Question 1

If a firm is engaged in monopolistic competition,it should seek a way to differentiate itself.

Accepted Answer

Monopolistic competition is characterized by a large number of firms producing differentiated products. Therefore, in order to gain a competitive advantage and attract customers, firms should seek to differentiate their products through branding, quality, packaging, etc.

Question 2

Brands that have developed loyal customers have a higher price elasticity of demand.

Accepted Answer

Brands with loyal customers often have a lower price elasticity of demand because their customers are less sensitive to price changes and more likely to continue purchasing the product even if prices increase.

Question 3

A demand curve shows the relationship between income and demand.

Accepted Answer

A demand curve shows the relationship between price and quantity demanded, not income and demand.

Question 4

If Brandon buys hats for his store for $5 each and sells them for $15 each,he is using a keystoning pricing strategy.

Accepted Answer

The answer of If Brandon buys hats for his store...

Question 5

A gray market employs irregular but not necessarily illegal methods of distributing products.

Accepted Answer

The statement accurately describes a gray market. Gray market refers to the sale of goods through channels that are not authorized by the manufacturer or the original distributor, but are not necessarily illegal. These channels may include overstocked items, unauthorized imports, or parallel imports. Gray market goods are often sold at a lower price than those sold through authorized channels, but may lack warranty or support from the manufacturer.

Question 6

Economic trends that affect pricing decisions include increases in disposable income and status consciousness,a trend for customers to shop cheap,global economic conditions,and local economic conditions.

Accepted Answer

Economic trends such as increases in disposable income and status consciousness, a trend for customers to shop cheap, global economic conditions, and local economic conditions can all affect pricing decisions.

Question 7

Diana owns a boutique specializing in ball gowns.Sales are stable and Diana feels it is time she had a 20% increase in her salary.If Diana takes this increase in compensation,it will decrease the breakeven quantity of gowns she needs to sell on a monthly basis.

Accepted Answer

Increasing Diana's salary would increase the fixed costs, thus increasing the breakeven quantity of gowns she needs to sell, not decreasing it.

Question 8

At the break-even point,profits are maximized.

Accepted Answer

At the break-even point, a company is not making a profit or a loss. Therefore, by definition, profits are not maximized at the break-even point.

Question 9

Rarely is the lowest-price product offering the dominant brand in a given market.

Accepted Answer

While price can certainly be a factor in consumer purchasing decisions, other factors such as quality, reputation, customer service, marketing, and product differentiation can also play significant roles in determining which brand dominates a market.

Question 10

In general,prices should not be based on costs because consumers make their purchase decisions based on perceived value,not the cost of production.

Accepted Answer

Prices should be based on the perceived value to the consumer rather than the costs of production. Consumers are willing to pay more for a product if they perceive it to be of higher value, regardless of the production costs. Therefore, pricing strategy should focus on understanding the perceived value of the product and setting a price that aligns with it.

Question 11

In addition to the product-specific and firm-specific factors that affect pricing,there are two broader factors - the Internet and sociocultural factors.

Accepted Answer

The answer of In addition to the product-specific and firm-specific...

Question 12

The key to successful pricing is to match the product with the consumer's perception of value.

Accepted Answer

Pricing should be based on how much value a consumer places on a product. Therefore, matching the product with the consumer's perception of value is important for successful pricing.

Question 13

Because consumers are generally more sensitive to price increases than to price decreases,it is easier to lose current customers with a price increase than it is to gain new customers with a price decrease.

Accepted Answer

This phenomenon is known as price sensitivity and has been observed in numerous studies and in various industries. Customers may perceive a price increase as a lack of value or quality, while a price decrease may not be seen as significant enough to switch brands or products. Therefore, it is important for businesses to carefully consider the impact of price changes and to communicate the reasons behind them to customers.

Question 14

The Internet has decreased consumers' price sensitivity.

Accepted Answer

The answer of The Internet has decreased consumers' price sensitivity....

Question 15

Price is the cash expenditure plus taxes that consumers have to pay for a good or service.

Accepted Answer

The answer of Price is the cash expenditure plus taxes...

Question 16

When Sony released their PlayStation 3 game machines,they charged a high price,attracting the most avid game players.This was a market penetration pricing strategy.

Accepted Answer

Market penetration pricing strategy involves setting a low price to attract a large number of customers quickly, not a high price. Sony's approach was more aligned with a skimming pricing strategy, targeting early adopters willing to pay more.

Question 17

In U.S.markets,there are many substitute products for Fruit Loops cereal,suggesting the price elasticity of demand for Fruit Loops is elastic.

Accepted Answer

The availability of substitute products in the market suggests that consumers have options to choose from, making them more sensitive to the price of Fruit Loops cereal. As a result, the price elasticity of demand for Fruit Loops is likely to be elastic, meaning that a change in its price would have a significant impact on the quantity demanded by consumers.

Question 18

Proving that a company has engaged in the deceptive bait and switch practice is easy.

Accepted Answer

Proving that a company has engaged in deceptive bait and switch practice can be difficult and requires evidence that shows the company intentionally advertised a product or service at a lower price or with better terms to lure in customers, only to switch or substitute the product or service with a higher-priced or lower-quality option. The burden of proof lies with the plaintiff and requires evidence such as advertising materials, sales records, and testimonies from customers who were affected by the practice.

Question 19

Price is the only part of the marketing mix that does not generate costs.

Accepted Answer

Price generates revenue rather than incurring costs, unlike product development, distribution (place), and promotion, which all involve costs.

Question 20

Cheryl wants to quickly establish a dominant market share for her new line of ergonomic pens.To do this,she will likely use a market penetration pricing strategy.

Accepted Answer

Market penetration pricing strategy is used to quickly gain a dominant market share by setting a low price for a new product or service. This strategy is used when a company wants to enter a new market or wants to increase its market share quickly. Therefore, it is likely that Cheryl will use this strategy to establish a dominant market share for her new line of ergonomic pens.

Quiz 13: Pricing Concepts for Establishing Value