Deck 11: Pricing Strategy

Question 1

Felicia Inc., a cosmetic company, wants to launch a new perfume called "Zing" with top notes of bergamot, orange, and cinnamon. When determining the price of the perfume and its market potential, the company takes into account the number of potential buyers and their economic strengths. Which of the following factors is Felicia using in determining the pricing of Zing?

A) Demographic factors
B) Psychological factors
C) Environmental influences
D) Behavioral factors

Answer 1

A

Question 2

Which of the following factors is primarily concerned with how consumers perceive various prices or price changes?

A) Environmental factors
B) Psychological factors
C) Demographic factors
D) Sociological factors

Answer 2

B

Question 3

Which of the following is an example of a demographic factor that influences the pricing decision of a product?

A) The nature of the product
B) The reaction of potential buyers to odd pricing
C) The prestige orientation of potential buyers
D) The expected consumption rates of potential buyers

Answer 3

D

Question 4

A bakery has to set the price of its sourdough bread. Which of the following is a psychological factor relevant to the pricing decision of the baker?

A) How many loaves of bread will a potential buyer consume every month?
B) Are the orders coming from households or sandwich shops?
C) Will a low price indicate inferior quality to a potential buyer?
D) How many potential buyers for sourdough bread are out there?

Question 5

For which of the following products is a retailer most likely to use prestige pricing?

A) Plastic storage containers
B) Fresh fruits
C) Frozen desserts
D) Crystal wine glasses

Question 6

Konnectz Inc. plans to launch the latest version of its smartphone. As part of its market research and pricing strategy, it takes into account the economic buying potential of its target consumers and their locations. Which of the following factors influencing pricing decisions is Konnectz primarily concerned with in this scenario?

A) Psychological factors
B) Environmental influences
C) Demographic factors
D) Product characteristics

Question 7

Buyers who want to avoid the hassle of waiting in line to order a pizza at Grundel's Pizza Joint can buy their pizzas sooner at a higher cost. Such costs are examples of _____ costs.

A) psychological
B) quality
C) behavioral
D) time

Question 8

The marketing manager of a doll manufacturing company is tasked with setting the price of the company's new range of collectible dolls. He decides to consider the psychological factors related to pricing and sets the price of each doll at $300. Which of the following questions would the marketing manager have considered when making his decision?

A) What is the discretionary income of prospective buyers of the doll?
B) Will prospective buyers relate the doll's high price to high quality?
C) Are the prospective buyers of the doll geographically clustered?
D) How many prospective buyers can afford to pay this much for a doll?

Question 9

Which of the following is a demographic factor that influences the pricing decision of a product?

A) The nature of the product
B) The potential buyers' need for prestige
C) The potential buyers' perception of product price and quality
D) The location of potential buyers

Question 10

Which of the following products is most likely to be priced using the prestige pricing strategy?

A) A bottle of liquor
B) A loaf of bread
C) A bag of potato chips
D) A carton of milk

Question 11

Which of the following factors influencing pricing decisions pertains to the expected consumption rates, the location, and the position of potential buyers?

A) Psychological factors
B) Environmental factors
C) Demographic factors
D) Price elasticity

Question 12

A company that manufactures LED lights is planning a long-term price change for its line of decorative table lamps. Which of the following is a psychological factor that the company is most likely to consider when making pricing decisions?

A) The location of potential buyers
B) The number of potential buyers
C) The economic strength of potential buyers
D) The prestige orientation of potential buyers

Question 13

Heidi, the marketing manager of a cosmetic manufacturing company, decides to fix the price of a new perfume at $89.99. She believes that the odd pricing of the product will encourage potential buyers to think of the product as less expensive. Which of the following factors has Heidi considered when making her pricing decision?

A) Environmental factors
B) Demographic factors
C) Economic factors
D) Psychological factors

Question 14

Zimmer Co., a food manufacturing company, wants to launch a new low-fat cereal called "Zimmer-less." The company decides to use certain demographic factors to determine the market potential of Zimmer-less and its expected sales at different price levels. Which of the following questions is the company most likely to consider?

A) How many boxes of the low-fat cereal will be consumed by a household in a month?
B) Are potential buyers likely to believe that the price of the cereal is indicative of its quality?
C) Are potential buyers of the cereal prestige oriented and therefore willing to pay more?
D) Will potential buyers be tempted to buy the cereal if it's oddly priced?

Question 15

One of the psychological factors affecting pricing decisions is the:

A) expected consumption rates of potential buyers.
B) location of potential buyers.
C) amount potential buyers will be willing to pay for the product.
D) economic strength of potential buyers.

