Deck 21: Setting the Right Price

Question 1

A price skimming strategy is most often used for a new product when:

A)competition in the market is abundant.
B)customers are unwilling to spend a large amount of money on the product.
C)its supply is greater than its demand.
D)the product is perceived as having unique advantages.

Answer 1

D

Question 2

Periods of inflation are an excellent time to build market share through the use of price shading.

Answer 2

False

Question 3

Unfair trade practice acts were enforced to:

A)ensure the adoption of the Sherman Act that makes bait pricing illegal.
B)prevent oligopoly leaders from joining together and fixing prices at the highest rates that a market will allow.
C)establish penalties for companies that break the Clayton Act by engaging in predatory pricing.
D)protect small local firms from giant companies that operate efficiently on razor-thin profit margins.

Answer 3

D

Question 4

Used Car Center Inc.allows salespeople to charge different customers different prices for essentially the same automobile depending on how good the customer is at negotiating the price.In this scenario,the company uses a:

A)two-part pricing tactic.
B)price lining tactic.
C)flexible pricing tactic.
D)price skimming tactic.

Question 5

For businesses,consumer penalties are part of doing business in a highly competitive marketplace.

Question 6

Predatory pricing is the practice of charging a very high price for a product with the intent of increasing competition.

Question 7

A__________is the general level at which a company expects to sell a good or service.

Question 8

Which of the following is a pricing policy whereby a firm charges a high introductory price,often coupled with heavy promotion?

A)Penetration pricing
B)Price skimming
C)Price discrimination
D)Status quo pricing

Question 9

Fine-tuning techniques are approaches that change the general price level of goods or services.

Question 10

__________are costs that are shared in the manufacturing and marketing of several products in a product line.

Question 11

Consumer penalties are extra fees paid by retailers to consumers for violating the terms of a purchase agreement.

Question 12

When executives from competing firms meet to decide which of them will submit the lowest bid on a contract,they are indulging in__________.

Question 13

Which of the following acts prohibits a firm from selling to two or more different buyers,within a reasonably short time,commodities (not services)of like grade and quality at different prices where the result would be to substantially lessen competition?

A)The Federal Trade Commission Act
B)The Food and Drug Administration Act
C)The Sherman Act
D)The Robinson-Patman Act

Question 14

Escalator pricing and delayed-quotation pricing are demand-oriented pricing tactics.

Question 15

Before estimating how much profit and how much market share can be earned at each possible price of a product,a company is most likely to:

A)choose the Return on Investment (ROI)target.
B)determine the corresponding costs for each price.
C)estimate industry supply.
D)implement pricing segmentation.

Question 16

A__________is a price reduction offered to a consumer,an industrial user,or a marketing intermediary in return for prompt payment of a bill.

Question 17

__________is a price tactic that requires a buyer to absorb the freight costs of a product from the shipping point.

Question 18

The marketing manager of pickacruise.com (a travel Web site targeted at consumers who want a luxury vacation)finds that the firm can increase its market share and become the industry leader if it slashes prices by 50 percent during the month of December.However,the Vice President of the finance department is committed to reporting a 25 percent Return on Investment (ROI)at all times,which cannot be achieved if the firm slashes its prices.This conflict illustrates:

A)a need to eliminate low-profit products.
B)a lack of competition in the marketplace.
C)how pricing operates in an ideal marketplace.
D)the need for trade-offs in pricing objectives.

Question 19

The most common markup figures on merchandise and transportation costs are six percent at the retail level and two percent at the wholesale level.

Question 20

99-Center Inc.is a retail store where all its merchandise is priced at 99 cents.This retailer uses a__________.

