Question 1

When a market legally circumvents authorized channels of distribution to sell goods at prices lower than those intended by the manufacturer, it is called a market.

Accepted Answer

This is known as a grey market, where products are sold through unauthorized channels at lower prices than those set by the manufacturer.

Question 2

Those expenses that remain essentially at the same level, regardless of any changes in the volume of production, are called the:

Accepted Answer

Fixed costs are expenses that do not change with the level of production or sales, such as rent or salaries.

Question 3

The fall in the price of coffee in the market led to a fall in the demand for tea.This is an example of a:

Accepted Answer

When the price of coffee falls and leads to a decrease in the demand for tea, it indicates that coffee and tea are substitute products. Consumers may switch from tea to coffee due to the lower price of coffee.

Question 4

Jeff is a hockey player who uses hockey sticks manufactured by a particular company.The manufacturing company decides to increase the price of hockey sticks, so Jeff switches to another company offering similar quality hockey sticks at a lower price.This is an example of the:

Accepted Answer

The substitution effect occurs when consumers switch from a more expensive product to a less expensive one that serves a similar purpose, as Jeff did by choosing a different company's hockey sticks.

Question 5

Which of the following refers to a pricing method by which the firm deliberately prices a product above the prices set for competing products to capture those consumers who always shop for the best or for whom price does not matter?

Accepted Answer

Premium pricing method involves setting a high price to attract status-conscious consumers who associate higher prices with superior quality or exclusivity.

Question 6

Which of the following occurs when only a few firms dominate a market?

Accepted Answer

An oligopoly occurs when a market is dominated by a small number of firms, leading to limited competition.

Question 7

Which of the following occurs when only one firm provides the product or service in a particular industry?

Accepted Answer

A monopoly occurs when a single firm is the sole provider of a product or service in an industry, without any competition.

Question 8

The price of a single piece of a product which is equal to the price less the variable cost per unit is called the:

Accepted Answer

Contribution per unit is the selling price of a product minus the variable cost per unit, representing the amount each unit contributes to covering fixed costs and generating profit.

Question 9

The moment at which the number of units sold generates just enough revenue to equal the total costs is called the:

Accepted Answer

The break-even point is the moment at which the number of units sold generates just enough revenue to equal the total costs.

Question 10

When many firms sell closely related but not homogeneous products, this is called:

Accepted Answer

Monopolistic competition is a market structure where many firms sell products that are similar but not identical, allowing for product differentiation.

Question 11

An approach that attempts to reflect how the firm wants consumers to interpret its products relative to the offerings of rival companies is called the:

Accepted Answer

The competitor-based pricing method involves setting prices based on the prices of competitors, reflecting how the firm wants consumers to perceive its products in relation to rival offerings.

Question 12

Which of the following pricing methods determine the final price to charge by starting with the cost, without recognizing the role that consumers or competitors' prices play in the marketplace?

Accepted Answer

Cost-based pricing method involves setting the price based on the cost of production plus a markup, without considering consumer demand or competitor pricing.

Question 13

The pattern of buying both premium and low-priced merchandise or patronizing both expensive, status-oriented retailers and price-oriented retailers is called:

Accepted Answer

Cross-shopping refers to the behavior of consumers who purchase both high-end and low-end products or shop at both expensive and budget-friendly retailers.

Question 14

Mike wants to set up a factory to manufacture roller skates.He plans to employ a hundred people in his office.Mike's other expenses include rent, utilities, insurance, administrative salaries (for executives and higher-level managers), and depreciation of the physical plant and equipment.The raw material and labour to make the skates constitute the:

Accepted Answer

Variable costs are expenses that change in proportion to the production output, such as raw materials and labor for manufacturing roller skates.

Question 15

The expenses, primarily labour and materials, that vary with production volume are called the:

Accepted Answer

Variable costs are expenses that change with the level of production.

Question 16

A situation in the market which occurs when two or more firms compete primarily by lowering their prices is referred to by the term:

Accepted Answer

A price war occurs when competing firms continuously lower their prices to undercut each other, often leading to reduced profit margins.

Question 17

Mike wants to set up a factory to manufacture roller skates.He plans to employ hundred people in his office.Mike's other expenses include rent, utilities, insurance, administrative salaries (for executives and higher-level managers), and depreciation of the physical plant and equipment.Rent, utilities, insurance, administrative salaries (for executives and higher-level managers), and depreciation of the physical plant and equipment constitute the:

Accepted Answer

Fixed costs are expenses that do not change with the level of production, such as rent, utilities, insurance, administrative salaries, and depreciation.

Question 18

When different companies sell commodity products that consumers perceive as substitutable, this is called:

Accepted Answer

Pure competition occurs when there are many buyers and sellers of a commodity product, and each firm has a negligible impact on the market price.

Question 19

Megan was an assistant manager in a firm and bought a Hyundai Accent L hatchback.She was then promoted to the position of senior manager and bought a Volvo S80.This is an example of the:

Accepted Answer

The income effect occurs when a change in income leads to a change in the quantity of a good demanded. Megan's promotion likely increased her income, allowing her to afford a more expensive car, the Volvo S80, compared to the Hyundai Accent L hatchback she previously owned.

Question 20

Which of the following pricing methods focuses on the overall value of the product offering as perceived by consumers, who determine value by comparing the benefits they expect the product to deliver with the sacrifice they will need to make to acquire the product?

Accepted Answer

Value-based pricing methods focus on the perceived value of the product to the consumer, where the price is set based on the benefits the consumer expects relative to the cost they are willing to pay.

Quiz 11: Value Delivery : Designing the Distribution Channel and Supply Chain Marketing Channels