Question 1

The owner of a flower shop decided to sell a dozen red roses for $13.50.He hopes the below-cost price for the roses will attract current and new customers who will also buy regularly priced items.The manager is encouraging store patronage through:
A) variable pricing
B) psychological pricing
C) price maintenance
D) price lowballing
E) leader pricing

Accepted Answer

Leader pricing is a pricing strategy where a business offers a discounted price on a popular or in-demand product to attract customers, with the hope that they will also purchase regularly priced items. In this case, the owner of the flower shop is using leader pricing by selling a dozen red roses below cost to attract customers and encourage them to purchase other items at regular prices.

Question 2

Kule,Inc.produces three different lines of car racks for transporting large,bulky items.  Included in the cost of goods sold is $12,000 of annual rent (a fixed cost)that is distributed equally among the three product lines.As a consultant to Kule,will you recommend that they drop the luggage rack line?
A) No,dropping the line will actually decrease overall net profits.
B) Yes,dropping the line will increase company net profits.
C) No,dropping the line will result in increased fixed costs.
D) Yes,dropping the line will reduce joint costs.
E) Yes,dropping the line will reduce cost of goods sold and increase revenues.

Accepted Answer

The answer of Kule,Inc.produces three different lines of car racks...

Question 3

Marketing two or more products in a single package for a special price is known as:
A) price bundling
B) two-part pricing
C) psychological pricing
D) price lining
E) family pricing

Accepted Answer

Price bundling refers to selling two or more products together as a single package at a discounted price, which encourages customers to purchase more items and provides a greater value proposition. This strategy can increase sales and profitability because it increases the perceived value of the overall package and appeals to customers looking for a deal.

Question 4

OfficeMax,a retailer of office supplies,is selling a point-and-shoot digital camera,the printer and software needed to print photographs,and a starter package of photograph paper for $230.If purchased separately,the items would cost a total of $250.OfficeMax has used:
A) price lining
B) two-part pricing
C) price maintenance
D) price bundling
E) price bracketing

Accepted Answer

The situation described is an example of price bundling, where multiple products or services are sold together as a bundle for a lower total price than if they were purchased separately.

Question 5

_____ are extra fees paid by consumers for violating the terms of purchase agreements.
A) Decoy fees
B) Misuse discounts
C) Punitive fees
D) Consumer penalties
E) Financial judgments

Accepted Answer

Businesses impose consumer penalties for two reasons: (2)suffer an irrevocable revenue loss and/or (2)incur significant additional transaction costs should customers be unable or unwilling to complete their purchase obligations.

Question 6

One popular cost-oriented pricing tactic is culling low-profit margin products from the product line.Which of the following statements does NOT describe a reason why a marketing manager would want to avoid this tactic?
A) The low margin item may be a large volume contributor to profit.
B) The tactic focuses special attention on the costs of producing each line and their contribution to overhead.
C) The loss of one item in the line may reduce the economies of scale.
D) The rest of the product line image may suffer if there is a "hole" in the line.
E) Other items in the line will now have to cover more fixed costs.

Accepted Answer

The statement in option B actually describes a reason why a marketing manager might want to use this tactic, as it emphasizes understanding the cost structure and contribution to overhead, rather than avoiding it.

Question 7

Leader pricing is used to:
A) attract customers to a store so they can be persuaded to buy a more expensive product instead
B) bundle products together for sale
C) attract customers to the store so they will buy other products in addition to the leader product
D) price products at odd numbered amounts to stimulate demand
E) maintain a status quo pricing strategy

Accepted Answer

Leader pricing is used to attract customers to the store with a lower-priced or discounted product, with the hope that they will purchase other products along with the leader product. This helps retailers to increase their sales and profitability.

Question 8

The Terra Vista Airport is a small airport frequently used by people who love the sport of skydiving.To help keep costs in line,the airport now charges its customers a small parking fee.At one time,the cost of parking at the airport was included in the price of the jump.Terra Vista Airport uses:
A) price lining
B) potential (or base)pricing
C) unbundling
D) professional services pricing
E) price maintenance

Accepted Answer

Terra Vista Airport is using unbundling pricing strategy by separating the cost of parking from the price of the jump, which helps the airport keep costs in line.

Question 9

Which of the following phrases accurately describes psychological pricing?
A) banned in most states
B) designed to aid the economy-minded purchaser
C) equally effective on all types of products
D) also called odd-even pricing
E) essentially the same as price shading

Accepted Answer

Psychological pricing is also known as odd-even pricing, which is the practice of setting prices at odd or even numbers to create a perception of a lower price, for example, $9.99 instead of $10. This is because consumers tend to perceive prices that end in 9 as lower than prices rounded to the nearest dollar.

Question 10

Ducktown Used Cars aired a radio spot announcing,"Today only,previously owned cars are only $200!" Meghan just wanted some kind of in-town transportation.When she went to Ducktown the salesperson said,"We have only one $200 car left,and it's not the kind of car I'd want my wife to drive.However,we do have some great deals on newer models." Meghan went home with an $8,000 used car.Ducktown is probably practicing:
A) decoy pricing
B) deal pricing
C) functional pricing
D) bait pricing
E) price pressuring

Accepted Answer

Ducktown used a bait pricing strategy by advertising a low price for cars to attract customers, but only offering one undesirable option at that price. This tactic is often used to get customers into the showroom where they can then be upsold on more expensive models.

Question 11

If a marketer decides to price goods at odd-numbered dollar amounts to denote bargains,and at even-numbered amounts to denote quality,he or she is using:
A) two-part pricing
B) price lining
C) price bracketing
D) decoy pricing
E) psychological pricing

Accepted Answer

Odd-even pricing is also called psychological pricing.

Question 12

The office supply store was selling two-drawer file cabinets for $20,which is a below-market price,to lure customers into the store in hopes that while they are in the store to buy a file cabinet,they will also buy other items that have a much higher markup.The office supply store is utilizing:
A) price lowballing
B) price maintenance
C) price lining
D) leader pricing
E) functional pricing

Accepted Answer

The office supply store is using leader pricing, which involves offering a few products at a very low price in order to attract customers who will then buy other items with higher profit margins. This is a common tactic in retail and is designed to drive traffic to the store and increase overall sales.

Question 13

R.W.Hunt & Sons,a distributor of rifles and anything needed for hunting or target practice,has packaged a new rifle scope with a package of paper targets at one low price.R.W.Hunt is actually selling the scope slightly below cost,but the paper targets are very profitable.R.W.Hunt is using a pricing technique called:
A) price lining
B) two-part pricing
C) psychological pricing
D) price bundling
E) bait pricing

Accepted Answer

R.W.Hunt is bundling the rifle scope with the paper targets to increase sales of both items. The lower price of the scope encourages customers to make the purchase and the profitable paper targets offset the cost of the discounted scope. This is an example of price bundling.

Question 14

______ tries to get customers into the store with misleading advertising and then uses high-pressure selling to persuade the consumer to buy something else more expensive.
A) Functional pricing
B) Bait pricing
C) Sales-oriented pricing
D) Production-oriented pricing
E) Decoy pricing

Accepted Answer

Bait pricing is a tactic where a business tries to lure customers in with an attractive offer or price, only to push them to buy a higher-priced alternative once they arrive. This is often considered a deceptive practice and can result in customer dissatisfaction and loss of trust.

Question 15

Lipton makes several easy-to-prepare side dishes all using macaroni shells.In promoting this product line,Lipton offers a 50-cents-off coupon that can be used for any of its macaroni-based mixes.Therefore,Lipton must consider _____ when pricing its mixes.
A) joint costs
B) differential costs
C) bundling costs
D) potential (or basing)costs
E) factorial costs

Accepted Answer

Joint costs are incurred when a single production process yields multiple products. In this case, Lipton's macaroni-based mixes are all produced using the same process, so the costs of production are joint costs.

Question 16

Kasha has decided to keep her new power boat in a "drystack" storage facility rather than in the water at a marina.The storage facility charges her a fee of $500 per year,plus $25 each time she calls ahead and asks the facility to put her boat in the water for the day or weekend.The facility is a using a pricing tactic known as:
A) multiple unit pricing
B) professional services pricing
C) price lining
D) price bundling
E) two-part pricing

Accepted Answer

The storage facility is using a two-part pricing tactic, which involves charging a fixed fee (in this case, $500 per year) and an additional fee for each use of the service (in this case, $25 each time Kasha calls ahead to have her boat put in the water). This approach is common in service industries, where fixed costs (such as equipment and maintenance) are high but variable costs (such as labor and materials) are relatively low.

