Question 1

What is keystoning?

Accepted Answer

A)  the practice of maintaining variable costs at one-half of total fixed costs 
B)  a method used for determining the point of elasticity 
C)  a method of changing consumers' perceptions about price 
D)  the practice of marking up prices by 100 percent

Question 2

How does price interact with the other three Ps of the marketing mix?

Accepted Answer

The answer of How does price interact with the other...

Question 3

One of the most stressful and pressure-filled tasks of the marketing manager is attempting to set the right price.Specify three aspects of the current pricing environment in consumer markets that have contributed to the difficulty in setting correct prices.

Accepted Answer

The answer of One of the most stressful and pressure-filled...

Question 4

What is an organization using when it sets its prices so that total revenue is as large as possible relative to total costs?

Accepted Answer

A)  sales maximization 
B)  profit maximization 
C)  status quo pricing 
D)  market share pricing

Question 5

In a sluggish economy,consumers will buy even the most modest of products with the same discretion once shown only to big-ticket items,such as computers,air fares,and designer clothes.The result is 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.In the past,Procter & Gamble set prices on significant brands such as Pampers so that total revenue was as large as possible relative to total costs.What type of approach does this represent?

Accepted Answer

A)  demand-oriented pricing 
B)  sales maximization 
C)  profit maximization 
D)  market share pricing

Question 6

What is the most popular method used by wholesalers and retailers in establishing a sales price?

Accepted Answer

A)  formula pricing 
B)  markup pricing 
C)  break-even pricing 
D)  marginal revenue pricing

Question 7

Procter & Gamble dropped the price of Pringle Potato Chips due to price competition and consumer demand.As a result of the price reduction,Procter & Gamble increased unit sales and earnings by 10 percent due to which of the following?

Accepted Answer

A)  market share fluctuations 
B)  increases in both supply and demand 
C)  elasticity of demand 
D)  price wars with other snack food makers

Question 8

If demand for athletic shoes is elastic,consumers will not change their purchasing habits greatly when the price of athletic shoes changes.

Accepted Answer

A) True 
 B)False

Question 9

As long as the revenue of the last unit produced and sold is greater than the cost of the last unit produced and sold,what should a firm do?

Accepted Answer

A)  reach its break-even point very shortly 
B)  continue manufacturing 
C)  continue using price equilibrium 
D)  consider using sales maximization pricing

Question 10

Today's firms must develop specific,measurable,and attainable pricing objectives if they hope to survive in highly competitive markets.

Accepted Answer

A) True 
 B)False

Question 11

HeartGood Eggs decided to offer a much larger than customary profit margin to grocery wholesalers and retailers on its new low-cholesterol eggs.This pricing strategy is designed to do all of the following EXCEPT which one?

Accepted Answer

A)  develop wide and convenient distribution 
B)  encourage trial by consumers if priced low by retailers 
C)  maximize profit margin for the producer 
D)  give dealers an incentive to promote the new product

Question 12

The Canadian Girl catalogue began as a concept to introduce today's girls to girls who lived in the past.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 Manitoba.Her story begins with her long sea voyage from Iceland.The basic doll dressed in a calico dress and striped apron plus the hardcover story of how she got to Manitoba costs $90.Six more hardback books of Kristen's life are available for $74.95.Kristen's nightgown costs $20,and a matching one for the doll owner is an additional $38.Buy both together and the price is only $50.A hand-painted wooden bed and trunk for Kristen are available for $213.Shipping costs vary with the price of the merchandise ordered.
-Refer to Canadian Girl Doll.Canadian Girl is the primary seller of historically accurate dolls with accompanying books in a market where there is very little competition.It has no cash flow problems and is not interested in maximizing its sales.From this information,you should know Canadian Girl has what type of pricing objectives?

Accepted Answer

A)  sales-oriented 
B)  psychological 
C)  profit-oriented 
D)  supply derived

Question 13

A firm has maximized its profits when its marginal revenue equals its marginal cost.

Accepted Answer

A) True 
 B)False

Question 14

Dosta Mattress Company manufactures and sells mattresses to retailers that then put their own store brand names on the product.At a price of $1,000,it sold 100 mattresses.It dropped its price to $600 and sold 175 mattresses.Regarding elasticity,what is demand for the mattresses?

Accepted Answer

A)  unitary 
B)  inelastic 
C)  asymmetrical 
D)  elastic

Question 15

Yield management systems (YMS)were first used by Internet service providers..

Accepted Answer

A) True 
 B)False

Question 16

Marketing managers who attempt to raise the quality image of their product by selling it at high prices are following which type of strategy?