Question 21

When executives from competing firms meet to decide which of them will submit the lowest bid on a contract,they are indulging in _____.​

A)price discrimination
B)​price fixing
C)bait pricing​
D)penetration pricing

Question 22

_____ is a price tactic that charges freight costs from a given point,regardless of the city from which the goods are shipped.​

A)Free on board (FOB)origin pricing
B)​Zone pricing
C)​Uniform delivered pricing
D)Basing-point pricing

Question 23

When an economy is characterized by high inflation,special pricing tactics are often necessary.One popular cost-oriented tactic is culling low-profit margin products from a product line.Explain why this tactic might backfire,and describe the other two cost-oriented tactics that can be used instead.

Question 24

A _____ is a price reduction offered to a consumer,an industrial user,or a marketing intermediary in return for prompt payment of a bill.​

A)cash discount
B)​quantity discount
C)​functional discount
D)seasonal discount

Question 25

Nellie Tompkins is the owner and operator of Tompkins' Salsa Inc. ,a salsa production unit.She makes and sells only three types of salsa--peach,pear,and pineapple.The joint costs of leasing her professional kitchen for manufacture,transport,insurance,and so on are allocated on an equal basis to the three types of salsas.Last year's sales figures and allocated joint costs are given below.Should Tompkins' Salsa Inc.stop selling its pear salsa? Why or why not?

Question 26

​When LofoniftInc.introduced its flagship product,an MP3 player,it captured the MP3 player market by offering its product at the lowest price in the market.This forced many of its competitors out of business.In this scenario,LofoniftInc.most likelyindulgedin _____.

A)predatory pricing
B)​price discrimination
C)​status quo pricing
D)price fixing

Question 27

Univ Airlines and Mirago Airlines are two competing airlines.They make an agreement to charge customers a certain price for airfreight.This leads to the filing of several lawsuits against them by other airlines.In this scenario,the two firms most likely indulged in__________.

Question 28

​A _____ is the general level at which a company expects to sell a good or service.

A)functional price
B)​base price
C)​premium price
D)mark-up price

Question 29

__________is a price tactic that charges freight costs from a given point,regardless of the city from which the goods are shipped.

Question 30

A__________is a price reduction offered to buyers buying in multiple units or above a specified dollar amount.

Question 31

Acmell Lawnmowers Inc.sells its mowers to retailers at different prices depending on whether they are independent stores or members of a national chain.In this scenario,the company indulges in__________.

Question 32

​_____ is a price tactic that requires abuyerto absorb the freight costs of a product from the shipping point.

A)Free on board (FOB)origin pricing
B)​Zone pricing
C)​Uniform delivered pricing
D)Basing-point pricing

Question 33

How do value-based pricing,unbundling,and bundling help marketers hold market share during a recession period?

Question 34

​Acmell Lawnmowers Inc.sells its mowers to retailers at different prices depending on whether they are independent stores or members of a national chain.In this scenario,the companyindulges in _____.

A)penetration pricing
B)​price skimming
C)​price discrimination
D)predatory pricing

Question 35

​_____ are costs that are shared in the manufacturing and marketing of several products in a product line.

A)Overhead costs
B)​Fixed costs
C)​Joint costs
D)Opportunity costs

Question 36

​A _____ is a price reduction offered to buyers buying in multiple units or above a specified dollar amount.

A)tradediscount 
B)​cash discount
C)​seasonal discount
D)quantity discount

Question 37

When Lofonift Inc.introduced its flagship product,an MP3 player,it captured the MP3 player market by offering its product at the lowest price in the market.This forced many of its competitors out of business.In this scenario,Lofonift Inc.most likely indulged in__________.

Question 38

Univ Airlines and MiragoAirlines are two competing airlines.They make an agreement to charge customers a certain price for airfreight.This leads to the filing of several lawsuits against them by other airlines.In this scenario,the two firms most likely indulged in _____.​

A)penetration pricing
B)​price skimming
C)​price fixing
D)odd-even pricing

Question 39

​99-Center Inc.is a retail store where all its merchandise ispriced at 99 cents.This retailer uses a _____.

A)single-price tactic
B)​flexible pricing tactic
C)​price lining tactic
D)price bundlingtactic