Question 1

The total expense incurred by a firm in producing and marketing a product,which equals the sum of fixed cost and variable cost,is referred to as

Accepted Answer

A) overhead cost. 
B) total cost. 
C) unit cost. 
D) average cost. 
E) marginal cost.

Question 2

Which of the following statements about consumer demand as a pricing constraint is MOST ACCURATE?

Accepted Answer

A) The number of potential buyers for the product class has little effect on the price a seller can charge. 
B) The number of potential buyers for the product affects the price a seller can charge,but only if the product is a luxury item. 
C) The number of potential buyers for the product affects the price a seller can charge,but only if the product is a necessity item. 
D) The number of potential buyers for the brand affects the price a seller can charge in the growth stage of a product life cycle,but not in the introductory stage. 
E) Whether the item is a luxury or a necessity affects the price a seller can charge.

Question 3

Many convenience stores now have mail slots where customers can pay their utility bills.The utility companies handle all the processing while the customers get the benefit of not having to use postage.The convenience store owner gets the advantage of the extra foot traffic.The mail slots are an example of

Accepted Answer

A) societal pricing. 
B) revenue sharing. 
C) value-pricing. 
D) barter. 
E) cost-pricing.

Question 4

Which of the following illustrates movement along the demand curve?

Accepted Answer

A) Prices remain the same,but there is a significant increase in demand. 
B) Prices remain the same,but there is a significant decrease in demand. 
C) As the price is raised,the quantity demanded increases,assuming all demand factors stay the same. 
D) As the price is lowered,the quantity demanded increases,assuming all demand factors stay the same. 
E) Movement along the curve indicates that some significant event has taken place outside the organization that has affected demand.

Question 5

All of the following statements about price are true EXCEPT:

Accepted Answer

A) Small changes in price can have big effects on both the number of units sold and company profit. 
B) The price for a product or service must earn a profit for the company. 
C) For most products and services,their prices are always the same. 
D) The price must be "right"-in the sense that customers must be willing to pay it. 
E) The price must generate enough sales dollars to pay for the cost of developing,producing,and marketing the product.

Question 6

The unit variable cost (UVC)equals variable cost (VC)divided by __________.

Accepted Answer

A) quantity (Q) 
B) fixed costs (F
C)  
C) total cost (T
C)  
D) total revenue (TR) 
E) price per unit of the product (P)

Question 7

What idea is described as a continuing,concise trade-off of incremental costs against incremental revenues?

Accepted Answer

A) break-even analysis 
B) marginal analysis 
C) demand analysis 
D) cost-benefit analysis 
E) situation analysis

Question 8

What factors determine price elasticity of demand?

Accepted Answer

The answer of What factors determine price elasticity of demand?...

Question 9

General Motors and Chrysler recently experienced financial distress resulting in near bankruptcies fundamentally because

Accepted Answer

A) the Asian markets such as China,India,and Japan entered the North American market and captured an even larger share. 
B) the value-pricing strategy used by the "big three" was flawed and North Americans' perceptions of value had changed. 
C) they were continually using deceptive pricing when establishing the manufacturer's suggested retail price for their vehicles. 
D) their costs got out of control,causing their total costs to exceed their total revenues. 
E) their product line was not changing with the times in order to meet changing environmental standards regarding fuel economy and emissions.

Question 10

Pricing constraints refer to

Accepted Answer

A) barriers that must be overcome in order to set pricing objectives. 
B) competitive pricing advantages one firm has over another. 
C) different pricing strategies for each of the firm's products. 
D) factors that limit the range of prices a firm may set. 
E) barriers to entry a firm faces when launching a new product.

Question 11

Forever Quilting is a small company that makes quilting kits priced at $120 each.There is no quantity discount.The costs of the materials that go into each kit total $45.It costs $5 in labor to assemble a kit.The company has monthly expenses of $1,000 for rent and insurance,$200 for heat and electricity,$500 for advertising,and $4,500 for the monthly salary of its owner.Last month the company sold 150 kits.Forever Quilting's total revenue for the month was

Accepted Answer

A) $4,300. 
B) $6,200. 
C) $7,500. 
D) $10,500. 
E) $18,000.

