Question 1

Price elasticity is almost always a negative number due to the inverse relationship between price and volume.

Accepted Answer

Price elasticity measures the degree of responsiveness of demand for a product or service to changes in its price. As price and volume have an inverse relationship, an increase in price leads to a decrease in quantity demanded, while a decrease in price leads to an increase in quantity demanded. Therefore, price elasticity is almost always a negative number.

Question 2

When a business's product has no considerable and sustainable differential advantage in a quality-sensitive market,with many competitors,many substitutes and easy competitor entry,conditions are favorable for a skim pricing strategy.

Accepted Answer

When there is no considerable and sustainable differential advantage in a quality-sensitive market, with many competitors, many substitutes, and easy competitor entry, it is not favorable for a skim pricing strategy. Instead, the business should consider a penetration pricing strategy to gain market share and build brand loyalty.

Question 3

Which of the following is most likely to be considered when using a cost-based pricing strategy?
A)price sensitivity in the market
B)company product-price positioning
C)competitors' product-price positioning
D)customer performance needs
E)desired profit margin

Accepted Answer

A cost-based pricing strategy takes into account the cost of producing the product or service, and adding a desired profit margin to determine the final price. Therefore, the desired profit margin is the most important consideration when using this strategy. Price sensitivity in the market, company and competitors' product-price positioning, and customer performance needs may be considered with other pricing strategies.

Question 4

A plus-one market-based pricing strategy means a business sets its price 1% higher than the competitors' price.

Accepted Answer

A plus-one market-based pricing strategy means a business sets its price 1 dollar higher than the competitors' price, not 1%.

Question 5

As a business adds more products to its product line,it decreases the risk of cannibalizing existing product sales.

Accepted Answer

As a business adds more products to its product line, it increases the risk of cannibalizing existing product sales. This is because some customers may switch from buying one product to buying another within the same product line, leading to a decline in sales for the first product.

Question 6

In ________,the price of a product is set to provide customers with an attractive savings after considering the life-cycle costs of acquiring,owning,using,maintaining,and disposing of a product.
A)value-in-use pricing
B)customerization value pricing
C)perceived-value pricing
D)performance-based pricing
E)cost-based pricing

Accepted Answer

Value-in-use pricing takes into account the total cost of ownership of a product and sets the price to provide customers with savings over the product's lifespan. This differs from cost-based pricing, which only considers the cost of producing the product, and perceived-value pricing, which takes into account the perceived value or benefits of the product to the customer. Performance-based pricing and customerization value pricing are not directly related to considering the total cost of ownership.

Question 7

Products that complement a certain product will not be affected whenever that product's price changes.

Accepted Answer

The statement is incorrect. Products that complement a certain product are often affected by changes in the price of the original product. For example, if the price of a printer increases, the price of printer ink cartridges may also increase as they are complementary products.

Question 8

When a price is inelastic,a price increase improves all aspects of performance.

Accepted Answer

The answer of When a price is inelastic,a price increase...

Question 9

A company that sells its product for a higher price than its competitor can offer a higher economic value to customers.

Accepted Answer

This is because economic value is determined by the perceived benefits of a product relative to its price. If a customer perceives the benefits to be worth the higher price, then the product offers higher economic value.

Question 10

When the total contribution produced by a pricing strategy is lower,overall profits will also be lower because fixed costs are deducted from the total contribution.

Accepted Answer

This is because fixed costs are deducted from the total contribution to calculate the profit, so if the total contribution is lower, the profit will also be lower.

Question 11

A reduce-focus pricing strategy calls for price increases with the intent of reducing volumes and market share in exchange for higher margins.

Accepted Answer

The statement accurately describes the reduce-focus pricing strategy.

Question 12

Which of the following is true of value-based pricing?
A)The cost of making a product and the desired profit margin are the two primary determinants in setting a value-based price.
B)Value-based pricing does not consider what customers require from a product in terms of performance and price.
C)Value-based pricing takes customer needs into account,but fails to consider customers' price sensitivity.
D)In value-based pricing,price is developed around a product's relative strengths to give customers greater benefits than competing products offer.
E)Value-based pricing is based on features of the product,but fails to consider the prices of similar products in the market.

