Deck 12: Price Determination

Question 1

_____ is defined as the amount of money and/or other items needed to acquire a product

A) Price
B) Income
C) Market
D) Utility
E) Return on investment

Answer 1

Price

Question 2

A bottle of Glenfiddich whisky costs $21 in Germany, but costs $35 in Denmark, $43 in Sweden, and $55 in Norway. The Scandinavian countries clamped down on liquor consumption after almost endemic abuse during the 19thcentury when the average Swede consumed 46 liters a year. The Scandinavian countries used _____ to try to reduce alcoholism.

A) value
B) price
C) utility
D) promotion
E) demand

Answer 2

price

Question 3

According to economic theory, _____ is the attribute of an item that makes it capable of satisfying wants.

A) value
B) price
C) utility
D) supply
E) demand

Answer 3

utility

Question 4

Wrenna is a piano teacher. Timothy wants to learn how to play the piano. She gives him lessons in payment for keeping her yard looking its best. This is an example of:

A) cost-plus pricing.
B) amortization.
C) barter.
D) cost-minus pricing.
E) marginal costing.

Question 5

Tullia is self-employed and is having trouble understanding her federal tax forms. She has agreed to bake a four-layer wedding cake for Stephanie if Stephanie, an accountant, will prepare Tullia's tax forms. This is an example of:

A) an unethical activity.
B) bartering.
C) marginal costing.
D) a good Samaritan act.
E) free trade.

Question 6

Which of the following is an example of a price?

A) the tuition Elizabeth pays to attend seminary
B) the fee you paid to the doctor who gave you a checkup
C) the lease payment Treasa makes on his Lexus
D) the fare you paid to the taxi that brought you home last night
E) all of the above

Question 7

Which of the following is an example of a price?

A) the student fee Heather pays for use of the university copy machine
B) the rent Daniel pays for his apartment
C) the interest you pay on your car loan
D) the commission paid to the realtor who sold Jim's house
E) all of the above

Question 8

Price:

A) is an allocator of resources.
B) is a basic regulator of the economic system.
C) determines what will be produced.
D) needs to be established in a socially responsible manner.
E) is accurately described by all of the above.

Question 9

Which of the following is NOT one of the factors of production?

A) labor
B) product
C) capital
D) land
E) entrepreneurship

Question 10

The allocation of scarce resources in a capitalistic system is controlled primarily by:

A) marketing.
B) monopolies.
C) price.
D) state legislatures.
E) federal agencies.

Question 11

The text identifies four distinct segments of shoppers based on the shoppers' perceptions of prices. Which of the following is NOT one of those segments?

A) system beater
B) brand loyal
C) uninvolved
D) laggard
E) deal shopper

Question 12

Kelly usually pays $6.75 for a particular brand of cat litter that has an additive deodorizer, but if a competitive brand that uses a baking soda additive to reduce odor goes on sale, she will buy the brand that costs less. In which distinct consumer segment based on price perceptions does Kelly belong in this instance?

A) system beater
B) brand loyal
C) uninvolved
D) laggard
E) deal shopper

Question 13

Yoshi believes there is no need to waste money. He likes to feel he is getting the lowest price on everything he buys. In distinct consumer segment based on price perceptions does Yoshi belong?

A) system beater
B) brand loyal
C) uninvolved
D) laggard
E) deal shopper

Question 14

The text identifies four distinct segments of shoppers based on the shoppers' perceptions of prices. These four shopper segments are identifiable by _____ factors.

A) psychographic
B) age and gender
C) social class and educational level
D) income, age, and social class
E) geographic

Question 15

Rolex is famous as a brand of very expensive watches. If Rolex were to market a watch that sold for $10.95, sales of the watch would probably be slow because of the perceived relationship between price and:

A) source credibility.
B) supplier.
C) promotion.
D) product quality.
E) resource allocation.

Question 16

Double-sized brass beds typically sell for about $1200. If a store that features antique reproductions were to try to sell a solid brass bed for $35, sales of the beds would probably be slow because of the perceived relationship between price and:

A) distribution.
B) supply.
C) promotion
D) product quality.
E) resource accumulation.

