Deck 18: Pricing Concepts

Question 1

According to your text,how is price best described?

A)as the perceived value of a good or service
B)as money exchanged for a good or service
C)as the psychological results of purchasing
D)as the value of a barter good in an exchange

Answer 1

A

Question 2

The pricing policy used by Middleton Industries,manufacturer of Renaissance charms for bracelets and necklaces,is to set prices so its retail prices are as high as the market will tolerate.Additionally,Middleton strives to keep its costs at an industry low by using silver and gold overlays over charms made of cheap base metal.Which type of policy is this?

A)market share maximization
B)profit maximization
C)sales pricing
D)status quo pricing

Answer 2

B
Profit maximization means setting prices so that total revenue is as large as possible relative to total costs.

Question 3

The Fenton Company produces memorial bricks,which veterans' organizations,chambers of commerce,and other service organizations sell as fundraisers.The company has a target return on investment of 13 percent.Which type of pricing objective does Fenton have?

A)profit oriented
B)status quo
C)sales maximization
D)supply-demand equalization

Answer 3

A
Targeted ROI is one of the most common types of profit-oriented pricing objectives used.

Question 4

What is the term for money that is left over after paying for company activities?

A)return on investment
B)a contribution margin
C)profit
D)net worth

Question 5

Pierre's Ice Cream Company produces ultra-rich ice cream.Last year,it managed to exceed its target ROI for the current fiscal year.The following results were found on its financial statements:
What was the actual return on investment (ROI)for Parrish Farms?

A)6.67 percent
B)10 percent
C)22 percent
D)28 percent

Question 6

Why are marketing managers finding it more difficult to set prices in today's environment?

A)Fewer dealer and generic brands are available because of competition.
B)The high rate of new-product introductions has led to careful evaluation by consumers.
C)Marketing managers are finding it difficult to compare prices between suppliers.
D)Buyers are less informed and are less price sensitive.

Question 7

Which of the following measures the overall effectiveness of management in generating profits with its available assets?

A)return on investment
B)economic order quantity
C)target-on-sales
D)retained earnings

Question 8

Under which of the following conditions will companies with low market share be most likely to fail?

A)competing in a slow-growth industry
B)competing in an industry that makes frequently purchased items
C)competing in an industry with few product changes
D)competing in an industry requiring market power and economies of scale

Question 9

Grove City Furniture Company has recently moved to a new,larger location.At this new location,it has been unable to attract sufficient customers.Frankie Alonza,its owner,does not have the cash to pay the current loan instalment due on the building and inventory.Alonza has decided to reduce all merchandise prices by at least 50 percent for a weekend sale so he can earn enough to make his loan payment.How can his pricing objective be classified?

A)as market share maximization
B)as satisfactory profits
C)as sales maximization
D)as target ROI.

Question 10

Which of the following pay for every activity of the company?

A)revenues
B)investments
C)profits
D)prices

Question 11

For convenience,pricing objectives can be divided into three categories.What are they?

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

Question 12

At Walmart,Randi saw a bag of daffodil flower bulbs and a box of plant fertilizer.The items,which were sold together,retailed at $28.50,but were marked down to $19.99.
Refer to Walmart.The retailer sold one at the $28.50 price and five at the $19.99.What was Walmart's revenue?

A)$19.99
B)$28.50
C)$99.95
D)$128.45

Question 13

Bernard Hinault makes the most expensive bicycles in the world.Its target market is people who willingly pay $8,000 or more for their bicycles.If Bernard Hinault were to lower prices to target customers who want a good bike but who can't or won't spend that much for one,which type of pricing objective would it most likely use?

A)inelastic or supply oriented
B)market share or sales maximization
C)profit maximization or target return on investment
D)demand oriented or supply oriented

Question 14

At Walmart,Randi saw a bag of daffodil flower bulbs and a box of plant fertilizer.The items,which were sold together,retailed at $28.50,but were marked down to $19.99.
Refer to Walmart.What is the $19.99?

A)the revenue
B)the price
C)the profit
D)the liquidity value

Question 15

Which type of pricing objective does a company using market share pricing have?

