Question 1

Companies that aim to ________ strive to be affordable luxuries.
A)survive in the market
B)partially recover their costs
C)maximize their market share
D)pursue value pricing
E)be product-quality leaders

Accepted Answer

E

Question 2

When consumers examine products,they often compare an observed price to an internal price they remember.This is known as a(n)________ price.
A)markup
B)reference
C)market-skimming
D)accumulated
E)target

Accepted Answer

The internal price that consumers remember and use as a benchmark for evaluating a product's price is known as a reference price.

Question 3

A company has developed the prototype of a mobile phone which it plans to launch in the next few months.The phone comes equipped with the most advanced technological features.As part of its test marketing efforts,it allows customers to examine and use the prototype and also gathers feedback regarding product features and price.The results of this test marketing effort show that customers are willing to pay at least $500,considering the phone's various features.As such,the company has found out about the customers' ________.
A)last paid price
B)expected future price
C)lower-bound price
D)upper-bound price
E)typical price

Accepted Answer

The test marketing effort showed that customers are willing to pay at least $500, indicating a lower-bound price.

Question 4

When Apple introduced its iPhone,it was priced at $599.This allowed Apple to earn the maximum amount of revenue from the various segments of the market.Two months after the introduction,the price has come down to $399.What kind of pricing did Apple adopt?
A)loss-leader pricing
B)market-penetration pricing
C)market-skimming pricing
D)target-return pricing
E)value pricing

Accepted Answer

Apple initially used market-skimming pricing by pricing the iPhone at $599 to earn maximum revenue from early adopters and customers willing to pay a premium for a new, innovative product. However, the price was later reduced to $399 to penetrate the mass market and appeal to a wider range of customers. This shift indicates a move towards market-penetration pricing.

Question 5

Companies who believe that a higher sales volume leads to lower unit costs and higher long-run profits are attempting to ________.
A)maximize their market share
B)skim the market
C)become a product-quality leader
D)merely survive in the market
E)maximize their current profits

Accepted Answer

Companies who attempt to increase sales volume believe in the concept of economies of scale, where as production volume increases, unit costs decrease. This allows them to offer lower prices which potentially increases their market share.

Question 6

The reservation price or the maximum that most consumers would pay for a given product is known as the ________ price.
A)expected future
B)usual discounted
C)upper-bound
D)typical
E)historical competitor

Accepted Answer

The reservation price is often considered as the upper-bound or the maximum price that most consumers are willing to pay for a particular product. It is the price point beyond which they would not be interested in buying the product. Options A, B, D, and E are not accurate descriptions of the reservation price.

Question 7

A company that is looking to maximize its market share would do well to follow ________ pricing.
A)markup
B)market-penetration
C)market-skimming
D)survival
E)target-return

Accepted Answer

Market-penetration pricing involves setting a low price for a new product in order to attract a large number of customers and gain market share quickly. This strategy is particularly effective for companies looking to maximize their market share.

Question 8

Pricing cues such as sale signs and prices that end in 9 are more influential ________.
A)when customers have substantial knowledge about prices
B)when customers purchase the particular item regularly
C)when product quality is standardized
D)when product designs vary over time
E)when prices do not vary from time to time

Accepted Answer

The answer of Pricing cues such as sale signs and...

Question 9

When a company introduces a product at a very high price and then gradually drops the price over time,it is pursuing a ________ strategy.
A)market-penetration pricing
B)market-skimming pricing
C)value-pricing
D)switching cost
E)loss-leader pricing

Accepted Answer

This is known as market-skimming pricing, which involves introducing a product at a high price in order to segment the market and capture the most revenue from early adopters who are willing to pay a premium. As demand slows down, the price is gradually lowered in order to attract new customers and capture market share.

Question 10

After determining its pricing objectives,what is the next logical step a firm should take in setting its pricing policy?
A)It should analyze its competitors' costs,prices,and offers.
B)It should select its pricing method.
C)It should select its final price.
D)It should determine the demand for its product.
E)It should estimate the cost of its product.

Accepted Answer

Once a firm has determined its pricing objectives, it should analyze the demand for its product to ensure that the pricing policy aligns with the market's willingness to pay. This will provide insight into the optimal price point that the firm should set to maximize profit while remaining competitive.

Question 11

A company decided to conduct a market survey for its new MP3 player which it had priced at $150.However,in the survey,95 percent of the participants said that the maximum they would pay for the MP3 player is $100.This is an example of which of the following possible consumer reference prices?
A)historical competitor price
B)expected future price
C)usual discounted price
D)upper-bound price
E)last price paid

Accepted Answer

This is an example of an upper-bound price, as 95 percent of the participants said that their maximum price they would pay is $100, which is below the company's price of $150.

Question 12

After estimating the demand and costs associated with alternative prices,a company has chosen to price its product in such a way that it gains the highest rate of return on its investment.The company is looking to ________.
A)maximize its market share
B)skim the market
C)become a product-quality leader
D)survive in the market
E)maximize its current profit

Accepted Answer

The company has chosen a price that will give it the highest rate of return on investment, which indicates that the primary goal is to maximize current profit.

Question 13

________ price refers to what the consumers feel the product should cost.
A)Fair
B)Typical
C)Usual discounted
D)List
E)Maximum retail

Accepted Answer

Fair price refers to the price that consumers perceive as reasonable and justifiable based on their assessment of the product's value, quality, and benefits. It is also influenced by external factors such as competition, market conditions, and economic factors. Therefore, fair pricing helps to build trust, loyalty, and long-term relationships with customers.

Question 14

Which of the following is the first step in setting a pricing policy?
A)selecting a pricing method
B)selecting the pricing objective
C)determining demand
D)estimating cost
E)analyzing competitors' costs,prices,and offers

Accepted Answer

Selecting the pricing objective is the first step in setting a pricing policy because it establishes the overall goal that the company wants to achieve through its pricing strategy. Once the objective is established, the company can then determine demand, estimate costs, analyze competitors, and select a pricing method that will help achieve the desired objective.

Question 15

Market skimming pricing makes sense under all the following conditions,EXCEPT ________.
A)if a sufficient number of buyers have a high current demand
B)if the unit costs of producing a small volume are high enough to cancel the advantage of charging what the traffic will bear
C)if the high initial price does not attract more competitors to the market
D)if consumers are likely to delay buying the product until its price drops
E)if the high price communicates the image of a superior product

Accepted Answer

Market skimming pricing is not suitable if consumers are likely to delay buying the product until its price drops. This is because such consumers would not be willing to pay the high initial price, and hence, there may not be enough buyers to sustain the strategy.

Question 16

A firm that is plagued with overcapacity,intense competition,or changing wants would do better if it pursues ________ as its major objective.
A)market skimming
B)product-quality leadership
C)survival
D)profit maximization
E)market penetration

Accepted Answer

When a firm is facing overcapacity, intense competition or changing wants, its major objective should be survival rather than profit maximization, market skimming, product-quality leadership or market penetration. The focus should be on sustaining the business in the face of challenges and uncertainties, rather than pursuing aggressive growth or profitability strategies. Therefore, option C - survival - is the best choice in this case.

Question 17

While shopping at the mall,Jane was asked by one of the sales representatives at the cosmetics counter to try out a new lipstick that her company was test marketing.The company representative asks her how much she would be willing to pay for the lipstick.After trying it out,Jane is of the opinion that $5 is just the right price for it.What type of a reference price is Jane using?
A)usual discounted price
B)fair price
C)maximum retail price
D)last price paid
E)historical competitor price

Accepted Answer

Jane is using a fair price as her reference price, indicating that she believes the price of $5 is reasonable for the product. She has not mentioned any discounted prices, maximum retail prices, last prices paid, or historical competitor prices.

Question 18

Many consumers are willing to pay $100 for a perfume that contains $10 worth of scent because the perfume is from a well-known brand.What kind of a pricing is the company depending on?
A)going-rate pricing
B)image pricing
C)market-skimming pricing
D)target pricing
E)markup pricing

Accepted Answer

The company is using image pricing, which is based on the consumer's perception of the product's value rather than its actual cost. In this case, the consumer is willing to pay a high price for the perfume because it is from a well-known brand, which suggests a high level of quality and prestige.

Question 19

The minimum price that most consumers would pay for a given product is known as the ________ price.
A)everyday low
B)usual discounted
C)fair
D)typical
E)lower-bound

Accepted Answer

The minimum price that consumers would pay for a given product is known as the lower-bound price. This is the lowest acceptable price for the consumers and anything above this price would drive them away from purchasing the product.

Question 20

A market-penetration pricing strategy is most suitable when _______.
A)a low price slows down market growth
B)production and distribution costs fall with accumulated production experience
C)a high price dissuades potential competitors from entering the market
D)the market is characterized by inelastic demand
E)a low price encourages actual competition

Accepted Answer

A market-penetration pricing strategy involves setting a low price for a product to penetrate the market quickly and attract a large number of customers. This strategy is most suitable when production and distribution costs fall with accumulated production experience, as a lower price can lead to increased sales volume and lower costs per unit. This can lead to increased profitability in the long run. Therefore, option B is the best choice.

Quiz 14: Developing Pricing Strategies and Programs

Companies that aim to ________ strive to be affordable luxuries.

When consumers examine products,they often compare an observed price to an internal price they remember.This is known as a(n) ________ price.

When Apple introduced its iPhone,it was priced at $599.This allowed Apple to earn the maximum amount of revenue from the various segments of the market.Two months after the introduction,the price has come down to $399.What kind of pricing did Apple adopt?

Companies who believe that a higher sales volume leads to lower unit costs and higher long-run profits are attempting to ________.

The reservation price or the maximum that most consumers would pay for a given product is known as the ________ price.

A company that is looking to maximize its market share would do well to follow ________ pricing.

Pricing cues such as sale signs and prices that end in 9 are more influential ________.

When a company introduces a product at a very high price and then gradually drops the price over time,it is pursuing a ________ strategy.

After determining its pricing objectives,what is the next logical step a firm should take in setting its pricing policy?

A company decided to conduct a market survey for its new MP3 player which it had priced at $150.However,in the survey,95 percent of the participants said that the maximum they would pay for the MP3 player is $100.This is an example of which of the following possible consumer reference prices?

After estimating the demand and costs associated with alternative prices,a company has chosen to price its product in such a way that it gains the highest rate of return on its investment.The company is looking to ________.

________ price refers to what the consumers feel the product should cost.

Which of the following is the first step in setting a pricing policy?

Market skimming pricing makes sense under all the following conditions,EXCEPT ________.

A firm that is plagued with overcapacity,intense competition,or changing wants would do better if it pursues ________ as its major objective.

Many consumers are willing to pay $100 for a perfume that contains $10 worth of scent because the perfume is from a well-known brand.What kind of a pricing is the company depending on?

The minimum price that most consumers would pay for a given product is known as the ________ price.

A market-penetration pricing strategy is most suitable when _______.