizer

Question 28

The quantity of a product that people will buy/demand is most dependent on which of the following?

A) supply
B) quality parameters
C) price
D) promotion strategy

Question 29

The responsiveness or the sensitivity of consumer demand to changes in price occurs when consumers buy more or less of a product when the price changes.What is this called?

A) the break-even point
B) elasticity of demand
C) the point of equilibrium
D) unitary revenue

Question 30

In a discount store Lee found a "sun kit" containing a beach towel,a sun visor,and sun block.The items,which were sold together,retailed at $18.50,but were marked down to $12.99.The retailer sold one for $18.50 and six at $12.99.Demand for the sun kit package is which of the following?

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

Question 31

Which of the following is defined as the quantity of a product that will be sold at various prices for a specified period?

A) demand
B) market share
C) supply
D) revenue

Question 32

What happens when demand is elastic?

A) As price goes up,revenue does not change.
B) As price goes down,revenue goes down.
C) As price goes down,revenue does not change.
D) As price goes up,revenue goes down.

Question 33

At a price of $6 each,314 people want to buy sun visors designed especially for volunteers at the Peachtree Road Race,and only 314 such visors were available.In this example,a state of which of the following has been achieved?

A) price equilibrium
B) symmetry
C) marketing balance
D) commerce stability

Question 34

When consumers are sensitive to price changes,which of the following occurs?

A) elastic demand
B) inelastic supply
C) elastic supply
D) inelastic demand

Question 35

The price of the good or service is a key decision for a marketer because it most significantly and directly affects which of the following?

A) the product's promotion
B) the product's distribution
C) the product's demand
D) the product's quality

Question 36

Which way do most demand curves slope?

A) upward and to the right
B) vertically
C) downward and to the right
D) downward and to the left

Question 37

The quantity of products that will be sold in the market at various prices for a specified time period is referred to as which of the following?

A) demand
B) supply
C) equity
D) inventory

Question 38

Although many factors can influence price,what are the primary determinants?

A) the demand for the good and the cost to the seller
B) demand by the consumer and perceived quality
C) stage of the product life cycle and costs to the consumer
D) costs of manufacturing and distribution

Question 39

What is the point at which there is no inclination for the price to rise or fall?

A) price symmetry
B) price stability
C) price status quo
D) price equilibrium

Question 40

Queeg Industries sells all types of artists' paint brushes.When the owner of Queeg learned that Patterson Art,one of its biggest competitors,had lowered its prices on all synthetic brushes by 5 percent,he did the same.This is an example of what type of pricing?

A) status quo
B) cost-plus
C) market share
D) predatory

Question 41

Which of the following use complex mathematical software to profitably fill unused capacity?

A) yield management systems
B) service management systems
C) capacity correlation systems
D) capacity management software

Question 42

Which of the following is most likely to be a variable cost for a manufacturer of amusement park rides?

A) annual lease of a tractor-trailer used to deliver rides to buyers
B) warehouse rent to store semi-finished and finished rides
C) executive salaries
D) steel,lumber,and aluminum used in construction of rides

Question 43

During sporting events at the local high school,Megan runs a concession stand.The costs associated with the purchase of hot dogs,mustard,relish,ketchup,chips,sodas,paper napkins,and cups are all examples of what type of costs?

A) fixed
B) variable
C) liquidity
D) promotional

Question 44

When price decreases and total revenue falls,demand is which of the following?

A) absolute
B) stable
C) elastic
D) inelastic

Question 45

The Pizza Depot is an independent retailer of pizzas and deli sandwiches.Which of the following is the BEST example of one of its fixed costs?

A) paper napkins
B) boxes for pizza delivery
C) payment on leased pizza ovens
D) electric and gas for baking

Question 46

What is a cost that changes with the level of output?

A) an elastic cost
B) a fixed cost
C) a liquidity cost
D) a variable cost

Question 47

Generally speaking,a firm can set its price higher when which of the following is true?

