Chapter 14

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. Where should the company set the price of the new product in order to maximize profits? A. $50 B. $200 C. $75 D. $275

$200

Which of the following are strategies that can be used as part of the profit orientation? (Choose every correct answer.) - Target profit pricing -value-based pricing -maximizing profits -competitive parity

- Target profit pricing -maximizing profits

Which of the following are considered part of the five Cs of pricing? (Choose every correct answer.) -Channel members -Charter membership -Customers -Competition -Change management -Company objectives

-Channel members -Customers -Competition -Company objectives

A firm may set low prices to do which of the following? (Choose every correct answer.) -Encouraging new competitors to the market -Encourage current firms to leave the market -Discourage new firms from entering the market -expand the entire market for additional firms -take market share away from competitors

-Encourage current firms to leave the market -Discourage new firms from entering the market -take market share away from competitors

Which of the following accurately characterizes demand curves? (Choose every correct answer.) -They relate demand to prices while assuming everything else remains unchanged -They are completely accurate prediction models over long periods of time -They are identical for all products and services in a given industry -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.

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

-as price increases, demand decreases -as price decreases, demand increases

Firms engaged in competitor orientation might use which of the following strategies? (Choose every correct answer.) -target return pricing -competitive parity -status quo pricing -premium pricing

-competitive parity -status quo pricing

If a restaurant reduces the price of a hamburger by 25% and sales increase by more than 50%, which of the following describe the demand for the hamburger? (Choose every correct answer.)

-elastic -price sensitive

Break-even analysis examines the relationships between which of the following? (Choose every correct answer.) -Unions -price -value -cost

-price -costs

Which of the following do you need to know to calculate target return price?

-variable costs -fixed costs -expected unit sales

Channel members include which of the following? (Choose every correct answer.)

-wholesalers -manufacturers -retailers

Which strategy is used by firms that believe increasing volume of sales will help the firm more than increasing profits? A. Sales-oriented strategy B. repeat-return strategy C. competitor-oriented strategy D. profit-oriented strategy

A. Sales-oriented strategy

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

A. break-even analysis

What kind of pricing is being used when a firm sets prices similar to major rivals' prices? A. competitive parity B. Target profit pricing C. comprehensive D. premium pricing

A. competitive parity

Which of the following types of theories is the maximizing profits strategy based on? A. Economic B. social C. psychological D. political

A. economic

A demand curve enables a firm to examine prices Blank______. A. in terms of demand and the firm's objectives B. relative to profits C. relative to each of the orientation strategies simultaneously. D. in terms of supply or how many producers offer the same goods or services.

A. in terms of demand and the firm's objectives

A demand curve enables a firm to examine prices Blank______. A. in terms of demand and the firms objectives B. relative to profits C. in terms of supply or how many producers offer the same goods or services. D. relative to each of the orientation strategies simultaneously

A. in terms of demand and the firms objectives

What type of competition occurs when only a few firms dominate a market? A. oligopolistic B. monopolitic C. barter D. pure

A. oligopolistic

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

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

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 ______. A. target return pricing B. contribution per unit calculations C. premium pricing D. competitive parity

A. target return pricing

Price is best defined as __. A. the overall sacrifice a consumer is willing to make to acquire a specific product or service. B. the last element of the marketing mix a consumer will always agree with C. the consumer's breakeven point D. the overall sacrifice a consumer will make to obtain one of the five Cs

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

Variable cost per unit times quantity equals Blank______. A. total variable cost B. total cost C. total revenue D. break-even

A. total variable cost

How is total cost calculated?

Answer: variable costs plus fixed costs

Competition, channel members, costs, customers, and company objectives are the five critical components of ______. A. Quality B. Pricing C. variety D. promotion

B. Pricing

What term describes consumers' ability to replace the focal brand with other products? A. cross-price elasticity B. substitution effect C. price elasticity of demand D. income effect

B. substitution effect

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

B. target profit pricing

When a firm is aiming for a particular amount of profit as its overriding concern, it usually implements______. A. target return pricing B. target profit pricing C. premium pricing D. the maximizing profits strategy

B. target profit pricing

Which of the following is an example of a monetary sacrifice included in the overall price of a product or service? A. Time B. Effort C. Shipping D. competition

C. Shipping

What is the premise behind the pricing of prestige products or services? A. The lower the price, the greater the status B. The lower the price, the higher the value C. The higher the price, the greater the status D. The higher the price, the lower the value

