Deck 17: Pricing in Retailing

Question 1

The sensitivity of consumers to price changes is measured by the _____.

A)input-output coefficient
B)coefficient of substitution
C)law of demand
D)price elasticity of demand

Answer 1

D

Question 2

Price discrimination is allowable under the Robinson-Patman Act if _____.

A)price differences can be justified by differences in costs
B)large retailers exert bargaining power
C)large retailers threaten to produce their own brand
D)products have different brand designations

Answer 2

A

Question 3

Horizontal price fixing involves an agreement _____.

A)among manufacturers,among wholesalers,or among retailers to set certain prices
B)to charge larger retail firms lower prices
C)by retailers to charge manufacturer suggested list prices
D)by retailers not to sell merchandise below cost

Answer 3

A

Question 4

Government guidelines with regard to the advertising of retail prices are published by _____.

A)the Consumer Federation of America
B)the Consumer Affairs Department
C)the FTC
D)Consumer Reports

Question 5

The impact of vertical price fixing laws is to _____.

A)lower prices to final consumers
B)provide appropriate pricing information to consumers
C)protect small and full-service retailers from price-cutting by discounters
D)protect small retailers from unfair competition due to the bargaining power of large retail chains

Question 6

Competition between manufacturer and dealer brands may result in a retailer's _____.

A)practicing market skimming
B)utilizing market pricing
C)utilizing price lining
D)selling against the brand

Question 7

Retailers can be protected against price declines by _____.

A)one-price policies
B)price guarantees
C)unit pricing
D)minimum-price laws

Question 8

Big retailers attempt to destroy competition by selling goods and services at extremely low prices in _____.

A)price discrimination
B)predatory pricing
C)bait-and-switch advertising
D)selling against the brand

Question 9

Federal pricing legislation applies to _____.

A)intrastate commerce
B)interstate commerce
C)all commerce
D)interstate commerce for price discrimination only

Question 10

Manufacturers and wholesalers can legally control retail prices by _____.

A)limiting sales to intrastate commerce
B)owning their own retail facilities and through consignment selling
C)refusing to sell to price-cutting retailers
D)charging larger buyers lower prices

Question 11

The control of retail prices by manufacturers or wholesalers relates to _____.

A)price discrimination
B)vertical price fixing
C)horizontal price fixing
D)predatory pricing

Question 12

Which act prevents large retailers from using their bargaining power to receive price concessions not warranted by their sizable orders?

A)Miller-Tydings Act
B)Cellar-Kefauver Act
C)Federal Trade Commission Act
D)Robinson-Patman Act

Question 13

When the price elasticity of demand is elastic and prices go up,_____.

A)revenues stay the same
B)revenues decline
C)revenues increase
D)profits increase

Question 14

Minimum-price laws are intended to protect small retailers from _____.

A)price discrimination
B)the Robinson-Patman Act
C)predatory pricing by larger firms
D)item pricing removal

Question 15

When the price elasticity of demand is unitary and prices go up,total _____.

A)revenues stay the same
B)revenues increase
C)revenues decline
D)profits increase

Question 16

Item price removal is controversial since consumers _____.

A)cannot determine a product's ingredients
B)will have less price advertising
C)cannot choose generic brands
D)find it difficult to verify the prices of items purchased

Question 17

Unit pricing legislation is necessary because of _____.

A)computerization and the UPC
B)item price removal
C)the existence of many different-sized packages
D)price advertising

Question 18

A retailer has no intention of selling the advertised item in _____.

A)bait-and-switch advertising
B)item price removal
C)price discrimination
D)unit pricing

Question 19

Vertical price fixing strategies are _____.

A)illegal per se
B)subject to the rule of reason
C)subject to state legislation
D)confined to goods of "like quality"

Question 20

The degree of price elasticity is based upon _____.

A)urgency of need and availability of substitutes
B)shopping orientation and market size
C)size of economic shoppers and economic conditions
D)inflation and age of target market

Question 21

A version of customary pricing is _____.

A)variable pricing
B)everyday low pricing
C)direct product profitability
D)maintained markup pricing

Question 22

A retailer that sets prices for goods and services and seeks to maintain them over an extended time practices _____.

A)variable pricing
B)customary pricing
C)a one-price policy
D)price lining

Question 23

In which pricing technique does a retailer advertise and sell key items in the product assortment at less than their usual profit margins?

A)odd pricing
B)price lining
C)bait-and-switch advertising
D)leader pricing

Question 24

The price-quality association and prestige pricing are two aspects of _____.

A)competition-oriented pricing
B)cost-oriented pricing
C)psychological pricing
D)odd pricing

Question 25

While the _____ markup is based on the original retail value,the _____ markup is based on actual prices received for the merchandise.

A)initial;actual
B)initial;maintained
C)planned;actual
D)planned;maintained

Question 26

Total demand drops from 500 to 400 units when a retailer increases car wash prices from $3 to $4.Price elasticity of demand (expressed as a positive number)equals _____.

A)0.57
B)0.78
C)1.75
D)2.60

Question 27

A retailer able to develop a distinctive niche can utilize _____.

A)pricing at the market
B)unit pricing
C)pricing below the market
D)administered pricing

Question 28

Price elasticity is generally a negative number because _____.

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

Question 29

The difference between the initial markup and maintained markup is based on _____.

A)markdowns,added markups,shortages,and discounts
B)markdowns,shortages,and discounts
C)seasonality and style preferences
D)the need to match the prices of competitors

Question 30

A movie theater finds that when it reduces its prices,its total revenues drop significantly.Its price elasticity of demand is _____.

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

Question 31

A major advantage of a late markdown policy is that _____.

A)lower markdowns are required
B)selling space is freed for new merchandise
C)the retailer has an opportunity to sell more merchandise at the original price
D)a retailer's cash flow position is improved

Question 32

A sales maximization goal for a retailer is reflected in which pricing strategy?

A)market penetration pricing
B)administered pricing
C)pricing above the market
D)market skimming pricing

Question 33

When a movie theater increases its price from $6 to $7,its quantity demanded decreases from 600 to 400 seats.Its price elasticity of demand (expressed as a positive number)equals _____.

A)0.2
B)0.9
C)1.8
D)2.6

Question 34

The difference between merchandise costs and selling price is the retailer's _____.

A)markup
B)gross profit return on investment
C)net profit
D)markdown

Question 35

Goods priced at $.87,$1.95,and $99,990 illustrate _____.

A)leader pricing
B)odd pricing
C)flexible pricing
D)multiple-unit pricing

Question 36

A price floor is generally set through _____.

A)cost-oriented pricing
B)demand-oriented pricing
C)competition-oriented pricing
D)administered pricing

Question 37

Which shopping orientation has the highest price sensitivity?

A)status-oriented consumers
B)personalizing consumers
C)economic consumers
D)assortment-oriented consumers

Question 38

Which pricing strategy is proper when customers are highly sensitive to price,low prices discourage actual and potential competition,and total retail costs do not increase as much as sales volume increases?

A)early recovery of cash
B)market skimming
C)selling against the brand
D)market penetration

Question 39

The most widely practiced retail pricing technique is _____.

A)markup pricing
B)competition-oriented pricing
C)prestige pricing
D)demand-oriented pricing

Question 40

The use of a variable markup policy on a systematic basis is referred to as _____.

A)direct product profitability
B)administered pricing
C)pricing at the market
D)unit pricing

Question 41

The major difference between bait-and-switch advertising and "trading the customer up" to a more expensive substitute is that in bait-and-switch advertising,the lower-priced item is _____.

A)not intended to be sold
B)sold below cost
C)sold to reduce competition from other retailers
D)sold to reduce seasonal sales trends

Question 42

A retailer has the greatest control over retail price setting in a(n)_____.

A)price war
B)regulated pricing environment
C)administered pricing environment
D)market pricing environment

Question 43

A market skimming strategy should be used when consumer price elasticity of demand is _____.

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

Question 44

A computer retailer can purchase a discontinued notebook PC for $800 and wants to obtain a 25 percent markup at retail.What retail price should be charged?

A)$800
B)$960
C)$1,000
D)$1,067

Question 45

A 100 percent markup at cost equals what markup at retail?

A)20 percent
B)40 percent
C)50 percent
D)80 percent

Question 46

A jewelry store has been offered a special price on a line of pearls.These pearls cost $160 per strand and can retail at $360 per strand.What markup will the jeweler obtain?

A)41 percent
B)56 percent
C)140 percent
D)227 percent

Question 47

A market skimming strategy can be used in conjunction with _____.

A)administered pricing
B)market pricing
C)price wars
D)elastic demand

Question 48

Loss leaders are often used by retailers to _____.

A)generate store traffic
B)destroy competition by making small retailers go out of business
C)avoid Robinson-Patman Act prosecution
D)adhere to price advertising legislation

Question 49

If demand-oriented pricing specifies the maximum price consumers will pay for a good or service,then cost-oriented pricing sets _____.

A)prestige pricing
B)seasonal pricing
C)psychological pricing
D)the price floor

Question 50

The major difference between a true loss leader and bait-and-switch advertising is based on _____.

A)the legality of the strategy
B)whether sufficient customer traffic is generated
C)whether the good or service is sold in sufficient quantities
D)whether other retailers are injured

Question 51

A bicycle store desires a minimum 20 percent markup for all popular bicycle models.If a retailer feels that a popular bicycle model should retail at $200,what is the maximum price the retailer can pay for the bicycle model?

A)$60
B)$160
C)$167
D)$180

Question 52

Administered pricing utilizes nonprice competition components such as _____.

