Question 1

If demand changes greatly with price,we say the demand is inelastic.

Accepted Answer

If demand changes greatly with price, we say the demand is elastic, not inelastic. Inelastic demand refers to a situation where changes in price have little or no effect on the quantity of goods or services demanded.

Question 2

EDLP is very similar to high- low pricing.

Accepted Answer

EDLP (Everyday Low Pricing) focuses on consistent low pricing without frequent sales or discounts, whereas high-low pricing involves offering high prices initially and then offering discounts or sales later on.

Question 3

Value- based pricing is being used when costs vary directly with the level of product.

Accepted Answer

Value-based pricing is based on the perceived value of the product or service to the customer, not the cost of producing it. Costs may or may not vary directly with the level of the product.

Question 4

Monopolies charge the full price because they do not fear attracting competition or regulation.

Accepted Answer

Monopolies may not charge the full price due to potential regulation, consumer backlash, or the threat of future competition, even if they currently face no direct competitors.

Question 5

Overhead cost is another term for fixed cost.

Accepted Answer

Overhead cost refers to fixed costs that a business incurs regardless of the level of production or sales.

Question 6

Target return pricing is used when a firm tries to determine the price at which it will break even or make the profit it is seeking.

Accepted Answer

Target return pricing aims to determine the price at which a firm can achieve a desired return on investment, whether by breaking even or making a profit.

Question 7

An upward- sloping experience curve is beneficial for a company.

Accepted Answer

An upward-sloping experience curve indicates increasing costs with more production, which is not beneficial for a company as it suggests inefficiencies or lack of learning.

Question 8

The demand curve shows the number of units the market will buy in a given time period at different prices that might be charged.In normal cases,the higher the price,the lower the demand.

Accepted Answer

This statement is true. According to the law of demand, as the price of a good increases, the quantity demanded for that good decreases, assuming all other factors remain constant. This inverse relationship between price and demand is reflected in the downward slope of the demand curve.

Question 9

Value- based pricing is the reverse of cost- based pricing.

Accepted Answer

Value-based pricing involves setting prices based on the perceived value to the customer rather than the cost of producing the product. This is opposite to cost-based pricing, which sets prices based on the cost of producing the product.

Question 10

Marketers may learn a few simple rules that apply equally to all price- demand relationships.

Accepted Answer

Price-demand relationships can vary significantly across different markets, products, and consumer segments, making it difficult to apply a single set of rules universally.

Question 11

When faced with price competition,cutting prices is often not the best answer.

Accepted Answer

Cutting prices may lead to lower profit margins and can create a race to the bottom with competitors constantly lowering prices. Instead, businesses may need to focus on differentiating their products or services, improving customer experience, and finding alternative ways to add value to stay competitive without lowering prices.

Question 12

Prices have a direct impact on a company's bottom line.

Accepted Answer

Prices play a crucial role in determining a company's profitability. If a company prices its products too high, it may lose customers to competitors with lower prices. On the other hand, if a company prices its products too low, it may not make enough profit to cover its expenses and invest in future growth. Finding the right pricing strategy is essential to maximizing a company's bottom line.

Question 13

Average unit cost increases with accumulated production experience.

Accepted Answer

average unit cost typically decreases as production experience accumulates due to improvements in efficiency and economies of scale.

Question 14

The more elastic the demand,the more it pays for the seller to raise the price.

Accepted Answer

This statement is false. If the demand for a product is elastic, it means that consumers are very sensitive to changes in price, and a price increase will likely result in a significant decrease in demand. As a result, the seller will not benefit from raising the price, as the decrease in demand will offset any potential increase in revenue from higher prices. On the other hand, if the demand for a product is inelastic, consumers are less sensitive to price changes, and a price increase is more likely to result in a revenue increase for the seller.

Question 15

Value- based pricing uses the company's perception of value.

Accepted Answer

Value-based pricing uses the customer's perception of value, not the company's, to set prices.

Question 16

Using value- based pricing,a marketer would not design a product and marketing program before setting the price.

Accepted Answer

Value-based pricing involves determining the perceived value of a product or service to the customer and then using that information to set a price. This approach prioritizes understanding the target market and their needs and preferences before developing the product and marketing program.

Question 17

Demand and consumer value perceptions set the floor for prices.

Accepted Answer

The floor for prices is typically set by the costs of production, not demand and consumer value perceptions. Demand and consumer value perceptions influence the ceiling for prices.

Question 18

Markup pricing is popular because prices tend to be similar and price competition is thus minimized.

Accepted Answer

Markup pricing is popular because it simplifies pricing decisions and can lead to similar prices among competitors, reducing the intensity of price competition.

Question 19

Cost- based pricing relies on consumer perception of value to drive pricing.

Accepted Answer

Cost-based pricing is driven by the cost of producing a product or providing a service, rather than consumer perception of value. It involves calculating the average cost per unit and adding a profit margin to determine the selling price.

Question 20

The simplest pricing method is cost- plus pricing,which involves adding a standard markup to the cost of the product.

Accepted Answer

Cost-plus pricing involves adding a standard markup to the cost of the product, making it the simplest pricing method.

Quiz 10: Pricing Strategies: Understanding and Capturing Customer Value