Question 1

Ceylon Express sells bottled pasteurized tea to retailers.It has the following revenues and costs:
$\begin{array}{llcc}
  \text { Sales price per bottle: } &\$0.50\
 \text { Average variable costs per bottle:} &\$0.30\
 \text {Total fixed costs (annual):  } &\$50,000\
 \text { Tax rate: } & \text { 20 percent } \
\end{array}$

What is the annual break-even point in units for the company?

Accepted Answer

The answer of Ceylon Express sells bottled pasteurized tea to...

Question 2

Which of the following statements about pricing strategies throughout the product life cycle is FALSE?

Accepted Answer

With inelastic demand,prices are set high at introduction.

Question 3

The dimensions of quality that are important to consumers include:

Accepted Answer

Durability is another dimension.

Question 4

Laurie knows little about cooking and does not want to spend the time to learn how to make a quiche.However,she has been asked to bring a quiche to an office retirement party.Not wanting to make a poor choice,she is likely to:

Accepted Answer

Most consumers equate price and quality.

Question 5

Manufacturers can do all of the following to regain some control over the price their products are sold for at the retail level EXCEPT:

Accepted Answer

Manufacturers can also package merchandise with the selling price marked on it or place goods on consignment.

Question 6

Which of the following statements about the Internet is true?

Accepted Answer

The Internet has shifted some,but not all,shopping power to consumers.Consumer reviews vary in quality.Fraud is a huge problem.

Question 7

Price wars often break out:

Accepted Answer

Intense competition frequently leads to price wars.

Question 8

What does the lack of a price-matching guarantee tend to signal to the target market?

Accepted Answer

Conversely,when a retailer offers a price-matching guarantee,it is signaling to the target market that is is positioned asa low-price dealer.

Question 9

Marketing managers who attempt to raise the quality image of their product by selling it at high prices are following a(n)_____ strategy.

Accepted Answer

Prestige pricing strategy sets high prices to connote high product quality.

Question 10

When the Apple iPhone 3G was introduced the Apple iTunes web site also began selling small program "apps" written by third parties that could be run on the iPhone.One interesting app was the "I Am Rich" application.For a price of $1,000 you could buy this app that did nothing but display a red gem on the iPhone's screen.The description of the app stated that this red icon would remind you (and others you show it to)"that you were rich enough to afford this." Six of the applications were sold before Apple Inc.removed the app from iTunes.At the $1,000 price the author of the app was using _____ pricing as part of his marketing approach.

Accepted Answer

Prestige pricing strategy sets high prices to connote high product quality and exclusiveness.

Question 11

When Jerry took delivery of his brand new (and very expensive)Jaguar automobile,he was filled with pleasure and excitement.This is an example of the _____ effect associated with the price-quality relationship.

Accepted Answer

Hedonistic consumption refers to pursuing emotional responses associated with using a product,such as pleasure,excitement,arousal,and fun.

Question 12

Tesla Motors
"Going green" doesn't have to be boring.The Tesla Roadster Sport is an electric car that goes from 0 to 60 in four seconds and drives more like a race car than an environmentally-friendly ride.But that level of performance will set you back $128,500.As of 2009,Silicon Valley-based Tesla Motors,Inc.was the only company offering highway-compatible electric cars.Most Roadster Sport buyers are car enthusiasts and are buying them for the "fun toy" aspect of having an electric car rather than for environmental reasons.
-Refer to Tesla Motors.The price of the Roadster was set so that total revenue was as large as possible relative to total costs.This represents a _____ approach.

Accepted Answer

Profit maximization means setting prices so that total revenue is as large as possible relative to total costs.

Question 13

As a product enters the growth stage,prices generally begin to stabilize.One reason for this is that:

Accepted Answer

Other reasons include competitors entering the market and economies of scale.

Question 14

When Apple Inc.developed and introduced the iPhone it was unique as it essentially combined a cellular phone with an iPod,an Internet browser,and email capabilities.As such,in the short run it seemed that demand for the product would be inelastic,with no real existing competition.The recommend pricing strategy in such a situation would be:

Accepted Answer

A high initial price is used when a new product faces little competition,needs to recoup R&D costs,and has inelastic demand.Prices will fall slightly when entering the growth stage.

Question 15

Kroger supermarkets will place well-known brands on the shelves at high prices while offering their own Kroger brand at lower prices.This practice is an example of:

Accepted Answer

Selling against the brand with private labels causes sales of the higher-priced brands to decline.

Question 16

Which of the following statements describes a limitation associated with break-even analysis?

Accepted Answer

Not all costs are easily categorized because a cost may be fixed when viewed in the short term but variable when considered over a longer period of time.

Question 17

During the hot summer months or the week before a new class starts if there is still space available,the Nick Price golf school in Orlando,Florida offers a 25 percent reduction to get golfers during the off-season or those making a last-minute decision.This is an example of pricing strategy used as a(n):

Accepted Answer

Price is often used as a promotional tool to increase consumer interest.

Question 18

Many consumers,especially when faced with an uncertain purchase decision,think that a high price:

Accepted Answer

Numerous studies have shown that consumers equate high price with high quality.

Question 19

Shopping bots:

Accepted Answer

Bot is short for robot,and shopping bots theoretically give pricing power to the consumer.

Question 20

David likes New Balance running shoes.However,when he stopped by the Foot Locker to buy a new pair of running shoes he notice that Nike had a new pair of running shoes that cost $350.To David the higher price of the Nike shoe indicated that it would be a better pair of running shoes.This is an example of:

Accepted Answer

Prestige pricing is the charging of a higher price to help promote high quality.

Quiz 19: Pricing Concepts