A)profit oriented
B)sales oriented
C)demand oriented
D)supply oriented

Question 16

Hal Macini,owner of Evergreen Landscaping,is more interested in earning customer goodwill than striving for maximum profit.He determines his prices by maintaining the company's profitability at a level that gives him a good living but will never make him a rich man.What is Macini basing his pricing policy on?

A)maintaining stable sales levels
B)earning satisfactory profits
C)creating retained earnings
D)creating the most sales possible

Question 17

Revenue

A)equals price minus costs.
B)equals return on investment.
C)equals profit.
D)equals price of goods times quantity sold.

Question 18

Which of the following statements best describes price?

A)Price and revenue are synonymous.
B)Price always equals some monetary figure.
C)Price is based on the satisfaction consumers expect to receive from a product.
D)Pricing high results in high profits.

Question 19

What is an organization using when it sets its prices so that total revenue is as large as possible relative to total costs?

A)profit maximization
B)market share pricing
C)demand-oriented pricing
D)status quo pricing

Question 20

At the end of the summer,Howard Nursery reduced the price on all of its plants,fertilizer,and potting soil by 50 percent in order to liquidate this inventory.What type of pricing strategy is being used in this example?

A)supply oriented investment
B)sales maximization
C)target return on investment
D)profit maximization

Question 21

What is the quantity of a product that people will buy/demand most dependent on?

A)its distribution strategy
B)its supply
C)its promotion strategy
D)its price

Question 22

What occurs when consumers are sensitive to price changes?

A)inelastic demand
B)elastic demand
C)inelastic supply
D)elastic supply

Question 23

In which direction do most demand curves slope?

A)horizontally
B)upward and to the right
C)downward and to the left
D)downward and to the right

Question 24

Which of the following is defined as the quantity of a product that will be sold at various prices for a specified period?

A)market share
B)demand
C)supply
D)revenue

Question 25

Which of the following is defined as the quantity of product offered to the market by suppliers at various prices for a specified period?

A)supply
B)demand
C)equity
D)barter

Question 26

Jon P.Farmer is the founder of Kolopua Hawaii LLC,a company that markets Pure Hawaiian Air.Bottles of Pure Hawaiian Air contain air that smells like the floral bouquet that greets tourists as they get off the plane in Hawaii.When a tourist shop began selling Pure Hawaiian Air,it charged $5 per bottle and could not keep up with the demand.It has since raised the price to $7.Now the shop is still selling all the bottles of Pure Hawaiian Air it carries,but the owner is not forced to reorder on a daily basis.What is the $7 price likely to be?

A)a supply schedule
B)a symmetrical price
C)a price equilibrium
D)an inventory equalizer

Question 27

Pursonal Touch produces and markets beaded purses.When graphed,the demand schedule for its purses is a straight line.If one purse costs $20,5,000 beaded purses are sold.At $25,4,500 purses are sold.How many beaded purses will be sold if the price per purse is increased to $30?

A)3,750
B)4,000
C)4,250
D)5,500

Question 28

What is the term for the responsiveness or the sensitivity of consumer demand to changes in price when consumers buy more or less of a product when the price changes?

A)the break-even point
B)the point of equilibrium
C)asymmetrical demand
D)elasticity of demand

Question 29

Although many factors can influence price,what are the primary determinants?

A)costs of manufacturing and distribution
B)the demand for the good and the cost to the seller
C)distribution and promotion strategies
D)stage of the product life cycle and costs to the consumer

Question 30

What is the term for the point at which there is no inclination for the price to rise or fall?

A)price equilibrium
B)price stability
C)price symmetry
D)price status quo

Question 31

As a short-term pricing objective,which of the following can be effectively used on a temporary basis to sell off excessive inventory?

A)profit maximization
B)status quo pricing
C)sales maximization
D)market share pricing

Question 32

According to your textbook which of the following statements describes an advantage of status quo pricing?

A)Status quo pricing is derived from actual costs of manufacturing.
B)Status quo pricing maintains the organization's differential advantage.
C)Status quo pricing causes price wars.
D)Status quo pricing requires little planning.

