ch. 11 mkt 4

In ________ pricing, the firm bases its price largely on competitor's prices. A) going-rate B) auction-type C) markup D) target-return E) perceived-value

A) going-rate

Which of the following is most likely to be a valid reason for initiating a price increase? A) anticipated cost inflation B) excess plant capacity C) a drive to dominate the market D) a low-cost strategy E) a market share objective

A) anticipated cost inflation

________ pricing takes into account a host of inputs, such as the buyer's image of the product performance, the channel deliverables, the warranty quality, customer support, and attributes such as the supplier's reputation, trustworthiness, and esteem. A) Perceived-value B) Value C) Going-rate D) Auction-type E) Markup

A) Perceived-value

ConAgra Foods decided its prices had risen too high, so it determined to set a lower price for its products. To make the new price level profitable, ConAgra cut $250 million in costs. What application of cost estimation did this represent? A) target costing B) experience-curve pricing C) ceiling pricing D) the learning curve E) promotional price elasticities

A) target costing

Which of the following is TRUE regarding price elasticity? A) The higher the elasticity, the lesser the volume growth resulting from a one-percent price reduction. B) Long-run and short-run price elasticity may differ, delaying the impact of a price change. C) If demand is elastic, sellers assume that lowering the price will decrease total revenue. D) Price elasticity does not depend on magnitude and direction of the contemplated price change. E) When demand is inelastic, sellers should lower prices in order to increase total revenue.

B) Long-run and short-run price elasticity may differ, delaying the impact of a price change.

________ auctions let would-be suppliers submit only one bid; they cannot know the other bids. A) Descending bid B) Sealed-bid C) English D) Dutch E) Reverse

B) Sealed-bid

When supermarkets and department stores drop the price on well-known brands to stimulate store traffic, they are said to be following ________ pricing. A) value B) loss-leader C) special event D) high-low E) everyday low

B) loss-leader

A manufacturer has invested $750,000 in a new product and wants to set a price to earn a 15 percent ROI. The cost per unit is $18 and the company expects to sell 50,000 units in the first year. Calculate the company's target-return price for this product. A) $18.10 B) $18.23 C) $20.25 D) $20.70 E) $25.50

C) $20.25

________ are offered by a manufacturer to trade-channel members if they will perform certain functions, such as selling, storing, and record keeping. A) Consumer promotions B) Quantity discounts C) Functional discounts D) Seasonal discounts E) Trade-in allowances

C) Functional discounts

________ reward dealers for participating in advertising and sales support programs. A) Functional discounts B) Trade discounts C) Promotional allowances D) Rebates E) Quantity discounts

C) Promotional allowances

In which of the following forms of countertrade do buyers and sellers directly exchange goods, with no money and no third party is involved? A) buyback arrangements B) offsets C) barter D) sealed bids E) compensation deals

C) barter

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.

D) It should determine the demand for its product.

When hotels, motels, and airlines offer discounts in slow selling periods, they are said to be offering ________. A) trade discounts B) quantity discounts C) functional discounts D) seasonal discounts E) trade-in allowances

D) seasonal discounts

Everyday low pricing is most suitable if ________. A) consumers are willing to perform activities such as clip coupons to avail of discounts B) consumers tend to associate price with quality C) customers are insensitive to changes in price D) the cost of conducting frequent sales and promotions is high E) consumers have sufficient time to find the best prices

D) the cost of conducting frequent sales and promotions is high

Prices that end in 9 are most appropriate when ________. A) customers have substantial knowledge about quality B) customers process prices right to left C) there is a mental price break at the lower, rounded price D) the marketer wants to suggest a discount or bargain E) the marketer wants to convey a high-price image

D) the marketer wants to suggest a discount or bargain

For price discrimination to work ________. A) the market must be segmentable and the segments must show similar intensities of demand B) members in the lower-price segment must be able to resell the product to the higher-price segment C) competitors must be able to undersell the firm in the higher-price segment D) the practice must not breed customer resentment and ill will E) the extra revenue derived from price discrimination must not exceed the cost of segmenting and policing the market

D) the practice must not breed customer resentment and ill will

An umbrella manufacturing company's fixed costs are $275,000. The variable cost per unit is $5 and each umbrella is sold at $10. How many units should the firm sell in order to break even? A) 1,819 B) 5,500 C) 18,000 D) 27,500 E) 55,000

E) 55,000

Which of the following is a possible trap of a price-cutting strategy? A) Low prices usually achieve increases in both market share and market loyalty when customers switch. B) The company might need additional business because it has excess plant capacity. C) The company can initiate price cuts to dominate the market through lower costs. D) Consumers might not demand price concessions in the future. E) Competitors that match low prices might have longer staying power because of deep cash reserves.

E) Competitors that match low prices might have longer staying power because of deep cash reserves.

