Marketing Chapter 10

Which of the following is true of value-based pricing? A) The targeted value and price drive decisions about what costs can be incurred and the resulting product design. B) Value-based pricing is mostly product driven. C) Value-based pricing involves setting prices based on the costs of producing, distributing, and selling the product plus a fair rate of return for its effort and risk. D) The marketer usually designs a product and marketing program and then sets the price. E) A company using value-based pricing designs what it considers to be a good product, adds up the costs of making the product, and sets a price that covers costs plus a target profit.

A) The targeted value and price drive decisions about what costs can be incurred and the resulting product design.

To take advantage of a downward-sloping experience curve, a company must do all of the following EXCEPT ________. A) increase the product's price B) be able to sell the higher volume of product C) price its product lower D) increase its production output E) decrease its costs through experience gained

A) increase the product's price

Herbie Inc., a firm manufacturing sandwich makers, has fixed costs of $250,000, variable costs of $20 per unit of output, and expected unit sales of 50,000 units. What is the unit cost of a sandwich maker manufactured by Herbie? A) $15 B) $25 C) $30 D) $50 E) $75

B) $25

Which of the following is true with regard to value-added pricing? A) Companies that practice value-added pricing typically match the competition by cutting prices. B) Companies practicing value-added pricing differentiate their offers by attaching value-added features to offerings that, in turn, justify higher prices. C) The intrinsic value of products sold by companies practicing value-added pricing is far less than their actual selling price. D) Companies practicing value-added pricing primarily rely on cost differentiation. E) Value-added pricing is the most suitable pricing strategy in pure monopolies.

B) Companies practicing value-added pricing differentiate their offers by attaching value-added features to offerings that, in turn, justify higher prices.

1. Price is important to managers ________. A) because prices cannot be changed quickly, so must be correctly determined B) because a small percentage improvement in price can generate a large percentage increase in profitability C) but other marketing mix elements create customer value and build relationships D) but product features can be changed more quickly E) but has little impact on a firm's market share

B) because a small percentage improvement in price can generate a large percentage increase in profitability

In 2011, the fixed costs of a company were $500,000, and its variable costs equaled $150,000. In 2010, the company made an annual profit of $200,000. It has been predicted that, despite a steady growth, the company's variable costs will likely equal $300,000 by 2013. The total costs of the company in 2011 were ________. A) $350,000 B) $450,000 C) $650,000 D) $800,000 E) $950,000

C) $650,000

9. A cell phone manufacturing firm produced 1,000 cell phones a day but believed that it could reasonably step up production to 2,000 cell phones a day. Consequently, it built a larger plant and installed efficient machinery and work arrangements to realize the projected output. Which of the following can most likely be inferred from this information? A) The unit cost of producing 2,000 cell phones per day would be twice that of the unit cost of producing 1,000 units per day. B) A production plant with the capacity of producing 5,000 cell phones a day would be most efficient. C) The unit cost of producing 2,000 cell phones per day would be lower than the unit cost of producing 1,000 units per day. D) A 2,000-capacity production plant would be less efficient because of increasing diseconomies of scale. E) The fixed costs of the firm are more likely to increase with the increase in output.

C) The unit cost of producing 2,000 cell phones per day would be lower than the unit cost of producing 1,000 units per day.

A restaurant wants to use value-based pricing. It knows the costs of the ingredients in the food. It must also factor in ________ in determining customer satisfaction and value. A) wages of employees B) costs of utilities of the restaurant C) atmosphere and décor of the restaurant D) travel distance for customers E) percentage of bar patrons versus dining patrons

C) atmosphere and décor of the restaurant

Companies with lower costs ________. A) specialize in selling products with value-added features B) usually market products with inferior quality, thereby justifying the low selling price C) can set lower prices that result in smaller margins but greater sales and profits D) tend to overprice products owing to their monopolistic advantage E) usually set higher prices that result in higher margins

C) can set lower prices that result in smaller margins but greater sales and profits

A downward-sloping experience curve is indicative of ________. A) the negative customer perception about a company's products B) the falling demand for a company's products C) the falling unit production cost of a company D) the low quality of a company's products E) slow and inadequate organizational learning

C) the falling unit production cost of a company

Samsung Mobile plans to launch a new phone with a unit cost of $270 and wants to earn a 10 percent markup on its sales. Samsung's markup price is ________. A) $275 B) $280 C) $295 D) $300 E) $335

D) $300

Mansfield Pharmaceuticals markets Zipro, an antibiotic. The firm has fixed costs of $1,000,000 and variable costs of $2 per bottle of 50 tablets priced at $10 per bottle. What is the break-even volume? A) 25,000 B) 55,000 C) 100,000 D) 115,000 E) 125,000

D) 115,000 E) 125,000

Department stores such as Kohl's and JCPenney's practice high-low pricing by ________. A) charging a constant, everyday low price B) providing few or no temporary price discounts C) increasing prices temporarily on select products D) having frequent sale days for store credit-card holders E) underpricing most consumer items

D) having frequent sale days for store credit-card holders

Factors a company considers in setting its price include all of the following EXCEPT ________. A) competitors' strategies and prices B) product costs C) overall marketing strategy and mix D) value of the product on the pre-owned market E) nature of the market and demand

D) value of the product on the pre-owned market

A manufacturing plant is designed to produce 2000 flat-screen TVs per day. But demand is higher than that. If the company tries to increase its production to 2500 TVs per day, the average costs will ________ because ________. A) decrease; the plant becomes more efficient B) stay the same; the plant becomes more efficient C) decrease; the plant becomes inefficient D) increase; the plant becomes more efficient E) increase; the plant becomes inefficient

E) increase; the plant becomes inefficient