Deck 19: Pricing Concepts

Question 1

Adequate distribution for a new product can often be attained by offering a small profit margin to distributors.

Answer 1

 False

Question 2

While break-even pricing is relatively simple,markup pricing uses more complicated concepts of cost.

Answer 2

 False

Question 3

To the consumer,price is the cost of something.

Answer 3

 True

Question 4

The greater the number of different uses for a product,the more inelastic demand tends to be.

Question 5

Predatory pricing is illegal under the Sherman Act and the Federal Trade Commission Act.

Question 6

Price matching is one of the ways to counter a competitor's prices.

Question 7

Extranets enable buyers to quickly and easily compare products and prices,putting them in a better bargaining position.

Question 8

Manufacturers find that their large customers such as department stores often make specific pricing demands that the suppliers must agree to.

Question 9

Profit maximization means striving for profits that are satisfactory to the stockholders and management-in other words,a level of profits consistent with the level of risk an organization faces.

Question 10

During the maturity stage of product life cycle,distribution channels become a significant cost factor.

Question 11

A lack of price matching contributes to a low price image.

Question 12

According to garment makers,the demands of large customers are nearly wiping out profits for all but the very large suppliers.

Question 13

Pricesalwayssteadilydeclineforaproductinthedeclinestageoftheproductlifecycle.

Question 14

Status quo pricing is a pricing objective that maintains existing prices or meets the competition's prices.

Question 15

When retailers stock exclusive versions of products that have similar specifications to ones carried in other stores but have different model or serial numbers,it facilitates price matching.

Question 16

An effective distribution network can sometimes overcome other minor flaws in the marketing mix.

Question 17

Price is often used as a promotional tool to increase consumer interest.

Question 18

Dynamic pricing is most useful when the capacity of a product or service cannot be fixed well in advance.

Question 19

Unlike a firm that launches a new item resembling several others already on the market,a firm that introduces a totally new product with no close substitutes will have no pricing freedom.

Question 20

As products enter the growth stage of the product life cycle,prices generally begin to stabilize.

Question 21

For businesses,consumer penalties are part of doing business in a highly competitive marketplace.

Question 22

Diffusion Research Company specializes in conducting market research for various firms.When it receives proposal for a new research,its management first estimates the cost of conducting the research and delivering the final research report.The management,then,attempts to reduce the costs through efficient operations.It also tries to maximize revenue by satisfying its customers' requirements.In this case,Diffusion Research Company uses a _____ pricing objective.

A)​profit-oriented
B)cash maximization
C)status quo
D)​sales-oriented

Question 23

Profit-oriented pricing objectives include:

A)​target return on investment.
B)target market share.
C)meeting competitors' prices.
D)​status quo pricing.

Question 24

Consumers are more likely to perceive the value of a product to be less than its cost if:

A)​in consumers' minds, the product's price is set too high.
B)the product's manufacturer gains very little profit from the product.
C)the product has an inelastic demand.
D)​the product's demand and supply attain the state of price equilibrium.

Question 25

A rebate is a discount to wholesalers and retailers for performing channel functions.

Question 26

At a price of $2,000 per unit,the demand for Ranger 60 mountain bikes from Cloyd's Inc.is 300 units,which is same as the number of bikes manufactured every year.If the marketing managers at Cloyd's Inc.decide to sell each bike at a price lower than $2,000 per unit,_____.

A)​a shortage of bikes will be created
B)the number of bikes being made will increase drastically
C)an inelastic demand for the bikes will be created
D)​the demand and supply for the bike will attain equilibrium

Question 27

_____ is the quantity of a product that will be offered to the market by a supplier at various prices for a specified period.

A)​Demand
B)Supply
C)Market share
D)​Product share

Question 28

Fresnas Designs Inc.is a company known for its quality interior decorations,customized service,and affordable prices.Given the high demand in the market for its service,the management of Fresnas Designs Inc.could price its products higher,but it prefers to price its products such that it will earn a reasonable revenue.In this case,the management of Fresnas Designs Inc.bases its pricing policy on:

A)​sales maximization.
B)earning satisfactory profits.
C)creating retained earnings.
D)​status quo pricing.

Question 29

At a local supermarket,Linda saw a box of plant fertilizer that was retailed at $25 but was marked down to $20.99.Given this information,$20.99 is the:

A)​dividend.
B)price.
C)margin.
D)​profit.

Question 30

Psychological pricing is marketing two or more products in a single package for a special price.

Question 31

To consumers,value is based upon:

A)​the absolute monetary value of price.
B)their perceived satisfaction.
C)their ability to get discount on a product.
D)​the steadiness of price over a period of time.

