Question 1

Jake's Auto Repair receives an invoice for some equipment he purchased on credit. The full face value of the invoice is to be paid within 60 days. However, if it is paid within 10 days, Jake can take a 6 percent discount off the face value of the invoice. Which of the following notations accurately represents the conditions described above?
A) 24/7, net 6
B) 10/60, net 6
C) 6/10, net 60
D) 60/6, net 3
E) 10/6, net 60

Accepted Answer

The notation "6/10, net 60" means that the invoice is due in full within 60 days, but if paid within 10 days, a 6 percent discount can be taken. This accurately represents the conditions described in the problem statement.

Question 2

A penetration pricing policy:
A) Tries to sell the whole market at one low price.
B) Tries to sell the top of the market at a high price.
C) Is used when demand for the product involved is inelastic.
D) Usually involves a slow reduction in price over time.
E) Is used when the firm does not expect strong competition soon after its product is introduced.

Accepted Answer

Penetration pricing aims to capture the entire market by setting a low price to attract a large number of customers quickly.

Question 3

Which of the following observations concerning introductory price dealing is true?
A) Established competitors usually choose to meet introductory price dealing.
B) They are temporary price cuts to speed new products into a market.
C) They have the same effect as price skimming.
D) They are the same as low penetration prices.
E) The plan is to sustain the price cut for an extended period of time.

Accepted Answer

Introductory price dealing involves temporary price cuts to introduce new products into a market. It is different from price skimming, which involves setting high prices for new products to capture the market's early adopters. It is also different from low penetration prices, which involve setting low prices for new products to quickly gain a large market share. Established competitors may choose to respond to introductory price dealing or wait to see if it is successful before taking action. The goal of introductory price dealing is not to sustain the price cut for an extended period, but rather to generate interest and trial for the new product.

Question 4

A firm would likely pursue penetration pricing when
A) it expects zero competition.
B) economies of scale are nonexistent.
C) the elite market is substantial.
D) the whole demand curve is fairly elastic.
E) supply is limited.

Accepted Answer

Penetration pricing is appropriate when the whole demand curve is fairly elastic, meaning that a lower price will significantly increase the quantity demanded. This strategy can be used to gain market share and increase sales volume. The other options do not necessarily indicate a need for penetration pricing.

Question 5

______________ are reductions from list price that are given by a seller to a buyer who either gives up some marketing function or provides the function himself.
A) PMs
B) Phony prices
C) Spiffs
D) Markups
E) Discounts

Accepted Answer

Discounts are given by a seller to a buyer for taking on some of the marketing functions or providing the function themselves, which reduces the workload or expense for the seller.

Question 6

Final customers or users are normally asked to pay ______________ prices for products they buy.
A) basic list
B) phony list
C) discounted
D) wholesale list
E) unchanging list

Accepted Answer

Final customers or users are typically asked to pay the basic list price, which is the standard price set by the retailer or manufacturer before any discounts or promotions.

Question 7

Unilever is introducing a new brand of car window cleaner in market maturity. To speed its entry into the market-without encouraging price competition-Unilever should use:
A) a flexible-price policy.
B) a one-price policy.
C) a penetration pricing policy.
D) introductory price dealing.
E) a skimming pricing policy.

Accepted Answer

The answer of Unilever is introducing a new brand of...

Question 8

Some developers of apps for the Apple iPhone price their apps low at launch to encourage sales and get attention so they can move into the prestigious "Top 25" list. Then, they frequently raise prices to get a higher profit margin on later sales. The initial low price is a(n):
A) Noncumulative quantity discount.
B) Temporary sale.
C) Introductory price deal.
D) Skimming price.
E) Cumulative quantity discount.

Accepted Answer

The initial low price offered by developers of apps for the Apple iPhone is an introductory price deal, which is meant to encourage sales and get attention. This is a common strategy used by app developers to move into the prestigious "Top 25" list. Once they have achieved this, they may raise prices to get a higher profit margin on later sales.

