Question 1

Refer to the scenario below to answer the following questions. Alden Manufacturing produces small kitchen appliances blenders, hand mixers, and electric skillets under the brand name First Generation. Alden attempts to target newlyweds and first-time home buyers with this brand. Considering that most young households have limited financial resources, Alden has used break-even analysis and analysis of the demand curve to determine pricing. "In doing this," Milt Alden stated, "we have better control over keeping price right in line with customers." Alden manufactures a three-speed blender, its top seller, and a five-speed blender. The hand mixers are manufactured in two styles a small hand-held mixer with two rotating beaters and a similar style that comes with an optional stand and attached mixing bowl. Alden's temperature-controlled skillets are manufactured in one style with three color options. "Our product offerings are narrower," Milt Alden added, "but our line workers know each product like the back of their hands. This allows us to produce superior products while holding our prices low."
-Milt Alden says that his line workers "know each product like the back of their hands," and that this knowledge helps the company keep its prices low. This indicates that Alden Manufacturing most likely uses which of the following strategies?
A) cost-plus pricing
B) skimming prices
C) the experience curve
D) break-even pricing
E) prestige pricing

Accepted Answer

The statement suggests that Alden Manufacturing uses the experience curve strategy, which involves gaining efficiencies over time through repetition and experience. This strategy allows the company to lower its costs and, in turn, its prices while maintaining quality.

Question 2

Of the components of the marketing mix, pricing is the most heavily regulated by federal law.

Accepted Answer

Pricing is heavily regulated by federal law to ensure fair competition and protect consumers from price gouging and deceptive pricing practices. Laws such as the Sherman Antitrust Act, the Robinson-Patman Act, and the Federal Trade Commission Act all have provisions that specifically address pricing practices in business.

Question 3

Refer to the scenario below to answer the following questions. Alden Manufacturing produces small kitchen appliances blenders, hand mixers, and electric skillets under the brand name First Generation. Alden attempts to target newlyweds and first-time home buyers with this brand. Considering that most young households have limited financial resources, Alden has used break-even analysis and analysis of the demand curve to determine pricing. "In doing this," Milt Alden stated, "we have better control over keeping price right in line with customers." Alden manufactures a three-speed blender, its top seller, and a five-speed blender. The hand mixers are manufactured in two styles a small hand-held mixer with two rotating beaters and a similar style that comes with an optional stand and attached mixing bowl. Alden's temperature-controlled skillets are manufactured in one style with three color options. "Our product offerings are narrower," Milt Alden added, "but our line workers know each product like the back of their hands. This allows us to produce superior products while holding our prices low."
-A retail store that carries Alden's products advertised a special low price on the company's three-speed blender. Customers who came to the retail store looking for the three-speed blender were told that the item was out of stock and were encouraged to buy the higher-priced five-speed blender. The retailer would most likely be accused of ________.
A) predatory pricing
B) price discrimination
C) loss-leader pricing
D) bait-and-switch pricing
E) price fixing

Accepted Answer

The retailer is using bait-and-switch pricing by advertising a low price for the three-speed blender, but then telling customers it is out of stock and encouraging them to buy a higher-priced item. This is a deceptive practice that is illegal.

Question 4

One sign of the increasing level of competition in today's marketplace is the increasing failure rates of both start-up and long-standing businesses.

Accepted Answer

The statement is correct, as competition is a significant reason for business failure.

Question 5

Promotional pricing is a form of deceptive pricing that is illegal in many states.

Accepted Answer

Promotional pricing is a marketing strategy involving temporary price reductions to increase sales or market share, not inherently deceptive or illegal, though it must be conducted within legal and ethical guidelines to avoid being misleading.

Question 6

The average price Xerox charged when it introduced the first stand-alone fax machine was $12,700. This premium price was a way for Xerox to recoup some of the research and development costs that went into production. Xerox used ________.
A) a skimming price
B) a trial price
C) penetration pricing
D) bundle pricing
E) loss-leader pricing

Accepted Answer

Xerox used a skimming price, which is a pricing strategy that involves setting a high price for a new product to recoup research and development costs and to generate early revenue from customers willing to pay a premium price for a new product.

Question 7

A powerful brand is more price elastic than a weak brand in the same product category.

Accepted Answer

A powerful brand typically has more brand loyalty and perceived value, which makes its demand less sensitive to price changes, hence it is more price inelastic compared to a weak brand in the same product category.

Question 8

In a monopolistic competition market structure, individual firms have almost no pricing power.

Accepted Answer

In a monopolistic competition market structure, firms have some pricing power because they have differentiated products or services that may have a unique appeal to a specific set of consumers. Therefore, they can charge a higher price compared to their competitors while still retaining some market share. However, their pricing power is limited by the availability of substitutes and the competition from other firms in the market.

Question 9

A demand curve never appears on a graph as a straight line.

Accepted Answer

A demand curve can appear as a straight line, depending on the type of demand being represented. However, in most cases, a demand curve will have a negative slope, indicating an inverse relationship between price and quantity demanded, and will curve downward.

