Question 1

Differentiate between horizontal price fixing and vertical price fixing.

Accepted Answer

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Question 2

A grocery store prices milk at cost, thus lowering the price of milk.This helps to attract customers who might buy other items in the store that are being sold at regular price.This is an example of:

Accepted Answer

A) price fixing. 
B) price bundling. 
C) price discrimination. 
D) leader pricing. 
E) price lining.

Question 3

A pricing strategy of setting the initial price low for the introduction of a new product or service, with the objective of building sales, market share, and profits quickly is called:

Accepted Answer

A) market development pricing. 
B) market extension pricing. 
C) market establishment pricing. 
D) market testing pricing. 
E) market penetration pricing.

Question 4

Megan was an assistant manager in a firm and bought a Hyundai Accent L hatchback.She was then promoted to the position of senior manager and bought a Volvo S80.This is an example of the:

Accepted Answer

A) substitution effect. 
B) price effect. 
C) supply effect. 
D) demand effect. 
E) income effect.

Question 5

A company manufacturing shampoo charges a low price to customers who buy sachets on the premise that since they belong to lower income groups they are more price sensitive.It charges higher prices to customers who buy shampoo bottles.This is an example of:

Accepted Answer

A) predatory pricing. 
B) vertical price fixing. 
C) horizontal price fixing. 
D) price discrimination. 
E) bait and switch.

Question 6

A situation in the market which occurs when two or more firms compete primarily by lowering their prices is referred to by the term:

Accepted Answer

A) pure competition. 
B) price engagement. 
C) monopolistic competition. 
D) price conflict. 
E) price war.

Question 7

Books Inc.is an online seller of books.It ships its books to different parts of the world and has divided the continents into different zones.When it delivers its shipments, it charges the rate of the particular zone in which the customer is located.This is an example of:

Accepted Answer

A) a quantity discount. 
B) geographic pricing. 
C) an allowance. 
D) a seasonal discount. 
E) uniform delivered pricing.

Question 8

The fall in the price of gas leads to an increased demand for cars in the market.This is an example of a:

Accepted Answer

A) substitute product. 
B) complementary product. 
C) shopping product. 
D) convenience product. 
E) standard product.

Question 9

Demand curves can be either straight or curved.

Accepted Answer

A) True 
 B)False

Question 10

Explain what motivates firms to enter price wars.

Accepted Answer

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Question 11

The method in which a manager must estimate how much more (or less) consumers are willing to pay for a product relative to other comparable products is called the:

Accepted Answer

A) improvement value method. 
B) supply-based method. 
C) demand-based method. 
D) premium pricing method. 
E) cost of ownership method.

Question 12

Which of the following pricing methods determine the final price to charge by starting with the cost, without recognizing the role that consumers or competitors' prices play in the marketplace?

Accepted Answer

A) cost-based pricing method 
B) value-based pricing method 
C) competitor-based pricing method 
D) supply-based pricing method 
E) demand-based pricing method

Question 13

Those products whose demand curves are positively related, such that they rise or fall together, are called:

Accepted Answer

A) substitute products 
B) complementary products 
C) shopping products 
D) convenience products 
E) standard products

Question 14

A dairy farm sells milk to a confectionery company.The dairy offers the company a discount of 10 percent on the total amount of the invoice if the company settles the amount within a period of 7 days instead of the usual 30 days.This is an example of a(n):

Accepted Answer

A) seasonal discount. 
B) advertising allowance. 
C) odd price. 
D) listing allowance. 
E) cash discount.

Question 15

A store that sells kids clothes drastically reduces prices during promotional sales in an effort to boost sales.This is an example of:

Accepted Answer

A) everyday low pricing. 
B) external reference price. 
C) high/low pricing. 
D) market penetration pricing. 
E) internal reference price.

Question 16

Recently the market has been flooded with a large number of rice suppliers.Since rice is a standardized product, the price for rice will be set according to the laws of supply and demand.This is an example of:

Accepted Answer

A) a monopoly. 
B) oligopolistic competition. 
C) monopolistic competition. 
D) pure competition. 
E) less price competition.

Question 17

Explain the concept of price skimming.

Accepted Answer

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Question 18

Mike wants to set up a factory to manufacture roller skates.He plans to employ a hundred people in his office.Mike's other expenses include rent, utilities, insurance, administrative salaries (for executives and higher-level managers), and depreciation of the physical plant and equipment.The raw material and labour to make the skates constitute the:

Accepted Answer

A) break-even point. 
B) variable costs. 
C) contribution per unit. 
D) demand curve. 
E) fixed costs.

Question 19

Cost-based methods recognize the role that consumers or competitors' prices play in the marketplace.

Accepted Answer