Deck 9: Price the Product

Question 1

The value of something we give up in order to obtain something else is referred to as a(n)________.

A)transformation cost
B)opportunity cost
C)exchange
D)variable cost
E)marginal cost

Answer 1

B

Question 2

Which of the following occurs when price is inelastic?

A)Price and revenue change in the same direction.
B)Revenues decrease when price increases.
C)Revenue is unaffected by price changes.
D)Quantity demanded increases when price increases.
E)The demand curve is more horizontal.

Answer 2

A

Question 3

How is the price elasticity of demand calculated?

A)averaging previous demand levels with new demand levels
B)dividing percentage change in quantity demanded by percentage change in price
C)dividing the new quantity demanded by the percentage change in price times 100
D)multiplying the percentage change in quantity demanded by the percentage change in price
E)dividing the percentage change in price by the percentage change in quantity demanded

Answer 3

B

Question 4

Which of the following is a measure of the sensitivity of customers to changes in price?

A)a liquidity ratio
B)demand sensitivity
C)price elasticity of demand
D)marginal analysis
E)basing-point

Question 5

________ do not vary with the number of units produced.

A)Liquidity costs
B)Fixed costs
C)Variable costs
D)Marginal costs
E)Everyday costs

Question 6

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

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

Question 7

In price planning, a firm would be most likely to set a profit objective for which of the following products?

A)a commodity such as coal
B)toothpaste
C)a fad such as Beanie Babies
D)lightbulbs
E)construction materials

Question 8

Break-even analysis is used to examine the relationship between ________.

A)fixed costs and variable costs
B)costs and contributions
C)costs and price
D)demand and costs
E)demand and profits

Question 9

________ is the assignment of value, or the amount a consumer must give to receive a product.

A)Profit
B)Exchange
C)Price
D)Demand
E)Yield

Question 10

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 11

Why do marketers consider prestige products to be an exception to the law of demand?

A)The demand curve for prestige products slopes downward and to the right.
B)Increasing the price of prestige products can make them seem more desirable.
C)Demand for prestige products often is greater than supply.
D)Prestige products such as diamonds, sapphires, and emeralds are nonrenewable resources.
E)Customers are more aware of any price changes to prestige products.

Question 12

The changes in prices of other products affect the demand for an item.This is a phenomenon called ________.

A)cross-elasticity of demand
B)complementary elasticity
C)interdependent elasticity
D)parallel elasticity
E)variable demand

Question 13

What is the first step a marketer should take to estimate a product's potential sales?

A)determine maximum production levels
B)conduct a survey of buyers' intentions
C)estimate total demand for the product in the market
D)determine how to expand market share
E)predict the company's market share

Question 14

Which of the following statements about price is true?

A)Pricing is the least important marketing mix element.
B)Price is always a monetary value.
C)Price can mean exchange of nonmonetary goods or services.
D)Most consumers believe price has little influence on their purchase decisions.
E)Pricing is unaffected by changes in the business cycle.

Question 15

When demand is ________, increases in price result in increases in total revenues, while decreases in price result in decreases in total revenue.

A)elastic
B)inelastic
C)flexible
D)supply-driven
E)cross-elastic

Question 16

Which of the following is NOT a type of pricing objective?

A)elasticity
B)market share
C)profit
D)competitive effect
E)image enhancement

Question 17

Demand would most likely be inelastic for which of the following?

A)lamb chops and t-bone steaks
B)gourmet cheese
C)symphony tickets
D)luxury watches
E)basic necessities

Question 18

According to the law of demand, which of the following is true?

A)If prices decrease, customers will buy more.
B)Customers are not aware of small price changes.
C)The effect on demand from changes in price cannot be accurately predicted.
D)Demand equals supply.
E)If prices increase, customers will buy more.

Question 19

A company that intends to maintain low-end pricing policies to make the market unattractive for its competitors is using which of the following pricing objectives in its price planning?

A)sales
B)profit
C)break-even
D)competitive effect
E)customer satisfaction

Question 20

________ are the per-unit costs of production that will fluctuate depending on how many units or individual products a firm produces.

A)Fixed costs
B)Variable costs
C)Average fixed costs
D)Marginal costs
E)Everyday costs

Question 21

When setting prices, a company must consider factors in its pricing environment.________ such as the business cycle, economic growth, and consumer confidence can have a significant impact on the firm's pricing strategies.

A)Consumer trends
B)Economic trends
C)Competitors' responses
D)Regulations
E)Market structures

Question 22

A firm is using a(n)________ strategy when it introduces a product at a very low price to gain market share early on.

