Chapter 20-21

47. _____ is a price tactic that requires a buyer to absorb the freight costs of a product from the shipping point. a. Free on board (FOB) origin pricing b. Zone pricing c. Uniform delivered pricing d. Basing-point pricing

a. free on board (FOD) origin pricing

56. A _____ is the general level at which a company expects to sell a good or service. a. functional price b. base price c. premium price d. mark-up price

a. functional price

44. When Lofonift Inc. introduced its flagship product, an MP3 player, it captured the MP3 player market by offering its product at the lowest price in the market. This forced many of its competitors out of business. In this scenario, Lofonift Inc. most likely indulged in _____. a. predatory pricing b. price discrimination c. status quo pricing d. price fixing

a. predatory pricing

42. When the price of a product is set at a level where demand and supply are the same, a state of _____ has been achieved. a. price equilibrium b. stability c. inelastic demand d. symmetry

a. price equilibrium

40. At a local retail store, Randi saw a bag of daffodil flower bulbs and a box of plant fertilizer. The items, which were sold together, retailed at $28.50 but were marked down to $19.99. The $19.99 is the: a. revenue. b. price. c. profit. d. liquidity value.

b. price

29. When executives from competing firms meet to decide which of them will submit the lowest bid on a contract, they are indulging in _____. a. price discrimination b. price fixing c. bait pricing d. penetration pricing

b. price fixing

46. Which of the following is a pricing policy whereby a firm charges a high introductory price, often coupled with heavy promotion? a. Penetration pricing b. Price skimming c. Price discrimination d. Status quo pricing

b. price skimming

1. College tuitions, initiation fees, bus fares, and club dues are all: A. examples of sales promotionsB. bartering tools.C. mediums of communication.D. examples for price.E. examples of liquidity

D. examples for price.

41. At a price of $2,000, the demand for Ranger 60 mountain bikes from Cloyd's Inc. is 300, but only 191 bikes are being made. At a price of $2,300, the demand for the bikes is 250, and exactly 250 bikes are being made. If Cloyd'ssells each one of the bikes at a price lower than $2,300, _____. a. a shortage of bikes will be created b. the number of bikes being made will increase drastically c. an inelastic demand for the bikes will be created d. the demand and supply for the bike will attain equilibrium

a. a shortage of bikes will be created

25. What happens when demand is elastic? a. As price goes up, revenue goes down. b. As price goes down, revenue goes down. c. As price goes up, revenue goes up. d. As price goes up, revenue does not change.

a. as price goes up, revenue goes down.

51. A _____ is a price reduction offered to a consumer, an industrial user, or a marketing intermediary in return for prompt payment of a bill. a. cash discount b. quantity discount c. functional discount d. seasonal discount

a. cash discount

34. Shopping bots theoretically give pricing power to: a. consumers. b. wholesalers. c. retailers. d. agents.

a. consumers

62. When Jerry took delivery of his brand new Karuaf automobile, he was filled with pleasure and excitement as Karuaf is a very expensive brand. This is an example of the _____ effect associated with the price-quality relationship. a. durability b. allocative c. prestige d. hedonistic

c. prestige

38. The quantity of a product that people will buy is most likely to decrease as the product's _____ increases. a. distribution b. quality c. price d. promotion

c. price

49. Acmell Lawnmowers Inc. sells its mowers to retailers at different prices depending on whether they are independent stores or members of a national chain. In this scenario, the company indulges in _____. a. penetration pricing b. price skimming c. price discrimination d. predatory pricing

c. proce discrimination

24. Dynamic pricing is used to: a. implement bait pricing to get more loyal customers. b. perform price discrimination among its customers. c. raise prices to maximize a company's revenues. d. attain price equilibrium.

c. raise prices to maximize a company's revenues.

50. Diffusion Research Company specializes in conducting market research for various firms. When it receives proposals for new research, its management will first estimate the cost of conducting the research and producing and delivering the final research report. The management then adds 30 percent to that cost estimate. This becomes the price estimate given to the potential research client. This suggests that Diffusion Research Company uses a _____ pricing objective. a. profit-oriented b. market share maximization c. status quo d. sales maximization

a. profit-oriented

55. Profit-oriented pricing objectives include: a. target return on investment. b. target market share. c. sales maximization. d. status quo pricing.