Question 9

On June 23, 2010, the value of the euro was 1.31 compared to the U.S. dollar. This meant that an American paying $100 for a product in the United States would be asked to pay ______ euros for the same product while traveling in Europe.
A) 31
B) 69
C) 100
D) 131

Accepted Answer

If the euro is worth 1.31 compared to the U.S. dollar, then for every one U.S. dollar, you get 1.31 euros. To find out how many euros you would pay for a $100 product in the U.S., you need to multiply 100 by 1.31: 100 x 1.31 = 131. Therefore, an American paying $100 for a product in the United States would be asked to pay 131 euros for the same product while traveling in Europe.

Question 10

Using temporary price cuts to speed a producer's new product into a market is known as:
A) a skimming pricing policy.
B) introductory price dealing.
C) a flexible-price policy.
D) a penetration pricing policy.
E) a meeting competition pricing policy.

Accepted Answer

Introductory price dealing involves temporary price cuts to encourage early adoption and speed up market entry for a new product.

Question 11

A trade discount is also called a _____.
A) cumulative quantity discount
B) noncumulative quantity discount
C) seasonal discount
D) stock discount
E) functional discount

Accepted Answer

A trade discount is also known as a functional discount, which is a discount offered by the supplier to the buyer as an incentive for making a purchase. It is usually given as a percentage off the list price and is based on the buyer's status as a member of the trade or as a loyal customer, rather than on the volume of the purchase.

Question 12

The use of temporary price cuts to speed new products into a market and encourage trial by customers is:
A) A penetration pricing policy.
B) Introductory price dealing.
C) Pricing for dollar or unit sales growth.
D) A skimming price policy.
E) A flexible-price policy.

Accepted Answer

The use of temporary price cuts to speed new products into a market and encourage trial by customers is known as introductory price dealing. This pricing strategy aims to attract new customers and create a buzz around the product. By offering the product at a lower price, it becomes more accessible to potential customers who may be hesitant to buy it at its regular price point.

Question 13

When setting a price level policy, a good marketing manager knows that:
A) introductory price dealing usually does not increase sales.
B) a penetration price makes the most sense when there is a large "elite" market.
C) a "skimming" price may lead to low profits if demand is very elastic.
D) it's easy to raise prices if the initial price is too low.
E) None of these alternatives is correct.

Accepted Answer

Introductory price dealing often increases sales by attracting customers to try a new product. A penetration pricing strategy is most effective in markets with a large potential base of customers, not just an "elite" market, as it aims to attract a large number of customers quickly with low prices. A "skimming" price strategy, which involves setting high initial prices, can actually lead to high profits in the case of inelastic demand, not low profits. It is generally difficult to raise prices once a product is introduced at a low price because customers may resist the price increase, expecting the product to remain at the lower price point.

Question 14

The Ivory Islands Resort offers a forty percent discount on lodging from September through December every year due the dramatic fall in the number of visitors during the period, largely because of unfavorable weather conditions. This type of price reduction is called _____.
A) cumulative quantity discounts
B) noncumulative quantity discounts
C) seasonal discounts
D) trade discounts
E) functional discounts

Accepted Answer

The discount offered by the Ivory Islands Resort is a seasonal discount, which is a type of price reduction offered during particular seasons or months of the year when sales are usually slow.

Question 15

Which pricing policy is probably "best" for a profit-oriented, low-cost producer who is introducing a new product into a market with elastic demand and is expecting strong competition very soon after product introduction?
A) Skimming pricing
B) Introductory price dealing
C) Meeting competition pricing
D) Penetration pricing
E) Status quo pricing

Accepted Answer

Penetration pricing is the best choice for a profit-oriented, low-cost producer who is introducing a new product into a market with elastic demand and is expecting strong competition soon after product introduction. Penetration pricing involves setting a low price to penetrate the market and gain market share quickly while discouraging potential competitors from entering the market. This pricing strategy is effective in a market with elastic demand because it encourages customers to switch from competitors to try the new product at a lower price. Additionally, this strategy enables the firm to establish its brand and customer loyalty.

Question 16

A British firm selling in the U.S. prices its product at $100. The initial exchange rate is 0.80 pounds per dollar. If the new exchange rate is 0.75 pounds per dollar, the revenue for the British firm from a single sale would drop by
A) 80 pounds.
B) 5 pounds.
C) 75 pounds.
D) 10 pounds.
E) 8 pounds.

