Question 1

Priceline.com is a firm that serves as a clearinghouse for extra capacity from airlines, hotels, and cruise lines. It is an example of a firm that uses a(n) ________ strategy.
A) cost-plus pricing
B) price war
C) reverse auction
D) average-cost pricing
E) target return pricing

Accepted Answer

Priceline.com uses a reverse auction strategy, where customers bid for the price they are willing to pay and the firm matches them with available inventory from airlines, hotels, and cruise lines.

Question 2

________ costs are the sum of the fixed and variable costs.
A) Marginal
B) Total
C) Average
D) Minimum
E) Reduced

Accepted Answer

Total costs are the sum of fixed costs (costs that do not change with the volume of production or sales) and variable costs (costs that vary with the volume of production or sales).

Question 3

________ are direct, immediate reductions in price provided to purchasers.
A) Allotments
B) Rebates
C) Offers
D) Discounts
E) Allowances

Accepted Answer

Discounts are direct reductions in price provided to purchasers. Allotments are not related to price reductions, but rather refer to a portion of something (such as shares of stock). Rebates are also price reductions, but they typically involve the purchaser completing additional steps (such as filling out a form or waiting for a certain amount of time) before receiving the discount. Offers and allowances refer more generally to a range of promotional tactics, and may include discounts but also other incentives or benefits.

Question 4

________ are typically expressed as greatly extended invoice due dates.
A) Cash discounts
B) Trade discounts
C) Quantity discounts
D) Seasonal discounts
E) Promotional allowances

Accepted Answer

The answer of ________ are typically expressed as greatly extended...

Question 5

________ remit monies to purchasers after the fact.
A) Allotments
B) Coupons
C) Offers
D) Discounts
E) Allowances

Accepted Answer

Allowances often involve remitting monies to purchasers after the fact, often as a form of rebate or compensation for various reasons, such as defects or dissatisfaction.

Question 6

The Internet created a rise in ________ as more and more people decided to meet online to sell products to the highest bidder.
A) price elasticity of demand
B) stability pricing
C) prestige pricing
D) auction pricing
E) trade discounts

Accepted Answer

The sentence directly refers to "sell products to the highest bidder," which is a clear indication of auction pricing. Auction pricing is a common model for online marketplaces such as eBay, where buyers bid against each other to get the product they want at the best possible price.

Question 7

James is trying to determine the best price for his new fishing poles and thus uses the sales price as a basis of calculating the markup percentage. He is using a ________ approach.
A) markup on cost
B) value price
C) average-cost pricing
D) markup on sales price
E) cost-plus

Accepted Answer

James is using the markup on sales price approach, as he is calculating the percentage markup based on the sales price of the product. This approach is also known as the "percentage markup" or "percentage of selling price" approach.

Question 8

You should be careful when using ________ pricing, as it is always possible that the quantity demanded will not match the marketing manager's forecast.
A) cost-plus
B) psychological
C) value
D) average-cost
E) prestige

Accepted Answer

Average-cost pricing can lead to mismatches between forecasted and actual demand because it doesn't account for changes in demand or competition, potentially resulting in overproduction or underproduction.

Question 9

Besides the standard auction approach where buyers bid for a seller's offering, it is now very common for sellers to utilize ________ to bid prices to capture a buyer's business.
A) price elasticity of demand
B) stability pricing
C) online promotion
D) channel discounts
E) reverse auctions

Accepted Answer

The best choice that fits the description is "reverse auctions," which is a type of auction where sellers bid to win a buyer's business. In reverse auctions, buyers indicate what they are willing to pay for a specific product or service, and then multiple sellers submit bids to win the buyer's business. The seller who offers the lowest price usually wins the bid. This approach is often used for sourcing and procurement activities in business-to-business (B2B) transactions.

Question 10

________ costs are incurred over time, regardless of volume, whereas ________ costs fluctuate with volume.
A) Fixed; variable
B) Variable; fixed
C) Total; variable
D) Variable; total
E) Marginal; total

Accepted Answer

Fixed costs are those that stay constant over time, regardless of production volume. Examples include rent, salaries, and insurance. Variable costs, on the other hand, vary with production volume. Examples of variable costs include raw materials, hourly wages, and utilities.

Question 11

________ is used by firms that rely on periodic heavy promotional pricing, primarily communicated through advertising and sales promotion, to build traffic and sales volume.
A) Psychological pricing
B) One-price strategy
C) Variable pricing
D) Everyday low pricing (EDLP)
E) High/low pricing

Accepted Answer

High/low pricing is a strategy that involves offering high prices on products initially and then marking them down through promotions or discounts later on. This strategy is often used by firms that rely on periodic heavy promotional pricing communicated through advertising and sales promotions to build traffic and sales volume.

Question 12

To use target return pricing, one must first calculate total ________ costs.
A) fixed
B) variable
C) marginal
D) minimum
E) average

Accepted Answer

Target return pricing involves setting a price that will result in a desired level of profit or return on investment. To determine this price, one must first calculate the total fixed costs involved in producing and selling the product or service. Variable costs and marginal costs may be taken into consideration in determining the overall cost structure, but it is the fixed costs that are most relevant for target return pricing. Minimum and average costs are not typically used in this approach to pricing.

