Deck 20: Considerations in Price Planning

Question 1

A good's value as judged by a seller and a buyer represents its

A) price.
B) rate of exchange.
C) fee.
D) purchase terms.

Answer 1

price.

Question 2

The words "admission fee," "service charge," "rent," "salary," and "retainer" are all substitutes for the term

A) rate of exchange.
B) purchase terms.
C) cost.
D) price.

Answer 2

price.

Question 3

What is the role of price in an open marketplace?

A) It reflects payment for tangible marketing factors.
B) It increases if there is an excess of supply over demand.
C) It decreases if there is an excess of demand over supply.
D) It allocates goods and services among potential buyers.

Answer 3

It allocates goods and services among potential buyers.

Question 4

When there are product shortages due to too low a supply, an equilibrium point will be reached if

A) consumer demand further expands.
B) consumers bid up prices.
C) sellers reduce prices.
D) competitors leave the market.

Question 5

When there are product surpluses due to too large a supply, an equilibrium point will be reached if

A) consumer demand further shrinks.
B) consumers bid up prices.
C) sellers reduce prices.
D) competitors enter the market.

Question 6

The growing importance of pricing decisions for marketing executives is most attributable to the

A) deregulation of communications, banking, and transportation industries.
B) minor role of price as a determinant of profit.
C) decreasing price-consciousness of the American public due to fears of recession.
D) U.S. trade surplus in international marketing.

Question 7

A strong U.S. dollar relative to foreign currencies means that foreign products cost

A) more in the United States, and U.S. products cost more abroad.
B) less in the United States, and U.S. products cost more abroad.
C) more in the United States, and U.S. products cost less abroad.
D) less in the United States, and U.S. products cost less abroad.

Question 8

A major difficulty with a firm's relying too heavily on a price-based strategy is that

A) consumers may not perceive its products as distinctive.
B) a large segment of the market may be price sensitive.
C) it is easy for competitors to copy price-based strategies.
D) it is almost certain to be involved in a major price war.

Question 9

With what pricing practice do sellers move along a demand curve?

A) Price competition
B) Nonprice competition
C) Unit pricing
D) UPC pricing

Question 10

A firm with distinctive goods and/or services is most likely to be involved with

A) subjective pricing.
B) price wars.
C) price competition.
D) nonprice competition.

Question 11

In nonprice competition, sellers

A) seek to shift the demand curves of consumers.
B) seek to shift their supply curves.
C) move along a demand curve.
D) reduce prices by being cost efficient.

Question 12

Compared to a price-oriented competitor, a nonprice-oriented firm will try to sell the same amount of goods or services at

A) list prices.
B) market prices.
C) higher prices.
D) odd prices.

Question 13

According to what concept do consumers usually purchase more units at a low price than at a high price?

A) The price elasticity of demand
B) The law of demand
C) Prestige pricing
D) The "price shopper" theory

Question 14

According to the law of demand, as prices increase, demand

A) stays the same.
B) decreases only if demand is elastic.
C) decreases only if demand is inelastic.
D) always decreases.

Question 15

The price sensitivity of buyers is measured by

A) the law of demand.
B) the price elasticity of demand.
C) subjective pricing.
D) vertical pricing.

Question 16

The percentage change in quantity demanded for each 1 percent change in price is calculated via the

A) price elasticity of demand.
B) price-competition concept.
C) unit-pricing concept.
D) law of demand.

Question 17

As prices are lowered, a firm's total revenues increase. This indicates that demand is

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

Question 18

Total revenue declines when prices are increased, but total revenue increases when prices are lowered with ___ demand.

A) unitary
B) elastic
C) inelastic
D) the law of

Question 19

Large reductions in price result in relatively low increases in quantity demanded when consumers have

A) little demand.
B) unitary demand.
C) inelastic demand.
D) elastic demand.

Question 20

A firm's price increase would actually lead to a rise in its total revenues when consumers have ___ demand

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

Question 21

The price elasticity of demand is based on the

A) number of sellers and the competitive environment.
B) number of consumers and the competitive environment.
C) availability of substitutes and the urgency of need.
D) availability of complements and the urgency of need.

Question 22

When the availability of substitutes is low and the urgency of need is high, the price elasticity of demand is

A) elastic.
B) inelastic.
C) unitary.
D) positive.

Question 23

According to which of these concepts is a consumer's perception of price more important than the actual price of a product?

A) Price lining
B) The law of demand
C) Subjective price
D) Price elasticity

Question 24

While some consumers may feel that a low price represents a good buy, others may feel that it represents low quality. This represents

A) price lining.
B) the law of demand.
C) subjective price.
D) price elasticity.

