Question 1

If Alden raises the price on the handheld mixer by 2 percent and quantity demanded falls by 10 percent,what is the price elasticity of demand?
A)- 12
B)5
C)12
D)- 8
E)- 5

Accepted Answer

Price elasticity of demand measures the responsiveness of the quantity demanded to a change in price. Mathematically, it is calculated as the percentage change in quantity demanded divided by the percentage change in price.

In this case, we know that price increased by 2 percent and quantity demanded fell by 10 percent. The price elasticity of demand can be calculated as follows:

Price elasticity of demand = (% change in quantity demanded) / (% change in price)
Price elasticity of demand = (-10%) / (2%)
Price elasticity of demand = -5

Since the elasticity value is negative, we know that handheld mixer is an inelastic good. This means that the percentage change in quantity demanded is less than the percentage change in price. In other words, consumers are not very responsive to changes in price, indicating that the handheld mixer is a necessity rather than a luxury good.

Question 2

Underpriced products sell very well,but they produce less revenue than they would have if price were raised to the level.
A)variable
B)perceived
C)elastic
D)price- floor
E)demand curve

Accepted Answer

Underpriced products sell well because they are perceived as a good deal by consumers, but they generate less revenue than they could if priced at a level that reflects their perceived value.

Question 3

A company should set prices that will allow _ to receive a fair profit.
A)consumers
B)resellers
C)the market
D)producers
E)competitors

Accepted Answer

The answer of A company should set prices that will...

Question 4

If Canon Camera Company follows a low- price,low- margin strategy for a product,what will competitors most likely do?
A)They will advertise less.
B)They will want to compete in the same markets against Canon.
C)They will decide to decide to target underserved niches.
D)They will advertise more.
E)none of the above

Accepted Answer

Competitors may decide to target underserved niches to avoid direct competition with Canon's low-price, low-margin strategy, allowing them to maintain higher margins.

Question 5

Firms are less affected by competitors' pricing strategies under than under .
A)oligopolistic competition;pure competition
B)pure competition;monopolistic competition
C)oligopolistic competition;monopolistic competition
D)monopolistic competition;oligopolistic competition
E)pure competition;a pure monopoly

Accepted Answer

In monopolistic competition, firms have differentiated products and therefore customers have a strong preference for a specific brand or product. This makes it difficult for competitors to poach customers by lowering prices. In contrast, in oligopolistic competition where there are only a few dominant firms, pricing decisions by one firm can have a significant impact on the market and can trigger a price war among competitors.

Question 6

Refer to the scenario below to answer the following questions.
Alden Manufacturing produces small kitchen appliances-blenders,hand mixers,and electric skillets-under the brand name First Generation.Alden attempts to target newlyweds and first- time home buyers with this brand.
In considering that most young households have limited financial resources,Alden has attempted to engage in target costing."In doing this," Milt Alden stated,"we have better control over keeping price right in line with customers."
Alden manufactures a three- speed blender,its top seller,and a five- speed blender.The hand mixers are manufactured in two styles-a small handheld mixer with two rotating beaters and a similar style that comes with an optional stand and attached mixing bowl.Alden's temperature- controlled skillets are manufactured in one style with three color options.
"Our product offerings are narrower," Milt Alden added,"but our line workers know each product like the back of their hands.This allows us to produce superior products while holding our prices low."
-Milt Alden uses a target costing strategy.Which of the following is he most likely to do in executing this strategy?
A)start by determining the costs of a new product
B)start with customer- value considerations
C)base his price on competitors' prices
D)use everyday low pricing
E)use a break- even chart to determine pricing

Accepted Answer

In target costing, the focus is on customer value considerations. The company starts by determining the price that the target market is willing to pay for the product, and then works backward to determine the maximum allowable cost for the product. This allows the company to design and manufacture products that meet the target market's needs while keeping costs low enough to achieve the desired profit margins. Therefore, B is the correct answer.

