Deck 10: Pricing Products: Understanding and Capturing Customer Value

Question 1

________ uses buyers' perceptions of what a product is worth,not the seller's cost,as the key to pricing.

A) Customer value-based pricing
B) Cost-based pricing
C) Variable cost
D) Price elasticity
E) Product image

Answer 1

Customer value-based pricing

Question 2

Consumer perceptions of the product's value set the ________ for prices.

A) demand curve
B) floor
C) ceiling
D) variable cost
E) image

Answer 2

ceiling

Question 3

________ is an important element in the marketing mix.It is the only element that does not represent costs.

A) Profit maximization
B) Market share leadership
C) Price
D) Product quality leadership
E) The target market

Answer 3

Price

Question 4

Measuring ________ can be difficult.A company might conduct surveys or experiments to test this in the different products it offers.

A) price elasticity
B) the demand curve
C) perceived value
D) break-even pricing
E) quantity supplied

Question 5

AirAsia offers flights at rock-bottom prices to many of its customers.It then charges for all extra services,such as baggage handling and in-flight refreshments.Which of the following best describes AirAsia's pricing method?

A) value-added pricing
B) good-value pricing
C) cost-plus pricing
D) high-low pricing
E) image pricing

Question 6

________ involves attaching features and services to differentiate a company's offers and to support charging higher prices.

A) Break-even pricing
B) Target pricing
C) Value-added pricing
D) Cost-plus pricing
E) Pricing-down

Question 7

When there is price competition,many companies adopt ________ rather than cutting prices to match competitors.

A) pricing power
B) value-added features
C) fixed costs
D) price elasticity
E) image pricing

Question 8

Product costs set a(n)________ to a product's price.

A) demand curve
B) floor
C) ceiling
D) break-even cost
E) experience curve

Question 9

Price is the only element in the marketing mix that produces ________.

A) revenue
B) variable costs
C) expenses
D) outfixed costs
E) stability

Question 10

Some companies have adopted a(n)________ strategy,offering just the right combination of quality and good service at a fair price.

A) value-based pricing
B) good-value pricing
C) cost-plus pricing
D) low-price image
E) elastic-pricing

Question 11

With ________,price is set to match customer's perceptions of product value.

A) variable cost pricing
B) cost-plus pricing
C) cost-based pricing
D) value-based pricing
E) everyday low pricing

Question 12

When McDonald's and other fast food restaurants offer "value menu" items at surprisingly low prices,they are using ________.

A) break-even pricing
B) target profit pricing
C) good-value pricing
D) cost-plus pricing
E) bundling

Question 13

In ________,price is considered along with the other marketing mix variables before the marketing program is set.

A) value-based pricing
B) cost-based pricing
C) variable costs
D) price elasticity
E) markup pricing

Question 14

________ is the amount of money charged for a product or service.

A) Value
B) A demand
C) Price
D) A wage
E) Salary

Question 15

Wal-mart is famous for using what important type of value pricing?

A) competition-based pricing
B) everyday low pricing
C) cost-plus pricing
D) break-even pricing
E) penetration pricing

Question 16

Which of the following is a customer-oriented approach to pricing?

A) Customer value-based pricing
B) Sealed-bid pricing
C) Break-even pricing
D) Target profit pricing
E) C and D

Question 17

Value-based pricing is the reverse process of ________.

A) variable cost pricing
B) cost-plus pricing
C) cost-based pricing
D) good-value pricing
E) value-added pricing

Question 18

________ involves charging a constant,everyday low price with few or no temporary price discounts.

A) High-low pricing
B) Target pricing
C) Cost-plus pricing
D) EDLP
E) Penetration pricing

Question 19

To offer everyday low prices,a company must first have __________________.

A) low rental
B) bulk pricing
C) variable pricing
D) everyday low costs
E) break-even pricing

Question 20

An important type of good-value pricing at the retail level is _________________.

A) everyday low pricing (EDLP)
B) best pricing
C) variable pricing
D) cost-plus pricing
E) break-even pricing

Question 21

SRAC is the acronym for which concept related to costs at different levels of production?

A) strategic reasoning and costs
B) short-run accounting costs
C) short-run average cost
D) strategic rights and company
E) strategic revenues and costs

Question 22

The LRAC is most closely related to which of the following?

