Deck 20: Pricing Concepts

Question 1

If the demand curve for a product slopes downward and to the right,it indicates that more of the product is demanded as its price is lowered.

Answer 1

True

Question 2

As products enter the growth stage of the product life cycle,prices generally begin to stabilize.

Answer 2

True

Question 3

An effective distribution network can sometimes overcome other minor flaws in the marketing mix.

Answer 3

True

Question 4

For convenience,pricing objectives can be divided into three categories.They are:

A)refundable,competitive,and attainable.
B)perceived,actual,and situational.
C)differentiated,niche,and undifferentiated.
D)profit oriented,sales oriented,and status quo.

Question 5

Price matching is one of the ways to counter a competitor's prices.

Question 6

Large customers insist on cash rebates if the guarantee of stores' profit margins are not met.

Question 7

Which of the following trends in the consumer market has increased the difficulty of setting the right price for a product?

A)The unwillingness of many firms to maintain or regain their market share by cutting prices
B)The decreased availability of bargain-priced private and generic product brands
C)The careful evaluation of each product's price against its value by potential buyers
D)The inability of consumers to do comparison shopping

Question 8

The best way for manufacturers to control prices is by using an exclusive distribution system.

Question 9

Britney is fifteen years old and wants to begin her own business selling cupcakes to coffee shops and restaurants.She is having a tough time deciding whether she should express her market share in terms of the revenue generated or the number of cupcakes sold.Regardless of what she chooses,which of the following types of pricing objectives is Britney considering?

A)Status quo pricing
B)Profit oriented
C)Target return on investment
D)Sales oriented

Question 10

Adequate distribution for a new product can often be attained by giving dealers a large trade allowance.

Question 11

Price is not used for trade promotions as it garners a negative opinion for the brand.

Question 12

According to garment makers,the demands of large customers are nearly wiping out profits for all but the very large suppliers.

Question 13

Stocking well-known branded items at high prices in order to sell store brands at discounted prices is called selling against the brand.

Question 14

Liquiction Pool and Patio Inc.is a company known for its quality pool installations,excellent customer service,and reasonable prices.Given the demand,Liquiction could price its products higher,but it prefers to price its products such that it will earn a reasonable level of profits.Liquiction seems to base its pricing policy on:

A)profit maximization.
B)earning satisfactory profits.
C)creating retained earnings.
D)maintaining a status quo pricing.

Question 15

A shopping bot is a private electronic network that links a company with its suppliers and customers.

Question 16

Competition remains constant during a product's life cycle.

Question 17

The demand curve for a product shows the change in the product's supply with changes in its price.

Question 18

Manufacturers find that their large customers always force sellers to do illegal price discrimination.

Question 19

Department stores seldom make demands on their suppliers to cover the heavy discounts and markdowns on their own selling floors.

Question 20

Prices always steadily decline for a product in the decline stage of the product life cycle.

Question 21

Which of the following is an advantage of status quo pricing?

A)It leads to optimal pricing of a product.
B)It maintains an organization's differential advantage.
C)It gives greater importance to the demand and costs of a product.
D)It requires little planning.

Question 22

Which of the following is a similarity between broad-based shopping bots and niche-oriented shopping bots?

A)Both search restricted government Web sites.
B)Both operate using a Yellow Pages type of model in that they list every retailer they can find.
C)Both search for only one type of product.
D)Both theoretically give pricing power to consumers.

Question 23

Which of the following is true about shopping bots?

A)They encourage a more creative use of advertising.
B)They create opportunities for prestige pricing.
C)They search the Web for the best price for a product.
D)They create inelastic demand.

Question 24

Pierre's Ice Cream Company produces ultra-rich ice cream,which it sells in Cleveland,Ohio,and other neighboring places.Last year,its actual return on investment exceeded its target return on investment (ROI)for that fiscal year.The following results were found on its financial statements: Gross revenues: $250,000 Total assets: $500,000 Gross profits: $100,000 Total liabilities: $200,000 Net profits after tax: $ 50,000 Owner's equity: $300,000 What was the actual ROI for Pierre's Ice Cream Company?

A)6.67 percent
B)10 percent
C)22 percent
D)28 percent

Question 25

GoodFurn Furniture Company has recently moved to a new,larger location.At the new location,it has been unable to attract sufficient customers.Its owner did not have the cash to pay the current loan installment due for the building and inventory.So,he decided to reduce all merchandise prices by at least 50 percent for a weekend sale to earn enough to make his loan payment.In this case,the owner's pricing objective can be classified as:

A)market share maximization.
B)satisfactory profits.
C)asset maximization.
D)sales maximization.

