Deck 11: Pricing Products and Services

Question 1

Barter refers to

A)a reciprocity agreement stipulating that if company "A" purchases services from company "B," then company "B" must purchase similar services from company "A."
B)a tying agreement stipulating that if company "A" purchases a product from company "B," it must also purchase its services.
C)the practice of exchanging products and services for other products and services rather than for money.
D)the practice of exchanging services for products of equal or greater value.
E)the practice of exchanging products and services for money.

Answer 1

C

Question 2

Attorneys' fees,entrance fees,train fares,and organization dues are all examples of

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

Answer 2

D

Question 3

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.

Answer 3

D

Question 4

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)fee
B)value
C)renumeration
D)price
E)exchange rate

Question 5

Vizio,Inc.is an up-and-coming contender in the __________ market.

A)designer eyewear
B)virtual media
C)HDTV
D)3D video game
E)exotic travel

Question 6

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

Question 7

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 8

North America's fastest-growing HDTV and consumer electronics company is

A)Samsung.
B)Philips.
C)LG.
D)Sony.
E)Vizio.

Question 9

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 10

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 11

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

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

Question 12

Vizio's long-term goal for the next 20 to 30 years is to

A)have at least one of its HDTV products in every single home in the United States.
B)have its HDTVs exported from the U.S.to China.
C)be the next Sony.
D)be the next Apple.
E)create the first completely wireless HDTV entertainments system.

Question 13

According to Vizio,"The whole goal is to ensure that we have the right product,at the right time and the right price and __________."

A)forever rid the world of plugs and wires
B)create customer value that is unmatched in the industry
C)deliver it to the right people
D)at the right place
E)drive a seamless end-to-end value chain

Question 14

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 15

Which of the following is an example of a price?

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

Question 16

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

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

Question 17

In order to deliver a product that the average consumer can afford,Vizio

A)handles product design and marketing in the United States and relies on contract manufacturers in Taiwan to build the product.
B)uses mass customization in Taiwan and then ships the HDTVs to the United States.
C)purchased a small company in China to distribute its products under the Vizio name.
D)purchased a small company in Japan to distribute its products under the Vizio name.
E)relies solely on recycled materials to build high quality,no-frills products.

Question 18

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

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

Question 19

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

A)high prices
B)low prices
C)quality
D)value
E)warranties

Question 20

All of the following are examples of a price EXCEPT:

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

Question 21

Figure 11-2
Figure 11-2 above represents the four approaches to selecting an appropriate price level."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 22

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 23

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 24

If you wanted to buy a McDonald's Big Mac,small fries,and a small drink separately,it will you cost you $6.19.However,if you purchased these three items together as part of the firm's Extra Value Meal package,you would pay only $4.39,savings 80¢.This "Extra Value Meal" price serves as __________ to you and other consumers,who compare the costs and benefits of substitute items to a bundle containing those items.

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

Question 25

Tesla Roadster Sport Photo
Suppose you want to get "plugged in" and buy a Tesla Roadster Sport (see the photo above),the world's leading all-electric,zero-emission car that has a 245-mile range and can be recharged in three hours.The Tesla Roadster Sport has a list price of $110,000,but you want several options (leather interior,carbon fiber hard top,electronics upgrade,metallic paint,performance wheels,and others)that will cost $20,000.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 $3,500 off the list price.The dealer will give you a $4,000 trade-in allowance for your 2005 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 $500 to the state,and a $500 destination charge to ship the car.But because the Tesla Roadster Sport 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 $2,500.Applying the price equation,what is your final price for the Tesla Roadster Sport?

A)$54,000
B)$81,000
C)$110,000
D)$131,000
E)$166,000

Question 26

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 (not the total cost)?

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

Question 27

The __________ equation = (Unit price × Quantity sold)− Total cost.

A)total revenue
B)variable cost
C)net present value
D)profit
E)break-even point

Question 28

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)do nothing and let the perceived value of the item increase as it matures in its life cycle.

Question 29

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 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

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 32

The key to setting a final price for a product is finding an approximate price level to use as a reasonable starting point.Four common approaches to selecting an approximate price level are: (1)demand-oriented; (2)cost-oriented; (3)profit-oriented; and (4)__________ approaches.

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

Question 33

The key to setting a price for a product is finding an approximate price level to use as a reasonable starting point.Four common approaches to selecting an approximate price level are: (1)demand-oriented; (2)cost-oriented; (3)__________; and (4)competition-oriented approaches.

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

Question 34

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 distributor
E)intangible items

Question 35

A firm's profit equation demonstrates that 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 36

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 37

A reference value __________.

A)is relative to the amount of time and energy a consumer puts into the purchase process
B)is based upon the value assigned to similar items used by the consumer's peers
C)results from performing a careful break-even analysis
D)involves comparing the costs and benefits of substitute items
E)is based upon the differential between customers' "needs" and "wants"

Question 38

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

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

Question 39

Calculate a firm's total revenue (TR)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 40

A buying situation can involve comparing the costs and benefits of substitute items-such as real sugar to the sugar substitute Splenda,which,although more expensive than sugar,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 41

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 really desiring the product are willing to pay when introducing a new or innovative product.
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 42

A skimming pricing policy is likely to be most effective when: (1)lowering the price has only a minor effect on increasing sales volume and reducing unit costs; (2)when the high initial price does not attract competitors; (3)customers interpret high price as signifying high quality; and (4)__________.