C. The higher the price, the greater the status

Which is one of the five Cs of pricing? A. customer salaries B. Channel dynamics C. company objectives D. cost uniqueness

C. company objectives

What type of orientation has a firm adopted when it measures itself primarily against firms that challenge it for customers? A. customer B. sales C. competitor D. Profit

C. competitor

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. A. price versus sales B. supply C. demand D. consumer

C. demand

If a company needs to raise the prices of some its products, it should choose to raise the prices of______ products because relatively fewer customers will stop buying the product as a result. A. elastic B. commodity C. inelastic D. moderately priced

C. inelastic

When incomes drop, what happens to the demand for an elastic product? A. it tends to increase significantly B. it tends to increase slightly C. it tends to decrease D. it remains unchanged

C. it tends to decrease

What term describes the ratio of change in a price and its effect on the quantity of the product demanded? A. prestige products and services B. Downward-sloping demand curve C. price elasticity of demand D. price elasticity of supply

C. price elasticity of demand

By focusing on target profit pricing, maximizing profits, or target return pricing, a firm is implementing a Blank______ orientation. A. competitor B. Sales C. Profit D. customer

C. profit

Sometimes firms selling a pioneering product will set a very low price in order to attract many customers before competitors enter the market. Which type of orientation does this demonstrate? A. customer B. competitor C. sales D. profit

C. sales

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

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

As people make more money, their spending behavior changes. This is known as _____. A. subsitution effect B. cross-price elasticity C. the income effect D. price elasticity of demand

C. the income effect

Which of the following is one of the Cs of the five Cs of pricing? A. company staff B. city ordinances C. council professionals D. customers

D. customers

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 Blank______. A. unaffected B. inelastic C. in high demand D. elastic

D. elastic

Which of the following is a firm implementing when it uses a mathematical model to identify the price at which the firm will make the most money possible? A. competitive parity B. Target profit pricing strategy C. Target return pricing strategy D. maximizing profit strategy

D. maximizing profit strategy

On which of the following does brand loyalty have the most significant impact? A. income effect B. cross-price elasticity C. complementary product effect D. substitution effect

D. substitution effect

What information is gained by adding variable and fixed costs together? A. break-even point B. profit margin C. net contribution per unit D. total cost

D. total cost

A firm that opens new stores in a community and sets artificially low prices with the sole purpose of driving competing stores in the area out of business is said to engage in a type of behavior called Blank______ pricing. A. oligopolistic B. target return C. monopolistic D. value-based E. predatory

E. predatory

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. True or False

False

Which of the following is another term for target return pricing?

Markup

What type of orientation is exemplified by target return pricing? A. competitor B. customer C. profit D. sales

Profit

Loyalty toward a particular brand makes other brands seem less substitutable, which decreases ______.

The price elasticity of demand

What is an example of a nonmonetary sacrifice made in acquiring a product or service? A. Time B. shipping and handling C. Travel expenses D. Taxes

Time

How do managers use break-even analysis?

To find a production quantity where, for a given price, costs are equal to revenues

At the break-even point, profits on the sale of a product are Blank______. A. sufficient to meet the firm's goals. B. optimal C. zero D. enough to justify launching the product

Zero

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

competition

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

Profit alone Blank______ how many units should be sold before a firm breaks even.

does not indicate

When there are many substitute products available, the price elasticity of demand for a given product will likely be ______. A. higher B. lower C. more inelastic D. better

higher

According to the cross-price elasticity of demand, when the price of DVD players drops, the demand for DVDs is likely to Blank______.

increase

When a 10% decrease in price results in a less than 10% increase in quantity sold, the demand for the product or service is described as Blank______.

inelastic

Under competitive_____________ , companies set their prices close to those of their major competitors.

parity

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 are called (Blank) products.

prestige

The equation for price elasticity of demand is the percentage change in quantity demanded divided by percentage change in Blank______. A. profits B. price C. preceptions D. supply

price

The overall sacrifice a consumer makes to acquire a product or service is known as___________.

price

A_______ _______ occurs when oligopolistic companies compete with each other by repeatedly lowering their prices. (Enter one word in each blank.

price war

Firms usually implement target (blank)(blank) to stimulate a certain level of sales at a certain profit per unit. (Enter one word in each blank.)

profit pricing

Antitrust laws are designed to protect consumers from:

the high prices charged by monopolies for their products.

Price times quantity equals Blank______

total revenue

In general, customers are more sensitive to price increases than to price decreases.

true