Question 1

For price discrimination to work ________.
A) the market must be segmentable and the segments must show similar intensities of demand
B) members in the lower-price segment must be able to resell the product to the higher-price segment
C) competitors must be able to undersell the firm in the higher-price segment
D) the practice must not breed customer resentment and ill will
E) the extra revenue derived from price discrimination must not exceed the cost of segmenting and policing the market

Accepted Answer

The answer of For price discrimination to work ________.
A) the...

Question 2

________ refers to selling below cost with the intention of destroying competition.
A) Bid rigging
B) Loss-leader pricing
C) Predatory pricing
D) Price discrimination
E) Price penetration

Accepted Answer

Predatory pricing refers to the practice of selling products or services at a price below cost with the intention of driving rivals out of business. This makes it easier for the predator to establish a monopoly or dominant market position, after which it can raise prices with impunity. The goal of predatory pricing is not to increase sales or market share, but rather to eliminate competition. As such, it is illegal under antitrust law.

Question 3

Psychological discounting involves setting an artificially high price and then offering the product at substantial savings.

Accepted Answer

The answer of Psychological discounting involves setting an artificially high...

Question 4

When hotels drop their rates on the weekends, this form of price discrimination is known as ________ pricing.
A) channel
B) image
C) product-form
D) time
E) location

Accepted Answer

When hotels drop their rates on weekends, it is an example of time-based pricing, as the price varies based on the time of week. This allows hotels to reach different segments of consumers who may be willing to pay different prices for the same room depending on when they are staying.

Question 5

The prices of tickets to the opera vary depending on where the person would like to be seated - in the gallery or in the stalls. This is an example of ________ pricing.
A) channel
B) time
C) image
D) product-form
E) location

Accepted Answer

The varying prices based on where the person would like to be seated (gallery versus stalls) is an example of location-based pricing.

Question 6

When museums charge a lower admission fee to students and senior citizens, this form of price discrimination is known as ________ pricing.
A) location
B) channel
C) customer-segment
D) special-customer
E) loss-leader

Accepted Answer

The pricing strategy in which different prices are charged for different groups of customers is known as customer-segment pricing. By offering lower admission fees to students and senior citizens, the museum is segmenting its customer base and pricing accordingly.

Question 7

Madame Tussaud's wax museum is a popular tourist attraction in London. The museum charges higher entry rates for tourists compared to locals. This form of price discrimination is known as ________ pricing.
A) customer-segment
B) image
C) location
D) special customer
E) special event

Accepted Answer

Customer-segment pricing involves charging different prices to different groups of customers based on their willingness to pay or other factors such as age, location, or nationality. In this case, Madame Tussaud's is charging higher prices to tourists compared to locals, which is a form of customer-segment pricing.

Question 8

Loss leader pricing dilutes a company's brand image.

Accepted Answer

Loss leader pricing involves offering products at very low prices or even below cost to attract customers and increase sales. While this may initially seem like a good strategy, it can ultimately dilute a company's brand image because customers may begin to associate the brand solely with low prices, rather than quality products or services. This can ultimately hurt the company's reputation and bottom line.

Question 9

When Coca-Cola carries a different price depending on whether the consumer purchases it in a fine restaurant, a fast-food restaurant, or a vending machine, then this form of price discrimination is known as ________ pricing.
A) product-form
B) loss-leader
C) special event
D) channel
E) location

Accepted Answer

The answer of When Coca-Cola carries a different price depending...

Question 10

The airline and hospitality industries use ________, by which they offer discounted but limited early purchases, higher-priced late purchases, and the lowest rates on unsold inventory just before it expires.
A) special-customer pricing
B) yield pricing
C) cash rebates
D) location pricing
E) customer-segment pricing

Accepted Answer

The pricing strategy used by the airline and hospitality industries where they offer discounted but limited early purchases, higher-priced late purchases, and the lowest rates on unsold inventory just before it expires is known as yield pricing. This is a common method in industries where inventory is perishable, and the goal is to maximize revenue by pricing items at different levels based on the timing of purchase.

Question 11

In second-degree price discrimination, the seller charges ________.
A) less to buyers of larger volumes
B) different prices depending on the season, day, or hour
C) a separate price to each customer depending on the intensity of his or her demand
D) different prices for different versions of the same product
E) different prices for the same product depending on the channel through which it is sold

Accepted Answer

In second-degree price discrimination, the seller charges less to buyers of larger volumes. It involves offering discounts to customers who purchase larger quantities of the same product.

Question 12

________ reward dealers for participating in advertising and sales support programs.
A) Functional discounts
B) Trade discounts
C) Promotional allowances
D) Rebates
E) Quantity discounts

Accepted Answer

Promotional allowances are rewards given to dealers for participating in advertising and sales support programs. Functional discounts are offered to wholesalers or retailers for performing services like storage, handling and selling. Trade discounts are a reduction in the list price offered by suppliers to intermediaries like retailers and wholesalers. Rebates are given when customers purchase a certain quantity or until a certain date, and quantity discounts are offered based on the volume of purchase.

