Question 1

Price fixing refers to

Accepted Answer

Price fixing is a form of collusion among firms in which they conspire to set prices for a product, typically to eliminate competition and increase profits. It involves an agreement between two or more competing firms to charge the same price or to coordinate their prices. This practice is illegal in many countries, including the United States, and can result in significant fines and other penalties.

Question 2

After extensive analysis, a mail order company has decided to embark on a policy of multiple-zone pricing. In which step of the price-setting process would the mail order firm have made this decision?

Accepted Answer

The answer of After extensive analysis, a mail order company...

Question 3

Selecting one or more geographical locations from which the list price for products plus freight expenses are charged to the buyer is referred to as

Accepted Answer

Basing-point pricing involves selecting one or more geographical locations (basing points) from which the list price for products plus freight expenses are charged to the buyer. The cost of transportation from the basing point to the buyer's location is also added to the price. This method was common in the past but is now less common due to advancements in transportation and communication technology.

Question 4

For which of the following products is its manufacturer most likely to use basing-point pricing?

Accepted Answer

Basing-point pricing is commonly used for products that are heavy and expensive to transport, such as coal. The price of the product is set at a base point (usually the location of the manufacturer or distributor) and transportation costs are added based on the distance from the base point to the customer.

Question 5

Five pricing practices are scrutinized because of potential unethical or illegal actions. They are (1) price fixing, (2) price discrimination, (3) deceptive pricing, (4) predatory pricing, and (5) __________.

Accepted Answer

Geographical pricing can be scrutinized for potential unethical or illegal actions as it involves setting different prices for the same product in different locations, which can lead to unfair competition or exploitation of certain markets.

Question 6

Five pricing practices are scrutinized because of potential unethical or illegal actions. They are (1) price fixing, (2) price discrimination, (3) deceptive pricing, (4) geographical pricing, and (5) __________.

Accepted Answer

The fifth pricing practice that is scrutinized due to potential unethical or illegal actions is predatory pricing, which occurs when a company sets prices unreasonably low to drive competitors out of the market and then raises the prices once the competition is eliminated. This practice is viewed as anti-competitive behavior and is prohibited by antitrust laws.

Question 7

A conspiracy among firms to set prices for a product is referred to as

Accepted Answer

Price fixing refers to firms conspiring to set prices for a product, usually at an artificially high level, which reduces competition and harms consumers. Price discrimination is when firms charge different prices to different customers for the same product. Predatory pricing is when a firm sets prices very low, with the intention of driving competitors out of business, before raising prices again once it has a monopoly. Tying arrangements and exclusive dealing refer to agreements between firms regarding the sale or distribution of products, but not to price setting.

Question 8

Which of the following statements about geographical adjustments to price is most accurate?

Accepted Answer

Basing-point pricing methods have been used in industries where freight expenses are a significant part of the total cost to the buyer. The other statements are inaccurate. In FOB origin pricing, the seller does not necessarily select the mode of transportation. In FOB with freight-allowed pricing, the seller is not required to pay for all transportation costs. Multiple-zone pricing is not referred to as "spider web" pricing. Geographical adjustments can be subject to government regulation even if the seller provides objective data.

Question 9

Another name for freight-absorption pricing is

Accepted Answer

Freight-absorption pricing is also known as FOB with freight-allowed pricing, where the seller absorbs all or part of the freight charges to attract more customers.

Question 10

Price fixing is illegal per se under the Sherman Act. What does per se mean?

Accepted Answer

"Per se" in this context means that price-fixing is inherently illegal and does not require proof of anti-competitive effects or intent. It is illegal in and of itself, without exception.

Question 11

Five pricing practices are scrutinized because of potential unethical or illegal actions. They are (1) predatory pricing, (2) price discrimination, (3) deceptive pricing, (4) geographical pricing, and (5) __________.

Accepted Answer

The answer choices for this question are a bit confusing as they include price discrimination twice. However, the fifth pricing practice that is typically scrutinized is not price discrimination (which was already listed as the second option) but rather price fixing. Price fixing is when two or more competitors agree to set prices at a certain level, which is illegal and unethical as it eliminates competition and can lead to higher prices for consumers.

Question 12

Multiple-zone pricing refers to

Accepted Answer

Multiple-zone pricing refers to a firm's division of its selling territory into geographic areas or zones. The firm charges different prices for the same product in different zones based on factors such as demand, competition, and transportation costs. This pricing strategy is commonly used by companies to maximize profits and remain competitive in different markets.

Question 13

Five pricing practices are scrutinized because of potential unethical or illegal actions. They are (1) price fixing, (2) predatory pricing, (3) deceptive pricing, (4) geographical pricing, and (5) __________.