A) long-term marketing plans
B) long-term business plans
C) the cost of producing a greater quantity of units
D) the cost of promoting a greater quantity of units
E) the legal responsibility of a company

Question 23

The simplest pricing method is ________.

A) value-based pricing
B) sealed-bid pricing
C) markup pricing
D) value-added pricing
E) target profit pricing

Question 24

________ are the sum of the ________ and ________ for any given level of production.

A) Fixed costs; variable; total costs
B) Fixed costs; total; variable costs
C) Variable costs; fixed; total costs
D) Total costs; fixed; variable costs
E) Break-even costs; fixed; total costs

Question 25

A company building its pricing strategy around the experience curve would be most likely to ________.

A) price its products low
B) price its products high
C) engage in break-even pricing
D) avoid cost-based pricing
E) engage in value-added pricing

Question 26

A company that wishes to build its pricing strategy around the experience curve would be likely to ________.

A) price its products low
B) price its products high
C) engage in break-even pricing
D) all of the above
E) None of the above.

Question 27

The learning curve is also referred to as the ________.

A) LRAC
B) experience curve
C) demand curve
D) break-even curve
E) price elasticity curve

Question 28

As production workers become better organized and more familiar with equipment,the average cost per unit decreases.This is called the ________.

A) demand curve
B) experience curve
C) short-run average cost curve
D) long-run average cost curve
E) marginal utility

Question 29

Costs that vary directly with the level of production are referred to as ________.

A) fixed costs
B) variable costs
C) target costs
D) total costs
E) unit costs

Question 30

One reason ________ remains popular is that sellers are more certain about costs than about demand.

A) markup pricing
B) skimming pricing
C) inelasticity pricing
D) elasticity pricing
E) penetration pricing

Question 31

When a downward-sloping experience curve exists,a company should usually ________ the selling price of that product in order to bring in higher revenues.

A) increase
B) greatly increase
C) decrease
D) not alter
E) level

Question 32

Fixed costs ________ as the number of units produced increases.

A) decrease
B) increase
C) divide in half
D) remain the same
E) increase at a diminishing rate

Question 33

The company designs what it considers to be a good product,totals the expenses of making the product,and sets a price that adds a standard markup to the cost of the product.This approach to pricing is called ________.

A) value-based pricing
B) fixed cost pricing
C) cost-plus pricing
D) variable pricing
E) skimming pricing

Question 34

________ pricing involves setting prices based on the costs for producing,distributing,and selling the product plus a fair rate of return for the company's efforts and risks.

A) Value-based
B) Fixed cost
C) Cost-based
D) Variable
E) Skimming

Question 35

With a higher volume of product,most companies can expect to ________.

A) gain economies of scale
B) become less efficient
C) see fixed costs increase
D) have a straight, horizontal learning curve
E) find competitors using the experience curve strategically

Question 36

Which of the following is a risk a company takes when building a strategy around the experience curve?

A) Competitors will likely not be able to meet the company's price cuts.
B) Existing technologies are likely to become more expensive as the company expands.
C) The method does not take competitors' prices into account.
D) The method may cause consumers to become frustrated with changing prices.
E) Aggressive pricing may give the product a cheap image, causing customers to lose interest.

Question 37

Which of the following is a reason why markup pricing is NOT practical?

A) Sellers earn a fair return on their investment.
B) By tying the price to cost, sellers simplify pricing.
C) When all firms in the industry use this pricing method, prices tend to be similar.
D) This method ignores demand.
E) With a standard markup, consumers know when they are being overcharged.

Question 38

Costs that do not vary with production or sales level are referred to as ________.

A) fixed costs
B) variable costs
C) target costs
D) total costs
E) unit costs

Question 39

Rent,interest,and executive salaries are examples of ________.

A) fixed costs
B) variable costs
C) accumulated costs
D) total costs
E) marketing costs

Question 40

Lawyers,accountants,and other professionals typically price by adding a standard markup for profit.This is known as ________.

A) variable costs
B) cost-plus pricing
C) value-based pricing
D) break-even price
E) penetration pricing

Question 41

AirAsia,Carrefour,and Dell,work to become the "low-cost producers" in their industries.They make use of _________________.

