Question 1

Which of the following BEST describes prestige pricing?

Accepted Answer

A)  It is also called leader pricing. 
B)  It emphasizes the monetary nature of price. 
C)  It is the practice of marking up prices by 100 percent. 
D)  It uses high prices to promote a high-quality product.

Question 2

Price is often used as a promotional tool.

Accepted Answer

A) True 
 B)False

Question 3

Queeg Industries sells all types of artists' paint brushes.When the owner of Queeg learned that Patterson Art,one of its biggest competitors,had lowered its prices on all synthetic brushes by 5 percent,he did the same.This is an example of what type of pricing?

Accepted Answer

A)  status quo 
B)  cost-plus 
C)  market share 
D)  predatory

Question 4

The point at which marginal cost and marginal revenue are equal always results in which of the following?

Accepted Answer

A)  maximization of revenue 
B)  maximization of costs 
C)  maximization of profits 
D)  break-even equilibrium

Question 5

Consumers use price as an indicator of the quality of a product,especially when consumers have a substantial degree of knowledge about the product.

Accepted Answer

A) True 
 B)False

Question 6

The Fenton Company produces memorial bricks,which veterans' organizations,Chambers of Commerce,and other service organizations sell as fund raisers.The company has a target return on investment of 13 percent.This means that the Fenton Company has what type of pricing objective?

Accepted Answer

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

Question 7

Profit maximization is the most common pricing objective used by firms.

Accepted Answer

A) True 
 B)False

Question 8

Benito is the manager of a souvenir shop in Panama City,Florida.He has decided to graph the demand per week for fresh orange juice because its price varies as the supply of fresh oranges varies.The graph indicates a demand schedule that slopes downward and to the right.This graph indicates that the quantity of juice demanded increases as which of the following occurs?

Accepted Answer

A)  price decreases 
B)  cost increases 
C)  price increases 
D)  supply increases

Question 9

Amanti Lighting sells a lamp kit for making personalized lighting.The company sells each lamp kit for $22.The average variable cost for each lamp kit is $13,and the total annual fixed costs for plant operation is $78,300.What is the break-even point in units?

Accepted Answer

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

Question 10

Hostlight Industries operate a chain of moderately priced motels across Canada.The company has many businesses competing for tourist dollars,and some nights during the tourist season its motels are only half full.Other nights,Hostlight has to turn away guests because there are no vacancies.Assuming the quality of the room and the services provided by the motels remain the same,Hostlight Industries could use which of the following to fill unused rooms?

Accepted Answer

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

Question 11

If the formula for elasticity results in a measure of elasticity (E)greater than 1,demand is said to be inelastic.

Accepted Answer

A) True 
 B)False

Question 12

Chulo Ibsen makes and sells hand-forged wrought iron fireplace screens for $125 each.He has determined that his fixed costs are $8,000,and his variable costs per firescreen are $45.
-Refer to Fireplace Screens.What is his break-even point in dollars?

Accepted Answer

A)  $10,000 
B)  $8,000 
C)  $5,875 
D)  $12,500

Question 13

Consumers exhibit less price sensitivity for all of the following reasons EXCEPT which one?

Accepted Answer

A)  when the product they are buying is unique 
B)  when substitutes are hard to find 
C)  when the product in question is in high demand 
D)  when the total expenditure for a product is high relative to their income

Question 14

Which of the following is defined as the quantity of a product that will be sold at various prices for a specified period?

Accepted Answer

A)  demand 
B)  market share 
C)  supply 
D)  revenue

Question 15

Safeway will place well-known brands on the shelves at high prices while offering its own Safeway brand at lower prices.This practice is an example of which of the following?

Accepted Answer

A)  brand cutting 
B)  illegal pricing 
C)  price pressurization 
D)  selling against the brand

Question 16

What is the difference between fixed and variable costs? Give examples of each type of cost.

Accepted Answer

The answer of What is the difference between fixed and...

Question 17

Len knows little about atlases and does not want to spend the time to learn about them.However,he needs to buy an atlas to use in a school history project.Not wanting to make a poor choice,he is likely to do which of the following?

Accepted Answer

A)  buy the most expensive atlas (perhaps paying too much),guessing that the price is related to quality 
B)  buy the least expensive atlas because most consumers believe that price is not directly related to quality 
C)  avoid making a decision by not buying an atlas 
D)  research the product and buy the least expensive atlas

Question 18

What are the problems associated with the use of a cost-based pricing strategy? What contribution does cost make to the setting of prices?

Accepted Answer

The answer of What are the problems associated with the...

Question 19

In a discount store Lee found a "sun kit" containing a beach towel,a sun visor,and sun block.The items,which were sold together,retailed at $18.50,but were marked down to $12.99.The retailer sold one for $18.50 and six at $12.99.Demand for the sun kit package is which of the following?

Accepted Answer

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

Question 20

During the off-season,Parrish Farms,a bed-and-breakfast inn,offers a 25 percent reduction on its weekend rates to entice customers to make last-minute reservations at its website.This is an example of pricing strategy used as which of the following?

Accepted Answer

A)  a direct sales tool 
B)  a promotion strategy 
C)  a product strategy 
D)  an Internet enhancer

Exam 16: Pricing Concepts

Which of the following BEST describes prestige pricing?

Price is often used as a promotional tool.

Queeg Industries sells all types of artists' paint brushes.When the owner of Queeg learned that Patterson Art,one of its biggest competitors,had lowered its prices on all synthetic brushes by 5 percent,he did the same.This is an example of what type of pricing?

The point at which marginal cost and marginal revenue are equal always results in which of the following?

Consumers use price as an indicator of the quality of a product,especially when consumers have a substantial degree of knowledge about the product.

The Fenton Company produces memorial bricks,which veterans' organizations,Chambers of Commerce,and other service organizations sell as fund raisers.The company has a target return on investment of 13 percent.This means that the Fenton Company has what type of pricing objective?

Profit maximization is the most common pricing objective used by firms.

Amanti Lighting sells a lamp kit for making personalized lighting.The company sells each lamp kit for $22.The average variable cost for each lamp kit is $13,and the total annual fixed costs for plant operation is $78,300.What is the break-even point in units?

If the formula for elasticity results in a measure of elasticity (E)greater than 1,demand is said to be inelastic.

Chulo Ibsen makes and sells hand-forged wrought iron fireplace screens for $125 each.He has determined that his fixed costs are $8,000,and his variable costs per firescreen are $45. -Refer to Fireplace Screens.What is his break-even point in dollars?

Consumers exhibit less price sensitivity for all of the following reasons EXCEPT which one?

Which of the following is defined as the quantity of a product that will be sold at various prices for a specified period?

Safeway will place well-known brands on the shelves at high prices while offering its own Safeway brand at lower prices.This practice is an example of which of the following?

What is the difference between fixed and variable costs? Give examples of each type of cost.

Len knows little about atlases and does not want to spend the time to learn about them.However,he needs to buy an atlas to use in a school history project.Not wanting to make a poor choice,he is likely to do which of the following?

What are the problems associated with the use of a cost-based pricing strategy? What contribution does cost make to the setting of prices?

In a discount store Lee found a "sun kit" containing a beach towel,a sun visor,and sun block.The items,which were sold together,retailed at $18.50,but were marked down to $12.99.The retailer sold one for $18.50 and six at $12.99.Demand for the sun kit package is which of the following?

During the off-season,Parrish Farms,a bed-and-breakfast inn,offers a 25 percent reduction on its weekend rates to entice customers to make last-minute reservations at its website.This is an example of pricing strategy used as which of the following?