Question 25

Agreements among companies at the same stage in a channel to set prices constitute

A) vertical price fixing.
B) horizontal price fixing.
C) unfair-sales acts.
D) loss-leader pricing.

Question 26

Which statement concerning horizontal price fixing agreements is correct?

A) All horizontal price fixing agreements are legal.
B) All horizontal price fixing agreements are illegal.
C) Horizontal price fixing agreements are only considered illegal if the resulting price is deemed "unreasonable."
D) Horizontal price fixing agreements are only considered illegal if channel members are franchisees.

Question 27

Which of these actions regarding horizontal pricing is legally permissible?

A) A firm's independently planning to match a competitor's lower price
B) A firm's discussing trade discounts with competitors at a convention
C) A firm's exchanging price information with competitors
D) A firm's agreeing to rotate low bids on important federal government contracts with other companies

Question 28

When manufacturers or wholesalers seek to control the retail prices of their goods or services, they are involved with

A) vertical price fixing.
B) horizontal price fixing.
C) predatory pricing.
D) chain-markup pricing.

Question 29

Under fair trade laws,

A) merchandise could not be sold for less than its cost plus a minimum markup.
B) retail prices were kept artificially low so that a manufacturer could maximize its market share.
C) manufacturers or wholesalers were able to control the resale prices of their goods and services.
D) all retailers in the United States were required to charge the same price for the same manufacturer's goods.

Question 30

The interstate use of fair trade was terminated by the

A) McGuire Act.
B) Miller-Tydings Act.
C) Robinson-Patman Act.
D) Consumer Goods Pricing Act.

Question 31

"Fair trade" is synonymous with which of these terms?

A) Unit pricing
B) Horizontal price fixing
C) Resale price maintenance
D) Price discrimination

Question 32

Today, manufacturers and wholesalers may legally control final selling prices through

A) vertical price fixing.
B) horizontal price fixing.
C) refusing to sell to full-price retailers.
D) consignment selling.

Question 33

The Robinson-Patman Act was initially enacted to protect

A) small retailers from the unfair business practices of large manufacturers.
B) final consumers from horizontal price fixing by wholesalers.
C) final consumers from horizontal price fixing by retailers.
D) small retailers from unfair price competition by large chains.

Question 34

Price discounts are legal under the Robinson-Patman Act if

A) they are used to secure the business of large channel-member customers.
B) transactions involve interstate commerce.
C) each buyer purchases merchandise of "like quality."
D) noncompeting buyers are involved.

Question 35

A manufacturer or wholesaler can legally sell the same good to two competing retailers at different prices, providing that the

A) differences are due to quantity discounts.
B) price differences are due to differences in the costs of dealing with each retailer.
C) price differences are less than 25 percent.
D) retailers do not discuss their respective purchase prices with one another.

Question 36

Retailers are sometimes prevented from selling merchandise for less than their cost plus a fixed percentage that includes overhead and profit because of

A) unit-pricing legislation.
B) unfair-sales acts.
C) the Robinson-Patman Act.
D) price-guarantee legislation.

Question 37

Which of these laws prohibits large firms from cutting below their costs in selected geographic areas so as to eliminate small, local competitors?

A) Loss-leader pricing
B) Predatory pricing
C) Unit pricing
D) Selling against the brand

Question 38

Retailers that use loss leaders to draw consumers to their stores assume that these people will

A) not actually purchase the loss leaders because of disparaging salesperson comments about their quality.
B) develop store loyalty on the basis of their infrequent use of specials.
C) purchase other nonsale items on the same shopping trip.
D) limit their purchases so that the stores will not be out-of-stock.

Question 39

Unit pricing enables consumers to

A) compare prices that are attached to each item's label with the prices rung up at the cash register.
B) compare prices per quantity for different-sized containers.
C) decide whether dealer brands or manufacturer brands are better values in terms of price and quality comparisons.
D) determine price savings if they purchase advertised specials.

Question 40

Which of these practices is most in accordance with the Federal Trade Commission's advertising guidelines?

A) An advertised price reduction claim is made on the basis of the customary markup used by most firms in an industry.
B) An advertised price reduction claim is made on the basis of a 25 percent reduction from an item's normal selling price.
C) A firm continuously advertises a product as being on sale.
D) A firm notes in its ads that its prices on all advertised items are at least $5 lower than any comparable competitor.

Question 41

With which of these practices do firms have NO intention of selling an advertised item?

A) Bait-and-switch advertising
B) Selling against the brand
C) Loss-leader advertising
D) Predatory pricing

Question 42

A retailer can gain greater control over prices by

A) developing strong national brands.
B) pre-ticketing prices on merchandise.
C) allowing manufacturers to open their own retail stores.
D) developing strong private brands.