Accepted Answer

The fifth pricing practice that is scrutinized because of potential unethical or illegal actions is price discrimination. This refers to charging different prices to different customers for the same product or service without any justification. It can be considered unethical or illegal if it is based on characteristics such as race, gender, religion, or nationality. The practice is regulated by antitrust laws to ensure fair competition in the marketplace.

Question 14

Which of the following statements about geographical adjustments to price is most accurate?

Accepted Answer

In FOB with freight-allowed pricing,the buyer subtracts the transportation costs from the list price.This is also called freight absorption pricing.

Question 15

Price fixing is illegal under the

Accepted Answer

Price fixing is considered an anti-competitive practice that violates the Sherman Antitrust Act, which prohibits any form of agreement among competitors that restrains trade or leads to the manipulation of prices. This act was enacted in 1890 and is the cornerstone of U.S. antitrust law. The other acts mentioned may also have provisions related to price fixing, but the Sherman Act is the primary law that covers this practice.

Question 16

Basing-point pricing refers to

Accepted Answer

The answer of Basing-point pricing refers to
...

Question 17

A pricing strategy where the buyer is allowed to deduct freight expenses from the list price of the goods so the seller pays the transportation costs is referred to as

Accepted Answer

FOB with freight-allowed pricing is the only choice that accurately describes this pricing strategy. FOB stands for "free on board" and refers to the point at which ownership and responsibility for the goods transfers from the seller to the buyer. With FOB with freight-allowed pricing, the seller agrees to pay for the transportation costs and allows the buyer to deduct those costs from the list price of the goods. This can be advantageous for both the buyer and seller, as it allows the seller to offer a competitive list price while still covering transportation costs, and it allows the buyer to save money on transportation expenses. The other choices listed do not accurately describe this pricing strategy.

Question 18

A company in Virginia that manufactures and sells peanut brittle to retailers charges higher shipping costs for orders sent to customers living west of the Mississippi River. This Virginia company is using

Accepted Answer

The Virginia company is using multiple-zone pricing because they are charging different shipping costs based on the geographic location of the customer (west of the Mississippi River). Single-zone pricing would charge the same shipping cost regardless of location, FOB origin pricing would only apply to the cost of getting the product to the carrier, freight absorption pricing would involve the company absorbing all shipping costs, and basing-point pricing would involve using a specific geographic location to determine transportation costs.

Question 19

Five pricing practices are scrutinized because of potential unethical or illegal actions. They are (1) price fixing, (2) price discrimination, (3) predatory pricing, (4) geographical pricing, and (5) __________.

Accepted Answer

Deceptive pricing is the fifth pricing practice that is scrutinized because it can be considered unethical or illegal. This includes false advertising, misleading sales tactics, and other deceptive practices aimed at tricking consumers into paying more than they should.

Question 20

When a firm divides its selling territory into geographic areas, it is referred to as

Accepted Answer

The answer of When a firm divides its selling territory...

Quiz 14: Arriving at the Final Price

Price fixing refers to

After extensive analysis, a mail order company has decided to embark on a policy of multiple-zone pricing. In which step of the price-setting process would the mail order firm have made this decision?

Selecting one or more geographical locations from which the list price for products plus freight expenses are charged to the buyer is referred to as

For which of the following products is its manufacturer most likely to use basing-point pricing?

Five pricing practices are scrutinized because of potential unethical or illegal actions. They are (1) price fixing, (2) price discrimination, (3) deceptive pricing, (4) predatory pricing, and (5) __________.

Five pricing practices are scrutinized because of potential unethical or illegal actions. They are (1) price fixing, (2) price discrimination, (3) deceptive pricing, (4) geographical pricing, and (5) __________.

A conspiracy among firms to set prices for a product is referred to as

Which of the following statements about geographical adjustments to price is most accurate?

Another name for freight-absorption pricing is

Price fixing is illegal per se under the Sherman Act. What does per se mean?

Five pricing practices are scrutinized because of potential unethical or illegal actions. They are (1) predatory pricing, (2) price discrimination, (3) deceptive pricing, (4) geographical pricing, and (5) __________.

Multiple-zone pricing refers to

Five pricing practices are scrutinized because of potential unethical or illegal actions. They are (1) price fixing, (2) predatory pricing, (3) deceptive pricing, (4) geographical pricing, and (5) __________.

Which of the following statements about geographical adjustments to price is most accurate?

Price fixing is illegal under the

Basing-point pricing refers to

A pricing strategy where the buyer is allowed to deduct freight expenses from the list price of the goods so the seller pays the transportation costs is referred to as

A company in Virginia that manufactures and sells peanut brittle to retailers charges higher shipping costs for orders sent to customers living west of the Mississippi River. This Virginia company is using

Five pricing practices are scrutinized because of potential unethical or illegal actions. They are (1) price fixing, (2) price discrimination, (3) predatory pricing, (4) geographical pricing, and (5) __________.

When a firm divides its selling territory into geographic areas, it is referred to as