Question 1

Cost and competition are the only two factors that have a serious impact upon price.

Accepted Answer

While cost and competition are important factors that can affect price, there are other factors that can also have a serious impact, such as supply and demand, consumer preferences, and changes in technology or regulations. Therefore, it is not accurate to say that cost and competition are the only two factors that matter.

Question 2

In oligopolies,the differential advantages that every firm strives for tends to be permanent.

Accepted Answer

In oligopolies, the differential advantages that firms strive for are often temporary due to the competitive nature of the market, where firms continuously innovate and adapt to maintain or enhance their market position.

Question 3

When substitute products differ in size or quality,there is a likelihood that firms will utilize cost or input formulas for pricing.

Accepted Answer

When substitute products differ in size or quality, firms may use cost or input formulas for pricing in order to compete with one another while maintaining profitability.

Question 4

Products with unique benefits tend to be price elastic.

Accepted Answer

Products with unique benefits or little competition tend to be price inelastic because consumers are willing to pay more for these unique features and have fewer alternative products to choose from.

Question 5

In order to protect the image of its product and its right to make a profit,sellers are allowed to manage reseller prices directly.

Accepted Answer

It is illegal for sellers to set a minimum resale price for their products. This is considered price fixing and violates antitrust laws. Resellers are allowed to set their own prices and compete with each other in the marketplace.

Question 6

Traditionally,the "driver" product of a group of complementary products is priced low to penetrate the market and "set the table" for high margins on the follow-up business of parts,consumables or service.

Accepted Answer

This is a common strategy in marketing where the initial or "driver" product is offered at a lower price to attract customers and establish a market presence. The profit is then made from the sale of complementary products, such as parts, consumables, or services, that have higher margins.

Question 7

It is illegal to use market segmentation as a pricing tool.

Accepted Answer

Market segmentation can be used as a pricing tool as it allows companies to offer different prices to different customer groups based on their willingness to pay, demographics, or other factors. However, there are laws that prohibit discrimination based on certain protected characteristics such as race, gender, and age. It is important for companies to use market segmentation ethically and in compliance with these laws.

Question 8

A supplier's functional discount is given to a purchaser based on the purchaser's role in the supplier's distributive system,reflecting the services performed by the purchaser for the supplier.

Accepted Answer

A supplier's functional discount is indeed based on the services performed by the purchaser for the supplier, such as marketing and promotional activities, product testing, and handling of logistics and inventory management. This discount is meant to incentivize the purchaser to continue providing these services, which are crucial for the supplier's business operations.

Question 9

In the negotiation process,the buyer essentially asks potential suppliers to "give us your best shot."

Accepted Answer

The answer of In the negotiation process,the buyer essentially asks...

Question 10

Lower prices prompt suppliers to hire additional shifts,use overtime,adjust capacity by subcontracting or retooling and employ other measures to boost supply.

Accepted Answer

Lower prices typically discourage suppliers from increasing production because they reduce the potential profit margin, making it less economically viable to hire additional shifts, use overtime, or invest in capacity adjustments.

Question 11

Gross profits or unit margins at certain levels of the channel are expressed as percentages of that organization's unit price or net sales.

Accepted Answer

The answer of Gross profits or unit margins at certain...

Question 12

Generally,the firm will earn its greatest profits at the price and quantity dictated by the intersection of total cost and total revenue.

Accepted Answer

The firm will earn its greatest profits at the quantity where marginal cost equals marginal revenue, not at the intersection of total cost and total revenue.

Question 13

Open bidding recognizes the significant costs of bid preparation.

Accepted Answer

Open bidding typically does not recognize the significant costs of bid preparation, as it focuses on inviting bids from multiple suppliers or contractors to ensure competition and potentially lower prices for the project owner.

Question 14

A supplier is most likely to opt for a push strategy when channel partners must be relied upon for differentiation.

Accepted Answer

With a push strategy, the supplier relies on promotional and sales efforts to push their products onto the market and onto channel partners. This strategy is most effective when differentiation is not necessary or when there is a lack of differentiation among products. In contrast, if channel partners are relied upon for differentiation, a pull strategy may be more effective as it focuses on creating demand for the product among end-users, which in turn motivates channel partners to carry the product.

Question 15

An exclusivity agreement aims to curb interbrand competition.

Accepted Answer

The answer of An exclusivity agreement aims to curb interbrand...

Question 16

At break-even quantity,total revenue equals total cost.

Accepted Answer

At break-even quantity, the total revenue earned by a firm is equal to its total cost. This is because break-even is the point at which the firm is neither making a profit nor incurring a loss, and therefore its revenue covers all its costs.

Question 17

Monopolistic competition is characterized by a large number of differentiated sellers while oligopolies are characterized by just a few sellers.

Accepted Answer

Monopolistic competition is a market structure where there are many firms selling differentiated products. Oligopoly, on the other hand, is a market structure where a few large firms dominate the market.

Question 18

A product can provide value in business markets not only when its invoice price is lower than the competitor's,but also when its performance is superior.

Accepted Answer

In business markets, value is not solely determined by the price of a product. Performance and quality also play a major role in determining the value a product can provide. Therefore, a product with superior performance even at a higher price point can still provide more value to a business than a cheaper but inferior product.

Question 19

Under a pull strategy,advertising is focused on end users in hopes that their requests to outlets would cause them to,in turn,order the product from the chain member "above" them in the channel.

Accepted Answer

A pull strategy involves directing advertising and promotional efforts towards end-users in order to generate demand for a product, with the aim that demand will pull the product through the channel. This is opposed to a push strategy, where promotional efforts are directed towards intermediaries in the channel to push the product towards the end-user.

Question 20

As a result of learning and/or experience,costs tend to decline over time.

Accepted Answer

This phenomenon is known as the learning curve effect, which suggests that as experience and learning increase, the cost per unit decreases due to efficiency gains and economies of scale.

Quiz 14: Pricing and Negotiating for Value