A) value-based pricing
B) going-rate pricing
C) cost-based pricing
D) good value pricing
E) A and C

Question 42

Under ________,the market consists of many buyers and sellers who trade over a range of prices rather than a single market price.

A) pure competition
B) monopolistic competition
C) oligopolistic competition
D) a pure monopoly
E) socialism

Question 43

Which of the following involves setting prices based on competitors' strategies,costs,prices,and market offerings?

A) target return pricing
B) good-value pricing
C) added-value pricing
D) market-based pricing
E) competition-based pricing

Question 44

Break-even pricing,or a variation called ________,is when the firm tries to determine the price at which it will break even or make the profit it is seeking.

A) competition-based pricing
B) target profit pricing
C) fixed cost pricing
D) value-based pricing
E) customer-based pricing

Question 45

Which of the following statements about break-even analysis is true?

A) It is used to determine how much production experience a company must have to achieve desired efficiencies.
B) It is a technique used to calculate fixed costs.
C) It determines the amount of retained earnings a company will have during an accounting period.
D) It is a technique marketers use to examine the relationship between supply and demand.
E) It is calculated using variable costs, the unit price, and fixed costs.

Question 46

In order to form a consistent and effective integrated marketing program,price decisions should be coordinated with each of the following EXCEPT ________.

A) product design
B) distribution
C) competitors' prices
D) promotion decisions
E) marketing objectives

Question 47

Price setting is usually determined by ________ in large companies.

A) top management
B) divisional managers
C) product line managers
D) pricing departments
E) both B and C

Question 48

The break-even volume is the point at which ________.

A) the total revenue and total costs lines intersect
B) demand equals supply
C) the production of one more unit will not increase profit
D) the company can pay all of its long-term debt
E) a firm's profit goal is reached

Question 49

Which of the following is an external factor that affects pricing decisions?

A) the salaries of production management
B) demand
C) the salaries of finance management
D) funds expensed to clean production equipment
E) A, B, and C

Question 50

In industrial markets,________ typically has the final say in setting the pricing objectives and policies of a company.

A) the sales manager
B) top management
C) the production manager
D) the finance manager
E) the sales staff

Question 51

Price setting is usually determined by ________ in small companies.

A) top management
B) marketing departments
C) sales departments
D) divisional managers
E) cross-functional teams

Question 52

A company that wants to emphasize its product's allure would most likely position its product on ________.

A) high prices
B) nonprice qualities
C) low prices
D) value prices
E) target costing

Question 53

As a manufacturer increases price,the ________ drops.

A) target
B) break-even volume
C) cost-plus pricing
D) total cost
E) profit margin

Question 54

Target profit pricing uses the concept of a(n)________,which shows the total cost and total revenue expected at different sales volume levels.

A) value-based chart
B) break-even chart
C) competition-based chart
D) demand curve
E) experience curve

Question 55

Price competition is minimized when all firms in an industry use which pricing method?

A) variable pricing
B) markup pricing
C) elasticity pricing
D) value-added pricing
E) value-based pricing

Question 56

With target costing,marketers will first ________ and then ________.

A) build the marketing mix; identify the target market
B) identify the marketing mix; determine product cost
C) design the product; determine its cost
D) use skimming pricing; penetrating pricing
E) determine a selling price; target costs to ensure that the price is met

Question 57

________ that influence pricing decisions include the nature of the market and other environmental factors.

A) Internal factors
B) Value factors
C) External factors
D) Target factors
E) Domestic factors

Question 58

In industries in which pricing is a key factor,________ often set the best prices or help others in setting them.

A) sales managers
B) salespeople
C) production managers
D) finance managers
E) pricing departments

Question 59

Under ________,the market consists of many buyers and sellers trading in a uniform commodity such as wheat,copper,or financial securities.

A) pure competition
B) monopolistic competition
C) oligopolistic competition
D) a pure monopoly
E) anti-trust agreements

Question 60

Many people feel that ________ pricing is fairer to both buyers and sellers.Sellers earn a fair return on their investment but do not take advantage of buyers when buyers' demand becomes great.

A) skimming
B) markup
C) elasticity
D) inelasticity
E) penetration

Question 61

Under ________,the market consists of one seller.

A) a pure monopoly
B) monopolistic competition
C) oligopolistic competition
D) pure competition
E) capitalism

Question 62

Trader Joe's offers an assortment of exclusive gourmet products at impossibly low prices.These prices are not limited-time offers or special discounts.Instead,they reflect Trader Joe's ________ strategy.

