Question 1

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

Accepted Answer

Developing close, friendly relationships with customers can lead to increased loyalty, positive word-of-mouth marketing, and a better understanding of the customer's needs and preferences, all of which can provide a competitive advantage. This approach is often referred to as relationship marketing.

Question 2

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 passage clearly states that Walt's Warehouse has a pricing strategy of everyday low prices (EDLP) which means they maintain lower prices than competitors all the time, rather than having frequent special sales.

Question 3

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

Accepted Answer

The pricing objectives should be set in conjunction with the other elements of the marketing mix to ensure that they align with the overall marketing strategy and objectives of the firm. The pricing decisions can impact the product features, distribution channels, and promotional messages, among other factors, and should be considered holistically with the rest of the marketing mix.

Question 4

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

Accepted Answer

This is the basic principle of economics that the price of a good is determined by the forces of supply and demand in the market. When the supply of a product is high and demand is low, the price falls, and when demand is high and supply is low, the price rises. This interaction of supply and demand ultimately sets the market price for a good or service.

Question 5

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

Accepted Answer

The high-low pricing strategy involves offering products at high prices but then frequently offering sales and discounts to encourage purchases. This can condition consumers to wait for sales and avoid paying regular prices, potentially leading to lower overall profits for the retailer.

Question 6

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

Accepted Answer

Firms utilizing an everyday low pricing (EDLP) strategy do not typically have special sales on a regular basis, as their prices are already low and consistent.

Question 7

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 8

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

Accepted Answer

While price competition is certainly a common strategy for many firms, it is not always the most important or effective way to gain a competitive advantage. Other strategies such as product differentiation, innovation, and marketing can also be effective ways to stand out in a crowded market. Additionally, relying solely on price competition can lead to a "race to the bottom" where firms constantly lower prices to undercut each other, ultimately hurting profitability for everyone involved.

Question 9

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 10

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. These costs are incurred regardless of how many customers visit the sushi bar or how much sushi is produced and sold.

Question 11

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 12

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 vary with the level of output or sales, and the cost of pickles, onions, buns, catsup, and meat patties would all increase or decrease with the number of burgers sold at Zestee Burgers.

Question 13

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 14

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

Miranda needs to know the price of the good, total fixed costs, and variable cost of producing each unit in order to compute the break-even level of sales.

Question 15

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

Accepted Answer

The answer of As the Internet grows in popularity,it is...

Question 16

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 is an important factor in microeconomic theory, marketers often seek to differentiate their products from competitors through other attributes such as quality, features, design, brand image, and customer experience. This allows them to position their products in the market and attract customers who value these attributes over price alone.

Question 17

Admiral Motors is the dominant firm in the auto market.When Admiral announces an increase in the prices of its automobiles,Chord and Frysler,the smaller firms in the market,usually quickly announce similar price increases for their own cars.This situation is an example of demand-oriented pricing.

Accepted Answer

The answer of Admiral Motors is the dominant firm in...

Question 18

Small firms often rely on non-price competition when competing against larger firms.

Accepted Answer

Small firms may not be able to compete with the pricing strategies of larger firms but they can differentiate their products or services through quality, innovation, personalized customer service and other non-price factors.

Question 19

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

A penetration strategy is focused on gaining market share by setting low prices to attract customers and discourage competitors.

Question 20

Webster Industries is one of the first producers of a unique consumer product.The company has chosen a low price strategy,hoping this will enable them to quickly attract many customers while discouraging potential competitors from entering the market.Webster's approach to pricing is a classic example of the skimming strategy.

Accepted Answer

Webster Industries has chosen a low price strategy, which is not a skimming strategy. A skimming strategy involves setting a high price for a unique or innovative product to start with and gradually reducing it as competition enters the market.

Quiz 14: Developing and Pricing Goods and Services