Question 1

Which of the following allows for price increases based on the cost-of-living index or some other formula?
A)price-shading index
B)factorial clause
C)escalator price clause
D)inelastic demand index

Accepted Answer

An escalator price clause allows for price increases based on the cost-of-living index or another formula. This clause is commonly used in long-term contracts to account for potential increases in costs over time. The other choices (A, B, and D) are not relevant to price increases based on the cost-of-living index or any other formula.

Question 2

Alissa Dunn is the owner and operator of Dunn's Best Jams,which she sells at craft festivals.She makes and sells only three types of jams: pecan pie jam,chocolate pie jam,and lemon tart jam.The costs of leasing her professional kitchen for manufacturing,travel to craft shows,insurance,and so on are allocated on an equal basis to the three types of jam sold.What are these costs?
A)derived costs
B)elastic costs
C)joint costs
D)synergistic costs

Accepted Answer

Joint costs are costs that are shared in the manufacturing and marketing of several products in a product line.

Question 3

The Toronto Convention and Visitors Association offers tourists a promotion in which they can buy one night in a Toronto hotel,two tickets to a Blue Jays baseball game,two tickets to a theatrical production,and dinner for two at an upscale restaurant for a substantially lower price than if the components were purchased separately.Which pricing technique is the Toronto Convention and Visitors Association using?
A)price lining
B)psychological pricing
C)price bundling
D)bait pricing

Accepted Answer

Marketing two or more products in a single package for a special price is called price bundling.

Question 4

One popular cost-oriented pricing tactic is culling low-profit margin products from the product line.Which of the following statements does NOT describe a reason that a marketing manager would want to avoid this tactic?
A)The tactic focuses special attention on the costs of producing each line and their contribution to overhead.
B)The loss of one item in the line may reduce the economies of scale.
C)The image of the rest of the product line may suffer if there is a "hole" in the line.
D)Other items in the line will now have to cover more fixed costs.

Accepted Answer

This pricing tactic does force a company to carefully consider the costs of each line and its overall contribution to overhead and fixed costs.

Question 5

Post makes several varieties of cereals.In promoting this product line,Post offers a 50-cents-off coupon that can be used to purchase any of its cereals.Therefore,what must Post consider when pricing its cereals?
A)joint costs
B)differential costs
C)bundling costs
D)potential (or basing)costs

Accepted Answer

Joint costs are costs that are shared in the manufacturing and marketing of several products in a product line.

Question 6

Which of the following factors can a manager ignore when deciding on prices for an entire product line?
A)Products in the line could be substitutes for one another.
B)Buyer considers the brand or the price first.
C)Products share joint costs.
D)Products will affect demand for the other products in the line.

Accepted Answer

The manager is trying to determine the relationships between the various products in the line and is looking at the products,not the buyer.

Question 7

Which of the following phrases accurately describes psychological pricing?
A)It is banned in most jurisdictions.
B)It is equally effective on all types of products.
C)It is also called odd-even pricing.
D)It is essentially the same as price shading.

Accepted Answer

Psychological pricing has mixed results,depending on the type of product.

Question 8

What is marketing two or more products in a single package for a special price known as?
A)price bundling
B)two-part bundling
C)psychological pricing
D)family pricing

Accepted Answer

Price bundling is the practice of offering two or more products in a single package at a special price. This strategy is often used to increase sales and attract customers who may not have purchased the products individually.

Question 9

If you want to buy season tickets in the comfortable seating behind the batter at the Fullerton Softball Complex,you can expect to make a qualifying payment that gives you the right to purchase the tickets.This payment is not deemed to be part of the ticket price.It is one of the costs that must be paid in order to buy a season ticket.What is Fullerton using?
A)professional services pricing
B)price lining
C)price bundling
D)two-part pricing

Accepted Answer

Two-part pricing involves two separate charges to consume a single good or service.

Question 10

Price is not set on the product until the item is either finished or delivered when using which of the following?
A)price shading
B)escalator pricing
C)delayed-quotation pricing
D)two-part pricing

Accepted Answer

Delayed-quotation pricing involves setting the price after the product is either finished or delivered. This allows the seller to take into account any unforeseen costs or changes in the market before setting the final price.

Question 11

Teresa and Debbie have decided to keep their new power boat in a "drystack" storage facility rather than in the water at a marina.The storage facility charges them a fee of $500 per year,plus $25 each time they call ahead and ask the facility to put their boat in the water for the day or weekend.Which pricing tactic is the facility using?
A)multiple unit pricing
B)price lining
C)price bundling
D)two-part pricing

Accepted Answer

Two-part pricing involves two separate charges to consume a single product or service.

Question 12

If a marketer decides to price goods at odd-numbered dollar amounts to denote bargains,and at even-numbered amounts to denote quality,what is he or she using?
A)two-part pricing
B)deal pricing
C)decoy pricing
D)psychological pricing

Accepted Answer

The marketer is using psychological pricing, which involves using pricing strategies to appeal to consumers' emotions and perceptions. In this case, odd numbers may be perceived as "bargain" prices, while even numbers may suggest higher quality.