Question 10

Value Meal Deals at a fast food restaurant in which you get a sandwich, fries, and a drink for one price are an example of price bundling.

Accepted Answer

Price bundling refers to offering several products or services for sale as one combined product or service package at a single price, which is exactly what the value meal deals at fast food restaurants do - they bundle a sandwich, fries, and a drink for one price.

Question 11

A markup and a margin both refer to the difference between a final price and unit cost.

Accepted Answer

A markup refers to the amount added to the cost price of a product to determine its selling price, while a margin is the difference between the selling price and the cost price, expressed as a percentage of the selling price.

Question 12

A marketer can influence exchange rates to create international pricing advantages.

Accepted Answer

Marketers typically do not have the ability to influence exchange rates as these are determined by broader economic factors, government policies, and market forces beyond the control of individual companies or marketers.

Question 13

The values of currencies on the global capital market are constantly changing.

Accepted Answer

The values of currencies on the global capital market are affected by various economic, political, and other factors, leading to their constant fluctuations, making option A true.

Question 14

In the competitive bidding process, all bids should be blind so communication between buyer and sellers remains confidential.

Accepted Answer

In competitive bidding, bids should be blind to maintain transparency and prevent bias. Communication between buyer and sellers should be limited and focused on clarifying the bidding process and requirements, rather than negotiating prices or terms. This helps ensure a fair and objective evaluation of bids based on their merits, rather than personal relationships or hidden agendas.

Question 15

Refer to the scenario below to answer the following questions. Alden Manufacturing produces small kitchen appliances blenders, hand mixers, and electric skillets under the brand name First Generation. Alden attempts to target newlyweds and first-time home buyers with this brand. Considering that most young households have limited financial resources, Alden has used break-even analysis and analysis of the demand curve to determine pricing. "In doing this," Milt Alden stated, "we have better control over keeping price right in line with customers." Alden manufactures a three-speed blender, its top seller, and a five-speed blender. The hand mixers are manufactured in two styles a small hand-held mixer with two rotating beaters and a similar style that comes with an optional stand and attached mixing bowl. Alden's temperature-controlled skillets are manufactured in one style with three color options. "Our product offerings are narrower," Milt Alden added, "but our line workers know each product like the back of their hands. This allows us to produce superior products while holding our prices low."
-If Alden raises the price on the handheld mixer by 2 percent and quantity demanded falls by 10 percent, what is the price elasticity of demand?
A) -5
B) -8
C) -12
D) 5
E) 12

Accepted Answer

The price elasticity of demand is calculated as the percentage change in quantity demanded divided by the percentage change in price. Here, a 10% decrease in quantity demanded results from a 2% increase in price, so the elasticity is -10% / 2% = -5.

Question 16

Johnson Boats wants to introduce a new model of boat into mature markets in highly developed countries with the goal of quickly gaining mass-market share. As a consultant, you should recommend a ________ pricing strategy.
A) skimming
B) penetration
C) price leadership
D) cost-plus
E) dynamic

Accepted Answer

A penetration pricing strategy is appropriate for Johnson Boats to quickly gain mass-market share in highly developed countries. This strategy involves setting a low price initially to attract a large number of buyers and gain market share quickly. This pricing strategy is suitable for mature markets where there is intense competition and price-sensitive customers. By setting a low price, Johnson Boats can quickly establish a foothold in the market and gain recognition for its new boat model. Once it establishes its brand and customer base, it can gradually increase prices.

Question 17

Whenever any competitor in a market raises or lowers its price, the value of every other product in that specific market is affected.

Accepted Answer

This statement is true because any change in price by a competitor in a market can influence the demand and supply of other products in that market. If a competitor lowers its price, it can attract more customers and force other competitors to also lower their prices to remain competitive. Conversely, if a competitor raises its price, it can reduce demand and force other competitors to either lower their prices or offer a higher quality product to attract customers.

Question 18

A marketer conducting online sales needs to consider varying clickthrough fees in calculating the incremental cost of an online sale.

Accepted Answer

Clickthrough fees refer to the fees paid by the marketer to the website or platform where they advertise in order to drive traffic to their own website. These fees can vary depending on a number of factors, such as the competitiveness of the industry or the quality of the ad. Therefore, in order to accurately calculate the incremental cost of an online sale, a marketer must consider these varying clickthrough fees.

Question 19

Marketers can use information from a break-even analysis to identify at what volume product sales will become profitable.

Accepted Answer

A break-even analysis helps in determining the sales volume required to cover all the costs associated with producing and selling a product, and helps in identifying the point at which a product will become profitable.

Question 20

Storefront pricing is also known as offline pricing.

Accepted Answer

Storefront pricing refers to the prices of products or services that businesses display in physical locations, such as in-store or brick-and-mortar establishments. This is also known as offline pricing, as it is distinct from the pricing that businesses may use for their online or e-commerce platforms.

Quiz 13: Pricing Strategies