Question 1

Which of the following pricing strategies can the manager of the Roast 'n Brew coffeehouse follow if she believes the store should have a status quo-oriented goal?

Accepted Answer

A status quo-oriented pricing goal focuses on maintaining existing prices to stabilize market share and meet the competition without rocking the boat. Pricing coffee at the same price as competition (A) aligns with this goal by avoiding price wars and not aggressively seeking to increase market share or profits, which would be implied by the other options.

Question 2

Which of the following sayings best reflects the philosophy of small manufacturers in industries that typically use a price stabilization goal?

Accepted Answer

"Follow the leader" best reflects the philosophy of small manufacturers in industries that typically use a price stabilization goal. These manufacturers often set their prices based on the prices established by the dominant or leading firms in the industry, rather than trying to undercut or significantly outprice competitors.

Question 3

A company in Singapore produces more ornamental fish than any other company in the world--nearly one-third of the world's pet guppies, tetras, goldfish, mollies, and other species. Small producers of tropical fish in other parts of the world would more than likely use a _____ pricing strategy.

Accepted Answer

Small producers of tropical fish in other parts of the world, competing against a dominant company like the one described, would likely use a status quo-oriented pricing strategy. This approach aims to maintain existing market conditions and avoid price wars by setting prices similar to the competition, in this case, the leading company in Singapore.

Question 4

Which of the following organizations would be most likely to adopt a price stabilization goal?

Accepted Answer

A company that manufactures chlorine in bulk would be most likely to adopt a price stabilization goal due to the commodity nature of its product. Commodities like chlorine often have prices that are subject to fluctuations based on market conditions, and companies may seek to stabilize prices to manage supply chain expectations and maintain consistent revenue streams.

Question 5

Concrete is a highly standardized product. What kind of pricing strategy would you expect companies that manufacture concrete to use?

Accepted Answer

Status quo-oriented pricing strategy is common in industries where products are highly standardized, like concrete. Companies aim to match competitors' prices to avoid price wars, focusing on maintaining market share rather than on price manipulation.

Question 6

A major reason for using price stabilization as a pricing goal is to:

Accepted Answer

Price stabilization aims to maintain consistent prices to avoid price wars and intense competition, which can erode profits and market stability.

Question 7

The price of one unit of product at its point of production or resale is its _____ price.

Accepted Answer

The price of one unit of product at its point of production or resale is referred to as its base price. This is the initial cost before any discounts, taxes, or additional charges are applied.

Question 8

A product's base price is also called its _____ price.

Accepted Answer

The base price of a product is commonly referred to as its list price, which is the price before any discounts, rebates, or special offers are applied.

Question 9

The base price for a dishwasher:

Accepted Answer

The base price of a dishwasher refers to its cost at the point of production or resale, not including additional charges, discounts, or allowances that might apply later in the distribution process.

Question 10

The cost of a case of computer paper sold to a retailer is $20. It costs $2 to ship the paper. If more than two boxes are purchased, the price per case is reduced by 5 percent. If the reseller engages in co-op advertising with the producer of the paper, there is an additional one percent discount. What is the base price of a case of computer paper?

Accepted Answer

The base price of a case of computer paper is given as $20. The additional costs and discounts mentioned (shipping, volume discount, co-op advertising discount) are applied after this base price, so they do not affect the base price itself.

Question 11

The base price of a product:

Accepted Answer

The base price of a product is its list price, which is the initial price set by the seller before any discounts, taxes, or additional fees are applied.

Question 12

Before Anthony went to the hardware store to buy a pair of fire-resistant gloves, his son asked him how much the gloves should cost. Anthony responded, "I think they should cost between $18 and $25." Between $18 and $25 is the:

Accepted Answer

The expected price is the price range that a consumer, in this case, Anthony, anticipates or believes is reasonable for a product before making a purchase. Anthony's statement about the gloves costing between $18 and $25 reflects his expectation of their price, not their elasticity, cost-plus pricing, marginal price, or inelasticity point.

Question 13

A bottle of Glenfiddich whisky that costs $21 in Germany, costs $35 in Denmark, $43 in Sweden, and $55 in Norway. The Scandinavian countries clamped down on liquor consumption after almost endemic abuse during the 19thcentury when the average Swede consumed 46 liters a year. It is not unusual for people to travel eight hours from Stockholm to Germany to stock up on beer, wine, and other spirits. The Scandinavian countries are uninterested in the _____ when setting prices.

Accepted Answer

The answer of A bottle of Glenfiddich whisky that costs...

Question 14

Dom Lucian makes decorated lamp shades, which he has tried to sell in a variety of locations. He was initially concerned that the lamp shades should not be priced too high because he wanted to have as many people as possible have the ability to buy and enjoy one of his creative lamp shades. When he decided to increase his price by 60 percent so he could pay his own living expenses, demand for his lamp shades increased drastically. Lucian learned that people are not interested in buying designer items unless the price is high enough to indicate quality or rarity. Lucian had ignored the issue of _____ when setting his initial price.

Accepted Answer

Lucian ignored the "expected price," which refers to the price consumers anticipate for a product based on its perceived quality or rarity. By initially setting a low price, he did not meet consumer expectations for a designer item, which changed when he increased the price.

Question 15

Dreyer's is a manufacturer of over 100 flavors of ice cream-many of them indulgent, chunky flavors. Due to the increase of the costs of ingredients, Dreyer's has reduced the size of its ice cream cartons to 1¾ quarts so that it can still charge $5 for a carton of ice cream. Dreyer's perceived this $5 to be the _____ for a carton of ice cream.

Accepted Answer

Dreyer's perceived the $5 as the expected price, which is the price consumers are willing to pay for a carton of ice cream without changing their purchasing behavior.

Question 16

After Tina got highlights put in her hair, she reached in her wallet and handed the hair stylist a $50 bill. In the town where she used to live, fifty dollars would have paid for the highlights, tipped the stylist handsomely, and gotten her $5 in change. She was very much surprised when the stylist asked her for another $10. Patrice's _____ differed from the actual price.

Accepted Answer

Patrice's expected price differed from the actual price, indicating she anticipated the service to cost less based on her previous experiences.

Question 17

K-Block cooking charts are poster-sized recipes designed to encourage children to cook. Before marketing the easy-to-use kid's recipes, its inventor asked parents how much they would pay for a package of four recipe cards for their children. K-Block's inventor was trying to determine the _____ for her product.

Accepted Answer

The inventor was trying to determine the expected price for her product by asking parents how much they would pay, which helps in setting a price that potential customers are willing to pay.

Question 18

Which of the following statements about inverse demand is True?

Accepted Answer

The answer of Which of the following statements about inverse...

Question 19

_____ occurs when customers infer that an item is of a better quality because it is priced higher.

Accepted Answer

Inverse demand occurs when customers perceive higher-priced items as being of better quality, leading them to infer value based on price.

Question 20

Dom Lucia makes decorated lamp shades, which he has tried to sell in a variety of locations. He was initially concerned that the lamp shades should not be priced too high because he wanted to have as many people as possible have the ability to buy and enjoy one of his creative lamp shades. When he decided to increase his price by 60 percent so he could pay his own living expenses, demand for his lamp shades increased drastically. Inadvertently, Lucia learned that his lamp shades had:

Accepted Answer

Lucia's experience demonstrates the concept of inverse demand, where increasing the price led to an increase in demand, contrary to the usual expectation that demand decreases as prices rise. This can happen when higher prices are perceived as indicating higher quality or exclusivity.

Quiz 12: Price Determination