Question 1

Which of the following statements about pricing strategies throughout the product life cycle is FALSE?
A) During product decline, prices may also decline until there is only one competitor left in the market.
B) Price increases during the maturity stage are cost initiated instead of demand initiated.
C) The maturity stage often brings about price decreases.
D) Prices stabilize when the product enters the growth stage.
E) With inelastic demand, price will be set low in the introduction stage.

Accepted Answer

With inelastic demand,prices are set high at introduction.

Question 2

In the mature and highly competitive furniture industry,you would expect furniture manufacturers to engage in:
A) a price war
B) price escalation
C) prestige pricing
D) above-market pricing
E) geographical pricing

Accepted Answer

In the maturity stage,with heavy competition,below-market pricing leads to price wars.

Question 3

Many consumers,especially when faced with an uncertain purchase decision,think that a high price:
A) is a signal of quality
B) is an indication that consumers are being ripped off
C) will always lead to major price discounts to wholesalers and retailers that distribute it
D) is a sign of the company's overall market share
E) indicates that the brand was slipping into the decline stage of the product life cycle but has had a sudden resurgence of growth

Accepted Answer

Numerous studies have shown that consumers equate high price with high quality.

Question 4

When Apple Inc.developed and introduced the iPhone it was unique as it essentially combined a cellular phone with an iPod,an Internet browser,and email capabilities.As such,in the short run it seemed that demand for the product would be inelastic,with no real existing competition.The recommend pricing strategy in such a situation would be:
A) low initial price, rising slightly when entering the growth stage
B) high initial price, falling slightly when entering the growth stage
C) high price, continuing through growth and maturity
D) low price, continuing through growth and maturity
E) low price initially, rising constantly through growth and into maturity

Accepted Answer

A high initial price is used when a new product faces little competition,needs to recoup R&D costs,and has inelastic demand.Prices will fall slightly when entering the growth stage.

Question 5

When the Apple iPhone 3G was introduced the Apple iTunes web site also began selling small program "apps" written by third parties that could be run on the iPhone.One interesting app was the "I Am Rich" application.For a price of $1,000 you could buy this app that did nothing but display a red gem on the iPhone's screen.The description of the app stated that this red icon would remind you (and others you show it to)"that you were rich enough to afford this." Six of the applications were sold before Apple Inc.removed the app from iTunes.At the $1,000 price the author of the app was using _____ pricing as part of his marketing approach.
A) snob appeal
B) prestige
C) exclusive
D) selective
E) unique

Accepted Answer

Prestige pricing strategy sets high prices to connote high product quality and exclusiveness.

Question 6

Prestige pricing:
A) equalizes supply and demand
B) uses high prices to promote a high-quality product
C) is the practice of marking up prices by 100 percent
D) is also called leader pricing
E) emphasizes the monetary nature of price

Accepted Answer

Actually,prestige pricing emphasizes all the intangible considerations buyers make when purchasing.

Question 7

Kroger supermarkets will place well-known brands on the shelves at high prices while offering their own Kroger brand at lower prices.This practice is an example of:
A) illegal pricing
B) selling against the brand
C) price pressurization
D) brand cutting
E) private-label cannibalization

Accepted Answer

Selling against the brand with private labels causes sales of the higher-priced brands to decline.

Question 8

David likes New Balance running shoes.However,when he stopped by the Foot Locker to buy a new pair of running shoes he notice that Nike had a new pair of running shoes that cost $350.To David the higher price of the Nike shoe indicated that it would be a better pair of running shoes.This is an example of _____.
A) premium pricing
B) price lining
C) prestige pricing
D) exclusive pricing
E) selective pricing

Accepted Answer

Prestige pricing is the charging of a higher price to help promote high quality.

Question 9

During the hot summer months or the week before a new class starts if there is still space available,the Nick Price golf school in Orlando,Florida offers a 25 percent reduction to get golfers during the off-season or those making a last-minute decision.This is an example of pricing strategy used as a(n):
A) distribution tool
B) price enhancer
C) product strategy
D) direct sales tool
E) promotion strategy

Accepted Answer

Price is often used as a promotional tool to increase consumer interest.

Question 10

Shopping bots:
A) encourage a more creative use of advertising
B) link manufacturers, suppliers, and customers
C) create opportunities for prestige pricing
D) provide a means for comparison shopping
E) create inelastic demand

Accepted Answer

Bot is short for robot,and shopping bots theoretically give pricing power to the consumer.

Question 11

Tesla Motors
"Going green" doesn't have to be boring. The Tesla Roadster Sport is an electric car that goes from 0 to 60 in four seconds and drives more like a race car than an environmentally-friendly ride. But that level of performance will set you back $128,500. As of 2009, Silicon Valley-based Tesla Motors, Inc. was the only company offering highway-compatible electric cars. Most Roadster Sport buyers are car enthusiasts and are buying them for the "fun toy" aspect of having an electric car rather than for environmental reasons.
-Refer to Tesla Motors. Tesla set the price of the Roadster high because the company wanted to promote a high-quality image. What type of pricing does this represent?
A) prestige pricing
B) elite pricing
C) penetration pricing
D) quality pricing
E) complete pricing

Accepted Answer

Prestige pricing is charging a high price to help promote a high-quality image.

Question 12

Manufacturers can do all of the following to regain some control over the price their products are sold for at the retail level EXCEPT:
A) require resellers to maintain prices in line with competitors' prices
B) developing brand loyalty in consumers by delivering quality and value
C) avoiding doing business with price-cutting discounters
D) franchising
E) using an exclusive distribution system

Accepted Answer

Manufacturers can also package merchandise with the selling price marked on it or place goods on consignment.

