Question 1

MusicMatch Central makes reproduction jukeboxes,which it sells to baby boomers for $500.It estimates its average variable costs to be $200 per jukebox.It figures its fixed costs to be $600,000 per year.How many jukeboxes does it have to sell to break even?

Accepted Answer

A) 1,200 jukeboxes 
B) 2,000 jukeboxes 
C) 2,500 jukeboxes 
D) 3,000 jukeboxes

Question 2

Price should not be used as a promotional tool.

Accepted Answer

A) True 
 B)False

Question 3

In a sluggish economy,consumers will buy even the most modest of products with the same discretion once shown only to big-ticket items,like computers,airfares,and designer clothes.The results are a growing popularity of cheaper private-label products and the likelihood that price wars among consumer goods could lead to the same kind of consolidation that occurred in the airline and electronics industries.Moreover,analysts say changing buying habits will force premium brand marketers to lower their prices to protect their positions.These companies may also upgrade products to distinguish them from private labels and promote their brands more aggressively than ever.
One analyst says that consumers are forcing product innovation.Products have to be sold on merit.As a result,there will be fewer brands of significance,but the significant brands will be stronger.Brand loyalty is believed to exist only when,or if,value is provided.How do the significant brands compete? One analyst says that a combination of sensible pricing and innovation with a strong brand name can stabilize market share.Reformulated or repackaged products are typical examples of innovative attempts to solidify market share.
-Refer to Consumer Buying Habits.Changing consumer buying habits will force premium brand marketers to lower their prices to protect their positions (maintain the same revenue).What does this suggest about demand for premium products?

Accepted Answer

A) It is elastic. 
B) It is highly elastic. 
C) It is fixed. 
D) It is unitary.

Question 4

Which costs do not change as output is increased or decreased?

Accepted Answer

A) asset 
B) variable 
C) fixed 
D) status quo

Question 5

Petra knows little about cooking and does not want to spend the time to learn how to make a quiche.However,she has been asked to bring a quiche to an office retirement party.Not wanting to make a poor choice,what is she likely to do?

Accepted Answer

A) intuitively make the right choice 
B) buy the most expensive pre-made quiche (perhaps paying too much),guessing that the price is related to quality 
C) research the product and buy the least expensive frozen quiche she can find 
D) buy the least expensive frozen quiche because most consumers believe that price is not directly related to quality

Question 6

While shopping,Anita found a "gardening kit" containing a pair of work gloves,a trowel,and a hand rake handsomely arranged in a clay flower pot.The items,which were sold together,retailed at $24.50,but had been marked down to $12.99.The retailer sold only one for $24.50 and six at the $12.99 price.Which of the following describes demand for the gardening kit package?

Accepted Answer

A) It is predictable. 
B) It is synergistic. 
C) It is inelastic. 
D) It is elastic.

Question 7

Which of the following determine what sales volume must be reached for a product before the company's total costs equal total revenue and no profits are earned?

Accepted Answer

A) marginal revenue estimates 
B) break-even analyses 
C) average total cost (AT
C) figures 
D) marginal costs of goods sold

Question 8

Furr Friends sells kits for making personalized grave markers for pets.The company sells each kit for $22.The average variable cost for each kit is $13,and the total annual fixed costs for plant operation are $78,300.What is the break-even point in units?

Accepted Answer

A) 2,237 
B) 3,559 
C) 6,023 
D) 8,700

Question 9

Hostlight Industries operate a chain of moderately priced hotels.There are many businesses that compete with them for tourist dollars,and some nights during the tourist season their hotels are only half full.Other nights they have to turn away guests because there are no vacancies.Assuming the quality of the rooms and the services provided by the hotels remain the same,what could Hostlight Industries use to fill unused rooms?

Accepted Answer

A) a yield management system 
B) a capacity correlation system 
C) service forecasting tools 
D) capacity maintenance tools

Question 10

During sporting events at the local high school,Steven Urangi runs a concession stand.The costs associated with the purchase of hot dogs,mustard,relish,ketchup,chips,soft drinks,paper napkins,and cups are all examples of which type of costs?

Accepted Answer

A) marginal 
B) variable 
C) fixed 
D) liquidity

Question 11

Bernard Hinault makes the most expensive bicycles in the world.Its target market is people who willingly pay $8,000 or more for their bicycles.If Bernard Hinault were to lower prices to target customers who want a good bike but who can't or won't spend that much for one,which type of pricing objective would it most likely use?

Accepted Answer

A) inelastic or supply oriented 
B) market share or sales maximization 
C) profit maximization or target return on investment 
D) demand oriented or supply oriented

Exam 18: Pricing Concepts