Question 1

When a seller determines the selling price by adding to cost an amount for profit and expenses not previously accounted for,the seller is using _____ pricing.

Accepted Answer

Markup pricing does not directly analyze the costs of production;rather,is uses the cost of buying the product from the producer,plus amounts for profit and for expenses otherwise not accounted for.

Question 2

_____ use complex mathematical software to profitably fill unused capacity.

Accepted Answer

A yield management system (YMS)is a technique for adjusting prices that uses complex mathematical software to profitability fill unused capacity by discounting early purchases,limiting early sales at these discounted prices,and overbooking capacity.

Question 3

Chad has calculated the sales volume at which his lemonade stand's costs equal revenue.Over dinner he announced to his family that he only needed to sell 50 glasses of lemonade at $5 per glass to cover all his costs (lumber and nails for the stand,lemons,sugar,etc. ).Which important factor has Chad excluded from his analysis?

Accepted Answer

Chaz's analysis only includes company costs and does not consider consumer demand.

Question 4

_____ costs do not change as output is increased or decreased.

Accepted Answer

This is the definition of fixed costs.

Question 5

Which of the following statements about yield management systems (YMS)is true?

Accepted Answer

YMS was first used in the airline industry,but it is now used by automobile manufacturers to make use of underutilized capacity.

Question 6

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

Accepted Answer

An example of a variable cost is the cost of materials.

Question 7

Which of the following is most likely to be a variable cost for an Internet retailer that sells spices,herbs,and seasonings to consumers?

Accepted Answer

Postage is the only item that varies depending upon the amount of units sold.

Question 8

One way a firm can gain pricing power is to:

Accepted Answer

This is one way for a firm to gain pricing power.

Question 9

Allstate has more than 1,500 price-levels that are determined by a complex algorithms that analyzes 16 credit report variables,including late payments and card balances.Allstate is using a _____ to set prices.

Accepted Answer

A yield management system is complex mathematical software used to profitably filled unused capacity.

Question 10

Patrick owns Liberty Tax and Bookkeeping Services.The monthly mortgage payment Patrick makes on his small office building and the annual cost of his business license are all examples of _____ costs.

Accepted Answer

Fixed costs do not change as output changes.

Question 11

For a nail salon,the costs associated with the purchase of nail polish and other products like nail polish remover,sterilized equipment,laundry service for the towels,and the beverages given to customers,are all examples of _____ costs.

Accepted Answer

A cost that changes with the level of output is called a variable cost.

Question 12

Monthly output at Leisure-Time,Inc.changed from 12 to 13 prefabricated gazebos,and the total costs changed from $9,000 to $10,500.What is the marginal cost for this company?

Accepted Answer

Marginal cost is the change in total costs associated with a one-unit change in output.

Question 13

Yield management systems are used to:

Accepted Answer

A yield management system (YMS)is a technique for adjusting prices that uses complex mathematical software to profitability fill unused capacity by discounting early purchases,limiting early sales at these discounted prices,and overbooking capacity.

Question 14

The greater the number of different uses for a product,the more _____ demand tends to be.

Accepted Answer

If a product has only one use,the quantity purchased probably will not vary as price varies.

Question 15

Total variable costs divided by quantity of output equals:

Accepted Answer

This is the definition of average variable cost.

Question 16

The two types of costs a marketer needs to consider when setting prices are:

Accepted Answer

A variable cost is a cost that varies with changes in the level of outputs (e.g. ,cost of materials),whereas a fixed cost does not change as output is increased or decreased (e.g. ,rent).

Question 17

Pricing power is all about:

Accepted Answer

Not only must the customer believe that the product will deliver high value,but it also must do so at a price that will cause the customer to buy it.

Question 18

_____ cost is the change in total costs associated with a one-unit change in output.

Accepted Answer

This is the definition of marginal cost.

Question 19

Central Bark is a dog resort where pets are pampered.Which of the following is the BEST example of one of its fixed costs?

Accepted Answer

The payment on the building remains the same,no matter how many dogs are visit the resort.

Question 20

If a product has high pricing power this would indicate a situation of:

Accepted Answer

A product with high pricing power is said to have inelastic demand.

Quiz 19: Pricing Concepts