Deck 18: Pricing for International Markets

Question 1

The international marketer must rely on experience and marketing research to determine middleman costs because no convenient source of data on middleman costs is available.

Answer 1

True

Question 2

Involving fewer middlemen in distribution means higher overall taxes.

Answer 2

False

Question 3

The possibility of a parallel market occurs when price differences are less than the cost of transportation between two markets.

Answer 3

False

Question 4

For countervailing duties to be invoked, it must be shown that prices are higher in the importing country than in the exporting country.

Question 5

Barter houses help countries negotiate prices for imports and exports and also provide facilities for cash payments and receipts.

Question 6

To restrict the gray market, companies must establish and monitor controls that effectively police sales channels.

Question 7

With deflation, consumers face ever-rising prices that eventually exclude many of them from the market.

Question 8

Gerard was concerned that he would not be able to get maintenance and servicing on equipment used in his overseas operation. Leasing the equipment would be the best option for Gerard.

Question 9

Deflation results in ever-decreasing prices, creating a positive result for consumers, but putting pressure on everyone in the supply chain to lower costs.

Question 10

Longer channels of distribution are more useful for keeping prices under control than shorter channels of distribution.

Question 11

Countertrading does not benefit countries that face a shortage of hard currencies with which to trade.

Question 12

Companies should use the full-cost pricing approach when it has high fixed costs relative to its variable costs.

Question 13

Eliminating costly functional features of a product or lowering overall product quality can reduce price escalation.

Question 14

A product sold in one country may be exported to another and undercut the prices charged in that country.

Question 15

In a free trade zone, payment of import duties is postponed until the product leaves the free trade zone and enters the country.

Question 16

In countries where large shares of the population are moving into middle-income classes, penetration pricing will depress market growth.

Question 17

Setting the right price for a product can be the key to success or failure in international markets.

Question 18

When the U.S. dollar strengthens, U.S. exports will decrease.

Question 19

Price escalation could lead to the sales of exported goods being confined to a limited segment of wealthy, price-insensitive customers.

Question 20

Companies that use pricing to achieve marketing objectives use pricing as a static element.

Question 21

What is most likely to be true of a company that views prices as an active instrument of accomplishing marketing objectives?

A) The company sets prices to achieve specific objectives.
B) The company follows market prices to achieve specific objectives.
C) The company exports only excess inventory.
D) The company views its export sales as an insignificant source of revenue.
E) The company places a low priority on foreign business.

Question 22

In ________ pricing, a firm is concerned only with the marginal or incremental cost of producing goods to be sold in overseas markets.

A) full-cost
B) fixed-cost
C) variable-cost
D) demand-based
E) premium

Question 23

Firms that are unfamiliar with overseas marketing and firms that produce industrial goods orient their pricing solely on the basis of

A) cultural differences in perceptions of pricing.
B) market segmentation from market to market.
C) the costs of production of the goods.
D) market segmentation from country to country.
E) competitive pricing in the market.

Question 24

Except for cash in advance, letters of credit afford the greatest degree of protection for the seller.

Question 25

An irrevocable, confirmed letter of credit means that a U.S. bank accepts responsibility to pay the seller regardless of the financial situation of the buyer or foreign bank.

Question 26

In general, price decisions are viewed in two ways: pricing as a static element in a business decision, and pricing

A) that depends on factors that are often beyond the control of a company.
B) as more a phenomenon of luck than planning.
C) as an active instrument of accomplishing marketing objectives.
D) that is determined by local sales managers.
E) that is static no matter the market.

Question 27

Domestic cartelization is legal in the United States.

Question 28

Cartels have the ability to maintain control of markets for indefinite periods.

Question 29

Administered pricing is an attempt to establish prices for an entire market.

Question 30

In bills of exchange, the buyer assumes all the risk until the payment is made.

Question 31

Gift Group Inc., an importing organization in New York, buys perfume from a company in France for $13 a unit. Unknown to the French company, Gift Group sells this product in the United States for $19 a unit. This leads to a loss of revenue for the French company as it also sells its perfume in the United States but for a higher price of $22. What concept does this demonstrate??

