Question 1

Samsung management decided to use skimming as a pricing strategy for its newest line of high-definition television (HDTV) sets. It should be aware that this strategy does not
A)generate capital to cover research and development costs.
B)discourage competitors from entering the market.
C)provide flexibility in the introductory base price.
D)protect the firm from covering costs if prices are set too low.
E)reduce the stress that may be placed on the firm's production capabilities.

Accepted Answer

Skimming pricing involves setting high initial prices to maximize profits from early adopters, which can attract competitors to enter the market due to the high margins, rather than discouraging them.

Question 2

HP sells some of its color printers for about $100, but the refill cartridges cost over $30 each. HP's pricing strategy would be best labeled as
A)reference pricing.
B)captive pricing.
C)customary pricing.
D)price lining.
E)complementary pricing.

Accepted Answer

Captive pricing involves selling a product at a lower price and then charging a higher price for additional parts, supplies or accessories that are essential for using the product. In this case, HP is selling their color printers at a relatively low price of $100, but the refill cartridges are priced at over $30 each, which is essential for using the printer. This pricing strategy aims to capture customers by making the entry cost low, but making profits on the recurring purchases of the refill cartridges. Therefore, the best choice is B) captive pricing.

Question 3

When a satellite dish company uses bundling to combine phone, dish, and broadband Internet access prices, it is attempting to influence a consumer's perception of price to make a product's price more attractive and reduce "sticker shock." This is an example of using a ____ pricing strategy.
A)competition-based
B)cost-based
C)promotional
D)competitive
E)psychological

Accepted Answer

The given scenario is an example of using psychological pricing strategy, as it aims to influence a consumer's perception of price by offering a bundled package at a lower price than if the services were purchased individually. By presenting the package as a better deal and reducing the perceived price, the company hopes to attract more customers.

Question 4

If Norelco introduced a new electric razor that sonically removes hair and priced it first at $175 and then at $150 before reducing the price to $100, the firm's initial pricing strategy is known as
A)penetration pricing.
B)psychological pricing.
C)price lining.
D)price skimming.
E)odd-number pricing.

Accepted Answer

The initial pricing strategy described in the scenario is an example of price skimming, which involves initially setting a high price for a new product before gradually lowering it over time.

Question 5

The fact that senior citizens are charged a lower price at movie theaters than younger adults is an example of ____ pricing.
A)price-line
B)promotional
C)professional
D)differential
E)psychological

Accepted Answer

This is an example of differential pricing, which is when different prices are charged for the same product or service based on factors such as age, income, or location. In this case, senior citizens are charged a lower price compared to younger adults.

Question 6

If Dell uses _____ pricing for its newest version of laptops, it is probably most interested in obtaining market share; and it is assuming
A)premium pricing; that no other competitors are likely to enter the market soon.
B)price-skimming; that no other competitors are likely to enter the market soon.
C)premium pricing; it needs to recoup R & D costs as soon as possible.
D)penetration pricing; that no other competitors are likely to enter the market soon.
E)penetration pricing; that other competitors could enter the market easily.

Accepted Answer

Penetration pricing is a strategy used to enter a market with a low initial price to attract a large number of customers quickly, which is effective in markets where competitors can easily enter. This approach is aimed at quickly gaining market share.

Question 7

Blue Bunny produces a variety of ice cream flavors and lines of varying qualities. The higher quality ice cream varieties are priced higher than the basic ones. Blue Bunny is using ____ to price its ice cream.
A)captive pricing
B)reference pricing
C)premium pricing
D)price skimming
E)differential pricing

Accepted Answer

Blue Bunny is using premium pricing by offering higher quality ice cream varieties at a higher price point compared to their basic flavors.

Question 8

Georgina recently put her house on the market at an asking price of $260,000. She realizes, however, that in order to sell the house, she may have to use
A)secondary-market pricing.
B)reference pricing.
C)negotiated pricing.
D)price lining.
E)premium pricing.

Accepted Answer

Negotiated pricing allows Georgina to adjust the price of her house based on negotiations with potential buyers. This can help her find a price that is more attractive to buyers while still getting a fair price for her property. The other options (secondary-market pricing, reference pricing, price lining, and premium pricing) are not as applicable to the unique situation of selling a house.

