Question 1

The break-even point is estimated by

Accepted Answer

A)  multiplying revenue per unit times the quantity sold.
B)  dividing fixed contribution per unit by variable costs.
C)  multiplying fixed costs by contribution per unit.
D)  dividing fixed costs by contribution per unit.
E)  dividing variable costs by fixed costs. D

Question 2

Consumers generally believe that ________ is one of the most important factors in their purchase decisions.

Accepted Answer

A)  promotion
B)  place
C)  policy
D)  perception
E)  price E

Question 3

Sonja's Sub Shop is located in a business district that has few customers on the weekend. To attract customers on Saturday and Sundays, it reduces its prices on these two days. This is an example of

Accepted Answer

A)  dynamic pricing.
B)  the substitution effect.
C)  the income effect.
D)  the target return effect.
E)  cross-price elasticity. A

Question 4

Price is the cash expenditure plus taxes that consumers must pay for a good or service.

Accepted Answer

A) True 
 B)False

Question 5

Simon estimates that the fixed costs associated with opening a new bank branch are $500,000. He expects the branch to attract 1,000 new customer accounts in the first year, each of which will cost $50 per year to service. He also expects to generate $100,000 per year in revenue. For Simon, the total cost of opening the new branch and remaining open for one year will be

Accepted Answer

A)  $500,000.
B)  $550,000.
C)  $650,000.
D)  $450,000.
E)  $605,000.

Question 6

Fizzy Drinks Inc. decided to generate new sales by being the lowest price competitor in the soft drink market so as to attract customers away from higher-priced producers. What company objective does this reflect?

Accepted Answer

A)  sales-oriented
B)  profit-oriented
C)  customer-oriented
D)  production-oriented
E)  competitor-oriented

Question 7

If all three grocery stores in town decide to charge the same price for a loaf of bread, what type of pricing tactic is being used?

Accepted Answer

A)  horizontal price fixing
B)  vertical price fixing
C)  horizontal price discrimination
D)  vertical price discrimination
E)  loss-leader pricing

Question 8

Differentiate between the four levels of competition and offer examples of each type.

Accepted Answer

The answer of Differentiate between the four levels of competition...

Question 9

What situation is occurring if a 1 percent decrease in price results in more than a 1 percent increase in quantity demand?

Accepted Answer

A)  Demand is cross-price elastic.
B)  Demand is price inelastic.
C)  Demand is price elastic.
D)  Demand maintains the status quo.
E)  Demand results in the income effect.

Question 10

In U.S. markets, there are many substitute products for Head & Shoulders dandruff shampoo, suggesting the price elasticity of demand for Head & Shoulders is high.

Accepted Answer

A) True 
 B)False

Question 11

In one year, the Whispering Leaves Resort incurred $100,000 in fixed costs. Because the resort booked 10,000 room nights, its total variable cost is $100,000 (10,000 room nights × $10 per room). Thus, its total cost is

Accepted Answer

A)  $10,000.
B)  $200,000.
C)  $20,000.
D)  $100,000.
E)  $120,000.

Question 12

What is an accurate description of predatory pricing?

Accepted Answer

A)  It is legal in the United States.
B)  It occurs when a firm sets a very high price for one or more of its products.
C)  It is illegal in the United States under both the Sherman Antitrust Act and the Federal Trade Commission Act.
D)  It is legal in the United States when a company wants to set a very low price to drive its competition out of business.
E)  It occurs when there are many firms competing for customers in a given market but their products are differentiated.

Question 13

Because there are only a few firms in markets with oligopolistic competition,

Accepted Answer

A)  everyone is a price taker.
B)  producers do not have to consider the reactions of rival firms.
C)  government often encourages consolidation to reduce the number of competitors.
D)  price wars may occur.
E)  the many competitors will focus on product differentiation.

Question 14

Cross-price elasticity is the

Accepted Answer

A)  percentage change in quantity of a product demanded divided by the percentage change in its price.
B)  percentage change in quantity demanded of Product A compared to the percentage change in price of Product B.
C)  change in price of Product A divided by change in quantity demanded for Product B.
D)  change in quantity of a product demanded divided by the change in its price.
E)  change in quantity of a product demanded divided by the change in its elasticity.

Question 15

Isabella knows that her customers always shop for top-of-the-line leather purses and price is not a consideration. She decides to price her line of purses and wallets above those of her closest competition in order to capture those customers who only look for the best. What type of strategy is Isabella using?

Accepted Answer

A)  a top of market strategy
B)  the value of quality
C)  advantageous pricing
D)  premium pricing
E)  differential pricing

Question 16

A demand curve shows the relationship between ________ during a specific period of time.

Accepted Answer

A)  income and demand
B)  price and costs
C)  price and elasticity
D)  profit and price
E)  price and demand

Question 17

How can a company find its way out of a market characterized by pure competition?

Accepted Answer

A)  consistently offer the lowest price until other competitors leave the market
B)  increase prices and attract different, quality-oriented customers
C)  decrease the amount of available product until the market reacts
D)  increase the amount of available product to flood the market
E)  differentiate the product in some way, even by packaging, so customers will see it as distinct

Question 18

In developing marketing strategies, why is price often the most challenging of the four Ps to manage?

Accepted Answer

A)  most managers feel it is the least important element of the marketing mix
B)  it is the least understood element of the marketing mix
C)  it has to be based on the promotion budget for the product
D)  it is difficult to calculate markups for products
E)  managers don't understand the relationship between benefits and costs

Question 19

Geoff customizes Trek trail bikes. No two bikes are alike. He notices that very few customers even ask the price of his trail bikes before they decide to purchase them. Demand for his trail bikes is probably

Accepted Answer

A)  price sensitive.
B)  price elastic.
C)  price inelastic.
D)  income elastic.
E)  cross-price elastic.

Question 20

Dynamic pricing is in place when retailers charge the same price for goods regardless of the selling season.

Accepted Answer

A) True 
 B)False

Exam 14: Pricing Concepts for Capturing Value

The break-even point is estimated by

Consumers generally believe that ________ is one of the most important factors in their purchase decisions.

Sonja's Sub Shop is located in a business district that has few customers on the weekend. To attract customers on Saturday and Sundays, it reduces its prices on these two days. This is an example of

Price is the cash expenditure plus taxes that consumers must pay for a good or service.

Fizzy Drinks Inc. decided to generate new sales by being the lowest price competitor in the soft drink market so as to attract customers away from higher-priced producers. What company objective does this reflect?

If all three grocery stores in town decide to charge the same price for a loaf of bread, what type of pricing tactic is being used?

Differentiate between the four levels of competition and offer examples of each type.

What situation is occurring if a 1 percent decrease in price results in more than a 1 percent increase in quantity demand?

In U.S. markets, there are many substitute products for Head & Shoulders dandruff shampoo, suggesting the price elasticity of demand for Head & Shoulders is high.

In one year, the Whispering Leaves Resort incurred $100,000 in fixed costs. Because the resort booked 10,000 room nights, its total variable cost is $100,000 (10,000 room nights × $10 per room) . Thus, its total cost is

What is an accurate description of predatory pricing?

Because there are only a few firms in markets with oligopolistic competition,

Cross-price elasticity is the

A demand curve shows the relationship between ________ during a specific period of time.

How can a company find its way out of a market characterized by pure competition?

In developing marketing strategies, why is price often the most challenging of the four Ps to manage?

Geoff customizes Trek trail bikes. No two bikes are alike. He notices that very few customers even ask the price of his trail bikes before they decide to purchase them. Demand for his trail bikes is probably

Dynamic pricing is in place when retailers charge the same price for goods regardless of the selling season.