Question 1

Retailers must carefully document competitor price levels when advertising these prices as "comparative values."

Accepted Answer

Retailers need to document competitor prices when advertising comparative values to ensure accuracy and avoid misleading consumers, which could lead to legal issues or damage to their reputation.

Question 2

A firm wants its customers to trade-up to more expensive items. So although customers may be drawn to the company by an ad for a low-priced item, its order-getting personnel inform the customers that a more expensive model has added features, a longer warranty, and on-premises repair service. In this case, trading-up customers constitutes illegal price discrimination.

Accepted Answer

Trading up involves persuading customers to buy a more expensive item than they originally intended, focusing on added value and benefits. It is a legal and common sales strategy, not price discrimination, which involves charging different prices to different customers without a justifiable reason.

Question 3

Disparagement of a heavily advertised item by a firm's salespeople is a usual sign of bait-and-switch advertising.

Accepted Answer

Bait-and-switch advertising involves luring customers with an advertised product and then disparaging it to sell a more expensive item.

Question 4

Selling against the brand is often used by retailers in order to increase store loyalty.

Accepted Answer

Selling against the brand refers to strategies where retailers promote their own store brands or generic products as alternatives to national brands, aiming to increase customer loyalty to the store itself by offering comparable quality at lower prices. This can enhance store loyalty as customers perceive the retailer as providing better value.

Question 5

Manufacturers like gray market products because unauthorized dealers are added to the distribution channel.

Accepted Answer

Manufacturers typically dislike gray market products because they undermine their pricing, distribution control, and brand reputation by allowing unauthorized dealers to sell their products, often at lower prices or in markets not intended by the manufacturer.

Question 6

Special deals and price guarantees come under the jurisdiction of the Robinson-Patman Act. These special pricing arrangements must be made available to all competing channel members on a proportionately equal basis.

Accepted Answer

The Robinson-Patman Act is a United States federal law that prohibits anticompetitive practices by producers, specifically price discrimination. It requires that special pricing arrangements be offered to all competing buyers on equal terms to prevent unfair competition.

Question 7

Under pure competition, the price environment is market-controlled.

Accepted Answer

Under pure competition, many sellers offer identical products, and no single seller can influence the market price, making the price environment market-controlled.

Question 8

A firm with a distinctive appeal to a market niche competes within a market-controlled price environment.

Accepted Answer

A firm with a distinctive appeal to a market niche often has more control over pricing due to its unique offering, rather than being subject to a market-controlled price environment.

Question 9

When industry deregulation first occurs, the price environment usually shifts from company-controlled to market-controlled.

Accepted Answer

The answer of When industry deregulation first occurs, the price...

Question 10

Price wars are most common in industries with well-differentiated products and high consumer price elasticity.

Accepted Answer

Price wars are more common in industries with undifferentiated products and low consumer price elasticity, where companies compete primarily on price rather than product features.

Question 11

a.	Describe how a used car dealer can employ both price and nonprice competition.
b. Describe how a new car dealer can employ both price and nonprice competition.

Accepted Answer

The answer of a.	Describe how a used car dealer can...

Question 12

a.	Compute price elasticity and total revenue for the following:
  
b. Designate each elasticity as elastic or inelastic.
c. If variable costs are $7 per unit and fixed costs are $500, at what price is profit maximized? Show all work.

Accepted Answer

The answer of a.	Compute price elasticity and total revenue for...

Question 13

a.	Describe the concept of subjective price and contrast it with the concept of price elasticity. Use an example related to the pricing of legal services.
b. How should a firm act if a consumer perceives its products to be priced higher than they actually are?

Accepted Answer

The answer of a.	Describe the concept of subjective price and...

Question 14

a.	Describe the actions a firm should take to avoid potential price-fixing charges.
b. Under what circumstances is vertical price fixing legal?
c. Why would a manufacturer seek to control the final selling prices of its products? Explain your answer.

Accepted Answer

The answer of a.	Describe the actions a firm should take...

Question 15

Describe the pricing practices that are covered under the Robinson-Patman Act. How does the act affect a salesperson's ability to negotiate prices with his or her customers?

Accepted Answer

The answer of Describe the pricing practices that are covered...

Question 16

a	Distinguish among loss leaders and bait-and-switch advertising.
b. Why would many manufacturers not want to see their products continually used as loss leaders?

Accepted Answer

The answer of a	Distinguish among loss leaders and bait-and-switch advertising.
b....

Question 17

Explain the FTC's guidelines with regard to standards of permissible conduct in price advertising. Illustrate each guideline with an example.

Accepted Answer

The answer of Explain the FTC's guidelines with regard to...

Question 18

How could selling against the brand, price guarantees, and gray market goods lead to channel conflict? Discuss the benefits of these strategies to retailers in relation to manufacturers.

Accepted Answer

The answer of How could selling against the brand, price...

Question 19

Describe the role of pricing in a market-controlled, company-controlled, and government-controlled price environment.

Accepted Answer

The answer of Describe the role of pricing in a...

Question 20

What conditions must exist for a price war to develop?

Accepted Answer

The answer of What conditions must exist for a price...

Quiz 20: Considerations in Price Planning