Question 1

A standard mark- up is added to the cost of producing a product under which of the following approaches to pricing?

Accepted Answer

A standard mark-up is added to the cost of producing a product under the cost-based approach to pricing, where the cost of production is the primary consideration in setting the price. The company determines the cost of producing a product and then adds a standard mark-up to cover its expenses and profit.

Question 2

All customers within a specified geographic area pay the same freight charges under a system known as:

Accepted Answer

Zone pricing is a pricing system in which customers within a specified geographic area pay the same freight charges.

Question 3

Acme Business Services offers commercial consultancy services to manufacturers and wholesalers. The company guarantees that it will improve their client's productivity by five per cent within the first year after their recommendations have been implemented. Acme's approach to pricing is BEST described as a:

Accepted Answer

Acme's pricing approach is based on the performance they guarantee to deliver, which is a five per cent improvement in productivity for their clients within the first year after implementing their recommendations. This shows that their pricing model is based on the value they provide to the client. Therefore, the best choice is a performance-based approach.

Question 4

Sally has decided to buy herself a new winter coat and wants to buy from the high range, preferably a cashmere coat. Based on what Sally learned while researching coats using online sources, she figures that she won't be able to obtain the required quality for less than $300. She is willing and able to pay up to $600 for the "right" coat. This price range, $300- $600, represents Sally's:

Accepted Answer

The answer of Sally has decided to buy herself a...

Question 5

Customers are MORE likely to be price sensitive in all of the following conditions, EXCEPT:

Accepted Answer

The answer of Customers are MORE likely to be price...

Question 6

For segmented pricing to be effective, certain conditions should be met. Which of the following is NOT one of the conditions necessary for effective segmented pricing?

Accepted Answer

The answer of For segmented pricing to be effective, certain...

Question 7

When demand hardly changes with a small change in price, then demand is said to be:

Accepted Answer

When demand hardly changes with a small change in price, it is said to be inelastic. This means that even if the price changes, there will be little to no effect on the quantity demanded.

Question 8

A manufacturer of women's hosiery offers consumers three pairs of pantihose plus a pair of leggings attractively packaged as a single unit and available for a single price. The hosiery manufacturer is using:

Accepted Answer

The manufacturer is offering a bundle of products together at a single price, which is an example of product-bundle pricing.

Question 9

When a customer takes title to goods at the point where a carrier assumes responsibility for the goods and the customer agrees to pay for the freight from the factory to the customer's preferred destination, this is known as:

Accepted Answer

This scenario describes free-on-board (FOB) pricing, where ownership of the goods transfers to the customer at the point where the carrier takes responsibility and the customer agrees to pay for freight from that point to their desired location.

Question 10

When a company offers a client a price reduction in return for prompt payment, this is known as:

Accepted Answer

A price reduction offered to a client for prompt payment is known as a cash discount. A functional discount is a reduced price offered to certain customers or distributors based on their role in the supply chain. Price discrimination involves charging different prices to different customers based on their willingness to pay. Segmented pricing involves charging different prices for different versions or levels of a product or service. Psychological pricing involves setting prices that appeal to consumers' emotional responses or perceptions of value.

Question 11

The pricing approach that bases its prices on how it believes competitors will price rather than on its own costs or demand estimates is known as:

Accepted Answer

The answer of The pricing approach that bases its prices...

Question 12

Wangaratta Grocery Chain often features a few products priced below cost to attract customers to their stores. WGC is employing:

Accepted Answer

WGC is using a marketing strategy called "loss leader" where they are intentionally selling few products at a loss to attract customers to their store and hope they will purchase other products with higher profit margins.

Question 13

Sellers are likely to initiate price cuts for any of the following reasons, EXCEPT:

Accepted Answer

The answer of Sellers are likely to initiate price cuts...

Question 14

When a marketer of a new product uses a low price with a view to attracting as many buyers as possible this is known as:

Accepted Answer

The scenario described is known as price penetration, where a low price is used to penetrate the market and attract a large number of buyers. This is often used for new products as a way to quickly gain market share and establish a foothold in the industry.

Question 15

A temporary reduction in price, which may involve pricing at below cost, and which is designed to increase patronage is known as a(n):

Accepted Answer

A loss leader is a pricing strategy where a product is sold at a lower price than its market cost to attract customers. This is typically done with the intention of making up for the temporary loss through increased sales of other products or services.

Question 16

The approach to pricing that incorporates shared risk and reward is known as:

Accepted Answer

The answer of The approach to pricing that incorporates shared...

Question 17

Owners of Apple iPhones often complain that once they have committed to the Apple brand they must purchase apps that are only available from Apple or its dealers. When consumers point out this issue, they are referring to:

Accepted Answer

Captive product pricing refers to the practice of companies selling a product at a low price but then requiring customers to purchase additional related products or services at a higher price. In the case of Apple, consumers who purchase an iPhone must also purchase apps from Apple's App Store, which is only available through Apple or its dealers. This is an example of captive product pricing.

Question 18

Market skimming pricing would NOT be recommended when:

Accepted Answer

Market skimming pricing is not recommended when more efficient competitors can enter the market easily, as they can offer a lower price and capture the market share. The other options listed (A, B, and D) are situations where market skimming pricing may be more appropriate.

Question 19

Dealers who assist a manufacturer with advertising or sales support may be offered a(n):

Accepted Answer

Dealers who assist a manufacturer with advertising or sales support may be offered a promotional allowance, which is a special payment made by the manufacturer to the dealer to encourage the dealer to promote products in a specific way. This type of allowance is often used to cover advertising costs, such as the cost of running ads in local newspapers or on local radio stations. It may also be used to cover the cost of sales promotions, such as offering discounts or special deals to customers.

Question 20

Sellers who are keen to build business with customers in a given geographic area, may consider using:

Accepted Answer

The answer of Sellers who are keen to build business...

Quiz 12: Pricing for Value