MKTG 321 Ch 20 Final Exam

price elasticity of demand (equation)

% change in quantity demanded / % change in price

What equation shows organizations the relationship between price and profit?

(Price ´ Quantity Sold) - Total Costs = Profits

Markum Industries determines that for its air compressors the following results are achieved at a price of $250: total costs = $250,000; variable costs per unit = $100; fixed costs = $175,000. Given these figures, Markum would break even at ____ units.

1167

If Colgate-Palmolive wants to maximize profit on its toothpaste, it should operate at the point where

Marginal Revenue = Marginal Costs

Profit (equation)

Profit= total rev- total costs Profit= (price x quantity sold) -total costs

external reference price

a comparison price provided by others

allowance

a concession in price to achieve a desired goal

demand curve

a graph of the quantity of products expected to be sold at various prices if other factors remain constant

price elasticity of demand

a measure of the sensitivity of demand to changes in price

internal reference price

a price developed in the buyer's mind through experience with the product

F.O.B. destination

a price indicating the producer is absorbing shipping costs

cash discount

a price reduction given to buyers for prompt payment or cash payment

seasonal discount

a price reduction given to buyers for purchasing good or services out of season

trade (functional) discount

a reduction off the list price a producer gives to an intermediary for performing certain functions

freight absorption pricing

absorption of all or part of actual freight costs by the seller

break even point (formula)

breakeven point= fixed costs / price - variable costs

uniform geographic pricing

charging all customers the same price, regardless of geographic location

ACE Electronics introduces a new voice-activated personal computer that no longer requires a keyboard. ACE charges the high price of $11,000 per unit, thus generating large profits because it has a 20 percent market share. ACE's major problem in the future will most likely be

competition

value conscious

concerned about price and quality of a product

Marketers generally view ____ as the minimum price a product can be sold for.

costs

fixed costs

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

variable costs

costs that vary directly with changes in the number of units produced or sold

quantity discounts

deductions from the list price for purchasing in large quantities

prestige sensitive

drawn to products that signify prominence and status

nonprice competition

emphasizing factors other than price to distinguish a product from competing brands

price competition

emphasizing price as an issue and matching or beating competitor's prices

price discrimination

employing price differentials that injure competition by giving one or more buyers a competitive advantage

base-point pricing

geographic pricing that combines factory price and freight charges from the base point nearest the buyer

A product under nonprice competition would most likely not succeed in the market if

it is easy to duplicate

Sellers that emphasize distinctive product features to encourage brand preferences among customers are practicing

non price competition

noncumulative discounts

one time price reductions based on the number of units purchased, the dollar value of the order, or the product mix purchased

Which of the following is not a major factor for firms making price decisions?

previous sales

If a company provides price differentials that harm competition by giving one or more buyers a competitive advantage, it is committing

price discrimination

transfer pricing

prices charged in sales between an organizations units

zone pricing

pricing based on transportation costs within major geographic zones

cumulative discounts

quantity discounts aggregated over a stated period of time

Since Victoria's Secret has decided to use nonprice competition, it distinguishes its brand through all but which of the following?

rebates

geographic pricing

reductions for transportation and other costs related to the physical distance between buyer and seller

When marginal cost is equal to marginal revenue, the firm should

stop producing additional units to maximize profits

price conscious

striving to pay low prices

marginal revenue

the change in total revenue resulting from the sale of an additional unit of a product

marginal cost

the extra cost incurred by producing one more unit of a product

average fixed costs

the fixed cost per unit produced

Price is a key element in the marketing mix because it relates directly to

the generation of total revenue

break even point

the point at which the costs of producing a product equals the revenue made from selling the product

F.O.B. factory (free-on-board)

the price of merchandise at the factory before shipment

total costs

the sum of the average fixed and average variable costs time the quantity produced

average total costs

the sum of the average fixed cost and the average variable cost

barter

the trading of products

price

the value paid for a product in a marketing exchange

average variable costs

the variable cost per unit produced

Generally, customers are most likely to rely on the price-quality association when

they cannot judge the quality of the products for themselves

Laura Spangler, of North Central Novelties, reduces the price of games sold to Robertson's Entertainment by 10 percent to allow for expenses associated with Robertson's promoting the games to consumers. This is an example of a ____ discount.

trade

When Cadillac buys headlights from Delco (both of which are divisions of General Motors), ____ pricing occurs

transfer

marginal analysis involves examining

what happens to a firm's costs and revenues when production is changed by one unit

The amount of profit a channel member expects depends on

what the intermediary could earn if it were handling a competing product instead.