A Japanese firm is ready to sell its recent technological innovation to the U.S. government. But it has asked for 80 percent in cash and the rest in mica. The Japanese firm is looking to enter into a(n) ________ with the U.S. government. A) functional discount B) compensation deal C) buyback arrangement D) offset agreement E) barter deal

B) compensation deal

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 does this image pricing suggest about these consumers? A) They process prices from left to right. B) They use the price as an indicator of quality. C) They are rounding up the price. D) They are remembering an external frame of reference. E) They are breaking the price into smaller units.

B) They use the price as an indicator of quality.

ROC Engineering, a Chinese shipbuilding company, agrees to build a fleet of submarines for the Sri Lankan navy, for which it will be paid in the local Sri Lankan currency. As per the agreement, ROC must also spend a substantial amount of the money it generates through this deal within the country. In accordance with the contract, ROC buys Sri Lankan tea at a reduced rate. This is an example of which of the following forms of countertrade? A) descending bid B) offset C) barter D) compensation deal E) buyback arrangement

B) offset

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

B) production and distribution costs fall with accumulated production experience

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

B) reference

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

B) selecting the pricing objective

Which of the following would NOT be a consumer's reference price? A) the advertised price per month B) the actual future price C) a price the consumer remembers D) a posted "regular retail price" E) the manufacturer's suggested price

B) the actual future price

When museums charge a lower admission fee to students and senior citizens, this form of pricing is known as ________. A) perceived value pricing B) third-degree price discrimination C) first-degree price discrimination D) second-degree price discrimination E) psychological discounting

B) third-degree price discrimination

The airline and hospitality industries use ________, by which they offer discounted but limited early purchases, higher-priced late purchases, and the lowest rates on unsold inventory just before it expires. A) special-customer pricing B) yield pricing C) cash rebates D) location pricing E) customer-segment pricing

B) yield pricing

Matt's retail store offers all products at $2 less than its competitors. The store never runs promotional campaigns or offers special discounts. Matt's retail store is following a(n) ________ pricing policy. A) auction-type B) target-plus C) everyday low D) high-low E) going-rate

C) everyday low

If demand hardly changes with a small change in price, the demand is said to be ________. A) strained B) marginal C) inelastic D) flexible E) unit elastic

C) inelastic

The decline in the average cost of production with accumulated production experience is called the ________. A) demand curve B) supply chain C) learning curve D) value chain E) indifference curve

C) learning curve

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 had come down to $399. What kind of a pricing did Apple adopt? A) loss-leader pricing B) market-penetration pricing C) market-skimming pricing D) target-return pricing E) value pricing

C) market-skimming pricing

Which of the following is the most elementary pricing method? A) value pricing B) going-rate pricing C) markup pricing D) target-return pricing E) perceived-value pricing

C) markup pricing

A firm that is plagued with overcapacity, intense competition, or changing consumer desires 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

C) survival

Despite its weaknesses, markup pricing remains popular for which of the following reasons? A) Sellers can determine demand much more easily than they can estimate costs. B) By tying the price to cost, the pricing task becomes more sophisticated. C) When all firms in the industry use markup pricing, price competition flourishes. D) Sellers take advantage of buyers when the latter's demand becomes acute. E) Many people feel that cost-plus pricing is fairer to both buyers and sellers.

E) Many people feel that cost-plus pricing is fairer to both buyers and sellers.

In which of the following auctions does the auctioneer first announce a high price for a product and then slowly decreases the price until a bidder accepts? A) a Dutch auction with one buyer and many sellers B) an English auction with one seller and many buyers C) an ascending bid auction D) a sealed-bid auction E) a Dutch auction with one seller and many buyers

E) a Dutch auction with one seller and many buyers

What would a consumer's lower price threshold signal? A) the use of everyday low pricing B) a discounted price for a high-value product C) a fair price D) a price below which the product is considered to be a good value E) a price below which the product is assumed to be of unacceptable quality

E) a price below which the product is assumed to be of unacceptable quality

In markets that are characterized by products that are highly homogeneous, how should a firm react to a competitor's reduction in price? A) shrink the amount of the product available B) substitute expensive materials or ingredients C) reduce product features D) reduce product services E) augment the product

E) augment the product

In ________, the seller charges a separate price to each customer depending on the intensity of his or her demand. A) second-degree price discrimination B) third-degree price discrimination C) psychological discounting D) special-customer pricing E) first-degree price discrimination

E) first-degree price discrimination

JJ's Hair Salon pays overhead each month, including bills for rent, heat, interest, and salaries. These payments are examples of ________ costs. A) total B) average C) activity-based D) variable E) fixed

E) fixed

Consumers are less price sensitive when ________. A) they buy high cost items B) they frequently change their buying habits C) there are more substitutes D) there are more competitors E) they do not readily notice higher prices

E) they do not readily notice higher prices