A) black-listed importing
B) indirect importing
C) circular importing
D) co-mingled importing
E) parallel importing

Question 32

Paul's oil delivery company was struggling to make ends meet, so it conspired with the other oil delivery companies in the area to set prices, allocate market territories, and redistribute profits. By controlling the market in this way, the companies created a cartel.

Question 33

Sales on open accounts are recommended when shipping is hazardous.

Question 34

The portion of international business handled on a cash-in-advance basis is not large and this is typically used when credit is doubtful.

Question 35

Letters of credit shift the buyer's credit risk to the bank issuing the letter of credit.

Question 36

What characterizes the variable-cost pricing approach?

A) Prices are often set on a cost-plus basis, that is, total costs plus a profit margin.
B) No unit of a similar product is different from any other unit in terms of cost.
C) Each unit must bear its full share of the total fixed and variable cost.
D) This approach is suitable when a company has high variable costs relative to its fixed costs.
E) Any contribution to fixed cost after variable costs are covered is profit to the company.

Question 37

Marianne's Chocolates sell well in the U.S. at a price of $24 per pound, and she has overproduced one kind of chocolate bar. Marianne has decided to see if she can sell them in Mexico, so she sets a price that is just over her cost. She figures if she makes even a little money, it would be worth it. Marianne is using ________ pricing.

A) full-cost
B) fixed-cost
C) variable-cost
D) demand-based
E) premium

Question 38

Assuming that an international marketer has produced the right product, used the proper channel of distribution, and promoted the goods correctly, the effort will fail if the international marketer fails to

A) inform the host government about all its marketing objectives.
B) set the right price for the goods or services.
C) set the import tariff for the goods or services.
D) form a joint venture in order to sell the product.
E) work on a franchise basis in the country.

Question 39

A company that views pricing as a static element in a business decision most probably

A) places a high priority on foreign business.
B) sets prices to achieve specific objectives such as targeted return on profit.
C) views export sales as active contributions to sales volume.
D) views domestic sales as an insignificant source of revenue.
E) places a low priority on foreign business.

Question 40

________ distribution, a practice often used by companies to maintain high retail margins to encourage retailers to maintain the exclusive-quality image of a product, can create a favorable condition for parallel importing.

A) Exclusive
B) Speculative
C) Intensive
D) Lateral
E) Dual

Question 41

A company uses ________ when the objective is to reach a segment of the market that is relatively price insensitive and thus willing to pay a premium price for the value received.

A) penetration pricing
B) everyday low pricing
C) predatory pricing
D) price skimming
E) psychological pricing

Question 42

When the value of the dollar is weak relative to the buyer's currency, sellers usually use ________ pricing.

A) competition-based
B) demand-based
C) premium
D) psychological
E) cost-plus

Question 43

Which approach to pricing is most suitable when a company has high variable costs relative to its fixed costs?

A) full-cost pricing
B) marginal-cost pricing
C) static-cost pricing
D) demand-based pricing
E) premium pricing

Question 44

What results from the added costs incurred as a result of exporting products from one country to another?

A) price deflation
B) penetration pricing
C) price escalation
D) price gouging
E) predatory pricing

Question 45

When a company exports a product from the United States to another country, the company is most likely to be unable to determine the ultimate price of a product if

A) the channels of distribution are short.
B) the number of middlemen in its distribution channels is low.
C) large orders are placed by retailers.
D) marketing and distribution channel infrastructures are well developed.
E) the middleman markups are not standardized.

Question 46

When the Indian rupee depreciated against the U.S. dollar, PC manufacturers who were dependent on imported components had to either absorb the increased cost or

A) raise the quantity of inputs they used in production.
B) give discounts to their customers.
C) increase the wages that they paid to labor.
D) increase the production of PCs.
E) raise the price of PCs.

Question 47

What is the most probable reason a manufacturer would choose to conduct its manufacturing operations in a third country?

A) to standardize middlemen margins
B) to reduce the credit risk of the seller
C) to increase the capital-labor ratio
D) to avoid antidumping duties
E) to reduce manufacturing costs

Question 48

Cosmeticon, a U.S.-based firm, has recently started exporting cosmetics to India. Cosmeticon has introduced a new range of mineral-based makeup products for the first time in the Indian market. As Cosmeticon has no competitors in this segment of the Indian cosmetics market, it has set a very high price for its products in order to reach the premium, price insensitive segment of the market. This is an example of

A) penetration pricing policy.
B) psychological pricing policy.
C) bundling.
D) price skimming.
E) cost-based pricing policy.