A)skimming pricing
B)trial pricing
C)intensive pricing
D)penetration pricing
E)price bundling

Question 23

Which of the following should be true for a skimming price to be successful?

A)Target consumers should be price sensitive.
B)Supply should exceed demand.
C)Demand must be stabilizing.
D)The producer should use intensive distribution.
E)There should be little chance that competitors can quickly enter the market.

Question 24

Which of the following is an example of a pricing strategy that focuses on customers' needs?

A)price leadership
B)everyday low pricing
C)distribution-based pricing
D)cost-plus pricing
E)skimming

Question 25

The most common cost-based approach to pricing is ________.

A)demand-based pricing
B)psychological pricing
C)yield management pricing
D)cost-plus pricing
E)cost-minus pricing

Question 26

In a market with ________, there are many sellers, each offering a slightly different product.Firms can differentiate products and focus on nonprice competition.

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

Question 27

In a market with ________, the market consists of many buyers and a few sellers who are likely to have similar pricing.

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

Question 28

In which type of pricing is the selling price based on an estimate of volume or quantity a firm can sell in different markets at different prices?

A)capacity management
B)target costing
C)demand-based
D)penetration
E)distribution-based

Question 29

The break-even point 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 30

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

A)target costing
B)value pricing
C)cost-plus pricing
D)break-even pricing
E)penetration pricing

Question 31

The method of setting prices in which marketers total all the costs for the product and then add an amount to arrive at the selling price is called ________.

A)supply-based pricing
B)target costing
C)cost-plus pricing
D)yield management pricing
E)demand-based pricing

Question 32

Which of the following is a reason that a marketer would choose a penetration pricing strategy?

A)to ensure the company has the ability to increase prices once demand decreases
B)to focus on the rapid achievement of profit objectives
C)to appeal to different consumer segments with different levels of price sensitivity
D)to create markets for highly technical products
E)to discourage competition from entering the market

Question 33

Which of the following statements about marginal analysis is true?

A)Marginal analysis is typically a straightforward procedure to apply in real-life situations.
B)An important factor in marginal analysis is predicting demand, which is an exact science.
C)Marginal revenue is also the demand curve, so it represents the amount customers will buy at different prices.
D)Profit is maximized at the point at which marginal cost is exactly equal to marginal revenue.
E)The cost of producing a unit beyond the point when marginal cost equals marginal revenue is much less than the revenue from the sale of that unit.

Question 34

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

A)It is used to determine how many more units need to be sold to increase market share by a specific amount.
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 contribution per unit costs and total fixed costs.

Question 35

A firm is using ________ when it charges a high, premium price for a new product with the intention of reducing the price in the future.

A)a skimming price
B)trial pricing
C)value pricing
D)penetration pricing
E)prestige pricing

Question 36

________ lets marketers look at cost and demand at the same time and identify the output and the price that will generate the maximum profit.

A)Break-even analysis
B)SWOT analysis
C)Marginal analysis
D)Competitive analysis
E)Supply-demand analysis

Question 37

With target costing, marketers first ________ and then ________.

A)build the marketing mix; identify the target market
B)identify target markets; set different prices for each market
C)design the product; determine its cost
D)use skimming pricing; use penetration pricing
E)determine a reasonable selling price; target costs to ensure that the price is met

Question 38

Two forms of demand-based pricing are ________.

A)price bundling and captive pricing
B)price skimming and penetration pricing
C)fixed pricing and variable pricing
D)target costing and yield management pricing
E)price leadership and everyday low pricing

Question 39

To determine the break-even point, a firm needs to first do which of the following?

A)determine what percentage of the market it wants
B)determine the point at which supply equals demand
C)calculate the contribution per unit
D)conduct an environmental audit
E)determine total market share

Question 40

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

A)the salaries of production management
B)competition
C)the salaries of finance management
D)overall pricing objectives
E)the company's overall marketing strategy

Question 41

Which of the following is a set price or price range in consumers' minds that they refer to in evaluating a product's price?

A)dynamic price
B)internal reference price
C)suggested retail price
D)captive price
E)value price

Question 42

________ is a pricing tactic a firm uses for two products that work only when used together.The firm sells one item at a very low price and then makes its profit on the second high-margin item.

A)Two-part pricing
B)Price bundling
C)Captive pricing
D)Penetration pricing
E)Skim pricing

Question 43

________ refers to the sale of two or more goods or services as a single package for one price.

A)Two-part pricing
B)Captive pricing
C)Price bundling
D)List pricing
E)Everyday low pricing

Question 44

With ________, the seller pays both the cost of loading and transporting the product to the customer.

