Question 1

A local restaurant sells lunch entrees for $7.95, $9.95, and $09.95.From this information, you can infer the restaurant uses which of the following?

Accepted Answer

The restaurant is using odd pricing and price lining. Odd pricing refers to ending the price with an odd number (e.g. $7.95) to create the perception of a lower price. Price lining refers to the strategy of offering different levels of pricing for similar products (e.g. lunch entrees priced at $7.95, $9.95, and $11.95).

Question 2

A hamburger stand near the local mall sells hamburgers for $3.99, drinks for $1.99, and fries for $1.49, while a gourmet restaurant nearby sells entrees for $20, $30, and $45.Both of these restaurants are using ________.

Accepted Answer

The answer of A hamburger stand near the local mall...

Question 3

Joe Bergerson makes and sells maple racks for cooling cakes and cookies.Joe knows that it costs $15 to make one rack, and he wants to earn a 25 percent profit on each rack.Which approach to pricing is Joe most likely to use?

Accepted Answer

Cost-plus pricing is when a business adds a markup to the cost of producing a product to determine the selling price. In this case, Joe wants to earn a 25% profit on each rack he sells, so he would add 25% of the $15 cost to the price to determine the selling price. This approach is commonly used by small businesses and allows them to ensure they are making a profit on each product sold.

Question 4

Mach 3 razor blades must be used in the Mach 3 razor.Which type of pricing is most likely used for the razor blades?

Accepted Answer

Captive pricing is a strategy where the price of the main product is kept low to attract customers, but the complementary product (razor blades in this case) is priced higher. This is done to ensure that customers continue to purchase the complementary product from the same brand, as they cannot use it with any other product. The statement "Mach 3 razor blades must be used in the Mach 3 razor" indicates that the pricing strategy being used is captive pricing.

Question 5

Savings for You, a discount retail chain, is highly competitive.When entering a new market, Savings for You often cuts prices so deeply that it sells below costs, effectively pushing smaller companies with less purchasing power out of the market.Savings for You is most at risk of being accused of ________.

Accepted Answer

Predatory pricing is the act of a dominant company charging very low prices to drive out competition from smaller companies. This is done with the intention of creating a monopoly in the market. In this scenario, Savings for You is using deep price cuts to drive out smaller competitors from the market, which is an example of predatory pricing.

Question 6

The average price Xerox charged when it introduced the first stand-alone fax machine was $12,700.This premium price was a way for Xerox to recoup some of the research and development costs that went into production.Xerox used ________.

Accepted Answer

A skimming price is a pricing strategy where a company sets a high price for its product when introducing it to the market. This strategy is typically used to recoup development costs and generate high profits from early adopters who are willing to pay a premium price. This description matches the pricing strategy used by Xerox when introducing its first stand-alone fax machine.

Question 7

A skimming price strategy would likely be most effective in selling which of the following?

Accepted Answer

The answer of A skimming price strategy would likely be...

Question 8

A number of top fashion-modeling agencies were charged with ________ because they were jointly determining what commissions they would charge for models.

Accepted Answer

The term "price-fixing" refers to the practice of competitors agreeing to set prices within an industry in order to eliminate competition and increase profits. Horizontal price-fixing refers to when competitors at the same level in a supply chain collude to set prices, often through agreements or collusion. In this case, the modeling agencies were jointly determining what commissions they would charge, which is an example of horizontal price-fixing.

Question 9

Valeo Fashions has just introduced a new line of fashion dresses for teens.The line will initially enter the market at high prices in a ________ strategy.

Accepted Answer

Skimming pricing involves introducing a product at a high price initially and then gradually lowering the price over time. This strategy is often used when a company introduces a new and innovative product and wants to recoup the development costs quickly before competing products enter the market. In this case, Valeo Fashions is introducing a new line of fashion dresses for teens, which could be seen as innovative, and plans to enter the market at high prices, indicating a skimming pricing strategy.

Question 10

When a beverage maker came out with a new drink and priced it at half price for a month to attract buyers, the company was using a(n)________ strategy.

Accepted Answer

The answer of When a beverage maker came out with...

Question 11

Johnson Boats wants to introduce a new model of boat into mature markets in highly developed countries with the goal of quickly gaining mass-market share.As a consultant, you should recommend a ________ pricing strategy.

Accepted Answer

The best pricing strategy for Johnson Boats in the given scenario is a penetration pricing strategy. This is because the company's goal is to quickly gain mass-market share in highly developed countries. A penetration pricing strategy involves setting a low price to quickly penetrate the market and gain a larger market share. This pricing strategy is effective in attracting price-sensitive customers who will then spread positive word-of-mouth about the product, ultimately resulting in increased sales and market share.

Question 12

Which of the following is an example of a variable cost for an amusement park?

Accepted Answer

Food cart supplies are an example of a variable cost for an amusement park because the cost will vary based on how much food is sold. The other expenses listed (salary of the park manager, liability insurance, interest on the property's mortgage, property taxes) are fixed costs, meaning they are not directly tied to the level of activity in the park.

Question 13

For a company that manufactures plastic signs, the printing press used to make the signs, the manager's salary, and the utilities are all examples of ________.

Accepted Answer

Fixed costs are expenses that do not vary with the production level or sales volume of a company. The printing press, manager's salary, and utilities are all fixed costs for a plastic sign manufacturing company.

Question 14

As a manufacturer increases price, the ________ drops.

Accepted Answer

The answer of As a manufacturer increases price, the ________...

Question 15

Swatch surveyed the market and identified an unserved segment of watch buyers.Using these results, they created a watch at a price consumers were willing to pay.The unorthodox order of this marketing mix decision is an example of ________.

Accepted Answer

The answer of Swatch surveyed the market and identified an...

Question 16

Odd (Even) number pricing reported in dollar and cents such as - $1.99, $2.98,$56.95 is an example of_____________.

Accepted Answer

Odd (Even) number pricing is a psychological tactic used to make prices appear lower than they actually are, influencing consumer perception and encouraging purchases.

Question 17

Manufacturers of which of the following would be most likely to use freight absorption pricing?

Accepted Answer

The answer of Manufacturers of which of the following would...

Question 18

Bayer AG agreed to pay $46 million as part of a law settlement for conspiring with Archer-Daniels-Midland (ADM) to keep prices of citric acid at a certain level.These two international companies were guilty of ________.

Accepted Answer

Bayer AG and Archer-Daniels-Midland were guilty of price-fixing, which involves conspiring to artificially set prices at a certain level, often to limit competition and increase profits. The settlement payment is a result of their illegal behavior.

Question 19

After looking at the ads in her Sunday paper, Ruby decided to visit a local nursery and buy potting soil at $1.99 a bag.The regular price is $4.99 a bag.While Ruby was there she also purchased three bushes, six flowering plants, and a bird bath.You can infer from this information that the nursery used the bags of potting soil as a(n) ________.

Accepted Answer

The fact that the potting soil was being sold at a significantly discounted price suggests that the nursery used it as a loss leader - a product sold at a low price to attract customers who may then purchase other, higher-priced items.

Question 20

When Circuit Town Electronics sets its televisions at three price levels of $699, $899, and $1,099, it is most likely using ________.

Accepted Answer

Circuit Town Electronics is using price lining by offering three distinct price points for their televisions. Price lining involves offering products at different price points to appeal to different segments of the market.

Quiz 9: Price the Product