Question 13

Delayed-quotation pricing does which of the following?
A)requires the seller to place a later date on the product invoice to help accounts receivable in recording transactions.
B)allows the final selling price to reflect cost increases incurred between the time the order is placed and the final delivery takes place.
C)prevents the competitor from submitting an earlier bid.
D)requires a seller to submit a bid after the closing date.

Accepted Answer

Delayed-quotation pricing delays the setting of the final price.

Question 14

Why do consumers sometimes prefer two-part pricing?
A)Prices are often perceived as quality indicators.
B)Consumers like to be in control of costs.
C)Consumers are uncertain about the number and types of activities they might use at places like amusement parks.
D)Prices have little or no psychological influence on most consumers.

Accepted Answer

Two-part pricing is a price tactic that charges two separate amounts to consume a single good or service.

Question 15

Kule,Inc.produces three different lines of car racks for transporting large,bulky items. 
Total company net annual profit = $40,000
Included in the cost of goods sold is $12,000 of annual rent (a fixed cost)that is distributed equally among the three product lines.As a consultant to Kule,will you recommend that it drop the luggage rack line?
A)No,dropping the line will actually decrease overall net profits.
B)Yes,dropping the line will increase company net profits.
C)No,dropping the line will result in increased fixed costs.
D)Yes,dropping the line will reduce cost of goods sold and increase revenues.

Accepted Answer

Current net profit is $40,000.Dropping the luggage rack line will increase profit by $10,000 initially,but the fixed rent costs ($4,000)that are being covered by that line will have to be distributed to the other two lines.That means the cost of goods sold for each remaining line will increase by $2,000 (or $4,000/2).Cost of goods sold for the Bicycle line will increase to 112,000,resulting in profit of $28,000;cost of goods sold for the Ski line will increase to 142,000,resulting in a profit of $18,000.Total profit will be $46,000,or $6,000 more than if the company kept the Luggage line.Therefore,Kule should drop the line.

Question 16

What is escalator pricing?
A)a demand-oriented pricing tactic
B)similar to delayed-quotation pricing
C)similar to price tactic
D)a form of market penetration pricing

Accepted Answer

Escalator pricing allows for price increases and delays the setting of the final price.

Question 17

Which of the following are extra charges paid by consumers for violating the terms of purchase agreements?
A)decoy fees
B)punitive fees
C)consumer penalties
D)financial judgments

Accepted Answer

Consumer penalties are extra charges imposed on consumers for violating the terms of purchase agreements.

Question 18

The Grand Slam Ticket Pack of Major League Baseball's Toronto Blue Jays provides four game tickets,four hotdogs,four Coca-Colas,four Jays bucket caps,one game program,and parking at prices as low as $59.This price is significantly lower than the items could be purchased individually.What are the Jays using?
A)price lining
B)two-part pricing
C)price maintenance
D)price bundling

Accepted Answer

Marketing two or more products in a single package for a special price is called price bundling.

Question 19

Why are consumers required by certain companiesto pay consumer fees?
A)because businesses allegedly will sell more if the consumer is unaware of the actual costs
B)because businesses allegedly suffer an irrevocable revenue loss
C)because businesses allegedly avoid additional transactional costs when purchase agreements are violated
D)because businesses allegedly incur greater fixed costs as a result of the purchase agreement violation

Accepted Answer

Businesses allege they incur more transactional costs as a result of purchase agreements violations.Fixed costs do not change.

Question 20

Tickets to the combined amusement park and water slide were $49 for the day.Then the company gave customers the option to purchase tickets for either the amusement park or the water slide for $18.To help keep costs in line,the park management also began charging its customers a small parking fee.Initially,the cost of parking was figured into the $49 price.What is the amusement park using?
A)price bundling
B)potential (or base)pricing
C)unbundling
D)professional services pricing

Accepted Answer

Reducing the bundle of services that comes with the basic product is called unbundling.

Quiz 19: Setting the Right Price

Which of the following allows for price increases based on the cost-of-living index or some other formula?

One popular cost-oriented pricing tactic is culling low-profit margin products from the product line.Which of the following statements does NOT describe a reason that a marketing manager would want to avoid this tactic?

Post makes several varieties of cereals.In promoting this product line,Post offers a 50-cents-off coupon that can be used to purchase any of its cereals.Therefore,what must Post consider when pricing its cereals?

Which of the following factors can a manager ignore when deciding on prices for an entire product line?

Which of the following phrases accurately describes psychological pricing?

What is marketing two or more products in a single package for a special price known as?

Price is not set on the product until the item is either finished or delivered when using which of the following?

If a marketer decides to price goods at odd-numbered dollar amounts to denote bargains,and at even-numbered amounts to denote quality,what is he or she using?

Delayed-quotation pricing does which of the following?

Why do consumers sometimes prefer two-part pricing?

What is escalator pricing?

Which of the following are extra charges paid by consumers for violating the terms of purchase agreements?

Why are consumers required by certain companiesto pay consumer fees?