Question 1

A cost that remains stable at any production level within a certain range is called a(n) _____ cost.

Accepted Answer

Fixed costs do not change with the level of production, meaning they remain constant regardless of how much is produced within a certain range.

Question 2

Many firms attempt to promote stable prices by meeting competitors' prices to maintain pricing parity.

Accepted Answer

Firms often engage in price matching or setting prices in line with competitors as a strategy to maintain market share and avoid price wars, thereby promoting stable prices within the industry.

Question 3

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

Accepted Answer

Prestige pricing is a strategy where products are priced at a high level to convey an image of luxury, exclusiveness, or superior quality, targeting consumers who associate higher prices with higher value or status.

Question 4

A price is the amount of funds required to purchase a good or service.

Accepted Answer

A price is indeed the amount of money or funds required to purchase a specific good or service.

Question 5

A cost that changes with the level of production is called a(n) _____ cost.

Accepted Answer

Variable costs change with the level of production, increasing as production increases and decreasing as production decreases. Fixed costs remain constant regardless of production levels.

Question 6

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

Accepted Answer

Breakeven analysis helps marketers determine the number of units that must be sold to cover all costs (fixed and variable), making it a valuable tool for planning and decision-making regarding pricing, budgeting, and profit targeting.

Question 7

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

Accepted Answer

The price of products includes not only the costs incurred by the manufacturer for raw material and processing, but also additional expenses such as marketing, distribution, transportation, and profit margins.

Question 8

The pricing technique used to determine the number of products that must be sold at a specified price to generate enough revenue to cover total cost is known as _____ analysis.

Accepted Answer

Breakeven analysis is used to calculate the point at which revenue received equals the costs associated with receiving the revenue, helping businesses determine the necessary sales volume to cover their total costs.

Question 9

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

Accepted Answer

The breakeven model actually assumes that per-unit variable costs remain constant at different levels of operation.

Question 10

A value pricing strategy emphasizes the benefits a product provides in comparion to the price and quality levels of competing offerings.

Accepted Answer

A value pricing strategy focuses on setting a product's price based on the perceived value it offers compared to competitors, emphasizing the benefits and quality it provides relative to its price.

Question 11

Which of the following pricing objectives reflects marketers' recognition of the role of price in creating an overall image of the firm and its product offerings as being high quality or exclusive?

Accepted Answer

A prestige objective reflects the strategy of setting prices to reflect the high status or exclusivity of a product, thereby influencing the overall image of the firm and its offerings as high quality or exclusive. This approach is used to attract customers who are looking for products that signify prestige or luxury.

Question 12

Prestige pricing objectives emphasize:

Accepted Answer

Prestige pricing objectives focus on creating an image of quality and exclusivity for a product, allowing companies to charge higher prices. This strategy is often used for luxury goods and services.

Question 13

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

Accepted Answer

Prestige objectives focus on the perception of a brand or product, often using higher prices to signal higher quality or status, thus contributing to the overall image of the firm and its offerings.

Question 14

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.

Accepted Answer

The basic breakeven model calculates the point at which revenue equals cost, focusing on the financial aspects of production and sales volumes, not directly on customer purchase intentions or price acceptance.

Question 15

Breakeven analysis is an effective tool to determine the level of sales required to cover costs.

Accepted Answer

Breakeven analysis calculates the point at which revenue equals costs, helping businesses understand the sales volume needed to cover all expenses.

Question 16

Which of the following actions is most likely to be taken by a company in order to implement the value pricing objective?

Accepted Answer

Value pricing is about setting a product's price based on the perceived value it offers compared to competitors, rather than solely on cost or market demand. Option B directly addresses this by focusing on convincing consumers that their lower-priced product offers the same quality as a higher-priced competitor, which aligns with the essence of value pricing.

Question 17

A pricing strategy that emphasizes benefits of a product in comparison to the price and quality levels of competing offerings is called _____ pricing.

Accepted Answer

Value pricing emphasizes the benefits of a product in comparison to the price and quality levels of competing offerings, focusing on providing customers with good value for their money.

Question 18

Which of the following is an example of a volume pricing objective?

Accepted Answer

Volume pricing objectives are strategies aimed at capturing a larger market share through price adjustments. Reducing prices to gain a higher share of the market directly aligns with this goal, as it encourages more customers to purchase the product, thereby increasing sales volume.

Question 19

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.

Accepted Answer

Pricing objectives are derived from broader organizational and marketing objectives, guiding the development of specific pricing policies and procedures to achieve these goals.

Question 20

Analysis has shown that ingredients account for less than 5 percent of a perfume's cost. So if a perfume costs $135 or more per ounce, it reflects the marketer's adoption of a pricing objective that focuses on:

Accepted Answer

The high cost of perfume, despite the low cost of ingredients, suggests that the pricing strategy is aimed at creating an image or prestige for the product rather than focusing on market share, competition, or sales maximization. This is because the significant markup is likely intended to position the perfume as a luxury or high-end product.

Quiz 13: Pricing Concepts