Question 16

Which of the following is a demographic factor that should be considered in the initial selection of a target market?

A) The number of potential buyers
B) The perishability of the product
C) Customers' needs for prestige and status
D) Customers' reactions to odd pricing

Question 17

Which of the following is a primary consideration in evaluating demand influences on pricing decisions?

A) Cost considerations in pricing
B) Government regulations
C) Competition
D) Price elasticity

Question 18

Starlight Inc. is a company that manufactures and sells decorative LED lights. Which of the following is a demographic factor that is likely to influence Starlight's pricing decisions?

A) The position of potential buyers
B) The nature of the product
C) The perception of price in the minds of potential buyers
D) The prestige orientation of potential buyers

Question 19

Which of the following is a psychological factor affecting pricing decisions?

A) The expected consumption rates of potential buyers
B) The location of potential buyers
C) The likelihood of potential buyers using price as an indicator of quality
D) The economic strength of potential buyers

Question 20

Hilda wants to purchase an expensive denim jacket from Alven's Corner, a premium apparel store. Her friend, Martha, suggests that Hilda buy the same jacket for half the price from a discount store in her neighborhood. Hilda, however, believes that the high cost of the jacket in Alven's Corner is an indication of its premium quality, and so she's willing to pay more. Which of the following psychological pricing strategies has Alven's Corner used to price its product?

A) Odd pricing
B) Prestige pricing
C) Bundle pricing
D) Option pricing

Question 21

Price elasticity is measured by:

A) dividing relative changes in the quantity sold by the relative changes in price.
B) multiplying the price of a unit product with the number of units sold.
C) dividing the number of units produced by the number of units sold.
D) adding the relative changes in price to the rate-of-return per product unit.

Question 22

Which of the following is a type of psychological pricing strategy?

A) Cost-plus pricing
B) Rate-of-return pricing
C) Markup pricing
D) Prestige pricing

Question 23

_____ is estimated by dividing relative changes in the quantity sold by the relative changes in price.

A) Price skimming
B) Cost-plus pricing
C) Rate-of-return pricing
D) Price elasticity

Question 24

Which of the following observations is true of price elasticity?

A) Price elasticity is only affected by demographic factors, not psychological factors.
B) Price elasticity is a measure of consumers' price sensitivity.
C) The estimation of price elasticity from historical data is an expensive approach and is not limited to the consideration of price changes.
D) Crude estimates of price elasticity are not useful to pricing decisions.

Question 25

When Lucile visited a stationery store to buy tape, she noticed that each roll of tape was priced at $1.99. In fact, most of the prices at the store were set a few dollars or a few cents below a round number. This indicates that the manager of the store is using a(n) _____.

A) odd-even pricing strategy
B) bundle pricing strategy
C) prestige pricing strategy
D) premium pricing strategy

Question 26

_____ is an example of a psychological pricing strategy.

A) Cost-plus pricing
B) Odd-even pricing
C) Markup pricing
D) Rate-of-return pricing

Question 27

Price elasticity (e) = x/percent change in price, where x stands for:

A) percent change in number of consumers.
B) gross change in price.
C) gross change in production.
D) percent change in quantity demanded.

Question 28

Paper&More Inc. is an online retailer of printers and accessories. A recent advertisement on its website reads, "Buy a compact photo printer and single-use color cartridge combo and save 30% percent off retail prices! Limited period offer. Act now!" Which of the following pricing strategies is the retailer using to sell its products?

A) Odd-even pricing
B) Prestige pricing
C) Bundle pricing
D) Optimized pricing

Question 29

Enchante Inc. is a high-end perfume manufacturer. It slashed the price of its brand of perfume "Entice" by 5 percent which resulted in a 20 percent increase in sales. Estimate the price elasticity for Entice.

A) 4
B) 5
C) 20
D) 100

Question 30

Kenny and Tessa are planning to go on a vacation. They learn that Dreamz Travel, a travel agency, is offering a special package that includes travel, lodging, and entertainment at a much lower price than the couple would have to pay for all of them separately. Which of the following pricing strategies is Dreamz Travel using in this scenario?

A) Price skimming
B) Odd-even pricing
C) Reference rate pricing
D) Bundle pricing

Question 31

Which of the following best explains why Delicia Co., a manufacturer of potato chips, prices each bag of potato chips at 99 cents rather than $1.00?