Question 17

When Kalani went to buy a silk blouse for his wife, he decided to go to an upscale boutique and look for one. He was amazed when he entered the store. It looked more like an elegant living room where someone had casually arranged a few items of clothing in strategic locations. The sales clerk greeted Kalani by asking if would he like a cup of coffee and a freshly baked cookie. Before Kalani left, he had spent $200 for a blouse. The price seemed appropriate to Kalani because he perceived a strong relationship between price and:

A) demand.
B) supply.
C) promotion
D) product quality.
E) resource accumulation.

Question 18

_____ is the ratio of perceived benefits to price and any other incurred costs.

A) A target return
B) Utility
C) Supply
D) Demand
E) Value

Question 19

The value of a product is the ratio of perceived benefits to price and any other incurred costs. These incurred costs would include:

A) time spent shopping for the product.
B) the advertising used to promote the product.
C) how the product was arranged in its retail setting.
D) whether the product's manufacturer used a product differentiation strategy.
E) all of the above.

Question 20

Which of the following factors can limit how much effect pricing has on a company's marketing program?

A) consumers' willingness to pay more due to a brand preference
B) the use of database marketing
C) issues of globalization containment
D) legislation specifying degree of quality required
E) all of the above

Question 21

When it comes to creating pricing strategy, marketers need to remember that one object of branding is to:

A) reduce the new for product obsolescence.
B) decrease the effect of price on product demand.
C) control distribution channels.
D) create product differentiation that can be imitated.
E) enhance product adoption.

Question 22

The first step in the procedure for determining the price of a product should be to:

A) set pricing objectives.
B) decide what share of the market is wanted.
C) establish a channel of distribution.
D) estimate the "expected price" of the product.
E) prepare a break-even analysis.

Question 23

Which of the following is NOT a commonly used type of pricing objective?

A) to break even
B) to maintain market share
C) to achieve a target return
D) to stabilize prices
E) to meet competition

Question 24

Which of the following is defined as a status quo-oriented pricing objective?

A) to achieve a target return
B) to meet competition
C) to increase sales volume
D) to maximize profit
E) to increase market share

Question 25

The owner of a company that markets a line of mustard-based barbecue sauces was overheard talking to her husband, "Next year at this time when I look at this company's operating statement, I want to see that we have made more money than we ever thought possible." Assuming that the only way to achieve this goal is through pricing, this is an example of a _____ objective.

A) status-quo
B) price stabilization
C) customer-oriented
D) profit maximization
E) production-oriented

Question 26

Which of the following is an example of a sales-oriented pricing objective?

A) to achieve a target return
B) to meet competition
C) to maximize profit
D) to increase sales volume
E) to optimize price

Question 27

K-Block cooking charts are poster-sized recipes designed to encourage children to cook. The pricing objective for the manufacturer of K-Block cooking charts is "to sell 500 more packages of cooking charts than it sold last year." This objective is an example of a _____ pricing goal.

A) profit-oriented
B) sales-oriented
C) customer-oriented
D) status quo-oriented
E) production-oriented

Question 28

The pricing objective for Gregson Landscaping Service, is "to avoid price competition." This objective is an example of a _____ pricing goal.

A) profit-oriented
B) sales-oriented
C) customer-oriented
D) status quo-oriented
E) resource maximization

Question 29

Charles Moses manages a business that sells computer software to physicians. Which of the following managerial goals is most compatible if he decides the firm's pricing objective is to achieve a target return?

A) to sell only the most current software
B) to reach 20 percent of all physicians with its advertising
C) to earn a net profit of 8 percent on net sales before taxes next year
D) to offer rebates wherever appropriate
E) to provide excellent customer service

Question 30

A company that sells reconditioned personal computers has set the following pricing objective: "To earn a net profit equal to 6 percent of gross sales next year." Which type of profit-oriented pricing objective does this exemplify?

