Question 1

A claim that a price is below a manufacturer's suggested or list price may be deceptive if

Accepted Answer

A claim that a price is below a manufacturer's suggested or list price may be deceptive if few or no sales occur at that price in a retailer's market area.

Question 2

In the 1980s,typical round-trip coach airfares from the East Coast to London were more than $500.Then Freddie Laker introduced the People's Express,a competing service into Newark at $350.Major airlines matched his price-and continued to do so until they drove People's Express out of business.Then prices shot back up to over $500.A lawsuit filed under the Sherman Act resulted in the judgment that the major airlines had explicitly tried to destroy a competitor.The experience of People's Express is an example of ________ on the part of the major airlines.

Accepted Answer

Predatory pricing,the practice People's Express encountered,is illegal under the Sherman Act and the Federal Trade Commission Act.Proving the presence of this practice has been difficult and expensive but was successful in this case.

Question 3

When a firm offers a very low price on a product to attract customers to a store and once in the store the customer is persuaded to purchase a higher-priced item,the practice is referred to as

Accepted Answer

Text term definition-bait and switch.

Question 4

The Robinson-Patman Act allows for price differentials to different customers under several conditions.Which of the following practices would be permitted?

Accepted Answer

The Robinson-Patman Act allows for price differentials to different customers under the following conditions: (1)when price differences charged to different customers do not exceed the differences in the cost of manufacture,sale,or delivery resulting from differing methods or quantities in which such goods are sold or delivered to buyers (this condition is called the cost justification defense);(2)when price differences result from changing market conditions,avoiding obsolescence of seasonal merchandise,including perishables,or closing out sales;and (3)when price differences are quoted to selected buyers in good faith to meet competitors' prices and are not intended to injure competition (this condition is called the meet-the-competition defense).

Question 5

Bob Biltmore owns dozens of very successful print shops throughout the Midwest.Biltmore's shops specialize in low-cost black-and-white copies and feature user-friendly machines consumers can easily operate.In recent months,Biltmore has noticed many more competitors in the areas where his stores are located.In an attempt to eliminate the competition,Biltmore has decided to charge a very low price for his black-and-white copies,a price so low his competitors will be forced out of business.After the competition has been driven out,Biltmore plans to raise the price of his copies.Biltmore is planning to engage in the illegal and unethical practice of

Accepted Answer

Under the Sherman Act and the Federal Trade Commission Act,the practice of predatory pricing is illegal-the activity Biltmore plans to undertake.Although difficult to prove,marketers cannot deliberately lower prices in order to eliminate competitors and then increase them once all competition is eliminated.

Question 6

Predatory pricing is

Accepted Answer

Predatory pricing is the practice of charging a very low price for a product with the intent of driving competitors out of business.Once competitors have been driven out,the firm raises its prices.Proving the presence of this practice has been difficult and expensive because it must be shown that the predator explicitly attempted to destroy a competitor and the predatory price was below the defendant's average cost.

Question 7

The Robinson-Patman Act covers promotional allowances as well as discounts.To legally offer promotional allowances to buyers,the seller must do so on a(n)________ basis to all buyers distributing the seller's products.

Accepted Answer

The Robinson-Patman Act also covers promotional allowances.To legally offer promotional allowances to buyers,the seller must do so on a proportionally equal basis to all buyers distributing the seller's products.

Question 8

Price deals that mislead consumers fall into the category of

Accepted Answer

Key term definition-deceptive pricing.

Question 9

A single jar of original formula Carmex has different prices for the product depending upon where it is sold,but each price will end in a nine ($0.99 at mass merchandisers like Walmart or Target,and between $1.59 and $1.79 in drug and food retailers such as Walgreens and Kroger).This pricing strategy is called

Accepted Answer

When Carmex prices a product like its single jar of original formula so that its price ends in a nine,the marketer is using an odd-even pricing strategy.The reason: The presumption is that demand increases if the price drops to an odd number such as $0.99 from $1.00.

Question 10

To promote their business,some psychics advertise on television free tarot-card readings and other insights into their customers' futures.Unfortunately,this "free reading" has cost some unsuspecting callers as much as $700 in phone charges.This sort of pricing practice would be primarily monitored by the

Accepted Answer

Price deals that mislead consumers fall into the category of deceptive pricing.The Federal Trade Commission Act outlaws deceptive pricing.The FTC monitors such practices.

Question 11

Predatory pricing is

Accepted Answer

Key term definition-predatory pricing.

