Question 1

A target return profit pricing objective implies that a company chooses to

Accepted Answer

A)  set targets whose performance can be measured quickly. 
B)  give up immediate profit in exchange for achieving a higher market share in hopes of penetrating competitive markets. 
C)  set a profit goal that is often determined by its board of directors. 
D)  reduce investment in any further market or product research. 
E)  set prices based on return on sales.

Question 2

Which of the following would be an example of a constraint in Step 1 of the price-setting process?

Accepted Answer

A)  We can rely on our reputation for our other products in the line. 
B)  We expect to make a profit of $1.2 million. 
C)  We need to make allowances for large quantity orders. 
D)  We should increase the price during the holiday shopping season. 
E)  We're going to face some aggressive competition.

Question 3

Describe the pricing constraints a firm is likely to face.

Accepted Answer

The answer of Describe the pricing constraints a firm is...

Question 4

All of these are examples of pricing constraints exceptwhich?

Accepted Answer

A)  cost of producing the product 
B)  competitors' prices 
C)  newness of the product 
D)  break-even point 
E)  demand for the product class, product, or brand

Question 5

Suppose you are the owner of a picture frame store and you wish to calculate how many frames you must sell to cover your fixed and variable costs at a given price. Let's assume that the demand for your frames is strong, so the average price customers are willing to pay for each picture frame is $120. Also, suppose your fixed costs (FC) total $32,000 (real estate taxes, interest on a bank loan, etc.) and unit variable cost (UVC) for a picture frame is $40 (labor, glass, frame, and matting). If your picture frame store sold 2,000 picture frames, what would your profit (or loss) be?

Accepted Answer

A)  a loss of $32,000 
B)  $0 
C)  $32,000 profit 
D)  $112,000 profit 
E)  $128,000 profit

Question 6

A movement along a demand curve (up or down) for a product occurs ________, assuming that other factors such as consumer tastes, price and availability of substitutes, and consumer incomes remain unchanged.

Accepted Answer

A)  when its price is lowered or increased and the quantity demanded for it correspondingly increases or decreases 
B)  when its demand is lowered or increased and the price offered for it correspondingly increases or decreases 
C)  when its demand and price are lowered 
D)  when its demand and price are increased 
E)  at the break-even point

Question 7

The horizontal axis of a demand curve graph represents

Accepted Answer

A)  market growth rate. 
B)  relative market share. 
C)  price per unit. 
D)  potential profit in dollars. 
E)  quantity demanded.

Question 8

Step 1 of the price-setting process identifies pricing objectives and constraints. Describe the reasons these objectives may change and give examples of objectives a firm may set.

Accepted Answer

The answer of Step 1 of the price-setting process identifies...

Question 9

Marketing managers often use break-even analysis to analyze the relationship between total revenue and total cost to determine profitability at various levels of output. What is the break-even formula? Use the formula to calculate how many radio-controlled drones a dealer must sell if her fixed costs are $100,000, unit variable costs are $150, and the selling price is $200.

Accepted Answer

The answer of Marketing managers often use break-even analysis to...

Question 10

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

Accepted Answer

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

Question 11

Products such as disposable diapers usually have

Accepted Answer

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

Question 12

A technique that analyzes the relationship between total revenue and total cost to determine profitability at various levels of output is referred to as

Accepted Answer

A)  break-even analysis. 
B)  marginal analysis. 
C)  sensitivity analysis. 
D)  market analysis. 
E)  tipping point analysis.

Question 13

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

Accepted Answer

A)  handles product design and marketing in the United States and relies on contract manufacturers in other countries to build the product. 
B)  uses mass customization in other countries 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 14

Total cost refers to

Accepted Answer

A)  the sum of the expenses of the firm that are stable and do not change with the quantity of a product that is produced and sold. 
B)  the change in expenses that results from producing and marketing one additional unit of a product. 
C)  the average amount of money received for selling one unit of a product or simply the price of that unit. 
D)  the sum of the expenses of the firm that vary directly with the quantity of a product that is produced and sold. 
E)  the total expense incurred by a firm in producing and marketing a product, which equals the sum of fixed cost and variable cost.

Question 15

Which of these is an example of a price?

Accepted Answer

A)  fare 
B)  operating costs 
C)  liquidity 
D)  value 
E)  brand equity

Question 16

Companies must know or anticipate what specific prices its present and potential competitors currently charge

Accepted Answer

A)  or may charge in the near future. 
B)  only when these are considered permanent prices. 
C)  primarily if they intend to compete on price rather than a form of differentiation like customer service. 
D)  primarily if they intend to target price-sensitive target markets. 
E)  if there are legal requirements for pricing in their industry.

Question 17

The marketplace sets the price for wheat, so farmers who are trying to sell their wheat crops do not need a pricing strategy and do just a little advertising when a crop comes in. The wheat is sold in ________ type of competitive market.

Accepted Answer

A)  an oligopoly 
B)  a pure monopoly 
C)  a pure competition 
D)  a monopolistic competition 
E)  a monopolistic oligopoly

Question 18

Washburn Guitars recently purchased Parker Guitar, another guitar manufacturer that designs products for professionals and collectors, and will combine the two production facilities into a new location. Washburn expects the acquisition to reduce its rent and tax expenses by 40 percent, and the new skilled employees will reduce the hours of work needed for each unit by 15 percent. This would cause the slope of the total cost curve to ________ and the break-even quantity to

Accepted Answer

A)  decrease; stay the same. 
B)  decrease; increase. 
C)  increase; increase. 
D)  stay the same; increase. 
E)  decrease; decrease.

Question 19

All of the following are demand factors exceptwhich?

Accepted Answer

A)  the price of similar products 
B)  consumer tastes 
C)  consumer income 
D)  the availability of similar products 
E)  the form of promotion

Question 20

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

Accepted Answer

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

Exam 13: Building the Price Foundation