Question 32

Stone Restaurant,a newly opened restaurant,was unable to attract a lot of customers.Since the owner of the restaurant had to pay the loan amount that he had taken to start the restaurant,he decided to implement a strategy that would help him attract more customers.He offered about 20 percent discount on all the dishes on the menu on weekends.This strategy,he thought,would help him earn enough to be able to make the loan payment.In this case,the owner's pricing objective can be classified as:

A)​market share maximization.
B)profit maximization.
C)asset maximization.
D)​sales maximization.

Question 33

For convenience,pricing objectives can be divided into three categories,which are:

A)​refundable, competitive, and attainable.
B)perceived, actual, and situational.
C)differentiated, niche, and undifferentiated.
D)​profit oriented, sales oriented, and status quo.

Question 34

Britney,a teenager,startsher own business of selling cupcakes to coffee shops and restaurants.She strives to increaseeither the market share in terms of the revenue generated or the number of cupcakes sold.This is an example of _____.

A)​status quo pricing
B)profit-oriented pricing objective
C)bait pricing
D)​sales-oriented pricing objective

Question 35

At Fournotts,a retail corporation,Riya saw a box of collector's edition comic books.Each book was priced at $28.50,but a customer who bought five of the books was required to pay only $19.99 for each book.Riya bought one book and her friend bought five books.In this case,Fournotts' revenue from this purchase is _____.

A)​$158.51
B)$19.99
C)$28.50
D)​$128.45

Question 36

Inelastic demand is a situation in which:

A)​an increase or a decrease in price does not significantly affect the demand for a product.
B)prices are adjusted over time to maximize a company's revenues.
C)demand is created for new products by aggressive brand awareness campaigns.
D)​consumers' demand is sensitive to price changes.

Question 37

Unlike a firm that strives for market share,a firm with the objective of maximizing sales:

A)​possesses adequate funds and faces an optimistic future.
B)ignores profits, competition, and the marketing environment as long as sales are rising.
C)benefits from maximization of cash if it is adopted as a long-run objective.
D)​seeks to maintain existing prices or to meet the competition's prices.

Question 38

To increase the popularity of its new range of smartphones,GizmoPro Inc.,a mobile phone manufacturer,offered several other products for free to customers who bought the smartphones.However,the management of GizmoPro Inc.soon found this to be an unsustainable practice.The company then decided to offer discounts on the products instead of giving them for free.These actions of the management of GizmoPro Inc.are aimed at:

A)​market share pricing.
B)profit maximization.
C)demandorientation.
D)​sales maximization.

Question 39

Return on investment (ROI)for a firm:

A)​is the margin of profit earned by the firm inclusive of the taxes payable by the firm.
B)is its total assets multiplied by the net profits after taxes.
C)measures management's overall effectiveness in generating profits with the available assets.
D)​will be lower than the previous year if the firm performs better in the market.

Question 40

Identify a true statement about status quo pricing.

A)​Itleads to optimal pricing of a product.
B)Itrequires serious planning and is difficult to implement.
C)It gives great importance to the demand and costs of a product.
D)​Itcan lead to a pricing disaster.

Question 41

Shopping bots theoretically give pricing power to:

A)​consumers.
B)wholesalers.
C)retailers.
D)​agents.

Question 42

When there are many substitutes available for a particular product,consumers:

A)​judge the quality of the substitute product based on supply of each substitute.
B)perceive individual products to have poor durability.
C)can easily switch from one product to another.
D)​are sensitive to changes in supply of substitute products belonging to new brands.

Question 43

Demand for a product will be inelastic if:

A)​its price is so low that it is an inconsequential part of an individual's budget.
B)the product has a number of different uses.
C)many substitute products are available in the market.
D)​the product can be repaired and replaced or prolonged in its use.

Question 44

Which of the following statements is true about shopping bots?

A)​The broad-based type of shopping bot searches for prices for only one type of product such as consumer electronics (CNET) or travel-related services (Kayak).
B)They create opportunities for prestige pricing.
C)They search the Web for the best price for a product.
D)​The niche-oriented shopping bot searches a wide range of product categories such as Google Shopping or Nextag.

Question 45

Which of the following is true of simple break-even analysis?

A)​It ignores the selling price of a product.
B)It does not give weightage to the cost of labor that is incurred during production.
C)It is applicable only when the demand for a product is elastic.
D)​It ignores the demand for a product.

Question 46

Which of the following is true of products in the introductory stage of their life cycle?

A)​Their prices will rise dramatically as they move into the specialty goods category.
B)They experience price increases that are cost initiated.
C)Their prices are usually set high.
D)​They experience an elastic demand in the core of the market.

