MKT Study Guide 4 1-39

1. Why should pricing objectives be explicitly stated? A. They have a direct effect on pricing policies and the methods used to set the price. B. It provides direction for company-level objectives.C. Explicitly stating objectives provides legal protection for the firm. D. Most state laws require explicitly stating legal objectives. E. Firms should always choose profit-oriented pricing objectives.

A

11. Pricing objectives should be explicitly stated because: A. they have a direct effect on pricing policies as well as price setting methods. B. they are signals given to competing firms. C. they form the basis of shareholder expectations about a firm's prospects. D. it is required by law. E. they are signals given to consumers.

a

14. Some top managers seek only enough profits to convince stockholders that they are "doing a good job." The pricing objective of such managers is: A. satisfactory profits. B. status quo. C. nonprice competition. D. profit maximization. E. meeting competition.

a

15. A one-price policy means: A. offering the same price to all customers who purchase products under essentially the same conditions and in the same quantities. B. never using temporary sales or rebates. C. selling to different customers at different prices. D. setting a price at the "right" level from the start and never changing it. E. None of these alternatives is correct.

a

23. Which pricing policy would probably be best for a profit-oriented producer introducing a really new product with a very inelastic demand curve? A. Skimming pricing B. Meeting competition pricing C. Below-the-market pricing D. Penetration pricing E. Introductory price dealing

a

3. A focus on a target return or return on investment are characteristic of _____ pricing objectives. A. profit-oriented B. sales-oriented C. status-quo oriented D. purchase oriented E. market-share oriented

a

8. Which of the following is NOT a "Something of Value" which might be offered to FINAL CONSUMERS in the "price equation"? A. Stocking allowance B. Service C. Repair facilities D. Credit E. Packaging

a

17. The majority of U.S. firms use a one-price policy A. to broadcast a single price to competitors. B. for administrative convenience. C. to increase pricing flexibility. D. to undercut competition. E. to ward off competition from imports.

b

5. _____ is what a customer must give up to get the benefits offered by the rest of a firm's marketing mix. A. Promotion B. Price C. Product D. Past E. Profit

b

19. Trying to get the "cream" of a market (i.e., the top of a demand curve) at a high price before aiming at the more price-sensitive customers is consistent with a(an): A. flexible-price policy. B. sales-oriented pricing policy. C. skimming pricing policy. D. introductory price dealing policy. E. penetration pricing policy.

c

20. The sales analysis of a product revealed that profits were highest when it was initially introduced into the market with a high selling price. However, the price was gradually reduced as it started facing competition as substitutes entered the market. This is an example of a(n) _____. A. introductory price dealing B. temporary price cut policy C. skimming price policy D. penetration price policy E. one price policy

c

4. Which of the following best defines the goal of a sales-oriented pricing objective? A. Increasing the target return on a product B. Gaining the maximum profit on a product C. Increasing the market share of a product D. Stabilizing prices across different markets for a product E. Gaining a greater return on the investment in a product

c

6. Almost any business transaction in a modern economy involves: A. an exchange at a list price. B. "dumping." C. an exchange of money—the money being the Price—for something of value. D. a loss of consumer surplus. E. an exchange in which price serves as a measure of quality.

c

10. Pricing objectives should flow from, and fit in with, A. shareholder expectations and market practices. B. regulatory policies. C. industry standards. D. company-level and marketing objectives. E. market price leader actions.

d

12. A marketing manager may choose a pricing objective that is: A. sales oriented. B. status quo oriented. C. profit oriented. D. Any of these—depending on the situation.

d

16. Which of the following is a disadvantage of flexible pricing? A. It allows a salesperson to adjust the price in response to competition. B. It leaves opportunities for sales by not adjusting to customers. C. It allows a salesperson to adjust the price depending on his customer. D. It can cause discontent among customers who realize they have paid a higher price than others. E. It results in broadcasting a price that the competition can undercut.

d

21. Which of the following pricing policies involves entering a market with a single low price and not significantly increasing the price even upon gaining a major market share? A. Introductory price dealing B. Temporary price cut policy C. Skimming price policy D. Penetration price policy E. Zone pricing policy

d

9. Which of the following is "something of value" that might be offered to FINAL CONSUMERS as part of the "price equation"? A. Sufficient margin to allow for profit. B. Push money. C. Competitive advantage. D. Branded merchandise. E. None of these is a good answer.

d

13. A government agency charges motorists a toll for using a bridge. The toll is dropped when the cost of the bridge is paid. In other words, the government's target return figure was A. twenty percent. B. one. C. ten percent. D. hundred percent. E. zero.

e

18. A flexible-price policy is MOST LIKELY to be set by a retailer selling: A. milk. B. women's shoes. C. golf balls. D. t-shirts. E. cars.

e

2. Strategy planning for Price is concerned with:A. to whom and when discounts and allowances will be given. B. how transportation costs will be handled. C. how flexible prices will be. D. at what level prices will be set over the product life cycle. E. All of these alternatives are correct.

e

22. If a producer's marketing manager doesn't know the shape of the demand curve for a new product, the initial price level policy should probably be a(an) ______________ policy. A. flexible-pricing B. target-return pricing C. introductory pricing D. penetration price E. skimming price

e

7. Which of the following is not an example of price? A. college tuition. B. doctor's fee. C. apartment rent. D. interest on a loan. E. All of these are examples of price.

e

26. By definition, a markup of $1 on a cost of $2 translates to a markup of 40 percent. True False

f

27. According to the text, markup (percent) means percentage of cost unless otherwise stated. True False

f

29. If a retailer adds a 25-cent markup to a product which costs the retailer $1.00, then according to the text the retailer's markup is 25 percent. True False

f

30. Most retailers and wholesalers set prices by using a different markup percent for each different product carried. True False

f

31. Marginal revenue is always positive. True False

f

32. High markups always mean big profits. True False

f

34. A firm's average fixed cost increases as its output increases. True False

f

35. Average fixed cost goes down as output decreases. True False

f

37. If a manager sells more than was expected when average-cost pricing was used to set a price, the firm will lose money. True False

f

38. Average-cost pricing works well if the firm actually sells the quantity which was used in setting the price, but losses may result if actual sales are much higher than were expected—due to higher total variable costs. True False

f

24. Cost-oriented approaches are the most common price setting approach. True False

t

25. A markup is the dollar amount added to the cost of products to get the selling price. True False

t

28. If a retailer adds a 25-cent markup to a product which costs the retailer $1.00, then according to the text the retailer's markup is 20 percent. True False

t

33. Total fixed costs do not change when output increases. True False

t

36. Ignoring demand is the major weakness of average-cost pricing. True False

t

39. When setting prices, the marketing manager should consider the firm's demand curve, or else the price may not even cover the firm's total cost. True False

t