Question 1

A paving contractor wants to work on road construction contracts administered and paid for by the state government. The contractor submits a sealed proposal to the state department of transportation for each construction job. The proposal contains a description of how the contractor will fulfill the specifications for the job at a specified price. The contractor is engaging in:
A) Odd-even pricing.
B) Prestige pricing.
C) Leader pricing.
D) Bid pricing.
E) Price lining.

Accepted Answer

The scenario describes the contractor submitting a sealed proposal (also known as a bid) to the state department of transportation for each construction job. This process is known as bid pricing, where a seller submits a proposal or bid for a project or contract.

Question 2

_____ involves setting one price for a set of products.
A) Price lining
B) Odd-even pricing
C) Product bundle pricing
D) Bait pricing
E) Price leading

Accepted Answer

Product bundle pricing involves setting one price for a set of products, offering a discount for purchasing the bundle compared to buying each item separately.

Question 3

With regard to bid pricing, a marketing manager should be aware that:
A) the customer is always required to accept the lowest bid.
B) since it costs very little to submit a bid, most firms try to bid for as many jobs as possible.
C) the same overhead charges and profit rates usually apply to all bids.
D) a big problem is estimating all the costs--including the variable and fixed costs that apply to a particular job.
E) All of the above are true statements.

Accepted Answer

While it may sound logical that customers will always accept the lowest bid, this is not always the case. Many factors go into a customer's decision to choose a particular bid. Additionally, while it may not cost much to submit a bid, firms must carefully consider the costs associated with actually doing the job and make sure their bid covers those costs while still allowing for a profit. Overhead charges and profit rates may vary from bid to bid, depending on the specifics of the job. The biggest challenge in bid pricing is accurately estimating all the costs that apply to the job, including both variable and fixed costs. Thus, choice D is the best answer.

Question 4

The idea that people will pay extra for "quality" and status is the idea behind
A) price lining.
B) average cost approaches to pricing.
C) penetration skimming.
D) prestige pricing.
E) psychological pricing.

Accepted Answer

Prestige pricing is the strategy of pricing products higher to give consumers the perception that the products are of higher quality and status. This is often used by luxury brands and high-end products, and is based on the idea that some consumers will pay extra for the perceived prestige of owning these products.

Question 5

When AT&T attracts residential customers by setting one monthly fee for high-speed Internet, cable TV, and long-distance phone services that is $40 less than the price of purchasing these three services separately, this is an example of:
A) Reference price
B) Price line
C) Bundle price
D) Leader price
E) Demand-backward price

Accepted Answer

This is an example of a bundle price, where multiple products or services are sold together at a lower price than buying them separately.

Question 6

Some consumers maintain a "price-quality association," meaning that if a product has a high price, they assume the product must have high quality. This "price-quality association" is the basis for the use of:
A) Odd-even pricing.
B) Prestige pricing.
C) Leader pricing.
D) Reference pricing.
E) Price lining.

Accepted Answer

Prestige pricing is based on the idea that consumers equate higher prices with higher quality. This strategy uses a high price to give the product an image of high quality, luxury, or exclusivity.

Question 7

_____ means offering a specific price for each possible job rather than setting a price that applies for all customers.
A) Price lining
B) Odd-even pricing
C) Product bundle pricing
D) Bid pricing
E) Price leading

Accepted Answer

Bid pricing means setting a specific price for each possible job, which is commonly used in industries like construction or freelance work. Customers are given the opportunity to submit their own price for a particular job, and the company may choose to accept or reject the bid based on various factors, such as complexity of the job, available resources, and competition.

Question 8

Regarding bid pricing:
A) the same overhead charges and profit rates should apply to all bids--to avoid legal problems.
B) most firms should try to bid for as many jobs as possible--to spread risk.
C) all business buyers are legally required to accept the lowest bid--if they ask for bids.
D) the big problem for sellers is estimating all the costs--including the variable and fixed costs--that apply to a particular job.
E) All of the above are true.

Accepted Answer

The big problem for sellers is accurately estimating all the costs that apply to a particular job, including variable and fixed costs. Overhead charges and profit rates do not necessarily have to be the same for all bids, and it may not be feasible for most firms to bid on every job. Business buyers are not legally required to accept the lowest bid if they specifically request bids.

