Deck 18: Pricing Concepts

Question 1

The increased options available to shoppers combine to create a market characterized by demand elasticity.

Answer 1

True

Question 2

Pricing can be used to modify consumer behavior.

Answer 2

True

Question 3

The price of products only includes the costs incurred by the manufacturer for procuring the raw material and for processing the products.

Answer 3

False

Question 4

Most states supplement federal legislation with their own unfair-trade laws,which require sellers to maintain minimum prices for comparable merchandise.

Question 5

The Robinson-Patman Act was intended primarily to save jobs.

Question 6

Many firms attempt to promote stable prices by meeting competitors' prices and competing for market share by focusing on the nonprice elements of the marketing mix.

Question 7

Paul and Amanda have 6 season tickets to the St.Louis Cardinals - a major league baseball team.During the season,they often offer their unused tickets to the highest bidder - especially when the Cardinals play the Chicago Cubs.This practice,known as "scalping" is illegal in all US cities.​

Question 8

Profits typically are higher when an incremental-cost pricing approach is utilized.​

Question 9

Sales maximization can also result from nonprice factors such as service and quality.

Question 10

Prestige objectives reflect marketers' recognition of the role of price in creating an overall image of the firm and its product offerings.

Question 11

Defense based on cost differentials against charges of price discrimination under the Robinson-Patman Act works only if the price differences exceed the cost differences resulting from selling to various classes of buyers.

Question 12

Demand curves must be based on marketing research estimates that may be less exact than cost figures.

Question 13

Unfair-trade laws were intended to protect small specialty shops,such as dairy stores,from loss-leader pricing tactics.

Question 14

A shortcoming of the breakeven model is that it assumes that per-unit variable costs change at different levels of operation.

Question 15

A price is the exchange value of a good or service.

Question 16

The only real difference among the multitude of cost-plus pricing techniques is the relative sophistication of the costing procedures employed.

Question 17

Pricing decisions are influenced by a variety of legal constraints imposed by federal,state,and local governments.

Question 18

The supply side of the pricing equation focuses on revenue curves.

Question 19

Purely cost-oriented approaches to pricing violate the marketing concept,so modifications that add demand analysis to the pricing decision are required.

Question 20

The ticket reselling market is both highly fragmented and susceptible to fraud and distorted pricing.

Question 21

Companies that adopt a volume objective continue to expand sales even when their total profits drop below the minimum return acceptable to management.

Question 22

Modified breakeven analysis forces the marketer to consider whether the consumer is likely to purchase the number of units of a good or service required for achieving breakeven at a given price.

Question 23

The two most common cost-oriented pricing procedures are the full-cost method and the incremental- cost method.

Question 24

The Anti-A&P Act was inspired by price competition triggered by the rise of grocery store chains.

Question 25

A profit-maximizing price rises to the point at which further increases will cause disproportionate decreases in the number of units sold.

Question 26

The challenge for those who compete on value is to convince customers that low-priced brands offer quality comparable to that of a higher-priced product.

Question 27

Fair-trade laws assert the manufacturer's authority to protect its asset by requiring retailers to maintain a minimum price.

Question 28

A customary price represents an upper limit on the price of a product imposed by the government in order to control the prices of essential products such as food items.

Question 29

In an oligopolistic market,price cutting is likely to increase total industry revenues.

Question 30

One of the advantages of the full-cost pricing approach is that it takes into consideration the competition and demand that exists for a product.

Question 31

In the global marketplace,prices are directly affected by special types of taxes called tariffs.

Question 32

Countries that export value- oriented products,rather than commodities,tend to enjoy more stable prices.

Question 33

The price elasticity of supply of a product is the percentage change in the quantity of a good or service supplied divided by the percentage change in its price.

Question 34

Prices of electronic equipment and automobiles tend to fluctuate far less than prices of crops such as sugarcane and bananas.

Question 35

High-demand sporting or concert events have encountered an expensive,often illegal,form of pricing where tickets are resold at a much higher price than what it was originally bought for.This practice is called ticket scalping.

Question 36

Microeconomics suggests a way of determining prices that assumes a profit-maximization objective.

Question 37

The basic breakeven model considers demand.

Question 38

The Miller-Tydings Resale Price Maintenance Act (1937)exempted interstate fair-trade contracts from compliance with antitrust requirements,thus freeing states to keep these laws on their books if they so desired.

Question 39

For consumers to pay prices either above or below what they consider the going rate,they must be convinced they are receiving fair value for their money.

Question 40

When most of a firm's costs are variable over a wide range of outputs,the primary determinant of profitability will be the revenue generated by sales.

Question 41

​Managers often find it difficult to estimate demand at various price levels.

Question 42

Price setting is based on the marketer's ability to strike a balance between desired profits,and the customer's perception of a product's value.

Question 43

Full-cost pricing allows the marketer to recover all costs plus the amount added as a profit margin.

Question 44

Countries that export international commodities,such as wood,chemicals,and agricultural crops,suffer economically when their prices fluctuate.

Question 45

Traditional economic theory considers both costs and demand in determining an equilibrium price.

Question 46

Prestige pricing establishes a relatively high price to develop and maintain an image of quality and exclusiveness that appeals to status-conscious consumers.

Question 47

All firms attempt to maximize profits.

Question 48

In an oligopolistic market,a single seller controls the pricing decisions.

Question 49

When a chain store sells certain products below cost to attract customers,it is practicing a loss-leader price tactic.

Question 50

Cost-plus pricing is the least popular method of setting prices.

Question 51

Every "regulatory" price increase is a tax.

Question 52

The government prohibits regulated monopolies in markets in which competition would lead to an uneconomical duplication of services.

Question 53

Antitrust legislation has eliminated all monopolies including the temporary monopolies,such as those created through patent protection.

Question 54

The PIMS project discovered a strong negative relationship between a firm's product quality and its return on investment.

Question 55

Marginal revenue is the change in total revenue that results from selling an additional unit of output.

Question 56

The breakeven point is the point at which total revenue equals total cost.

Question 57

In an oligopolistic market,high start-up costs form significant barriers to entry for new competitors.

Question 58

Companies can avoid penalties under the Robinson-Patman Act as long as they can demonstrate that their price discounts and promotional allowances restrict competition.

Question 59

The price elasticity of demand (or elasticity of demand)is the percentage change in the quantity of a good or service demanded divided by the percentage change in its price.

Question 60

Basic so-called fighting brands are intended to capture market share from lower-priced competitors by offering relatively high quality products at comparatively higher prices.

Question 61

Tariffs make it possible for firms to protect their local markets while still setting prices on domestically produced goods well above world market levels.

Question 62

A firm minimizes its profits when marginal costs equal marginal revenues.

Question 63

Marketers determine prices in two basic ways: by applying the theoretical concepts of supply and demand and by completing cost-oriented analyses.

Question 64

Economic theory attempts to derive correct equilibrium prices in the marketplace by comparing supply and demand.

Question 65

Firms with large shares accumulate greater operating experience and lower overall costs relative to competitors with smaller market shares.

Question 66

When discounts become normal elements of a competitive marketplace,other marketing mix elements gain importance in purchase decisions.

Question 67

Lower off-season prices and higher peak-season prices for lodging at resorts illustrate the use of yield management as a strategy to generate revenues for a largely fixed-cost industry.

Question 68

State fair-trade laws were made invalid by the enactment of the Consumer Goods Pricing Act of 1975.

Question 69

Manufacturers attempt to balance consumer expectations of customary prices with the realities of rising costs by increasing overall product size.

Question 70

The term "tariff" refers to the tax exemption granted to domestic producers in order to increase their competitiveness in the international markets.

Question 71

Pricing objectives tied directly to meeting prices charged by major competitors emphasize the price element of the marketing mix and focus less strongly on nonprice variables.

Question 72

Overall organizational objectives and more specific marketing objectives guide the development of pricing objectives,which in turn lead to the development and implementation of more specific pricing policies and procedures.

Question 73

The average total cost is the cost calculated by dividing the sum of the variable and fixed costs by the number of units produced.

Question 74

The economic theory assumes that firms behave rationally which in turn results in an effort to maximize gains and minimize losses.

Question 75

When the elasticity of demand or supply is greater than 1.0,then that demand or supply is said to be inelastic.

Question 76

The basic breakeven model addresses the question of whether customers will actually purchase the product at the specified price in the quantity required to break even or make a profit.

Question 77

Modified breakeven analysis combines the traditional breakeven analysis model with an evaluation of advertising effectiveness to influence consumer purchases.​

Question 78

Total revenue is determined by multiplying the product's selling price and the number of units sold.

Question 79

Firms that use a volume objective to guide their pricing strategy believe that increased sales are less important in the long-run competitive picture than immediate high profits.

Question 80

Breakeven analysis is an effective tool for marketers in assessing the sales required for covering costs and achieving specified profit levels.