Question 1

Under the Robinson-Patman Act, price differentials may be allowed if:

Accepted Answer

The Robinson-Patman Act allows for price differentials under certain conditions, including those listed in options A, B, C, and D. These conditions are considered justifiable reasons for a seller to offer different prices to different buyers, as they do not inherently involve unfair competition or discrimination among purchasers.

Question 2

Under the Robinson-Patman Act, price differentials may be allowed if:

Accepted Answer

The answer of Under the Robinson-Patman Act, price differentials may...

Question 3

Which of the following is a type of geographic pricing strategy?

Accepted Answer

All the options listed (uniform delivered pricing, zone-delivered pricing, freight-absorption pricing, and FOB factory pricing) are types of geographic pricing strategies. These strategies vary in how they handle shipping costs and pricing based on the customer's location relative to the seller or manufacturer.

Question 4

The FOB in the term FOB factory pricing is an acronym for:

Accepted Answer

"Free on board" is the correct definition of FOB. It means that the seller delivers the goods to a specified location (usually a port), and the buyer is responsible for shipping costs from that point forward.

Question 5

When a seller uses FOB factory pricing,:

Accepted Answer

FOB (Free On Board) factory pricing means that the buyer is responsible for all freight charges from the seller's factory or warehouse. This implies that the buyer pays for the transportation of the goods, not the seller.

Question 6

Grainger is a large wholesaler of industrial and commercial equipment, component, and supplies. If the purchase order is for more than $800, the buyer must pay all shipping costs before Grainger will ship the item. This is an example of:

Accepted Answer

FOB (Free On Board) factory pricing means the buyer is responsible for the shipping costs from the factory. In this scenario, since the buyer must pay all shipping costs for orders over $800 before Grainger will ship the item, it aligns with the concept of FOB factory pricing, where the buyer takes responsibility for the goods once they leave the seller's premises.

Question 7

In which of the following geographic pricing strategies does the seller pay no freight charges?

Accepted Answer

In FOB (Free On Board) factory pricing, the buyer is responsible for the freight costs, meaning the seller pays no freight charges. The buyer takes ownership of the goods once they are shipped, and is responsible for the freight and any damages during transportation.

Question 8

Yesterday Civil War Press in Virginia shipped 112 paperback books to a retailer in East Tennessee, 54 paperback books to a retailer in Florida, and 9 paperback books to a customer in North Carolina, yet Civil War Press paid no freight charges. Each of the book purchasers paid the freight on their orders. Which geographic pricing strategy did Civil War Press use?

Accepted Answer

Civil War Press used FOB (Free On Board) factory pricing, where the buyer pays the freight from the factory or warehouse, indicating that the cost of delivery is not included in the price of the goods.

Question 9

With which geographic pricing strategy is the seller likely to have the lowest freight expense?

Accepted Answer

FOB (Free On Board) factory pricing means the buyer pays for transportation of the goods from the factory, so the seller has no freight expense.

Question 10

_____ is sometimes referred to as "postage stamp pricing."

Accepted Answer

Uniform delivered pricing, also known as "postage stamp pricing," involves charging all buyers the same price for shipping, regardless of their actual distance from the shipping point. This method simplifies the pricing structure, much like how postage stamps cost the same regardless of the delivery distance within a country.

Question 11

_____ pricing is typically used where freight costs are a small part of the seller's total costs.

Accepted Answer

The answer of _____ pricing is typically used where freight...

Question 12

Critics of FOB factory pricing are usually in favor of:

Accepted Answer

The answer of Critics of FOB factory pricing are usually...

Question 13

Critics of FOB factory pricing are usually in favor of uniform delivered pricing because:

Accepted Answer

They believe freight costs should not be charged separately to customers any more than any other single marketing or production expense.

Question 14

_____ is similar to the distance-based pricing used by package-delivery services, such as FedEx.

Accepted Answer

Zone-delivered pricing is similar to the distance-based pricing used by package-delivery services like FedEx, where the price varies based on the geographic location of the customer.