Question 9

Which of the following pricing approaches should be used by a profit-oriented retailer if its demand curve is down-sloping to the right for awhile--but then actually bends back to the left at lower prices?
A) Psychological pricing
B) Prestige pricing
C) Average-cost pricing
D) Bait pricing
E) Penetration pricing

Accepted Answer

Prestige pricing is appropriate for a profit-oriented retailer facing a demand curve that initially slopes downward to the right but then bends back to the left at lower prices. This phenomenon indicates that at lower prices, the perceived value and thus the demand for the product decreases, which is a scenario where prestige pricing can be effective. Prestige pricing involves setting a high price to signal high quality or exclusivity, appealing to consumers who associate higher prices with higher value, which aligns with the demand curve described.

Question 10

When Nintendo sets a relatively low price on its game units to stimulate more demand for its game cartridges, it is using
A) complementary product pricing.
B) product-bundle pricing.
C) price lining.
D) bait pricing.
E) cost plus pricing.

Accepted Answer

Complementary product pricing involves setting a price for one product low to stimulate demand for its complementary products. In this case, Nintendo sets a low price for its game units (consoles) to increase demand for its game cartridges, which are complementary products.

Question 11

Fly-Right Travel Agency arranges vacation packages to Disney World in Florida. The price includes airfare, a rental car, deluxe accommodations, and tickets to Disney World and other attractions. Fly-Right is using:
A) Product-bundle pricing.
B) Complementary product pricing.
C) Full-line pricing.
D) Bid pricing.
E) Demand-backward pricing.

Accepted Answer

Fly-Right Travel Agency is offering a package deal that includes multiple products or services (airfare, rental car, accommodations, and tickets to attractions) for one price. This is an example of product-bundle pricing, where multiple products are bundled together at a discounted price instead of being sold separately.

Question 12

When Walgreens Drugstore advertises one price for the cost of a roll of film and the cost of processing it, it is using
A) complementary product pricing.
B) flexible pricing.
C) product-bundle pricing.
D) a one-price policy.
E) bait pricing.

Accepted Answer

Product-bundle pricing involves offering several products for sale as one combined product. This strategy is used by Walgreens when it advertises a single price for both a roll of film and the cost of processing it, effectively bundling two complementary services into one package deal.

Question 13

Setting relatively high prices to suggest high-quality or high-status is:
A) odd-even pricing.
B) price lining.
C) leader pricing.
D) psychological pricing.
E) prestige pricing.

Accepted Answer

Prestige pricing is a strategy of setting high prices to suggest high quality, exclusivity or high-status. This pricing strategy is often used for luxury goods and services to create a sense of prestige and glamour, and to create a perception of value and exclusivity in the minds of customers.

Question 14

Which of the following statements is true?
A) Prestige pricing is used to target government buyers.
B) With full-line pricing, all products in the company's line must be targeted at the same market.
C) Demand-backward pricing is used to target industrial buyers.
D) Value pricing can only be used by mass-merchandisers.
E) None of the above is true.

Accepted Answer

None of the statements are true. Prestige pricing is used to target high-end consumers, not just government buyers. Full-line pricing involves pricing products in a product line differently to target different market segments. Demand-backward pricing involves setting a price based on what the buyer is willing to pay, regardless of whether they are industrial or consumer buyers. Value pricing can be used by any company that wants to offer high value at a low price, not just mass-merchandisers.

Question 15

With regard to bid pricing, a marketing manager should be aware that:
A) the same overhead charges and profit rates usually apply to all bids.
B) bids are usually based on inspection.
C) a big problem is estimating all the costs--including the variable and fixed costs that apply to a particular job.
D) e-commerce is of little use in bid pricing.
E) all of the above are correct.

Accepted Answer

Bids often involve estimating a wide range of costs, including both variable and fixed costs that are specific to the job. Overhead charges and profit rates can vary depending on the company and the project, and bids may or may not involve inspection. While e-commerce can be used to facilitate the bidding process, it is not directly related to bid pricing itself. Therefore, option C is the best choice.

Question 16

In a down economy, a local florist surveys her customers to determine the amount they feel comfortable spending for a bouquet of flowers. Then she displays bouquets costing that exact amount in her refrigerated case. This is an example of:
A) Reference price
B) Line price
C) Bundle price
D) Leader price
E) Demand-backward price

Accepted Answer

This is an example of demand-backward pricing, where the price point is determined first based on customer demand or expectation, and then the product (in this case, a bouquet of flowers) is tailored to meet that price point.

