Question 1

Marketers have no flexibility in setting prices under conditions of

Accepted Answer

In a perfect competition market structure, there are many sellers and buyers, and no single seller can influence the market price. Prices are determined by the forces of supply and demand, leaving individual marketers with no flexibility in setting their prices.

Question 2

The ____ prohibits price fixing among firms in an industry.

Accepted Answer

The Sherman Antitrust Act prohibits price fixing among firms in an industry. It was passed in 1890 and is one of the oldest and most important antitrust laws in the United States. The law also prohibits other anticompetitive practices, such as market allocation and monopolization.

Question 3

Both the Federal Trade Commission Act and the Wheeler-Lea Act prohibit

Accepted Answer

The Federal Trade Commission Act and the Wheeler-Lea Act both aim to protect consumers from unfair or deceptive practices, including deceptive pricing.

Question 4

What type of discount is given to a business purchaser for performing activities such as transporting, storing, and selling?

Accepted Answer

Trade discounts are given to business purchasers for performing functions like transporting, storing, and selling.

Question 5

A price developed in the consumer's mind through experience with the product is called a(n)

Accepted Answer

Internal Reference Price is a price developed in the consumer's mind through experience with the product. This internalized price serves as a reference point for future purchase decisions, and consumers tend to evaluate current prices based on this reference price.

Question 6

Which of the following is not a discount provided to business customers?

Accepted Answer

All of the other options (trade, cumulative, cash, and seasonal) are commonly used types of discounts offered to business customers. Differentiated is not a commonly used term for a type of discount.

Question 7

The Panama Jack Company utilizes a special strategy to sell its ECO-shirt line. Its basic promotional tool is the discount. These discounts offered to middlemen for performing certain channel activities are referred to as ____ discounts.

Accepted Answer

Trade discounts are offered by manufacturers to middlemen to encourage certain channel activities, such as promoting a particular product line or achieving a certain sales volume. In this case, the Panama Jack Company is using discounts as a promotional tool for its ECO-shirt line, which falls under the category of trade discounts.

Question 8

If a company provides price differentials that harm competition by giving one or more buyers a competitive advantage, it is committing

Accepted Answer

Price discrimination occurs when a company charges different prices for the same product to different buyers, which can harm competition by giving certain buyers a competitive advantage. This is often illegal and can result in antitrust violations. Choices B, C, D, and E do not accurately describe the situation of a company providing price differentials that harm competition.

Question 9

Which of the following acts does not directly affect pricing decisions?

Accepted Answer

The Simpson-Marshall Act does not directly affect pricing decisions. It is a labor law that established the eight-hour workday for railroad workers. The other acts listed, such as the Sherman Antitrust Act, Federal Trade Commission Act, Wheeler-Lea Act, and Clayton Act, all have provisions related to pricing decisions and antitrust regulation.

Question 10

Buyers who focus on purchasing products that signify prominence and status are

Accepted Answer

Prestige-sensitive buyers focus on purchasing products that signify prominence and status, often associated with luxury and exclusivity.

Question 11

Laura Spangler, of North Central Novelties, reduces the price of games sold to Robertson's Entertainment by 10% to allow for expenses associated with Robertson's promoting the games to consumers. This is an example of a ____ discount.

Accepted Answer

This is an example of a trade discount, as it is given to encourage sales promotion and marketing efforts by the buyer, Robertson's Entertainment. Trade discounts are a common type of discount given to distributors or wholesalers who buy in bulk or help promote the seller's products. A cash discount is given for paying early, a quantity discount is given for buying in large quantities, a seasonal discount is given for buying during a specific time period, and a complementary discount is given for buying related products or services together.

Question 12

Provisions of the Robinson-Patman Act, as well as those of the ____, limit the use of price differentials.

Accepted Answer

The Robinson-Patman Act and the Clayton Act both limit the use of price differentials. The Robinson-Patman Act prohibits price discrimination among customers, while the Clayton Act prohibits exclusive dealing arrangements and tying contracts that can create price differentials between competitors.

Question 13

Nicole is out shopping with her friends for the day. While evaluating a decision to purchase a handbag, she says, "People notice when you buy the most expensive brand of a product." Nicole is most likely a _____ consumer.

Accepted Answer

Nicole's statement indicates that she is concerned with the image or status associated with the brand she purchases, which suggests that she is a prestige-sensitive consumer who places a high value on the perceived reputation or exclusivity of products.

Question 14

Vanessa is shopping for a new pair of athletic shoes. Since she is concerned about both the price and the quality aspects of a product, Vanessa is most likely a ___ consumer.

Accepted Answer

Vanessa is concerned about both price and quality, indicating that she wants to get the most value for her money. Therefore, she is a value-conscious consumer.

Question 15

Monopolies usually keep their prices at a level that generates a reasonable, but not excessive, return primarily because

Accepted Answer

Monopolies often keep prices at a reasonable level to avoid attracting government scrutiny and potential regulation, which could occur if they are perceived as exploiting their market power excessively.

Question 16

ACE Electronics introduces a new voice-activated personal computer that no longer requires a keyboard. ACE charges the high price of $11,000 per unit, thus generating large profits because it has a 20% market share. ACE's major problem in the future will most likely be

Accepted Answer

ACE Electronics' high price and 20% market share will likely attract competitors who will offer lower prices and possibly better features. This may lead to a decrease in ACE's market share and profit margins, making competition their major problem in the future.

Question 17

When a customer is considering the purchase of a product in a less-familiar product category, that individual is likely to rely more heavily on

Accepted Answer

When a customer is considering the purchase of a product in a less-familiar product category, they are likely to rely more heavily on external reference prices, such as pricing information from similar products and competitive brands. This allows them to evaluate the value of the product and make a more informed purchase decision. Internal reference prices (A) may not be applicable in this situation as the customer may not have prior experience with the product category, while symbol prices (B) and high value products (C) may not necessarily provide relevant pricing information. Discounted reference prices (D) may also not be applicable if the customer is unfamiliar with the product category and therefore may not view discounts as significant.

Question 18

Lucy buys a new dress at T.J. Maxx that has a price tag with "Compare at $150.00. Our Price $89.99." This is an example of the use of

Accepted Answer

The price tag with "Compare at $150.00. Our Price $89.99" is an example of an external reference price, as it compares the original or reference price of the item (in this case, $150.00) to the sale or discounted price (in this case, $89.99) offered by T.J. Maxx.

Question 19

If Ralph Lauren offers to reduce the price of its women's blazers when retailers buy more than 100 pieces, the designer is offering a ____ discount.

Accepted Answer

A quantity discount is offered based on the amount of products purchased. In this case, Ralph Lauren is offering a discount to retailers who buy more than 100 pieces of women's blazers.

Question 20

Which of the following prohibits price discrimination that lessens competition among wholesalers and retailers?

Accepted Answer

The Robinson-Patman Act prohibits price discrimination that lessens competition among wholesalers and retailers. The Sherman Antitrust Act prohibits illegal monopolies and restraints of trade, the Lanham Trademark Act governs trademark law, the Federal Trade Commission Act created the Federal Trade Commission to regulate unfair methods of competition, and the Wheeler-Lea Act prohibits unfair or deceptive acts or practices.

Quiz 19: Pricing Concepts