Deck 11: Pricing Strategy

Question 1

Which of the following is a psychological factor relevant to pricing decisions of a bakery?

A) How many loaves of bread will a potential buyer consume every month?
B) Are the orders coming from households or sandwich shops?
C) Will a low price indicate inferior quality to the potential buyer?
D) How many potential buyers for multigrain bread are there?

Answer 1

C
Explanation: Psychological factors related to pricing concern primarily how consumers will perceive various prices or price changes. Psychological factors include questions such as, whether potential buyers will use price as an indicator of product quality. Expected consumption rate of potential buyers, position of potential buyers, and number of potential buyers are demographic factors relevant to pricing decisions.

Question 2

Fone Inc.is about to launch the latest version of its smartphone.As part of its pricing strategy,it is analyzing the economic strength of its potential buyers.Which of the following factors influencing pricing decisions is Fone concerned with?

A) Psychological factors
B) Environmental factors
C) Demographic factors
D) Price elasticity

Answer 2

C
Explanation: Demographic factors that are particularly important for pricing decisions include the number of potential buyers, location of potential buyers, and the economic strength of potential buyers.

Question 3

Which of the following factors related to pricing is concerned primarily with how consumers perceive various prices or price changes?

A) Environmental factors
B) Psychological factors
C) Demographic factors
D) Sociological factors

Answer 3

B
Explanation: Psychological factors related to pricing concern primarily how consumers will perceive various prices or price changes.

Question 4

Protectnow,Inc.is a company that sells insurance.Which of the following is an example of a psychological factor relevant to Protectnow's pricing decisions?

A) The position of its potential buyers
B) The expected number of insurances it will sell in the next fiscal year
C) The economic strength of its potential buyers
D) The prestige orientation of its potential buyers

Question 5

Which of the following factors influencing pricing decisions pertains to demand influences for a product?

A) Environmental factors
B) Distinctiveness
C) Cost factors
D) Psychological factors

Question 6

_____ influences on pricing decisions concern primarily the nature of the target market and expected reactions of consumers to a given price or change in price.

A) Product
B) Environmental
C) Supply
D) Demand

Question 7

Which of the following is an example of a psychological factor relevant to the pricing decisions made for a collectible doll that sells for $299?

A) What is the discretionary income of prospective buyers of the doll?
B) Will prospective buyers view the doll's high price as an indicator of high quality?
C) Are the prospective buyers of the doll geographically clustered?
D) How many prospective buyers can afford to pay this much for a doll?

Question 8

Which of the following factors influencing pricing decisions pertains to the expected consumption rate of potential buyers,location of potential buyers,and position of potential buyers?

A) Psychological factors
B) Environmental factors
C) Demographic factors
D) Price elasticity

Question 9

Which of the following is a factor influencing pricing decisions that are relevant to demand influences for a product?

A) Environmental factors
B) Distinctiveness
C) Cost factors
D) Demographic factors

Question 10

Which of the following best explains why Frito-Lay's potato chips are priced at 69 cents a bag rather than 70 cents?

A) To encourage consumers to think these chips are less expensive
B) To gain more consumers who are not too keen about the quality of the chips
C) To create a signal that these chips are exceptionally fine
D) To increase sales by giving discount offers

Question 11

A gas station in South San Francisco charges $4.29 instead of $4.30 for regular gas and $4.79 instead of $4.80 for premium gas to make the prices look less expensive.This is an example of _____ pricing.

A) prestige
B) bundle
C) markup
D) odd-even

Question 12

Which of the following is a demographic factor that influences the pricing decision of a product?

A) Buyers using price as an indicator of product quality
B) Potential buyers being favorably attracted by odd pricing
C) Prestige orientation of potential buyers
D) Expected consumption rates of potential buyers

Question 13

Which of the following is an example of a demographic factor that is significant to the pricing decisions of a new type of low-fat cereal for children?

A) How many boxes of the low-fat cereal will be consumed by a household in a month?
B) What price will indicate the quality of the cereal?
C) Are potential buyers of the cereal prestige oriented?
D) Will potential buyers be attracted to the cereal if its manufacturer uses odd pricing?

Question 14

Protectnow,Inc.is a company that sells insurance.Which of the following is an example of a demographic factor that would be relevant to Protectnow's pricing decisions?