Accepted Answer

At the initial exchange rate of 0.80 pounds per dollar, $100 would convert to 100 * 0.80 = 80 pounds. At the new exchange rate of 0.75 pounds per dollar, $100 converts to 100 * 0.75 = 75 pounds. The difference in revenue from a single sale is 80 - 75 = 5 pounds.

Question 17

It is not uncommon for sales personnel at The Electronics Showroom to use aggressive sales tactics to encourage customers to buy Giant-Size brand televisions. Giant-Size has encouraged this behavior by using:
A) advertising allowances.
B) push money allowances.
C) stocking allowances.
D) trade-in allowances.
E) slotting allowances.

Accepted Answer

Push money allowances are incentives given by manufacturers to encourage salespeople to aggressively promote their products. In this case, Giant-Size is using push money allowances to encourage sales personnel at The Electronics Showroom to push their brand of televisions.

Question 18

_____ are the prices final customers or users are normally asked to pay for products.
A) Basic list prices
B) Discounts
C) Cost prices
D) Net prices
E) Payoffs

Accepted Answer

Basic list prices are the prices that customers are asked to pay for products without any discounts or deductions.

Question 19

Introductory price dealing:
A) would not be used if other competitors already had competing products on the market at a price consumers found acceptable.
B) is often viewed by competitors as a "stay out" price.
C) usually sets off price wars.
D) is different from penetration pricing.
E) can apply only to final consumers, not channel members.

Accepted Answer

Introductory pricing and penetration pricing are often used interchangeably, but they are technically different. Penetration pricing is the practice of setting a low price to gain market share, while introductory pricing refers to the initial price of a new product on the market, which could be high or low depending on the marketing strategy. Therefore, choice D is correct.

Question 20

A rebate is:
A) a temporary discount from the price list.
B) a reduction in price to encourage buyers to pay their bills quickly.
C) a temporary price cut to attract customers.
D) a refund paid to consumers after a purchase.
E) a document detailing pricing changes.

Accepted Answer

A rebate is a refund paid to consumers after a purchase, typically as a promotional offer. It is not a temporary discount, reduction in price for quick payment, temporary price cut, or a document detailing pricing changes.

Quiz 16: Pricing Objectives and Policies

A penetration pricing policy:

Which of the following observations concerning introductory price dealing is true?

A firm would likely pursue penetration pricing when

______________ are reductions from list price that are given by a seller to a buyer who either gives up some marketing function or provides the function himself.

Final customers or users are normally asked to pay ______________ prices for products they buy.

Unilever is introducing a new brand of car window cleaner in market maturity. To speed its entry into the market-without encouraging price competition-Unilever should use:

Some developers of apps for the Apple iPhone price their apps low at launch to encourage sales and get attention so they can move into the prestigious "Top 25" list. Then, they frequently raise prices to get a higher profit margin on later sales. The initial low price is a(n) :

On June 23, 2010, the value of the euro was 1.31 compared to the U.S. dollar. This meant that an American paying $100 for a product in the United States would be asked to pay ______ euros for the same product while traveling in Europe.

Using temporary price cuts to speed a producer's new product into a market is known as:

A trade discount is also called a _____.

The use of temporary price cuts to speed new products into a market and encourage trial by customers is:

When setting a price level policy, a good marketing manager knows that:

The Ivory Islands Resort offers a forty percent discount on lodging from September through December every year due the dramatic fall in the number of visitors during the period, largely because of unfavorable weather conditions. This type of price reduction is called _____.

Which pricing policy is probably "best" for a profit-oriented, low-cost producer who is introducing a new product into a market with elastic demand and is expecting strong competition very soon after product introduction?

A British firm selling in the U.S. prices its product at $100. The initial exchange rate is 0.80 pounds per dollar. If the new exchange rate is 0.75 pounds per dollar, the revenue for the British firm from a single sale would drop by

It is not uncommon for sales personnel at The Electronics Showroom to use aggressive sales tactics to encourage customers to buy Giant-Size brand televisions. Giant-Size has encouraged this behavior by using:

_____ are the prices final customers or users are normally asked to pay for products.

Introductory price dealing:

A rebate is: