Question 1

A(n) ________ is an extra payment designed to gain reseller participation in special programs.

Accepted Answer

An allowance is an extra payment made to resellers to encourage their participation in special programs, such as promotional or training programs. Its aim is to motivate resellers to support the manufacturer's marketing efforts by increasing sales and improving product visibility. The other options are not relevant to this definition.

Question 2

Psychological discounting involves setting an artificially high price and then offering the product at substantial savings.

Accepted Answer

Psychological discounting is a pricing strategy where a product is initially priced higher than its market value, and then offered at a discount to make the consumer perceive they are getting a good deal.

Question 3

When supermarkets and department stores drop the price on well-known brands to stimulate store traffic, they are said to be following ________ pricing.

Accepted Answer

When supermarkets and department stores drop the price on well-known brands to stimulate store traffic, they are said to be following loss-leader pricing.

Question 4

Loss leader pricing dilutes a company's brand image.

Accepted Answer

Loss leader pricing involves selling a product at a very low price to attract customers, but this can potentially damage the brand image of the company as customers may perceive the quality of the product to be poor or question why the product's price was so high previously. As a result, the perception of the brand may be negatively affected.

Question 5

The airline and hospitality industries use ________, by which they offer discounted but limited early purchases, higher-priced late purchases, and the lowest rates on unsold inventory just before it expires.

Accepted Answer

The description matches the yield pricing strategy, which is commonly used in the airline and hospitality industries. It involves offering different prices based on the timing of purchase and the supply-demand situation. Special-customer pricing, cash rebates, location pricing, and customer-segment pricing are different pricing strategies that do not match the description given.

Question 6

In ________, the seller charges different amounts to different classes of buyers.

Accepted Answer

Third-degree price discrimination is when a seller charges different prices to different classes of buyers, based on factors such as their willingness to pay, demographics, or location. This type of price discrimination is legal and commonly used in industries such as transportation, where prices may be lower for senior citizens, students, or those traveling on weekends.

Question 7

In a compensation deal, the seller sells a plant, equipment, or technology to another country and agrees to accept as partial payment products manufactured with the supplied equipment.

Accepted Answer

The answer of In a compensation deal, the seller sells...

Question 8

When hotels drop their rates on the weekends, this form of price discrimination is known as ________ pricing.

Accepted Answer

Dropping prices on weekends is an example of time-based pricing, which is a type of price discrimination strategy. This is where the business adjusts pricing according to the time of day, day of the week, or season to maximize revenue.

Question 9

For price discrimination to work ________.

Accepted Answer

Price discrimination requires that it does not create significant customer resentment, as this could harm the company's reputation and customer relationships.

Question 10

In first-degree price discrimination, the seller charges less to buyers who purchase in larger volumes.

Accepted Answer

In first-degree price discrimination, the seller charges different prices based on each individual buyer's willingness to pay, not based on volume of purchase.

Question 11

In second-degree price discrimination, the seller charges ________.

Accepted Answer

In second-degree price discrimination, the seller charges less to buyers of larger volumes. This means that the seller is offering discounts for bulk purchases, which can help attract more customers and increase sales.

Question 12

________ refers to selling below cost with the intention of destroying competition.

Accepted Answer

Predatory pricing refers to selling products below cost with the intention of driving competitors out of the market. This creates barriers to entry for new competitors and allows the firm to establish a monopolistic or dominant market position in the long term. Bid rigging involves collusion among firms to manipulate the bidding process, price discrimination involves charging different prices to different consumers based on their willingness to pay, and price penetration involves setting low prices in order to gain market share in the short term. Loss-leader pricing involves intentionally offering a few products below cost in order to attract customers to purchase additional, more profitable products.

Question 13

________ reward dealers for participating in advertising and sales support programs.

Accepted Answer

Promotional allowances are incentives given to dealers for participating in advertising and sales support programs. These may include reimbursement for advertising expenses, free merchandise, or other promotional items. Functional discounts and rebates are usually given based on the quantity or volume of purchases made by the dealer. Trade discounts may be given as a standard reduction in price, and quantity discounts are based on the volume of purchases made by the dealer.

Question 14

In ________, the seller charges a separate price to each customer depending on the intensity of his or her demand.

Accepted Answer

First-degree price discrimination, also known as perfect price discrimination, occurs when a seller charges a different price for each unit sold or to each customer based on their willingness to pay. This approach aims to capture the maximum amount of consumer surplus for the seller by tailoring prices to the individual demand of each customer.

Question 15

When a movie theater charges a lower ticket fee for children and senior citizens, it is engaging in ________ pricing.

Accepted Answer

The pricing strategy of charging a lower ticket fee for children and senior citizens is an example of customer-segment pricing, as the theater is offering different prices to different segments of its customer base based on age.

Question 16

When hotels, motels, and airlines offer discounts in slow selling periods, they are said to be offering ________.

Accepted Answer

Seasonal discounts are offered during slow selling periods to attract customers and increase sales. Hotels, motels, and airlines often use this technique to fill vacant rooms/seats during off-seasons or weekdays. Trade discounts are offered to businesses in the same industry, quantity discounts are given on bulk purchases, functional discounts are given for payment methods, and trade-in allowances are given for exchanging an old product for a new one. Therefore, seasonal discounts are the most appropriate for this scenario.

Question 17

The prices of tickets to the opera vary depending on where the person would like to be seated - in the gallery or in the stalls. This is an example of ________ pricing.

Accepted Answer

Location pricing refers to varying prices based on where the product or service is located. In this case, the prices of tickets to the opera vary based on whether the person would like to be seated in the gallery or in the stalls. Therefore, this is an example of location pricing.

Question 18

When Coca-Cola carries a different price depending on whether the consumer purchases it in a fine restaurant, a fast-food restaurant, or a vending machine, then this form of price discrimination is known as ________ pricing.

Accepted Answer

Channel pricing involves setting different prices for the same product based on the distribution channel through which it is sold, such as a restaurant or vending machine.

Question 19

When museums charge a lower admission fee to students and senior citizens, this form of price discrimination is known as ________ pricing.

Accepted Answer

Customer-segment pricing involves charging different prices to different groups of customers based on their willingness to pay, demographics, or other characteristics. In this case, the museum is charging lower prices to students and senior citizens, who may have less disposable income than other visitors. This is a common example of customer-segment pricing in the cultural sector.

Question 20

Madame Tussaud's wax museum is a popular tourist attraction in London. The museum charges higher entry rates for tourists compared to locals. This form of price discrimination is known as ________ pricing.

Accepted Answer

Customer-segment pricing is when a company charges different prices to different groups of customers based on their willingness to pay. In this case, Madame Tussaud's is charging higher prices to tourists, who are likely willing to pay more for the experience than locals. This is a common form of price discrimination in the tourism industry.

Quiz 16: Developing Pricing Strategies and Programs