Question 26

Yield management systems are used to:

A)determine the availability of product substitutes in industries that are experiencing rapid change.
B)profitably fill unused capacity by using complex mathematical systems.
C)predict necessary service levels required to achieve revenue goals.
D)determine whether it is financially more feasible to buy a new product or repair a broken one.

Question 27

Dynamic pricing is used to:

A)implement bait pricing to get more loyal customers.
B)perform price discrimination among its customers.
C)raise prices to maximize a company's revenues.
D)attain price equilibrium.

Question 28

During the hot summer months,the Nick Price Golf School offers a 25 percent reduction on its golf lessons to attract golfers during the off-season.Which of the following is exemplified in this scenario?

A)The power of yield management systems
B)The advantage of markup pricing
C)The relationship between price and quality
D)The use of price as a promotional tool

Question 29

Although many factors can influence the price of a product,the primary determinants are:

A)the costs of manufacturing and distributing the product.
B)the demand for the product and the cost to the seller for the product.
C)the demand by consumers and the perceived quality of the product.
D)the distribution and promotion strategies for the product.

Question 30

At Starmart,Riya saw a box of collector's edition comic books.Each book was priced at $28.50,but a customer who bought five of the books was required to pay only $19.99 for each book.Riya bought one book and her friend bought five books.What was the retailer's revenue from this purchase?

A)$158.51
B)$19.99
C)$28.50
D)$128.45

Question 31

Which of the following statements is true about yield management systems (YMS)?

A)They are used to eliminate the problem of simultaneous production and consumption from services.
B)They are restricted to use only in service industries.
C)They are complex pricing systems used to establish price equilibrium.
D)They are used to make profitable use of the unused capacity of perishable goods.

Question 32

Which of the following statements is true about the Internet?

A)The Internet has shifted all shopping power to consumers
B)​Consumer reviews on the Internet about various products tend to be equal in quality
C)​Business-to-business auctions on the Internet are likely to be the dominant form in the future
D)Extranets are programs that search the Internet for the best price for a particular product

Question 33

Why are more and more companies turning to dynamic pricing?

A)To help adjust prices
B)To implement bait pricing
C)To implement free on board origin pricing
D)To establish inelasticity of demand

Question 34

At a local retail store,Randi saw a bag of daffodil flower bulbs and a box of plant fertilizer.The items,which were sold together,retailed at $28.50 but were marked down to $19.99.The $19.99 is the:

A)revenue.
B)price.
C)profit.
D)liquidity value.

Question 35

At the end of summer,the Gloomin' Garden Inc.reduced the price on all of its plants,fertilizers,and potting soil by 50 percent in order to liquidate this inventory.What type of pricing strategy has been used by Gloomin' Garden Inc.?

A)Supply oriented pricing
B)Sales maximization
C)Target return on investment
D)Satisfactory profit

Question 36

Consumers are more likely to perceive the value of a product to be less than its cost if:

A)the product's price is set too high.
B)the product's manufacturer gains very little profit from the product.
C)the product has an inelastic demand.
D)the product's demand and supply attain the state of price equilibrium.

Question 37

Which of the following is true of products in the introduction stage of their life cycle?

A)Their prices will rise dramatically as they move into the specialty goods category.
B)They experience price increases that are cost initiated.
C)Their prices are usually set high.
D)They experience an elastic demand in the core of the market.

Question 38

Shopping bots theoretically give pricing power to:

A)consumers.
B)wholesalers.
C)retailers.
D)agents.

Question 39

Profit-oriented pricing objectives include:

A)target return on investment.
B)target market share.
C)sales maximization.
D)status quo pricing.

Question 40

What happens when demand is elastic?

A)As price goes up,revenue goes down.
B)As price goes down,revenue goes down.
C)As price goes up,revenue goes up.
D)As price goes up,revenue does not change.

Question 41

Jaggd Inc. ,an electronic goods manufacturing company,was planning to launch its latest smartphone in the market.Within the first few days of launching the phone,Jaggd wanted to earn as much revenue as the cost incurred in manufacturing the phone.So,it priced the phone about as high as the market would allow.In this case,Jaggd entered the market with a__________approach to pricing the smartphone.