Accepted Answer

A)  prestige pricing 
B)  market share 
C)  profit maximization 
D)  investment asset

Question 17

At the end of February,the Hearts and Flowers store reduced the price on all of its Valentine's Day's candy by 50 percent in order to liquidate this inventory.What type of pricing strategy is being used in this example?

Accepted Answer

A)  target return on investment 
B)  satisfactory profit 
C)  sales maximization 
D)  profit maximization

Question 18

In the mid-1990s,WestJet chose to compete head-on with Air Canada by launching WestJetLite,an alternative low-fare commercial airline passenger operation.Top executives at WestJet had expected its no-frills operation to break even within a year of its inception,but the airline fell short of the goal.A source close to the company explained it by saying,"Its costs were too high,and its revenues were too low." Some observers criticized WestJetLite's marketing efforts.When the no-frills service was first launched,it lacked a distinct name or identity,missing its chance to make a splash.Then WestJet tried to sell three "brands" at once-Plush ,a new premium service,and its more traditional long-haul domestic flights.As one rival expressed it,"You cannot be all things to all people."
-Refer to WestJetLite.The statement that WestJetLite had problems because,"Its costs were too high,and its revenues were too low," suggests which of the following?

Accepted Answer

A)  The airline had no revenue left over after paying for airline activities. 
B)  The airline had no profit left over after paying for airline activities. 
C)  The airline had no returns left over after paying for airline activities. 
D)  The airline had no ROI left over after paying for airline activities.

Question 19

Markup pricing,adding an amount to cost to cover expenses and profit,is one of the most common pricing methods used by intermediaries to establish a selling price.

Accepted Answer

A) True 
 B)False

Question 20

In the mid-1990s,WestJet chose to compete head-on with Air Canada by launching WestJetLite,an alternative low-fare commercial airline passenger operation.Top executives at WestJet had expected its no-frills operation to break even within a year of its inception,but the airline fell short of the goal.A source close to the company explained it by saying,"Its costs were too high,and its revenues were too low." Some observers criticized WestJetLite's marketing efforts.When the no-frills service was first launched,it lacked a distinct name or identity,missing its chance to make a splash.Then WestJet tried to sell three "brands" at once-Plush ,a new premium service,and its more traditional long-haul domestic flights.As one rival expressed it,"You cannot be all things to all people."
-Refer to WestJetLite.WestJetLite's pricing objectives were based on gaining as much market share as possible from Air Canada.This suggests that WestJetLite had what type of pricing objectives?

Accepted Answer

A)  sales-oriented 
B)  need-oriented 
C)  cost-oriented 
D)  profit-oriented

Exam 16: Pricing Concepts

What is keystoning?

How does price interact with the other three Ps of the marketing mix?

One of the most stressful and pressure-filled tasks of the marketing manager is attempting to set the right price.Specify three aspects of the current pricing environment in consumer markets that have contributed to the difficulty in setting correct prices.

What is an organization using when it sets its prices so that total revenue is as large as possible relative to total costs?

What is the most popular method used by wholesalers and retailers in establishing a sales price?

Procter & Gamble dropped the price of Pringle Potato Chips due to price competition and consumer demand.As a result of the price reduction,Procter & Gamble increased unit sales and earnings by 10 percent due to which of the following?

If demand for athletic shoes is elastic,consumers will not change their purchasing habits greatly when the price of athletic shoes changes.

As long as the revenue of the last unit produced and sold is greater than the cost of the last unit produced and sold,what should a firm do?

Today's firms must develop specific,measurable,and attainable pricing objectives if they hope to survive in highly competitive markets.

HeartGood Eggs decided to offer a much larger than customary profit margin to grocery wholesalers and retailers on its new low-cholesterol eggs.This pricing strategy is designed to do all of the following EXCEPT which one?

A firm has maximized its profits when its marginal revenue equals its marginal cost.

Dosta Mattress Company manufactures and sells mattresses to retailers that then put their own store brand names on the product.At a price of $1,000,it sold 100 mattresses.It dropped its price to $600 and sold 175 mattresses.Regarding elasticity,what is demand for the mattresses?

Yield management systems (YMS)were first used by Internet service providers..

Marketing managers who attempt to raise the quality image of their product by selling it at high prices are following which type of strategy?

At the end of February,the Hearts and Flowers store reduced the price on all of its Valentine's Day's candy by 50 percent in order to liquidate this inventory.What type of pricing strategy is being used in this example?

Markup pricing,adding an amount to cost to cover expenses and profit,is one of the most common pricing methods used by intermediaries to establish a selling price.