Deck 17: Pricing Concepts

Question 1

Break-even analysis determines what sales volume must be reached for a product before the company's total revenue equals total costs.

Answer 1

True

Question 2

Firms that price their products solely on the basis of costs are adhering to the marketing concept.

Answer 2

False

Question 3

If the formula for elasticity results in a measure of elasticity (E)greater than 1,demand is said to be inelastic.

Answer 3

False

Question 4

When pricing goals are mainly sales-oriented,cost considerations are usually subordinated to demand considerations.

Question 5

Because the price of condensed soup is small relative to a consumer's purchasing power,and there are several alternate uses for the product,condensed soup probably has elastic demand.

Question 6

Variable costs vary with changes in the level of output,whereas marginal costs do not vary as output changes.

Question 7

Profit maximization is the most common pricing objective used by firms.

Question 8

A marketers using a profit maximization strategy will charge the highest prices the market will bear.

Question 9

Sales-oriented pricing objectives are either based on market share or dollar or unit sales.

Question 10

Price is defined as the perceived value of a good or service that is exchanged for a certain dollar amount.

Question 11

Yield management systems (YMS)were first used by Internet service providers..

Question 12

Today's firms must develop specific,measurable,and attainable pricing objectives if they hope to survive in highly competitive markets.

Question 13

A firm has maximized its profits when its marginal revenue equals its marginal cost.

Question 14

Markup pricing,adding an amount to cost to cover expenses and profit,is one of the most common pricing methods used by intermediaries to establish a selling price.

Question 15

Maximization of sales is an appropriate and useful long-term pricing objective for most firms.

Question 16

If the formula for elasticity results in a measure of elasticity (E)equal to 1,the increase in sales exactly offsets the decrease in price so that total revenue remains the same.

Question 17

Yield management systems can only be used by service industries.

Question 18

Price equilibrium is the price at which supply and demand are equal,and there is no inclination for prices to rise or fall.

Question 19

If demand for athletic shoes is elastic,consumers will not change their purchasing habits greatly when the price of athletic shoes changes.

Question 20

Status quo pricing objectives indicate that prices are adjusted to meet the competition.

Question 21

At her local supermarket,Tara saw a pizza pan and a package of mix to make homemade pizza.The items,which were sold together,retailed at $28.50,but were marked down to $19.99.The $19.99 is the:

A) revenue
B) price
C) profit
D) liquidity value
E) amortized value

Question 22

Revenue:

A) equals quantity sold times profit margin
B) equals price minus costs
C) equals return on investment
D) is synonymous with profit
E) equals price of goods times quantity sold

Question 23

Price is often used as a promotional tool.

Question 24

As products enter the growth stage of the product life cycle,prices generally begin to fluctuate wildly.

Question 25

Consumers use price as an indicator of the quality of a product,especially when consumers have a substantial degree of knowledge about the product.

Question 26

An organization is using _____ when it sets its prices so that total revenue is as large as possible relative to total costs.

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

Question 27

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) The high rate of new product introductions has led to careful reevaluation by consumers.
D) Marketing managers are finding it difficult to compare prices between suppliers.
E) Buyers are less informed and are less price-sensitive.

Question 28

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.Macini is basing his pricing policy on:

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

Question 29

At her local supermarket,Tara saw a pizza pan and a package of mix to make homemade pizza.The items,which were sold together,retailed at $28.50,but were marked down to $19.99.The retailer sold one for $28.50 and six at the $19.99.The retailer's revenue is:

A) $19.99
B) $28.50
C) $99.95
D) $128.45
E) cannot be calculated with the information provided

Question 30

When there is only one product manufacturer left for a product in the decline stage,prices will stabilize.

Question 31

According to the text,price is best described as:

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

Question 32

Distribution strategies become a less important factor during the growth stage of a product's life cycle.

Question 33

For convenience,pricing objectives can be divided into three categories.They are:

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

Question 34

Money that is left over after paying for company activities is called:

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

Question 35

Which of the following statements about price is true?

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

Question 36

Adequate distribution for a new product is often obtained by reducing the size of the profit margin for its resellers.

Question 37

The pricing policy used by Middleton Industries,manufacturer of Renaissance charms for bracelets and necklaces,is to set prices so the 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 a _____ policy

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

Question 38

Sara Lee Crustless bread designed for making sandwiches is a product that is in the introductory stage of its product life cycle.If management at Sara Lee is typical,its pricing strategy will depend on the elasticity of demand for the crustless bread.

Question 39

Which of the following statements about price is true?

A) Price can relate to anything with perceived value,not just money.
B) Price is that which is given up in an exchange to acquire a product.
C) Customers are interested in obtaining a perceived reasonable price.
D) The price paid is based on the satisfaction consumers expect to receive from a product.
E) All of the above statements about price are true.

Question 40

_____ pay for every activity of the company.

A) Revenues
B) Investments
C) Retained earnings
D) Profits
E) Prices

Question 41

Deb Ross 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,her firm's pricing objective can be categorized as:

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

Question 42

If a company's pricing objective is to meet the competition or to maintain existing prices,it is using _____ pricing.

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

Question 43

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

A) Status quo pricing is derived from actual costs of manufacturing.
B) Status quo pricing maintains the organization's differential advantage.
C) Status quo pricing is active,not reactive.
D) Status quo pricing causes price wars.
E) Status quo pricing requires little planning.

