chapter 19

marginal cost

. Marginal cost (MC) is the extra cost a firm incurs when it produces one more unit of a product.

average fixed costs

Average fixed cost is the fixed cost per unit produced and is calculated by dividing fixed costs by the number of units produced.

fixed costs

Fixed costs do not vary with changes in the number of units produced or sold.

Marginal revenue (MR) is the change in total revenue that occurs when a firm sells an additional unit of a product.

Marginal revenue (MR)

breakeven point

The point at which the costs of producing a product equal the revenue made from selling the product is the breakeven point

total costs

Total cost is the sum of average fixed costs and average variable costs times the quantity produced.

price is reduced to achieve a goal

allowance

reduced for buyers that pay promptly

cash discount

Which of the following shows the quantity of products a firm expects to sell at various prices if other factors remain constant?

demand curve

Which one of the following types of products is not subject to inelastic demand?

dining room furniture

Which of the following is not a factor that affects pricing decisions?

discounts

total revenue increases with a decrease in price

elastic

total revenue moves in the opposite direction to the shift in price

elastic

When the buyer pays for delivery of a business product, the price is quoted as F.O.B. _________ , but when the seller pays for delivery the price is quoted as F.O.B. _________ .

factory, destination

Costs that don't change with the level of production, such as rent, are referred to as _______ costs.

fixed

To calculate the breakeven point, a firm divides ________ costs by per-unit contribution to _________ costs.

fixed, fixed

A price developed in the buyer's mind through experience with the product is a(n) ________.

internal reference price

If a firm sells a prestige product, what kind of relationship between price and quantity demanded should it expect?

it should expect to sell more at higher prices, up to a point

What happens when the firm achieves the breakeven point?

it will make money on each unit sold after that point

The change in total revenue that would be received when one additional unit is sold is known as _______ revenue.

marginal

It is formally defined as the percentage change in quantity demanded relative to a given percentage change in price

price elasticity of demand

A business must decide whether it will use ___________ competition only or __________competition before setting a price for its product.

price, nonprice

price is reduced for buyers that make purchases during off peak periods

seasonal discount

Factors that influence the assessment of value include ________, ________, and ________

time constraints, perceived quality, price levels

price is reduced for intermediaries that perform a function like warehousing

trade discount

Which of the following are types of pricing used in business markets?

transfer pricing, price discounting, geographic pricing

Costs that change with the level of production, such as raw materials costs, are referred to as

variable

s vary directly with changes in the number of units produced or sold.

variable costs

total revenue decreases with a decrease in price

inelastic

total revenue moves in the same direction as the shift in price

inelastic

___________ is when consumer demand is insensitive to price changes, and____________demand is when consumer demand is sensitive to price changes.

inelastic demand , elastic demand

price is reduced for customers wholly in large quantities

quantity discount

To use price competition most effectively, an organization should focus on _______ and _______.

responding to rivals price change, keeping its costs low

Price is a key element in the marketing mix because it relates directly to the generation of total _______.

revenue