Question 33

If a company's pricing objective is to meet the competition or to maintain existing prices,which type of pricing is it using?

A)head-on
B)target return on investment
C)status quo
D)market share

Question 34

Khimaira Farms sells handcrafted cookie cutters.When graphed,the demand schedule for Khimaira Farms brand cookie cutters forms a straight line.If at $3 per cutter,500 cookie cutters are demanded,and at $4 per cutter,450 cookie cutters are ordered,how many will be ordered at a price of $6 per cutter?

A)333
B)350
C)400
D)450

Question 35

For about a year,AMD representatives have told journalists that they do not believe that AMD will have to react in any way to the launch of Intel's Quad-Core processor.But just a week before Intel's introduction of this product,AMD reduced the price of its desktop processors by 47 percent.What is AMD hoping that demand for its processors will be?

A)elastic
B)derived
C)inelastic
D)joint

Question 36

The demand is the quantity of a product that will be sold in the market at various prices for a specified time period and the quantity of a product that will be offered to the market by suppliers at various prices for a specified period is referred to as which of the following?

A)equity
B)supply
C)demand
D)inventory

Question 37

Leo Bliss manages a guest souvenir shop in Florida.He has decided to graph the demand per week for fresh orange juice because its price varies as the demand of fresh oranges varies.The graph indicates a demand schedule that slopes downward and to the right.This graph indicates that the quantity of juice demanded increases as which of the following occurs?

A)cost increases
B)supply decreases
C)price decreases
D)supply increases

Question 38

Queeg Industries sells all types of artists' paintbrushes.When the owner of Queeg learned that Patterson Art,one of its biggest competitors in the region,had lowered its prices on all synthetic brushes by 5 percent,he did the same.Which type of pricing is this?

A)status quo
B)target return
C)market share
D)predatory

Question 39

The price of the good or service is a key decision for a marketer because it most significantly and directly affects which of the following?

A)the product's distribution
B)the product's demand
C)the product's promotion
D)the product's quality

Question 40

At a price of $6 each,314 people want to buy sun visors designed especially for volunteers at the Nike run,and only 314 such visors are available.In this example,which type of state has been achieved?

A)symmetry
B)marketing balance
C)commerce stability
D)price equilibrium

Question 41

What happens when demand is elastic?

A)As price goes up,revenue goes down.
B)As price goes down,revenue goes down.
C)As price goes up,revenue goes up.
D)As price goes up,revenue does not change.

Question 42

What is the term for a cost that changes with the level of output?

A)liquidity
B)variable
C)fixed
D)asset

Question 43

When Nesco brand food hydrators sold for $59.99,Nesco sold 90 dehydrators.When the company dropped the price of its dehydrators to $44.95,it sold 145 dehydrators.What does demand for the food dehydrators appear to be?

A)elastic
B)inelastic
C)unitary
D)symmetrical

Question 44

Customers who suffer a poverty of time and have a strong need for convenience are taken advantage of by ATMs because of which of these?

A)elasticity of demand
B)inelastic demand schedule
C)unitary supply and demand
D)supply characteristics

Question 45

Which of the following factors does NOT directly affect the elasticity of demand?

A)the other uses of a product
B)the inputs needed to manufacture the product
C)the availability of substitute goods
D)the price relative to purchasing power

Question 46

Which of the following is most likely to be a variable cost for an Internet retailer that sells spices,herbs,and seasonings to consumers?

A)an annual lease on mixer used to blend seasonings
B)executive salaries
C)rent for a building where spices and herbs are repackaged for consumers
D)postage for shipping spices and herbs

Question 47

Procter & Gamble dropped the price of Pringles Potato Chips due to price competition and consumer demand.As a result of the price reduction,why did Procter & Gamble experience increased unit sales and earnings by 10 percent?

A)price wars with other snack food makers
B)elasticity of demand
C)price demand determinants
D)market share fluctuations

Question 48

What are yield management systems used for?