Question 17

Kule,Inc.produces three different lines of car racks for transporting large,bulky items.  Included in the cost of goods sold is $120,000 of annual rent (a fixed cost)that is distributed equally among the three product lines.What will be the effect on total net profit for the company if the line of bicycle racks is dropped?
A) Total net profit will increase by $30,000.
B) Total net profit will increase by $10,000.
C) Total net profit will decrease by $70,000.
D) Total net profit will decrease by $10,000.
E) There is not enough information provided to answer this question.

Accepted Answer

The answer of Kule,Inc.produces three different lines of car racks...

Question 18

Consumers are required to pay consumer fees because businesses allegedly:
A) will sell more if the consumer is unaware of the actual costs
B) suffer an irrevocable revenue loss
C) are required by the federal government to charge this fee
D) avoid additional transactional costs when purchase agreements are violated
E) incur greater fixed costs as a result of the purchase agreement violation

Accepted Answer

There is no such federal law.Businesses allege they incur more transactional costs as a result of purchase agreements violations.Fixed costs do not change.

Question 19

Which of the following factors can a manager IGNORE when deciding on prices for an entire product line?
A) Products in the line could be substitutes for one another.
B) Buyer considers the brand or the price first.
C) Products share joint costs.
D) Products will affect demand for the other product lines.
E) Products in the line are complementary to one another.

Accepted Answer

A manager can ignore whether a buyer considers the brand or the price first when deciding on prices for an entire product line, as this is more related to individual product positioning rather than the overall pricing strategy for the line.

Question 20

_____ is an attempt by the marketing manager to induce store patronage through selling a product near cost or even below cost.
A) Odd-even pricing
B) Leader pricing
C) Price skimming
D) Potential (or base)pricing
E) Price lowballing

Accepted Answer

Leader pricing is a pricing strategy in which a product is sold at or below cost to attract customers to the store with the hope that they will buy other products as well. This tactic is used to increase traffic to the store and establish customer loyalty. Therefore, option B is the correct answer. Other options such as odd-even pricing, price skimming, potential pricing, and price lowballing are pricing strategies but not specifically designed to induce store patronage through selling a product near or below cost.

Quiz 18: Setting the Right Price

The owner of a flower shop decided to sell a dozen red roses for $13.50.He hopes the below-cost price for the roses will attract current and new customers who will also buy regularly priced items.The manager is encouraging store patronage through:

Marketing two or more products in a single package for a special price is known as:

OfficeMax,a retailer of office supplies,is selling a point-and-shoot digital camera,the printer and software needed to print photographs,and a starter package of photograph paper for $230.If purchased separately,the items would cost a total of $250.OfficeMax has used:

_____ are extra fees paid by consumers for violating the terms of purchase agreements.

One popular cost-oriented pricing tactic is culling low-profit margin products from the product line.Which of the following statements does NOT describe a reason why a marketing manager would want to avoid this tactic?

Leader pricing is used to:

The Terra Vista Airport is a small airport frequently used by people who love the sport of skydiving.To help keep costs in line,the airport now charges its customers a small parking fee.At one time,the cost of parking at the airport was included in the price of the jump.Terra Vista Airport uses:

Which of the following phrases accurately describes psychological pricing?

If a marketer decides to price goods at odd-numbered dollar amounts to denote bargains,and at even-numbered amounts to denote quality,he or she is using:

The office supply store was selling two-drawer file cabinets for $20,which is a below-market price,to lure customers into the store in hopes that while they are in the store to buy a file cabinet,they will also buy other items that have a much higher markup.The office supply store is utilizing:

______ tries to get customers into the store with misleading advertising and then uses high-pressure selling to persuade the consumer to buy something else more expensive.

Lipton makes several easy-to-prepare side dishes all using macaroni shells.In promoting this product line,Lipton offers a 50-cents-off coupon that can be used for any of its macaroni-based mixes.Therefore,Lipton must consider _____ when pricing its mixes.

Consumers are required to pay consumer fees because businesses allegedly:

Which of the following factors can a manager IGNORE when deciding on prices for an entire product line?

_____ is an attempt by the marketing manager to induce store patronage through selling a product near cost or even below cost.