Question 13

When hotels, motels, and airlines offer discounts in slow selling periods, they are said to be offering ________.
A) trade discounts
B) quantity discounts
C) functional discounts
D) seasonal discounts
E) trade-in allowances

Accepted Answer

Seasonal discounts are offered during times of slow sales to encourage customers to book or buy during these periods. This is a common practice in the hospitality and travel industries. Trade discounts are offered to businesses buying in bulk, quantity discounts are offered based on the amount purchased by an individual customer, functional discounts are discounts offered for completing specific functions such as paying for an order early, and trade-in allowances are discounts offered for trading in an old product when purchasing a new one. None of these options accurately describe discounts offered during slow selling periods like seasonal discounts do.

Question 14

A(n) ________ is an extra payment designed to gain reseller participation in special programs.
A) seasonal discount
B) allowance
C) discount
D) quantity discount
E) functional discount

Accepted Answer

An allowance is an extra payment, above the regular price or commission, that is designed to gain reseller participation in special programs such as advertising and display programs, and training programs. Seasonal discount, quantity discount, and functional discount are different types of price reductions offered to customers, while a discount is a reduction of the regular price.

Question 15

In ________, the seller charges a separate price to each customer depending on the intensity of his or her demand.
A) second-degree price discrimination
B) third-degree price discrimination
C) psychological discounting
D) special-customer pricing
E) first-degree price discrimination

Accepted Answer

First-degree price discrimination, also known as perfect price discrimination, occurs when a seller charges a different price for each unit sold or to each customer based on their willingness to pay. This approach aims to capture the maximum amount of consumer surplus for the seller by tailoring prices to the individual demand of each customer.

Question 16

When a movie theater charges a lower ticket fee for children and senior citizens, it is engaging in ________ pricing.
A) product-form
B) image
C) customer-segment
D) location
E) time

Accepted Answer

Customer-segment pricing involves charging different prices to different customer groups based on their willingness to pay, such as charging lower prices for children and senior citizens.

Question 17

In a compensation deal, the seller sells a plant, equipment, or technology to another country and agrees to accept as partial payment products manufactured with the supplied equipment.

Accepted Answer

The answer of In a compensation deal, the seller sells...

Question 18

When supermarkets and department stores drop the price on well-known brands to stimulate store traffic, they are said to be following ________ pricing.
A) value
B) loss-leader
C) special event
D) high-low
E) everyday low

Accepted Answer

The description of dropping the price on well-known brands to stimulate store traffic fits the concept of a loss-leader pricing strategy, where retailers sell products at a loss to attract customers in hopes that they will make additional purchases.

Question 19

In ________, the seller charges different amounts to different classes of buyers.
A) perceived value pricing
B) third-degree price discrimination
C) first-degree price discrimination
D) second-degree price discrimination
E) psychological discounting

Accepted Answer

Third-degree price discrimination is the practice of charging different prices to different groups of consumers for the same good or service. This can be based on factors such as age, income, or location, and is a common strategy used by companies to maximize their profits. Perceived value pricing (A) is the practice of setting prices based on the perceived value of a product or service in the eyes of the consumer. First-degree price discrimination (C) is the practice of charging each customer the maximum price they are willing to pay, while second-degree price discrimination (D) involves offering different prices based on the quantity or volume of the product being purchased. Psychological discounting (E) is not a commonly used pricing strategy.

Question 20

In first-degree price discrimination, the seller charges less to buyers who purchase in larger volumes.

Accepted Answer

In first-degree price discrimination, the seller charges each buyer their maximum willingness to pay, regardless of their volume of purchase.

Quiz 16: Developing Pricing Strategies and Programs

For price discrimination to work ________.

________ refers to selling below cost with the intention of destroying competition.

Psychological discounting involves setting an artificially high price and then offering the product at substantial savings.

When hotels drop their rates on the weekends, this form of price discrimination is known as ________ pricing.

The prices of tickets to the opera vary depending on where the person would like to be seated - in the gallery or in the stalls. This is an example of ________ pricing.

When museums charge a lower admission fee to students and senior citizens, this form of price discrimination is known as ________ pricing.

Madame Tussaud's wax museum is a popular tourist attraction in London. The museum charges higher entry rates for tourists compared to locals. This form of price discrimination is known as ________ pricing.

Loss leader pricing dilutes a company's brand image.

When Coca-Cola carries a different price depending on whether the consumer purchases it in a fine restaurant, a fast-food restaurant, or a vending machine, then this form of price discrimination is known as ________ pricing.

The airline and hospitality industries use ________, by which they offer discounted but limited early purchases, higher-priced late purchases, and the lowest rates on unsold inventory just before it expires.

In second-degree price discrimination, the seller charges ________.

________ reward dealers for participating in advertising and sales support programs.

When hotels, motels, and airlines offer discounts in slow selling periods, they are said to be offering ________.

A(n) ________ is an extra payment designed to gain reseller participation in special programs.

In ________, the seller charges a separate price to each customer depending on the intensity of his or her demand.

When a movie theater charges a lower ticket fee for children and senior citizens, it is engaging in ________ pricing.

In a compensation deal, the seller sells a plant, equipment, or technology to another country and agrees to accept as partial payment products manufactured with the supplied equipment.

When supermarkets and department stores drop the price on well-known brands to stimulate store traffic, they are said to be following ________ pricing.

In ________, the seller charges different amounts to different classes of buyers.

In first-degree price discrimination, the seller charges less to buyers who purchase in larger volumes.