Deck 10: Pricing the Product

Question 1

Why do marketers consider prestige products to be an exception to the law of demand?

A)The demand curve for prestige products slopes downward and to the right.
B)Prestige products like diamonds,sapphires,and emeralds are non-renewable resources.
C)Increasing the price of prestige products can make them seem more desirable.
D)Customers are not oblivious to the price of prestige products like they are to the price of other products.
E)Demand for prestige products often is much lower than supply.

Answer 1

C

Question 2

When K-Mart entered the Australian and New Zealand markets,there were already stores providing similar services and products.To get people to try the K-Mart stores,the chain deliberately sold merchandise below the price charged by competitors.What type of pricing objective does this approach show?

A)Competitive effect
B)Profit
C)Sales or market share
D)Image enhancement
E)Break-even

Answer 2

A

Question 3

Which of the following is not a type of pricing objective?

A)Image enhancement
B)Competitive effect
C)Profit
D)Customer satisfaction
E)Break-even

Answer 3

E

Question 4

The rate you pay to rent a motel room and the extra charges for the in-room movie rentals and room service are all examples of ________.

A)contribution margins
B)exchange values
C)prices
D)profits
E)countertrades

Question 5

The demand curve ________.

A)shows the relationship between product demand and product price
B)is always graphically depicted by a straight line
C)shows the quantity of product customers will buy in a market during a period of time even if other factors change
D)is used to illustrate the effect of price on the quality of goods
E)usually slopes upward and to the right

Question 6

A car dealership implemented a value pricing strategy where customers got only one price so there was no need to bargain with sales people.The dealership's website gives detailed price information without the need or involvement of a sales person.What pricing objectives do you believe the dealership is pursuing and why they have made this decision?

Question 7

Discuss opportunity costs from the perspective of a student.

Question 8

What pricing objectives would you recommend a retailer of prestige products set? Why?

Question 9

Everyday Nutrition is a leading manufacturer of nutritional supplements.When setting prices,the company decided to institute a pricing strategy that would support a 5 percent increase in sales over the next three years.What type of pricing objective does Everyday Nutrition have?

A)Customer satisfaction
B)Profit
C)Sales or market share
D)Image enhancement
E)Break-even

Question 10

________ is the value customers give up or exchange to obtain a desired product.

A)Exchange value
B)Revenue
C)Price
D)Contribution margin
E)Profit

Question 11

Which of the following statements about pricing is true?

A)Most consumers believe price has little influence on their purchase decisions.
B)Pricing is unaffected by changes in the business cycle.
C)Pricing is the least important marketing mix element during a recession.
D)Consumers rate 'reasonable price' as the most important consideration in purchase decisions.
E)All of the above

Question 12

Bonnie has enough money to either buy a used car or to pay for an international marketing class that will spend three weeks visiting companies in Europe.She needs the car to get to work and to class,but she is also planning on a career in international marketing,and the trip would allow her to start networking.She will incur ________ whether she buys the car or takes the class.

A)stockholders' equity
B)opportunity costs
C)retained earnings
D)transformation costs
E)liquidity

Question 13

Which of the following products would most likely have profit as its main pricing objective?

A)Construction material
B)A fad product
C)Toothpaste
D)A commodity like coal
E)Light bulbs

Question 14

________ is a measure of the sensitivity of customers to changes in price.

A)Demand sensitivity
B)The price elasticity of demand
C)Customer apathy
D)A liquidity ratio
E)A break-even analysis

Question 15

If a company wants to increase market share,it must reduce its price.Discuss

Question 16

A company that intended to maintain low-end pricing policies to make the market unattractive for its competitors is pursuing a/n ________ pricing objective.

A)break-even
B)profit
C)competitive effect
D)image enhancement
E)sales or market share

Question 17

Sandy offers to baby-sit for Brenda on Monday if she can borrow Brenda's notes from a marketing class she missed last week when she was ill.This is an example of ________.

A)equitable transactions
B)barter
C)reciprocity
D)equity
E)amortisation

Question 18

Companies have the choice of five basic types of pricing objectives.Explain and give an example of each and discuss the situations under which it would be appropriate to pursue each type of pricing objective.

Question 19

According to the law of demand,________.

A)it cannot be predicted how changes in price will affect demand
B)if prices increase,customers will buy more
C)customers are oblivious to price changes
D)if prices decrease,customers will buy more
E)demand equals supply

Question 20

What is the first step an organisation takes to estimate its potential sales?

A)Develop demand curves for different price levels.
B)Estimate demand for the entire product category in the market the company serves.
C)Determine maximum production levels.
D)Determine how to expand market share.
E)Conduct a survey of buyers' knowledge.

Question 21

Demand would likely be inelastic for ________.