A) The position of its potential buyers
B) The types of insurance it sells
C) The fact that its potential buyers use price as an indicator of product quality
D) The prestige orientation of its potential buyers

Question 15

Hertz economy cars are rented for $129 rather than $130 to appear less expensive.This is an example of _____ pricing.

A) prestige
B) bundle
C) markup
D) odd-even

Question 16

Which of the following is a psychological factor affecting pricing decisions?

A) Expected consumption rates of potential buyers
B) Location of potential buyers
C) Chances of a buyer being favorably attracted by odd pricing
D) Economic strength of potential consumers

Question 17

Which of the following is a demographic factor that influences the pricing decision of a product?

A) Potential buyers using price as an indicator of product quality
B) Potential buyers being favorably attracted by odd pricing
C) Prestige orientation of potential buyers
D) Economic strength of potential buyers

Question 18

Which of the following is a psychological factor affecting pricing decisions?

A) Expected consumption rates of potential buyers
B) Location of potential buyers
C) Use of price as an indicator of quality by potential buyers
D) Economic strength of potential buyers

Question 19

Which of the following factors influencing pricing decisions pertains to demand influences for a product?

A) Breakeven point
B) Target pricing
C) Cost-plus pricing
D) Price elasticity

Question 20

Travel agencies offer vacation packages that include travel,accommodations,and entertainment at a single price to signify value and convenience for customers.This is an example of _____ pricing.

A) odd-even
B) prestige
C) bundle
D) rate of return

Question 21

Which of the following is a type of psychological pricing strategy?

A) Cost-plus pricing
B) Rate-of-return pricing
C) Markup pricing
D) Odd-even pricing

Question 22

Which of the following is a common pricing objective?

A) Pricing to maximize short-term profits
B) Pricing to achieve a target return on investment
C) Pricing to reduce inventory costs
D) Pricing to increase prestige of the product

Question 23

Which of the following is true about odd-even pricing?

A) Prices are set a few dollars or a few cents below a round number to encourage the customers to think of the products as less expensive.
B) A percentage is added to the retailer's invoice price to determine the final selling price of the product.
C) Several products are sold together at a single price to connote value and convenience for customers.
D) It is used most often to describe the pricing of jobs that are nonroutine and difficult to "cost" in advance.

Question 24

Under a single policy,Reassurance Inc.,an insurance company,provides insurance such as fire,engineering,healthcare,and property to companies.By doing this,Reassurance aims to:

A) connote value and convenience for customers.
B) create a signal that the service is exceptionally fine.
C) increase sales through steep price discounting.
D) encourage customers to think of them as high quality maintainers.

Question 25

_____ is estimated by dividing relative changes in the quantity sold by the relative changes in price.

A) Price skimming
B) Cost-plus pricing
C) Rate-of-return pricing
D) Price elasticity

Question 26

Charming Inc.is a high-end perfume manufacturer.It slashed the price of its least popular fragrance "Energy" by 5 percent during the last fiscal year.This resulted in a 20 percent increase in the sales of Energy in that time period compared to the year before.Estimate the price elasticity for Energy.

A) 4
B) 5
C) 20
D) 100

Question 27

Printers Cove Inc.is an online retailer of printers and accessories.A recent ad on their Web site reads: "Buy a compact photo printer and single-use color cartridge combo and save 30 percent off retail prices.Limited period offer.Act now." This is an example of _____ pricing.

A) odd-even
B) prestige
C) bundle
D) rate of return

Question 28

When Lucile went to buy some bedding plants for a flowerbed she was building,she noticed that a six-pack of plants was for $0.79,a 3-inch container with one plant was for $0.99,and a 5-inch container was for $1.29.This example indicates that the seller is using _____ pricing.

A) odd-even
B) bundle
C) prestige
D) cost-plus

Question 29

Both Tonya and Edna went to buy a black sweater.Edna bought hers from Dillard's for $79.Tonya bought a similar one at Sears and paid $34.95.Edna is convinced her sweater is much superior to Tonya's because it is more expensive.Which of the following is the psychological factor that makes Edna buy such high-priced items?

A) The use of odd pricing which made Edna feel like she got more for her money
B) The use of prestige pricing which means the high price was used to signal high quality
C) The use of bundle pricing which stresses both value and convenience to Edna and validates the high price of the sweater
D) The use of price elasticity which determines Edna's and Tonya's price sensitivity

Question 30

Sporty Inc.manufactures high-end designer sports shoes.The price of its most popular shoe "Fast" went up by 10 percent during the last fiscal year.Sporty sold 50 percent more units of Fast in that time period compared to the year before.Estimate the price elasticity for Fast.

A) 5
B) 10
C) 500
D) 50

Question 31

For which of the following products is a retailer most likely to use prestige pricing?

A) Plastic storage containers
B) Fresh fruits
C) Frozen desserts
D) Crystal wine glasses

Question 32

Before Kenny and Tessa started their vacation,they had budgeted $70 a night for motels.When the couple went to check-in into a motel for the night,they were pleasantly surprised to learn that the $69 they paid for their room included breakfast for two.Which form of psychological pricing is the motel using?

A) Price skimming
B) Prestige pricing
C) Reference rate pricing
D) Bundle pricing

Question 33

Price elasticity (e)= x/percent change in price,where x stands for:

A) percent change in number of consumers.
B) gross change in price.
C) gross change in production.
D) percent change in quantity demanded.

Question 34

Which of the following is a type of psychological pricing strategy?

A) Cost-plus pricing
B) Rate-of-return pricing
C) Markup pricing
D) Prestige pricing

Question 35

Terrie went to the hardware store this morning to purchase a gallon of Roundup Weed-and-Grass killer for which she expected to pay about $15.She found a gallon of Roundup packaged with a quart of Weed-B-Gone,a new product claiming to kill weeds without destroying grass.Together they were priced at $17.This example would best describe _____ pricing.

A) odd-even
B) prestige
C) bundle
D) cost-plus

Question 36

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

A) Establishing price leadership for new products
B) Stabilization of price and margin
C) Pricing to prevent competition
D) Pricing to achieve a target market share

Question 37

Which of the following is true about bundle pricing?

A) Prices are set a few dollars or a few cents below a round number to encourage the customers to think of the products as less expensive.
B) A percentage is added to the retailer's invoice price to determine the final selling price of the product.
C) Several products are sold together at a single price to connote value and convenience for customers.
D) It is used most often to describe the pricing of jobs that are nonroutine and difficult to "cost" in advance

Question 38

Which of the following is a type of psychological pricing strategy?

A) Cost-plus pricing
B) Rate-of-return pricing
C) Markup pricing
D) Bundle pricing

Question 39

Which of the following is a common pricing objective?

A) Pricing to maximize short-term profits
B) Pricing to reduce inventory costs
C) Pricing to achieve a target market share
D) Pricing to increase prestige of the product

Question 40

Which of the following observations is true about price elasticity?

A) It is significantly affected by both governmental and environmental factors.
B) The historical data-based price elasticity measurement approach is limited to the considerations of price changes.
C) Estimates of price elasticity are useful for pricing decisions, provided those estimates are accurate.
D) Price elasticity can be estimated accurately from sociological data.

Question 41

_____ is most often used to describe the pricing of services that are nonroutine and difficult to "cost" in advance of their completion.

A) Target cost pricing
B) Rate-of-return pricing
C) Bundle pricing
D) Cost-plus pricing

Question 42

Which of the following is an important product consideration in pricing?

A) Affordability
B) Distinctiveness
C) Elasticity
D) Target market share

Question 43

A company might use penetration pricing when it:

A) perceives demand for a new product to be price inelastic.
B) wants to charge a relatively high price on a new product.
C) expects competition to move in rapidly.
D) has a temporary monopoly in the market.

Question 44

Which of the following observations about the impact of product considerations on pricing is true?

A) A penetration policy should be used when the firm expects minimal competition for a product.
B) A skimming policy provides best returns for perishable products as they approach being no longer fit for sale.
C) A penetration policy is commonly used for products that are highly distinctive in customers' minds.
D) A skimming policy is useful when the firm has a temporary monopoly and when demand for the product is price inelastic.

Question 45

Which of the following describes an advantage associated with cost-oriented approaches to pricing?

