Question 1

Which strategy involves a firm charging a price identical to or very close to the competition's price?

Accepted Answer

A) differentiation pricing 
B) penetration pricing 
C) status quo pricing 
D) leader pricing

Question 2

Which pricing method (skimming,penetration,or status quo)would be most appropriate for each of the following products: (1)a new kind of automatic vacuum cleaner, (2)brightly coloured wooden blocks to be used as a child's toy, (3)a new,low-cost,no-calorie fat substitute, (4)a home computer,and (5)a designer perfume.Briefly justify your answers.

Accepted Answer

The answer of Which pricing method (skimming,penetration,or status quo)would be...

Question 3

Why do consumers sometimes prefer two-part pricing?

Accepted Answer

A) Prices are often perceived as quality indicators. 
B) Consumers like to be in control of costs. 
C) Consumers are uncertain about the number and types of activities they might use at places like amusement parks. 
D) Prices have little or no psychological influence on most consumers.

Question 4

Quart jars of Dancing Pig Barbecue Sauce,produced in British Columbia,are sold through the mail.The company uses two different shipping prices.All customers west of the Fraser River pay $3.99 shipping and handling costs per order,while all east of the Fraser River pay $4.99.Which type of pricing is being used?

Accepted Answer

A) penetration 
B) skimming 
C) zone 
D) freight absorption

Question 5

What is marketing two or more products in a single package for a special price known as?

Accepted Answer

A) price bundling 
B) two-part bundling 
C) psychological pricing 
D) family pricing

Question 6

Functional discounts are typically calculated as the wholesale price times the accumulated margin percentages.

Accepted Answer

A) True 
 B)False

Question 7

It's September and Sophia wants to buy some arts and crafts supplies for an after-school program she is developing for her daughter's elementary school.In her Saturday newspaper was a flyer from Michael's,an arts and crafts retailer.As she looked through the newspaper insert,she noticed that if she purchased three or more bottles of Alene's Tacky Glue,the regular price of $1.50 each was reduced to $1.15 each.She also saw that the store priced its plastic storage boxes at $1.99,$3.99,and $5.99.She thought they would be useful for storing each individual child's projects.On the front page of the flyer was an ad for Funky Girls Gel Pens,something she knew her daughter would love to use.The price at Michael's was $6.99 lower than the price she had found at the other stores that carried the pens.She thought that some of the older girls might like to start a scrapbook and was pleased to find that Michael's had a scrapbook starter kit,which includes scissors,book,pages,and stickers for only $15.The items could be purchased separately for $19.99.The flyer also announced that all flag-related items left over from its Canada Day sale were reduced by 40 percent.
-Refer to Art Supplies.Which pricing tactic was Michael's probably using with its Funky Girls Gel Pens?

Accepted Answer

A) seasonal pricing 
B) price lining 
C) price bundling 
D) leader pricing

Question 8

Post makes several varieties of cereals.In promoting this product line,Post offers a 50-cents-off coupon that can be used to purchase any of its cereals.Therefore,what must Post consider when pricing its cereals?

Accepted Answer

A) joint costs 
B) differential costs 
C) bundling costs 
D) potential (or basing)costs

Question 9

When a channel intermediary is compensated for the ordinary services and tasks performed within the channel of distribution,the compensation usually comes in the form of a discount from base price.What is this discount called?

Accepted Answer

A) promotional allowance. 
B) cumulative or noncumulative quantity discount 
C) functional (or trade)discount. 
D) rebate allowance

Question 10

The American Girl catalogue began as a concept to introduce girls who lived in the past to today's girls.Each historically accurate doll is carefully crafted and dressed and has books to describe her life.For example,Kristen is an 1854 pioneer girl who is growing up in Minnesota.Her story begins with her long sea voyage from Sweden.The basic doll dressed in a calico dress and striped apron and the hardcover story of how she got to Minnesota cost $90.Six more hardback books of Kristen's life are available for $80.Kristen's nightgown costs $20,and a matching one for the doll owner is an additional $40.Buy both together and the price is only $50.A hand-painted wooden bed and trunk for Kristen are available for $220.Shipping costs vary with the price of the merchandise ordered and are not connected to weight or distance.
-Refer to American Girl Catalogue.When a customer buys the matching nightgown set for the doll and her owner,what did American Girl use to price the items?

Accepted Answer

A) price bundling 
B) markdown pricing 
C) penetration pricing 
D) status quo pricing

Question 11

Functional discounts,noncumulative quantity discounts,and promotional allowances are examples of rebates given to the trade customer.

