Question 1

Which of the following use complex mathematical software to profitably fill unused capacity?

Accepted Answer

Yield management systems use complex mathematical software to profitably fill unused capacity by analyzing demand patterns, forecasting future demand, and adjusting pricing and availability accordingly. Service management systems may track available capacity, but do not typically use complex mathematical software to profitably fill it. Capacity correlation systems and capacity management software may track and analyze capacity, but do not necessarily use complex mathematical software to optimize it.

Question 2

Which of the following is most likely to be a variable cost for a manufacturer of amusement park rides?

Accepted Answer

Steel, lumber, and aluminum are materials used in the construction of amusement park rides and are considered variable costs because their usage varies based on the level of production. The other options are fixed costs or indirect costs that do not vary directly based on the level of production.

Question 3

During sporting events at the local high school,Megan runs a concession stand.The costs associated with the purchase of hot dogs,mustard,relish,ketchup,chips,sodas,paper napkins,and cups are all examples of what type of costs?

Accepted Answer

The costs associated with the purchase of hot dogs, mustard, relish, ketchup, chips, sodas, paper napkins, and cups will vary depending on the number of customers and amount of product sold, making them variable costs. Fixed costs, on the other hand, are costs that remain constant regardless of the level of production or sales, such as rent, salaries, and insurance. Liquidity costs are related to the ability of a business to meet its financial obligations, and promotional costs refer to expenses incurred to advertise or promote a product or service.

Question 4

When price decreases and total revenue falls,demand is which of the following?

Accepted Answer

When price decreases and total revenue falls, it indicates that the quantity demanded does not increase enough to offset the price reduction, which is characteristic of inelastic demand.

Question 5

The Pizza Depot is an independent retailer of pizzas and deli sandwiches.Which of the following is the BEST example of one of its fixed costs?

Accepted Answer

Payment on leased pizza ovens is a fixed cost because it remains the same regardless of the quantity of pizzas and sandwiches sold.

Question 6

What is a cost that changes with the level of output?

Accepted Answer

A variable cost is a cost that changes with the level of output or production. This means that as the level of output increases, the cost also increases, and vice versa. Examples of variable costs include the cost of raw materials, direct labor costs, and sales commissions.

Question 7

Generally speaking,a firm can set its price higher when which of the following is true?

Accepted Answer

When demand is more inelastic, it means that consumers are less responsive to changes in price, and hence the firm can set a higher price without losing a significant amount of customers. This is because consumers are willing to pay a higher price for the product due to its unique or necessary nature, and they may have limited substitutes available to them.

Question 8

The maintenance costs of WestJetLite's airplane storage facilities represents what type of cost?

Accepted Answer

Fixed costs refer to expenses that are incurred regardless of the level of activity or production. The maintenance costs of WestJetLite's airplane storage facilities are a fixed cost since they must be paid even if there are no planes stored, and they remain the same regardless of how many planes are stored.

Question 9

Which of the following factors directly affect the elasticity of demand?

Accepted Answer

Elasticity of demand is influenced by the availability of substitutes and the various uses of a product, as these factors determine how consumers can respond to price changes.

Question 10

Al has opened a auto repair shop.The monthly payment on the tools he recently purchased,the rent on his business location,and his business license are all examples of what type of costs?

Accepted Answer

Fixed costs refer to expenses that are constant regardless of the level of output or sales. The monthly payment on tools, rent, and business license are all recurring fixed costs that Al will incur each month, regardless of how many cars he repairs.

Question 11

Concha y Toro,a Chilean wine,has reduced the price of one bottle from $10 to $8.It previously sold 420 bottles in the month prior to the price reduction,and it now sells 525 bottles per month.What is being experienced?

Accepted Answer

The answer of Concha y Toro,a Chilean wine,has reduced the...

Question 12

Hostlight Industries operate a chain of moderately priced motels across Canada.The company has many businesses competing for tourist dollars,and some nights during the tourist season its motels are only half full.Other nights,Hostlight has to turn away guests because there are no vacancies.Assuming the quality of the room and the services provided by the motels remain the same,Hostlight Industries could use which of the following to fill unused rooms?