A) the achievement of a target return
B) price stabilization
C) to meet competition
D) to increase sales volume
E) sales maximization

Question 31

Middlemen add a _____ to the cost they pay for a product in order to cover anticipated operating expenses and provide a desired profit for the period.

A) markup
B) markdown
C) variable cost
D) fixed revenue
E) turnover

Question 32

Which of the following sayings best reflects the philosophy of an organization that has adopted the pricing goal of profit maximization?

A) "An eye for an eye."
B) "Charge all that the traffic will bear."
C) "Keep your chin down."
D) "Nobody undersells us."
E) "Walk softly and carry a big stick."

Question 33

Priceline's CEO seems to have a _____ pricing objective because his stated goal is to match 50 percent of all reasonable bids received with products made available from the Internet company.

A) promotion-oriented
B) sales-oriented
C) product-oriented
D) status quo-oriented
E) production-oriented

Question 34

Which of the following statements about a profit-maximization pricing goal is True?

A) A profit maximization goal should never be attempted when a company is trying to market in a new geographic area.
B) A profit maximization goal should maximize profit on every single item.
C) Public opinion seldom has any effect on profit-maximization goals.
D) To provide efficient results, a profit maximization goal should be pursued for only a short while.
E) According to economic theory and to business practices, there is nothing wrong with a profit maximization goal.

Question 35

A pricing goal of increasing sales volume is typically adopted to:

A) increase demand for a product category.
B) maintain market share.
C) maintain a slow, steady level of growth.
D) discourage potential competitors from entering a market.
E) achieve a target return on investment.

Question 36

During the afternoons, many theaters charge less for a movie ticket than they do for an evening show. The theaters offer these special reduced rates in order to achieve a _____ pricing objective.

A) promotion-oriented
B) sales-oriented
C) distribution-oriented
D) status quo-oriented
E) production-oriented

Question 37

The two primary manufacturers of microprocessors are Intel and AMD. To get a foothold in the market, AMD introduced its microprocessors at a price much lower than comparable Intel processors. AMD used a _____ pricing objective.

A) promotion-oriented
B) sales-oriented
C) distribution-oriented
D) status quo-oriented
E) production-oriented

Question 38

If the marketing manager of Eden Foods, a marketer of organically-grown vegetables and fruits, wants to increase that company's market share by one percent during the next two years, it would be an example of a _____ pricing objective.

A) promotion-oriented
B) sales-oriented
C) customer-oriented
D) status quo-oriented
E) production-oriented

Question 39

Which of the following pricing strategies can the manager of the Roast 'n Brew coffeehouse follow if she believes the store should have a sales-oriented goal?

A) Avoid price wars.
B) Reduce price (and cut costs) to build market share.
C) Achieve a target return based on last year's sales.
D) Maximize profit in the upcoming year.
E) Stabilize price per cup of coffee.

Question 40

Which of the following sayings could most closely reflect the philosophy of an organization that uses a sales-oriented goal?

A) "An eye for an eye."
B) "Charge all that the traffic will bear."
C) "Grab a bigger slice of the pie."
D) "Keep your head down."
E) "Walk softly and carry a big stick."

Question 41

Which of the following pricing strategies can the manager of the Roast 'n Brew coffeehouse follow if she believes the store should have a status quo-oriented goal?

A) Price coffee at the same price as competition down the block.
B) Maximize return on investment during next year.
C) Engage in price wars when necessary.
D) Increase sales volume by 15 percent.
E) Earn five percent more profit than last year.

Question 42

Which of the following sayings best reflects the philosophy of small manufacturers in industries that typically use a price stabilization goal?

A) "Walk softly and carry a big stick."
B) "Charge all that the traffic will bear."
C) "Follow the leader."
D) "An eye for an eye."
E) "Keep your chin down."

Question 43

A company in Singapore produces more ornamental fish than any other company in the world--nearly one-third of the world's pet guppies, tetras, goldfish, mollies, and other species. Small producers of tropical fish in other parts of the world would more than likely use a _____ pricing strategy.

