Question 1

An example of an objective set by a sales-oriented company is to institute a company-wide policy that all products must provide for at least an 18 percent profit margin to reach a particular profit goal for the firm.

Accepted Answer

A) True 
 B)False  False

Question 2

For which of the following is demand likely to be least sensitive to price increases?

Accepted Answer

A)   spring break vacations
B)   a specific brand of cereal
C)   prescription drugs
D)   theater tickets
E)   restaurant meals C

Question 3

The demand curve for prestige products generally slopes downward due to higher prices.

Accepted Answer

A) True 
 B)False  False

Question 4

When it comes to measuring consumers' price sensitivity,products are viewed as either

Accepted Answer

A)   elastic or inelastic.
B)   fixed or variable.
C)   complementary or substitutable.
D)   necessary or optional.
E)   dynamic or rigid.

Question 5

Naomi tells her sales representatives the goal is to generate at least a 20 percent return on investment for all of the industrial building supplies they sell.Naomi is using a _______ pricing strategy.

Accepted Answer

A)   sales orientation
B)   target profit
C)   target return
D)   status quo
E)   competitive parity

Question 6

One of the limitations associated with break-even analysis is that

Accepted Answer

A)   it assumes fixed costs are zero.
B)   it cannot adjust for high variable costs.
C)   it tells marketers only what price is needed to break even.
D)   it assumes that there is only one price.
E)   it assumes that demand is extremely inelastic.

Question 7

Managers of Wendy's fast-food restaurants keep track of prices at competitors such as McDonald's,Burger King,and Arby's,knowing that a decrease in the prices at these other fast-food restaurants will

Accepted Answer

A)   increase the income effect for Wendy's products.
B)   increase demand for Wendy's products.
C)   decrease the income effect for Wendy's products.
D)   increase the complementary effect for Wendy's products.
E)   decrease demand for Wendy's products.

Question 8

How is consumer behavior affected by the "income effect"?

Accepted Answer

The answer of How is consumer behavior affected by the...

Question 9

_______ products are products whose demands are positively related and as such,they rise or fall together.

Accepted Answer

A)   Substitute
B)   Premium
C)   Elastic
D)   Inelastic
E)   Complementary

Question 10

Predatory pricing

Accepted Answer

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

Question 11

Rarely is the lowest-price product offering the dominant brand in a given market.

Accepted Answer

A) True 
 B)False

Question 12

A study found that,among addicted smokers,a 10 percent increase in the price of cigarettes resulted in a 2 percent decrease in quantity demanded.For these consumers,cigarettes have a(n)_______ price elasticity demand.

Accepted Answer

A)   elastic
B)   inelastic
C)   cross-price
D)   income effect
E)   substitution effect

Question 13

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 14

Health clubs often use a low introductory offer price to get people to join their club.These low prices represent a _______ pricing strategy.

Accepted Answer

A)   maximizing profits
B)   target profit
C)   target return
D)   status quo
E)   sales orientation

Question 15

Most public colleges charge less than half the price of similar private colleges.How can each type of college be delivering value?

Accepted Answer

The answer of Most public colleges charge less than half...

Question 16

What five components should be taken into consideration when a company is developing its pricing objectives?

Accepted Answer

The answer of What five components should be taken into...

Question 17

Break-even analysis is useful because it allows managers to

Accepted Answer

A)   quantify the relationship between price elasticity and product elasticity.
B)   reposition products based on their break-even positioning revenue.
C)   estimate the quantity they will need to sell at a given price to break even.
D)   determine the relationship between price and quantity demanded.
E)   analyze the different elements contributing to their variable costs.

Question 18

The Coffee Express company is located in a business district with 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.

Question 19

When Ursula decides how to price new products in her gift store,she measures the value of her product offerings against those of the other stores in her area.Ursula uses a _______ pricing strategy.

Accepted Answer

A)   maximizing profits
B)   target profit
C)   target return
D)   competitor-oriented
E)   sales oriented

Question 20

Traditional demand curve economic theory is used by marketers to understand _______ in the five Cs of pricing.

Accepted Answer

A)   competitors
B)   channel members
C)   cost
D)   customers
E)   company objectives

Exam 14: Pricing Concepts for Establishing Value