Question 1

When a seller uses "zone pricing," all customers who are in the same zone are charged the same freight charge-even if the actual shipping cost varies.

Accepted Answer

When a seller uses zone pricing, they divide the shipping destinations into zones based on distance from the origin or other factors such as population density. Customers within the same zone are charged the same freight charge regardless of the actual shipping cost. This allows the seller to simplify their shipping pricing structure and may result in some customers paying a higher than necessary shipping fee, while others pay less than the actual cost.

Question 2

There are more pricing options in pure competition than in monopolistic competition.

Accepted Answer

In pure competition, the market sets the price due to the large number of sellers offering identical products, leaving little room for individual pricing strategies. In monopolistic competition, each firm has some degree of market power due to product differentiation, allowing for more pricing options.

Question 3

If a seller wanted to pay the delivery charges and keep title to the products until delivered to a buyer, the seller could use "F.O.B. buyer's factory" geographic pricing terms.
F.O.B. buyer's factory. In this case, title does not pass until the products are delivered.
F.O.B. delivered or

Accepted Answer

F.O.B. (Free On Board) buyer's factory means the seller retains ownership and responsibility for the goods until they are delivered to the buyer's location, including paying for delivery charges.

Question 4

Freight-absorption pricing basically amounts to cutting list price on sales to distant customers.

Accepted Answer

Freight-absorption pricing involves cutting list price to offset the cost of shipping to distant customers.

Question 5

Uniform delivered pricing is most commonly used when transportation costs are relatively low.

Accepted Answer

Uniform delivered pricing is when a company charges the same price for a product regardless of the location of the customer. This pricing strategy is most commonly used when transportation costs are low, as the cost of delivering the product to a distant location does not significantly affect the overall price.

Question 6

F.O.B. "shipping point" pricing simplifies the seller's pricing, but tends to reduce the size of the seller's market.
F.O.B. shipping point pricing simplifies the seller's pricing but it may narrow the market.

Accepted Answer

F.O.B. shipping point pricing means that the buyer is responsible for paying the shipping costs and takes ownership of the goods at the seller's warehouse or shipping point. This simplifies the seller's pricing because they only need to quote a price for the goods themselves, without having to account for shipping costs. However, this may reduce the size of the seller's market because some buyers may prefer F.O.B. destination pricing, where the seller is responsible for shipping costs and the buyer takes ownership of the goods at their own location.

Question 7

When a seller uses "zone pricing," the actual freight charge for delivering each order is included in the price the buyer pays for the product.

Accepted Answer

Zone pricing involves setting different prices for the same product in different geographical areas, not necessarily including the actual freight charge for each specific delivery in the price.

Question 8

Value pricing involves developing a "bare bones" marketing mix and a cheap price.

Accepted Answer

Value pricing involves setting a price that represents a good value for the customer while still allowing the company to earn a profit. This may involve offering a mix of benefits and features that are important to the target market, which may result in a higher price point than a "bare bones" approach.

Question 9

Push money allowances are intended to make the retailers' salespeople sell particular products very aggressively.

Accepted Answer

Push money allowances are financial incentives given to retailers' salespeople to encourage them to aggressively sell specific products.

Question 10

"Value pricing" means setting a fair price level for a marketing mix that gives the target market superior customer value.

Accepted Answer

Value pricing involves setting a price that aligns with the perceived value of the product or service to the customer, rather than just considering the cost of production or competitors' prices. This allows companies to offer superior customer value and remain competitive in the market.

Question 11

Unfair trade practice acts put a higher limit on prices, especially at the wholesale and retail levels.

Accepted Answer

Unfair trade practice acts often aim to prevent prices from being artificially inflated, but they do not set specific price limits. Instead, they may prohibit certain types of price manipulation, such as price fixing or price gouging.

Question 12

In oligopoly situations, the only sensible policy is meeting competition.

Accepted Answer

In oligopoly situations, there are only a few firms in the market and they tend to have a significant impact on prices and competition. Therefore, attempting to engage in aggressive pricing or other strategies to gain market share can often lead to a price war or other negative outcomes. The most practical and effective approach is usually to focus on meeting the competition, offering similar products or services at competitive prices, while finding ways to differentiate the company through quality, service, or other means.

Question 13

A value pricer tries to offer a target market the same marketing mix as competitors but with a below-the-market price.

Accepted Answer

A value pricer aims to offer a similar marketing mix as competitors with a lower price, but not necessarily below the market price. They may offer a similar price as the market, but provide more value to customers through other aspects of the marketing mix such as product quality or promotions.

Question 14

In mature markets there is downward pressure on both prices and profit margins. In this situation retailers often have to set prices to meet the competition.

Accepted Answer

In mature markets, competition is high and customers have more options to choose from, resulting in retailers having to set competitive prices to maintain their market share. This puts downward pressure on both prices and profit margins as retailers try to offer the best value to customers.

Question 15

Most firms operate in monopolistic competition instead of pure competition.

Accepted Answer

Most firms differentiate their products through branding, advertising, and other marketing strategies, which leads to a degree of market power and differentiation from competitors. This creates monopolistic competition, where firms have some control over setting prices and face a downward sloping demand curve, rather than the perfectly elastic demand curve under perfect competition.

Question 16

The unfair trade practices acts are intended to prevent intermediaries from using "outrageously" high markups that would cheat consumers.

Accepted Answer

The answer of The unfair trade practices acts are intended...

Question 17

Most firms operate in monopolistic competition, where products and whole marketing mixes are not exactly the same.

Accepted Answer

Monopolistic competition is characterized by a large number of competitors with differentiated products, allowing for some control over pricing and marketing strategies.

Question 18

Meeting the competitive price often makes sense for a firm in an oligopoly situation, because setting a price above the market will usually result in a large loss of sales it might have gotten at the competitive price.

Accepted Answer

In an oligopoly situation, there are only a few firms that dominate the market. These firms are aware of each other's strategies and are constantly trying to gain a competitive advantage. If a firm sets a price above the market, it risks losing customers to its competitors who offer a similar product at a lower price. Thus, setting a competitive price makes more sense as it can help the firm retain its market share and prevent a loss of sales.

Question 19

In zone pricing, the seller pays the actual freight charges and bills each customer the exact amount.

Accepted Answer

In zone pricing, the seller charges each customer a fixed shipping rate based on the geographic zone of the customer, rather than the actual freight charges.

Question 20

Stocking allowances are given to an intermediary to get shelf space for a product.

Accepted Answer

Stocking allowances are a type of trade promotion in which an intermediary, such as a retailer or distributor, is given a financial incentive to stock or carry a particular product. This could include payments for shelf space, discounts on purchases or advertising support.

Quiz 16: Pricing Objectives and Policies