Deck 11: Pricing Decisions

Question 1

Domestic competition typically puts pressure on the prices of international companies.

Answer 1

False

Question 2

Price escalation is the increase in a product's price as transportation, duty, and distributor margins are added to the factory price.

Answer 2

True

Question 3

Gray market goods are trademarked products that are exported from one country to another, where they are sold by authorized persons or organizations.

Answer 3

False

Question 4

Exchange-rate clauses protect both buyers and sellers from unforeseen large swings in currencies.

Question 5

Changing pricing policies will lead to direct cost implications immediately.

Question 6

Compared to other pricing strategies, it's relatively hard to arrive at a selling price using the cost-plus pricing method, even if the accounting costs are readily available.

Question 7

In many parts of the world, external market information regarding demand is distorted.

Question 8

Companies need not maintain gross and operating profit margins under inflammatory conditions.

Question 9

A local government can require a prior cash deposit from importers before allowing goods into the country.

Question 10

The price of a product or service should ideally be higher than the demand for that product or service.

Question 11

Cost-plus pricing requires adding up all the costs required to get the product to where it must go, plus shipping and ancillary charges, and a profit percentage.

Question 12

An exchange-rate clause allows the buyer and seller to agree to supply and purchase at fixed prices in each company's national currency.

Question 13

The task of determining prices is simplified by exchange rate fluctuations.

Question 14

Companies in strong, competitive market positions pass on price increases to consumers leading to a significant decrease in sales volume.

Question 15

Companies typically avoid periodic price adjustments during inflation.

Question 16

The traditional method of cost-plus pricing estimates costs based on future forecasts.

Question 17

The United States does not subsidize any of its agricultural sectors.

Question 18

Pricing below cost can be profitable in the long term.

Question 19

Sourcing is a tool that can be used to fight price escalation.

Question 20

In practice, companies always fix the price of products in country target markets to avoid the impact of currency fluctuations.

Question 21

For a positive proof of dumping to occur in the United States, both price discrimination and injury must be demonstrated.

Question 22

Using a geocentric approach to international pricing, a company fixes a single price worldwide.

Question 23

________ is a global pricing strategy used by organizations when the domestic currency is strong.

A) Billing foreign customers in the domestic currency
B) Minimizing expenditures in local or host country currency
C) Shifting sourcing to domestic market
D) Stressing price benefits

Question 24

Under which of the following circumstances does an exchange-rate policy accept the foreign exchange market's effect on currency value?

A) if the exchange rate is greater than the maximum rate limit
B) if the exchange rate is within the agreed range of fluctuation
C) if the exchange rate fluctuation is lesser than a minimum rate
D) if the exchange rate fluctuation remains unpredictable

Question 25

Which of the following is a disadvantage of using the historical cost-plus approach to arrive at a selling price?

A) It does not include the shipping and ancillary charges as part of a product's cost.
B) It ignores demand and competitive conditions in the target markets.
C) It fails to address the indirect manufacturing costs that a company is likely to incur.
D) It cannot be used by companies that are new to exporting products.

Question 26

Which of the following is a basic factor that determines the boundaries within which market prices should be set?

A) market access
B) competition
C) service
D) export duties

Question 27

Companies that want to maintain their share in the market frequently adopt a ________ strategy.

A) market holding
B) market penetration
C) skimming
D) price escalation

Question 28

A polycentric pricing policy permits subsidiary managers to establish prices.

Question 29

Dumping in international trade is a market skimming strategy.

Question 30

Transfer prices cannot be determined by allowing an organization's affiliates to negotiate among themselves.

Question 31

Local income levels are critical for the pricing of consumer products.

Question 32

Gray markets are beneficial to buyers as they gain from lower prices and increased choices.

Question 33

Which of the following is a global pricing strategy used by organizations when the domestic currency is weak?

A) maximizing expenditures in host-country currency
B) billing foreign customers in the domestic currency
C) shifting sourcing to domestic market
D) improving productivity and engaging in cost reduction

Question 34

Pricing products at a loss for certain amount of time is characteristic of a ________ strategy.

A) penetration pricing
B) market holding
C) cost-plus pricing
D) market skimming

Question 35

Bailey, a luxury car brand, has manufacturing units located across the United States, from where it exports to several Asian countries. The rising costs and a strong home currency have forced the organization to rethink its strategic plans. Based on the market holding strategy, which of the following actions is the organization most likely to take to maintain its competitive advantage in the Asian countries?

A) sell the product at a loss for a certain amount of time
B) increase the price of its exported products
C) accept lower margins to maintain competitive advantage
D) shift manufacturing units to the target countries

Question 36

Which of the following is perceived from an experience curve?

A) Prices increase as total production volume is doubled.
B) Labor time does not impact an organization's overall costs.
C) Valued-added costs increase each time cumulative volume doubles.
D) Performing a task more often reduces the costs of doing it.

Question 37

A marketing strategy used to set deliberate high prices for new products is referred to as ________.

A) market holding
B) penetration pricing
C) market skimming
D) cost-plus pricing

Question 38

Cost-plus pricing is a variation to a market-based transfer pricing approach.

Question 39

Transfer pricing concerns transactions between buyers and sellers that have separate individual corporate parents.

Question 40

In the United States, gray market goods are subject to a 80-year-old law, the Tariff Act of 1930.

Question 41

Which of the following statements best defines parallel importing?

A) selling products at an undercut price than other legitimate importers
B) selling goods in the gray market at higher prices than the market rate
C) competing with authorized importers in the gray market
D) competing in a market by selling legitimately imported goods

Question 42

________ is referred as the exporting of products at a price that is lower than that charged in its home market.

A) Price escalation
B) Transfer pricing
C) Dumping
D) Competitive pricing

Question 43

The specific regulation of the U.S. government that governs the fair distribution of income is ________.

A) the Robinson-Pitman Act
B) the Sherman Antitrust Act
C) GATT
D) Section 482 of the tax code

Question 44

________ refers to the pricing of goods and services bought and sold by operating units or divisions of a single company.

A) Price escalation
B) Transfer pricing
C) Dumping
D) Competitive pricing

Question 45

Which of the following global pricing policies allows subsidiary or affiliate managers to establish whatever price they feel is most desirable in their circumstances?

A) adaptation
B) invention
C) extension
D) depreciation

Question 46

Explain transfer pricing. What are the three alternative approaches to determine a transfer price?

Question 47

Explain briefly about the ethnocentric global pricing policy.

Question 48

A company using a geocentric international pricing strategy typically fixes the long term price floor based on ________.

A) transfer prices within corporate systems
B) profits from local sourcing
C) market penetration pricing
D) return on invested capital

Question 49

Which of the following is an alternative approach to transfer pricing?

A) negotiated prices
B) sourcing
C) dumping
D) competitive pricing

Question 50

________ is defined as the prices that would have been charged in independent transactions between unrelated parties.

A) Predatory formula
B) Relative price
C) Nominal price
D) Arm's-length formula

Question 51

The main purpose of Section 482 of the United States Internal Revenue Code is to ________.

A) control corporate monopoly
B) lower prices in global markets
C) discourage dumping
D) regulate transfer pricing

Question 52

What are the three basic factors that determine the market price of a product?

Question 53

When a company neither fixes a single price worldwide nor remains aloof from subsidiary pricing, the strategy is referred to as ________.

A) adaptation
B) invention
C) extension
D) depreciation