Question 43

In selling against the brand, channel members desire to

A) build market share for private brands at the expense of manufacturer brands.
B) increase the average quantity of goods bought by consumers.
C) generate sales at the expense of competitors.
D) sell gray market goods to compete against authorized dealers.

Question 44

Products imported into the United States by unauthorized distribution channels are called

A) black market goods.
B) gray market goods.
C) price matching goods.
D) free market goods.

Question 45

Wholesalers and retailers often seek price guarantees to

A) guard against class-action suits involving horizontal price fixing.
B) insure compliance with the Robinson-Patman Act.
C) insure that they have received the lowest possible prices.
D) comply with Federal Trade Commission advertising guidelines.

Question 46

Individual firms have the MOST degree of control over their prices charged in a ___ price environment.

A) company-controlled
B) market-controlled
C) government-controlled
D) deregulated-market

Question 47

The presence of differentiated products characterizes a ___ price environment.

A) market-controlled
B) company-controlled
C) government-controlled
D) self-regulated

Question 48

The price environment for public utilities, taxis, and buses is

A) competition-controlled.
B) market-controlled.
C) company-controlled.
D) government-controlled.

Question 49

When an industry becomes deregulated, the pricing environment shifts from ___-controlled to ___-controlled.

A) market, government
B) government, market
C) government, company
D) company, market

Question 50

Firms seek to continually undercut each other's prices to draw customers via

A) selling gray market goods.
B) selling against the brand.
C) price discrimination.
D) price wars.

Question 51

Which of these is NOT part of a price-based transaction?

A) A businessperson's leasing a new car for $499 per month
B) The U.S. Navy returning $500,000 worth of defective parts to a major supplier
C) A student's receiving a $1,000 trade-in towards the purchase of a new car
D) A retailer's receiving a 3 percent cash discount

Question 52

At the market-equilibrium price point,

A) price is established by a government agency.
B) the quantity demanded equals the supply provided.
C) there is a shortage of supply.
D) there is an excess of demand.

Question 53

As a product goes from the growth to the maturity stage of the product life cycle, its price should

A) decline to attract the mass market.
B) increase to cover increased promotion and distribution costs.
C) increase to attract status-conscious consumers.
D) remain the same as before.

Question 54

The Following Questions are linked to this scenario: A mail-order limited-line wholesaler is refining its overall pricing strategy.

-The wholesaler seeks to increase sales revenue via a price competition strategy. The firm should

A) increase delivery frequency to its most important customers.
B) reduce its wholesale prices.
C) focus on differentiating its products from competitors'.
D) become more efficient.

Question 55

The Following Questions are linked to this scenario: A mail-order limited-line wholesaler is refining its overall pricing strategy.

-The wholesaler emphasizes a 24-hour toll-free telephone technical service, pays for transportation both ways if defective parts must be returned, and will express ship parts, at its expense, if an item is out-of-stock. It plans to price its products at a 10 to 15 percent premium over its lowest-priced competitor. The firm practices

A) nonprice competition.
B) price competition.
C) subjective pricing.
D) market-equilibrium pricing.

Question 56

A firm is most likely to be concerned about a competitor's matching or beating its prices if that firm is involved with

A) nonprice competition.
B) price competition.
C) subjective pricing.
D) cost-based pricing.

Question 57

The success of a firm's nonprice strategy is mostly based on

A) the firm's long-term cost advantages relative to competitors.
B) how quickly competitors can match its prices.
C) how quickly competitors can start a price war.
D) consumer perceptions about the uniqueness of that firm's products.

Question 58

Price elasticity is usually a negative number because of

A) inelastic demand.
B) elastic demand.
C) unitary demand.
D) the law of demand.

Question 59

A product's price elasticity (expressed as a positive number) is 2.7. If there is a 10 percent increase in price, the quantity demanded will

A) increase by 2.7 percent.
B) increase by 27 percent.
C) decrease by 2.7 percent.
D) decrease by 27 percent.

Question 60

After increasing the price of ceiling fans from $60 to $75, a firm finds that its sales decline from 100 to 80 units. The product's price elasticity (expressed as a positive number) is

A) 0.11.
B) 0.20.
C) 1.00.
D) 1.11.

Question 61

A firm sold 100,000 pens at a price of $0.50 each. When it reduced its price to $0.40, 200,000 pens were sold. Its price elasticity (expressed as a positive number) is

A) 0.11.
B) 0.33.
C) 3.0.
D) 3.3.

Question 62

A firm's price elasticity (expressed as a positive number) for a major product is 0.3. If it reduces the product's price, total revenue will

A) increase by 30 percent.
B) increase by 70 percent.
C) decline by 30 percent.
D) decline by 70 percent.

