Question 1

Which of the following is true of market-penetration pricing?
A) It should be used when the product's quality and image support a high price.
B) It involves setting a high price for a new product to appeal to the elite in society.
C) It results in drawing in large numbers of buyers quickly, winning a large market share.
D) It is best used in conjunction with a market-skimming pricing strategy.
E) It results in the company making fewer and less profitable sales.

Accepted Answer

Market-penetration pricing involves setting a low price for a new product to attract a large number of buyers quickly and win a large market share. This strategy is often used when a company wants to enter a new market or when there is intense competition. The goal is to establish the product as quickly as possible and gain market share, even if it means sacrificing profit margins in the short term.

Question 2

A market-penetration pricing policy should LEAST likely be used for a new product when ________.
A) the market is highly price sensitive
B) production and distribution costs fall as sales volume increases
C) the product's quality and image support a high price
D) a high price helps keep out the competition
E) there are few or no competitors in the market

Accepted Answer

A market-penetration pricing policy involves setting a low price to attract customers and gain market share quickly. This strategy may not be appropriate for a new product that has high quality and image, as customers may associate a low price with low quality. A high price can actually enhance the perceived quality and prestige of the product.

Question 3

Which of the following is true of optional product pricing?
A) It involves capitalizing on low value by-products.
B) It involves pricing accessory products sold with the main product
C) It is used to price a company's main product.
D) It involves setting geographically-specific prices.
E) It is used to price products that must be used with the company's main product.

Accepted Answer

Optional product pricing involves pricing accessory products sold with the main product, such as a camera and its lenses.

Question 4

Midnight Magic, a perfume manufacturing company, plans to release a new fragrance during the holiday season at $99 per bottle. The company intends to bring the price down to $49 within six months of its release to attract buyers who couldn't afford the initial price. Which of the following pricing strategies is Midnight Magic using?
A) market-penetration pricing
B) market-skimming pricing
C) competitive pricing
D) cost-plus pricing
E) product-line pricing

Accepted Answer

The answer of Midnight Magic, a perfume manufacturing company, plans...

Question 5

Companies set not a single price, but a pricing ________ which covers different items in its line and changes over time as products move through their life cycles.
A) by-product
B) structure
C) loop
D) cycle
E) bundle

Accepted Answer

Companies set a pricing structure which covers different items in its line and changes over time as products move through their life cycles.

Question 6

Whizz Corp. wishes to introduce a new hybrid car into mature markets in developed countries with the goal of gaining mass-market share quickly. Which of the following pricing strategies would help the firm meet its goal?
A) market-skimming pricing
B) market-penetration pricing
C) market-segmentation pricing
D) cost-plus pricing
E) captive-product pricing

Accepted Answer

Market-penetration pricing is a pricing strategy where a company sets a low price for its product or service with the goal of gaining a large market share quickly. This is particularly effective in mature markets where there is already stiff competition. By setting a low price, the company can attract customers away from its competitors and gain a foothold in the market. As the market share increases, the company can gradually increase its prices to improve profitability.

Question 7

A market-skimming pricing strategy should NOT be used for a new product when ________.
A) the product's quality and image support its higher price
B) enough buyers want the products at that price
C) competitors are unable to enter the market
D) competitors can undercut prices easily
E) producing a smaller number of goods is feasible

Accepted Answer

A market-skimming pricing strategy involves setting a high price initially and then gradually lowering it over time as competition emerges. This strategy works best when there is significant demand for the product at the higher price, and when competitors are unable to enter the market or undercut prices easily. If competitors can easily undercut prices, the strategy may not be feasible as the company may lose market share.

Question 8

In a bid to attract more customers in a market which has several competitors, Barrymore's Bakery slashed the prices of all its products by 50%. Managers at the firm reasoned that lower prices would draw in even more customers, making up for the reduction in price several times over. Which of the following pricing strategies are they using?
A) market-skimming pricing
B) market-penetration pricing
C) captive-product pricing
D) cash discount pricing
E) by-product pricing

Accepted Answer

Barrymore's Bakery is using market-penetration pricing where they are offering lower prices to attract more customers and increase their market share.

Question 9

Electrowhip, a company that manufacturers blenders and electric whisks, has decided to use a market-penetration pricing strategy. Which of the following, if true, proves their decision to be a wise one?
A) Electrowhip's competitors utilize social media for marketing their products.
B) Electrowhip sells products whose image and quality support high prices.
C) Electrowhip operates in a market with many competitors.
D) Electrowhip does not operate in a price sensitive market.
E) Electrowhip's products are intended to appeal to the elite in society.

Accepted Answer

The answer of Electrowhip, a company that manufacturers blenders and...

Question 10

When a company sets a high price for a new product with the intention of reducing the price in the future, it is using the ________ pricing strategy.
A) market-skimming
B) cost-plus
C) market-segmentation
D) market-penetration
E) competitive

Accepted Answer

The market-skimming pricing strategy involves setting a high price initially to capture the maximum revenue from the market, and then gradually reducing the price to reach a wider range of customers. This strategy is typically used for innovative or technologically advanced products with limited competition in the market.

Question 11

Multiprint, a printer manufacturing firm, sells ink cartridges for each of its specific models. Only Multiprint cartridges are compatible with Multiprint printers, and no two of the firm's models share the same specifications. What type of pricing does Multiprint use?
A) product line pricing
B) optional product pricing
C) captive product pricing
D) by-product pricing
E) product bundle pricing

Accepted Answer

Multiprint uses captive product pricing because they only allow their own specific ink cartridges to be used with their printers, forcing customers to continue buying their specific products.

Question 12

Which of the following product mix pricing strategies involves pricing products that must or can only be used with the main product?
A) by-product pricing
B) product bundle pricing
C) captive product pricing
D) product line pricing
E) optional product pricing

Accepted Answer

Captive product pricing involves pricing products that can only be used with the main product, such as ink cartridges for a printer or blades for a razor.

Question 13

Companies facing the challenge of setting prices for the first time can choose between two broad strategies: market-penetration pricing and ________.
A) comparative pricing
B) competitive pricing
C) market-skimming pricing
D) market-segmentation pricing
E) cost-plus pricing

Accepted Answer

Market-skimming pricing is the strategy of setting a high initial price to "skim" revenue layers from the market. This strategy is typically used for innovative products with significant differentiation and limited competition. It allows the company to earn high profits initially before competitors enter the market and prices start to fall. This strategy is often used to recoup development costs quickly. Market-penetration pricing is the strategy of setting a low initial price to attract a large number of buyers quickly and win a large market share. This strategy is typically used for products with high production volumes and low marginal costs. Therefore, market-skimming pricing is the best choice for companies facing the challenge of setting prices for the first time.

Question 14

Which of the following is true of price skimming?
A) It is effective in situations in which competitors are able to undercut prices easily.
B) It can be profitably used when the product's quality and image support its price.
C) It involves underpricing products so that companies make larger sales.
D) It is ineffective in situations in which competitors are unable to enter the market easily.
E) It leads to a situation in which the company makes more, though less profitable, sales.

Accepted Answer

Price skimming involves setting a high initial price for a new product, typically targeting early adopters who are willing to pay a premium. It is effective when the product's quality and image support its price, as customers are willing to pay more for a superior product. Price skimming is not effective when competitors are able to easily undercut prices, as this will lead to decreased demand for the higher-priced product. Additionally, price skimming is a strategy that aims to maximize profits, rather than sales volume.

Question 15

Which of the following companies uses product line pricing?
A) Photo Genie, which sells inexpensive cameras that run only on their own expensive batteries
B) Mobile Point, which launched a range of cell phone models, each priced according to its features
C) Penguin's Parlor, which offers customers a 20% discount on their birthdays and certain holidays
D) Green Thumb, which gives away free watering cans with the purchase of certain potted plants
E) Panizza, whose combo meals are priced lower than the individual components sold together

Accepted Answer

Mobile Point has launched a range of cell phone models, each priced according to its features, which demonstrates product line pricing.

Question 16

Which of the following is true of product line pricing?
A) The price steps take cost differences between products in the line into account.
B) The pricing strategy cannot be availed of by companies in developed countries.
C) The price steps do not account for the prices of similar products from competitors.
D) The pricing strategy involves overpricing products so that they appeal to the elite.
E) The customer's perception of the value of different features is considered irrelevant.