Question 9

When an organization sets a number of prices for selected groups of merchandise, this is commonly referred to as
A)reference pricing.
B)price lining.
C)customary pricing.
D)odd-number pricing.
E)ethical pricing.

Accepted Answer

Price lining is a pricing strategy in which an organization sets a number of prices for selected groups of merchandise. This allows customers to easily compare and choose items within their desired price range, while also providing the organization with clear pricing strategies for different product categories.

Question 10

Which of the following would be used in setting the price of a new product if considerable competition is expected?
A)Psychological pricing
B)Penetration pricing
C)Odd-number pricing
D)Price skimming
E)Reference pricing

Accepted Answer

Penetration pricing is a strategy used to enter a competitive market by setting a lower initial price to attract customers quickly. This approach can be effective in discouraging competitors and building a customer base.

Question 11

A problem associated with ____ is that consumers can predict when prices will be lowered and delay purchases until that time.
A)random discounting
B)penetration pricing
C)reference pricing
D)everyday low pricing
E)periodic discounting

Accepted Answer

Periodic discounting refers to offering discounts at specific, predetermined times (such as seasonal sales or holiday promotions). The problem with this is that consumers can anticipate these sales and delay purchases until the discounted period, which can hurt sales during non-discounted times.

Question 12

If Nabisco wants to quickly gain a large market share with its new line of reduced-fat snack crackers, it should use
A)penetration pricing.
B)random discounting.
C)captive pricing.
D)price skimming.
E)everyday low prices.

Accepted Answer

Penetration pricing is a pricing strategy in which a company sets a low price for its product initially to quickly gain a large market share. This strategy is particularly effective when launching a new product, like Nabisco's reduced-fat snack crackers, as it allows the company to attract more price-sensitive consumers who are looking for a healthier snacking option at a lower price point. With penetration pricing, Nabisco can establish a foothold in the market and increase its sales volume, which may ultimately help the company achieve economies of scale and lower production costs in the long run.

Question 13

The "White Sale" that many department stores have every year a few weeks after Christmas is an example of
A)secondary pricing.
B)off-peak pricing.
C)periodic discounting.
D)random discounting.
E)captive pricing.

Accepted Answer

The "White Sale" that occurs every year a few weeks after Christmas is an example of periodic discounting, which is when discounts are offered at regular intervals or during specific times of the year, such as holidays or seasonal changes.

Question 14

When Sharp first introduced its line of graphing calculators, it set the price quite high; it has lowered the price as competitors have entered the market. The pricing strategy initially used by Sharp is called
A)customary pricing.
B)odd-number pricing.
C)penetration pricing.
D)price skimming.
E)reference pricing.

Accepted Answer

Sharp initially set the price high for its graphing calculators, which is characteristic of price skimming strategy, where a company charges a high price for its product during the introduction phase and gradually lowers the price over time. The other options, such as customary pricing, odd-number pricing, penetration pricing, and reference pricing, do not apply to the pricing strategy used by Sharp.

Question 15

The newest version of a product like Bose headphones is likely to use _____, while the new version of Red Bull is likely to use _____ .
A)penetration pricing; price skimming
B)price skimming; psychological pricing
C)psychological pricing; penetration pricing
D)price skimming; penetration pricing
E)price skimming; promotional pricing

Accepted Answer

Bose headphones are a high-end product with features that likely justify a higher price point, so a new version is likely to use price skimming to maximize profits before competitors release similar products. Red Bull, on the other hand, is a beverage with a large target market and high competition, so a new version is likely to use penetration pricing to gain market share and compete with other similar products.

Question 16

Pricing the basic product in a product line low while pricing related items at a higher level is called
A)premium pricing.
B)reference pricing.
C)captive pricing.
D)price skimming.
E)price lining.

Accepted Answer

Captive pricing involves setting a low price for the basic product in a product line and then charging higher prices for the accessories or related items. This strategy is often used to attract customers with the lower-priced basic product and then generate additional revenue through the sale of the higher-priced related items.