Question 13

Which of the following statements about the Internet is true?
A) The Internet has shifted all shopping power to consumers.
B) Consumer reviews tend to be equal in quality.
C) Business-to-business auctions on the Internet are likely to be more important than consumer auctions in the future.
D) Fraud is not a problem on the Internet.
E) Extranets are programs that search the Internet for the best price for a particular product.

Accepted Answer

The Internet has shifted some,but not all,shopping power to consumers.Consumer reviews vary in quality.Fraud is a huge problem.

Question 14

Laurie knows little about cooking and does not want to spend the time to learn how to make a quiche.However,she has been asked to bring a quiche to an office retirement party.Not wanting to make a poor choice,she is likely to:
A) intuitively make the right choice
B) avoid making a decision by not attending the party
C) buy the most expensive pre-made quiche (perhaps paying too much), guessing that the price is related to quality
D) research the product and buy the least expensive frozen quiche she can find
E) buy the least expensive frozen quiche because most consumers feel that price is not directly related to quality

Accepted Answer

Most consumers equate price and quality.

Question 15

The dimensions of quality that are important to consumers include:
A) versatility
B) serviceability
C) performance
D) ease of use
E) all of the choices

Accepted Answer

Durability is another dimension.

Question 16

Marketing managers who attempt to raise the quality image of their product by selling it at high prices are following a(n)_____ strategy.
A) profit maximization
B) market share
C) maintained markup pricing
D) prestige pricing
E) investment asset

Accepted Answer

Prestige pricing strategy sets high prices to connote high product quality.

Question 17

Which of the following statements describes a limitation associated with break-even analysis?
A) It is sometimes difficult to ascertain whether a cost is fixed or variable.
B) It requires the calculation of marginal revenue.
C) It strictly considers demand.
D) It assumes variable cost per item, which is difficult to calculate.
E) It can only be expressed as a break-even point in dollar amounts.

Accepted Answer

Not all costs are easily categorized because a cost may be fixed when viewed in the short term but variable when considered over a longer period of time.

Question 18

Tesla Motors
"Going green" doesn't have to be boring. The Tesla Roadster Sport is an electric car that goes from 0 to 60 in four seconds and drives more like a race car than an environmentally-friendly ride. But that level of performance will set you back $128,500. As of 2009, Silicon Valley-based Tesla Motors, Inc. was the only company offering highway-compatible electric cars. Most Roadster Sport buyers are car enthusiasts and are buying them for the "fun toy" aspect of having an electric car rather than for environmental reasons.
-Refer to Tesla Motors. If total fixed costs are $23,400,000 and the average variable costs is $50,500,how many Roadsters must Tesla sell to break-even?
A) 130
B) 182
C) 250
D) 300
E) 463

Accepted Answer

Breakeven quantity = total fixed costs/(price - average variable costs)= 23,400,000/(128,500 - 50,500)or total fixed costs/fixed cost contribution = 23,400,000/78,000.

Question 19

Tesla Motors
"Going green" doesn't have to be boring. The Tesla Roadster Sport is an electric car that goes from 0 to 60 in four seconds and drives more like a race car than an environmentally-friendly ride. But that level of performance will set you back $128,500. As of 2009, Silicon Valley-based Tesla Motors, Inc. was the only company offering highway-compatible electric cars. Most Roadster Sport buyers are car enthusiasts and are buying them for the "fun toy" aspect of having an electric car rather than for environmental reasons.
-Refer to Tesla Motors.What is the fixed cost contribution for the Roadster given average variable costs of $50,500?
A) $50,500
B) $78,000
C) $128,500
D) $179,000
E) $500,000

Accepted Answer

Fixed cost contribution is the price minus the average variable cost: $128,500 - $50,500 = $78,000.

Question 20

Tesla Motors
"Going green" doesn't have to be boring. The Tesla Roadster Sport is an electric car that goes from 0 to 60 in four seconds and drives more like a race car than an environmentally-friendly ride. But that level of performance will set you back $128,500. As of 2009, Silicon Valley-based Tesla Motors, Inc. was the only company offering highway-compatible electric cars. Most Roadster Sport buyers are car enthusiasts and are buying them for the "fun toy" aspect of having an electric car rather than for environmental reasons.
-Refer to Tesla Motors. The price of the Roadster was set so that total revenue was as large as possible relative to total costs.This represents a _____ approach.
A) profit maximization
B) market share pricing
C) demand-oriented pricing
D) sales maximization
E) status quo pricing

Accepted Answer

Profit maximization means setting prices so that total revenue is as large as possible relative to total costs.

Quiz 19: Pricing Concepts

Which of the following statements about pricing strategies throughout the product life cycle is FALSE?

In the mature and highly competitive furniture industry,you would expect furniture manufacturers to engage in:

Many consumers,especially when faced with an uncertain purchase decision,think that a high price:

Prestige pricing:

Kroger supermarkets will place well-known brands on the shelves at high prices while offering their own Kroger brand at lower prices.This practice is an example of:

Shopping bots:

Manufacturers can do all of the following to regain some control over the price their products are sold for at the retail level EXCEPT:

Which of the following statements about the Internet is true?

Laurie knows little about cooking and does not want to spend the time to learn how to make a quiche.However,she has been asked to bring a quiche to an office retirement party.Not wanting to make a poor choice,she is likely to:

The dimensions of quality that are important to consumers include:

Marketing managers who attempt to raise the quality image of their product by selling it at high prices are following a(n) _____ strategy.

Which of the following statements describes a limitation associated with break-even analysis?