A)enough customers are willing to buy immediately at the high initial price
B)consumers tend to be price sensitive
C)it will be easier to set measurable sales unit goals
D)a lower price will significantly reduce unit costs
E)consumers perceive your product to be similar to other products on the market

Question 43

A skimming pricing policy is likely to be most effective when

A)consumers perceive your product to be similar to other products on the market.
B)a lower price will significantly lower fixed costs.
C)customers interpret high price as signifying high quality.
D)consumers tend to be price sensitive.
E)it will be easier to set measurable sales unit goals.

Question 44

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 45

Figure 11-2
Figure 11-2 above represents the four approaches to selecting an appropriate price level."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 46

Setting the highest initial price that customers really desiring the product are willing to pay when introducing a new or innovative product is referred to as a

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

Question 47

Figure 11-2
Figure 11-2 above represents the four approaches to selecting an appropriate price level."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

A manufacturer of a digital video recorder (DVR)is thinking of using a skimming pricing strategy for its new product.Which of the following conditions would argue AGAINST using a skimming pricing strategy for the DVR?

A)large potential market,even at a high price
B)technological problems still exist for competitors
C)increasing volume reduces production costs substantially
D)consumers perceive a price-quality relationship
E)consumers are innovators

Question 49

Figure 11-2
Figure 11-2 above represents the four approaches to selecting an appropriate price level."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 50

When microwave ovens were in the introduction stage of their product life cycle,some consumers were willing to pay exorbitant prices for these innovative ovens.Taking advantage of this strong consumer desire,marketers set the price for microwave ovens at the highest initial price possible.Marketers of microwave ovens used a __________ pricing strategy.

A)skimming
B)penetration
C)prestige
D)price lining
E)bundle

Question 51

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 52

All of the following are demand-oriented approaches to selecting an approximate price level EXCEPT:

A)odd-even.
B)yield management.
C)customary.
D)bundle.
E)prestige.

Question 53

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 54

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 55

A skimming pricing policy is likely to be most effective when

A)consumers tend to be price sensitive.
B)it will be easier to set measurable sales unit goals.
C)a lower price will significantly lower fixed costs.
D)consumers perceive your product to be similar to other products on the market.
E)lowering the price has only a minor effect on increasing sales volume and reducing unit costs.

Question 56

The first Apple iPad was introduced in 2010 at an initial price of $650 for the 16 GB version.People waited in line overnight so they could be one of the first to own this unique tablet device.Which pricing strategy did Apple use to help recoup its research and development costs for the iPad?

A)price lining
B)penetration pricing
C)customary pricing
D)skimming pricing
E)target pricing

Question 57

Hallmark was the official supplier of flowers at the last Winter Olympics.Hallmark presented each Olympic winner with a special bouquet of roses designed to resemble the Olympic torch.Consumers were able to buy a smaller version of this same bouquet at the Hallmark website for $74.95.The Olympic bouquet that consumers could buy contained two dozen yellow roses,yet you could buy the same two dozen yellow roses for less than $35 at most supermarkets.If Hallmark is treating the Olympic bouquet as an innovative product,then it is using which demand-oriented pricing approach?

A)bundle pricing
B)yield management pricing
C)skimming pricing
D)target return-on-sales pricing
E)penetration pricing

Question 58

A skimming pricing policy is likely to be most effective when

A)consumers perceive one product to be similar to other products on the market.
B)a lower price will significantly lower fixed costs.
C)competitors will be attracted to the market due to the potential for high sales revenues.
D)consumers tend to be price sensitive.
E)the high initial price will not attract competitors.

Question 59

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 60

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 61

A manufacturer using __________ is setting a high price so that quality- or status-conscious consumers will be attracted to the product and buy it.

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

Question 62

You can buy a General Electric dishwasher for $399 or you can buy a similar Bosch brand dishwasher for $989.Since Bosch uses its pricing strategy to project a high-quality product image,it is most likely using __________ pricing.

A)bundle
B)standard markup
C)prestige
D)penetration
E)cost plus fixed-fee

Question 63

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 64

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 65

A Patek Philippe Platinum World Time wristwatch is among the most expensive in the world,costing several million dollars.This is an example of a __________ strategy.

A)penetration pricing
B)target pricing
C)bundle pricing
D)loss leader pricing
E)prestige 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 batteries at a low initial price to attract the mass market.In this case,Energizer used

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

Question 67

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 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 were unable to perceive the improved 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 68

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 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

Talbot's sells women's clothes.A longsleeve scoopneck t-shirt with the Talbot's label costs $45.By comparison,you can buy a t-shirt for $5 at a Family Dollar Store,but it won't have the prestigious Talbot's label or quality.What kind of demand-oriented approach to pricing does Talbot's use?

A)experience curve pricing
B)skimming pricing
C)demand-backward pricing
D)prestige pricing
E)flexible pricing

Question 71

A penetration pricing policy is MOST LIKELY to be effective when

A)unit production and marketing costs fall dramatically as production volumes increase.
B)customers are willing to buy immediately at the high initial price.
C)lowering the price has only a minor effect on increasing sales volume and reducing unit costs.
D)the high initial prices do not attract competitors.
E)customers interpret high price as signifying high quality.

Question 72

A penetration pricing policy is MOST LIKELY to be effective when

A)lowering the price has only a minor effect on increasing sales volume and reducing unit costs.
B)many segments of the market are price sensitive.
C)the high initial prices do not attract competitors.
D)customers interpret high price as signifying high quality.
E)customers are willing to buy immediately at the high initial price.

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

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.

Question 75

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 76

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 __________ pricing strategy.

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

Question 77

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 78

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 79

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)odd-even
D)penetration
E)loss-leader

Question 80

A penetration pricing policy is MOST LIKELY to be effective when

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