Deck 14: Pricing and Negotiating for Value

Question 1

Cost and competition are the only two factors that have a serious impact upon price.

Answer 1

False

Question 2

In oligopolies,the differential advantages that every firm strives for tends to be permanent.

Answer 2

False

Question 3

When substitute products differ in size or quality,there is a likelihood that firms will utilize cost or input formulas for pricing.

Answer 3

True

Question 4

Products with unique benefits tend to be price elastic.

Question 5

In order to protect the image of its product and its right to make a profit,sellers are allowed to manage reseller prices directly.

Question 6

Traditionally,the "driver" product of a group of complementary products is priced low to penetrate the market and "set the table" for high margins on the follow-up business of parts,consumables or service.

Question 7

It is illegal to use market segmentation as a pricing tool.

Question 8

A supplier's functional discount is given to a purchaser based on the purchaser's role in the supplier's distributive system,reflecting the services performed by the purchaser for the supplier.

Question 9

In the negotiation process,the buyer essentially asks potential suppliers to "give us your best shot."

Question 10

Lower prices prompt suppliers to hire additional shifts,use overtime,adjust capacity by subcontracting or retooling and employ other measures to boost supply.

Question 11

Gross profits or unit margins at certain levels of the channel are expressed as percentages of that organization's unit price or net sales.

Question 12

Generally,the firm will earn its greatest profits at the price and quantity dictated by the intersection of total cost and total revenue.

Question 13

Open bidding recognizes the significant costs of bid preparation.

Question 14

A supplier is most likely to opt for a push strategy when channel partners must be relied upon for differentiation.

Question 15

An exclusivity agreement aims to curb interbrand competition.

Question 16

At break-even quantity,total revenue equals total cost.

Question 17

Monopolistic competition is characterized by a large number of differentiated sellers while oligopolies are characterized by just a few sellers.

Question 18

A product can provide value in business markets not only when its invoice price is lower than the competitor's,but also when its performance is superior.

Question 19

Under a pull strategy,advertising is focused on end users in hopes that their requests to outlets would cause them to,in turn,order the product from the chain member "above" them in the channel.

Question 20

As a result of learning and/or experience,costs tend to decline over time.

Question 21

A product providing unique benefits typically exhibits a(n)_____ demand curve.

A) Elastic
B) Neutral
C) Inelastic
D) Horizontal
E) Vertical

Question 22

The most distinctive characteristic of oligopolistic markets is:

A) Its advantage in customer service
B) The similarity of its products
C) Its complete product uniqueness
D) A high degree of price control
E) Its large number of small competitors

Question 23

These type of business markets are characterized by just a few sellers.

A) Monopsonistic competition
B) Monopolies
C) Purely competitive
D) Monopolistically competitive
E) Oligopolies

Question 24

At break-even quantity:

A) Total revenue equals marginal cost
B) Total revenue equals total cost
C) Marginal revenue equals total cost
D) Marginal revenue equals fixed cost
E) Total revenue equals variable cost

Question 25

This is the amount of money paid by a buyer to a seller for a particular product or service.

A) Bonus
B) Price
C) Profit
D) Income
E) Dividend

Question 26

In which of the following types of markets is the demand curve completely elastic?

A) Oligopoly
B) Monopoly
C) Pure competition
D) Monopolistic competition
E) Perfect competition

Question 27

The _____ price identifies the average revenue needed to cover costs,given a particular sales level.

A) Maximizing
B) Optimal
C) Target
D) Break-even
E) Market-clearing

Question 28

This price is theoretically set by the intersection of the supply and demand curves.

A) Profit-maximizing
B) Equilibrium
C) Sales maximizing
D) Minimum
E) Ideal

Question 29

_____ markets are populated by a large number of differentiated sellers.

A) Oligopolies
B) Monopolistically competitive
C) Purely monopolistic
D) Purely competitive
E) Perfectly competitive

Question 30

Price per unit is also called _____ revenue.

A) Average
B) Marginal
C) Profitable
D) Production
E) Cost

Question 31

Which of the following market models is least likely to be encountered in the real world?

A) Monopolistic competition
B) Oligopoly
C) Pure competition
D) Oligopsony
E) Monopsony

Question 32

Oligopolies are especially susceptible to:

A) Unique products
B) Rigid price control
C) Price wars
D) Large competition
E) Elastic demand

Question 33

This is the name frequently given to this task of evaluating the incremental volume needed to cover incremental costs or the incremental loss of average revenue in the instance of price cuts.

A) Profit analysis
B) Production analysis
C) Unit sales measure
D) Marginal analysis
E) Revenue analysis

Question 34

The _____ is a downward-sloping line that represents the tendency of firms to purchase increasing amounts of our product-or additional firms to make purchases-as price declines.

A) Demand function
B) Supply function
C) Jagged function
D) Channel function
E) Procurement function

Question 35

According to the economic theory,profit is maximized when the firm operates at that point at which:

A) Average revenue equals average cost
B) Total revenue equals total cost
C) Marginal revenue equals marginal cost
D) Average total cost equals marginal cost
E) Average fixed cost equals average variable cost

Question 36

The demand curve facing a product with lots of substitutes is likely to be:

A) Elastic
B) Vertical
C) Neutral
D) Inelastic
E) Non-elastic

Question 37

Firms in an oligopolistic market may strive for a differential advantage; however any advantage tends to net only narrow latitude for:

A) Superior customer service
B) Brand image
C) Price premium
D) Logistical excellence
E) Brand name

Question 38

At the _____ quantity,the firm realizes a sales level-at a specified price-at which total revenue equals total cost.

A) Break-even
B) Maximizing
C) Optimal
D) Market-clearing
E) Competitive

Question 39

Price is most unaffected by:

A) Demand factors
B) Cost and competitive factors
C) Strategy issues
D) Trade and legal factors
E) Cultural factors

Question 40

In monopolistic competition,firms making substantial profits tend to be emulated,this shrinks the once substantial profits,because when _____,there are no profits.

A) Marginal revenue equals average revenue
B) Average total cost equals average fixed cost
C) Average revenue equals marginal cost
D) Marginal revenue equals average total cost
E) Average revenue equals average total cost

Question 41

Single firms selling _____,usually price the "driver" product relatively low in order to penetrate the market and then make high margins on the follow-up business of parts,consumables or service

A) Homogenous products
B) Substitute products
C) Products used in combination
D) Undifferentiated products
E) Products that are unique

Question 42

Prices set by a seller and offered on a take-it-or-leave-it basis to prospective buyers are called:

A) Supplier prices
B) Seller prices
C) Constrained prices
D) Administered prices
E) Forced prices

Question 43

Derived demand is more likely to impact a single firm that markets:

A) Substitute products
B) Complementary products
C) Generic products
D) Fighting brands
E) All business products

Question 44

Which of the following is NOT a function of the pricing strategy?

A) Incorporating channel intermediary prices
B) Incorporating channel intermediary costs
C) Incorporating channel intermediary margins
D) Indirect management of channel prices
E) Direct management of reseller prices

Question 45

Sellers promise exclusivity in order to:

A) Restrain intrabrand competition
B) Restrain interbrand competition
C) Prevent competition from new resellers
D) Evade the Robinson Patman Act
E) Restrict customer choice

Question 46

_____ restrictions specify the site or sites from which the product may be sold.

A) Customer
B) Location
C) Selection
D) Customer
E) Exclusivity

Question 47

Push strategies emphasize all of the following EXCEPT:

A) Trade promotions
B) Healthy margins
C) Using promotions to differentiate the brand effectively among end users
D) Selling aids for the channel
E) Advertising intended primarily to support salesmen's claims

Question 48

A(n)_____ strategy emphasizes direct communication with end users to differentiate the product through the media.

A) Pull
B) Advertising
C) Channel
D) Distributor
E) Push

Question 49

The Robinson-Patman Act is the premier piece of federal legislation prohibiting:

A) Monopoly
B) Unions
C) Exclusive dealing
D) Price discrimination
E) Global pricing contracts

Question 50

When substitute products differ in size,the pricing task tends to be driven largely by:

A) Demand factors
B) Legal factors
C) Trade factors
D) Competitive factors
E) Cost factors

Question 51

Market _____ provides the most "natural" basis for price differentiation strategies.

A) Monopoly
B) Segmentation
C) Leadership
D) Domination
E) Share

Question 52

Channel margins:

A) Are monopolistically determined
B) Are tightly regulated by the FTC
C) Are typically expressed as a string of percentages
D) Are set by the Robinson Patman Act
E) Must be the same for all channel members

Question 53

Discounts intended to reflect services performed by a purchaser for the supplier are called:

A) Channel discounts
B) Functional discounts
C) Distributor discounts
D) Supplier discounts
E) Competitive discounts

Question 54

Highly effective advertising is more likely to:

A) Create a positive brand image
B) Reduce strong customer preferences
C) Lower price competition among resellers
D) Clearly integrate the product
E) Merge preferences and price competition

Question 55

When selling complementary products,it is traditional to price the most attractive or "_____" product,low and seek high margins on parts,consumables or services.

