Deck 18: Pricing Concepts

Question 1

The Miller-Tydings Resale Price Maintenance Act (1937)exempted interstate fair-trade contracts from compliance with antitrust requirements,thus freeing states to keep these laws on their books if they so desired.

Answer 1

True

Question 2

Most states supplement federal legislation with their own unfair-trade laws,which require sellers to maintain minimum prices for comparable merchandise.

Answer 2

True

Question 3

Companies can avoid penalties under the Robinson-Patman Act as long as they can demonstrate that their price discounts and promotional allowances restrict competition.

Answer 3

False

Question 4

The ticket reselling market is both highly fragmented and susceptible to fraud and distorted pricing.

Question 5

Tariffs make it possible for firms to protect their local markets while still setting prices on domestically produced goods well above world market levels.

Question 6

The term "tariff" refers to the tax exemption granted to domestic producers in order to increase their competitiveness in the international markets.

Question 7

The Robinson-Patman Act was intended primarily to save jobs.

Question 8

Fair-trade laws assert the manufacturer's authority to protect its asset by requiring retailers to maintain a minimum price.

Question 9

Pricing can be used to modify consumer behavior.

Question 10

In the global marketplace,prices are directly affected by special types of taxes called tariffs.

Question 11

The Anti-A&P Act was inspired by price competition triggered by the rise of grocery store chains.

Question 12

State fair-trade laws were made invalid by the enactment of the Consumer Goods Pricing Act of 1975.

Question 13

Defense based on cost differentials against charges of price discrimination under the Robinson-Patman Act works only if the price differences exceed the cost differences resulting from selling to various classes of buyers.

Question 14

High-demand sporting or concert events have encountered an expensive,often illegal,form of pricing where tickets are resold at a much higher price than what it was originally bought for.This practice is called ticket scalping.

Question 15

The price of products only includes the costs incurred by the manufacturer for procuring the raw material and for processing the products.

Question 16

Pricing decisions are influenced by a variety of legal constraints imposed by federal,state,and local governments.

Question 17

Unfair-trade laws were intended to protect small specialty shops,such as dairy stores,from loss-leader pricing tactics.

Question 18

A price is the exchange value of a good or service.

Question 19

When a chain store sells certain products below cost to attract customers,it is practicing a loss-leader price tactic.

Question 20

Every "regulatory" price increase is a tax.

Question 21

Companies which adopt a volume objective continue to expand sales even when their total profits drop below the minimum return acceptable to management.

Question 22

Overall organizational objectives and more specific marketing objectives guide the development of pricing objectives,which in turn lead to the development and implementation of more specific pricing policies and procedures.

Question 23

Basic so-called fighting brands are intended to capture market share from lower-priced competitors by offering relatively high quality products at comparatively higher prices.

Question 24

A value pricing strategy works best for relatively high-priced goods and services.

Question 25

Prestige pricing establishes a relatively high price to develop and maintain an image of quality and exclusiveness that appeals to status-conscious consumers.

Question 26

The economic theory assumes that firms behave rationally which in turn results in an effort to maximize gains and minimize losses.

Question 27

Prestige objectives reflect marketers' recognition of the role of price in creating an overall image of the firm and its product offerings.

Question 28

For consumers to pay prices either above or below what they consider the going rate,they must be convinced they are receiving fair value for their money.

Question 29

Total revenue is determined by multiplying the product's selling price and the number of units sold.

Question 30

A profit-maximizing price rises to the point at which further increases will cause disproportionate decreases in the number of units sold.

Question 31

Firms with large shares accumulate greater operating experience and lower overall costs relative to competitors with smaller market shares.

Question 32

Pricing objectives tied directly to meeting prices charged by major competitors emphasize the price element of the marketing mix and focus less strongly on nonprice variables.

Question 33

Many firms attempt to promote stable prices by meeting competitors' prices and competing for market share by focusing on the nonprice elements of the marketing mix.

Question 34

Price setting is based on the marketer's ability to strike a balance between desired profits,and the customer's perception of a product's value.

Question 35

When discounts become normal elements of a competitive marketplace,other marketing mix elements gain importance in purchase decisions.

Question 36

Sales maximization can also result from nonprice factors such as service and quality.

Question 37

The PIMS project discovered a strong negative relationship between a firm's product quality and its return on investment.

Question 38

A customary price represents an upper limit on the price of a product imposed by the government in order to control the prices of essential products such as food items.