A) promotion-oriented
B) sales-oriented
C) customer-oriented
D) status quo-oriented
E) production-oriented

Question 44

Which of the following organizations would be most likely to adopt a price stabilization goal?

A) a manufacturer of dry seasoning mixes used to make salad dressings
B) a wine merchant
C) a convenience store
D) a manufacturer of gardening equipment for physically challenged gardeners
E) a company that manufactures chlorine in bulk

Question 45

Concrete is a highly standardized product. What kind of pricing strategy would you expect companies that manufacture concrete to use?

A) promotion-oriented
B) sales-oriented
C) customer-oriented
D) status quo-oriented
E) production-oriented

Question 46

A major reason for using price stabilization as a pricing goal is to:

A) keep new firms from entering the market.
B) make as much profit as possible.
C) give management more flexibility in price determination.
D) encourage aggressive, dynamic pricing.
E) avoid price competition.

Question 47

The price of one unit of product at its point of production or resale is its _____ price.

A) marginal
B) base
C) break-even
D) markdown
E) introductory

Question 48

A product's base price is also called its _____ price.

A) suggested manufacturer's retail
B) pioneering
C) list
D) break-even
E) markup

Question 49

The base price for a dishwasher:

A) includes all freight charges.
B) is the price establishing when the retailer uses leader pricing.
C) includes discounts paid to the middleman for quick payment.
D) refers to the price of the dishwasher at its point of production or resale.
E) includes allowances earned by the middleman for storing the item.

Question 50

The cost of a case of computer paper sold to a retailer is $20. It costs $2 to ship the paper. If more than two boxes are purchased, the price per case is reduced by 5 percent. If the reseller engages in co-op advertising with the producer of the paper, there is an additional one percent discount. What is the base price of a case of computer paper?

A) $18.80
B) $19.00
C) $20.00
D) $20.68
E) $22.00

Question 51

The base price of a product:

A) is a product's expected price.
B) equals its list price minus all discounts.
C) equals the total production cost of the product divided by the number of units manufactured for sale.
D) is its list price.
E) equals the price a consumer is willing to pay for additional products.

Question 52

Before Anthony went to the hardware store to buy a pair of fire-resistant gloves, his son asked him how much the gloves should cost. Anthony responded, "I think they should cost between $18 and $25." Between $18 and $25 is the:

A) point of price elasticity.
B) cost-plus price.
C) marginal price.
D) point of price inelasticity.
E) expected price.

Question 53

A bottle of Glenfiddich whisky that costs $21 in Germany, costs $35 in Denmark, $43 in Sweden, and $55 in Norway. The Scandinavian countries clamped down on liquor consumption after almost endemic abuse during the 19thcentury when the average Swede consumed 46 liters a year. It is not unusual for people to travel eight hours from Stockholm to Germany to stock up on beer, wine, and other spirits. The Scandinavian countries are uninterested in the _____ when setting prices.

A) point of price elasticity
B) cost-plus price
C) marginal price
D) point of price inelasticity
E) expected price

Question 54

Dom Lucian makes decorated lamp shades, which he has tried to sell in a variety of locations. He was initially concerned that the lamp shades should not be priced too high because he wanted to have as many people as possible have the ability to buy and enjoy one of his creative lamp shades. When he decided to increase his price by 60 percent so he could pay his own living expenses, demand for his lamp shades increased drastically. Lucian learned that people are not interested in buying designer items unless the price is high enough to indicate quality or rarity. Lucian had ignored the issue of _____ when setting his initial price.

A) point of price elasticity
B) cost-plus price
C) marginal price
D) point of price inelasticity
E) expected price

Question 55

Dreyer's is a manufacturer of over 100 flavors of ice cream-many of them indulgent, chunky flavors. Due to the increase of the costs of ingredients, Dreyer's has reduced the size of its ice cream cartons to 1¾ quarts so that it can still charge $5 for a carton of ice cream. Dreyer's perceived this $5 to be the _____ for a carton of ice cream.