A)uniform delivered pricing
B)basing-point pricing
C)F.O.B.origin pricing
D)F.O.B.delivered pricing
E)F.O.B.factory pricing

Question 45

In a(n)________, all of the buyers know the highest price bid at any point in time.

A)reverse auction
B)dynamic auction
C)open auction
D)reserve auction
E)price-lining auction

Question 46

Trade or functional discounts are offered by manufacturers to which of the following?

A)channel intermediaries who perform wholesaling tasks that the manufacturer would otherwise have to perform
B)consumers who earn a price reduction for buying in bulk
C)intermediaries who pay their bills before they are due
D)manufacturers that agree to exclusive distribution contracts
E)the government market and other organizations that require bid proposals

Question 47

The idea of externalities is the basis of ________.

A)dynamic pricing
B)e-commerce
C)freenomics
D)reserve pricing
E)price sensitivity

Question 48

A new product carries a low price for a limited period of time to attract customers in what type of pricing strategy?

A)price skimming
B)trial pricing
C)penetration pricing
D)specialty pricing
E)price bundling

Question 49

Which of the following allow shoppers to bid on everything from bobble heads to health-and-fitness equipment?

A)freenomics
B)shopbots
C)reverse auctions
D)online auctions
E)list prices

Question 50

Often consumers base their perception of price on what they perceive to be the customary or ________.

A)dynamic price
B)fair price
C)target price
D)list price
E)assimilated price

Question 51

When a company charges the same rate to ship a product anywhere in the United States, it is using which form of pricing?

A)freight absorption
B)F.O.B.factory
C)F.O.B.origin
D)uniform delivered
E)basing-point

Question 52

A list price is also referred to as a(n)________.

A)captive price
B)bundled price
C)channel price
D)suggested retail price
E)basing-point price

Question 53

Another name for F.O.B.factory pricing is ________ pricing.

A)captive
B)F.O.B destination
C)F.O.B.origin
D)F.O.B.delivered
E)basing-point

Question 54

Whether a firm sells to businesses or directly to consumers, most pricing structures are built around which of the following?

A)distribution costs
B)channel length
C)trade discounts
D)sales promotions
E)list prices

Question 55

Freenomics is a new business model based on pricing goods ________.

A)based on psychological factors
B)at zero or close to zero
C)using crowdsourcing
D)using odd-even pricing
E)using the price-placebo effect

Question 56

Which of the following is true about noncumulative quantity discounts?

A)They encourage large single orders.
B)They encourage a strong relationship between buyer and seller.
C)They are based on a total quantity purchased within a set time period.
D)They typically involve giving the buyer a credit to use against future orders.
E)They encourage small, regularly spaced orders.

Question 57

On the Internet, price can easily be adjusted to meet changes in the marketplace.This is called ________.

A)captive pricing
B)dynamic pricing
C)basing-point pricing
D)price bundling
E)freenomics

Question 58

A quantity discount is a price reduction to buyers who purchase ________.

A)frequently
B)large volumes
C)close outs
D)bundled products
E)seasonal products

Question 59

When a snow blower shop offers a price reduction to customers who buy during the spring and summer, the shop is giving a(n)________ discount.

A)functional
B)seasonal
C)annual
D)trade
E)allowance

Question 60

An illegal marketing practice in which an advertised price special is used as bait to get customers into the store with the intention of switching them to a higher-priced item is called_______________________.

A)Predatory Pricing
B)Bait and Switch
C)Loss Leader Pricing
D)Price Discrimination
E)Bid Rigging

Question 61

When Home Depot stores entered the Canadian market, there were already stores providing similar services and products.To get people to try the Home Depot stores, the chain deliberately sold merchandise below the price that the Canadians were used to.What type of pricing objective did Home Depot use?

A)market share
B)profit
C)competitive effect
D)customer satisfaction
E)image enhancement

Question 62

Competition Act on price-fixing requires that sellers set their prices ________.

A)based on their fixed and variable costs
B)without communication with competitors
C)to achieve a specified profit margin
D)consistently with all customers
E)consistently throughout a region

Question 63

Rough diamond seller De Beers, for example, currently faces a price fixing class action law suit that alleges that they have led a world-wide diamond cartel that has had anti-competitive impact on Canadian .This is an example of _________________.

