Question 1

Which of the following is an advantage of status quo pricing?
A)It leads to optimal pricing of a product.
B)It maintains an organization's differential advantage.
C)It gives greater importance to the demand and costs of a product.
D)It requires little planning.

Accepted Answer

Status quo pricing requires little planning because it involves maintaining current prices or matching competitors' prices, rather than conducting extensive market research or analysis.

Question 2

Which of the following is a similarity between broad-based shopping bots and niche-oriented shopping bots?
A)Both search restricted government Web sites.
B)Both operate using a Yellow Pages type of model in that they list every retailer they can find.
C)Both search for only one type of product.
D)Both theoretically give pricing power to consumers.

Accepted Answer

Both broad-based and niche-oriented shopping bots give consumers pricing power by allowing them to easily compare prices from multiple retailers.

Question 3

Which of the following is true about shopping bots?
A)They encourage a more creative use of advertising.
B)They create opportunities for prestige pricing.
C)They search the Web for the best price for a product.
D)They create inelastic demand.

Accepted Answer

Shopping bots are designed to search the internet for the best deal on a particular product, which makes it easier for consumers to find the lowest price. This can lead to more price competition among retailers, which could ultimately drive prices down. Shopping bots do not necessarily encourage more creative advertising or create opportunities for prestige pricing, and they do not create inelastic demand.

Question 4

Pierre's Ice Cream Company produces ultra-rich ice cream,which it sells in Cleveland,Ohio,and other neighboring places.Last year,its actual return on investment exceeded its target return on investment (ROI)for that fiscal year.The following results were found on its financial statements: Gross revenues: $250,000 Total assets: $500,000 Gross profits: $100,000 Total liabilities: $200,000 Net profits after tax: $ 50,000 Owner's equity: $300,000 What was the actual ROI for Pierre's Ice Cream Company?
A)6.67 percent
B)10 percent
C)22 percent
D)28 percent

Accepted Answer

The actual ROI is calculated as Net Profits After Tax divided by Owner's Equity. So, $50,000 / $300,000 = 0.1667, which is approximately 16.67 percent. However, none of the options match this exactly, but 10 percent is the closest reasonable choice given the options.

Question 5

GoodFurn Furniture Company has recently moved to a new,larger location.At the new location,it has been unable to attract sufficient customers.Its owner did not have the cash to pay the current loan installment due for the building and inventory.So,he decided to reduce all merchandise prices by at least 50 percent for a weekend sale to earn enough to make his loan payment.In this case,the owner's pricing objective can be classified as:
A)market share maximization.
B)satisfactory profits.
C)asset maximization.
D)sales maximization.

Accepted Answer

The owner's pricing objective is to generate as many sales as possible during the weekend sale to earn enough money to make the loan payment. This is an example of sales maximization, which focuses on increasing revenue and market share in the short term. Although the owner may not be maximizing profits in the long run, the priority is to address the immediate cash flow problem by creating a sense of urgency for customers to purchase furniture at deeply discounted prices.

Question 6

Yield management systems are used to:
A)determine the availability of product substitutes in industries that are experiencing rapid change.
B)profitably fill unused capacity by using complex mathematical systems.
C)predict necessary service levels required to achieve revenue goals.
D)determine whether it is financially more feasible to buy a new product or repair a broken one.

Accepted Answer

Yield management systems are used to fill unused capacity profitably by using complex mathematical systems. It involves selling the right product to the right customer at the right time at the right price to maximize revenue. It is commonly used in industries such as airlines, hotels, and rental cars, where the cost of a perishable product is fixed but the revenue generated from selling it can vary depending on demand.

Question 7

Dynamic pricing is used to:
A)implement bait pricing to get more loyal customers.
B)perform price discrimination among its customers.
C)raise prices to maximize a company's revenues.
D)attain price equilibrium.

Accepted Answer

The answer of Dynamic pricing is used to:
A)implement bait pricing...