Question 17

A product that has more features than those of its competition, or that is perceived to be of higher quality, warrants using which type of pricing strategy?
A)Custom pricing
B)Special-event pricing
C)Premium pricing
D)Price lining
E)Reference pricing

Accepted Answer

Premium pricing is the best choice in this scenario because it is a strategy that sets a high price to convey that the product is of higher quality than its competition. This pricing strategy works well when there are features or benefits that differentiate the product from others in the market, and customers are willing to pay more for those extra features or benefits.

Question 18

If a business decides to reduce its prices once in a while on an unsystematic basis, it is using
A)price reduction planning.
B)random discounting.
C)bundle pricing.
D)periodic discounting.
E)penetration pricing.

Accepted Answer

Random discounting refers to price reductions that are not part of a planned strategy and are implemented on an unsystematic basis. This approach can help attract price-sensitive customers and move excess inventory, but it may also harm profit margins or confuse customers who become accustomed to these discounts. The other options listed involve more intentional and structured approaches to price setting and promotion.

Question 19

Executives in Japan decided to price Lexus luxury cars in the United States at $55,000 while pricing them at $66,000 in their own country. This is an example of
A)secondary-market pricing.
B)price skimming.
C)reference pricing.
D)odd-number pricing.
E)random discounting.

Accepted Answer

This is an example of secondary-market pricing, where a company sells the same product at different prices in different markets. In this case, Lexus cars are priced differently in the U.S. and Japan, reflecting a strategy to adapt prices for different market conditions or consumer expectations.

Question 20

A manager at Kohl's discovers that Macy's has reduced the price of its children's Levi's from $31.99 to $24.99, according to an advertisement in the Sunday newspaper. She immediately phones her store and instructs the salesperson on duty to put a sign up next to their children's Levi's that reads, "SALE: $24.99." This is an example of what pricing strategy?
A)Secondary-market pricing
B)Bundle pricing
C)Reference pricing
D)Random discounting
E)Comparison discounting

Accepted Answer

The answer of A manager at Kohl's discovers that Macy's...

Quiz 12: Pricing Concepts and Management

Samsung management decided to use skimming as a pricing strategy for its newest line of high-definition television (HDTV) sets. It should be aware that this strategy does not

HP sells some of its color printers for about $100, but the refill cartridges cost over $30 each. HP's pricing strategy would be best labeled as

When a satellite dish company uses bundling to combine phone, dish, and broadband Internet access prices, it is attempting to influence a consumer's perception of price to make a product's price more attractive and reduce "sticker shock." This is an example of using a ____ pricing strategy.

If Norelco introduced a new electric razor that sonically removes hair and priced it first at $175 and then at $150 before reducing the price to $100, the firm's initial pricing strategy is known as

The fact that senior citizens are charged a lower price at movie theaters than younger adults is an example of ____ pricing.

If Dell uses _____ pricing for its newest version of laptops, it is probably most interested in obtaining market share; and it is assuming

Blue Bunny produces a variety of ice cream flavors and lines of varying qualities. The higher quality ice cream varieties are priced higher than the basic ones. Blue Bunny is using ____ to price its ice cream.

Georgina recently put her house on the market at an asking price of $260,000. She realizes, however, that in order to sell the house, she may have to use

When an organization sets a number of prices for selected groups of merchandise, this is commonly referred to as

Which of the following would be used in setting the price of a new product if considerable competition is expected?

A problem associated with ____ is that consumers can predict when prices will be lowered and delay purchases until that time.

If Nabisco wants to quickly gain a large market share with its new line of reduced-fat snack crackers, it should use

The "White Sale" that many department stores have every year a few weeks after Christmas is an example of

When Sharp first introduced its line of graphing calculators, it set the price quite high; it has lowered the price as competitors have entered the market. The pricing strategy initially used by Sharp is called

The newest version of a product like Bose headphones is likely to use _, while the new version of Red Bull is likely to use _ .

Pricing the basic product in a product line low while pricing related items at a higher level is called

A product that has more features than those of its competition, or that is perceived to be of higher quality, warrants using which type of pricing strategy?

If a business decides to reduce its prices once in a while on an unsystematic basis, it is using

Executives in Japan decided to price Lexus luxury cars in the United States at $55,000 while pricing them at $66,000 in their own country. This is an example of