Question 1

Most buyers prefer basing-point pricing policies compared to other policies used by sellers to handle transportation costs.

Accepted Answer

Most buyers prefer policies such as freight absorption or uniform delivered pricing where the seller absorbs the transportation costs, rather than basing-point pricing where the buyer takes on the transportation costs based on the location of the seller. Basing-point pricing can sometimes lead to confusion and disputes over the actual cost of the product.

Question 2

Most price structures are built around list prices.

Accepted Answer

Most price structures are built around list prices, which are the prices set by the manufacturer or supplier and are often subject to discounts or markups for various factors such as volume purchases, special promotions, or customer loyalty programs.

Question 3

When the list price of a product is discounted by the value of a used product that is turned in at the time of sale,the transaction is called a sale with a trade-in.

Accepted Answer

A sale with a trade-in involves a discount on the list price when a customer turns in a used product.

Question 4

A low price is a sure sell because the demand for many goods is highly elastic.

Accepted Answer

While a lower price can increase demand for goods with elastic demand, it's not a sure sell because other factors like product quality, brand loyalty, and competition also significantly influence purchasing decisions.

Question 5

List price is the amount the consumer actually pays for a product.

Accepted Answer

List price is the price set by the manufacturer or retailer, but the consumer may end up paying a different price due to factors such as discounts, promotions, or bargaining. The amount the consumer actually pays is known as the selling price.

Question 6

Marketers implement leader pricing policies to avoid violating maximum-markup regulations and to earn a maximum return on promotional sales.

Accepted Answer

Leader pricing is used to attract customers by offering popular items at a low price, not to avoid markup regulations or maximize promotional sales returns.

Question 7

Rebates are usually granted to customers by retailers.

Accepted Answer

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Question 8

A dual pricing strategy provides more flexibility to set prices with changing market conditions than a market-differentiated pricing strategy.

Accepted Answer

A market-differentiated pricing strategy inherently allows for more flexibility as it involves setting different prices based on market segments, which can be adjusted according to market conditions. Dual pricing typically involves only two price points, offering less flexibility.

Question 9

A leader merchandise is a product offered by retailers to customers at less than cost to attract them to stores.

Accepted Answer

A leader merchandise is actually a product offered by retailers to customers at an attractive price to lead them into buying other products in the store. It is not sold at a loss.

Question 10

The global status of an industry will influence a firm's pricing strategies in international markets.

Accepted Answer

The global status of an industry can have a significant impact on a firm's pricing strategies when entering international markets. For example, if the industry is saturated with numerous competitors, the firm may need to offer lower prices in order to attract customers and gain market share. Alternatively, if the industry is dominated by only a few large firms, the firm may need to set prices at a similar level in order to be perceived as a credible player in the market. Additionally, economic, political, and social factors in the international markets may impact pricing decisions. Therefore, a firm must carefully consider the global industry and market conditions when developing pricing strategies.

Question 11

Skimming pricing strategies are also known as "market-plus pricing."

Accepted Answer

Skimming pricing involves setting higher prices for a new product or service in order to maximize profit in the early stages of its introduction. This approach is sometimes referred to as "market-plus pricing" as it aims to capture the most valuable consumers in a given market segment before gradually lowering prices over time to increase sales volume.

Question 12

Everyday low pricing is a pricing strategy that relies on short-term cost-cutting tactics such as coupons and rebates.

Accepted Answer

Everyday low pricing is a pricing strategy that aims at providing consistent and low prices for customers over a long period of time, rather than relying on temporary discounts and promotions.

Question 13

Trade-ins are seldom used in sales of durable goods.

Accepted Answer

Trade-ins are commonly used in sales of durable goods, such as cars and electronics, as a way for customers to offset the cost of a new purchase by trading in their old item.

Question 14

One-price policies are more likely to be applied in marketing programs based on individual bargaining.

Accepted Answer

One-price policies refer to a uniform pricing strategy where all customers are charged the same price for a product or service. This is less likely to be applied in marketing programs based on individual bargaining, where prices may vary depending on negotiations and agreements made between the buyer and seller.

Question 15

Tiffany,Rolex,Gucci,and Prada represent exclusivity,meaning their prices are mostly inelastic.

Accepted Answer

Exclusivity implies a sense of rarity and luxury, which often results in higher prices. Inelastic demand means that a change in price does not have a significant impact on demand, which is often the case for luxury brands that have a strong brand image and loyal customer base. Therefore, it can be inferred that Tiffany, Rolex, Gucci, and Prada have mostly inelastic prices.

Question 16

Setting prices is a one-time decision for most products in most companies.

Accepted Answer

Setting prices is not a one-time decision for most products in most companies as prices may need to be adjusted based on changes in market conditions, competition, and costs. Pricing strategies are often revisited and updated as needed.

Question 17

Large companies set up profit centers as a control device in their newly decentralized operation.

Accepted Answer

Large companies may set up profit centers in order to delegate more decision-making and accountability to individual units, while also keeping track of their financial performance. Profit centers are typically evaluated based on their profitability, which helps managers to identify areas for improvement and make informed decisions about resource allocation. This can be an effective control mechanism in a decentralized operation.

Question 18

The government monitors transfer pricing closely because it is an easy way for companies to avoid taxes on profits.

Accepted Answer

Transfer pricing refers to the practice of setting the price on goods and services sold between different subsidiaries or divisions within the same company. Companies can manipulate transfer pricing to shift profits to subsidiaries in countries with lower tax rates, thereby avoiding taxes in higher tax rate countries. The government monitors transfer pricing to prevent companies from exploiting this loophole and avoid taxes on their profits.

Question 19

A grocery store places tags on shelves just below the products that list the product name,UPC number,a store code,and the regular price of the product.This regular price is called the market price.

Accepted Answer

The regular price listed by a store is typically referred to as the "retail price" or "shelf price," not the "market price." The market price generally refers to the current price at which an asset or service can be bought or sold in a marketplace.

Question 20

Firms that price their products differently for online purchases face the risk of cannibalization.

Accepted Answer

This is because customers can easily compare online and offline prices and may choose to purchase the cheaper option, leading to a loss of sales for the brick-and-mortar stores. Additionally, customers may become hesitant to purchase products from physical stores if they know the online prices are lower, which can also contribute to cannibalization.

Quiz 19: Pricing Strategies