Question 1

Consumers use price less to judge the quality of a product when they ________.
A)lack information
B)lack skills to use the product
C)have experience with the product
D)are shopping for a specialty item
E)cannot physically examine the product

Accepted Answer

Consumers who have experience with a product are less likely to use price as an indicator of quality because their experience gives them other criteria to judge the product's quality.

Question 2

Which of the following is a reason for a company to raise its prices?
A)to balance out cost increases
B)to win a larger share of the market
C)to use excess capacity
D)to boost sales volume
E)to balance out decreasing costs

Accepted Answer

Raising prices is often a response to increasing costs, including costs of raw materials, labor, and overhead. By raising prices, companies can offset these cost increases and maintain profit margins.

Question 3

Under which type of geographic pricing strategy does each customer pay the exact freight for the product from the factory to its destination?
A)basing-point pricing
B)freight-absorption pricing
C)FOB-origin pricing
D)dynamic pricing
E)zone pricing

Accepted Answer

FOB-origin pricing involves the customer paying the exact freight for the product from the factory to its destination. This pricing strategy is most commonly used for larger shipments and the customer is responsible for arranging the transportation and paying the freight charges.

Question 4

The Internet offers ________, where the price can easily be adjusted to meet changes in demand.
A)captive pricing
B)dynamic pricing
C)basing-point pricing
D)price bundling
E)cost-plus pricing

Accepted Answer

Dynamic pricing is a pricing strategy where prices can easily be adjusted to meet changes in demand. The Internet provides an ideal platform for dynamic pricing as changes in consumer demand and market conditions can be quickly and easily monitored and pricing adjusted accordingly.

Question 5

What type of pricing is being used when a company temporarily prices its product below the list price or even below cost to create buying excitement and urgency?
A)segmented pricing
B)psychological pricing
C)referent pricing
D)promotional pricing
E)dynamic pricing

Accepted Answer

Promotional pricing is a strategy in which a company temporarily reduces the price of its product or service to create buying excitement and urgency. This type of pricing is often used during sales or special promotions to attract customers and increase sales volume. By offering a lower price, the company hopes to convince customers to make a purchase they might not have made otherwise. This strategy can be effective in generating short-term sales, but it is not sustainable as a long-term pricing strategy.

Question 6

In Lima, Peru, 20 stores specializing in selling the same quality and brand of wheat products are located on one street. An individual seller cannot charge more than the going price without the risk of losing business to the other stores. This is an example of what type of market?
A)pure competition
B)monopolistic competition
C)oligopolistic competition
D)pure monopoly
E)socialist

Accepted Answer

This scenario is an example of pure competition, where there are many sellers offering identical products, and no single seller can influence the market price.

Question 7

General Motors prices its automobiles to achieve a 15 to 20 percent profit on its investment. This approach is called ________.
A)value-based pricing
B)going-rate pricing
C)cost-plus pricing
D)low-price image
E)target return pricing

Accepted Answer

Target return pricing is a pricing strategy where a firm sets prices to achieve a specific return on its investment, which aligns with General Motors aiming for a 15 to 20 percent profit on its investment.

Question 8

The Competition Act is the federal law that was enacted to curb the formation of ________.
A)unfair competition
B)oligopolies
C)competitive markets
D)international markets
E)limited partnerships

Accepted Answer

The Competition Act is designed to prevent unfair competition practices, such as monopolies and anti-competitive mergers, to ensure fair competition in the marketplace.

Question 9

When a manufacturer offers a ________, customers buy products from manufacturers' dealers within a specified time period and the manufacturer sends the customer a check.
A)cash rebate
B)special event price
C)dealer reduction
D)promotional pricing reward
E)discount allowance

Accepted Answer

A cash rebate is a type of promotion in which a manufacturer offers a certain amount of money back to customers who purchase their products within a specified time period. This type of promotion encourages customers to buy products from the manufacturer's dealers and can help increase sales.

Question 10

Which of the following is likely to be the least effective action that a company can take to combat a competitor's price cut on a product?
A)reduce price
B)raise perceived value
C)improve quality and increase price
D)bundle products together
E)launch a low-price "fighting brand"

Accepted Answer

The answer of Which of the following is likely to...

Question 11

Price escalation in international markets is most likely to result from the higher costs of selling in another country and differences in market conditions or ________.
A)cultural preferences
B)selling strategies
C)regional tastes
D)customer perceptions
E)language barriers

Accepted Answer

The answer of Price escalation in international markets is most...

Question 12

Which of the following is a poor reason for a company to initiate a price cut?
A)to boost sales
B)to obtain prestige
C)to dominate the market
D)to relieve excess capacity
E)to influence falling demand

Accepted Answer

Initiating a price cut to obtain prestige is not a valid reason because price cuts are typically associated with providing value to customers, and not with improving the company's reputation or status. Prestige is more likely to be achieved through other means such as superior quality, innovative products or exceptional customer service.

Question 13

Which of the following is the opposite of FOB-origin pricing?
A)basing-point pricing
B)absorption pricing
C)uniform-delivered pricing
D)freight-absorption pricing
E)zone pricing

Accepted Answer

FOB-origin pricing means that the buyer is responsible for all transportation costs from the seller's location. The opposite of this would be uniform-delivered pricing, where the seller includes transportation costs in the price of the product and delivers it to the buyer's location at a fixed price. Basing-point pricing, absorption pricing, freight-absorption pricing, and zone pricing are not direct opposites of FOB-origin pricing.