A) demand is more fixed
B) demand is more inelastic
C) demand is more elastic
D) demand is more variable

Question 48

The maintenance costs of WestJetLite's airplane storage facilities represents what type of cost?

A) variable
B) inelastic
C) fixed
D) elastic

Question 49

Which of the following factors directly affect the elasticity of demand?

A) the other uses of a product
B) the inputs needed to manufacture the product
C) the unavailability of substitute goods
D) a product's warranty

Question 50

Al has opened a auto repair shop.The monthly payment on the tools he recently purchased,the rent on his business location,and his business license are all examples of what type of costs?

A) marginal
B) fixed
C) demand
D) variable

Question 51

Concha y Toro,a Chilean wine,has reduced the price of one bottle from $10 to $8.It previously sold 420 bottles in the month prior to the price reduction,and it now sells 525 bottles per month.What is being experienced?

A) unitary elasticity
B) elastic demand
C) consumer surplus
D) inelastic demand

Question 52

Hostlight Industries operate a chain of moderately priced motels across Canada.The company has many businesses competing for tourist dollars,and some nights during the tourist season its motels are only half full.Other nights,Hostlight has to turn away guests because there are no vacancies.Assuming the quality of the room and the services provided by the motels remain the same,Hostlight Industries could use which of the following to fill unused rooms?

A) service forecasting tools
B) a capacity correlation system
C) capacity maintenance tools
D) a yield management system

Question 53

When is demand inelastic?

A) if price stays the same and revenue goes down
B) if price goes down and revenue goes down
C) if price goes up or down and revenue stays the same
D) if price goes up and revenue goes down

Question 54

Which costs do not change as output is increased or decreased?

A) status quo
B) variable
C) fixed
D) asset

Question 55

Which of the following statements about YMS is true?

A) YMS are mathematically complex systems to make use of underutilized capacity and reduce the cost of perishability.
B) YMS are complex pricing systems used to set equilibrium pricing points.
C) The first use of YMS was in the car industry as it looked for ways to compete with imports.
D) YMS cannot be used by any other businesses but services.

Question 56

Procter & Gamble dropped the price of Pringle Potato Chips due to price competition and consumer demand.As a result of the price reduction,Procter & Gamble increased unit sales and earnings by 10 percent due to which of the following?

A) market share fluctuations
B) increases in both supply and demand
C) elasticity of demand
D) price wars with other snack food makers

Question 57

Critics claim bank ATMs take advantage of which customers who suffer a poverty of time and have a strong need for convenience?

A) customers with inelastic demand schedule
B) customers with elasticity of demand
C) customers with unitary supply and demand
D) customers with supply characteristics

Question 58

What are yield management systems used for?

A) to profitably fill unused capacity
B) to determine the availability of product substitutes in complex industries that are experiencing rapid change
C) to predict necessary service levels to achieve revenue goals
D) to determine whether it is financially more feasible to buy a new product or repair a broken one

Question 59

Consumers exhibit less price sensitivity for all of the following reasons EXCEPT which one?

A) when the product they are buying is unique
B) when substitutes are hard to find
C) when the product in question is in high demand
D) when the total expenditure for a product is high relative to their income

Question 60

Dosta Mattress Company manufactures and sells mattresses to retailers that then put their own store brand names on the product.At a price of $1,000,it sold 100 mattresses.It dropped its price to $600 and sold 175 mattresses.Regarding elasticity,what is demand for the mattresses?

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

Question 61

An office supply store can buy an office chair for $30.If the store owner sells the office chair for $45,what is the markup based on the selling price?

A) 25 percent
B) 30 percent
C) 50 percent
D) 15 percent

Question 62

Aviation fuel for WestJetLite Airlines represents what type of cost?