Accepted Answer

Value-based pricing focuses on setting prices based on the value perceived by the customer. This includes taking into account customer needs and preferences as well as considering what competing products offer. The goal is to develop prices that provide customers with greater benefits than competing products in order to capture a share of the market. The cost of making the product and desired profit margin may be considered, but they are not the primary determinants in setting a value-based price. Value-based pricing also takes into consideration customers' price sensitivity. Therefore, option D is the correct choice.

Question 13

Which of the following types of pricing considers neither what the buyer would be willing to pay for product performance nor the pricing of competitive products in the market?
A)cost-based pricing
B)perceived-value pricing
C)customerization-based pricing
D)value-in-use pricing
E)performance-based pricing

Accepted Answer

Cost-based pricing is determined solely by the cost of production, without any consideration for buyer willingness to pay or competitive pricing in the market.

Question 14

To use single-segment pricing,a company bases the price of a product on the costs of manufacturing and marketing the product,not on the attractive savings the customers realize over the life of the product.

Accepted Answer

Single-segment pricing involves setting one price for all customers, not specifically basing it on manufacturing and marketing costs or on the savings customers realize. It's more about targeting a broad market with a uniform pricing strategy.

Question 15

Market-based pricing does not consider what the customer would be willing to pay for product performance,but depends on the costs of manufacturing the product.

Accepted Answer

Market-based pricing does consider what the customer would be willing to pay for product performance, and sets the price based on the perceived value to the customer. It is not solely based on the cost of manufacturing the product.

Question 16

A low-cost leader in a market is by definition the volume leader.

Accepted Answer

Being a low-cost leader means a company offers products or services at the lowest price compared to competitors, but it doesn't necessarily mean the company has the highest sales volume. Volume leadership depends on the number of units sold, which can be influenced by factors other than just price, such as brand loyalty, product differentiation, and distribution channels.

Question 17

The number of performance aspects that can be evaluated in a price-performance trade-off analysis is limited.

Accepted Answer

The number of performance aspects that can be evaluated in a price-performance trade-off analysis is limited by the resources available to conduct the analysis, such as time, budget, and expertise.

Question 18

Which of the following statements is true of pricing decisions?
A)Market-based pricing starts with a good understanding of customer needs and the benefits that a product offers relative to competitors' products.
B)The business with the lowest price will always offer customers the best economic value.
C)It is possible to implement market-based pricing with low levels of customer and competitor intelligence.
D)Competitors' product-price positioning and company product-price positioning are the two primary determinants in setting a cost-based price.
E)Cost-based pricing takes into account what the customer would be willing to pay for a certain level of product performance.

Accepted Answer

Market-based pricing starts with understanding customer needs and the benefits a product offers relative to competitors' products. This approach focuses on the value of the product to the customer and what they are willing to pay for it. A low price does not always equate to the best value for the customer, as other factors such as quality, convenience, and reputation can also influence their purchasing decision. Additionally, implementing market-based pricing requires a good understanding of customer and competitor intelligence to make informed pricing decisions. Cost-based pricing focuses on the expenses incurred to produce a product, rather than the value it provides to the customer.

Question 19

Life-cycle costs of ownership include acquisition cost,ownership cost,usage cost,repair/maintenance cost and disposal cost/value.

Accepted Answer

This is true. Life-cycle costs of ownership refer to all costs associated with owning and using a product over its entire life cycle, including acquisition, ownership, usage, repair/maintenance, and disposal costs/values.

Question 20

Market-based pricing is not possible without extensive customer and competitor intelligence.

Accepted Answer

Market-based pricing relies on understanding the market demand and prices set by competitors. This requires gathering extensive customer and competitor intelligence to inform pricing decisions.

Quiz 8: Value-Based Pricing and Pricing Strategies