Question 1

Which of the following is a form of psychological pricing that involves selling several products together at a single price in order to suggest a good value?

Accepted Answer

Bundle pricing involves selling products together at a single price to suggest a good value, making it a form of psychological pricing. Odd pricing refers to pricing products just below a round number, markup pricing involves adding a certain percentage to the cost of a product, and prestige pricing involves setting a high price to suggest high quality and exclusivity.

Question 2

Price elasticity (e)= x/percent change in price where x stands for:

Accepted Answer

Price elasticity measures the responsiveness of quantity demanded to a change in price. Therefore, x in the formula refers to the percent change in quantity demanded. Choices A, B, and C are not relevant to the calculation of price elasticity.

Question 3

A gas station in South Ventalia charges $4.99 instead of $5.00 for regular gas and $9.99 instead of $10.00 for premium gas to encourage its customers to believe that its prices are low.This is an example of _____.

Accepted Answer

This is an example of odd-even pricing, where prices are set just below a round number to give the impression of being a better deal.

Question 4

Paper & MoreInc.is an online retailer of printers and accessories.A recent advertisement on its website reads "Buy a compact photo printer and single-use color cartridge combo and save 30% percent on retail prices! Limited period offer.Act now!" Which of the following pricing strategies is the retailer using to sell its products?

Accepted Answer

The retailer is using bundle pricing strategy where they offer a combo deal with a discount on the total price of the items if purchased separately.

Question 5

Which of the following best explains why Delicia Co. ,a manufacturer of potato chips,prices each bag of potato chips at 99 cents rather than $1.00?

Accepted Answer

This pricing strategy is known as psychological pricing, where the price is set just below the whole dollar amount to make consumers think that the product is priced lower than it actually is. This can encourage more sales and make the product more attractive.

Question 6

Under a single policy,Reassurance Inc. ,an insurance company,provides insurance coverage for healthcare,accident,and property to independent corporations.By doing this,Reassurance Inc.aims to:

Accepted Answer

By providing coverage for multiple types of insurance under a single policy, Reassurance Inc. is offering value and convenience for its customers. This can encourage more businesses to sign up for the insurance, increasing sales for the company. It does not necessarily signal exceptional fine service, offer steep price discounting, or position the company as a high-quality upholder, although these could potentially be secondary benefits.

Question 7

Which of the following is a type of psychological pricing strategy?

Accepted Answer

Bundle pricing is a type of psychological pricing strategy that sets the price of a group of products or services sold together lower than the combined price of the individual items. It creates the perception of a bargain and encourages customers to buy more than they originally intended. Cost-plus pricing, rate-of-return pricing, and markup pricing are not psychological pricing strategies.

Question 8

_____ is estimated by dividing relative changes in the quantity sold by the relative changes in price.

Accepted Answer

Price elasticity is a measure of the responsiveness of the quantity demanded or quantity sold of a product to changes in its price. It is calculated by dividing the percentage change in the quantity sold by the percentage change in price.

Question 9

When Lucile visited a stationery store to buy tape,she noticed that each roll of tape was priced at $1.99.In fact,most of the prices at the store were set a few dollars or a few cents below a round number.This indicates that the manager of the store is using a(n)_____.

Accepted Answer

The use of prices that are slightly below a round number is a characteristic of the odd-even pricing strategy. This strategy involves setting prices at odd numbers or just below the nearest dollar or ten-dollar amount, with the idea that customers perceive them as being lower than they actually are.

Question 10

Travel agencies offering vacation packages that include travel,accommodation,and entertainment at a single price to connote value and convenience for customers is an example of _____.

Accepted Answer

Bundle pricing refers to the strategy of offering multiple products or services as a package deal at a lower price than they would cost individually. This is done to convey value and convenience to customers, as seen in the example of travel agencies offering vacation packages that include travel, accommodation, and entertainment at a single price. This type of pricing is particularly effective in the tourism and hospitality industries.

Question 11

Which of the following observations is true of price elasticity?