Question 39

Firms which use a volume objective to guide their pricing strategy believe that increased sales are less important in the long-run competitive picture than immediate high profits.

Question 40

The challenge for those who compete on value is to convince customers that low-priced brands offer quality comparable to that of a higher-priced product.

Question 41

In an oligopolistic market,high start-up costs form significant barriers to entry for new competitors.

Question 42

Demand curves must be based on marketing research estimates that may be less exact than cost figures.

Question 43

Manufacturers attempt to balance consumer expectations of customary prices with the realities of rising costs by increasing overall product size.

Question 44

Economic theory attempts to derive correct equilibrium prices in the marketplace by comparing supply and demand.

Question 45

All firms attempt to maximize profits.

Question 46

Marketers determine prices in two basic ways: by applying the theoretical concepts of supply and demand and by completing cost-oriented analyses.

Question 47

The supply side of the pricing equation focuses on revenue curves.

Question 48

Antitrust legislation has eliminated all monopolies including the temporary monopolies,such as those created through patent protection.

Question 49

A firm minimizes its profits when marginal costs equal marginal revenues.

Question 50

In an oligopolistic market,price cutting is likely to increase total industry revenues.

Question 51

The average total cost is the cost calculated by dividing the sum of the variable and fixed costs by the number of units produced.

Question 52

The price elasticity of supply of a product is the percentage change in the quantity of a good or service supplied divided by the percentage change in its price.

Question 53

Marginal revenue is the change in total revenue that results from selling an additional unit of output.

Question 54

If consumers can easily find close substitutes for a good or service,the product's demand tends to be inelastic.

Question 55

Microeconomics suggests a way of determining prices that assumes a profit-maximization objective.

Question 56

The increased options available to shoppers combine to create a market characterized by demand elasticity.

Question 57

The price elasticity of demand (or elasticity of demand)is the percentage change in the quantity of a good or service demanded divided by the percentage change in its price.

Question 58

In an oligopolistic market,a single seller controls the pricing decisions.

Question 59

When the elasticity of demand or supply is greater than 1.0,then that demand or supply is said to be inelastic.

Question 60

The government prohibits regulated monopolies in markets in which competition would lead to an uneconomical duplication of services.

Question 61

Countries that export value- oriented products,rather than commodities,tend to enjoy more stable prices.

Question 62

Cost-plus pricing is the least popular method of setting prices.

Question 63

Traditional economic theory considers both costs and demand in determining an equilibrium price.

Question 64

The two most common cost-oriented pricing procedures are the full-cost method and the incremental- cost method.

Question 65

Prices of electronic equipment and automobiles tend to fluctuate far less than prices of crops such as sugarcane and bananas.

Question 66

One of the advantages of the full-cost pricing approach is that it takes into consideration the competition and demand that exists for a product.

Question 67

The breakeven point is the point at which total revenue equals total cost.

Question 68

A shortcoming of the breakeven model is that it assumes that per-unit variable costs change at different levels of operation.

Question 69

Modern accounting procedures provide managers with a clear understanding of cost structures,so managers can readily comprehend the supply side of the pricing equation.

Question 70

Purely cost-oriented approaches to pricing violate the marketing concept,so modifications that add demand analysis to the pricing decision are required.

Question 71

Modified breakeven analysis forces the marketer to consider whether the consumer is likely to purchase the number of units of a good or service required for achieving breakeven at a given price.

Question 72

The basic breakeven model considers demand.

Question 73

Full-cost pricing allows the marketer to recover all costs plus the amount added as a profit margin.

Question 74

Lower off-season prices and higher peak-season prices for lodging at resorts illustrate the use of yield management as a strategy to generate revenues for a largely fixed-cost industry.

Question 75

Countries that export international commodities,such as wood,chemicals,and agricultural crops,suffer economically when their prices fluctuate.

Question 76

Full-cost pricing allocates fixed costs that can be directly attributed to the production of the specific priced item.

Question 77

The basic breakeven model addresses the question of whether customers will actually purchase the product at the specified price in the quantity required to break even or make a profit.

Question 78

Breakeven analysis is an effective tool for marketers in assessing the sales required for covering costs and achieving specified profit levels.

Question 79

When most of a firm's costs are variable over a wide range of outputs,the primary determinant of profitability will be the revenue generated by sales.

Question 80

The only real difference among the multitude of cost-plus pricing techniques is the relative sophistication of the costing procedures employed.