A)to determine the availability of product substitutes in complex industries that are experiencing rapid change
B)to profitably fill unused capacity
C)to predict necessary service levels to achieve revenue goals
D)to create elastic demand for low-involvement products

Question 49

Which of the following statements best describes YMS?

A)YMS eliminate the problem of simultaneous production and consumption from services.
B)YMS cannot be used by any other businesses but services.
C)YMS are complex pricing systems used to set equilibrium pricing points.
D)YMS are mathematically complex systems to make use of underutilized capacity and reduce the cost of perishability.

Question 50

Which costs do not change as output is increased or decreased?

A)asset
B)variable
C)fixed
D)status quo

Question 51

A bakery supply catalogue sells five-pound bags of moist apricots and cranberries,sweet dates,bits of pineapple,and candied cherries to be used in fruitcakes.Each bag costs $24.95.
Refer to Dried Fruits.If the price of cranberries were to increase by 5 percent,it would have no effect on the price of the fruit mix because cranberries are only one of several fruits in the package.What is the demand for cranberries for this particular use?

A)elastic
B)derived
C)synergistic
D)inelastic

Question 52

Craftarium,Inc.makes and sells beaded purses,jackets,slippers,and other fashion items.Which of the following is the best example of one of its fixed costs?

A)payment on leased delivery vehicles
B)purse handles
C)packaging for kits
D)advertisements in fashion magazines

Question 53

Which of the following use complex mathematical software to profitably fill unused capacity?

A)yield management systems
B)capacity correlation systems
C)service forecasting systems
D)service management systems

Question 54

When the NES Group lowered the price of its professional-grade meat slicers from $2,300 to $1,600,demand doubled from 4 units sold per month to 8 units per month.However,total revenue dropped.What is this an example of?

A)unitary elasticity
B)elastic demand
C)consumer shortage
D)inelastic demand

Question 55

Hostlight Industries operate a chain of moderately priced hotels.There are many businesses that compete with them for tourist dollars,and some nights during the tourist season their hotels are only half full.Other nights they have to turn away guests because there are no vacancies.Assuming the quality of the rooms and the services provided by the hotels remain the same,what could Hostlight Industries use to fill unused rooms?

A)a yield management system
B)a capacity correlation system
C)service forecasting tools
D)capacity maintenance tools

Question 56

A bakery supply catalogue sells five-pound bags of moist apricots and cranberries,sweet dates,bits of pineapple,and candied cherries to be used in fruitcakes.Each bag costs $24.95.
Refer to Dried Fruits.Since the amount of cranberries purchased depends on how many bags of fruit are demanded,what is the cost of the cranberries?

A)a variable cost
B)a marginal contributor
C)a fixed cost
D)a variable revenue

Question 57

Which of the following occurs when an increase in sales exactly offsets a decrease in price so that total revenue remains exactly the same?

A)inelastic demand
B)functional elasticity of demand
C)unitary elasticity
D)highly elastic demand

Question 58

When price decreases and total revenue falls,how can demand be described?

A)as elastic
B)as inelastic
C)as unitary
D)as stable

Question 59

While shopping,Anita found a "gardening kit" containing a pair of work gloves,a trowel,and a hand rake handsomely arranged in a clay flower pot.The items,which were sold together,retailed at $24.50,but had been marked down to $12.99.The retailer sold only one for $24.50 and six at the $12.99 price.Which of the following describes demand for the gardening kit package?

A)It is predictable.
B)It is synergistic.
C)It is inelastic.
D)It is elastic.

Question 60

Concha y Toro,a Chilean wine,has reduced the price of one bottle from $10 to $8.It previously sold 420 bottles in the month prior to the price reduction,and it now sells 525 bottles per month.What is it experiencing?

A)consumer elasticity
B)inelastic demand
C)elastic demand
D)unitary elasticity

Question 61

According to your textbook,which of the following describes a disadvantage associated with markup pricing?

A)how difficult it is to implement
B)its failure to explicitly consider product demand
C)its dependence on marginal costs
D)too many factors influence it

Question 62

What is the term for the extra revenue associated with selling an additional unit of output?