Question 15

Liz saw an ad in a New Jersey newspaper for a book guaranteed to reduce stress. In the ad, she read that the price of the book was slightly higher west of the Mississippi River. This price differential is due to:

Accepted Answer

Zone-delivered pricing is a strategy where the price of a product varies depending on the geographical location of the buyer. The price difference mentioned in the ad, being higher west of the Mississippi River, is indicative of zone-delivered pricing, where transportation costs or market strategies lead to different prices in different regions.

Question 16

Robbie lives in Alaska and is a frequent buyer of science fiction books from an Internet site. Robbie's brother who lives in South Carolina also buys science fiction books at the same site. Both brothers typically buy six books per month, and Robbie usually pays about $3 more for UPS shipping than his brother. The price differential is most likely due to:

Accepted Answer

The price differential in shipping costs between Robbie in Alaska and his brother in South Carolina is most likely due to distance-based pricing. This means that the further the distance the package has to travel, the more it will cost to ship. Since Alaska is much farther from most shipping centers compared to South Carolina, it costs more to ship items there.

Question 17

One of the major difficulties of zone-delivered pricing is determining zone boundaries:

Accepted Answer

Zone-delivered pricing can lead to challenges in setting boundaries that do not result in illegal price discrimination. This involves ensuring that pricing strategies do not unfairly disadvantage or advantage customers in different zones based on arbitrary or discriminatory criteria.

Question 18

_____ pricing may be adopted to offset the competitive disadvantages of FOB factory pricing.

Accepted Answer

Freight-absorption pricing is used to offset competitive disadvantages by absorbing some or all of the freight costs, making the delivered price more competitive.

Question 19

In order to offset the competitive disadvantage of FOB factory pricing, Tate Marble Company in Georgia could use _____ pricing to ship its products to building contractors and furniture restorers in any part of the United States.

Accepted Answer

Freight-absorption pricing allows the seller to absorb some or all of the freight charges to reduce the delivered price to the customer, helping to offset competitive disadvantages related to shipping costs.

Question 20

A beef-processing company that has excess capacity and high fixed costs will most likely use _____ pricing.

Accepted Answer

Freight-absorption pricing is a strategy where a company absorbs some or all of the shipping costs to make its products' price more attractive to distant customers. This approach is particularly beneficial for a company with excess capacity and high fixed costs, as it helps to increase sales volume by making products more competitively priced in markets that are further away.

Quiz 13: Pricing Strategies

Under the Robinson-Patman Act, price differentials may be allowed if:

Under the Robinson-Patman Act, price differentials may be allowed if:

Which of the following is a type of geographic pricing strategy?

The FOB in the term FOB factory pricing is an acronym for:

When a seller uses FOB factory pricing,:

Grainger is a large wholesaler of industrial and commercial equipment, component, and supplies. If the purchase order is for more than $800, the buyer must pay all shipping costs before Grainger will ship the item. This is an example of:

In which of the following geographic pricing strategies does the seller pay no freight charges?

With which geographic pricing strategy is the seller likely to have the lowest freight expense?

_____ is sometimes referred to as "postage stamp pricing."

_____ pricing is typically used where freight costs are a small part of the seller's total costs.

Critics of FOB factory pricing are usually in favor of:

Critics of FOB factory pricing are usually in favor of uniform delivered pricing because:

_____ is similar to the distance-based pricing used by package-delivery services, such as FedEx.

Liz saw an ad in a New Jersey newspaper for a book guaranteed to reduce stress. In the ad, she read that the price of the book was slightly higher west of the Mississippi River. This price differential is due to:

One of the major difficulties of zone-delivered pricing is determining zone boundaries:

_____ pricing may be adopted to offset the competitive disadvantages of FOB factory pricing.

In order to offset the competitive disadvantage of FOB factory pricing, Tate Marble Company in Georgia could use _____ pricing to ship its products to building contractors and furniture restorers in any part of the United States.

A beef-processing company that has excess capacity and high fixed costs will most likely use _____ pricing.