A)Price Maintenance
B)Bait and Switch
C)Loss Leader Pricing
D)Price Discrimination
E)Bid Rigging

Question 64

Which of the following occurs when competitors making the same product jointly determine what price each will charge customers for the item?

A)horizontal price fixing
B)vertical price fixing
C)predatory pricing
D)internal reference pricing
E)assimilation pricing

Question 65

Which of the following occurs when manufacturers or wholesalers attempt to force retailers to charge a certain price for their products?

A)horizontal price fixing
B)vertical price fixing
C)predatory pricing
D)internal reference pricing
E)assimilation pricing

Question 66

Some retailers advertise items at very low prices or even below cost just to get customers into the store.The rationale for implementing this ________ strategy is the belief that once a customer is in the store she will buy the advertised item as well as other items at regular prices.

A)bait-and-switch
B)price lining
C)predatory pricing
D)loss leader pricing
E)dynamic pricing

Question 67

Which of the following is a pricing strategy that turns the typical assumption about price-demand relationships on its head?

A)penetration pricing
B)price bundling
C)assimilation effect pricing
D)placebo effect pricing
E)prestige pricing

Question 68

Sellers should know that the less elastic the demand for their product is, the more advantageous it is for them to ________.

A)drop the price
B)raise the price
C)maintain the price
D)discontinue the item
E)bundle the item with another product

Question 69

Price fixing occurs when two or more companies conspire to ________.

A)keep prices at a certain level
B)use predatory pricing
C)use loss-leader pricing
D)use bait-and-switch tactics
E)prohibit competitors from entering a market

Question 70

Enforcing laws against ________ is complicated because such practices are similar to the legal practice of "trading up."

A)price bundling
B)captive pricing
C)bait-and-switch tactics
D)prestige pricing
E)placebo effect pricing

Question 71

Many people rely on a prescription drug to control their cholesterol.An increase in the price of the drug would have little effect on the quantity demanded because there are no substitutes for the drug and because people who take it have no choice but to continue taking it if they wish to stay healthy.The demand for the cholesterol drug is ________.

A)elastic
B)inelastic
C)cross-elastic
D)supply-driven
E)asymmetrical

Question 72

Which unit of Industry Canada, is responsible for ensuring that Canadian businesses ( including foreign businesses that operate in Canada) adhere to federal laws that are designed to maintain and encourage fair competition.

A)Immigration Misnistry
B)Foreign Trade Department
C)Consumer Ministry
D)The Competition Bureau
E)Prime Minister's Office

Question 73

By using ________, a company deliberately sets a low price with the intention of driving its competition out of business.

A)price-fixing
B)price lining
C)contrast pricing
D)predatory pricing
E)loss leader pricing

Question 74

T he illegal practice of offering the same product of like quality and quantity to different business customers at different prices, thus lessening competition is called ______________________.

A)Predatory Pricing
B)Bait and Switch
C)Loss Leader Pricing
D)Price Discrimination
E)Bid Rigging

Question 75

A business using price lining is doing which of the following?

A)trying to avoid the use of psychological pricing, which may be negatively received by customers
B)trying to recoup its research and development costs for a new product
C)attempting to attain a large market share before any competitors can enter the marketplace
D)using price points to determine its pricing strategy
E)engaging in potentially unethical pricing

Question 76

When setting prices, a leading manufacturer of nutritional supplements decided to institute a pricing strategy that would support a five percent increase in sales over the next three years.What type of pricing objective has the company set?

A)profit
B)sales
C)competitive effect
D)cost-plus
E)value

Question 77

From a marketer's point of view, price lining is a way to do which of the following?

A)control supply
B)maximize profits
C)make the business more socially responsible
D)pass shipping costs on to consumers
E)eliminate price elasticity concerns

Question 78

The ______________________was recently amended to enable civil (as well as criminal) action to more quickly and effectively stop unfair, deceptive, or otherwise anti- competitive behaviour.

A)Consumer Packaging and Labelling Act
B)Competition Act
C)Textile Labelling Act
D)Precious Metals Marking Act
E)Grey Marketing Act

Question 79

Consumers usually perceive higher-priced products as ________.

A)out of reach for all but the wealthy
B)having high quality
C)having low profit margins
D)having cost-based prices
E)being in the introductory stage of the product life cycle

Question 80

When Joe's Coffee Nook raised the price of a latte, Joe noticed a substantial change in how many lattes he sold daily.A price reduction caused his sales to increase.From this information, you can assume the demand for lattes is ________.

A)static
B)supply-driven
C)asymmetrical
D)elastic
E)inelastic