Question 12

List four key factors used to estimate demand.

Accepted Answer

The answer of List four key factors used to estimate...

Question 13

Three different objectives relate to a firm's profit,which is often measured in terms of return on investment.One objective,known as _________,occurs when a firm sets a profit goal,usually determined by its board of directors.

Accepted Answer

A) maximizing current profit 
B) managing for long-run profits 
C) target return 
D) breakeven strategy 
E) minimizing risk

Question 14

Suppose you are the owner of a picture frame store and you wish to calculate how many pictures you must sell to cover your fixed and variable costs at a given price.Let's assume that the demand for your pictures is strong,so the average price customers are willing to pay for each picture frame is $120.Also,suppose your fixed costs (FC)total $32,000 (real estate taxes,interest on a bank loan,etc. )and unit variable cost (UVC)for a picture frame is $40 (labor,glass,frame,and matting).What is the quantity of picture frames you will need to sell to break-even?

Accepted Answer

A) 200 picture frames 
B) 400 picture frames 
C) 800 picture frames 
D) 1,600 picture frames 
E) 2,000 picture frames

Question 15

The manufacturer of a new kind of fat-free ice cream that has the consistency and taste of regular ice cream is thinking of using a penetration pricing strategy for its new product.Which of the following conditions would argue AGAINST using a penetration pricing strategy for the tasty fat-free ice cream?

Accepted Answer

A) The ice cream market is highly elastic. 
B) A large portion of the market has inelastic demand for ice cream-over a fairly broad range of prices. 
C) Economies of scale in production would be substantial. 
D) Retailers are not willing to pay for new brands of premium ice cream in the already overcrowded category. 
E) Once the initial price is set,it is nearly impossible to lower the price without alienating early buyers.

Question 16

In Figure 13-10 above,which is a break-even chart that depicts a graphic presentation of a break-even analysis for a picture frame store,the area "GCD" represents the firm's

Accepted Answer

A) fixed costs 
B) break-even point 
C) variable costs 
D) profit 
E) total revenue

Question 17

Estimating demand,sales revenue,and price elasticity are issues that would be addressed during __________ of the price-setting process.

Accepted Answer

A) Step 1 
B) Step 2 
C) Step 3 
D) Step 4 
E) Step 5

Question 18

List the following competitive markets from LEAST competitive to MOST competitive.

Accepted Answer

A) monopolistic competition,pure monopoly,pure competition,and oligopoly 
B) pure competition,monopolistic competition,oligopoly,and pure monopoly 
C) pure competition,monopolistic competition,pure monopoly,and oligopoly 
D) monopolistic competition,pure monopoly,pure competition,and oligopoly. 
E) pure monopoly,oligopoly,monopolistic competition,and pure competition

Question 19

Washburn Guitars markets its guitars to four distinct market segments.The firm's mass customization instruments are targeted at

Accepted Answer

A) first-time buyers. 
B) professional musicians. 
C) stars and famous musicians. 
D) large institutional buyers such as band programs. 
E) intermediate-skill players who may become professional musicians.

Question 20

Which of the following statements regarding pricing constraints is MOST ACCURATE?

Accepted Answer

A) When a product is in the introductory stage of the product life cycle,there is very little latitude in setting the initial price since consumers still don't know what the product can really do. 
B) A company has more latitude in setting an initial price if the product is in the introductory stage of its life cycle. 
C) The greater the number of products in a company's product line,the less the product features of similar products can affect price. 
D) The newest addition to a company's product line should always have the highest price in order to maintain the value of existing brands. 
E) To avoid cannibalization,the newest product addition to a company's product line should never have a price lower than the other offerings in the line.

Exam 13: Building the Price Foundation