Question 63

After reducing a route's average ticket price from $250 to $200, an airline's reservation system tracks an increase in passenger demand from 5,000 to 7,500. The price elasticity of the passengers is best described as

A) inelastic.
B) unitary.
C) elastic.
D) erratic.

Question 64

The demand for an emergency good can be classified as

A) elastic.
B) inelastic.
C) unitary.
D) derived.

Question 65

A firm computes the price elasticity of demand as 1.0 (expressed as a positive number). If its prices are increased by 35 percent, what will happen to total sales revenues?

A) They will fall by 3.5 percent.
B) They will fall by 35 per cent.
C) They will rise by 35 percent.
D) They will stay the same.

Question 66

A firm finds that its sales revenues are unchanged after it increased its prices by 25 percent. Its price elasticity of demand is considered to be

A) unitary.
B) elastic.
C) inelastic.
D) zero.

Question 67

A firm experiences a price elasticity of 0.3 (expressed as a positive number) as it drops a brand's price from a high to a medium price level. This price elasticity percentage suggests that the brand

A) is in a market dominated by price shoppers.
B) is in a market characterized by low brand loyalty.
C) has elastic demand.
D) has strong product differentiation.

Question 68

At very low prices, a firm cannot stimulate demand further because market saturation is reached and consumers begin to perceive quality to be inferior. Thus, the price elasticity of demand at these low price levels is

A) reversed.
B) unitary.
C) elastic.
D) inelastic.

Question 69

Which type of shopper has elastic demand?

A) Price shopper
B) Status seeker
C) Convenience shopper
D) Service/features shopper

Question 70

A firm using a strategy of nonprice competition should seek to attract which market segment?

A) Service/features shopper
B) Subjective price shopper
C) Price shopper
D) Price elastic shopper

Question 71

A study by AT&T found that many potential consumers do not use its long-distance services because they perceive rates to be too high. AT&T should

A) ignore this market segment.
B) reduce actual prices.
C) appeal to "price" shoppers.
D) change consumers' subjective prices regarding its services.

Question 72

Which statement about costs is NOT correct?

A) Silver and gold prices have been very volatile.
B) The costs of raw materials, supplies, labor, and transportation are frequently beyond the control of the firm.
C) The recent annual inflation rate has typically been 3 to 5 percent.
D) Since the early 1980s, overall price increases have been relatively high.

Question 73

Trade and professional associations generally do not allow their members to discuss prices, and will not distribute data on price changes, for fear of being involved in

A) unfair-sales acts.
B) horizontal price-fixing violations.
C) vertical price-fixing violations.
D) Robinson-Patman Act violations.

Question 74

A manufacturer wishes to legally control the final retail prices of its products, maintain the loyalty of small retailers, and retain its exclusive image. The manufacturer should consider

A) putting pressure on price-cutting retailers.
B) intensive distribution.
C) consignment selling.
D) not issuing suggested list prices.

Question 75

A manufacturer wants to strictly adhere to the Robinson-Patman Act. The firm should develop a policy of

A) telling its salespeople not to depart from published price lists.
B) encouraging bargaining with customers.
C) giving greater power to large retailers in negotiations.
D) selling goods to competing retailers at lower prices.

Question 76

A wholesaler wants to strictly adhere to the Robinson-Patman Act. The firm should develop a policy of

A) setting prices on the basis of detailed cost-accounting data.
B) not selling merchandise for less than its cost, plus overhead and profit allowances.
C) encouraging bargaining among its customers.
D) competing on the basis of discounts and terms, but not price.

Question 77

Which of these is NOT a legal exception to the Robinson-Patman Act for a manufacturer?

A) Only a few, very small, channel members are affected by a supplier's price discrimination practices.
B) Price differences are justified on the basis of a cost-accounting analysis.
C) Noncompeting buyers are involved.
D) Discounts are available to all channel members on a proportionate basis.

Question 78

Which of these involves only state-enacted legislation?

A) The Robinson-Patman Act and unfair-sales acts
B) The Consumer Goods Pricing Act and unit pricing
C) The Miller-Tydings Act and the Consumer Goods Pricing Act
D) Unfair-sales acts and unit pricing

Question 79

A company charges low prices (below cost) in geographic areas where competition is intense, and high prices in areas where competition has been eliminated. The firm is engaging in

A) predatory pricing.
B) loss leader pricing.
C) vertical price fixing.
D) subjective pricing.

Question 80

A retailer advertises a coffee maker at a below-cost price to attract customers and stimulate the purchase of nonsale merchandise. The firm is engaged in what pricing strategy?

A) Predatory
B) Bait-and-switch
C) Loss leader
D) Deceptive