Question 1

Most public utilities must petition regulatory commissions in order to obtain a rate increase. Which pricing constraint does this statement demonstrate?

Accepted Answer

A)  demand for the product, class, or brand 
B)  newness of product in the life cycle 
C)  costs of production 
D)  type of competitive market 
E)  single product versus a product line

Question 2

Factors that limit the range of prices a firm may set are referred to as

Accepted Answer

A)  pricing boundary conditions. 
B)  pricing constraints. 
C)  demand factors. 
D)  pricing margins. 
E)  pricing restrictions.

Question 3

Washburn Guitars markets its guitars to four distinct market segments. The firm's mass-produced instruments are targeted at

Accepted Answer

A)  first-time buyers. 
B)  professional musicians. 
C)  stars and famous musicians. 
D)  guitar collectors and music aficionados. 
E)  intermediate-skill players who may become professional musicians.

Question 4

Tim Marlow, the owner of The Clock Works, wanted to know how many clocks he must sell in order to cover his fixed cost at a given price. Marlow knew that he had total fixed costs of $20,000 for equipment, taxes, and a bank loan. He also had a unit variable cost of $20 per clock for labor and materials. If the price Marlow charges for each of his clocks is $40, what is his break-even point quantity?

Accepted Answer

A)  100 clocks 
B)  334 clocks 
C)  500 clocks 
D)  1,000 clocks 
E)  10,000 clocks

Question 5

The competitive market situation in which the few sellers are sensitive to each other's prices is referred to as

Accepted Answer

A)  pure monopoly. 
B)  oligopoly. 
C)  monopolistic competition. 
D)  pure competition. 
E)  oligopolistic competition.

Question 6

Pricing objectives involve

Accepted Answer

A)  reconciling the prices charged by an organization to the values set forth in its business mission. 
B)  taking specific steps to capitalize on an organization's internal strengths as they apply to price. 
C)  specifying the role of price in an organization's marketing and strategic plans. 
D)  taking specific steps to compensate for an organization's weaknesses as they apply to price. 
E)  subjectively setting intrinsic values to all products and services offered by an organization.

Question 7

The newer a product and the earlier it is in its life cycle,

Accepted Answer

A)  the lower the price the firm must charge. 
B)  the more competition it has. 
C)  the higher the price that can usually be charged. 
D)  the lower its production costs are. 
E)  the lower its unit variable cost is.

Question 8

Which of these statements regarding pricing constraints is most accurate?

Accepted Answer

A)  Generally, the greater the demand for a product, the higher the price that can be set. 
B)  At the corporate level, when setting pricing constraints, a firm must disregard current conditions in the marketplace because they are too temporal for long-term planning. 
C)  Pricing constraints must always be set, but they are rarely enforced. 
D)  It is possible to create pricing constraints with the greatest range possible in order to anticipate any and all changes in the marketing environment. 
E)  Even if a firm is trying to satisfy its obligations to its customers and society in general, it should ignore setting pricing constraints.

Question 9

Which of these statements regarding pricing objectives is most accurate?

Accepted Answer

A)  Pricing objectives are similar to core values in that there is little to no change in them over time. 
B)  Pricing objectives may change depending on the segments in which a company is doing business. 
C)  Pricing objectives may change depending upon the cost of advertising. 
D)  Pricing objectives are established exclusively by the marketing department. 
E)  Pricing objectives are extremely sensitive to even the slightest change in the local economy.

Question 10

Which of these statements is most accurate?

Accepted Answer

A)  Nonprofit organizations are exempt from having to cover the costs of producing and/or marketing their products. 
B)  Socially responsible corporations should have the pricing constraint of covering all costs of producing and marketing their products, but they should not price their products to earn a profit. 
C)  Marketers must ensure that firms in their channels of distribution make an adequate profit or they will be cut off from their customers. 
D)  Price elasticity of demand makes it virtually impossible for companies to cover all their marketing and production costs at all times. 
E)  Marketing and production costs are the most difficult and expensive aspect of pricing because they draw so much capital away from other departments in the organization.

Question 11

The vertical 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 12

At one point, people were willing to pay hundreds of dollars on eBay for a Beanie Baby toy that originally cost a small fraction of that. Today, those same Beanie Babies can be found at garage sales for less than a dollar apiece. This is most likely due to

Accepted Answer

A)  faulty craftsmanship in later production batches. 
B)  a sharp downturn in the economy. 
C)  the new, more nostalgic fad of bobblehead dolls. 
D)  too many counterfeit Beanie Babies entering the country. 
E)  a product becoming a fad and then losing its fad appeal.