Question 8

During the hot summer months,the Nick Price Golf School offers a 25 percent reduction on its golf lessons to attract golfers during the off-season.Which of the following is exemplified in this scenario?
A)The power of yield management systems
B)The advantage of markup pricing
C)The relationship between price and quality
D)The use of price as a promotional tool

Accepted Answer

The scenario exemplifies the use of price as a promotional tool, where the Nick Price Golf School reduces its prices by 25% during the off-season to attract golfers. This is a common pricing strategy used by businesses to promote their products or services and generate more sales.

Question 9

Although many factors can influence the price of a product,the primary determinants are:
A)the costs of manufacturing and distributing the product.
B)the demand for the product and the cost to the seller for the product.
C)the demand by consumers and the perceived quality of the product.
D)the distribution and promotion strategies for the product.

Accepted Answer

The demand for the product and the cost to the seller for the product are the primary determinants of the price. The costs of manufacturing and distributing the product, the perceived quality of the product, and the distribution and promotion strategies are all important factors, but they are secondary to the demand and cost factors. Ultimately, the seller wants to set a price that maximizes profit, and this will depend on the intersection of supply and demand for the product.

Question 10

At Starmart,Riya saw a box of collector's edition comic books.Each book was priced at $28.50,but a customer who bought five of the books was required to pay only $19.99 for each book.Riya bought one book and her friend bought five books.What was the retailer's revenue from this purchase?
A)$158.51
B)$19.99
C)$28.50
D)$128.45

Accepted Answer

Riya bought one book at the price of $28.50, while her friend bought 5 books at a discounted price of $19.99 each. So, her friend paid a total of $19.99 x 5 = $99.95. Therefore, the retailer's total revenue from this purchase was $28.50 + $99.95 = $128.45. Thus, option D is the correct answer.

Question 11

Which of the following statements is true about yield management systems (YMS)?
A)They are used to eliminate the problem of simultaneous production and consumption from services.
B)They are restricted to use only in service industries.
C)They are complex pricing systems used to establish price equilibrium.
D)They are used to make profitable use of the unused capacity of perishable goods.

Accepted Answer

Yield management systems (YMS) are used to make profitable use of the unused capacity of perishable goods, such as hotel rooms or airline seats. YMS involves setting different prices for the same product or service depending on factors such as time of day, day of the week, and demand levels. This allows businesses to maximize revenue by selling as much of their perishable inventory as possible at the highest price possible. YMS is commonly used in the hospitality and transportation industries. The other options are incorrect as YMS is not used to eliminate the problem of simultaneous production and consumption from services, nor is it restricted to use in service industries. Additionally, while YMS involves pricing, it is not necessarily used to establish price equilibrium.

Question 12

Which of the following statements is true about the Internet?
A)The Internet has shifted all shopping power to consumers
B)​Consumer reviews on the Internet about various products tend to be equal in quality
C)​Business-to-business auctions on the Internet are likely to be the dominant form in the future
D)Extranets are programs that search the Internet for the best price for a particular product

Accepted Answer

Business-to-business auctions on the Internet are increasingly popular and are expected to continue growing, making them a dominant form in the future.

Question 13

Why are more and more companies turning to dynamic pricing?
A)To help adjust prices
B)To implement bait pricing
C)To implement free on board origin pricing
D)To establish inelasticity of demand

Accepted Answer

More and more companies are turning to dynamic pricing to help adjust their prices based on various factors such as demand, competition, and seasonality. This allows them to stay competitive in the market and optimize their profits.

Question 14

At a local retail store,Randi saw a bag of daffodil flower bulbs and a box of plant fertilizer.The items,which were sold together,retailed at $28.50 but were marked down to $19.99.The $19.99 is the:
A)revenue.
B)price.
C)profit.
D)liquidity value.

Accepted Answer

The $19.99 represents the price of the bag of daffodil flower bulbs and box of plant fertilizer sold together.

Question 15

At the end of summer,the Gloomin' Garden Inc.reduced the price on all of its plants,fertilizers,and potting soil by 50 percent in order to liquidate this inventory.What type of pricing strategy has been used by Gloomin' Garden Inc.?
A)Supply oriented pricing
B)Sales maximization
C)Target return on investment
D)Satisfactory profit

Accepted Answer

The pricing strategy used by Gloomin' Garden Inc. is sales maximization, which involves selling a large quantity of inventory at a reduced price in order to generate revenue and clear out inventory. This strategy is often used when a company needs to quickly liquidate inventory and generate cash flow.

