Question 1

Jayce is searching for a ticket home from college for semester break. While he has checked several websites and all the airlines that fly the route he will take, it seems like every airline is charging the same price. It appears that the airlines are using:
A) competitive parity pricing.
B) value pricing.
C) market-based pricing.
D) cost-plus pricing.

Accepted Answer

Competitive parity pricing is when companies set their prices in line with their competitors' prices, which seems to be the case here as all airlines Jayce checked are charging the same price for the route he is interested in.

Question 2

In most economies, _______refers to the amount of funds required to purchase a product.
A) price
B) cost
C) profit
D) demand

Accepted Answer

Price refers to the amount of money required to purchase a product, reflecting its value in monetary terms.

Question 3

It is interesting that gasoline stations near one another normally have the very same price - down to the tenth of a cent a gallon! From a strategic pricing perspective, we can conclude gasoline stations tend to use a:
A) competition objective.
B) sales volume objective.
C) prestige objective.
D) loss avoidance objective.

Accepted Answer

Gasoline stations often use a competition objective in their pricing strategy, aiming to match or slightly undercut the prices of nearby competitors to attract customers. This is why prices are very similar among stations in close proximity.

Question 4

Champagne is a product with considerable mystic. There is rarely a James Bond movie where he does not drink some Champagne with a beautiful woman! Champagne is typically associated with the "finer things in life." However, even among Champagnes, some are special - often just by the pricing strategy taken. For example, Dom Pérignon Rose Gold in the 6-liter bottle is priced at nearly $50,000, assuring this Champagne is perceived as "the finest thing in life." Dom Pérignon is using:
A) prestige pricing.
B) high line pricing.
C) ultra pricing.
D) market-based pricing.

Accepted Answer

Prestige pricing is a strategy where prices are set higher than normal because the product is perceived to offer more in terms of value, brand, or experience. Dom Pérignon's high pricing for its Rose Gold Champagne is a classic example of prestige pricing, aiming to enhance its perception as a luxury or premium product.

Question 5

Nakamichi introduced a set of true high-fidelity headphones at a price of $2,000. However, the product simply did not find a market. Most likely, this was due to:
A) The price exceeded the consumer price ceiling.
B) The price was below the consumer price floor.
C) Fixed costs were too high.
D) Competitors' prices were too high.

Accepted Answer

The price exceeding the consumer price ceiling means that the product was priced higher than what consumers were willing to pay for headphones, regardless of their high fidelity, leading to poor market acceptance.

Question 6

Pricing is a highly visible component of a firm's marketing mix and an easy tool for obtaining a differential advantage over competitors. However, when competitors continually undercut each other to gain that advantage, it can lead to a price war that damages all companies involved. When firms have identical or very similar products and price information is readily available - for example, Coca-Cola and Pepsi - a common pricing approach to avoid price wars is:
A) competitive-parity pricing.
B) market-based pricing.
C) commodity pricing.
D) bargain pricing.

Accepted Answer

Competitive-parity pricing involves setting prices similar to those of major competitors to avoid price wars, especially in markets where products are very similar and price information is easily accessible, like the Coca-Cola and Pepsi example. This approach helps maintain market stability and protect profit margins for all competitors involved.

Question 7

Azature introduced the "world's most expensive nail polish." The Black Diamond nail polish contains 267 carats of crushed black diamond powder and a price of a whopping $250,000 a bottle. Azature is using a(n) _______ approach.
A) prestige pricing
B) price-line pricing
C) ultra-pricing
D) competitive parity pricing

Accepted Answer

Prestige pricing strategy involves setting a high price to convey an image of luxury, exclusivity, or high quality. Azature's use of crushed black diamonds and the extremely high price point for their nail polish fits this approach, as it aims to position the product as a luxury item.

Question 8

Designer companies such as Prada, Chanel, and Cartier tend to price their product very high to infer quality and exclusivity to potential customers. Strategically, this approach is known as a:
A) prestige objective.
B) sales volume objective.
C) competition objective.
D) loss avoidance objective.

Accepted Answer

This approach is known as a prestige objective because it aims to position the brand and its products as high-quality and exclusive, justifying the high price point and appealing to consumers seeking luxury and status.

Question 9

Almost all fast-food restaurants offering a short menu with low prices to compete with the other restaurants. These are intended to attract very price conscious consumers and are usually a "dollar menu" or offered at prices such as $.99 and $1.49. This approach is referred to as:
A) value pricing.
B) deep discounting.
C) cost-plus pricing.
D) basic pricing.

Accepted Answer

Value pricing is a strategy where businesses set prices primarily based on consumer perceptions of value rather than solely on production costs. The approach of offering a short menu with low prices, like a "dollar menu," to attract price-conscious consumers is a classic example of value pricing.

Question 10

Brands which can differentiate themselves from competitors by features, quality, or service are able to:
A) charge a higher price than competitors.
B) reduce fixed costs.
C) reduce variable costs.
D) increase the breakeven volume.

Accepted Answer

Brands that differentiate themselves can charge higher prices because they offer something unique or of higher quality that competitors do not, making customers willing to pay more for their products or services.

Question 11

A firm can price its items at the same price as competitors, or try to sell its products at a price higher than its competitors. To sell at a price higher than the competition, a firm would need to:
A) enhance features or otherwise differentiate its product and justify the higher price.
B) reduce the production costs so the profit margin would be higher.
C) make sure its price end in a ".99."
D) be willing to lose money on that product line.

Accepted Answer

To sell at a price higher than the competition, a firm needs to enhance features or differentiate its product to justify the higher price to consumers.

Question 12

Which of the following is NOT one of the three foundations of pricing?
A) Production efficiency
B) Costs
C) Potential demand
D) Competition

Accepted Answer

Production efficiency is not considered one of the three foundations of pricing. The three main foundations typically include costs, potential demand, and competition. These elements are crucial in determining the price of a product or service, focusing on how much it costs to produce, the demand for the product, and the prices set by competitors. Production efficiency, while important for overall business operations and cost management, is not directly a foundation of pricing.

Question 13

Customer demand is an important consideration in establishing prices. Demand, or at least potential demand, actually establishes the ___________ for a firm's prices.
A) ceiling
B) losses
C) profits
D) floor

Accepted Answer

Demand sets the maximum price that customers are willing to pay for a product or service, which acts as a ceiling on the price a firm can charge.

Question 14

A company might sell a product below the production costs for short-term promotional purposes.

Accepted Answer

Selling a product below production costs can be a strategic move for promotional purposes, to attract customers, increase market share, or introduce new customers to a product line.

Question 15

A company will never sell a product below the production costs.

Accepted Answer

Companies might sell products below production costs for various reasons, such as clearing out inventory, gaining market share, or as a strategy to enter new markets.

Question 16

Prices are related to the other elements of the marketing mix and to virtually all marketing outcomes. If a firm has a strong desire to increase its market share, it is likely it will:
A) decrease the price of the product.
B) increase the price of the product.
C) use a prestige pricing approach.
D) match the competitors price.

Accepted Answer

To increase market share, a firm might decrease the price of its product to attract more customers, making its offerings more appealing compared to competitors. This strategy can lead to higher sales volumes, thereby increasing market share.

Question 17

Mitch and Jill were visiting the Eiffel Tower when there was a downpour. They were willing to pay 25 euros for a poorly made umbrella that would usually sell for 10 euros or less. This illustrates the fact that:
A) The relationship between price and potential demand can be driven by many factors.
B) That cost plays no role in pricing decisions.
C) Consumers act in irrational manner.
D) Travelers do not understand exchange rates.

Accepted Answer

The willingness to pay a higher price for an umbrella during a downpour illustrates how demand can increase due to situational factors, affecting the price consumers are willing to pay.

Question 18

Firms with a volume or sales objective are most likely to:
A) reduce prices to maximize sales or gain a specific market share.
B) charge a higher price than most competitors to increase revenue.
C) raise prices to maintain prestige.
D) match competitors' prices.

Accepted Answer

Firms with a volume or sales objective aim to maximize sales or gain a specific market share, often by reducing prices to attract more customers. This strategy is used to increase the volume of products sold, rather than focusing on maximizing profit margins.

Question 19

Firms expect each of their products to:
A) cover the direct costs of production and help contribute to the regular fixed costs.
B) cover the direct costs of production, but not contribute to the fixed costs.
C) cover the organizations complete fixed costs.
D) cover the regular fixed costs of the organization and contribute to the costs of production.

Accepted Answer

Firms expect each of their products to cover the direct costs of production and also help in contributing to the regular fixed costs. This ensures that each product is financially viable and supports the overall financial health of the firm.

Question 20

There are a variety of pricing strategies available to firms. For example, firms selling perishable goods - such as a produce shop - might want to make sure all the inventory is sold. This firm would likely have a
A) sales volume objective.
B) competition objective.
C) prestige objective.
D) loss avoidance objective.

Accepted Answer

A sales volume objective focuses on selling a high volume of products, which aligns with the goal of a produce shop wanting to ensure all perishable goods are sold before they spoil.

Quiz 13: Pricing Concepts

Jayce is searching for a ticket home from college for semester break. While he has checked several websites and all the airlines that fly the route he will take, it seems like every airline is charging the same price. It appears that the airlines are using:

In most economies, _______refers to the amount of funds required to purchase a product.

It is interesting that gasoline stations near one another normally have the very same price - down to the tenth of a cent a gallon! From a strategic pricing perspective, we can conclude gasoline stations tend to use a:

Nakamichi introduced a set of true high-fidelity headphones at a price of $2,000. However, the product simply did not find a market. Most likely, this was due to:

Azature introduced the "world's most expensive nail polish." The Black Diamond nail polish contains 267 carats of crushed black diamond powder and a price of a whopping $250,000 a bottle. Azature is using a(n) _______ approach.

Designer companies such as Prada, Chanel, and Cartier tend to price their product very high to infer quality and exclusivity to potential customers. Strategically, this approach is known as a:

Almost all fast-food restaurants offering a short menu with low prices to compete with the other restaurants. These are intended to attract very price conscious consumers and are usually a "dollar menu" or offered at prices such as $.99 and $1.49. This approach is referred to as:

Brands which can differentiate themselves from competitors by features, quality, or service are able to:

A firm can price its items at the same price as competitors, or try to sell its products at a price higher than its competitors. To sell at a price higher than the competition, a firm would need to:

Which of the following is NOT one of the three foundations of pricing?

Customer demand is an important consideration in establishing prices. Demand, or at least potential demand, actually establishes the ___________ for a firm's prices.

A company might sell a product below the production costs for short-term promotional purposes.

A company will never sell a product below the production costs.

Prices are related to the other elements of the marketing mix and to virtually all marketing outcomes. If a firm has a strong desire to increase its market share, it is likely it will:

Mitch and Jill were visiting the Eiffel Tower when there was a downpour. They were willing to pay 25 euros for a poorly made umbrella that would usually sell for 10 euros or less. This illustrates the fact that:

Firms with a volume or sales objective are most likely to:

Firms expect each of their products to:

There are a variety of pricing strategies available to firms. For example, firms selling perishable goods - such as a produce shop - might want to make sure all the inventory is sold. This firm would likely have a