A) point of price elasticity
B) cost-plus price
C) marginal price
D) point of price inelasticity
E) expected price

Question 56

After Tina got highlights put in her hair, she reached in her wallet and handed the hair stylist a $50 bill. In the town where she used to live, fifty dollars would have paid for the highlights, tipped the stylist handsomely, and gotten her $5 in change. She was very much surprised when the stylist asked her for another $10. Patrice's _____ differed from the actual price.

A) marginal price
B) base price
C) cost-plus price
D) expected price
E) value-added perception

Question 57

K-Block cooking charts are poster-sized recipes designed to encourage children to cook. Before marketing the easy-to-use kid's recipes, its inventor asked parents how much they would pay for a package of four recipe cards for their children. K-Block's inventor was trying to determine the _____ for her product.

A) inverse demand
B) demand inference
C) demand reference point
D) expected price
E) augmented value

Question 58

Which of the following statements about inverse demand is True?

A) Inverse demand is unaffected by price.
B) Below expected price, inverse demand creates a demand curve identical to the normal demand curve.
C) Inverse demand describes a situation where more sales occur when price is increased.
D) Inverse demand describes a situation where sales decline as price increases.
E) Inverse demand occurs when products are sold at their expected price.

Question 59

_____ occurs when customers infer that an item is of a better quality because it is priced higher.

A) Inverse demand
B) Demand inference
C) A high demand contribution
D) An S-shaped demand curve
E) A normally-distributed demand

Question 60

Dom Lucia makes decorated lamp shades, which he has tried to sell in a variety of locations. He was initially concerned that the lamp shades should not be priced too high because he wanted to have as many people as possible have the ability to buy and enjoy one of his creative lamp shades. When he decided to increase his price by 60 percent so he could pay his own living expenses, demand for his lamp shades increased drastically. Inadvertently, Lucia learned that his lamp shades had:

A) inverse demand
B) demand inference
C) a high demand contribution
D) an S-shaped demand curve
E) a normally-distributed demand

Question 61

Aphrodite's manufactures and markets scents, which can be added to enhance plain bath oil or potpourri, used to cover unpleasant odors, or used in candle-making. Last year, sales were disappointing. The manufacturer decided to increase the price of each bottle of scent by approximately 25 percent. This increase in price resulted in a 20 percent increase in bottles sold. Aphrodite's apparently experienced:

A) profit programming.
B) cost-plus perceptions.
C) leader pricing.
D) penetration pricing.
E) inverse demand.

Question 62

Proteus USA Inc. sells gift food basket components. It carries a full line of gourmet foods, but finds its cheese and nut selection to be its best seller. Proteus USA has been in business for 11 years. For the first time in the company's history its sales were down in all categories in 1999. The next year Proteus USA increased the price of its cheese and nut selections by 20 percent to offset any continued downturn in the market. Sales of these items almost doubled what they had been in 1999. Proteus USA experienced:

A) profit programming.
B) marginal elasticity.
C) leader pricing.
D) penetration pricing.
E) inverse demand.

Question 63

Price elasticity of demand refers to the:

A) responsiveness of quantity demanded to price changes.
B) the effect a new competitor has on total industry sales.
C) willingness of consumers to buy a particular product during periods of excess supply.
D) willingness of consumers to postpone buying a particular product during periods of excess demand.
E) range of prices within a product category.

Question 64

Which of the following is an example of competition for sliced ham used to make sandwiches?

A) freshly-made chicken salad
B) sliced turkey
C) sliced American cheese
D) a can of Starkist tuna
E) all of the above

Question 65

Which of the following is an example of direct competition for Aussie brand shampoo?

A) Tone bar soap
B) Dial antibacterial liquid soap
C) Tide liquid detergent
D) Clairol Herbal Essence shampoo
E) all of the above

Question 66

Which of the following is an example of substitute competition for glass of Carnation Instant Breakfast?