A) To encourage consumers to think these chips are less expensive
B) To attract those consumers who are not too keen about the quality of the chips
C) To create a signal that these chips are exceptionally fine
D) To increase sales by offering the chips at a discounted price

Question 32

Under a single policy, Reassurance Inc., an insurance company, provides insurance covering areas such as healthcare, accident, and property to independent corporations. By doing this, Reassurance aims to:

A) connote value and convenience for its customers.
B) create a signal that its service is exceptionally fine.
C) increase sales through steep price discounting.
D) encourage customers to view it as an upholder of high quality.

Question 33

A gas station in South Ventalia charges $4.99 instead of $5.00 for regular gas and $9.99 instead of $10.00 for premium gas to encourage its customers to believe that its prices are low. This is an example of _____ pricing.

A) prestige
B) bundle
C) markup
D) odd-even

Question 34

In odd-even pricing, _____.

A) prices are set a few dollars or a few cents below a round number to encourage the customers to think of the products as less expensive
B) prices are set exclusively on the cost of the product and historical prices
C) several products are sold together at a single price to connote value and convenience for customers
D) a high price is charged to create a signal that the product is exceptionally fine

Question 35

Matrixautos, an automobile rental unit, rents its cars at $499 rather than $500 to encourage its consumers to think of its services as less expensive. This is an example of _____ pricing.

A) prestige
B) bundle
C) markup
D) odd-even

Question 36

Which of the following is a type of psychological pricing strategy?

A) Cost-plus pricing
B) Rate-of-return pricing
C) Markup pricing
D) Bundle pricing

Question 37

Bundle pricing is a psychological pricing strategy in which:

A) prices are set a few dollars or a few cents below a round number to encourage the customers to think of the products as less expensive.
B) a high price is charged to create a signal that the product is exceptionally fine.
C) several products are sold together at a single price to connote value and convenience for customers.
D) prices are set exclusively on the cost of the product and historical prices.

Question 38

Fido's Burgers, a fast food joint, offers its customers a chicken burger meal with fries, coleslaw, and soda at a price lower than would be charged if the products were purchased separately. This example would best describe a(n) _____.

A) odd-even pricing strategy
B) prestige pricing strategy
C) bundle pricing strategy
D) premium pricing strategy

Question 39

Travel agencies offering vacation packages that include travel, accommodation, and entertainment at a single price to connote value and convenience for customers is an example of _____.

A) odd-even pricing
B) prestige pricing
C) bundle pricing
D) rate of return pricing

Question 40

Cogniti Inc. manufactures high-end designer sports shoes. The company increased the price of its most popular brand of shoes, Sportsy, by 10 percent, and the demand for these shoes went up by 50%. Estimate the price elasticity for Sportsy.

A) 5
B) 10
C) 500
D) 50

Question 41

Which of the following is a common pricing objective?

A) Pricing to maximize short-term profits
B) Pricing to reduce inventory costs
C) Pricing to achieve a target market share
D) Pricing to increase the prestige of a product

Question 42

One of the disadvantages associated with cost-oriented approaches to pricing is that:

A) they give little consideration to supply factors.
B) they are difficult to understand and implement.
C) they fail to adequately reflect competition.
D) they generally do not yield a good price decision.

Question 43

In the context of product considerations in pricing, _____ is an approach to pricing in which a seller charges a relatively high price on a new product and is used when demand for the product is price inelastic.

A) price fixing
B) line pricing
C) a penetration policy
D) a skimming policy

Question 44

Which of the following product characteristics affecting pricing typically involves discounting products as they approach being no longer fit for sale?

A) Distinctiveness
B) Perishability
C) Durability
D) Stage in product life cycle

Question 45

_____ is a variation of cost-oriented pricing which is commonly used in retailing.

A) Cost-plus pricing
B) Markup pricing
C) Rate-of-return pricing
D) Bundle pricing

Question 46

_____ is most often used to describe the pricing of jobs that are nonroutine and difficult to "cost" in advance.

A) Target cost pricing
B) Rate-of-return pricing
C) Marked pricing
D) Cost-plus pricing

Question 47

Which of the following is true of the advantages of cost-oriented pricing?

A) They yield similar prices and minimize price competition in most industries.
B) They clearly and adequately reflect competition.
C) They give adequate consideration to both supply and demand factors.
D) They are very simple to use and generally yield a good price decision.

Question 48

Which of the following is true of pricing objectives?

A) Pricing objectives should not be derived from overall marketing objectives.
B) Pricing to achieve a target return on investment is a common pricing objective.
C) Pricing objectives are not devised to meet or prevent competition.
D) The basic pricing objective is solely concerned with short-run profits.