a. target return on investment

37. Why are more and more companies turning to dynamic pricing? a. To help adjust prices b. To implement bait pricing c. To implement free on board origin pricing d. To establish inelasticity of demand

a. to help adjust prices

10. As products enter the growth stage of the product life cycle, prices generally begin to stabilize. a. True b. False

a. true

11. For businesses, consumer penalties are part of doing business in a highly competitive marketplace. a. True b. False

a. true

13. Stocking well-known branded items at high prices in order to sell store brands at discounted prices is called selling against the brand. a. True b. False

a. true

14. Price matching is one of the ways to counter a competitor's prices. a. True b. False

a. true

17. The most common markup figures on merchandise and transportation costs are six percent at the retail level and two percent at the wholesale level. a. True b. False

a. true

3. Large customers insist on cash rebates if the guarantee of stores' profit margins are not met. a. True b. False

a. true

8. An effective distribution network can sometimes overcome other minor flaws in the marketing mix. a. True b. False

a. true

33. Pierre's Ice Cream Company produces ultra-rich ice cream, which it sells in Cleveland, Ohio, and other neighboring places. Last year, its actual return on investment exceeded its target return on investment (ROI) for that fiscal year. The following results were found on its financial statements: Gross revenues: $250,000 Total assets: $500,000 Gross profits: $100,000 Total liabilities: $200,000 Net profits after tax: $ 50,000 Owner's equity: $300,000 What was the actual ROI for Pierre's Ice Cream Company? a. 6.67 percent b. 10 percent c. 22 percent d. 28 percent

b. 10 percent

60. Before estimating how much profit and how much market share can be earned at each possible price of a product, a company is most likely to: a. choose the Return on Investment (ROI) target. b. determine the corresponding costs for each price. c. estimate industry supply. d. implement pricing segmentation.

b. determine the corresponding costs for each price.

35. Liquiction Pool and Patio Inc. is a company known for its quality pool installations, excellent customer service, and reasonable prices. Given the demand, Liquiction could price its products higher, but it prefers to price its products such that it will earn a reasonable level of profits. Liquiction seems to base its pricing policy on: a. profit maximization. b. earning satisfactory profits. c. creating retained earnings. d. maintaining a status quo pricing.

b. earning satisfactory profits

19. Jaggd Inc., an electronic goods manufacturing company, was planning to launch its latest smartphone in the market. Within the first few days of launching the phone, Jaggd wanted to earn as much revenue as the cost incurred in manufacturing the phone. So, it priced the phone about as high as the market would allow. In this case, Jaggd entered the market with a _____ approach to pricing the smartphone.

b. profit maximization

39. Yield management systems are used to: a. determine the availability of product substitutes in industries that are experiencing rapid change. b. profitably fill unused capacity by using complex mathematical systems. c. predict necessary service levels required to achieve revenue goals. d. determine whether it is financially more feasible to buy a new product or repair a broken one.

b. profitably fill unused capacity by using complex mathematical systems

65. Although many factors can influence the price of a product, the primary determinants are: a. the costs of manufacturing and distributing the product. b. the demand for the product and the cost to the seller for the product. c. the demand by consumers and the perceived quality of the product. d. the distribution and promotion strategies for the product.

b. the demand for the product and the cost to the seller for the product.

45. A cost that changes with the level of output is called a(n) _____ cost. a. liquidity b. variable c. fixed d. indirect

b. variable

20. Which of the following statements is true about the Internet? a. The Internet has shifted all shopping power to consumers b. Consumer reviews on the Internet about various products tend to be equal in quality c. Business-to-business auctions on the Internet are likely to be the dominant form in the future d. Extranets are programs that search the Internet for the best price for a particular product

c. business-to-business auctions on the internet are likely to be the dominant form in the future.

64. When consumer demandis sensitive to price changes, _____ occurs. a. inelastic demand b. sales maximization c. elastic demand d. profit maximization

c. elastic demand

52. _____ costs do not change as output is increased or decreased. a. Marginal b. Variable c. Fixed d. Total

c. fixed

27. Used Car Center Inc. allows salespeople to charge different customers different prices for essentially the same automobile depending on how good the customer is at negotiating the price. In this scenario, the company uses a: a. two-part pricing tactic. b. price lining tactic. c. flexible pricing tactic. d. price skimming tactic.

c. flexible pricing tactic.

18. _____ are costs that are shared in the manufacturing and marketing of several products in a product line. a. Overhead costs b. Fixed costs c. Joint costs d. Opportunity costs

c. joint costs

28. Which of the following trends in the consumer market has increased the difficulty of setting the right price for a product? a. The unwillingness of many firms to maintain or regain their market share by cutting prices b. The decreased availability of bargain-priced private and generic product brands c. The careful evaluation of each product's price against its value by potential buyers d. The inability of consumers to do comparison shopping

c. the careful evaluation of each products price against its value by potential buyers

59. Which of the following is true of products in the introduction stage of their life cycle? a. Their prices will rise dramatically as they move into the specialty goods category. b. They experience price increases that are cost initiated. c. Their prices are usually set high. d. They experience an elastic demand in the core of the market.

c. their prices are usually high

63. Which of the following statements is true about yield management systems (YMS)? a. They are used to eliminate the problem of simultaneous production and consumption from services. b. They are restricted to use only in service industries. c. They are complex pricing systems used to establish price equilibrium. d. They are used to make profitable use of the unused capacity of perishable goods.

c. they are complex pricing systems used to establish price equilibrium

23. Which of the following is true about shopping bots? a. They encourage a more creative use of advertising. b. They create opportunities for prestige pricing. c. They search the Web for the best price for a product. d. They create inelastic demand.

c. they search the web for the best price for a product.