Question 47

Which of the following happens if demand is elastic?

A)​As price goes up, consumer demand changes.
B)The competition between organizations reduces.
C)There is no substitute for a product in such case.
D)​Purchasing power of the consumer decreases.

Question 48

Which of the following is true of price-quality relationships?

A)​Consumers perceive lowerpriced goods to be more long lasting than higherpriced goods.
B)Consumers believe that higher priced goods are manufactured with better quality of ingredients.
C)Consumers lack information about the quality of lowerpriced goods due to poor advertising.
D)​Consumer demands for higherpriced goods remain unchanged even if their quality declines.

Question 49

Adequate distribution for a new product can often be attained by:

A)​offering a larger-than-usual profit margin to distributors.
B)having different model or serial numbers for products.
C)allowing customers to involve in showrooming.
D)​increasing the prices of the products.

Question 50

_____ is a method of determining what sales volume must be reached before total revenue equals total costs.

A)​Break-even analysis
B)Markup pricing
C)Opportunity analysis
D)​Fixed-cost pricing

Question 51

Identify a true statement about yield management systems.

A)​They determine the availability of product substitutes in industries that are experiencing rapid change.
B)They use a software that employs techniques such as discounting early purchases and limiting early sales at these discounted prices.
C)They predict necessary service levels required to achieve revenue goals.
D)​They determine whether it is financially more feasible to buy a new product or repair a broken one.

Question 52

The managers at Click-to-Door,a giant e-commerce Web site,closely monitor its rival online retailers to analyze the prices at which they offer certain goods and how the consumers respond to the changes in prices.They use the results of this analysis to constantly change the priceson their Web site to maximize sales as well as profits.In this case,which of the following models of pricing does Click-to-Door follow?

A)​Comparative pricing
B)Dynamic pricing
C)Capacitive pricing
D)​Dependent pricing

Question 53

_____ does not change as output is increased or decreased.

A)​Marginal cost
B)Dependentcost
C)Fixed cost
D)​Opportunity cost

Question 54

Unlike niche-oriented shopping bots,broad-based shopping bots:

A)​give pricing power to the retailers.
B)search for prices for only one type of product.
C)operate using a Yellow Pages type of model.
D)​include examples like SeatGeek(event tickets) andKayak(travel-related services).

Question 55

Which of the following statements is true about yield management systems (YMS)?

A)​Theyare used to eliminate the problem of simultaneous production and consumption from services.
B)They are can be used only in service industries.
C)They are complex pricing systems used to establish price equilibrium.
D)​They are used to make profitable use of the unused capacity of perishable goods.

Question 56

Which of the following is a limitation of break-even analysis?

A)​It does not give an estimate of how much profit can be earned once the break-even point is obtained.
B)It does not give weightage to the cost of labor that is incurred during production.
C)It is applicable only when the demand for a product is elastic.
D)​It is hard to determine which costs are fixed and which costs are variable.

Question 57

Which of the following is an impact of the Internet on consumers' shopping behavior?

A)​The Internet auction business is likely to disappear in the future.
B)Consumer reviews on the Internet about various products tend to be equal in quality.
C)Business-to-business auctions are likely to be the dominant form of Internet auction in the future.
D)​Extranets are programs that search the Internet for the best price for a particular product.

Question 58

During off-season,the Rues Hotel offers a 25 percent reduction on its rooms to attract guests.Given this information,which of the following is illustrated in this scenario?

A)​The power of yield management systems
B)The advantage of markup pricing
C)The relationship between price and quality
D)​The use of price as a promotional tool

Question 59

A cost that changes with the level of output is called a(n)_____.

A)​liquid cost
B)variable cost
C)independent cost
D)​indirect cost

Question 60

Dynamic pricing is used to:

A)​implement bait pricing to get more loyal customers.
B)perform price discrimination among customers.
C)adjust prices over time to maximize a company's revenues.
D)​attain price equilibrium.

Question 61

Unlike even-numbered prices,odd-numbered prices:

A)​make consumers feel they are paying a higher price for a product.
B)are used for "prestige" items.
C)have elastic demand.
D)​connote a bargain.

Question 62

_____ is a price tactic in which different customers pay different prices for essentially the same merchandise bought in equal quantities.

A)​One-part pricing
B)Price lining
C)Flexible pricing
D)​Price skimming

Question 63

_____ is a pricing policy whereby a firm charges a relatively low price for a product when it is first rolled out as a way to reach the mass market.

