Question 1

A demand curve which drops in stages is called:&#10;A) A normal curve.&#10;B) A price demand curve.&#10;C) A stepped demand curve.

Accepted Answer

A stepped demand curve is characterized by its drop in stages, reflecting different quantities demanded at different price levels, but with these changes occurring in distinct steps rather than smoothly.

Question 2

What is value in use?&#10;A) The cost savings made by the customer by buying a specific product.&#10;B) The cost of the product to the customer.&#10;C) The cost of the product spread over the period in which the product will be used.

Accepted Answer

Value in use refers to the cost savings or benefits a customer realizes by using a specific product compared to alternative options, not just the purchase cost or the cost spread over its use period.

Question 3

The costs associated with changing from one product to another are called:&#10;A) Changeover costs.&#10;B) Switching costs.&#10;C) Overhead costs.

Accepted Answer

Switching costs.&#10;

Question 4

Which of the following is NOT a source of experience curve effects?&#10;A) Technological improvements.&#10;B) Learning.&#10;C) Education.

Accepted Answer

Education is not considered a direct source of experience curve effects. Experience curve effects typically arise from within an organization through operational improvements, learning by doing, and technological advancements, rather than from external educational processes.

Question 5

Setting prices by calculating all the costs then adding on the profit margin is called:&#10;A) Cost-plus pricing.&#10;B) Profit-based pricing.&#10;C) Calculation pricing.

Accepted Answer

Cost-plus pricing involves adding a markup to the cost of goods to ensure a profit margin. It's a straightforward method where the total cost of producing a product or service is calculated, and then a profit margin is added on top to set the final price.

Question 6

What is polycentric pricing?&#10;A) Setting prices at different rates according to negotiation centres.&#10;B) Allowing local managers to set prices.&#10;C) Pricing against many cost centres.

Accepted Answer

Polycentric pricing refers to a strategy where companies allow their local or regional managers to set the prices of products or services, taking into account the local market conditions, competition, and costs. This approach recognizes the differences in consumer behavior, economic conditions, and market dynamics across different locations.

Question 7

Setting the prices of goods which one division of the firm buys from another is called:&#10;A) Divisional pricing.&#10;B) Demand pricing.&#10;C) Transfer pricing.

Accepted Answer

Transfer pricing refers to the pricing of goods, services, and intangible property bought and sold between various divisions within the same company.

Question 8

What does FOB stand for?&#10;A) Fixed order book.&#10;B) Free on board.&#10;C) Funded over breakeven.

Accepted Answer

FOB stands for "Free on Board," a term used in international shipping to indicate that the seller is responsible for the goods until they are loaded onto the shipping vessel, at which point the responsibility shifts to the buyer.

Question 9

What is a documentary letter of credit?&#10;A) A letter from a bank confirming that the buyer has the cash to pay for the goods.&#10;B) A letter from a vendor confirming that the buyer will be offered credit.&#10;C) A letter from a bank guaranteeing to pay the vendor provided the conditions of the sale are met.

Accepted Answer

A documentary letter of credit is a financial instrument issued by a bank on behalf of the buyer, guaranteeing payment to the seller/vendor upon the fulfillment of the terms and conditions specified in the letter. This involves the presentation of certain documents that prove the goods were shipped or services were provided as agreed.

Question 10

What is open-account trading?&#10;A) The vendor gives the buyer credit.&#10;B) The buyer agrees to a long-term stream of purchases.&#10;C) The vendor agrees to open its bank accounts to the buyer, as a sign of good faith.

Accepted Answer

Open-account trading is a form of trade finance where the seller extends credit to the buyer. This means the seller ships the goods or provides the service first and allows the buyer to pay later, typically within 30, 60, 90 days, or more, depending on the agreement.

Deck 10: Pricing