53. At Starmart, Riya saw a box of collector's edition comic books. Each book was priced at $28.50, but a customer who bought five of the books was required to pay only $19.99 for each book. Riya bought one book and her friend bought five books. What was the retailer's revenue from this purchase? a. $158.51 b. $19.99 c. $28.50 d. $128.45

d. 128.45

32. _____ is a price tactic that charges freight costs from a given point, regardless of the city from which the goods are shipped. a. Free on board (FOB) origin pricing b. Zone pricing c. Uniform delivered pricing d. Basing-point pricing

d. basing-point pricing

26. Which of the following is a similarity between broad-based shopping bots and niche-oriented shopping bots? a. Both search restricted government Web sites. b. Both operate using a Yellow Pages type of model in that they list every retailer they can find. c. Both search for only one type of product. d. Both theoretically give pricing power to consumers.

d. both theoretically give pricing power to consumers.

21. Which of the following is an advantage of status quo pricing? a. It leads to optimal pricing of a product. b. It maintains an organization's differential advantage. c. It gives greater importance to the demand and costs of a product. d. It requires little planning.

d. it requires little planning.

30. Randy's Apparels Inc. plans to expand its customer base and product line. It introduces a new line of designer wear that are very expensive and exclusively available at Randy's. It emphasizes the high quality and exclusivity of this new line of products in its advertisements. In this case, Randy's Apparels has used _____ for the new line of products. a. predatory pricing b. leader pricing c. bait pricing d. prestige pricing

d. prestige pricing

58. For convenience, pricing objectives can be divided into three categories. They are: a. refundable, competitive, and attainable. b. perceived, actual, and situational. c. differentiated, niche, and undifferentiated. d. profit oriented, sales oriented, and status quo.

d. profit oriented, sales oriented, and status quo.

22. Unfair trade practice acts were enforced to: a. ensure the adoption of the Sherman Act that makes bait pricing illegal. b. prevent oligopoly leaders from joining together and fixing prices at the highest rates that a market will allow. c. establish penalties for companies that break the Clayton Act by engaging in predatory pricing. d. protect small local firms from giant companies that operate efficiently on razor-thin profit margins.

d. protect small locals firms from giant companies that operate efficiently on razor-thin profit margins.

54. A _____ is a price reduction offered to buyers buying in multiple units or above a specified dollar amount. a. trade discount b. cash discount c. seasonal discount d. quantity discount

d. quantity discount

31. GoodFurn Furniture Company has recently moved to a new, larger location. At the new location, it has been unable to attract sufficient customers. Its owner did not have the cash to pay the current loan installment due for the building and inventory. So, he decided to reduce all merchandise prices by at least 50 percent for a weekend sale to earn enough to make his loan payment. In this case, the owner's pricing objective can be classified as: a. market share maximization. b. satisfactory profits. c. asset maximization. d. sales maximization.

d. sales maximization

43. The marketing manager of pickacruise.com (a travel Web site targeted at consumers who want a luxury vacation) finds that the firm can increase its market share and become the industry leader if it slashes prices by 50 percent during the month of December. However, the Vice President of the finance department is committed to reporting a 25 percent Return on Investment (ROI) at all times, which cannot be achieved if the firm slashes its prices. This conflict illustrates: a. a need to eliminate low-profit products. b. a lack of competition in the marketplace. c. how pricing operates in an ideal marketplace. d. the need for trade-offs in pricing objectives.

d. the need for trade-offs in pricing objectives.

36. A price skimming strategy is most often used for a new product when: a. competition in the market is abundant. b. customers are unwilling to spend a large amount of money on the product. c. its supply is greater than its demand. d. the product is perceived as having unique advantages.

d. the product is perceived as having unique advantages.

57. Which of the following acts prohibits a firm from selling to two or more different buyers, within a reasonably short time, commodities (not services) of like grade and quality at different prices where the result would be to substantially lessen competition? a. The Federal Trade Commission Act b. The Food and Drug Administration Act c. The Sherman Act d. The Robinson-Patman Act

d. the robinson-patman act

48. During the hot summer months, the Nick Price Golf School offers a 25 percent reduction on its golf lessons to attract golfers during the off-season. Which of the following is exemplified in this scenario? a. The power of yield management systems b. The advantage of markup pricing c. The relationship between price and quality d. The use of price as a promotional tool

d. the use of price as a promotional tool