A)laundry detergent
B)shampoo
C)deodorant
D)clothing
E)All of the above

Question 22

Which of the following would be an example of a variable cost for an amusement park?

A)Concession supplies such as soft drinks
B)Interest on loans
C)Liability insurance
D)Park manager's salary
E)All of the above

Question 23

Demand is generally income inelastic for ________.

A)necessities such as basic food
B)T-bone steaks
C)butter,caviar,and gourmet cheese
D)inferior goods
E)symphony tickets

Question 24

The break-even point is the point at which ________.

A)the economic order quantity is reached
B)demand equals supply
C)the total revenue and total cost lines intersect
D)the production of one more unit will not increase profit any more
E)a company can pay all of its long-term debt

Question 25

Many people rely on the prescription drug Lipitor to control their cholesterol.An increase in the price of the drug would have little effect on the quantity demanded because there are no substitutes for the drug and because people who are taking it have no choice but to continue taking it if they wish to stay healthy.The demand for Lipitor is ________.

A)synergistic
B)elastic
C)supply-driven
D)inelastic
E)flexible

Question 26

When demand is inelastic,________.

A)the demand curve is more horizontal
B)revenue is unaffected by price changes
C)price and revenue change in the same direction
D)revenues decrease when price increases
E)quantity demanded decreases when price increases

Question 27

When demand is ________,increases in price result in increases in total revenues while decreases in price result in decreases in total revenue.

A)elastic
B)flexible
C)synergistic
D)inelastic
E)supply-driven

Question 28

When demand is inelastic,________.

A)demand decreases during recessions
B)changes in income have little impact on demand
C)how changes in income will affect demand cannot be predicted
D)decreases in income produces decreases in revenue
E)None of the above

Question 29

What is cross-elasticity of demand? Describe a situation in which cross-elasticity of demand occurs.

Question 30

________ are costs that do not vary with the number of units produced.

A)Variable costs
B)Fixed costs
C)Amortisation costs
D)Retained earnings
E)Liquidity expenses

Question 31

Break-even analysis ________.

A)is used to determine the number of units a company must sell to cover all of its costs
B)determines the amount of retained earnings a company will have during an accounting period
C)is a technique marketers use to examine the relationship between supply and demand
D)is used to determine how many more units need to be sold to increase market share by a specific amount
E)is a technique used to calculate contribution margin

Question 32

When Joe's Java Cafe raised the price of latté,Joe noticed a substantial change in how many cups of latté he sold daily.When he reduced the price of a cup of latté,his sales of lattés increased.From this information,you can assume the demand for cups of latté is ________.

A)inelastic
B)static
C)supply-driven
D)synergistic
E)elastic

Question 33

For a company that manufactures plastic signs,the printing press used to make the signs,its manager's salary,and its utilities are all examples of ________.

A)liquidity expenses
B)amortisation costs
C)retained earnings
D)variable costs
E)fixed costs

Question 34

What is the difference between fixed costs and average fixed costs?

Question 35

________ occurs when changes in the price of one product affects the demand for another product.

A)Cross-elasticity of demand
B)Complementary demand
C)Parallel elasticity
D)Complementary elasticity
E)Asymmetrical demand

Question 36

Explain the term variable costs and provide three examples of variable costs incurred by a restaurant.

Question 37

The price elasticity of demand is calculated by ________.

A)multiplying percentage change in quantity demanded by percentage change in price
B)dividing the new quantity demanded by the percentage change in price times 100
C)averaging previous demand levels with new demand levels
D)dividing the percentage change in price by the percentage change in quantity demanded
E)dividing percentage change in quantity demanded by percentage change in price

Question 38

What is the difference between elastic demand and inelastic demand?

Question 39

________ are the per-unit costs of production that will fluctuate depending on how many units or individual products a firm produces.

A)Fixed costs
B)Variable costs
C)Retained earnings
D)Liquidity expenses
E)Amortisation costs

Question 40

Explain the term fixed costs and provide three examples of fixed costs incurred by a restaurant.

Question 41

Which of the following statements is true about target costing?

A)Target costing is a process where companies identify needed levels of quality.
B)Marketers need to determine the price consumers would be willing to pay.
C)Marketers need to determine the functionality needed to satisfy consumers.
D)The product is only manufactured if costs can be controlled to meet required price levels.
E)All of the above

Question 42

In advertisements consumers are told that a particular retailer is determined to offer the lowest price and if a lower price can be found,the retailer will match it.Which external influence on pricing is most evident in this type of advertising?

A)Government subsidies
B)The economic environment
C)Consumer trends
D)Currency exchange rates
E)The competition

Question 43

With ________,the selling price is based on an estimate of the volume or quantity a firm can sell in different markets at different prices.