Question 17

Good Health Co. has set a suggested retail list price of $40 on its new vitamin tablets on the assumption that its target market will find the product attractive at this price. From this suggested retail list price, Good Health has subtracted its usual chain of markups for wholesalers and retailers to obtain its own selling price of $17. This is:
A) demand-backward pricing.
B) full-line pricing.
C) average-cost pricing.
D) odd-even pricing.
E) prestige pricing.

Accepted Answer

Demand-backward pricing involves setting a final price that consumers are willing to pay and then subtracting desired margins to find the price at which a manufacturer can sell the product to wholesalers or retailers. Good Health Co. used this approach by starting with a suggested retail price and working backward to determine its own selling price.

Question 18

Regarding "full-line pricing," which of the following statements is TRUE?
A) A good marketing manager usually tries to price products in a line so that the prices will seem logically related and make sense to target customers.
B) The marketing manager should try to cover all costs on the whole product line.
C) Most customers seem to feel that prices in a product line should be somewhat related to cost.
D) Not all companies that make a line of products must use full-line pricing.
E) All of the above are true.

Accepted Answer

Full-line pricing involves setting prices for a range of products in a way that makes sense to customers, covers costs across the line, and considers customer perceptions of cost relationships.

Question 19

If a service firm sets a specific price for each possible job--rather than setting a price which applies for all potential customers--it is most likely using:
A) product-bundle pricing.
B) a one-price policy.
C) price lining.
D) average-cost pricing.
E) bid pricing.

Accepted Answer

Bid pricing involves setting a specific price for each job based on the customer's needs and requirements. This is commonly used by service firms such as construction companies or freelance workers who need to quote a price for a specific project or service. The price is determined by a bidding process where the customer requests quotes and the service provider submits their bid based on the scope and complexity of the job.

Question 20

When consumers decide to purchase a music CD from Amazon.com, the company's Web site often suggests that consumers purchase an additional CD by the same artist for a combined price that is lower than the two CDs would sell for separately. Amazon.com is using:
A) Product-bundle pricing.
B) Complementary product pricing.
C) Full-line pricing.
D) Bid pricing.
E) Demand-backward pricing.

Accepted Answer

Amazon.com is using product-bundle pricing, which is the practice of offering several products for sale as one combined product at a lower price than the combined individual prices of the separate products. In this case, Amazon is offering two CDs by the same artist at a lower price than if they were bought separately.

Quiz 18: Price Setting in the Business World

_____ involves setting one price for a set of products.

With regard to bid pricing, a marketing manager should be aware that:

The idea that people will pay extra for "quality" and status is the idea behind

When AT&T attracts residential customers by setting one monthly fee for high-speed Internet, cable TV, and long-distance phone services that is $40 less than the price of purchasing these three services separately, this is an example of:

Some consumers maintain a "price-quality association," meaning that if a product has a high price, they assume the product must have high quality. This "price-quality association" is the basis for the use of:

_____ means offering a specific price for each possible job rather than setting a price that applies for all customers.

Regarding bid pricing:

Which of the following pricing approaches should be used by a profit-oriented retailer if its demand curve is down-sloping to the right for awhile--but then actually bends back to the left at lower prices?

When Nintendo sets a relatively low price on its game units to stimulate more demand for its game cartridges, it is using

Fly-Right Travel Agency arranges vacation packages to Disney World in Florida. The price includes airfare, a rental car, deluxe accommodations, and tickets to Disney World and other attractions. Fly-Right is using:

When Walgreens Drugstore advertises one price for the cost of a roll of film and the cost of processing it, it is using

Setting relatively high prices to suggest high-quality or high-status is:

Which of the following statements is true?

With regard to bid pricing, a marketing manager should be aware that:

In a down economy, a local florist surveys her customers to determine the amount they feel comfortable spending for a bouquet of flowers. Then she displays bouquets costing that exact amount in her refrigerated case. This is an example of:

Regarding "full-line pricing," which of the following statements is TRUE?

If a service firm sets a specific price for each possible job--rather than setting a price which applies for all potential customers--it is most likely using:

When consumers decide to purchase a music CD from Amazon.com, the company's Web site often suggests that consumers purchase an additional CD by the same artist for a combined price that is lower than the two CDs would sell for separately. Amazon.com is using: