Question 1

Chain-markup pricing demonstrates that channel members can set prices independently of one another.

Accepted Answer

Chain-markup pricing involves each member of the distribution channel adding a markup to the cost of the product, which means their pricing decisions are interdependent rather than independent.

Question 2

According to these data, profit is maximized at a price of $7. (Note: The calculation involves modified break-even analysis).

Accepted Answer

The answer of According to these data, profit is maximized...

Question 3

Of the forms of price discrimination, only time-based discrimination involves cost differences when marketing to each segment.

Accepted Answer

Time-based discrimination can involve cost differences, but it is not the only form of price discrimination that does so. Other forms, like quantity discounts or geographical pricing, can also involve cost differences when marketing to different segments.

Question 4

A heating-oil dealer decides to charge prices 10 percent above the market because it offers 24-hour service, has scheduled deliveries, and has a superior oil-burner maintenance program. This illustrates a competition-based price strategy.

Accepted Answer

The dealer is setting prices based on the competition, specifically by charging 10 percent above the market price. This is a competition-based price strategy.

Question 5

Customary pricing and a one-price policy both seek to standardize prices, while variable pricing and flexible pricing do not.

Accepted Answer

Customary pricing and a one-price policy both aim to maintain consistent prices across customers or situations, whereas variable pricing and flexible pricing strategies allow for adjustments based on factors like demand, customer, or market conditions.

Question 6

In a one-price policy, all buyers pay the same uniform delivered price regardless of their location.

Accepted Answer

A one-price policy means that the seller charges the same price to all customers, regardless of their location or the cost of delivery.

Question 7

A firm utilizing an odd-pricing strategy assumes that consumers have inelastic demand between odd prices and even-dollar values.

Accepted Answer

Odd-pricing strategy is based on the psychological pricing theory that prices ending in an odd number (e.g., $1.99) are perceived by consumers as significantly lower than they actually are, rather than assuming inelastic demand between odd and even prices.

Question 8

The profitability of a leader pricing strategy should be computed solely on the basis of the profits generated from the items that are price leaders.

Accepted Answer

The profitability of a leader pricing strategy should also consider the increased sales of other items that customers may purchase while buying the discounted leader items, not just the profits from the price leaders themselves.

Question 9

Price lining allows a firm to appeal to distinct market segments with product/price alternatives that are clearly differentiated from each other.

Accepted Answer

Price lining is a strategy where a company offers different products or services at different price points, with each price point aimed at targeting a specific market segment. This allows the firm to cater to the needs and preferences of diverse customer groups by providing clearly differentiated options in terms of both product features and prices.

Question 10

Unbundled pricing enables full-service firms to better compete with discounters by separating out the costs (prices) of the specific services the full-service firms offer.

Accepted Answer

Unbundled pricing allows full-service firms to itemize and separately charge for each specific service they offer, making it easier for them to compete with discounters by providing customers with more transparent pricing options and the ability to choose only the services they need.

Question 11

List five specific symptoms of a poor pricing strategy. Explain how each symptom could be addressed by using a revised pricing strategy.

Accepted Answer

The answer of List five specific symptoms of a poor...

Question 12

a.	Describe several sales-based, profit-based, and status quo-based pricing objectives that a restaurant chain could set.
b. Explain how the chain could use both penetration and skimming pricing strategies.

Accepted Answer

The answer of a.	Describe several sales-based, profit-based, and status quo-based...

Question 13

Explain these basic cost concepts and how they change as a company produces more goods:
a. Total variable costs.
b. Average variable costs.
c. Total fixed costs.
d. Average fixed costs.
e. Total costs.
f. Average total costs.

Accepted Answer

The answer of Explain these basic cost concepts and how...

Question 14

Differentiate between markup and target pricing. How could a firm utilize both techniques?

Accepted Answer

The answer of Differentiate between markup and target pricing. How...

Question 15

Explain how traditional break-even analysis differs from modified break-even analysis. Which technique has more realistic assumptions? Which is easier to use? Explain your answers.

Accepted Answer

The answer of Explain how traditional break-even analysis differs from...

Question 16

a.	Differentiate between demand-minus and chain-markup pricing.
b. What should a manufacturer do if its actual product cost is 10 percent more than the computed maximum product cost (using the chain-markup pricing formula)?

Accepted Answer

The answer of a.	Differentiate between demand-minus and chain-markup pricing.
b. What...

Question 17

a.	Define price discrimination.
b. Under what circumstances is price discrimination illegal?
c. Develop a price discrimination strategy for a hotel chain, including an example of each form of price discrimination.

Accepted Answer

The answer of a.	Define price discrimination.
b. Under what circumstances is...

Question 18

What is the role of market segmentation in yield management pricing? Describe its ideal uses and potential limitations.

Accepted Answer

The answer of What is the role of market segmentation...

Question 19

Differentiate among these pricing alternatives:
a. One-price policy.
b. Customary pricing.
c. Flexible pricing.
d. Variable pricing.

Accepted Answer

The answer of Differentiate among these pricing alternatives:
a. One-price policy.
b....

Question 20

a.	Differentiate among an escalator clause, surcharge, and additional markups.
b. Explain the difference between a markdown and a rebate from the perspective of a manufacturer and a retailer.

Accepted Answer

The answer of a.	Differentiate among an escalator clause, surcharge, and...

Quiz 21: Developing and Applying a Pricing Strategy