Question 49

Which of the following businesses is most likely to use rate-of-return pricing?

A) A grocery wholesaler
B) A glass manufacturer
C) An independently owned clothing retailer
D) A construction company

Question 50

Jenna sells ice creams at the beach each summer. Each bar of ice cream costs her 20¢. She adds on an additional 20¢ to each bar to pay for electricity for the freezer, napkins, and her time, finally selling her ice creams at 40¢ a bar. In this scenario, Jena uses _____ pricing.

A) bundle
B) rate-of-return
C) odd-even
D) markup

Question 51

Which of the following is true of the rate-of-return approach to pricing?

A) Rate-of-return pricing is commonly used by manufacturers.
B) Rate-of-return pricing is a psychological pricing strategy.
C) Rate-of-return pricing does not involve circular reasoning.
D) Rate-of-return pricing places maximum emphasis on estimating sales volume.

Question 52

Markup pricing is a variation of cost-oriented pricing in which:

A) the price is determined by adding a desired rate of return on investment to total costs.
B) a percentage is added to the retailer's invoice price to determine the final selling price of the product.
C) the costs of producing a product or completing a project are totaled and a profit amount or percentage is added on.
D) a breakeven analysis is performed for expected production and sales levels and a rate of return is added on.

Question 53

Which of the following is true of a high/low pricing strategy?

A) Conditioning customers to buy only on sale is the main characteristic of this strategy.
B) In this strategy, a retailer charges prices that are on level with its competitors' and avoids promoting sales.
C) Most fashion, drug, and grocery stores avoid using this pricing strategy.
D) The main disadvantage of this strategy is that it makes it difficult for a retailer to get rid of slow-selling merchandise.

Question 54

The estimated production and sales for a coffee table book on celebrity gardening is 10,000 volumes at a total cost of $100,000. Calculate the sales price for each book if the publisher desires a before-tax return of 25 percent.

A) $12.50
B) $15.00
C) $18.75
D) $10.00

Question 55

Markup pricing:

A) is commonly used in retailing.
B) is commonly used by manufacturers.
C) is most often used to describe the pricing of jobs that are nonroutine and difficult to "cost" in advance.
D) is a psychological pricing strategy.

Question 56

Which of the following is true of product considerations in pricing?

A) A penetration policy is generally used when the firm expects minimal competition for a product.
B) A skimming policy is generally used when the firm expects competition to move in rapidly.
C) A penetration policy cannot be used to obtain large economies of scale.
D) A skimming policy is useful when demand for the product is price inelastic.

Question 57

Which of the following is a variation of cost-oriented pricing?

A) Odd-even pricing
B) Bundle pricing
C) Rate-of-return pricing
D) Prestige pricing

Question 58

Which of the following is an advantage of using the everyday low pricing (EDLP) strategy?

A) This strategy allows retailers to charge higher prices to customers who are not price-sensitive and will pay the "high" price.
B) This strategy allows retailers to get rid of slow-selling merchandise.
C) This strategy tends to reduce advertising and operating expenses.
D) This strategy, when implemented, tends to draw a lot of customers and create a lot of excitement.

Question 59

_____ is a variation of cost-oriented pricing and is closely related to markup pricing.

A) Cost-plus pricing
B) Odd-even pricing
C) Prestige pricing
D) Bundle pricing

Question 60

For which of the following products is a producer most likely to use cost-plus pricing?

A) A landscaping project of a five-acre public park
B) A jar of peanut butter
C) A first edition novel that is valued at $125
D) A state-of-the-art home entertainment system

Question 61

Rubrix, a leading animation and gaming company, launches its video game console at an introductory price of $189.00, which is relatively low for products of this category. The reasoning behind this low pricing is that Rubrix expected fierce competition to move in rapidly. Also, the demand for video game consoles varied according to the price sensitivity of prospective customers. Identify the pricing policy used here.

A) Penetration policy
B) Markdown policy
C) Skimming policy
D) Going-rate policy

Question 62

Price discrimination, which lessens competition or is deemed injurious to it, is outlawed by the _____ Act.

A) Robinson-Patman
B) Taft-Hartley
C) Clayton
D) Federal Trade Commission

Question 63

For which of the following products is a seller most likely to use a going-rate pricing strategy?

A) Sports cars
B) Wedding apparel
C) Whole milk
D) Designer furniture

Question 64

In the context of government regulations, which of the following is the primary device used to outlaw horizontal price fixing?