Question 49

A ________ policy is used to stimulate market and sales growth by deliberately offering products at low prices.

A) penetration pricing
B) variable-cost pricing
C) premium pricing
D) price skimming
E) full-cost pricing

Question 50

In a deflationary market, in order to win the trust of consumers, it is essential for a company to

A) engage in forfaiting agreements with consumers.
B) spend more on advertising and stall the production of products.
C) allow prices to escalate and target the price insensitive segment of the market.
D) keep prices low and raise brand value.
E) form a cartel to control the dynamics of the market.

Question 51

The creation of a free trade zone may lead to

A) a decline in exports.
B) an increase in taxes and duties levied on a product.
C) a reduction in the price escalation.
D) a decline in imports.
E) an increase in labor costs and overheads.

Question 52

By shipping unassembled goods to a free trade zone (FTZ) in an importing country, a marketer can typically lower costs because

A) labor costs are higher in the importing country.
B) the final prices of the goods are adjusted for inflation.
C) use of unassembled goods gives the marketer immunity from dumping penalties.
D) duties are typically assessed at lower rates for unassembled goods.
E) local content used in production is low.

Question 53

Lower prices to the buyer may also mean lower tariffs, because most tariffs are levied on a(n) ________ basis.

A) specific
B) alternative
C) accrual
D) shorter, lower
E) ad valorem

Question 54

What primary discriminatory tax must be taken into account in foreign competition?

A) transfer taxes
B) tariffs
C) tolls
D) excise taxes
E) inflation taxes

Question 55

________ pricing is a practical approach to use when a company has high fixed costs and unused production capacity.

A) Full-cost
B) Cost-plus
C) Marginal-cost
D) Demand-based
E) Premium

Question 56

________ duties are levied as a percentage of the value of the goods imported.

A) Specific
B) Protective
C) Prohibitive
D) Ad valorem
E) Compound

Question 57

If the supply of a product in a market is limited, a company may follow a ________ approach to maximize revenue and to match demand to supply.

A) penetration
B) psychological pricing
C) variable-cost pricing
D) predatory pricing
E) price skimming

Question 58

A(n) ________ duty is a flat charge per physical unit imported.

A) ad valorem
B) compound
C) prohibitive
D) alternative
E) specific

Question 59

Companies that use ________ pricing insist that no unit of a similar product is different from any other unit in terms of cost and that each unit must bear its full share of the total fixed and variable cost.

A) full-cost
B) fixed-cost
C) variable-cost
D) demand-based
E) premium

Question 60

In most cases, the reason products cost relatively little in one country and cost more in another is the

A) profiteering measures taken by exporting companies.
B) consistency in perception of quality in all countries.
C) inelastic demand of most consumer goods.
D) requirement that all export goods must use set skimmed price.
E) higher costs of exporting.

Question 61

In general, the end goal of all ________ activities is to reduce the impact of price competition or eliminate it.

A) reciprocal pricing
B) administered pricing
C) free trade
D) export-oriented trade
E) price skimming

Question 62

Dumping has been defined as the situation in which a product is sold in the international market

A) at a price below the cost of production.
B) only to the premium, price insensitive segment of the market.
C) where the demand for the product is lower than in the domestic market.
D) at a higher price than in the domestic market.
E) at the same price as in the domestic market.

Question 63

What is true of price quotations for international sale?

A) Price quotations can be made only if it is shown that prices are lower in the importing country than in the exporting country.
B) Price quotations must specify the currency to be used, credit terms of the transaction, and documents required.
C) The price quotation and contract should define only the quantity of goods and not necessarily the quality.
D) Price quotations must be quoted only in terms of electronic trade dollars.
E) Price quotations need to specify the transportation charges but need not necessarily state what type of documentation needs to be used.

Question 64

What would be considered an advantage of leasing equipment rather than owning it?

A) Lease revenue tends to fluctuate greatly.
B) Leased equipment rarely breaks down.
C) Leasing helps guarantee better maintenance on overseas equipment.
D) Leasing keeps companies from using experimental equipment.
E) Leasing is less risky than outright sale of equipment.

Question 65

What is the function of a countervailing duty?

A) balance revenues against costs
B) restrict the amount a country will import
C) increase revenues from parallel imports
D) increase the amount a country will export
E) permit the use of foreign currency within the country

Question 66

The use of countertrade in international trade

A) allows trade with countries short of hard currency.
B) reduces a firm's competitive advantage.
C) increases the tax liabilities of trading firms.
D) leads to a loss of revenue.
E) is considered unethical.

Question 67

A ________, which restricts the amount a country will import, may be imposed on foreign goods benefiting from subsidies, whether in production, export, or transportation.

A) trigger volume
B) trigger price
C) minimum access volume
D) market access opportunity
E) substantial cause

Question 68

A crucial problem confronting a seller in a countertrade negotiation is determining the ________ for the goods offered as payment.

A) delivery method
B) warranties
C) insurance premiums
D) potential demand
E) the cost

Question 69

For ________ duties to be levied on a product, it must be shown that prices are lower in the importing country than in the exporting country and that producers in the importing country are being directly harmed by the dumping of the product.

A) countertrade
B) domestic protection
C) countervailing
D) foreign practice
E) import restriction

Question 70

The costs of production may be lowered if a firm ships unassembled goods to a free trade zone (FTZ) in an importing country because

A) wages and other overheads may be higher in an FTZ.
B) locally produced components do not qualify for tariffs.
C) unassembled goods may qualify for lower freight rates.
D) the finished goods cannot be exported to other countries.
E) goods imported in an FTZ qualify for the same level of tariffs as other imported goods.

Question 71

OPEC is an example of a ________; it can control the price of oil by controlling the market.

A) cabal
B) monopoly
C) cartel
D) producers' association
E) competitive market

Question 72

Assembly in the importing country is a way companies attempt to lower prices and avoid dumping charges. These assembly plants are known as ________ plants.

A) antidumping
B) screwdriver
C) import-oriented
D) export-oriented
E) automated

Question 73

A ________ exists when various companies producing similar products or services work together to control markets for the types of goods and services they produce.

A) cabal
B) monopoly
C) cartel
D) producers' association
E) competitive market

Question 74

________ are the primary outside source of aid for companies affected by the uncertainty of a countertrade.

A) Trade unions
B) Barter houses
C) Industry associations
D) Swap centers
E) Satellite towns

Question 75

What is an example of a price-fixing arrangement most directly associated with international marketing?

A) price escalation
B) barter houses
C) letters of credit
D) cartels
E) countertrade

Question 76

A marketer may face lower costs by shipping unassembled goods to a free trade zone (FTZ) in an importing country because

A) locally produced components may not be used in production.
B) labor costs may be lower in the importing country.
C) FTZs levy higher taxes and surcharges on imported goods.
D) ocean transportation rates may not be affected by the weight and volume of the components.
E) duties may be assessed at a higher rate for unassembled goods.

Question 77

When Burger Boys an American fast-food company, wanted to market its burgers and fries in France, it was asked to import French mustard to the United States in return. This is an example of

A) bargaining.
B) countervailing duties.
C) buy-back.
D) countertrade.
E) bribery.

Question 78

An important selling technique to alleviate high prices and capital shortages for capital equipment is the ________ system.

A) leasing
B) antidumping
C) direct buy-back
D) consignment
E) rental

Question 79

What do barter houses do?

A) They specialize in trading goods acquired through barter arrangements.
B) They negotiate barter arrangements with countries that accept the U.S. currency as a countertrade.
C) They specialize in bartering with third countries for unused raw materials.
D) They direct bartered goods to the World Trade Organization for its approval.
E) They review disputes in barter arrangements at the request of the International Court of Justice.

Question 80

Dumping in the world markets is most likely to increase when

A) domestic production capacity is low.
B) demand in the home country is low.
C) demand in the foreign country is low.
D) foreign production capacity is high.
E) cost of production is low.