Deck 18: Pricing for International Markets

Question 1

The possibility of a parallel market occurs whenever price differences are lesser than the cost of transportation between two markets.

Answer 1

False
Explanation: The possibility of a parallel market occurs whenever price differences are greater than the cost of transportation between two markets.

Question 2

Barter houses help countries negotiate prices for imports and exports and also provide facilities for cash payments and receipts.

Answer 2

False
Explanation: Barter houses specialize in trading goods acquired through barter arrangements and are the primary outside source of aid for companies beset by the uncertainty of a countertrade.

Question 3

Full-cost pricing is an approach to pricing that emphasizes that one unit of a product be different from the other and must, therefore, be priced differently.

Answer 3

False
Explanation: Companies following the full-cost pricing philosophy insist that no unit of a similar product is different from any other unit in terms of cost and that each unit must bear its full share of the total fixed and variable cost.

Question 4

Deflation results in ever-decreasing prices, creating a positive result for consumers, but both put pressure to lower costs on everyone in the supply chain.

Question 5

Countertrading does not benefit countries that face a shortage of hard currencies with which to trade.

Question 6

To remain price competitive when the dollar is strong, export-oriented companies must find ways to offset the higher price caused by currency values.

Question 7

In countries where large shares of the population are moving into middle-income classes, penetration pricing becomes irrelevant as a tool to stimulate market growth.

Question 8

Leasing helps guarantee better maintenance and service on overseas equipment.

Question 9

For countervailing duties to be invoked, it must be shown that prices are higher in the importing country than in the exporting country.

Question 10

Eliminating costly functional features or lowering overall product quality can minimize price escalation.

Question 11

Longer channels of distribution help keep prices under control.

Question 12

The international marketer must rely on experience and marketing research to ascertain middleman costs because no convenient source of data on middleman costs is available.

Question 13

Deflation causes consumer prices to escalate, and consumers face ever-rising prices that eventually exclude many of them from the market.

Question 14

Fewer middlemen may mean higher overall taxes.

Question 15

Price escalation could lead to sales of the exported good being confined to a limited segment of wealthy, price-insensitive customers.

Question 16

Companies that are serious about restricting the gray market must establish and monitor controls that effectively police distribution channels.

Question 17

As the prices for the same good are equal in different markets, a product sold in one country may be exported to another and can undercut the prices charged in that country.

Question 18

In a free trade zone, payment of import duties is postponed until the product leaves the free trade zone and enters the country.

Question 19

Companies that use pricing to achieve marketing objectives are engaged in static pricing.

Question 20

Setting the right price for a product can be the key to success or failure in the international marketplace.

Question 21

Which of the following characterizes the variable-cost pricing approach?

A) In this approach, prices are often set on a cost-plus basis, that is, total costs plus a profit margin.
B) This approach insists that no unit of a similar product is different from any other unit in terms of cost.
C) This approach insists that each unit must bear its full share of the total fixed and variable cost.
D) This approach is suitable when a company has high variable costs relative to its fixed costs.
E) In this approach, any contribution to fixed cost after variable costs are covered is profit to the company.

Question 22

The portion of international business handled on a cash-in-advance basis is not large and typically is used when credit is doubtful.

Question 23

Domestic cartelization is legal in the United States.

Question 24

Administered pricing attempts to establish pricing for an entire market.

Question 25

Sales on open accounts are recommended when shipping is hazardous.

Question 26

_____ pricing is a practical approach to pricing when a company has high fixed costs and unused production capacity.

A) Full-cost
B) Cost-plus
C) Marginal-cost
D) Demand-based
E) Premium

Question 27

Except for cash in advance, letters of credit afford the greatest degree of protection for the seller.

Question 28

Letters of credit shift the buyer's credit risk to the bank issuing the letter of credit.

Question 29

Cartels have the ability to maintain control for indefinite periods.

Question 30

Which of the following is true of a company that views prices as an active instrument of accomplishing marketing objectives?

A) The company sets prices to achieve specific objectives.
B) The company follows market prices to achieve specific objectives.
C) The company exports only excess inventory.
D) The company views its export sales as an insignificant source of revenue.
E) The company places a low priority on foreign business.

Question 31

One of the primary functions of a cartel is to control the market for its goods and services.

Question 32

An irrevocable, confirmed letter of credit means that a U.S. bank accepts responsibility to pay the seller regardless of the financial situation of the buyer or foreign bank.

Question 33

The Floral Group, an importing organization in New York, has just bought an excessive amount of perfume from perfume manufacturer in Paris. Unknown to the perfume manufacturer, the Floral Group has sold 25 percent of its order to distributors in France that have been unable to purchase any products from the perfume manufacturer. Which of the following best describes the transaction that has just taken place?

A) Black-listed importing
B) Direct importing
C) Circular importing
D) Co-mingled importing
E) Parallel importing

Question 34

A company that views pricing as a static element in a business decision:

A) places a high priority on foreign business.
B) sets prices to achieve specific objectives such as targeted return on profit.
C) customizes its products for the foreign market.
D) views domestic sales as an insignificant source of revenue.
E) exports only excess inventory.

Question 35

Firms that are unfamiliar with overseas marketing and firms that produce industrial goods orient their pricing solely on the basis of:

A) cultural differences in perceptions of pricing.
B) market segmentation from market to market.
C) the costs of production of the good.
D) market segmentation from country to country.
E) competitive pricing in the market.

Question 36

In bills of exchange, the credit of one or more banks is involved.

Question 37

In general, price decisions are viewed in two ways. Which of the following is one of them?

A) Pricing depends on factors that are often beyond the control of a company.
B) Pricing is more a phenomenon of luck than planning.
C) Pricing is an active instrument of accomplishing marketing objectives.
D) The less control a company has over the final selling price of a product, the better it is able to achieve its marketing goals.
E) The broader the company's product line, the less complex is the process of controlling prices to the end user.

Question 38

In _____ pricing, the firm is concerned only with the marginal or incremental cost of producing goods to be sold in overseas markets.

A) full-cost
B) fixed-cost
C) variable-cost
D) demand-based
E) premium

Question 39

Assuming that the international marketer has produced the right product, used the proper channel of distribution, and promoted the good correctly, the effort can fail badly if the international marketer fails to:

A) inform the host government of all its marketing objectives.
B) set the right price for the goods or services.
C) work with trade union representatives.
D) consider the environmental impact of its goods or services.
E) work on a franchise basis in the country.

Question 40

Since it encourages retailers to stock large assortments of a product, the practice of _____ distribution often creates a favorable condition for parallel importing.

A) exclusive
B) selective
C) intensive
D) global
E) dual

Question 41

_____ duties are levied as a percentage of the value of the goods imported.

A) Specific
B) Protective
C) Prohibitive
D) Ad valorem
E) Compound

Question 42

A company uses _____ when the objective is to reach a segment of the market that is relatively price insensitive and thus willing to pay a premium price for the value received.

A) penetration pricing
B) everyday low pricing
C) full-cost pricing
D) price skimming
E) psychological pricing

Question 43

When the value of the dollar is weak relative to the buyer's currency, sellers generally employ _____ pricing.

A) competition-based
B) demand-based
C) premium
D) psychological
E) cost-plus

Question 44

In _____ pricing, the philosophy is that no unit of a similar product is different from any other unit in terms of cost and that each unit must bear its full share of the total fixed and variable cost.

A) full-cost
B) fixed-cost
C) variable-cost
D) demand-based
E) premium

Question 45

Lower prices to the buyer may also mean lower tariffs, because most tariffs are levied on a(n) _____ basis.

A) specific
B) alternative
C) accrual
D) shorter; lower
E) ad valorem

Question 46

Lush Cosmetics, a firm based in the U.S., recently started exporting cosmetics to India. Lush introduced a new range of mineral-based makeup for the first time in the Indian market. It was also priced much higher than the other brands in the market. This is an example of _____.

A) a penetration pricing policy
B) a psychological pricing policy
C) bundling
D) price skimming
E) cost-based pricing policy

Question 47

When the Indian rupee depreciated against the U.S. dollar, PC manufacturers who were dependent on imported parts had to _____ in order to retain their profit margins.

A) raise the quantity of inputs they used in production
B) give discounts to their customers
C) increase the wages that they paid to labor
D) increase the production of PCs
E) raise the price of PCs

Question 48

A _____ policy is used to stimulate market and sales growth by deliberately offering products at low prices.

A) penetration pricing
B) variable-cost pricing
C) premium pricing
D) price skimming
E) full-cost pricing

Question 49

In a _____ market, it is essential for a company to keep prices low and raise brand value to win the trust of consumers.

A) fragmented
B) monopolistic
C) competitive
D) deflationary
E) consolidated

Question 50

_____ are the primary discriminatory tax that must be taken into account in reckoning with foreign competition.

A) Transfer taxes
B) Tariffs
C) Tolls
D) Excise taxes
E) Inflation taxes

Question 51

A(n) _____ duty is a flat charge per physical unit imported.

A) ad valorem
B) compound
C) prohibitive
D) alternative
E) specific

Question 52

_____ results from the added costs incurred as a result of exporting products from one country to another.

A) Price deflation
B) The pricing mechanism
C) Price escalation
D) Price gouging
E) Price fixing

Question 53

The creation of a free trade zone leads to:

A) a decline in exports.
B) an increase in taxes and duties levied on a good.
C) reduced price escalation.
D) a fall in imports.
E) higher labor costs and overheads.

Question 54

In most cases, the reason that products which cost relatively little in one country cost more in another is:

A) profiteering.
B) inadequate demand.
C) inelastic demand.
D) elastic demand.
E) the costs of exporting.

Question 55

Which of the following is true of international currencies?

A) Exchange rate volatility for international currencies is relatively low.
B) There is a benchmark currency in the world against which all other currencies are pegged.
C) All major currencies are free floating relative to one another.
D) All currencies are fully backed by gold reserves.
E) The World Bank mandates a fixed exchange rate regime.

Question 56

One of the possible reasons for manufacturing in a third country could be an attempt to _____.

A) standardize middlemen margins
B) reduce the credit risk of the seller
C) reduce the capital-labor ratio
D) increase the inputs used in manufacturing
E) reduce manufacturing costs

Question 57

Which of the following is true of the full-cost pricing approach?

A) In this approach, any contribution to fixed cost after variable costs are covered is profit to the company.
B) In this approach, the firm is concerned only with the marginal or incremental cost of producing goods to be sold in overseas markets.
C) In this approach, prices are often set on a cost-plus basis, that is, total costs plus a profit margin.
D) This approach is a practical approach to pricing when a company has high fixed costs and unused production capacity.
E) This approach insists that each unit of a similar product is treated differently in terms of cost.

Question 58

If the supply of a good in a market is limited, a company may follow a _____ approach to maximize revenue and to match demand to supply.

A) penetration pricing
B) psychological pricing
C) variable-cost pricing
D) full-cost pricing
E) price skimming

Question 59

Which of the following approaches to pricing is suitable when a company has high variable costs relative to its fixed costs?

A) Full-cost pricing
B) Marginal-cost pricing
C) Cost-plus pricing
D) Demand-based pricing
E) Premium pricing

Question 60

The final price of an imported product is likely to be high if:

A) the channels of distribution are short.
B) the number of middlemen in distribution channels is low.
C) large orders are placed by retailers.
D) marketing and distribution channel infrastructures are well developed.
E) middleman markups are not standardized.

Question 61

One approach to defining the pricing policy of dumping is to say that it is a case where a product is sold in the international market:

A) at a price below the cost of production.
B) only to those that can pay for it.
C) where the demand for the good is higher than in the domestic market.
D) at a higher price than in the domestic market.
E) at the same price as in the domestic market.

Question 62

An important selling technique to alleviate high prices and capital shortages for capital equipment is the _____ system.

A) leasing
B) anti-dumping
C) direct buy-back
D) consignment
E) rental

Question 63

Which of the following is essential while making price quotations for international sale?

A) Price quotations can be made only if it is shown that prices are lower in the importing country than in the exporting country.
B) Price quotations must specify the currency to be used and the credit terms of the transaction.
C) The price quotation and contract should define only the quantity of goods and not necessarily the quality.
D) Price quotations must be quoted only in terms of electronic trade dollars.
E) Price quotations need to specify the transportation charges but need not necessarily state what type of documentation needs to be used.

Question 64

Which of the following would be considered an advantage of leasing equipment rather than owning it?

A) Lease revenue tends to fluctuate greatly.
B) Leased equipment rarely breaks down.
C) Leasing helps guarantee better maintenance on overseas equipment.
D) Leasing keeps companies from using experimental equipment.
E) Leasing is less risky than outright sale of equipment.

Question 65

Which of the following is true of free trade zones (FTZs)?

A) In an FTZ, payment of import duties is postponed until the product leaves the FTZ area and enters the country.
B) FTZs operate throughout the world, replacing imported goods with domestic goods.
C) An FTZ is, in essence, a taxable enclave and considered part of the country as far as import regulations are concerned.
D) An FTZ benefits export companies but does not offer any advantages to an importer.
E) The creation of FTZs typically increases taxes, duties, surcharges, and freight charges on imported goods.

Question 66

By shipping unassembled goods to a free trade zone (FTZ) in an importing country, a marketer can lower costs because:

A) labor costs are higher in the importing country.
B) the final prices of the good are adjusted for inflation.
C) assembled goods qualify for lower freight rates.
D) duties are assessed at lower rates for unassembled goods.
E) local content used in production is low.

Question 67

What do barter houses do?

A) Specialize in trading goods acquired through barter arrangements.
B) Acquire goods from producers in other countries through barter arrangements.
C) Buy and hold bartered goods for resellers.
D) Insure any barter goods.
E) Auction bartered goods for sellers.

Question 68

For _____ duties to be levied on a good, it must be shown that prices are lower in the importing country than in the exporting country and that producers in the importing country are being directly harmed by dumping.

A) countertrade
B) domestic protection
C) countervailing
D) foreign practice
E) import restriction

Question 69

When Polar Inc., an American fast-food company, wanted to market its burgers and fries in France, it was asked to accept French wine in return. This is an example of:

A) bargaining.
B) countervailing duties.
C) buy-back.
D) countertrade.
E) bribery.

Question 70

Drew's company imports materials and parts into a free trade zone (FTZ) within the United States and then exports finished products to other countries. Her company will:

A) incur higher labor costs than other domestic companies.
B) not be able to store finished goods with the FTZ.
C) have to pay tariffs based on the value of both the parts and materials.
D) have to pay tariffs based on the value of the finished products when they leave the country.
E) not have to pay tariffs on the imported materials and parts.

Question 71

_____ are the primary outside source of aid for companies beset by the uncertainty of a countertrade.

A) Trade unions
B) Barter houses
C) Industry associations
D) Swap centers
E) Satellite towns

Question 72

The use of countertrade in international trade:

A) allows trade with countries short of hard currency.
B) reduces a firm's competitive advantage.
C) could increase the tax liabilities of trading firms.
D) leads to a loss of revenue.
E) is considered unethical.

Question 73

The crucial problem confronting a seller in a countertrade negotiation is determining the _____ for the goods offered as payment.

A) delivery method
B) warranties
C) insurance premiums
D) potential demand
E) the cost

Question 74

A marketer may face lower costs by shipping unassembled goods to a free trade zone (FTZ) in an importing country because:

A) locally-produced components may not be used in production.
B) wages may be lower in the importing country.
C) FTZs levy higher taxes and surcharges on imported goods.
D) ocean transportation rates may not be affected by the weight and volume of the components.
E) duties may be assessed at a higher rate for unassembled goods.

Question 75

What is the function of a countervailing duty?

A) To balance revenues against costs.
B) To restrict the amount a country will import.
C) To increase revenues from parallel imports.
D) To expand the amount a country will import.
E) To permit the use of foreign currency within the country.

Question 76

Dumping in the world markets is likely to increase when:

A) domestic production capacity is low.
B) demand in the home country is low.
C) demand in the foreign country is low.
D) foreign production capacity is high.
E) cost of production is low.

Question 77

The costs of production may be lowered if a firm ships unassembled goods to a free trade zone (FTZ) in an importing country because:

A) wages and other overheads may be higher in an FTZ.
B) locally-produced components do not qualify for tariffs.
C) unassembled goods may qualify for lower freight rates.
D) the finished goods are exported to other countries.
E) goods imported in an FTZ qualify for the same level of tariffs as other imported goods.

Question 78

Assembly in the importing country is a way companies attempt to lower prices and avoid dumping charges. These assembly plants are known as _____ plants.

A) antidumping
B) screwdriver
C) import-oriented
D) export-oriented
E) automated

Question 79

Which of the following is true of countertrading?

A) Frequently there is inadequate time to conduct a market analysis in a countertrade negotiation.
B) Identifying countries that have a history of countertrading is one of the major problems with countertrades.
C) The use of countertrading to sell a good implies that the demand for the good is highly elastic.
D) Countertrading does not benefit countries that face a shortage of hard currencies with which to trade.
E) The U.S. dollar is the reserve currency that is used in countertrades.

Question 80

A _____, which restricts the amount a country will import, may be imposed on foreign goods benefiting from subsidies, whether in production, export, or transportation.

A) trigger volume
B) trigger price
C) minimum access volume
D) market access opportunity
E) substantial cause