Question 1

Diana owns a boutique specializing in ball gowns.Sales are stable and Diana feels it is time she had a 20 percent increase in her salary.If Diana takes this increase in compensation,it will decrease the break-even quantity of gowns she needs to sell on a monthly basis.

Accepted Answer

Increasing Diana's salary does not affect the break-even quantity of gowns she needs to sell. The break-even quantity is solely dependent on the variable costs, fixed costs, and selling price of the gowns.

Question 2

When a firm has a particular profit goal as its overriding concern,it will use target return pricing to meet the profit objective.

Accepted Answer

False

Question 3

A gray market employs irregular but not necessarily illegal methods of distributing products.

Accepted Answer

The statement correctly defines a gray market as a form of distribution that is not illegal but does not align with traditional distribution channels.

Question 4

Pure competition occurs when there are many firms competing for customers in a given market but their products are differentiated.

Accepted Answer

Pure competition occurs when there are many firms competing for customers in a given market and their products are identical or standardized. Differentiated products would imply some level of product differentiation, which would indicate a degree of monopolistic competition.

Question 5

Price is the only part of the marketing mix that does not generate costs.

Accepted Answer

Price generates revenue rather than incurring costs, unlike product development, distribution (place), and promotion, which all involve costs.

Question 6

Costs related to supply and costs related to demand are the two primary cost categories.

Accepted Answer

The two primary cost categories are costs related to production and costs related to distribution.

Question 7

In U.S.markets,there are many substitute products for Fruit Loops cereal,suggesting the price elasticity of demand for Fruit Loops is high.

Accepted Answer

The availability of many substitute products for Fruit Loops suggests that consumers have options and are likely to switch to alternatives if the price of Fruit Loops increases, leading to a high price elasticity of demand.

Question 8

Brands that have developed loyal customers have a higher price elasticity of demand.

Accepted Answer

Brands with loyal customers often have a lower price elasticity of demand because their customers are less sensitive to price changes and more likely to continue purchasing the product even if prices increase.

Question 9

Dynamic pricing is also referred to as individualized pricing.

Accepted Answer

Dynamic pricing is a strategy where prices are tailored to individual customers based on varying factors such as demand, competition, and customer behavior. Therefore, it is also known as individualized pricing.

Question 10

The demand curve for prestige products generally slopes downward due to higher prices.

Accepted Answer

The demand curve for prestige products often slopes upwards at certain ranges because higher prices can increase the perceived value and desirability of these products, leading to increased demand.

Question 11

Price is the cash expenditure plus taxes that consumers have to pay for a good or service.

Accepted Answer

The answer of Price is the cash expenditure plus taxes...

Question 12

If a firm is engaged in monopolistic competition,it should seek a way to differentiate itself.

Accepted Answer

In monopolistic competition, there are many firms competing with each other, but each firm produces a slightly different product that is perceived as unique by customers. Therefore, firms in monopolistic competition should seek to differentiate themselves from their competitors in order to attract customers and gain a competitive advantage.

Question 13

The key to successful pricing is to match the product with the consumer's perception of value.

Accepted Answer

This statement is true. Pricing must be consistent with how consumers perceive the value of a product in order to be successful.

Question 14

Pricing strategies should be aligned with a firm's overall goals and objectives.

Accepted Answer

Pricing strategies play a crucial role in achieving a firm's overall objectives. The pricing decisions should be based on factors like target market, competition, product differentiation, and cost structure to ensure profitability and long-term sustainability. Therefore, pricing strategy should be aligned with the firm's overall goals and objectives.

Question 15

Price elasticity of demand measures how changes in a price affect the quantity of the product demanded.

Accepted Answer

Price elasticity of demand measures the responsiveness of quantity demanded to changes in price. It is calculated as the percentage change in quantity demanded divided by the percentage change in price.

Question 16

American Airlines just reduced its fares for summer flights by $100.Delta Airlines changes its pricing structure and reduces its flights by $100 as well.Delta is employing status quo pricing.

Accepted Answer

Delta Airlines is employing status quo pricing by matching the price reduction of a competitor (American Airlines) to maintain its position in the market and avoid price wars.

Question 17

At the break-even point,profits are maximized.

Accepted Answer

At the break-even point, profits are not maximized but rather it is the point where total revenue equals total costs. Profit is only generated once sales exceed the break-even point.

Question 18

Rarely is the lowest-price product offering the dominant brand in a given market.

Accepted Answer

While price is an important factor in consumer decision-making, other factors such as quality, brand reputation, and customer loyalty also play significant roles. Therefore, the lowest-price product is not always the most dominant brand in a market.

Question 19

Because consumers are generally more sensitive to price increases than to price decreases,it is easier to lose current customers with a price increase than it is to gain new customers with a price decrease.

Accepted Answer

This phenomenon is known as price sensitivity, and it is a common observation in economics and marketing. Consumers tend to notice price increases more than price decreases, and they may react by switching to a competitor, reducing their consumption, or seeking substitutes. Therefore, companies should be cautious when raising prices and consider the potential impact on customer loyalty and demand. On the other hand, price decreases may not necessarily attract new customers if the product or service doesn't meet their needs or if they perceive it as lower quality. Thus, pricing strategies should be based on a careful analysis of the market, competition, and customer preferences.

Question 20

A demand curve shows the relationship between income and demand.

Accepted Answer

A demand curve shows the relationship between price and quantity demanded, not income and demand.

Quiz 14: Pricing Concepts for Establishing Value