Chapter 14 - Pricing Concepts for Capturing Value (Smartbook)

otal cost is ______. fixed costs divided by variable costs variable costs times fixed costs variable costs minus fixed costs variable costs plus fixed costs

variable costs plus fixed costs

A demand curve shows that a company will sell 10,000 units if it prices its new product at $200 per unit, but it will sell 20,000 units if it reduces the price to $75. If the company wants to maximize profits, what should it price the new product at? $50 $200 $75 $275

$200

Select all that apply Assuming the economy and other factors stay the same, a downward-sloping demand curve for a product shows which of the following? As price increases, demand increases. As price decreases, demand increases. As price decreases, demand decreases. As price increases, demand decreases.

As price increases, demand increases. As price increases, demand decreases.

True or false: A firm with a primary objective of very high sales growth will have the same pricing strategy as a firm with a primary objective of being a quality leader.

False

Select all that apply Strategies that can be used as part of the profit orientation strategy include which of the following? Value-based pricing Maximizing profits Target profit pricing Competitive parity

Maximizing profits Target profit pricing

______ makes up one of the Cs of the five Cs of pricing. The customer Council professionals Company staff Channel flexibility

The customer

True or false: Customers are one of the five Cs of pricing.

True

Select all that apply Channel members include which of the following? Wholesalers Manufacturers Consumers Retailers

Wholesalers Manufacturers Retailers

The five Cs of pricing include ______. customer salaries company objectives cost uniqueness channel dynamics

company objectives

One of the five Cs of pricing is ______. competition company knowledge customer advantage cost saving

competition

The five Cs of pricing are company objectives, customers, cost, channel members, and _____

competition

The graph that shows how many units of a product or service consumers will want during a specific period at different prices is known as the ______ curve. consumer price versus sales demand supply

demand

When a 10% decrease in price produces more than a 10% increase in quantity sold, the product or service is responsive to price changes and is considered to be ______. unaffected in high demand elastic inelastic

elastic

When the price of DVD players drops, theoretically based on demand elasticity, the demand for DVDs is likely to ______. remain unchanged increase decrease first increase then decrease

increase

The equation for price elasticity of demand is the percentage change in quantity demanded divided by percentage change in ______. price profits perceptions supply

price

The overall sacrifice a consumer is willing to make to acquire a product or service is known as ______

price

To achieve target profit pricing, a company uses ______ to stimulate sales at a specific profit level.

price

The ratio of change in a price and its effect on the quantity of the product demanded is known as ______. price elasticity of supply prestige products and services price elasticity of demand the downward-sloping demand curve

price elasticity of demand

Select all that apply If McDonald's reduces the price of a Big Mac by 25% and sales increase by more than 50%, the firm could describe demand as which of the following? price sensitive inelastic price insensitive elastic

price sensitive elastic

By focusing on target profit pricing, maximizing profits, or target return pricing, a firm is implementing a ______ orientation. sales profit customer competitor

profit

Sometimes firms selling a pioneering product will set a very low price in order to attract many customers before competitors enter the market. This is an example of a ______ orientation. competitor customer profit sales

sales

Firms that believe increasing volume of sales will help the firm more than increasing profits use the ______ strategy. profit-oriented sales-oriented repeat-return competitor-oriented

sales-oriented

Compared to other company objectives, a sales-oriented firm ______. sets market share gains as a priority works to reach a particular profit goal sets prices very low to generate new sales, even if profits suffer bases its prices on the prices charged by other firms in the market

sets prices very low to generate new sales, even if profits suffer

Select all that apply A firm may set low prices to: take market share away from competitors encourage new competitors to the market discourage firms from entering the market encourage current firms to leave the market expand the entire market for additional firms

take market share away from competitors discourage firms from entering the market encourage current firms to leave the market