A) inelastic
B) marginal
C) fixed
D) variable

Question 63

A firm develops a satisfactory product/service,evaluates the total expense of the product/service,and sets a price that covers all expenses and a target profit.This type of pricing is product/service driven.What is being described?

A) marginal revenue-based pricing
B) market-driven pricing
C) cost-based pricing
D) demand-based pricing

Question 64

When does profit maximization occur?

A) when marginal variable costs equal average revenues
B) when marginal revenue equals marginal cost
C) when total costs equals average fixed revenue
D) when total costs equal total variable costs

Question 65

What is the biggest advantage associated with markup pricing?

A) its inability to be decoded by customers
B) its reliance on marginal costs
C) its simplicity
D) the fact that merchandise is never underpriced with this technique

Question 66

What is the change in total costs associated with a one-unit change in output?

A) variable cost
B) marginal cost
C) flex cost
D) elastic cost

Question 67

The typical break-even model assumes a given fixed cost and which of the following?

A) constant average variable cost
B) variable per unit cost
C) constant inventory turnover
D) markup cost attained through keystoning

Question 68

Which of the following determine what sales volume must be reached for a product before the company's total costs equal total revenue and no profits are earned?

A) price equilibrium analyses
B) break-even analyses
C) marginal revenue estimates
D) marginal costs of goods sold

Question 69

When a seller determines the selling price by adding to cost an amount for profit and expenses not previously accounted for,what type of pricing is the seller using?

A) demand-oriented pricing
B) profit maximization pricing
C) markup pricing
D) target return pricing

Question 70

Monthly output at Vincent Sheds and Outbuildings changed from 15 to 16 outdoor storage buildings,and the total costs changed from $27,000 to $28,500.What was the marginal cost for the company?

A) $1,500
B) $2,000
C) $1,200
D) $10,000

Question 71

An event planner wants to determine a price for a package of garland of silk flowers.Its cost is $7.00.She wants a markup of 30 percent based on selling price.Which of the following is closest to the price she should charge her customers?

A) $15
B) $18
C) $10
D) $12

Question 72

What is the most popular method used by wholesalers and retailers in establishing a sales price?

A) formula pricing
B) markup pricing
C) break-even pricing
D) marginal revenue pricing

Question 73

Which of the following describes a disadvantage associated with markup pricing?

A) how difficult it is to implement
B) its inability to consider product demand
C) its dependence on marginal costs
D) too many factors influence it

Question 74

As long as the revenue of the last unit produced and sold is greater than the cost of the last unit produced and sold,what should a firm do?

A) reach its break-even point very shortly
B) continue manufacturing
C) continue using price equilibrium
D) consider using sales maximization pricing

Question 75

Antique Reproductions pays a manufacturer $800 for a hand-forged iron fireplace screen,and it sells the fireplace screen to a customer for $1,600.What is the markup on the screen?

A) $160
B) $240
C) $400
D) $800

Question 76

What is the practice of marking up prices by 100 percent (or doubling the cost to set the selling price)?

A) symmetrical pricing
B) mark-on adding
C) margin pricing
D) keystoning

Question 77

The point at which marginal cost and marginal revenue are equal always results in which of the following?

A) maximization of revenue
B) maximization of costs
C) maximization of profits
D) break-even equilibrium

Question 78

What is the extra revenue associated with selling an additional unit of output?

A) average variable cost
B) marginal cost
C) marginal revenue
D) net profit

Question 79

What is keystoning?

A) the practice of maintaining variable costs at one-half of total fixed costs
B) a method used for determining the point of elasticity
C) a method of changing consumers' perceptions about price
D) the practice of marking up prices by 100 percent

Question 80

Deco Furniture sells reproductions of furniture and collectibles that were seen during the early part of the 20th century.The store's owner does not take into account competition when pricing the store's merchandise.The markup on all items in the store is 100 percent over cost (or double the cost).What is Deco Furniture using?

A) break-even pricing
B) keystoning
C) target ROI pricing
D) double sourcing