A)price guarantees and price lining
B)quantity and seasonal discounts
C)bargaining and buyer power
D)selection and location

Question 53

What types of goods are transshipped by other retailers?

A)generic brands
B)private brands
C)manufacturer brands
D)gray market goods

Question 54

A 60 percent markup at retail equals what markup at cost?

A)75 percent
B)150 percent
C)300 percent
D)400 percent

Question 55

Both loss leaders and leader pricing seek to _____.

A)maximize a retailer's return on investment
B)increase early recovery of cash for a retailer
C)reduce marginal competitors through aggressive pricing practices
D)increase store traffic and sales of regular markup merchandise

Question 56

A demand-related difficulty with a retailer utilizing loss leaders is that it affects _____.

A)variable markups
B)prestige pricing
C)legal provisions
D)price-floor pricing

Question 57

Retailers may defend their bait-and-switch advertising practices on the basis that _____.

A)they are legal
B)special purchases allow low prices
C)the prices offered are below cost
D)better,but more expensive,alternatives are available

Question 58

A manufacturer or wholesaler,in attempting to illegally enforce vertical price fixing,may _____.

A)conspire with other manufacturers to set retail prices
B)utilize fair trade protection
C)own its retail facilities
D)refuse to sell goods to price-cutting retailers

Question 59

At which price does the retailer maximize total sales revenue? Selling Price Quantity Demanded
(in $ ) (in units)
$5)00 12,000
$6)00 9,500
$7)00 8,700
$8)00 7,000

A)$5.00
B)$6.00
C)$7.00
D)$8.00

Question 60

The Robinson-Patman Act was developed to _____.

A)reduce the power of dealer branding
B)help provide honest advertising
C)curb the potential bargaining power of large retail chains
D)limit price competition among retailers

Question 61

A major advantage to the use of an everyday low pricing (EDLP)strategy to a retailer is its _____.

A)reduction of advertising and relabeling costs
B)generation of customer traffic that accompanies special sales events
C)ability to receive increased allowances from major suppliers
D)providing of special sales events to consumers to generate traffic

Question 62

A one-price policy does not allow _____.

A)markdowns and/or markups
B)employee discounts
C)quantity discounts
D)bargaining

Question 63

In bait-and-switch advertising,the retail advertiser has no intention of selling the advertised item at the advertised price.

Question 64

An item originally priced at $30 is reduced to $19.95.The off-retail markdown percentage is _____ percent.

A)25
B)34
C)66
D)75

Question 65

A market skimming strategy is most appropriate when customers are highly sensitive to price and when low prices discourage actual and potential competition.

Question 66

The Robinson-Patman Act seeks to prevent large retailers from using their bargaining power to receive unjustifiable cost savings.

Question 67

The opposite strategy to a variable pricing policy is _____.

A)a one-price policy
B)flexible pricing
C)price lining
D)customary pricing

Question 68

The major difference between an initial markup and a maintained markup is that the maintained markup reflects _____.

A)planned shortages
B)planned retail operating expenses
C)actual prices received and actual shortages
D)actual purchases

Question 69

A retailer selling goods with volatile prices,such as home computers,should seek to receive price guarantees from suppliers to protect itself against price declines.

Question 70

An item originally priced at $22 is raised to $25 based upon unanticipated demand.The addition to retail percentage is _____ percent.

A)10
B)12
C)14
D)16

Question 71

A store that operates on a one-price policy _____.

A)rarely changes its prices
B)does not have special discounts for its most loyal customers
C)uses the same pricing schedule for all customers
D)does not have quantity discounts

Question 72

A stationery retailer generally prices portable copiers using a 30 percent markup.The retailer expects to sell 125 portable copiers at the 30 percent markup.How many units would it have to sell at a 40 percent markup to maintain the same gross profit?

A)80
B)94
C)100
D)105

Question 73

Two aspects of psychological pricing are the price-quality association and prestige pricing.

Question 74

If total revenue decreases when prices decrease,the price elasticity of demand is elastic.

Question 75

The last point in the development of a price policy should be to develop objectives: market penetration or market skimming.

Question 76

In a market penetration strategy,goals are generally expressed in terms of sales and market share.

Question 77

A stationery retailer generally prices portable copiers using a 30 percent markup.The retailer expects to sell 125 portable copiers at the 30 percent markup.How many units would it have to sell at a 25 percent markup to maintain the same gross profit?

A)150
B)175
C)200
D)The answer cannot be determined from the information provided.

Question 78

It is currently illegal for manufacturers and wholesalers to control ultimate retail prices for their goods under any circumstances.

Question 79

An example of a staggered markdown policy is a(n)_____.

A)automatic markdown plan
B)price adjustment policy
C)late markdown policy
D)early markdown policy

Question 80

The need for unit pricing legislation is due to the existence of nonstandardized package sizes.