Question 1

What are the geographic considerations of pricing?

Accepted Answer

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Question 2

As long as a company can demonstrate that its price discounts and promotional allowances do not restrict competition, the company can avoid any penalties under the Competition Act.

Accepted Answer

Under the Competition Act, practices like price discounts and promotional allowances are permissible as long as they do not have an anti-competitive effect, such as restricting competition or creating a monopoly. If a company can demonstrate that its practices do not restrict competition, it can avoid penalties.

Question 3

Responding to the weakening of their control over prices brought about by e-commerce, marketers have begun to bundle a host of additional goods and services with the tangible products they offer their customers.

Accepted Answer

This statement is true as marketers have started packaging additional goods and services along with tangible products in order to counter the impact of the increasing power of e-commerce on pricing.

Question 4

Bots act as comparison shopping agents because they search the Web for a specific product and print out a list of sites that offer the best prices.

Accepted Answer

Bots, specifically designed as comparison shopping agents, automate the process of searching the Web for a specific product, comparing prices across different sites, and listing the sites offering the best deals, thus facilitating easier and more efficient shopping for users.

Question 5

Flexible cost-plus global pricing allows companies to grant discounts or change prices according to shifts in the competitive environment or fluctuations in international exchange rates.

Accepted Answer

Flexible cost-plus global pricing enables companies to adjust their prices in response to changes in the competitive landscape or currency exchange rates, allowing them to remain competitive and maintain profitability across different markets.

Question 6

When some customers pay more than others for the same product this is referred to as price fixing.

Accepted Answer

Price fixing refers to an agreement among competitors to set prices at a certain level, rather than charging different prices to different customers for the same product, which is known as price discrimination.

Question 7

What are allowances? What are the major categories of allowances?

Accepted Answer

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Question 8

Discuss the benefits a company receives when following a skimming pricing strategy.

Accepted Answer

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Question 9

Discuss the practice of promotional pricing and the role played by loss leaders and leader pricing.

Accepted Answer

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Question 10

Explain everyday low pricing.

Accepted Answer

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Question 11

A pharmaceutical company that sets a price below cost on a new cholesterol medication in order to shut out competitors that may want to enter the market could be fined for predatory pricing.

Accepted Answer

Predatory pricing is a strategy where a company sets prices below cost with the intention to eliminate competition or deter new entrants, which can be considered anti-competitive behavior and is illegal under antitrust laws in many jurisdictions.

Question 12

If foreign marketing costs are high and variable unit costs are used as the basis for pricing, a standard worldwide price may successfully be used.

Accepted Answer

Using variable unit costs as the basis for pricing, especially when foreign marketing costs are high, typically leads to different prices in different markets rather than a standard worldwide price. This is because variable costs and marketing expenses can vary significantly from one country to another, affecting the final price.

Question 13

Discuss the four major types of pricing policies, as well as flexible alternatives.

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Question 14

Tariffs often make it possible for firms to set prices on domestically priced goods well above world market levels.

Accepted Answer

Tariffs increase the cost of imported goods, allowing domestic producers to raise their prices without being undercut by cheaper foreign competition, potentially leading to prices above world market levels.

Question 15

Online marketing has added a new opportunity for cannibalization.

Accepted Answer

Online marketing introduces the possibility of digital channels competing with a company's existing channels (such as physical stores), potentially reducing sales in those traditional channels, which is a form of cannibalization.

Question 16

Indonesian companies manufacture inexpensive yet well-crafted leather belts, handbags, shoes, and apparel. Subsidized by the Indonesian government, the companies begin dumping these products on the Italian and French markets. The Italians respond by taxing the products 70 percent, which would be considered a tariff in this instance.

Accepted Answer

A tariff is a tax imposed by a government on imported goods. In this scenario, the Italian government's action of taxing the Indonesian products by 70 percent is a measure to protect its domestic industries from the cheaper imported goods, which is a classic example of a tariff.

Question 17

The government monitors transfer pricing closely because it is an easy way for companies to avoid taxes on profits.

Accepted Answer

Transfer pricing is a strategy used by multinational companies to shift profits from high-tax countries to low-tax countries, thereby reducing their overall tax burden. The government monitors transfer pricing closely to ensure that companies are not avoiding taxes on their profits through this method.

Question 18

Bundling is common in the telecommunications industry, although many customers would prefer prices to be listed individually.

Accepted Answer

Bundling is a common practice in the telecommunications industry, where services like internet, phone, and television are often offered together at a discounted rate compared to purchasing each service separately. This can sometimes obscure individual service costs, leading to customer preferences for individually listed prices for transparency.

Question 19

Compare and contrast competitive bidding and negotiated prices.

Accepted Answer

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Question 20

All exporters use cost-plus pricing methods to establish dual prices that fully allocate their true domestic and foreign costs to their products.

Accepted Answer

Exporters use a variety of pricing methods, not just cost-plus pricing, to establish prices. The choice of method depends on market conditions, competition, demand, and other factors, not solely on allocating domestic and foreign costs.

Quiz 16: Pricing Concepts and Strategies