A)average revenue
B)marginal revenue
C)marginal cost
D)average variable cost

Question 63

The point at which marginal cost and marginal revenue are equal always results in which of the following?

A)maximization of revenue
B)maximization of costs
C)maximization of profits
D)break-even equilibrium

Question 64

During sporting events at the local high school,Steven Urangi runs a concession stand.The costs associated with the purchase of hot dogs,mustard,relish,ketchup,chips,soft drinks,paper napkins,and cups are all examples of which type of costs?

A)marginal
B)variable
C)fixed
D)liquidity

Question 65

What is the biggest advantage associated with markup pricing?

A)its simplicity
B)its inability to be decoded by customers
C)the way that the technique considers demand
D)the fact that merchandise is never underpriced with this technique

Question 66

Which of the following determine what sales volume must be reached for a product before the company's total costs equal total revenue and no profits are earned?

A)marginal revenue estimates
B)break-even analyses
C)average total cost (ATC)figures
D)marginal costs of goods sold

Question 67

As long as the revenue of the last unit produced and sold is greater than the cost of the last unit produced and sold,what should a firm do?

A)continue manufacturing
B)not use formula pricing
C)continue using price equilibrium
D)consider using sales maximization pricing

Question 68

Mitch owns Lakeside Apple Growers.The monthly payment on the land he purchased for his orchard,the mortgage on his small office building,and his business license are all examples of which type of costs?

A)marginal
B)variable
C)fixed
D)demand

Question 69

Monthly output at Leisure-Time,Inc.changed from 12 to 13 prefabricated gazebos,and the total costs changed from $9,000 to $10,500.What is the marginal cost for this company?

A)$1,500
B)$2,000
C)$10,000
D)$12,000

Question 70

Hippie High is a retail store that sells reproductions of clothes worn in the 1960s and the 1970s.The store's owner does not take into account competition when pricing the store's clothing.The markup on all items in the store is 100 percent over cost (or double the cost).What does Hippie High use?

A)keystoning
B)target ROI pricing
C)break-even pricing
D)double sourcing

Question 71

What is keystoning?

A)the practice of marking up prices by 100 percent
B)a method used for determining the point of elasticity
C)a plan for reducing marginal costs
D)a method of changing consumers' perceptions about price

Question 72

When does profit maximization occur?

A)when total costs equals average fixed revenue
B)when average variable costs are larger than average total costs
C)when marginal variable costs equal average revenues
D)when marginal revenue equals marginal cost

Question 73

What is the most popular method used by wholesalers and retailers in establishing a sales price?

A)markup pricing
B)status quo pricing
C)marginal revenue pricing
D)break-even pricing

Question 74

What is the term for the change in total costs associated with a one-unit change in output?

A)variable cost
B)elastic cost
C)marginal cost
D)flex cost

Question 75

When a seller determines the selling price by adding to cost an amount for profit and expenses not previously accounted for,which type of pricing is the seller using?

A)profit maximization
B)demand oriented
C)target return
D)markup

Question 76

An educational toy store can buy a world globe for $30.If the store owner sells the globe for $45,what is the markup based on the selling price?

A)15 percent
B)20 percent
C)25 percent
D)33 percent

Question 77

Kenady Appliances pays a manufacturer $800 for a convection oven,and it sells the convection oven to a customer for $1,600.What is the markup on the screen?

A)$160
B)$240
C)$800
D)$400

Question 78

What is the term for the practice of marking up prices by 100 percent (or doubling the cost to set the selling price)?

A)margin pricing
B)keystoning
C)mark-on adding
D)formula doubling

Question 79

An independent retailer of specialty kitchen items wants to determine what price she should put on a set of plastic wine glasses.They cost her $7.She wants a markup of 30 percent based on selling price.Which of the following is closest to the price she should charge her customers?

A)$10
B)$12
C)$15
D)$18

Question 80

Besides a given fixed cost,what does the typical break-even model assume?

A)variable per unit cost
B)constant inventory turnover
C)constant production schedule
D)constant average variable cost