Accepted Answer

A) True 
 B)False

Question 12

The American Girl catalogue began as a concept to introduce girls who lived in the past to today's girls.Each historically accurate doll is carefully crafted and dressed and has books to describe her life.For example,Kristen is an 1854 pioneer girl who is growing up in Minnesota.Her story begins with her long sea voyage from Sweden.The basic doll dressed in a calico dress and striped apron and the hardcover story of how she got to Minnesota cost $90.Six more hardback books of Kristen's life are available for $80.Kristen's nightgown costs $20,and a matching one for the doll owner is an additional $40.Buy both together and the price is only $50.A hand-painted wooden bed and trunk for Kristen are available for $220.Shipping costs vary with the price of the merchandise ordered and are not connected to weight or distance.
-Refer to American Girl Catalogue.While a doll can be purchased at Walmart for less than $10,American Girl markets its dolls at a price much higher than the prices of its competitors.Which strategy does it most likely use?

Accepted Answer

A) price skimming 
B) psychographic pricing 
C) penetration 
D) status quo pricing

Question 13

The retail nursery is selling potting soil at a below-market price to lure customers into the store in hopes that while they are in the store to buy potting soil,they will also buy other gardening items that have a much higher markup.What is the retail nursery using?

Accepted Answer

A) price lowballing 
B) price maintenance 
C) price lining 
D) leader pricing

Question 14

What is the term for a price reduction that shifts the storage function forward to the purchaser and enables manufacturers to maintain steady production year-round?

Accepted Answer

A) functional allowance 
B) promotional allowance 
C) quantity discount 
D) seasonal discount

Question 15

A 16-ounce bottle of Prairie Herb vinegar sells for $4.95,and a 16-ounce bottle of Heinz vinegar costs $1.05.Prairie Herb vinegar is new to the market,perceived to be of higher quality,and provides a unique flavour to foods even though it is used in the same way as Heinz vinegar.Which type of policy is Prairie Herb vinegar most likely using?

Accepted Answer

A) penetration pricing 
B) status quo skimming 
C) price-skimming 
D) bundling cost pricing

Question 16

If a marketer decides to price goods at odd-numbered dollar amounts to denote bargains,and at even-numbered amounts to denote quality,what is he or she using?

Accepted Answer

A) two-part pricing 
B) deal pricing 
C) decoy pricing 
D) psychological pricing

Question 17

Geographically dispersed sellers often result in significant freight costs.Define four types of geographic pricing tactics that can be selected by a marketing manager to moderate the impact of freight costs on its more dispersed customers.For each tactic defined,specify the circumstances that would prompt the selection of that geographic pricing tactic.

Accepted Answer

The answer of Geographically dispersed sellers often result in significant...

Question 18

Why are quantity discounts most often used?

Accepted Answer

A) to reward the buyer who pays in cash 
B) to encourage large orders 
C) to increase supply for a specific raw material 
D) to shift the storage function backward to the supplier

Question 19

A national manufacturer of car parts has six warehouses and has a pricing policy of charging freight from the closest warehouse to the customer,regardless of where parts are shipped from.For instance,if the customer is in Vancouver,British Columbia,the closest warehouse to the customer is in Seattle,Washington.If the ordered car part actually comes from the Alabama warehouse,the customer still pays freight from Seattle.Which pricing does the manufacturer use?

Accepted Answer

A) FOB origin 
B) uniform delivered 
C) basing-point 
D) freight absorption

Question 20

Manufacturers know the approximate price level they can expect when establishing a product price.This approximate price is called the base price.

Accepted Answer

A) True 
 B)False

Exam 19: Setting the Right Price

Which strategy involves a firm charging a price identical to or very close to the competition's price?

Why do consumers sometimes prefer two-part pricing?

What is marketing two or more products in a single package for a special price known as?

Functional discounts are typically calculated as the wholesale price times the accumulated margin percentages.

Post makes several varieties of cereals.In promoting this product line,Post offers a 50-cents-off coupon that can be used to purchase any of its cereals.Therefore,what must Post consider when pricing its cereals?

When a channel intermediary is compensated for the ordinary services and tasks performed within the channel of distribution,the compensation usually comes in the form of a discount from base price.What is this discount called?

Functional discounts,noncumulative quantity discounts,and promotional allowances are examples of rebates given to the trade customer.

The retail nursery is selling potting soil at a below-market price to lure customers into the store in hopes that while they are in the store to buy potting soil,they will also buy other gardening items that have a much higher markup.What is the retail nursery using?

What is the term for a price reduction that shifts the storage function forward to the purchaser and enables manufacturers to maintain steady production year-round?

If a marketer decides to price goods at odd-numbered dollar amounts to denote bargains,and at even-numbered amounts to denote quality,what is he or she using?

Why are quantity discounts most often used?

Manufacturers know the approximate price level they can expect when establishing a product price.This approximate price is called the base price.