Question 7

Under ,the market consists of one seller.
A)oligopolistic competition
B)monopolistic competition
C)a pure monopoly
D)capitalism
E)pure competition

Accepted Answer

A market consisting of one seller is a pure monopoly, meaning the seller has complete control over the market and can set prices as they please. This is different from monopolistic competition which has multiple sellers offering similar but not identical products, and pure competition which has many buyers and sellers with no one dominating the market. Oligopolistic competition refers to a market with a few large firms dominating the market. Capitalism is an economic system based on private ownership and free market competition, but does not specifically refer to a market with one seller.

Question 8

are the sum of the _ and for any given level of production.
A)Variable costs;fixed;total costs
B)Fixed costs;variable;total costs
C)Break- even costs;fixed;total costs
D)Total costs;fixed;variable costs
E)Fixed costs;total;variable costs

Accepted Answer

The answer of are the sum of the _ and...

Question 9

Many people feel that pricing is fairer to both buyers and sellers.Sellers earn a fair return on their investment but do not take advantage of buyers when buyers' demand becomes great.
A)skimming
B)elasticity
C)markup
D)inelasticity
E)penetration

Accepted Answer

Markup pricing is based on adding a predetermined margin, or markup, to the cost of a product to determine its selling price. This pricing strategy allows sellers to earn a fair return on their investment while still ensuring that buyers are paying a fair price. As demand increases, sellers can adjust their markup accordingly to maintain profitability without taking advantage of buyers with inflated prices.

Question 10

The company designs what it considers to be a good product,totals the expenses of making the product,and sets a price that adds a standard markup to the cost of the product.This approach to pricing is called .
A)variable pricing
B)value- based pricing
C)cost- plus pricing
D)skimming pricing
E)fixed cost pricing

Accepted Answer

This approach to pricing is called cost-plus pricing, where the company sets a price by calculating the cost of producing the product and adding a standard markup (percentage) to it. This pricing method is commonly used in manufacturing industries where the cost of production is relatively high and fixed.

Question 11

The relationship between the price charged and the resulting demand level can be shown as the .
A)break- even pricing
B)variable cost
C)demand curve
D)target cost
E)experience curve

Accepted Answer

The relationship between price and demand is typically shown through a demand curve, which illustrates how the quantity of a product demanded changes as the price of that product changes. As prices increase, typically the quantity demanded decreases. This inverse relationship is captured in the demand curve, which helps firms understand what price will generate the optimal level of demand for their product.

Question 12

Dips in the economy and the instant price comparisons made possible by the Internet have both contributed to .
A)decreased consumer price sensitivity
B)a more direct relationship between supply and demand
C)increased consumer price sensitivity
D)decreased brand loyalty
E)a less direct relationship between supply and demand

Accepted Answer

Dips in the economy and the availability of instant price comparisons have made consumers more aware of price fluctuations, leading to increased sensitivity towards prices. This means that consumers are more likely to compare prices across brands and choose the most affordable option.

Question 13

A company building its pricing strategy around the experience curve would be most likely to .
A)price its products high
B)engage in value- added pricing
C)price its products low
D)avoid cost- based pricing
E)engage in break- even pricing

Accepted Answer

A company building its pricing strategy around the experience curve would price its products low. The experience curve implies that a company's unit costs decrease as output increases due to learning, experience and economies of scale. Therefore, the company can set lower prices than its competitors and still enjoy healthy profit margins. This low pricing strategy can also help the company to gain market share and improve its competitiveness over time.

Question 14

If demand changes greatly with a small change in price,we say the demand is .
A)value- based
B)fixed
C)elastic
D)inelastic
E)variable

Accepted Answer

Elastic demand means that the quantity demanded changes significantly in response to a small change in price. This suggests that buyers are sensitive to price changes and will likely switch to substitutes if the price of the product they desire becomes too high. As a result, sellers may need to adjust their prices accordingly to maintain sales.