A)price-floor planning
B)capacity management
C)demand-based pricing
D)penetration pricing
E)resale maintenance

Question 44

Anderson Industries makes weatherproof covers for barbecue grills.Each cover costs $7.00 to produce and is sold to distributors for $15.The company's fixed costs are $170,000.The company's ________ for producing one more grill cover is $7.00 because its fixed costs per unit do not change.

A)marginal revenue
B)liquidity
C)break-even point
D)retained earning
E)marginal cost

Question 45

The most common cost-based approach to pricing is ________.

A)demand-based pricing
B)cost-plus pricing
C)price discrimination
D)skimming
E)psychological pricing

Question 46

With ________,marketers determine all of the costs for the product,and then add the desired profit per unit.

A)demand-based pricing
B)supply-based pricing
C)cost-plus pricing
D)physiological pricing
E)marketing-oriented pricing

Question 47

Which one of the following statements about marginal analysis is true?

A)Marginal analysis identifies the output and the price that will generate the maximum profit.
B)An important factor in marginal analysis is predicting demand,and this is not an exact science.
C)Marginal analysis is a less-than-perfect way to determine the best price for a product.
D)Marginal analysis is not always a straightforward procedure.
E)All of the above

Question 48

A firm is using ________ when it charges a premium price for a new product with the intention of reducing the price in the future.

A)trial pricing
B)penetration pricing
C)price-quality inference pricing
D)prestige pricing
E)a skimming price

Question 49

Which of the following is an example of a pricing strategy based on customers' needs?

A)Chain-markup pricing
B)Price-floor pricing
C)Price leadership
D)Demand-backward pricing
E)Value pricing

Question 50

Break-even analysis is only used to determine the number of units a company must produce to break even.Discuss.

Question 51

Pumpkin Patch sells a range of children's clothing.The company has noted over the past few years that an increasing proportion of its customers have only one or two children.What external influence on pricing has Pumpkin Patch noted?

A)Consumer trends
B)The competition
C)Currency exchange rates
D)Government subsidies
E)The economic environment

Question 52

One of the drawbacks to the use of cost-based pricing is ________.

A)the strategy's complexity
B)the need for a rigid organisational structure for implementation
C)how difficult it is to cover all production and marketing costs with this strategy
D)the strategy's inability to consider competitive factors
E)All of the above

Question 53

To determine the break-even point,a firm first needs to calculate the contribution per unit.What does this mean?

Question 54

Royal Sweets has a long history of selling lollies and chocolates from its store in the major shopping centre in a medium sized town.Royal Sweets is considering adding premium chocolates to its range of chocolates and assumes that it can sell a dozen of these premium chocolates in an attractive box for $3.50.Its total fixed costs would be $15,000 for the new range,and its variable costs per dozen for the premium chocolates are $2.00.Royal Sweets determines that the current market for premium chocolates in its town is 20,000 dozen boxes per year and knows that it has one major competitor in the shopping centre and one smaller competitor in one of the suburban areas who both sell premium chocolates.Calculate the break-even point and advise Royal Sweets.

Question 55

A person selling wooden racks for cooling cakes and bread knows that it costs $15.00 to make one rack.If the person who crafted the rack priced each rack so that he earns a 25 percent profit from the money he spent to make one rack,he is using which approach to pricing?

A)Price discrimination
B)Skimming
C)Psychological pricing
D)Demand-based pricing
E)Cost-plus pricing

Question 56

For a skimming price to be successful,________.

A)supply must exceed demand
B)demand must be stable
C)there should be little chance that competitors can get into the market quickly
D)consumers must be price sensitive
E)the producer must use intensive distribution

Question 57

Assume that Royal Sweets will only consider adding premium chocolates to their product line if they can be assured of profit of at least $5,000.The premium chocolates would sell for $3.50 per dozen,fixed costs are $15,000 and variable costs are $2.00 per dozen.The total market in the town is assumed to be 20,000 dozen and there are two competitors currently selling premium chocolates - one of which sells 15,000.Advise Royal Sweets.

Question 58

Discuss the impact of consumer trends on the pricing environment.

Question 59

To determine the break-even point,a firm needs first to ________.

A)determine the point at which supply equals demand
B)determine total market share
C)calculate the contribution per unit to fixed costs
D)determine what percentage of the market it desires
E)conduct an environmental audit

Question 60

________ provides a way for marketers to look at cost and demand at the same time and identifies the output and the price that will generate the maximum profit.

A)A market audit
B)A situational analysis
C)A competitive analysis
D)Marginal analysis
E)Break-even analysis

Question 61

A consumer product list price is also referred to as a/n ________.

A)channel price
B)skimming price
C)recommended retail price
D)unbundled price
E)captive price

Question 62

Manufacturers of ________ would be the one most likely to use freight absorption pricing.