A)​Penetration pricing
B)Price skimming
C)Price discrimination
D)​Status quo pricing

Question 64

A _____ is a price reduction offered to a consumer,an industrial user,or a marketing intermediary in return for prompt payment of a bill.

A)​cash discount
B)quantity discount
C)functional discount
D)​seasonal discount

Question 65

A _____ is a price reduction offered to buyers buying in multiple units or above a specified dollar amount.

A)​trade discount
B)cash discount
C)seasonal discount
D)​quantity discount

Question 66

_____ is sometimes called a "market-plus" approach to pricing because it denotes a high price relative to the prices of competing products.

A)​Price skimming
B)Penetration pricing
C)Status quo pricing
D)​Bait-and-switch pricing

Question 67

In _____,the seller pays all or part of the actual freight charges and does not pass them on to the buyer.

A)​free on board origin pricing
B)freight absorption pricing
C)uniform delivered pricing
D)​basing-point pricing

Question 68

The marketing manager of Rues Golf Club finds that the club can increase its market share and become the industry leader if it slashes membership prices by 50 percent during the first quarter of the year.However,the club cannot achieve its target return on investment if its slashes its membership prices during a quarter.This conflict illustrates:

A)​a need to eliminate low-profit products.
B)a lack of competition in the marketplace.
C)how pricing operates in an ideal marketplace.
D)​the need for trade-offs in pricing objectives.

Question 69

A price skimming strategy is most often used for a new product when:

A)​competition in the market is abundant.
B)customers are unwilling to spend a large amount of money on the product.
C)its supply is greater than its demand.
D)​the product is perceived by the target market as having unique advantages.

Question 70

_____ is a price tactic that charges freight costs from a given point,regardless of the city from which the goods are shipped.

A)​Free on board origin pricing
B)Zone pricing
C)Uniform delivered pricing
D)​Basing-point pricing

Question 71

_____ is a price tactic that tries to get consumers into a store through false or misleading price advertising and then uses high-pressure selling to persuade consumers to buy more expensive merchandise.

A)​Leader pricing
B)Price lining
C)Bait pricing
D)​Price bundling

Question 72

Univ Airlines and Mirago Airlines are two competing airlines.They make an agreement to charge customers a certain price for airfreight.This leads to the filing of several lawsuits against them by other airlines.In this case,Univ Airlines and Mirago Airlines can be charged under _____.

A)​the Clayton Act
B)the Sarbanes-Oxley Act
C)the Sherman Act
D)​the Robinson-Patman Act

Question 73

Firms that indulge in price fixing:

A)​decide how much to charge for a product.
B)undercut the price quoted by a seller to a buyer.
C)charge different prices to different customers.
D)​do not sell to two or more different buyers.

Question 74

Which of the following statements is true of price lines?

A)​Buyers cannot be offered a wide variety of merchandise at each established price.
B)Price lines enable a seller to reach several market segments.
C)Firms have to carry a larger total inventory than it could without price lines.
D)​Price lines are advantageous when costs rise continually.

Question 75

99-Center Inc.is a retail store where all its merchandise is priced at 99 cents.This retailer uses a _____.

A)​single-price tactic
B)flexible pricing tactic
C)price lining tactic
D)​price bundling tactic

Question 76

When Lofonift Inc.introduced its flagship product,an MP3 player,it captured the MP3 player market by offering its product at the lowest price in the market.This gradually forced many of its competitors out of business.Once its competitors were out of business,Lofonift Inc.raised its prices.In this scenario,Lofonift Inc.most likely indulged in _____.

A)​predatory pricing
B)price discrimination
C)status quo pricing
D)​price fixing

Question 77

Which of the following statements is true of unfair trade practice acts?

A)​They prohibit any firm from selling to two or more different buyers.
B)Unfair trade practice lawsprevent oligopoly leaders from joining together and fixing prices at the highest rates that a market will allow.
C)They establish penalties for companies that engage in predatory pricing.
D)​State enforcement of unfair trade practice laws has been lax partly because low prices benefit local consumers.

Question 78

Discuss the role of price in the evaluation of product alternatives.

Question 79

Ava Lawnmowers Inc.is a company that manufactures and sells lawn mowers.Since it faces stiff competition in the market,it sells its products at different prices depending on the number of lawn movers purchased by the consumers.In this scenario,the company indulges in _____.

A)​penetration pricing
B)price skimming
C)price discrimination
D)​predatory pricing

Question 80

_____ is the selling to two or more different buyers,within a reasonably short time,of commodities (not services)of like grade and quality at different prices where the result would be to substantially lessen competition.

A)​Price discrimination
B)Price fixing
C)Bait pricing
D)​Penetration pricing