Question 1

Ultimately, the price of a good is determined by the interaction of supply and demand in the marketplace.

Accepted Answer

This is a basic principle in economics known as the Law of Supply and Demand. The price of a good will increase if demand exceeds supply and decrease if supply exceeds demand.

Question 2

One way firms can gain a competitive advantage without relying on low prices is by developing close, friendly relationships with their customers.

Accepted Answer

By developing close, friendly relationships with their customers, firms can build customer loyalty and increase customer retention. This can lead to positive word-of-mouth advertising and a competitive advantage over firms that do not prioritize customer relationships.

Question 3

Despite the fact that microeconomic theory places a great deal of emphasis on price, marketers often try to find ways to compete on product attributes other than price.

Accepted Answer

While price may be a significant factor in microeconomic theory, marketers recognize that there are other ways to differentiate their products and appeal to customers, such as quality, design, features, and brand image. By focusing on these attributes, they can create a unique value proposition and compete effectively, even if their prices are higher than their competitors'.

Question 4

A penetration strategy calls for a firm to charge low prices with the intent of attracting a large number of customers and discouraging competition.

Accepted Answer

This statement correctly describes a penetration strategy.

Question 5

Pattie Bunz operates the Zestee Burgers restaurant. The cost of pickles, onions, buns, catsup, and meat patties would all be considered variable costs for her type of business.

Accepted Answer

Variable costs are expenses that are directly related to the production or sale of a product, and can vary depending on the level of output. The cost of pickles, onions, buns, catsup, and meat patties are all ingredients used to make burgers, which is the primary product of Zestee Burgers restaurant. Therefore, they would all be considered variable costs for the business.

Question 6

Miranda is a marketing manager for a large manufacturer. Her boss has asked her to evaluate a new-product idea. One of the things Miranda wants to determine is how much of this product her firm would have to sell in order to break even. In order to compute this break-even level of sales, she will need to know the price of the good, the total fixed costs, and variable cost of producing each unit.

Accepted Answer

To compute the break-even level of sales, Miranda does indeed need to know the price of the good, the total fixed costs, and the variable cost of producing each unit.

Question 7

A skimming price strategy involves a low pricing policy intended to attract price-sensitive customers from competitors.

Accepted Answer

The answer of A skimming price strategy involves a low...

Question 8

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

Accepted Answer

Variable costs are expenses that increase or decrease with the level of production. This is because they are directly linked to the amount of production or sales made by a company. Examples of variable costs include raw materials, commissions, direct labor costs, and packaging costs, among others.

Question 9

For most firms, price competition is the most important way to gain a competitive advantage over rivals.

Accepted Answer

While price competition can be a factor in gaining a competitive advantage, there are other ways to differentiate and compete such as offering superior quality, innovation, customer service, branding, and distribution channels. Focusing solely on price can lead to a price war and erode profits.

Question 10

Firms utilizing an everyday low pricing (EDLP) strategy establish a policy of special sales on a regular basis.

Accepted Answer

EDLP means that the firm sets a low price on a consistent basis, without relying on special sales or promotions.

Question 11

The key to demand-oriented pricing is the recognition that not all producers face the same costs of production.

Accepted Answer

The answer of The key to demand-oriented pricing is the...

Question 12

Small firms often rely on nonprice competition when competing against larger firms.

Accepted Answer

Small firms often cannot compete on price against larger firms, so they focus on offering unique products or services, personalized customer service, and other nonprice factors that differentiate them from their larger competitors.

Question 13

Shuichi owns and operates his own sushi bar. His fixed costs would include rent, insurance, and property taxes.

Accepted Answer

Fixed costs are expenses that do not vary with the level of production or sales, such as rent, insurance, and property taxes. Therefore, Shuichi's fixed costs would include these expenses.

Question 14

Carlotta owns and manages the Carlite Car Wash. She charges $8 per car wash. Her fixed costs are $600 per month, while her variable costs per car wash amount to $2. Carlotta must wash 60 cars to break even.

Accepted Answer

The answer of Carlotta owns and manages the Carlite Car...

Question 15

The pricing objectives of a firm should be set independently of the other elements of their marketing mix.

Accepted Answer

Pricing objectives should be closely aligned with the other elements of the marketing mix, such as product, promotion, and distribution, to ensure consistency in the overall marketing strategy. The pricing of a product or service should also take into account factors such as competition, target market, and consumer demand.

Question 16

Psychological pricing utilizes high prices to create the image of a high-quality product.

Accepted Answer

The answer of Psychological pricing utilizes high prices to create...

Question 17

Gill's Gadgets establishes the price it charges for its products by determining the cost of production and then adding on a desired profit margin. Gill's strategy is known as target costing.

Accepted Answer

The answer of Gill's Gadgets establishes the price it charges...

Question 18

Rather than having frequent special sales, Walt's Warehouse has a pricing strategy that maintains lower prices than competitors all the time. Walt's pricing strategy is known as everyday low prices (EDLP).

Accepted Answer

The description matches the definition of everyday low prices (EDLP).

Question 19

A high-low pricing strategy may condition consumers to avoid paying the regular prices by waiting for sale prices.

Accepted Answer

This is a potential consequence of using a high-low pricing strategy. Customers may learn to wait for sales and discounts instead of paying the regular price, which could harm the retailer's profitability in the long run.

Question 20

As the Internet has grown in popularity, it is likely that more firms will adopt a high-low pricing strategy.

Accepted Answer

The answer of As the Internet has grown in popularity,...

Quiz 14: Developing and Pricing Goods and Services