Question 15

describes how responsive demand will be to a change in price.
A)The demand curve
B)Break- even pricing
C)Target costing
D)Price elasticity
E)Supply

Accepted Answer

Price elasticity describes how responsive demand will be to a change in price. It measures the percentage change in quantity demanded of a good or service in response to a change in its price. A high price elasticity means that a small change in price will result in a large change in the quantity demanded, indicating that demand is very responsive to price changes. A low price elasticity means that a change in price will not have a significant impact on the quantity demanded, indicating that demand is not very responsive to price changes.

Question 16

Amos Zook,an Amish farmer,sells organically grown produce.Often he will trade some of his produce for dairy products produced by other Amish farmers.The sum of the values exchanged for the produce is the _ .
A)price
B)cost- plus price
C)penetration price
D)common value price
E)dynamic price

Accepted Answer

The sum of the values exchanged for the produce is the "price," which is the amount of money or goods exchanged for a product or service.

Question 17

Consumer perceptions of the product's value set the for prices.
A)floor
B)ceiling
C)image
D)demand curve
E)variable cost

Accepted Answer

Consumer perceptions of the product's value set the ceiling for prices, meaning that businesses cannot realistically charge more than what consumers perceive the product to be worth. The floor refers to the minimum price that a business can charge based on its variable costs, while image refers to the overall perception of the brand or company. The demand curve is a graphical representation of the relationship between price and quantity demanded. Variable cost refers to the cost incurred by a business to produce one unit of a product or service.

Question 18

is the amount of money charged for a product or service.
A)A demand
B)Value
C)Price
D)Salary
E)A wage

Accepted Answer

Price refers to the amount of money charged for a product or service.

Question 19

Under ,the market consists of many buyers and sellers who trade over a range of prices rather than a single market price.
A)oligopolistic competition
B)monopolistic competition
C)socialism
D)a pure monopoly
E)pure competition

Accepted Answer

Monopolistic competition is characterized by many buyers and sellers trading over a range of prices because each seller offers a slightly different product.

Question 20

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

Accepted Answer

The demand curve shows the relationship between product demand and product price, indicating the quantity of a product consumers are willing to buy at different price points. It typically slopes downward and to the right, indicating that as price increases, quantity demanded decreases. The demand curve is not always a straight line and does not necessarily illustrate the effect of price on the quantity supplied. It also does not illustrate the quantity of product customers will buy in a market during a period of time if other factors change.

Quiz 10: Pricing Strategies: Understanding and Capturing Customer Value

If Alden raises the price on the handheld mixer by 2 percent and quantity demanded falls by 10 percent,what is the price elasticity of demand?

Underpriced products sell very well,but they produce less revenue than they would have if price were raised to the level.

A company should set prices that will allow _ to receive a fair profit.

If Canon Camera Company follows a low- price,low- margin strategy for a product,what will competitors most likely do?

Firms are less affected by competitors' pricing strategies under than under .

Under ,the market consists of one seller.

are the sum of the _ and for any given level of production.

Many people feel that pricing is fairer to both buyers and sellers.Sellers earn a fair return on their investment but do not take advantage of buyers when buyers' demand becomes great.

The company designs what it considers to be a good product,totals the expenses of making the product,and sets a price that adds a standard markup to the cost of the product.This approach to pricing is called .

The relationship between the price charged and the resulting demand level can be shown as the .

Dips in the economy and the instant price comparisons made possible by the Internet have both contributed to .

A company building its pricing strategy around the experience curve would be most likely to .

If demand changes greatly with a small change in price,we say the demand is .

describes how responsive demand will be to a change in price.

Amos Zook,an Amish farmer,sells organically grown produce.Often he will trade some of his produce for dairy products produced by other Amish farmers.The sum of the values exchanged for the produce is the _ .

Consumer perceptions of the product's value set the for prices.

is the amount of money charged for a product or service.

Under ,the market consists of many buyers and sellers who trade over a range of prices rather than a single market price.

Which of the following is true about the demand curve?