Question 12

When a seller represents a price as reduced,the item must have been offered in good faith at a higher price for a substantial previous period.Former price comparisons are deceptive if

Accepted Answer

When a seller represents a price as reduced,the item must have been offered in good faith at a higher price for a substantial previous period.Setting a high price for the purpose of establishing reference for a price reduction is deceptive.

Question 13

A hardware store advertises a ⅜-inch Black and Decker Power Drill for $29.95.You enter the store intending to purchase the drill.The salesperson informs you that they are all sold out.She tells you that the "sale" drills were factory seconds and that if you are going to be doing any kind of serious woodworking,you should buy the Model 3309,which sells for $49.99.This scenario has elements of which type of illegal pricing practice?

Accepted Answer

This scenario has all the elements of bait and switch,which is a deceptive practice whereby a firm offers a very low price on a product (the bait)to attract customers to a store.Once in the store,the customer is persuaded to purchase a higher-priced item (the switch)using a variety of tricks,including not having the item in stock and downgrading the item.

Question 14

The practice of charging a very low price for a product with the intent of driving competitors out of business is referred to as

Accepted Answer

Key term definition-predatory pricing.

Question 15

Advertising such as "Retail Value $100,Our Price $85" is deceptive if

Accepted Answer

Advertising such as "Retail Value $100,Our Price $85" is deceptive if a verified and substantial number of stores in the market area do not price the item at $100.

Question 16

The practice of offering a bargain that is conditional on the purchase of other products may exist when a buyer is offered the "1-Cent Sales," the "Buy 1,Get 1 Free," or the "Get 2 for the Price of 1" deal.Such pricing is legal only if

Accepted Answer

The practice of offering a bargain that is conditional on the purchase of other products may exist when a buyer is offered the "1-Cent Sales," the "Buy 1,Get 1 Free," or the "Get 2 for the Price of 1" deal is legal only if the first items are sold at the regular price,not a price inflated for the offer.

Question 17

Deceptive pricing practices are outlawed by legislation and enforced by which federal agency?

Accepted Answer

Price deals that mislead consumers fall into the category of deceptive pricing,which is outlawed by the Federal Trade Commission Act.

Question 18

Which of the following statements about the legal and regulatory aspect of pricing is most accurate?

Accepted Answer

The Federal Trade Commission Act covers predatory pricing,deceptive pricing,and geographical pricing.

Question 19

Which of the following statements about geographical pricing is most accurate?

Accepted Answer

Under the Robinson-Patman Act,basing-point pricing can be illegal.Just like FOB origin pricing,FOB freight-allowed pricing practices are legal.For the most part,geographical pricing has been immune to legal and regulatory restrictions,except in those instances in which a conspiracy to lessen competition exists under the Sherman Act or price discrimination exists under the Robinson-Patman Act.

Question 20

Carmex uses all of the following approaches to setting the price of its products except which?

Accepted Answer

Carmex uses each of the four perspectives to set prices: demand-oriented;cost-oriented;profit-oriented;and competition-oriented.

Quiz 14: Arriving at the Final Price

A claim that a price is below a manufacturer's suggested or list price may be deceptive if

When a firm offers a very low price on a product to attract customers to a store and once in the store the customer is persuaded to purchase a higher-priced item,the practice is referred to as

The Robinson-Patman Act allows for price differentials to different customers under several conditions.Which of the following practices would be permitted?

Predatory pricing is

The Robinson-Patman Act covers promotional allowances as well as discounts.To legally offer promotional allowances to buyers,the seller must do so on a(n) ________ basis to all buyers distributing the seller's products.

Price deals that mislead consumers fall into the category of

Predatory pricing is

When a seller represents a price as reduced,the item must have been offered in good faith at a higher price for a substantial previous period.Former price comparisons are deceptive if

The practice of charging a very low price for a product with the intent of driving competitors out of business is referred to as

Advertising such as "Retail Value $100,Our Price $85" is deceptive if

The practice of offering a bargain that is conditional on the purchase of other products may exist when a buyer is offered the "1-Cent Sales," the "Buy 1,Get 1 Free," or the "Get 2 for the Price of 1" deal.Such pricing is legal only if

Deceptive pricing practices are outlawed by legislation and enforced by which federal agency?

Which of the following statements about the legal and regulatory aspect of pricing is most accurate?

Which of the following statements about geographical pricing is most accurate?

Carmex uses all of the following approaches to setting the price of its products except which?