Question 13

Which statement would most likely be spoken by someone in the midst of estimating demand and revenue in the price-setting process?

Accepted Answer

A)  "It's important to offer discounts to seniors." 
B)  "We have to try to achieve an 8 percent profit share." 
C)  "The starting price should be $4.99 and we can raise the price again in six months." 
D)  "But, if we increase the price even by $1, how many customers will we lose?" 
E)  "We should probably price the extra-large version somewhere between $600 and $650."

Question 14

Forever Quilting is a small company that makes quilting kits priced at $120 each. There is no quantity discount. The costs of the materials that go into each kit total $45. It costs $5 in labor to assemble a kit. The company has monthly expenses of $1,000 for rent and insurance, $200 for heat and electricity, $500 for advertising, and $4,500 for the monthly salary of its owner. Last month the company sold 150 kits. Forever Quilting's total revenue for the month was

Accepted Answer

A)  $4,300. 
B)  $6,200. 
C)  $7,500. 
D)  $10,500. 
E)  $18,000.

Question 15

Total revenue is

Accepted Answer

A)  the profit made from selling a product or service. 
B)  the net gain in sales if the unit price is lowered. 
C)  the least number of units sold needed to cover product, distribution, and promotional costs. 
D)  the amount at which marginal costs exceed fixed costs. 
E)  the total money received from the sale of a product.

Question 16

Apple's iPhone was originally a single model in a product line targeted at high-end users. However, lower-cost rival smartphones soon entered the market and Apple began to market multiple offerings itself. Here, Apple faces

Accepted Answer

A)  the inability to change prices quickly. 
B)  speeding up the diffusion of innovation process. 
C)  brand extension confusion. 
D)  charging a lower price to gain a foothold in the market. 
E)  the challenge of pricing multiple products in an expanding product line.

Question 17

Unit variable cost refers to variable cost expressed

Accepted Answer

A)  as the sum of all units sold. 
B)  on a per unit basis for a product. 
C)  as a percentage of total sales. 
D)  as a percentage of fixed costs. 
E)  as a percentage of total costs.

Question 18

A reference value involves comparing the costs and benefits of

Accepted Answer

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 manufacturer or distributor. 
E)  intangible items.

Question 19

Which of these statements is most accurate?

Accepted Answer

A)  For some products, price influences the perception of overall quality, and ultimately value, to consumers. 
B)  A consumer's view of a product's value depends almost entirely on external assessments of quality. 
C)  A consumer's view of value is a function of his or her education and income. 
D)  Price plays only a small part in a consumer's perceived value of a product or service. 
E)  Price plays a large role in assessing value but a very minor role in assessing quality.

Question 20

You are president of an electric appliances manufacturer. You want to reduce your break-even quantity. All things being equal, you can do this by

Accepted Answer

A)  increasing the quantity sold, while keeping price unchanged. 
B)  reducing marginal revenue. 
C)  reducing unit variable cost. 
D)  increasing fixed cost. 
E)  increasing total cost.

Exam 13: Building the Price Foundation

Most public utilities must petition regulatory commissions in order to obtain a rate increase. Which pricing constraint does this statement demonstrate?

Factors that limit the range of prices a firm may set are referred to as

Washburn Guitars markets its guitars to four distinct market segments. The firm's mass-produced instruments are targeted at

The competitive market situation in which the few sellers are sensitive to each other's prices is referred to as

Pricing objectives involve

The newer a product and the earlier it is in its life cycle,

Which of these statements regarding pricing constraints is most accurate?

Which of these statements regarding pricing objectives is most accurate?

Which of these statements is most accurate?

The vertical axis of a demand curve graph represents

At one point, people were willing to pay hundreds of dollars on eBay for a Beanie Baby toy that originally cost a small fraction of that. Today, those same Beanie Babies can be found at garage sales for less than a dollar apiece. This is most likely due to

Which statement would most likely be spoken by someone in the midst of estimating demand and revenue in the price-setting process?

Total revenue is

Apple's iPhone was originally a single model in a product line targeted at high-end users. However, lower-cost rival smartphones soon entered the market and Apple began to market multiple offerings itself. Here, Apple faces

Unit variable cost refers to variable cost expressed

A reference value involves comparing the costs and benefits of

Which of these statements is most accurate?

You are president of an electric appliances manufacturer. You want to reduce your break-even quantity. All things being equal, you can do this by