Question 14

Federal legislation on price-fixing requires that sellers set their prices ________.
A)based on their fixed and variable costs
B)without communication with competitors
C)to achieve a specified profit margin
D)with the intention of putting competitors out of business
E)consistently throughout a region

Accepted Answer

Federal legislation on price-fixing prohibits sellers from communicating with competitors to set prices, as this would eliminate competition and violate antitrust laws. Prices should be determined based on legitimate factors such as costs, market demand, and competitive pressures, but not through collusion or coordination with other companies.

Question 15

________ prices are the prices that buyers carry in their mind and refers to when looking at a given product.
A)Psychological
B)Reference
C)Promotional
D)Geographical
E)Dynamic

Accepted Answer

Reference prices are the prices that consumers have in mind or expect to pay for a product, which they use as a basis for comparison when they encounter the actual price of the product.

Question 16

Xbox 360 decides to add a free subscription to XBOX magazine with every game bought in an effort to differentiate its offering from PS3 games. This is an example of ________.
A)good-value pricing
B)add-on pricing
C)product-support pricing
D)value-added pricing
E)cost-based pricing

Accepted Answer

This is an example of value-added pricing, as Xbox 360 is adding value to the offering by providing a free subscription to XBOX magazine with every game purchased.

Question 17

In a monopolistic competitive market, a company might decide to ________ if only one competitor raises its prices.
A)reduce its production costs
B)reduce its marketing costs
C)maintain its current price and profit margin
D)increase its marketing budget to raise the perceived value of its product
E)increase its production costs to improve the quality of the product

Accepted Answer

In a monopolistic competitive market, each company has control over the price it charges for its product. If one competitor raises its prices, the other companies can choose to maintain their current price and profit margin, which can attract more customers away from the higher priced competitor. This strategy can help the company gain a larger market share and increase its profit. Reducing production or marketing costs or increasing marketing budget or production costs may not necessarily be the best strategy in response to a competitor's price increase.

Question 18

Price discrimination is legal under which of the following conditions?
A)when a manufacturer and reseller have agreed upon a specified retail price for a product
B)when a manufacturer sells to retailers in different markets
C)if a seller can prove its costs per unit are different when selling to different retailers
D)if a seller advertises prices that are not actually available to consumers
E)if a seller has not communicated with competitors before announcing prices

Accepted Answer

Price discrimination is legal when a seller can prove that their costs per unit are different when selling to different retailers. This is known as cost-based discrimination, and it is generally considered to be fair and reasonable.

Question 19

A company faces fixed costs of $100,000 and variable costs of $8.00/unit. They plan to directly sell their product to the market for $12.00. How many units must they produce and sell to break even?
A)20,000
B)25,000
C)40,000
D)50,000
E)not enough information to calculate

Accepted Answer

The answer of A company faces fixed costs of $100,000...

Question 20

Swatch surveyed the market and identified an unserved segment of watch buyers. Using these results, they created a watch at a price consumers were willing to pay. The unorthodox order of this marketing mix decision is an example of ________.
A)competition-based pricing
B)cost-plus pricing
C)target costing
D)value-based pricing
E)penetration pricing

Accepted Answer

Target costing involves first determining the price consumers are willing to pay and then designing a product that can be profitably made at that price, which is the approach described.

Quiz 10: Pricing: Understanding and Capturing Customer Value

Consumers use price less to judge the quality of a product when they ________.

Which of the following is a reason for a company to raise its prices?

Under which type of geographic pricing strategy does each customer pay the exact freight for the product from the factory to its destination?

The Internet offers ________, where the price can easily be adjusted to meet changes in demand.

What type of pricing is being used when a company temporarily prices its product below the list price or even below cost to create buying excitement and urgency?

In Lima, Peru, 20 stores specializing in selling the same quality and brand of wheat products are located on one street. An individual seller cannot charge more than the going price without the risk of losing business to the other stores. This is an example of what type of market?

General Motors prices its automobiles to achieve a 15 to 20 percent profit on its investment. This approach is called ________.

The Competition Act is the federal law that was enacted to curb the formation of ________.

When a manufacturer offers a ________, customers buy products from manufacturers' dealers within a specified time period and the manufacturer sends the customer a check.

Which of the following is likely to be the least effective action that a company can take to combat a competitor's price cut on a product?

Price escalation in international markets is most likely to result from the higher costs of selling in another country and differences in market conditions or ________.

Which of the following is a poor reason for a company to initiate a price cut?

Which of the following is the opposite of FOB-origin pricing?

Federal legislation on price-fixing requires that sellers set their prices ________.

________ prices are the prices that buyers carry in their mind and refers to when looking at a given product.

Xbox 360 decides to add a free subscription to XBOX magazine with every game bought in an effort to differentiate its offering from PS3 games. This is an example of ________.

In a monopolistic competitive market, a company might decide to ________ if only one competitor raises its prices.

Price discrimination is legal under which of the following conditions?

A company faces fixed costs of $100,000 and variable costs of $8.00/unit. They plan to directly sell their product to the market for $12.00. How many units must they produce and sell to break even?

Swatch surveyed the market and identified an unserved segment of watch buyers. Using these results, they created a watch at a price consumers were willing to pay. The unorthodox order of this marketing mix decision is an example of ________.