A) a granola bar
B) a bagel with cream cheese
C) a plate of eggs and bacon
D) a McMuffin, a breakfast food sold at McDonald's
E) all of the above

Question 67

Which of the following is an example of substitute competition for a Little Debbie oatmeal snack cake?

A) next semester's tuition
B) a tank of gasoline
C) a candy bar
D) a new outfit for an upcoming dance
E) all of the above

Question 68

William wants to buy his wife a diamond bracelet for their next anniversary, but he is having trouble saving money for the purchase. Since he decided to buy the bracelet, he has had to pay for two root canals, a new pair of glasses, a new heating and cooling system for his house, and $700 worth or repairs to his car. William is having trouble due to:

A) direct competition
B) the availability of substitutes
C) replacement utility
D) the need to make marginal purchases
E) competition for his dollars

Question 69

Which of the following could be in competition for the dollars required to pay for a cruise to Bermuda?

A) a replacement water heater
B) an increase in college tuition
C) a fall which results in a hospital emergency room visit
D) a trip to the Grand Canyon
E) all of the above

Question 70

The price of a product is influenced by:

A) whether it is a new or an established product.
B) whether the product can be leased as well as purchased outright.
C) whether the product may be returned to the seller.
D) whether a trade-in is involved.
E) all of the above.

Question 71

When production stops, all _____ become zero.

A) variable production costs
B) overhead costs
C) costs
D) fixed production costs
E) fixed costs

Question 72

The fee paid to William Shatner for performing in Priceline.com ads (and not considering any residuals he might be paid) was most likely a ______ cost.

A) fixed
B) marginal
C) expected
D) unit
E) variable

Question 73

Which of the following is an example of a fixed cost for a bottler of spring water?

A) plastic bottles
B) cartons for bottles
C) incorrectly filled bottles
D) the salary of the chemist who checks water purity
E) labels for bottles

Question 74

Which of the following is an example of a fixed cost for a retail flower and gift shop?

A) gas for the delivery truck
B) store mortgage payment
C) fresh flowers
D) part-time sales people
E) plastic flower pots, foil, and ribbon

Question 75

F&P Georgia Manufacturing makes automobile suspension assemblies for Honda Motors of America. The subassembly consists of 45 separate components put together with 208 spot welds, many of which are done by robotic welding machines. The lease payment on the robotic welding machines would be an example of a _____ cost.

A) variable
B) markup
C) base
D) marginal
E) fixed

Question 76

F&P Georgia Manufacturing makes automobile suspension assemblies for Honda Motors of America. The subassembly consists of 45 separate components put together with 208 spot welds, many of which are done by robotic welding machines. The component parts would be an example of a _____ cost.

A) variable
B) markup
C) base
D) marginal
E) fixed

Question 77

Which of the following is an example of a variable cost for a company that manufactures uniforms for all types of civilian jobs?

A) buttons and zippers
B) salary to top management
C) lease payment on loading equipment
D) property tax on factory and neighboring warehouse
E) all of the above

Question 78

Which of the following is an example of a variable cost for a supermarket?

A) manager's salary
B) base cost of health insurance for employees
C) wages for checkout clerks
D) cost of freezer bins for storing ice cream and ice cream products
E) all of the above

Question 79

Marnie Czeider sells homemade banana bread at a local flea market on Saturdays for $12 a loaf. She sells 100 loaves every Saturday. Which of the following is an example of one of her variable costs?

A) the price of bananas
B) her salary
C) the cost of the license she got from the health department
D) the rent on her flea market booth
E) the price of the bread

Question 80

LoriAnn Oils sells bottled flavorings to cooks for spicing up their cakes, cookies, and candies. A case contains 48 bottles. Variable costs for making a case of peppermint oil equal $15. Fixed costs for each case are $2.75. The company wants to make a 150 percent profit on each case. Distribution costs to send a case to Alaska is $11. If more than three cases are ordered at one time, the price is reduced by 5 percent. What is the total cost for making three cases of peppermint oil?

A) $50.58
B) $53.25
C) $79.95
D) $81.93
E) $86.25