When a firm is aiming for a particular amount of profit as its overriding concern, it usually implements ______. target return pricing premium pricing target profit pricing the maximizing profits strategy

target profit pricing

When a firm uses a mathematical model to identify the price at which the firm will make the most money possible, it is implementing ______. competitive parity the target profit pricing strategy the target return pricing strategy the maximizing profits strategy

the maximizing profits strategy

Price is best defined as ______. the consumer's break-even point the last element of the marketing mix a consumer will always agree with the overall sacrifice a consumer is willing to make to acquire a specific product or service the overall sacrifice a consumer will make to obtain one of the five Cs

the overall sacrifice a consumer is willing to make to acquire a specific product or service

The _____ is fixed costs plus the sum of the variable costs. profit margin net contribution per unit total cost break-even point

total cost

Select all that apply Break-even analysis examines the relationships between which of the following? Price Unions Cost Value

Price Cost

The percentage change in the quantity of one product demanded compared with the percentage change in price in another product is called _______-price elasticity.

cross

Competition, channel members, costs, customers, and company objectives are the five critical components of ______. pricing quality variety promotion

pricing

When firms compete by lowering price at retail, they are engaged in ______. a price war monopolistic pricing oligopolistic pricing pure pricing

a price war

A _____ _______ occurs when oligopolistic companies compete with each other by repeatedly lowering their prices.

price war

The five Cs of pricing include ______. channel members company taxes cost savings competitor staffing

channel members

Suppose the variable cost per unit of a firm is $10, fixed costs are $1,000,000, and expected sales are 50,000 units. If the firm wants to achieve a markup of 10% of cost, then the target return price of the firm is _____. $2 $8.3 $12.2 $10.1

$12.2

Select all that apply Which of the following are considered part of the five Cs of pricing? Channel members Company objectives Charter membership Change management Competition Customers

Channel members Company objectives Competition Customers

Which of the following theories is the maximizing profits strategy based on? Political Psychological Economic Social

Economic

Which of the following do you need to know to calculate target return price? (Select all that apply.) Fixed costs Expected unit sales Variable costs Break-even point

Fixed costs Expected unit sales Variable costs

Target return pricing is an example of what type of orientation? Profit Customer Competitor Sales

Profit

Select all that apply Which of the following accurately characterize demand curves? They are identical for all products and services in a given industry. They are completely accurate prediction models. They show how much consumers will demand during a specific period at different prices. They relate demand to prices while assuming everything else remains unchanged.

They show how much consumers will demand during a specific period at different prices. They relate demand to prices while assuming everything else remains unchanged.

A useful technique that enables managers to examine the relationships among cost, price, revenue, and profit over different levels of production and sales is called ______. cost-benefit analysis cross-price elasticity break-even analysis fixed costs

break-even analysis

For most products, demand increases as the price decreases. Because of this general trend, demand curves usually have a(n) ______ slope. horizontal upward downward vertical

downward

A demand curve enables a firm to examine prices ______. relative to each of the orientation strategies simultaneously relative to profits in terms of supply, or how many producers offer the same good or service in terms of demand and the firm's objectives

in terms of demand and the firm's objectives

A demand curve enables a firm to examine prices ______. relative to profits relative to each of the orientation strategies simultaneously in terms of demand and the firm's objectives in terms of supply, or how many producers offer the same good or service

in terms of demand and the firm's objectives

When a 10% decrease in price results in less than a 10% increase in quantity sold, demand for the product or service is described as ______. inelastic price sensitive elastic commodity-like

inelastic

If a firm has been accused of opening stores in new communities with artificially low prices, set for the sole purpose of driving competing stores in the area out of business, this type of behavior is called ______ pricing. oligopolistic predatory monopolistic target return value-based

predatory

_____ _____ occurs when a company has a very low price for its product(s) in order to drive its competition out of business.

predatory pricing

Products that cost a lot of money but that people buy anyway because of the status and exclusivity that they project to others are called ______ products.

prestige

Firms that are less concerned with the level of profits and more interested in the rate at which profits are generated relative to their investments tend to use ______. target return pricing premium pricing contribution per unit competitive parity

target return pricing

Prestige products or services follow the premise that ______ associated with the product. the lower the price, the higher the value the lower the price, the greater the status the higher the price, the greater the status the higher the price, the lower the value

the higher the price, the greater the status