Question 1

The key to successful pricing is to match the product with the consumer's perception of value.

Accepted Answer

This statement is true. Pricing should be based on the perceived value of the product by the consumer, rather than solely on production costs or competitor prices. When a product is priced correctly based on its perceived value, consumers are more likely to make a purchase because they feel they are getting a fair price for what they are receiving.

Question 2

When a firm has a particular profit goal as its overriding concern,it will use target return pricing to meet the profit objective.

Accepted Answer

False

Question 3

If a firm is engaged in monopolistic competition,it should seek a way to differentiate itself.

Accepted Answer

In monopolistic competition, firms sell products that are somewhat differentiated from their competitors. Therefore, it is important for the firm to find a way to differentiate their product even further to gain a competitive advantage and attract more customers.

Question 4

Because consumers are generally more sensitive to price increases than to price decreases,it is easier to lose current customers with a price increase than it is to gain new customers with a price decrease.

Accepted Answer

This statement is supported by the concept of price elasticity of demand, which states that consumers tend to be more responsive to changes in price when it comes to products they already purchase regularly. This means that a price increase may cause current customers to switch to a cheaper alternative, while a price decrease may not necessarily attract new customers who were not previously interested in the product.

Question 5

Sellers using an EDLP pricing strategy often communicate their strategy through the creative use of a reference price.

Accepted Answer

EDLP (Everyday Low Pricing) strategy focuses on providing consistently low prices without frequent sales or discounts, thus reducing the emphasis on a reference price comparison.

Question 6

Pure competition occurs when there are many firms competing for customers in a given market but their products are differentiated.

Accepted Answer

This statement is incorrect. Pure competition occurs when there are many firms competing for customers in a given market and their products are identical, leaving no room for differentiation.

Question 7

At the break-even point,profits are maximized.

Accepted Answer

At the break-even point, the company's total revenue is equal to its total cost. While the company may not be incurring a loss, it is also not making a profit. Therefore, profits are not maximized at the break-even point.

Question 8

A gray market employs irregular but not necessarily illegal methods of distributing products.

Accepted Answer

A gray market involves the distribution of products through channels that are not authorized by the manufacturer, but the methods used are not necessarily illegal. It may involve importing products from other countries where they are sold at a lower price and then reselling them in a different market. While this practice may be against the manufacturer's wishes, it is not inherently illegal.

Question 9

A high / low pricing strategy relies on the promotion of sales,during which prices are temporarily reduced to encourage purchases.

Accepted Answer

A high/low pricing strategy involves setting high prices initially and then periodically offering sales or discounts to encourage purchases.

Question 10

Dynamic pricing is also referred to as individualized pricing.

Accepted Answer

Dynamic pricing is also known as individualized pricing because it involves pricing products or services differently for individual customers based on their unique characteristics and behaviors.

Question 11

A demand curve shows the relationship between income and demand.

Accepted Answer

A demand curve shows the relationship between price and quantity demanded, not income and demand.

Question 12

Pricing strategies should be aligned with a firm's overall goals and objectives.

Accepted Answer

Pricing strategies are an important component of a firm's overall strategy and should be aligned with their overall goals and objectives. The pricing strategy chosen can impact the firm's profitability, competitive position, and value proposition to the customer. Therefore, it is important to carefully consider pricing decisions within the context of the firm's broader strategic goals and objectives.

Question 13

Brands that have developed loyal customers have a higher price elasticity of demand.

Accepted Answer

Brands with loyal customers often have a lower price elasticity of demand because their customers are less sensitive to price changes and more likely to continue purchasing the product even if prices increase.

Question 14

When a retail store rarely sells deeply discounted or sale products,it is known as "everyday low pricing."

Accepted Answer

Everyday low pricing refers to a pricing strategy where products are consistently priced low without relying on sales or promotions to attract customers.

Question 15

American Airlines just reduced its fares for summer flights by $100.Delta Airlines changes its pricing structure and reduces its flights by $100 as well.Delta is employing status quo pricing.

Accepted Answer

Delta Airlines is employing status quo pricing by matching the price reduction of a competitor (American Airlines) to maintain its position in the market and avoid price wars.

Question 16

Diana owns a boutique specializing in ball gowns.Sales are stable and Diana feels it is time she had a 20 percent increase in her salary.If Diana takes this increase in compensation,it will decrease the break-even quantity of gowns she needs to sell on a monthly basis.

Accepted Answer

Increasing Diana's salary does not directly affect the break-even quantity of gowns she needs to sell. It may potentially affect her pricing strategy or expenses, but there is not enough information to determine the impact on the break-even quantity.

Question 17

Price is the only part of the marketing mix that does not generate costs.

Accepted Answer

Price generates revenue rather than incurring costs, unlike product development, distribution (place), and promotion, which all involve costs.

Question 18

Price elasticity of demand measures how changes in a price affect the quantity of the product demanded.

Accepted Answer

Price elasticity of demand is a measure of the responsiveness of the quantity demanded of a product to changes in its price. It can be described as the percentage change in quantity demanded in response to a percentage change in price. A high price elasticity of demand indicates that changes in price will result in significant changes in the quantity demanded, while a low price elasticity of demand suggests that changes in price will have a relatively small impact on the quantity demanded.

Question 19

Rarely is the lowest-price product offering the dominant brand in a given market.

Accepted Answer

While price is an important factor in consumer purchasing decisions, it is not the only factor. Other factors such as quality, brand reputation, and availability also influence consumer behavior. Therefore, the lowest-priced product may not necessarily become the dominant brand in a given market.

Question 20

The demand curve for prestige products generally slopes downward due to higher prices.

Accepted Answer

The demand curve for prestige products often slopes upwards at certain ranges because higher prices can increase the perceived value and desirability of these products, leading to increased demand.

Quiz 14: Pricing Concepts for Establishing Value