Deck 18: Pricing for International Markets

Question 1

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

Answer 1

True
Explanation: Unless some of the costs that create price escalation can be reduced, the marketer is faced with a price that may confine sales to a limited segment of wealthy, price-insensitive customers. In many markets, buyers have less purchasing power than in the United States and can be easily priced out of the market.

Question 2

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.

Answer 2

True
Explanation: 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 3

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

Answer 3

False
Explanation: 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 4

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

Question 5

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 6

Companies should use the full-cost pricing approach when it has high fixed costs relative to its variable costs.

Question 7

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

Question 8

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

Question 9

Leasing helps guarantee better maintenance and service on overseas equipment.

Question 10

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

Question 11

As the price of a particular product remains the same in different markets, the product sold in one country may be exported to another and undercut the prices charged in that country.

Question 12

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

Question 13

Companies that use pricing to achieve marketing objectives use pricing as a static element.

Question 14

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

Question 15

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

Question 16

Involving fewer middlemen in distribution means higher overall taxes.

Question 17

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 18

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

Question 19

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

Question 20

Longer channels of distribution are more appropriate for keeping prices under control than shorter channels of distribution.

Question 21

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

Question 22

In bills of exchange, the buyer assumes all the risk until the payment is made.

Question 23

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

A) Pricing entirely 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 a company's product line, the less complex is the process of controlling prices to the end user.

Question 24

Which of the following is most likely to be 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 25

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

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

Question 26

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 27

Domestic cartelization is legal in the United States.

Question 28

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

A) places a high priority on foreign business.
B) sets prices to achieve specific objectives such as targeted return on profit.
C) views export sales as active contributions to sales volume.
D) views domestic sales as an insignificant source of revenue.
E) exports only excess inventory.

Question 29

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 goods.
D) market segmentation from country to country.
E) competitive pricing in the market.

Question 30

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

Question 31

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

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

Question 32

Sales on open accounts are recommended when shipping is hazardous.

Question 33

Administered pricing is an attempt to establish prices for an entire market.

Question 34

Floral Group Inc., an importing organization in New York, buys perfumes from GS Inc. in France for $13 a unit. Unknown to GS, Floral Group sells this product in the United States for $15 a unit. This leads to a loss of revenue for GS Inc. as it also sells its perfume in the United States but for a higher price of $18. Which of the following best describes the above scenario?

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

Question 35

A cartel exists when various companies producing similar products or services work together to control markets for the types of goods and services they produce.

Question 36

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

Question 37

Cartels have the ability to maintain control of markets for indefinite periods.

Question 38

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 39

_____, a practice often used by companies to maintain high retail margins to encourage retailers to maintain the exclusive-quality image of a product, can create a favorable condition for parallel importing.

A) Exclusive distribution
B) Speculative distribution
C) Intensive distribution
D) Lateral distribution
E) Dual distribution

Question 40

Assuming that an international marketer has produced the right product, used the proper channel of distribution, and promoted the goods correctly, the effort is most likely to fail if the international marketer fails to:

A) inform the host government about all its marketing objectives.
B) set the right price for the goods or services.
C) set the import tariff for the goods or services.
D) form a joint venture in order to sell the product.
E) work on a franchise basis in the country.

Question 41

When a company exports a product from the United States to another country, the company is most likely to be unable to determine the ultimate price of a product if:

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

Question 42

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

A) the profiteering measures taken by exporting companies.
B) the consistency in perception of quality in all countries.
C) the inelastic demand of most consumer goods.
D) the requirement that all export goods must use set skimmed price.
E) the higher costs of exporting.

Question 43

_____ 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 44

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

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

Question 45

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

A) Price deflation
B) Penetration pricing
C) Price escalation
D) Price gouging
E) Predatory pricing

Question 46

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 47

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

A) In this approach, firms regard foreign sales as bonus sales and assume that there will be no return over their variable costs.
B) In this approach, firms are 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 48

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 49

The creation of a free trade zone leads to:

A) a decline in exports.
B) an increase in taxes and duties levied on a product.
C) a reduction in the price escalation.
D) a decline in imports.
E) an increase in labor costs and overheads.

Question 50

In a deflationary market, in order to win the trust of consumers, it is essential for a company to:

A) engage in forfaiting agreements with consumers.
B) spend more on advertising and stall the production of products.
C) allow prices to escalate and target the price insensitive segment of the market.
D) keep prices low and raise brand value.
E) form a cartel to control the dynamics of the market.

Question 51

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

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

Question 52

Which of the following is true of international currencies?

A) Exchange rate volatility index can be used to accurately predict the value of any currency.
B) The value of all currencies is set by the World Trade Organization.
C) All major currencies are floating freely relative to one another.
D) All currencies are fully backed by gold reserves.
E) The World Bank mandates a fixed exchange rate regime.

Question 53

Which of the following is the most probable reason a manufacturer would choose to conduct its manufacturing operations in a third country?

A) To standardize middlemen margins
B) To reduce the credit risk of the seller
C) To increase the capital-labor ratio
D) To avoid antidumping duties
E) To reduce manufacturing costs

Question 54

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

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

Question 55

Companies following the _____ 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.

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

Question 56

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

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

Question 57

When the Indian rupee depreciated against the U.S. dollar, PC manufacturers who were dependent on imported components had to either absorb the increased cost or _____.

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 58

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) predatory pricing
D) price skimming
E) psychological pricing

Question 59

If the supply of a product 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) predatory pricing
E) price skimming

Question 60

Lush Cosmetics Corp., a U.S.-based firm, has recently started exporting cosmetics to India. Lush has introduced a new range of mineral-based makeup products for the first time in the Indian market. As Lush has no competitors in this segment of the Indian cosmetics market, it has set a very high price for its products in order to reach the premium, price insensitive segment of the market. This is an example of _____.

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

Question 61

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 increase the amount a country will export
E) To permit the use of foreign currency within the country

Question 62

For _____ to be levied on a product, 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 the dumping of the product.

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

Question 63

Drew's company imports materials and parts into a free trade zone (FTZ) within the United States and then has the finished products imported into the United States. Her company will most likely:

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

Question 64

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

A) labor costs are higher in the importing country.
B) the final prices of the goods are adjusted for inflation.
C) use of unassembled goods gives the marketer immunity from dumping penalties.
D) duties are assessed at lower rates for unassembled goods.
E) local content used in production is low.

Question 65

The use of countertrade in international trade:

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

Question 66

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 cannot be exported to other countries.
E) goods imported in an FTZ qualify for the same level of tariffs as other imported goods.

Question 67

Dumping in the world markets is most 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 68

_____ 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 69

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

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

Question 70

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

A) leasing system
B) antidumping system
C) direct buy-back system
D) consignment system
E) rental system

Question 71

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 72

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 73

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 the premium, price insensitive segment of the market.
C) where the demand for the product is lower 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 74

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 the biggest problem with countertrading.
C) The use of countertrading to sell a product implies that the demand for the product 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 75

What do barter houses do?

A) They specialize in trading goods acquired through barter arrangements.
B) They negotiate barter arrangements with countries that accept the U.S. currency as a countertrade.
C) They specialize in bartering with third countries for unused raw material.
D) They direct bartered goods to the World Trade Organization for its approval.
E) They review disputes in barter arrangements at the request of the International Court of Justice.

Question 76

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

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

Question 77

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 host 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 utilization of FTZs typically increases taxes, duties, surcharges, and freight charges on imported goods.

Question 78

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

Question 79

Which of the following is true of 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 80

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.