Accepted Answer

A yield management system would allow Hostlight Industries to adjust prices based on demand, in order to fill unused rooms during slower periods and to maximize revenue during peak periods. This would also help to avoid turning away guests due to lack of availability. Service forecasting tools and capacity maintenance tools may help with general planning and maintenance, but do not address the specific issue of filling unused rooms. A capacity correlation system may help with overall capacity planning, but again does not address the specific issue of filling unused rooms.

Question 13

When is demand inelastic?

Accepted Answer

Demand is inelastic when a decrease in price leads to a decrease in total revenue, indicating that the percentage change in quantity demanded is less than the percentage change in price.

Question 14

Which costs do not change as output is increased or decreased?

Accepted Answer

Fixed costs are independent of output levels and remain constant in both the short and the long run. These costs do not change as output is increased or decreased.

Question 15

Which of the following statements about YMS is true?

Accepted Answer

YMS (yield management systems) are indeed mathematically complex systems used to optimize revenue by making use of underutilized capacity and reducing the cost of perishability. This technique is commonly used in industries such as airlines, hotels, and rental car companies to maximize revenue by dynamically adjusting pricing based on demand and supply. Option B and C are both incorrect, as YMS is not a complex pricing system nor was it first used in the car industry. Option D is also incorrect, as YMS can be used by any industry where capacity utilization and perishability are important factors that affect revenue.

Question 16

Procter & Gamble dropped the price of Pringle Potato Chips due to price competition and consumer demand.As a result of the price reduction,Procter & Gamble increased unit sales and earnings by 10 percent due to which of the following?

Accepted Answer

The increase in unit sales and earnings due to a price reduction suggests that demand for Pringle Potato Chips is elastic. This means that consumers are responsive to changes in price and are more likely to purchase the product at a lower price, leading to an increase in both sales and revenue. Market share fluctuations, increases in both supply and demand, and price wars with other snack food makers do not fully explain the observed increase in sales and earnings.

Question 17

Critics claim bank ATMs take advantage of which customers who suffer a poverty of time and have a strong need for convenience?

Accepted Answer

Customers with inelastic demand schedules have a strong need for convenience and are willing to pay a higher price for it. Bank ATMs charge fees for transactions, which these customers are more likely to pay because they place a higher value on the convenience of being able to withdraw cash quickly and easily.

Question 18

What are yield management systems used for?

Accepted Answer

Yield management systems are used to profitably fill unused capacity, primarily in the hospitality and transportation industries. These systems help businesses optimize their pricing strategies to increase revenue and minimize unsold inventory. B, C, and D are not accurate descriptions of yield management systems.

Question 19

Consumers exhibit less price sensitivity for all of the following reasons EXCEPT which one?

Accepted Answer

Consumers are more price sensitive when the total expenditure for a product is high relative to their income. This means that if the product is more expensive and not essential, consumers will be more likely to choose a cheaper alternative or forego the purchase altogether. Therefore, consumers exhibit less price sensitivity when the total expenditure for a product is low relative to their income. The other options (A, B, and C) indicate situations in which consumers may be more willing to pay a higher price for a product, which increases their price insensitivity.

Question 20

Dosta Mattress Company manufactures and sells mattresses to retailers that then put their own store brand names on the product.At a price of $1,000,it sold 100 mattresses.It dropped its price to $600 and sold 175 mattresses.Regarding elasticity,what is demand for the mattresses?

Accepted Answer

The elasticity of demand can be determined by the percentage change in quantity demanded with respect to the percentage change in price. In this case, the percentage change in price is 40% ($1000-$600/$1000 x 100%). The percentage change in quantity demanded is 75% ((175-100)/100 x100%). Since the percentage change in quantity demanded is greater than the percentage change in price, demand is elastic. This means that a 40% decrease in price results in a 75% increase in quantity demanded, indicating that consumers are responsive to price changes.

Quiz 16: Pricing Concepts