A) everyday low pricing
B) cost-plus pricing
C) dynamic pricing
D) value-based pricing
E) cost-based pricing

Question 63

Superior Tires has decided to decrease its prices.The company can expect that ________ for its product will increase.

A) cost-plus pricing
B) value-based pricing
C) demand
D) the experience curve
E) competition

Question 64

Buyers are less price sensitive in all of the following situations EXCEPT ________.

A) when the product they are buying is unique
B) when the product they are buying is high in quality
C) when substitute products are hard to find
D) when the total expenditure for a product is high relative to their income
E) when the product is exclusive

Question 65

The relationship between the price charged and the resulting demand level can be shown as the ________.

A) demand curve
B) variable cost
C) target cost
D) break-even pricing
E) experience curve

Question 66

If demand changes greatly with a small change in price,we say the demand is ________.

A) variable
B) inelastic
C) value-based
D) elastic
E) fixed

Question 67

Assume a manufacturer with fixed costs of $100,000,a variable cost of $10,and expected sales of 50,000 units wants to earn a 20 percent markup on sales.What is the manufacturer's markup price?

A) $14
B) $15
C) $18
D) $18.50
E) none of the above

Question 68

Xbox 360 decides to add a free subscription to XBOX magazine with every game bought in an effort to differentiate its offering from PS3 games.This is an example of ________.

A) good-value pricing
B) add-on pricing
C) product-support pricing
D) value-added pricing
E) cost-based pricing

Question 69

Firms are less affected by competitors' pricing strategies under ________ than under ________.

A) monopolistic competition; oligopolistic competition
B) pure competition; monopolistic competition
C) oligopolistic competition; pure competition
D) oligopolistic competition; monopolistic competition
E) pure competition; a pure monopoly

Question 70

In the aftermath of a recession,consumers may become ________.

A) more price-sensitive
B) less value-conscious
C) more interested in prestige pricing
D) less interested in price cutting
E) more loyal to prestigious products

Question 71

The long-run average cost curve (LRAC)helps the producer understand which of the following?

A) What the level of production should be in order to be most efficient
B) How to deal with competitors' prices
C) How to deal with external factors
D) How to price under conditions of inelastic demand
E) How to price under conditions of elastic demand

Question 72

________ describes how responsive demand will be to a change in price.

A) Price elasticity
B) Break-even pricing
C) The demand curve
D) Target costing
E) Supply

Question 73

Amos sells organically grown produce.Often he will trade some of his produce for dairy products produced by other farmers.The sum of the values exchanged for the produce is the ________.

A) price
B) cost-plus price
C) dynamic price
D) common value price
E) penetration price

Question 74

Dips in the economy and the instant price comparisons made possible by the Internet have both contributed to ________.

A) decreased consumer price sensitivity
B) increased consumer price sensitivity
C) a less direct relationship between supply and demand
D) a more direct relationship between supply and demand
E) decreased brand loyalty

Question 75

Price elasticity of demand is ________ divided by ________.

A) percent change in quantity demanded; percent change in price
B) demand; price
C) percent change in price; percent change in quantity demanded
D) the going price; the asking price
E) retail value; list price

Question 76

Which of the following is true about the demand curve?

A) It is used to illustrate the effect of price on the quantity supplied.
B) It is always graphically depicted by a straight line.
C) It shows the quantity of product customers will buy in a market during a period of time even if other factors change.
D) It usually slopes upward and to the right.
E) It shows the relationship between product demand and product price.

Question 77

If demand hardly changes with a small change in price,we say the demand is ________.

A) variable
B) inelastic
C) value-based
D) at break-even pricing
E) market penetrating

Question 78

When companies set prices,the government and social concerns are two ________ affecting pricing decisions.

A) external factors
B) internal factors
C) economic conditions
D) demand curves
E) temporary influences

Question 79

A company should set prices that will allow ________ to receive a fair profit.

A) resellers
B) producers
C) consumers
D) the market
E) competitors

Question 80

The less ________ the demand,the ________ it benefits the seller to raise the price.

A) focused; more
B) elastic; more
C) elastic; less
D) constant; more
E) concentrated; more