Question 44

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) 5,500
B) 4,250
C) 4,000
D) 3,750
E) 3,500

Question 45

_____ measures the overall effectiveness of management in generating profits with its available assets.

A) Return on investment
B) Economic order quantity
C) Target-on-sales
D) Retained earnings
E) Efficiency maximization

Question 46

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

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

Question 47

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

A) competing in a slow-growth industry
B) competing in an industry that makes frequently purchased items
C) competing in an industry with few product changes
D) competing in an industry requiring market power and economies of scale
E) competing in none of these industries

Question 48

As a short-term pricing objective,_____ can be effectively used on a temporary basis to sell off excessive inventory.

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

Question 49

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) 350
B) 450
C) 400
D) 333
E) 375

Question 50

Lincoln 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:

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

Question 51

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

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

Question 52

The price of the good or service is a key decision for a marketer because it most significantly and directly affects the product's:

A) distribution
B) costs
C) demand
D) promotion
E) quality

Question 53

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 a(n)_____ pricing objective.

A) profit oriented
B) market share maximization
C) status quo
D) sales maximization
E) supply-demand equalization

Question 54

Paulo 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:

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

Question 55

The quantity of a product that people will buy/demand is most dependent on its:

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

Question 56

Although many factors can influence price,the primary determinants are:

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

Question 57

Parrish Farms produces homemade cheese.Last year,it managed to exceed its target ROI for the current fiscal year.The following results were found on its financial statements: What was the actual return on investment (ROI)for Parrish Farms?

A) 6.67 percent
B) 10 percent
C) 22 percent
D) 28 percent
E) none of these answers

Question 58

A company using market share pricing has a _____ pricing objective.

A) profit-oriented
B) sales-oriented
C) demand-oriented
D) supply-oriented
E) status quo

Question 59

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) supply-oriented
B) sales maximization
C) target return on investment
D) satisfactory profit
E) profit maximization

Question 60

_____ is defined as the quantity of a product that will be sold at various prices for a specified period.

A) Market share
B) Demand
C) Supply
D) Value
E) Revenue

Question 61

The responsiveness or the sensitivity of consumer demand to changes in price is referred to as _____and occurs when consumers buy more or less of a product when the price changes.

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

Question 62

Most demand curves slope:

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

Question 63

Critics claim bank ATMs take advantage of the _____ of customers who suffer a poverty of time and have a strong need for convenience.

A) elasticity of demand
B) inelastic demand schedule
C) unitary supply and demand
D) ROI characteristics
E) supply characteristics

Question 64

Procter & Gamble dropped the price of Pringle Potato Chips in the Southeast 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:

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

Question 65

When price decreases and total revenue falls,demand is:

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

Question 66

The ______ is the quantity of products that will be sold in the market at various prices for a specified time period,and _____ is the quantity of a product that will be offered to the market by suppliers at various prices for a specified period.

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

Question 67

A bakery supply catalog sells 5-pound bags of moist apricots and cranberries,sweet dates,bits of pineapple,and candied cherries to be used in fruitcakes.Each bag costs $24.95.If the price of cranberries were to increase by 5 percent,it would have no effect on the price of the fruit mix because cranberries are only one of several fruits in the package.The demand for cranberries for this particular use is:

A) elastic
B) derived
C) asymmetrical
D) inelastic
E) joint

Question 68

What happens when demand is elastic?

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

Question 69

_____ use complex mathematical software to profitably fill unused capacity.

A) Yield management systems
B) Capacity correlation systems
C) Service forecasting tools
D) Service management systems
E) Capacity management software

Question 70

When Richard opened The Kite Hut,he charged $7 for kites and could not keep up with the 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 a(n):

A) supply schedule
B) symmetrical price
C) price equilibrium
D) inventory equalizer
E) inelastic price

Question 71

Dosta Mattress Company manufactures and sells mattresses to retailers who then put their own store brand names on the product.At a price of $100,it sold 100 mattresses.It dropped its price to $60 and sold 175 mattresses.Regarding elasticity,demand for the mattresses is:

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

Question 72

Which of the following factors does NOT directly affect the elasticity of demand?

A) the other uses of a product
B) the inputs needed to manufacture the product
C) the availability of substitute goods
D) the price relative to a consumer's purchasing power
E) a product's durability

Question 73

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 shirts were available.In this example,a state of _____ has been achieved.

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

Question 74

_____ is defined as the quantity of product offered to the market by suppliers at various prices for a specified period.

A) Supply
B) Demand
C) Equity
D) Liquidity
E) Current asset

Question 75

When consumers are sensitive to price changes,______ occurs.

A) inelastic demand
B) elastic supply
C) elastic demand
D) inelastic supply
E) unitary elasticity

Question 76

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.It is experiencing:

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

Question 77

When Plantation Manufacturing Company lowered the price of its patio sets from $1,100 to $850,demand doubled from 4 units sold per month to 8 units per month.However,total revenue dropped.This is an example of:

A) substitute goods
B) unitary elasticity
C) elastic demand
D) consumer shortage
E) inelastic demand

Question 78

In a discount store Lee found a "sun kit" containing a beach towel,a sun visor,and suntan lotion.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 the $12.99.Demand for the sun kit package is:

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

Question 79

The point at which there is no inclination for the price to rise or fall is called price:

A) equilibrium
B) stability
C) leverage
D) symmetry
E) status quo

Question 80

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

A) Inelastic demand
B) Asymmetrical elasticity of demand
C) Unitary elasticity
D) Highly elastic demand
E) Fixed elasticity