A) Dominant
B) Star
C) Driver
D) Cash cow
E) Premier

Question 56

Products that may replace others of the same or another producer are termed:

A) Complementary products
B) Product groups
C) Product mixes
D) Substitute products
E) Assortments

Question 57

Buyers may take a proactive role in making market forces work to satisfy organizational needs through:

A) Competitive bidding
B) Administered pricing
C) Channel pricing
D) Mark-up pricing
E) Constrained pricing

Question 58

Customer restrictions:

A) Are prohibited by the Robinson-Patman Act
B) Are implemented through exclusivity
C) Allow distributors to sell to other distributors
D) Specify the type of business the reseller may or may not serve
E) Limits distributors to only the firm's largest accounts

Question 59

The most important factor in deciding between a push or pull strategy is:

A) Cost
B) How customers in the segment process information
C) Keeping retail margins high
D) Channel control
E) The amount of profit a firm is making

Question 60

According to the Robinson-Patman Act,illegal price discrimination:

A) Results whenever the firm fails to maintain strict per unit prices in all markets
B) Occurs when different prices are charged for different products
C) Occurs when competition is adversely affected
D) Can only occur among firms that distribute products nationwide
E) Occurs when there are price differences based on quantity purchased

Question 61

If products can be differentiated via the media,a firm should follow a _____ strategy and allow reseller margins to erode.

A) Pull
B) Advertising
C) Channel
D) Distributor
E) Push

Question 62

What is price? What are its determinants?

Question 63

_____ involves two-way communication and problem solving to come to mutually agreeable terms.

A) Open bidding
B) Closed bidding
C) Negotiation
D) A global contract
E) Administrated pricing

Question 64

Accommodation is:

A) Sacrifice to build or sustain a relationship
B) The right course when it is critical to win a deal
C) A common course when the party doesn't really need the deal or the partner
D) Joint problem solving, searching for creative win-win solutions
E) A hybrid of competition and avoidance

Question 65

_____ format reflects the buyer's ability to identify capable suppliers and also recognizes the significant costs of bid preparation.

A) Open bidding
B) Closed bidding
C) Negotiation
D) Collusive bidding
E) Job bidding

Question 66

In this negotiation strategy,success is determined by minimizing or avoiding conflict and soothing all hostility; own feelings are ignored in favor of harmony.

A) Competitive negotiation
B) Collaborative negotiation
C) Accommodative negotiation
D) Distributive bargaining
E) Integrative negotiation

Question 67

The key attitude of integrative negotiation is:

A) "What's the best way that I can profit from this deal?"
B) "Gain or loss does not really matter"
C) "You win, I lose"
D) "I win, you lose"
E) "What's the best way to address the needs of all parties?"

Question 68

This strategy is common when the party doesn't really need the deal or the partner.

A) Avoidance
B) Accommodation
C) Compromise
D) Collaboration
E) Negotiation

Question 69

Which of the following is a joint problem solving strategy,searching for creative win-win solutions?

A) Avoidance
B) Accommodation
C) Collaboration
D) Competitive negotiation
E) Compromise

Question 70

The primary motivation in distributive bargaining is:

A) Maximize own outcome
B) Maximize joint outcome
C) "You win, I lose"
D) Maximize others' outcome
E) Let others gain

Question 71

Negotiation strategy is best determined by the importance of the:

A) Break-even analysis and pro forma income statements
B) Income statements as well as break-even and marginal analysis
C) Outcome and the exchange relationship
D) Channel margins and margin analysis
E) Production flow and channel coordination

Question 72

Which of the following features the solicitation of proposals from an exclusive set of potential suppliers?

A) Negotiation
B) Segment bidding
C) Competition bidding
D) Closed bidding
E) Profit maximization

Question 73

Explain oligopolies using the economic model?

Question 74

Business marketers cannot approach every business bargaining situation in the same way.How can successful negotiation strategies be implemented in ever changing market situation?

Question 75

Competitive negotiation,which has a winner and loser:

A) Gives little regard to the prospects for subsequent exchange with the party
B) Is joint problem solving
C) Is an easy solution, bringing a premature end to the negotiations
D) Is a common course when the party doesn't really need the deal or the partner
E) Always creates win-win situations

Question 76

Parties know and convey real needs while seeking and responding to needs of the other in this type of negotiation.

A) Competitive negotiation
B) Team negotiation
C) Accommodative negotiation
D) Distributive bargaining
E) Integrative negotiation

Question 77

This type of negotiation is characterized by secrecy and defensiveness; high trust in self and low trust in others.

A) Cooperative negotiation
B) Collaborative negotiation
C) Accommodative negotiation
D) Distributive bargaining
E) Integrative negotiation

Question 78

A compromise strategy is:

A) Sacrifice to build or sustain a relationship
B) A hybrid of competition and accommodation
C) Joint problem solving, searching for creative win-win solutions
D) A common course when the party doesn't really need the deal or the partner
E) The right course when it is critical to win a deal

Question 79

Write a short note on monopolistic competition relating it to the profit maximization model?

Question 80

Compare and contrast "pull" and "push" strategies?