chapter 10

The amount of something (money, time, or effort) that a buyer exchanges with a seller to obtain a product is referred to in marketing terms as A. renumeration. B. value. C. price. D. fee. E. worth.

c

The degree to which the price of a product affects consumers' purchasing behavior is referred to as A. price elasticity. B. dynamic pricing. C. price sensitivity. D. marginal pricing. E. price relevance.

c

The price strategy of unbundling involves A. adding a certain amount to the cost of each item in a product set. B. pricing products a few cents below the next dollar amount. C. separating out the individual goods that make up a product and pricing each one individually. D. placing two or more products together in a package and selling them at a single price. E. constantly updating prices to reflect changes in supply or demand.

c

A measure of price sensitivity that gives the percentage change in quantity demanded in response to a percentage change in price is known as A. price elasticity of demand. B. break-even analysis. C. profit maximization. D. price elasticity of supply. E. marginal revenue.

a

What are two of the most common and effective strategies marketers can use for raising prices? A. unbundling and escalator clauses B. reference pricing and unbundling C. markup pricing and escalator clauses D. prestige pricing and dynamic pricing E. odd pricing and prestige pricing

a

What is marginal revenue? A. the change in total revenue that results from selling one additional product unit B. a percentage change in price that results from a change in quantity demanded C. the total change in revenue that results from a large change in product price D. the change in total revenue that results from producing one additional unit E. the total change in revenue that results from a small change in product price

a

Which of the following accurately describes break-even analysis? A. the process of calculating the sales volume needed to achieve a profit of zero B. the process of calculating the point at which fixed costs and variable costs are equal C. the process of calculating the difference between marginal revenue and marginal cost D. the process of calculating the percentage change in quantity demanded in response to a percentage change in price E. the process of calculating how many units of product must be sold to cover fixed costs

a

Which of the following is a variable cost? A. delivery cost B. salaries C. advertising cost D. insurance E. rent

a

Which of the following provides the best source of information for marketers regarding how high they can price a product before customers stop considering the product a good value? A. salespeople B. sales forecasts C. historical pricing data D. advertising staff E. customer service personnel

a

According to your text, one of the most common mistakes in modern pricing is A. failing to correctly calculate the break-even point. B. charging someone less than they are willing to pay. C. covering fixed costs while ignoring variable costs. D. setting the price too high on an introductory product. E. pricing items based on consumers' reference prices.

b

According to your text, pricing resembles a game of A. checkers. B. chess. C. cards. D. blackjack. E. roulette.

b

Consumers will be more price sensitive when A. some or all of the purchase price is paid by others. B. the price they have to pay is more than they anticipated. C. the cost of not getting the expected benefits of a purchase is high. D. a product's price is within the range that they perceive as fair or reasonable. E. they perceive the price as a gain rather than a forgone loss.

b

Volume maximization is also referred to as A. price skimming. B. penetration pricing. C. profit maximization. D. survival pricing. E. target pricing.

b

Which of the following is NOT a fixed cost? A. rent B. material C. salaries D. insurance E. advertising costs

b

In the price-setting process, the next step after demand has been evaluated is to A. define the pricing objectives. B. analyze the competitive price environment. C. determine the costs. D. choose a price. E. evaluate the alternatives.

c

What can be said regarding the role of industry structure on setting price? A. In industry in which there are many buyers and sellers, the pricing impact of any single firm will be quite large. B. In an industry in which there are many buyers and sellers, firms will typically match the price of competitors. C. In an industry in which there are many buyers and sellers, the pricing impact of any single firm will be fairly small. D. In an industry in which a small number of firms compete, the pricing impact of any single firm will be fairly small. E. Marketers should make pricing decisions irrespective of whether there are many or few competitors in the industry.

c

Compare the following statements and select the one that is accurate regarding a profit maximization strategy. A. For a profit maximization strategy to work over the long term, the firm must have a significant cost or resource advantage over competitors. B. A profit maximization strategy sets prices low to encourage a greater volume of purchases and lower the level of involvement for the consumer. C. Profit maximization should not be used as a permanent pricing objective, but is effective in allowing a firm to endure a difficult time. D. A profit maximization strategy is best used when a product is in the growth and maturity stage of the product life cycle. E. Profit maximization assumes that customers value a product's differentiating attributes and are willing to pay a higher price to take advantage of those attributes.

e

One of the most important concepts in marketing is the price elasticity of demand, which is the A. degree to which the price of a product affects consumers' purchasing behavior. B. point at which the costs of producing a product equal the revenue made from selling the product. C. price that consumers consider reasonable and fair for a product. D. percentage a product is marked up in response to consumer demand. E. percentage change in quantity demanded in response to a percentage change in price.

e

One of the most important strategic decisions a firm faces is _______ because it reflects the value the product delivers to consumers as well as the value it captures for the firm. A. advertising B. promotion C. profit management D. production management E. pricing

e

Scotts Fertilizer has a 4-step program for lawn care. Each step features a different product. Scotts sells the fertilizer as a set containing one bag of each of the 4-step products. If Scotts decided to sell each product individually rather than as a set, it would be an example of which pricing strategy? A. dumping B. dynamic pricing C. minimal pricing D. underpricing E. unbundling

e

Since consumers have the tendency to compare prices on almost everything they buy, marketers should attempt to capitalize on this tendency when setting prices by determining the price consumers will consider fair and reasonable for a product. This is known as the A. benchmark price. B. break-even point. C. dynamic price. D. reasonable price. E. reference price.

e

The first step in the price-setting process is to A. evaluate demand. B. determine the costs. C. analyze the competitive price environment. D. define the pricing objectives. E. compare alternatives.

d

Variable costs are defined as costs that A. vary depending on the type of material used in production. B. change only during economic downturns. C. remain constant even though the product offering varies. D. vary depending on the number of units produced or sold. E. vary depending on the advertising budget for the product.

d

Which of the following statements regarding break-even analysis is TRUE? A. Break-even analysis does not measure the cost of sales. B. Break-even analysis is an accurate measure of fixed costs. C. Break-even analysis is an accurate measure of variable costs. D. Break-even analysis does not measure price sensitivity. E. Break-even analysis reflects how demand may be affected at different price levels.

d