A) The Clayton Act
B) The Robinson-Patman Act
C) The Sherman Antitrust Act
D) The Taft-Hartley Act

Question 65

Deceptive pricing practices are outlawed under the _____ Act.

A) Federal Trade Commission
B) Sherman-Antitrust
C) Taft-Hartley
D) Fair Pricing

Question 66

Exclusivez, a leading jeweler, offers a pair of diamond earrings for only $2000, a price that is 40 percent lower than that of its competitors. Exclusivez aims to use this strategy to drive its competitors out of business and become the market leader in diamond jewelry. This is an example of _____.

A) price discrimination
B) price fixing
C) predatory pricing
D) deceptive pricing

Question 67

Marking merchandise with an exceptionally high price and then claiming that the lower selling price actually used represents a legitimate price reduction, is an example of _____.

A) deceptive pricing
B) price fixing
C) predatory pricing
D) price discrimination

Question 68

Which of the following is an environmental influence on pricing decisions?

A) Price elasticity
B) Government regulations
C) Demographic conditions
D) Psychological factors

Question 69

Which of the following is an example of an environmental influence on pricing decisions?

A) The cost structure used by competitors
B) The stage of the life cycle a product is in
C) The cost-oriented pricing strategy used by manufacturers
D) The economic strength of potential buyers

Question 70

Which of the following is most likely to be a reason for a firm to price a product above competition?

A) The firm is selling a homogenous product.
B) The demand for the firm's product is price elastic.
C) The firm is a price leader in the industry.
D) The firm's product is inferior in comparison to its counterparts.

Question 71

Leverage Inc. and its competitor, Allen Motors Co., were charged for conspiring to keep the end-user price for hatchback cars artificially high. In other words, the two automobile manufacturing companies were charged for:

A) price discrimination.
B) price fixing.
C) predatory pricing.
D) deceptive pricing.

Question 72

In which stage of the general pricing model does a marketer estimate how much of a particular product the target market will purchase at various price levels?

A) Analysis of profit potential
B) Evaluation of product-price relationships
C) Setting initial price structure
D) Estimation of costs and other price limitations

Question 73

In the context of product considerations in pricing, a(n) _____ is an approach to pricing in which a seller charges a relatively low price on a new product and is used when demand for the product is, at least in the short run, price elastic.

A) going rate policy
B) markdown policy
C) penetration policy
D) skimming policy

Question 74

_____ is an example of pricing below competition, in which the firm is bidding directly against competition for project contracts.

A) Prestige pricing
B) Bundle pricing
C) Price skimming
D) Sealed-bid pricing

Question 75

Pricing a product at the average price charged by the industry is called _____ and is popular for homogeneous products.

A) sealed-bid pricing
B) bundle pricing
C) odd-even pricing
D) going-rate pricing

Question 76

A razor manufacturer introduces its new three-blade razor at a relatively low price to counter competition and to encourage more consumers to purchase it. Through this approach to pricing, the razor manufacturer hopes to create a rapid mass market within a short span of time and obtain large economies of scale. This is an example of _____.

A) a penetration policy
B) cost-plus pricing
C) bundle pricing
D) a skimming policy

Question 77

Herald Inc. is a leading producer of software technology and cloud computing devices. In an attempt to further its goal of innovation, Herald introduces a technologically advanced one-of-a-kind user interface at a relatively high price. By doing so, Herald seeks temporary monopoly until competitors move in. This is a typical example of a(n) _____ policy.

A) penetration
B) odd-even
C) skimming
D) going-rate

Question 78

How is a skimming policy different from a penetration policy?

A) A skimming policy is used when demand for a product is price inelastic, while a penetration policy is used when demand for a product is price elastic.
B) A skimming policy is used when a seller wants to charge a relatively low price on a new product, while a penetration policy is used when a seller wants to charge a relatively high price on a new product.
C) A skimming policy is used to obtain large economies of scale and for the rapid creation of a mass market, while a penetration policy is used to capitalize on a temporary monopoly.
D) A skimming policy is used to discourage competition, while a penetration policy is used to obtain maximum revenue from the market before substitute products are created.

Question 79

Which of the following kinds of pricing strategies would you expect producers to use for pricing homogeneous products, such as wool, tomatoes, wheat, coal, and bone meal?

A) Penetration pricing
B) Going-rate pricing
C) Skimming pricing
D) Sealed-bid pricing

Question 80

A company tends to use penetration pricing when it:

A) perceives the demand for a new product to be price inelastic.
B) wants to charge a relatively high price on a new product.
C) expects competition to move in rapidly.
D) has a temporary monopoly in the market.