A) They provide a direct correlation of price to what people will be willing to pay for the product.
B) They clearly and adequately reflect competition.
C) They give adequate consideration to both supply and demand factors.
D) They are very simple to use and generally yield a good price decision.

Question 46

Which of the following is a type of cost-oriented pricing?

A) Odd pricing
B) Bundle pricing
C) Prestige pricing
D) Cost-plus pricing

Question 47

A razor manufacturer introduced its new three-blade razor at a very low price to encourage more consumers to purchase it and to discourage competition.This is an example of _____ pricing.

A) penetration
B) cost-plus
C) going-rate
D) markdown

Question 48

Which of the following businesses is most likely to use rate-of-return pricing?

A) A large book store
B) A glass manufacturer
C) An independently owned clothing retailer
D) A construction company

Question 49

Which of the following is true about markup pricing?

A) Prices are set a few dollars or a few cents below a round number to encourage the customers to think of the products as less expensive.
B) A percentage is added to the retailer's invoice price to determine the final selling price of the product.
C) Several products are sold together at a single price to connote value and convenience for customers.
D) It is used most often to describe the pricing of jobs that are nonroutine and difficult to "cost" in advance.

Question 50

For which of the following products is the producer most likely to use cost-plus pricing?

A) A landscaping project of a five-acre public park
B) A kite bought at a souvenir shop
C) A first edition novel that is valued at $125
D) A state-of-the-art home entertainment system

Question 51

Which of the following describes a disadvantage associated with cost-oriented approaches to pricing?

A) Give little consideration to supply factors
B) Difficult to understand and put into practice
C) Fail to adequately reflect competition
D) Generally do not yield a good price decision

Question 52

Which of the following product characteristics that affect pricing typically involves discounting products as they approach being no longer fit for a sale?

A) Distinctiveness
B) Perishability
C) Durability
D) Stage in product life cycle

Question 53

Which of the following is a type of cost-oriented pricing?

A) Odd pricing
B) Bundle pricing
C) Rate-of-return pricing
D) Prestige pricing

Question 54

Which of the following is a common pricing objective?

A) Pricing to meet or prevent competition
B) Pricing to reduce inventory costs
C) Pricing to maximize short-term profits
D) Pricing to increase prestige of the product

Question 55

Jena runs an ice cream cooler at the beach each summer.Her brother does not charge her rent for setting up her ice cream cooler in his stand.Each bar of ice cream costs her $0.20.She adds an additional $0.20 to each bar to pay for electricity for the freezer,napkins,and her time,selling the ice cream finally at $0.40 per bar.Jena uses _____ pricing.

A) bundle
B) rate-of-return
C) odd-even
D) markup

Question 56

The pricing strategy in which the seller charges a relatively low price on a new product is called the _____ policy.

A) underscoring
B) markdown
C) penetration
D) skimming

Question 57

Which of the following types of cost-oriented pricing is closely related to markup pricing?

A) Cost-plus pricing
B) Odd pricing
C) Prestige pricing
D) Value pricing

Question 58

The estimated production and sales for a coffee table book on celebrity gardening is 10,000 volumes at a total cost of $100,000.Calculate the sales price for each book if the publisher desires a before-tax return of 25 percent.

A) $12.50
B) $15.00
C) $18.75
D) $10.00

Question 59

Which of the following is a type of cost-oriented pricing?

A) Odd pricing
B) Bundle pricing
C) Markup pricing
D) Prestige pricing

Question 60

The pricing strategy in which the seller charges a relatively high price on a new product is called _____.

A) price fixing
B) line pricing
C) penetration pricing
D) price skimming

Question 61

Which of the following kinds of pricing strategies would you expect producers to use for pricing homogeneous products,such as wool,tomatoes,wheat,coal,and bone meal?

A) Penetration pricing
B) Going-rate pricing
C) Skimming pricing
D) Sealed-bid pricing

Question 62

Which of the following is an environmental influence in pricing decisions?

A) Price elasticity
B) Government regulations
C) Demographic conditions
D) Psychological factors

Question 63

Which of the following is most likely to be a reason for a firm to price a product above competition?

A) The firm is selling a homogenous product.
B) Demand for the product is price elastic.
C) The firm is a price leader in the industry.
D) This approach represents the collective wisdom of the industry.

Question 64

Setting prices so targeted customers will perceive products to offer greater worth than competitive offerings is called _____ pricing.

A) target
B) markup
C) value
D) EDLP

Question 65

General Electric Company and De Beers Centenary AG were charged for conspiring to keep the end-user price for industrial diamonds artificially high.In other words,the two companies were charged for _____.

A) price discrimination
B) price fixing
C) predatory pricing
D) deceptive pricing

Question 66

Which of the following is NOT a basic value position?

A) A product could be priced relatively high for a product class because it offers value in the form of high quality.
B) A product could be priced at about average for the product class because it offers value in the form of good quality for a reasonable price.
C) A product could be priced relatively low for a product class because it offers value in the form of acceptable quality at a low price.
D) A product could be priced low for a product class because it offers value in the form of high quality at a substantially low price.

Question 67

Marking merchandise with an exceptionally high price and then claiming that the lower selling price actually used represents a legitimate price reduction,is an example of _____ pricing.

A) deceptive
B) odd-even
C) predatory
D) markup

Question 68

A new device "Sniffer",used for testing alcohol levels in drunken driving suspects,is priced out of the reach of most law enforcement units.Those units that have bought the Sniffer are extremely pleased with its results and the fact that these results are readily accepted in court.There is nothing on the market today that has the accuracy and the portability of the Sniffer.The manufacturer of the Sniffer is likely to be using a(n)_____ pricing policy.

A) penetration
B) odd-even
C) skimming
D) going-rate

Question 69

Pricing a product at competition is called _____ pricing and is popular for homogeneous products.

A) sealed-bid
B) bundle
C) odd-even
D) going-rate

Question 70

GameCube video game console was launched with an introductory price of $199.95,which was quite low for products of this category.The reasoning behind this low pricing was that the GameCube manufacturer expected competition to move in rapidly.Identify the pricing policy used here.

A) Penetration policy
B) Markdown policy
C) Skimming policy
D) Going-rate policy

Question 71

In which stage of the general pricing model do marketers estimate how much of a particular product the target market will purchase at various price levels?

A) Analyze profit potential
B) Evaluate product-price relationships
C) Set initial price structure
D) Estimate costs and other price limitations

Question 72

Deceptive pricing practices are outlawed under the _____ Act.

A) Federal Trade Commission
B) Sherman-Antitrust
C) Taft-Hartley
D) Fair Pricing

Question 73

A product could be priced relatively low for a product class because it offers value in the form of acceptable quality at a low price.Which of the following products is an example of this value position?

A) Hyundai Accent
B) Porsche Panamera
C) Honda Accord
D) Rolls-Royce Phantom

Question 74

_____ is an example of pricing below the competition.

A) Cost-minus pricing
B) Bundle pricing
C) Penetration pricing
D) Sealed-bid pricing

Question 75

Price discrimination that lessens competition or is deemed injurious to it,is outlawed by the _____ Act.

A) Robinson-Patman
B) Taft-Hartley
C) Clayton
D) Federal Trade Commission

Question 76

Which of the following is an example of an environmental influence on pricing decisions?

A) The cost structure used by competitors
B) The stage of the life cycle a product is in
C) Rate-of-return pricing used by manufacturers
D) The economic strength of potential buyers

Question 77

Which of the following is the primary device used to outlaw horizontal price fixing?

A) Sherman Antitrust Act
B) Robinson-Patman Act
C) Clayton Act
D) Taft-Hartley Act

Question 78

Before it closed its doors,Montgomery Ward advertised a pair of diamond earrings for $399 that it said had a regular price of $2,199.When the Better Business Bureau examined the incident,it did not find any evidence that the retailer had ever actually offered a pair of earrings at the aforesaid "regular price." Montgomery Ward was found guilty of _____.

A) price discrimination
B) price fixing
C) predatory pricing
D) deceptive pricing

Question 79

For which of the following products is the seller most likely to use going-rate pricing?

A) Sports cars
B) Wedding apparel
C) Whole milk
D) Designer furniture

Question 80

Which of the following is the primary law that is used to protect consumers from price fixing?

A) Sherman Antitrust Act
B) Robinson-Patman Act
C) Taft-Hartley Act
D) Clayton Act