Question 42

Jaggd Inc. ,an electronic goods manufacturing company,was planning to launch its latest smartphone in the market.Within the first few days of launching the phone,Jaggd wanted to earn as much revenue as the cost incurred in manufacturing the phone.So,it priced the phoneabout as high as the market would allow.In this case,Jaggd entered the market with a _____ approach to pricing the smartphone.​

A)market share pricing
B)​profit maximization
C)​demand-oriented
D)sales maximization

Question 43

​The quantity of a product that people will buy is most likely to decrease as the product's _____ increases.

A)distribution
B)​quality
C)​price
D)promotion

Question 44

Why do manufacturers of products that are in the maturity stage of the product life cycle prefer to offer similar prices?

Question 45

When the price of a product is set at a level where demand and supply are the same,a state of__________has been achieved.

Question 46

When consumer demandis sensitive to price changes,_____ occurs.​

A)inelastic demand
B)​sales maximization
C)​elastic demand
D)profit maximization

Question 47

__________costs do not change as output is increased or decreased.

Question 48

Randy's Apparels Inc.plans to expand its customer base and product line.It introduces a new line of designer wear that are very expensive and exclusively available at Randy's.It emphasizes the high quality and exclusivity of this new line of products in its advertisements.In this case,Randy's Apparels has used__________for the new line of products.

Question 49

​Diffusion Research Company specializes in conducting market research for various firms.When it receives proposals for new research,its management will first estimate the cost of conducting the research and producing and delivering the final research report.The management then adds 30 percent to that cost estimate.This becomes the price estimate given to the potential research client.This suggests that Diffusion Research Company uses a _____ pricing objective.

A)profit-oriented
B)​market share maximization
C)​status quo
D)sales maximization

Question 50

A cost that changes with the level of output is called a(n)__________cost.

Question 51

When consumer demand is sensitive to price changes,__________occurs.

Question 52

Diffusion Research Company specializes in conducting market research for various firms.When it receives proposals for new research,its management will first estimate the cost of conducting the research and producing and delivering the final research report.The management then adds 30 percent to that cost estimate.This becomes the price estimate given to the potential research client.This suggests that Diffusion Research Company uses a__________pricing objective.

Question 53

Justify the statement,"Shopping bots have made the purchase decisions of consumers more efficient."

Question 54

How do manufacturers benefit from prestige pricing?

Question 55

At a price of $2,000,the demand for Ranger 60 mountain bikes from Cloyd's Inc.is 300,but only 191 bikes are being made.At a price of $2,300,the demand for the bikes is 250,and exactly 250 bikes are being made.If Cloyd'ssells each one of the bikes at a price lower than $2,300,_____.​

A)a shortage of bikes will be created
B)​the number of bikes being made will increase drastically
C)​an inelastic demand for the bikes will be created
D)the demand and supply for the bike will attain equilibrium

Question 56

At a price of $2,000,the demand for Ranger 60 mountain bikes from Cloyd's Inc.is 300,but only 191 bikes are being made.At a price of $2,300,the demand for the bikes is 250,and exactly 250 bikes are being made.If Cloyd's sells each one of the bikes at a price lower than $2,300,__________.

Question 57

Jade claims that a consumer's psychological state of mind plays a vital role in how he perceives the price and quality of a product.Provide arguments to support his claim.

Question 58

When Jerry took delivery of his brand new Karuaf automobile,he was filled with pleasure and excitement as Karuaf is a very expensive brand.This is an example of the__________effect associated with the price-quality relationship.

Question 59

When the price of a product is set at a level where demand and supply are the same,a state of _____ has been achieved.​

A)price equilibrium
B)​stability
C)​inelastic demand
D)symmetry

Question 60

The quantity of a product that people will buy is most likely to decrease as the product's__________increases.

Question 61

​A cost that changes with the level of output is called a(n)_____ cost.

A)liquidity
B)​variable
C)​fixed
D)indirect

Question 62

Randy's Apparels Inc.plans to expand its customer base and product line.It introduces a new line of designer wear that are very expensive and exclusively available at Randy's.It emphasizes the high quality and exclusivityof this new line of products in its advertisements.In this case,Randy's Apparels has used _____ for the new line of products.​

A)predatory pricing
B)​leader pricing
C)​bait pricing
D)prestige pricing

Question 63

When Jerry took delivery of his brand new Karuaf automobile,he was filled with pleasure and excitement as Karuaf is a very expensive brand.This is an example of the _____ effect associated with the price-quality relationship.

A)durability
B)​allocative
C)​prestige
D)hedonistic

Question 64

_____ costs do not change as output is increased or decreased.​

A)Marginal
B)​Variable
C)​Fixed
D)Total