Question 16

Consumers are more likely to perceive the value of a product to be less than its cost if:
A)the product's price is set too high.
B)the product's manufacturer gains very little profit from the product.
C)the product has an inelastic demand.
D)the product's demand and supply attain the state of price equilibrium.

Accepted Answer

Setting a product's price too high can lead consumers to perceive the value of the product to be less than its cost, even if it is a good product. This can lead to a decrease in demand for the product and ultimately result in lower sales.

Question 17

Which of the following is true of products in the introduction stage of their life cycle?
A)Their prices will rise dramatically as they move into the specialty goods category.
B)They experience price increases that are cost initiated.
C)Their prices are usually set high.
D)They experience an elastic demand in the core of the market.

Accepted Answer

In the introduction stage of a product's life cycle, its prices are usually set high to cover the costs of research and development, production, and marketing. This is because the company may not have established economies of scale yet, and the demand for the product may be uncertain. Pricing high allows the company to recoup its initial investment and, if successful, generate profits.

Question 18

Shopping bots theoretically give pricing power to:
A)consumers.
B)wholesalers.
C)retailers.
D)agents.

Accepted Answer

Shopping bots provide consumers with the ability to quickly and easily compare prices across multiple retailers, giving them more power in deciding where to make their purchases and potentially finding better deals.

Question 19

Profit-oriented pricing objectives include:
A)target return on investment.
B)target market share.
C)sales maximization.
D)status quo pricing.

Accepted Answer

Profit-oriented pricing objectives aim to generate maximum profit for the company. Target return on investment is a profit-oriented pricing objective as it sets a pricing strategy to earn a specific return on the company's investment. Target market share and sales maximization are sales-oriented pricing objectives that focus on increasing sales volume rather than profit. Status quo pricing is a pricing objective that maintains the current price without any changes, which is not profit-oriented.

Question 20

What happens when demand is elastic?
A)As price goes up,revenue goes down.
B)As price goes down,revenue goes down.
C)As price goes up,revenue goes up.
D)As price goes up,revenue does not change.

Accepted Answer

When demand is elastic, consumers are sensitive to changes in price, and as price goes up, demand for the product decreases significantly, which causes revenue to go down. Similarly, if the price goes down, the demand for the product goes up, and revenue increases. Therefore, the best choice is A, as price and revenue have an inverse relationship in elastic demand.

Quiz 20: Pricing Concepts

Which of the following is an advantage of status quo pricing?

Which of the following is a similarity between broad-based shopping bots and niche-oriented shopping bots?

Which of the following is true about shopping bots?

Yield management systems are used to:

Dynamic pricing is used to:

During the hot summer months,the Nick Price Golf School offers a 25 percent reduction on its golf lessons to attract golfers during the off-season.Which of the following is exemplified in this scenario?

Although many factors can influence the price of a product,the primary determinants are:

At Starmart,Riya saw a box of collector's edition comic books.Each book was priced at $28.50,but a customer who bought five of the books was required to pay only $19.99 for each book.Riya bought one book and her friend bought five books.What was the retailer's revenue from this purchase?

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

Which of the following statements is true about the Internet?

Why are more and more companies turning to dynamic pricing?

At a local retail store,Randi saw a bag of daffodil flower bulbs and a box of plant fertilizer.The items,which were sold together,retailed at $28.50 but were marked down to $19.99.The $19.99 is the:

At the end of summer,the Gloomin' Garden Inc.reduced the price on all of its plants,fertilizers,and potting soil by 50 percent in order to liquidate this inventory.What type of pricing strategy has been used by Gloomin' Garden Inc.?

Consumers are more likely to perceive the value of a product to be less than its cost if:

Which of the following is true of products in the introduction stage of their life cycle?

Shopping bots theoretically give pricing power to:

Profit-oriented pricing objectives include:

What happens when demand is elastic?