Question 13

The rise of Walmart as one of the world's largest corporations has brought the concept of ________ to the forefront of global consumer consciousness.
A) reverse auctions
B) target return on investment pricing
C) price points
D) everyday low pricing
E) high/low pricing

Accepted Answer

The mention of Walmart in the question suggests that the missing concept is related to their pricing strategy. Walmart is known for their "everyday low pricing" strategy, which is reflected in their slogan of "Save Money. Live Better." Therefore, option D is the best choice.

Question 14

Veggie Vitality will send retailers a check if the retailer successfully includes its vegetable-based smoothies in promotional efforts. Veggie Vitality uses ________ to incentivize retailers.
A) cash discounts
B) trade discounts
C) quantity discounts
D) seasonal discounts
E) promotional allowances

Accepted Answer

Veggie Vitality is offering a promotional allowance to incentivize retailers. They are providing a financial reward to be included in the retailer's promotional efforts, which is a form of promotional allowances.

Question 15

Dyani runs Cute Cakes, a gourmet cupcake bakery. To set prices for her cupcakes, Dyani looks at the cost of making each cupcake and then adds an additional amount on top of that to arrive at her price. Dyani is using ________.
A) cost-plus pricing
B) high/low pricing
C) markup on sales price
D) average-cost pricing
E) target return pricing

Accepted Answer

Dyani is using cost-plus pricing, which involves adding a markup on top of the cost of making each cupcake to arrive at the final price.

Question 16

To better take into account the differential impact of fixed and variable costs, marketing managers can use ________ pricing.
A) cost-plus
B) psychological
C) odd/even
D) average-cost
E) target return

Accepted Answer

Target return pricing is designed to consider both fixed and variable costs and then set a price to achieve a targeted return on investment. This method helps in better accounting for the differential impact of these costs.

Question 17

The fundamental philosophy behind ________ is to reduce investment in promotion and transfer part of the savings to lower price.
A) price bundling
B) target return on investment pricing
C) variable pricing
D) everyday low pricing
E) reverse auctions

Accepted Answer

The philosophy described in the question is aligned with the concept of everyday low pricing (EDLP), which involves offering consistently low prices to consumers without the use of discounts or promotions. The idea is that the company saves money on advertising and promotion and can pass those savings along to customers in the form of lower prices. This approach is often associated with retailers such as Walmart and is intended to create value for customers while driving volume and loyalty.

Question 18

As with average-cost pricing, the effectiveness of ________ pricing is highly dependent on the accuracy of the forecast.
A) cost-plus
B) psychological
C) reference
D) average-cost
E) target return

Accepted Answer

Target return pricing relies on accurate forecasts to ensure that the pricing strategy meets the desired return on investment.

Question 19

Solid Surface, a countertop store, will give customers a 10 percent discount if they pay their bills in full in 20 days; however, after 20 days they do not receive a discount. This is an example of a ________.
A) cash discount
B) trade discount
C) quantity discount
D) seasonal discount
E) promotional allowance

Accepted Answer

This is an example of a cash discount, which is a discount offered to customers who pay in cash or pay their bills early.

Question 20

________ provide an incentive to a channel member for performing some function in the channel that benefits the seller, such as stocking a product or performing a product service.
A) Cash discounts
B) Quantity discounts
C) Trade discounts
D) Seasonal discounts
E) Promotional allowances

Accepted Answer

The answer of ________ provide an incentive to a channel...

Quiz 11: Manage Pricing Decisions

Priceline.com is a firm that serves as a clearinghouse for extra capacity from airlines, hotels, and cruise lines. It is an example of a firm that uses a(n) ________ strategy.

________ costs are the sum of the fixed and variable costs.

________ are direct, immediate reductions in price provided to purchasers.

________ are typically expressed as greatly extended invoice due dates.

________ remit monies to purchasers after the fact.

The Internet created a rise in ________ as more and more people decided to meet online to sell products to the highest bidder.

James is trying to determine the best price for his new fishing poles and thus uses the sales price as a basis of calculating the markup percentage. He is using a ________ approach.

You should be careful when using ________ pricing, as it is always possible that the quantity demanded will not match the marketing manager's forecast.

Besides the standard auction approach where buyers bid for a seller's offering, it is now very common for sellers to utilize ________ to bid prices to capture a buyer's business.

costs are incurred over time, regardless of volume, whereas costs fluctuate with volume.

________ is used by firms that rely on periodic heavy promotional pricing, primarily communicated through advertising and sales promotion, to build traffic and sales volume.

To use target return pricing, one must first calculate total ________ costs.

The rise of Walmart as one of the world's largest corporations has brought the concept of ________ to the forefront of global consumer consciousness.

Veggie Vitality will send retailers a check if the retailer successfully includes its vegetable-based smoothies in promotional efforts. Veggie Vitality uses ________ to incentivize retailers.

Dyani runs Cute Cakes, a gourmet cupcake bakery. To set prices for her cupcakes, Dyani looks at the cost of making each cupcake and then adds an additional amount on top of that to arrive at her price. Dyani is using ________.

To better take into account the differential impact of fixed and variable costs, marketing managers can use ________ pricing.

The fundamental philosophy behind ________ is to reduce investment in promotion and transfer part of the savings to lower price.

As with average-cost pricing, the effectiveness of ________ pricing is highly dependent on the accuracy of the forecast.

Solid Surface, a countertop store, will give customers a 10 percent discount if they pay their bills in full in 20 days; however, after 20 days they do not receive a discount. This is an example of a ________.

________ provide an incentive to a channel member for performing some function in the channel that benefits the seller, such as stocking a product or performing a product service.