Question 1

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 2

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 the marginal revenue equals marginal cost.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 the price so that marginal revenue equals marginal cost.

Question 3

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 4

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 5

Which of the following statements about pricing strategies throughout the product life cycle is NOT true?
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 during the introduction stage.

Accepted Answer

With inelastic demand,prices are set high at introduction.

Question 6

Ceylon Express sells bottled pasteurized tea to retailers.It has the following revenues and costs: 
What is the annual break-even point in units for the company?
A) 50,000
B) 250,000
C) 100,000
D) 166,667
E) 500,000

Accepted Answer

Break-even quantity is the total fixed costs ($50,000.00)divided by fixed cost contribution per unit ($0.20).

Question 7

When Jerry took delivery of his brand new (and very expensive)Jaguar automobile,he was filled with pleasure and excitement.This is an example of the _____ effect associated with the price-quality relationship.
A) durability
B) allocative
C) prestige
D) hedonistic
E) performance

Accepted Answer

Hedonistic consumption refers to pursuing emotional responses associated with using a product,such as pleasure,excitement,arousal,and fun.

Question 8

When Apple,Inc.developed and introduced the iPad,it was unique as it essentially combined a touch-based portable computer,a wireless marketplace,and an eBook reader.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 research and development costs,and has inelastic demand.Prices will fall slightly when entering the growth stage.

Question 9

As a product enters the growth stage,prices generally begin to stabilize.One reason for this is that:
A) the product has begun to appeal to a broader market.
B) most competitors have been eliminated from the market.
C) manufacturers hope to recover their development costs quickly.
D) the available supply decreases.
E) All of the above are correct.

Accepted Answer

Other reasons include competitors entering the market and economies of scale.

Question 10

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 11

When the Apple iPhone 3G was introduced,users could buy the "I Am Rich" app for a price of $1,000.The app 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 12

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 good quality.

Question 13

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

Accepted Answer

Durability and prestige are other dimensions.

Question 14

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 15

David likes New Balance running shoes.However,when he stopped by the Foot Locker to buy a new pair of running shoes,he noticed 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 charging a high price to help promote a high-quality image.

Question 16

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 17

Shopping bots:
A) encourage a more creative use of advertising.
B) link manufacturers, suppliers, and customers.
C) create opportunities for prestige pricing.
D) search the Web for the best price.
E) create inelastic demand.

Accepted Answer

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

Question 18

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 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.If Tesla had assets of $5 million and net profits after taxes of $550,000,what is Tesla's return on investment?
A) 1 percent
B) 9 percent
C) 11 percent
D) $14,135
E) $4,450,000

Accepted Answer

Return on investment = Net profit after taxes ÷ Total assets OR
Return on investment = $550,000 ÷ $5,000,000

Question 20

Prices generally begin to stabilize:
A) as a product enters the growth stage.
B) when a product if first introduced onto the market.
C) as a result of keystoning.
D) when a product enters the decline stage of the life cycle.
E) in hotly competitive markets.

Accepted Answer

As the product enters the growth stage,prices generally begin to stabilize.

Quiz 37: Pricing Concepts

Which of the following statements about the Internet is true?

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

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 about pricing strategies throughout the product life cycle is NOT true?

Ceylon Express sells bottled pasteurized tea to retailers.It has the following revenues and costs: What is the annual break-even point in units for the company?

When Jerry took delivery of his brand new (and very expensive) Jaguar automobile,he was filled with pleasure and excitement.This is an example of the _____ effect associated with the price-quality relationship.

As a product enters the growth stage,prices generally begin to stabilize.One reason for this is that:

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

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

The dimensions of quality that are important to consumers include:

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:

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:

Prices generally begin to stabilize: