Question 1

If Canon Camera Company follows a low-price,low-margin strategy for a product,what will competitors most likely do?
A) They will decide to decide to target underserved niches.
B) They will want to compete in the same markets against Canon.
C) They will advertise less.
D) They will advertise more.
E) none of the above

Accepted Answer

Competitors are likely to target underserved niches to avoid direct price competition with Canon's low-price, low-margin strategy.

Question 2

A company faces fixed costs of $100,000 and variable costs of $8.00/unit.It plans to directly sell its product to the market for $12.00.How many units must it produce and sell to break even?
A) 20,000
B) 25,000
C) 40,000
D) 50,000
E) not enough information to calculate

Accepted Answer

To break even, total revenue must equal total costs. The break-even point in units is calculated as Fixed Costs / (Selling Price per Unit - Variable Cost per Unit) = $100,000 / ($12 - $8) = 25,000 units.

Question 3

Jimmy's Hardware,an independent local retailer,is losing business to Wal-mart.This is most likely because he cannot match Wal-mart's pricing strategy of ________.
A) EDLP
B) EFGF
C) fixed prices
D) value-added pricing
E) skimming pricing

Accepted Answer

Wal-mart's pricing strategy is often based on Every Day Low Prices (EDLP), which means they offer consistently low prices without relying on frequent sales or discounts. Jimmy's Hardware may not be able to match these low prices consistently, causing customers to shop at Wal-mart instead.

Question 4

Consumers usually perceive higher-priced products as ________.
A) out of reach for most people
B) having more allure
C) having target-cost prices
D) having cost-based prices
E) being in the introductory stage of the product life cycle

Accepted Answer

Consumers usually perceive higher-priced products as having more allure, which can make them seem more desirable or premium.

Question 5

Consumers who have less time and patience for watching for supermarket specials and clipping coupons would most likely prefer ________.
A) variable pricing
B) high-low pricing
C) EDLP
D) break-even pricing
E) value-added pricing

Accepted Answer

Consumers who have less time and patience would most likely prefer Every Day Low Pricing (EDLP), which offers consistent low prices on products rather than having to wait for sales or use coupons. This pricing strategy would allow them to save money without having to invest a lot of time into finding deals.

Question 6

Performance Motors prices its automobiles to achieve a 15 to 20 percent profit on its investment.This approach is called ________.
A) value-based pricing
B) going-rate pricing
C) cost-plus pricing
D) low-price image
E) target profit pricing

Accepted Answer

Target profit pricing is a pricing strategy where a company sets prices to achieve a specific profit margin or target profit, in this case, 15 to 20 percent.

Question 7

A manufacturer is trying to determine its break-even volume.With fixed costs of $100,000,a variable cost of $10,and expected sales of 50,000 units,what should the manufacturer's unit cost be to break even?
A) $10
B) $12
C) $16
D) $20
E) none of the above

Accepted Answer

The answer of A manufacturer is trying to determine its...

Question 8

________ pricing works only if that price actually brings in the expected level of sales.
A) Elasticity
B) Markup
C) Variable
D) Inelasticity
E) Target profit

Accepted Answer

Target profit pricing is based on setting a price that will generate a specific level of profit. However, this pricing strategy only works if the price is set at a level that will actually result in the expected level of sales. If the price is too high and results in low sales, or if the price is too low and results in high costs, then the target profit may not be achieved.

Question 9

If demand falls by 1 percent when price is increased by 2 percent,then ________.
A) elasticity is -1/2
B) demand is inelastic
C) demand is elastic
D) buyers are not price sensitive
E) A and B

Accepted Answer

The answer of If demand falls by 1 percent when...

Question 10

Refer to the scenario below to answer the following questions.
Pensonic Manufacturing produces small kitchen appliances-blenders, hand mixers, and electric skillets. Pensonic attempts to target newlyweds and first-time home buyers with this brand, under a market share leadership strategy.
In considering that most young households have limited financial resources, Pensonic has attempted to engage in target costing. "In doing this," Pensonic's manager Abdul Razak stated, "we have better control over keeping price right in line with customers."
Pensonic manufactures a three-speed blender, its top seller, and a five-speed blender. The hand mixers are manufactured in two styles-a small hand-held mixer with two rotating beaters and a similar style that comes with an optional stand and attached mixing bowl. Alden's temperature-controlled skillets are manufactured in one style with three color options.
"Our product offerings are narrower," Abdul Razak added, "but our line workers know each product like the back of their hands. This allows us to produce superior products while holding our prices low."
-If Abdul raises the price on the handheld mixer by 2 percent and quantity demanded falls by 10 percent,what is the price elasticity of demand?
A) -5
B) -8
C) -12
D) 5
E) 12

Accepted Answer

Price elasticity of demand = percentage change in quantity demanded / percentage change in price

Here, the price change is 2% and the quantity demanded falls by 10%.

Percentage change in price = 2% 
Percentage change in quantity demanded = -10%

Price elasticity of demand = (-10%) / (2%) = -5

Therefore, the price elasticity of demand is -5.

As for the best choice, the scenario does not provide any specific question or decision to be made. Therefore, it is impossible to determine a best choice.

Question 11

When companies de-emphasize price and use other marketing mix tools in their marketing campaigns,they are focused on being more competitive through ________.
A) target costing
B) value pricing
C) cost-plus pricing
D) a non-price position
E) skimming pricing

Accepted Answer

When companies de-emphasize price and use other marketing mix tools in their marketing campaigns, they are adopting a non-price position strategy. This strategy focuses on non-price elements such as quality, features, design, or customer service to differentiate a product from that of competitors without relying on price as the main competitive advantage. This can enhance the perceived value of the product and build customer loyalty, which can result in long-term profitability for the company.

Question 12

Refer to the scenario below to answer the following questions.
Pensonic Manufacturing produces small kitchen appliances-blenders, hand mixers, and electric skillets. Pensonic attempts to target newlyweds and first-time home buyers with this brand, under a market share leadership strategy.
In considering that most young households have limited financial resources, Pensonic has attempted to engage in target costing. "In doing this," Pensonic's manager Abdul Razak stated, "we have better control over keeping price right in line with customers."
Pensonic manufactures a three-speed blender, its top seller, and a five-speed blender. The hand mixers are manufactured in two styles-a small hand-held mixer with two rotating beaters and a similar style that comes with an optional stand and attached mixing bowl. Alden's temperature-controlled skillets are manufactured in one style with three color options.
"Our product offerings are narrower," Abdul Razak added, "but our line workers know each product like the back of their hands. This allows us to produce superior products while holding our prices low."
-Abdul Razak says that his line workers "know each product like the back of their hands," and that this knowledge helps the company keep its prices low.This indicates that Pensonic Manufacturing most likely uses which of the following strategies?
A) cost-plus pricing
B) value-added pricing
C) the experience curve
D) cost-based pricing
E) target profit pricing

Accepted Answer

Pensonic Manufacturing's focus on narrow product offerings and in-depth knowledge of each product by its line workers suggests the use of the experience curve strategy, which involves using accumulated knowledge and experience to lower production costs and improve quality. This strategy aligns with Pensonic's goal of producing superior products while keeping prices low, especially for its target market of young households with limited financial resources. Cost-plus pricing, value-added pricing, cost-based pricing, and target profit pricing are pricing strategies that focus on setting prices based on different cost or profit factors, and are not necessarily related to manufacturing efficiency or product knowledge.

Question 13

In _____________,sellers try to develop differentiated offers for different customer segments and,in addition to price,freely use branding,advertising,and personal selling to set their offers apart.
A) pure competition
B) pure monopoly
C) monopolistic competition
D) oligopolistic competition
E) None of the above.

Accepted Answer

Monopolistic competition is characterized by differentiated offers where sellers use branding, advertising, and personal selling to set their offers apart. In pure competition, all sellers offer the same product and cannot differentiate their offers, while in pure monopoly, there is only one seller in the market. Oligopolistic competition is characterized by a small number of large firms competing in the market. Hence, the best choice for the given question is C.

Question 14

Refer to the scenario below to answer the following questions.
Pensonic Manufacturing produces small kitchen appliances-blenders, hand mixers, and electric skillets. Pensonic attempts to target newlyweds and first-time home buyers with this brand, under a market share leadership strategy.
In considering that most young households have limited financial resources, Pensonic has attempted to engage in target costing. "In doing this," Pensonic's manager Abdul Razak stated, "we have better control over keeping price right in line with customers."
Pensonic manufactures a three-speed blender, its top seller, and a five-speed blender. The hand mixers are manufactured in two styles-a small hand-held mixer with two rotating beaters and a similar style that comes with an optional stand and attached mixing bowl. Alden's temperature-controlled skillets are manufactured in one style with three color options.
"Our product offerings are narrower," Abdul Razak added, "but our line workers know each product like the back of their hands. This allows us to produce superior products while holding our prices low."
-Abdul Razak uses a target costing strategy.Which of the following is he most likely to do in executing this strategy?
A) base his price on competitors' prices
B) use everyday low pricing
C) use a break-even chart to determine pricing
D) start with customer-value considerations
E) start by determining the costs of a new product

Accepted Answer

Target costing involves starting with customer-value considerations and determining the cost that can be incurred to meet that value. This allows for better control over keeping prices in line with customers, as stated by Abdul Razak. Therefore, starting with customer-value considerations is the best option for executing a target costing strategy.

Question 15

If Canon Camera Company follows a high-price,high-margin strategy,what will competitors such as Nikon,Minolta,and Pentax most likely do?
A) They will go out of business.
B) They will want to compete against Canon.
C) They will advertise less.
D) They will bundle their products.
E) none of the above

Accepted Answer

Competitors such as Nikon, Minolta, and Pentax would most likely want to compete against Canon by either differentiating their products or lowering their prices to attract customers who are price-sensitive. They may also invest in advertising to communicate their unique value propositions compared to Canon. It is unlikely that they would go out of business, bundle their products, or advertise less since these actions may not effectively address the challenge posed by Canon's high-price, high-margin strategy.

Question 16

If an individual store cannot charge more than the going price without the risk of losing business to other stores,it is in a _____________type of market?
A) pure competition
B) monopolistic competition
C) oligopolistic competition
D) pure monopoly
E) socialist

Accepted Answer

In a pure competition market, many sellers offer identical products, and no single seller can influence the market price, so they must accept the going price.

Question 17

Companies are fortunate to have demand that is more ________ because they may be able to set higher prices.
A) elastic
B) external
C) internal
D) inelastic
E) fixed

Accepted Answer

When demand for a product or service is inelastic, it means that consumers are willing to pay a higher price for it, and the quantity demanded does not change significantly in response to changes in price. This gives companies the ability to set higher prices without fearing a significant drop in sales. Therefore, companies are fortunate to have inelastic demand because it allows them to potentially increase their profits.

Question 18

In competition-based pricing,_________ will base their judgments of a product's value on the prices that competitors charge for similar products.
A) competitors
B) consumers
C) producers
D) manufacturers
E) clients

Accepted Answer

Competition-based pricing involves setting prices based on the prices charged by competitors for similar products. Therefore, the primary focus of this pricing strategy is to appeal to consumers and gain a competitive advantage.

Question 19

When Honda set out to design the Fit,it began with a $13,950 starting price point and an operating efficiency of 15 kilometers per liter as its goals.It then designed a stylish,peppy little car with costs that allowed it to give target customers those values.The unorthodox order of this marketing mix decision is an example of ________.
A) competition-based pricing
B) cost-plus pricing
C) target costing
D) value-based pricing
E) penetration pricing

Accepted Answer

The unorthodox order of setting a target cost and then designing the car to fit within that cost is an example of target costing. This approach involves starting with the desired selling price and subtracting the desired profit margin to arrive at the target cost. The product is then designed to meet that cost while still delivering the desired value to the customer.

Question 20

As a manufacturer decreases price,________ volume increases.
A) target
B) break-even
C) cost-plus pricing
D) total cost
E) sales

Accepted Answer

The answer of As a manufacturer decreases price,________ volume increases.
A)...

Quiz 10: Pricing Products: Understanding and Capturing Customer Value

If Canon Camera Company follows a low-price,low-margin strategy for a product,what will competitors most likely do?

A company faces fixed costs of $100,000 and variable costs of $8.00/unit.It plans to directly sell its product to the market for $12.00.How many units must it produce and sell to break even?

Jimmy's Hardware,an independent local retailer,is losing business to Wal-mart.This is most likely because he cannot match Wal-mart's pricing strategy of ________.

Consumers usually perceive higher-priced products as ________.

Consumers who have less time and patience for watching for supermarket specials and clipping coupons would most likely prefer ________.

Performance Motors prices its automobiles to achieve a 15 to 20 percent profit on its investment.This approach is called ________.

A manufacturer is trying to determine its break-even volume.With fixed costs of $100,000,a variable cost of $10,and expected sales of 50,000 units,what should the manufacturer's unit cost be to break even?

________ pricing works only if that price actually brings in the expected level of sales.

If demand falls by 1 percent when price is increased by 2 percent,then ________.

When companies de-emphasize price and use other marketing mix tools in their marketing campaigns,they are focused on being more competitive through ________.

In _____________,sellers try to develop differentiated offers for different customer segments and,in addition to price,freely use branding,advertising,and personal selling to set their offers apart.

If Canon Camera Company follows a high-price,high-margin strategy,what will competitors such as Nikon,Minolta,and Pentax most likely do?

If an individual store cannot charge more than the going price without the risk of losing business to other stores,it is in a _____________type of market?

Companies are fortunate to have demand that is more ________ because they may be able to set higher prices.

In competition-based pricing,_________ will base their judgments of a product's value on the prices that competitors charge for similar products.

As a manufacturer decreases price,________ volume increases.