Accepted Answer

Price elasticity is a measure of how responsive consumers are to changes in the price of a product or service. It helps businesses understand how sensitive customers are to price changes, and can inform pricing decisions and marketing strategies. Options A, C, and D are not accurate. While demographic factors can impact price elasticity, psychological factors such as brand loyalty and perceived value also play a role. Estimating price elasticity from historical data can be a cost-effective approach, and while crude estimates may not be as accurate as more precise calculations, they can still be useful for informing pricing decisions.

Question 12

Kenny and Tessa are planning to go on vacation.They learn that Dreamz Travel,a travel agency,is offering a special package that includes travel,lodging,and entertainment at a much lower price than the couple would have to pay for all of them separately.Which of the following pricing strategies is Dreamz Travel using in this scenario?

Accepted Answer

Dreamz Travel is offering a package that includes multiple products or services at a discounted price. This pricing strategy is known as bundle pricing.

Question 13

_____ is an example of a psychological pricing strategy.

Accepted Answer

Odd-even pricing is a psychological pricing strategy that involves setting prices at odd numbers (such as $9.99) to create the impression of a lower price. This strategy aims to appeal to consumers' emotions and make them believe that they are paying less than they really are, resulting in increased sales. Other pricing strategies, such as cost-plus pricing, markup pricing, and rate-of-return pricing, do not rely on psychological factors to influence consumer behavior.

Question 14

For which of the following products is a retailer most likely to use prestige pricing?

Accepted Answer

Retailers are most likely to use prestige pricing for products that are luxury or high-end items, such as crystal wine glasses. This type of pricing strategy is effective for products where consumers are willing to pay more for a perceived higher quality or status. Plastic storage containers, fresh fruits, and frozen desserts are not typically associated with prestige pricing.

Question 15

In odd-even pricing,_____.

Accepted Answer

In odd-even pricing, prices are set just below a round number to create a perception of the product being less expensive. For example, setting a price at $9.99 instead of $10.00.

Question 16

Matrixautos,an automobile rental unit,rents its cars at $499 rather than $500 to encourage its consumers to think of its services as less expensive.This is an example of _____.

Accepted Answer

This is an example of odd-even pricing, where the price is set just below a round number to create the perception of a more affordable price.

Question 17

Enchante Inc.is a high-end perfume manufacturer.It slashed the price of its brand of perfume "Entice" by 5 percent,which resulted in a 20 percent increase in sales.Estimate the price elasticity for Entice.

Accepted Answer

The price elasticity of demand is calculated as the percentage change in quantity demanded divided by the percentage change in price. Here, it's (20% / 5%) = 4.

Question 18

Cogniti Inc.manufactures high-end designer sports shoes.The company increased the price of its most popular brand of shoes,Sportsy,by 10 percent,and the demand for these shoes went up by 50 percent.Estimate the price elasticity for Sportsy.

Accepted Answer

The price elasticity of demand is calculated as the percentage change in quantity demanded divided by the percentage change in price. Here, it's (50% / 10%) = 5.

Question 19

Fido's Burgers,a fast food joint,offers its customers a chicken burger meal with fries,coleslaw,and soda at a price lower than would be charged if the products were purchased separately.This example would best describe a(n)_____.

Accepted Answer

The scenario describes a bundle pricing strategy where the fast food joint offers a discounted price for a combination of products (chicken burger meal with fries, coleslaw, and soda) than if the individual products were purchased separately.

Question 20

Bundle pricing is a psychological pricing strategy in which:

Accepted Answer

Bundle pricing involves grouping several products together and selling them at a single price. This strategy creates a perception of value and convenience for customers, as they can purchase multiple items at a discounted rate compared to buying each item separately. This not only appeals to customers but also increases the chances of selling more products per customer, which can lead to higher profits for the business. Thus, option C is the correct choice. Options A and B describe different pricing strategies, and option D suggests pricing based solely on cost and historical prices, which may not consider other factors such as competition and market demand.

Quiz 11: Pricing Strategy