A)toothpaste
B)chocolate bars
C)furniture polish
D)laptop computers
E)None of the above

Question 63

Trade or functional discounts are offered to ________.

A)the government market and other organisations that require bid proposals
B)consumers who earn the price reduction for buying in bulk
C)channel intermediaries who perform tasks such as credit and storage that the manufacturer would otherwise have to perform
D)manufacturers that agree to exclusive distribution contracts
E)intermediaries such as financing institutions and advertising agencies as a cost of doing business with them

Question 64

One of the most important opportunities offered by the internet is ________,where the price can easily be adjusted to meet changes in the marketplace.

A)dynamic pricing
B)captive pricing
C)loss leader pricing
D)price bundling
E)online auctions

Question 65

Hunting bows are often priced low,and retailers of archery equipment make their profit on higher-margin high-priced arrows.This is an example of ________.

A)price skimming
B)comparative pricing
C)captive pricing
D)price bundling
E)penetration pricing

Question 66

A firm is using a ________ strategy when it introduces a product at a very low price to encourage rapid product adoption.

A)skimming pricing
B)comparative pricing
C)penetration pricing
D)corrective pricing
E)price-quality inference pricing

Question 67

________ refers to the sale of two or more goods and services as a single package for one price.

A)Price skimming
B)Comparative pricing
C)Captive pricing
D)Price bundling
E)Penetration pricing

Question 68

Whether a firm sells to businesses or directly to consumers,most pricing structures are built around ________.

A)trade discounts
B)channel length
C)list prices
D)distribution costs
E)sales promotions

Question 69

________is a pricing tactic a firm uses when it has two products that work only when used together.The firm sells one item at a very low price and then makes its profit on the second high-margin item.

A)Price skimming
B)Comparative pricing
C)Captive pricing
D)Price bundling
E)Penetration pricing

Question 70

Cumulative quantity discounts ________.

A)can be a credit against future orders
B)are based on a total quantity bought within a specified time period
C)can be offered as rebates
D)are used to encourage buyers to use the same supplier over a period of time
E)All of the above

Question 71

With ________,the seller pays both the cost of loading and transporting the product to the customer.

A)F)O.B.origin
B)F)O.B.delivered
C)captive pricing
D)zone pricing
E)uniform delivered pricing

Question 72

The average price Xerox charged when it introduced the first stand-alone fax machine was $12,700.This premium price was a way for Xerox to recoup some of the research and development costs that went into producing this machine.Xerox used ________.

A)skimming pricing
B)penetration pricing
C)prestige pricing
D)price-quality inference pricing
E)trial pricing

Question 73

Marketers use penetration pricing for new products to ________.

A)discourage competition from entering the market
B)focus on the rapid achievement of profit objectives
C)ensure the company has the ability to lower prices once demand decreases
D)appeal to different consumer segments with different levels of price sensitivity
E)create markets for highly technical products

Question 74

When a company charges the same rate to ship a product anywhere in either Australia or New Zealand,it is using which form of geographic pricing?

A)Captive pricing
B)F)O.B.origin
C)F)O.B.destination
D)Uniform delivered pricing
E)F)O.B.delivered

Question 75

The wholesaler has stated the terms of sale to retailers are 5% 10 days,net 30 days.This means that ________.

A)retailers will sell to customers at list price minus 5% for 30 days
B)retailers who pay within 10 days get a 5% discount
C)wholesalers will sell to retailers at list price minus 5% for 10 days only
D)the total amount is due within 30 days
E)B and D

Question 76

With ________,a new product carries a low price for a limited period of time to attract customers.

A)commodity pricing
B)trial pricing
C)price skimming
D)specialty pricing
E)comparative pricing

Question 77

The package for 'X-Factor',a new Energy Drink,promoted a limited time price reduction.The manufacturer of 'X-Factor' used ________.

A)comparative pricing
B)trial pricing
C)commodity pricing
D)price skimming
E)specialty pricing

Question 78

Noncumulative quantity discounts ________.

A)are based on a total quantity bought within a specified time period
B)are typically offered as rebates
C)can cause hardship to the retailers receiving them
D)encourage large single orders
E)All of the above

Question 79

With dynamic pricing on the internet,________.

A)firms are able to respond quickly to changes in supply and/or demand
B)firms are able to respond quickly to changes in cost
C)the cost of changing prices is practically zero
D)A and B
E)A,B,and C

Question 80

When George ordered a DVD player and a set of surround-sound speakers on the internet,he really felt like he had got a bargain because the seller did not charge him any shipping costs.The website where George made his purchase most likely used ________ and included the shipping costs in the base price.

A)zone pricing
B)captive pricing
C)F)O.B.delivered
D)freight absorption pricing
E)uniform delivered pricing