Accepted Answer

Product line pricing takes into account cost differences between products in the line, and prices each product accordingly. This strategy helps to maximize profits while also offering customers a range of options at different price points. The other options are all incorrect. B is incorrect because product line pricing is applicable to companies in any country. C is incorrect because competitive pricing is a key consideration in product line pricing. D is incorrect because overpricing products does not lead to increased appeal to the elite. E is incorrect because the customer's perception of the value of different features is a key consideration in product line pricing.

Question 17

Which of the following product mix pricing strategies involves setting prices across an entire product range based on cost differences between the products, customer evaluations of different features, and competitors' prices?
A) by-product pricing
B) product bundle pricing
C) optional product pricing
D) captive product pricing
E) product line pricing

Accepted Answer

Product line pricing involves setting prices for all products within a product range based on cost differences, customer evaluations, and competitor prices. Therefore, the best choice is E. By-product pricing involves setting prices for by-products created during the production process, product bundle pricing involves offering discounts for purchasing multiple products together, optional product pricing involves offering optional add-ons at additional prices, and captive product pricing involves setting a low price for a main product and higher prices for necessary accessories.

Question 18

Tone Zone plans to introduce four mp3 player models over the next year. These models range from basic players at $99 per unit, to more sophisticated players at $399 per unit. The more features a model has, the more expensive it is. What pricing strategy is Tone Zone using for its range of mp3 players?
A) product line pricing
B) product bundle pricing
C) captive product pricing
D) by-product pricing
E) optional product pricing

Accepted Answer

Tone Zone is using product line pricing by offering different models at different price points based on the features included. This allows customers to choose the model that best fits their needs and budget.

Question 19

Which of the following product mix pricing strategies involves pricing additional/accessory products sold along with the main product?
A) inclusive product pricing
B) exclusive product pricing
C) by-product pricing
D) product bundle pricing
E) optional product pricing

Accepted Answer

Optional product pricing involves setting prices for additional or accessory products that are sold along with the main product, allowing customers to customize their purchase.

Question 20

Companies which set a low price for a new product in order to attract a large number of buyers and a large market share are using the ________ strategy.
A) market-skimming pricing
B) market-penetration pricing
C) cost-plus pricing
D) inclusive pricing
E) exclusive pricing

Accepted Answer

Market-penetration pricing involves setting a low price to encourage a large number of buyers and gain a significant market share. This strategy is often used for new products, as it helps to quickly establish the product in the market and attract early adopters.

Quiz 11: Pricing Strategies: Additional Considerations

Which of the following is true of market-penetration pricing?

A market-penetration pricing policy should LEAST likely be used for a new product when ________.

Which of the following is true of optional product pricing?

Companies set not a single price, but a pricing ________ which covers different items in its line and changes over time as products move through their life cycles.

Whizz Corp. wishes to introduce a new hybrid car into mature markets in developed countries with the goal of gaining mass-market share quickly. Which of the following pricing strategies would help the firm meet its goal?

A market-skimming pricing strategy should NOT be used for a new product when ________.

Electrowhip, a company that manufacturers blenders and electric whisks, has decided to use a market-penetration pricing strategy. Which of the following, if true, proves their decision to be a wise one?

When a company sets a high price for a new product with the intention of reducing the price in the future, it is using the ________ pricing strategy.

Multiprint, a printer manufacturing firm, sells ink cartridges for each of its specific models. Only Multiprint cartridges are compatible with Multiprint printers, and no two of the firm's models share the same specifications. What type of pricing does Multiprint use?

Which of the following product mix pricing strategies involves pricing products that must or can only be used with the main product?

Companies facing the challenge of setting prices for the first time can choose between two broad strategies: market-penetration pricing and ________.

Which of the following is true of price skimming?

Which of the following companies uses product line pricing?

Which of the following is true of product line pricing?

Which of the following product mix pricing strategies involves setting prices across an entire product range based on cost differences between the products, customer evaluations of different features, and competitors' prices?

Which of the following product mix pricing strategies involves pricing additional/accessory products sold along with the main product?

Companies which set a low price for a new product in order to attract a large number of buyers and a large market share are using the ________ strategy.