Ch. 11
73) Freight-absorption pricing is used for ________.
C) holding on to increasingly competitive markets
60) Which of the following is true of promotional pricing?
A) It leads to 'deal-prone' customers who buy products only during sales.
39) A(n) ________ refers to promotional money paid by manufacturers to retailers in return for an agreement to feature the manufacturer's products in some way.
A) allowance
9) Which of the following is true of market-penetration pricing?
C) It results in drawing in large numbers of buyers quickly, winning a large market share.
20) Multiprint, a printer manufacturing firm, sells ink cartridges for each of its specific models. Only Multiprint cartridges are compatible with Multiprint printers, and no two of the firm's models share the same specifications. What type of pricing does Multiprint use?
C) captive product pricing
46) The New Age Gallery has three admission prices for students, adults, and seniors, even though all three groups are entitled to the same services. This form of pricing is called ________.
C) customer-segmented pricing
79) Which of the following is true of the bottom of the pyramid?
D) It is considered a source of fresh growth opportunities.
69) Motorzone offers replacement parts for old Volkswagen Beetles. The company calculates shipping charges based on shipping parts from Boston, even though some parts actually ship from St. Louis. Motorzone most likely practices ________ pricing.
D) basing-point
3) A market-skimming pricing strategy should NOT be used for a new product when ________.
D) competitors can undercut prices easily
84) In response to price cuts from competitors, a cereal company with several more expensive and higher quality cereals introduced a lower-priced option to its product line. This is an example of which of the following responses to a competitor's price cut?
D) launching a "fighter brand"
44) In return for participating in Honda advertising and sales support programs, Honda dealerships are rewarded with payments or price reductions, which are known as ________.
D) promotional allowances
30) Which of the following is a price adjustment strategy?
E) discount and allowance pricing
102) For market skimming to be successful, the cost of producing a smaller quantity of goods should not be higher than the prices charged.
TRUE
6) Which of the following is true of price skimming?
B) It can be profitably used when the product's quality and image support its price.
18) Which of the following is true of optional product pricing?
B) It involves pricing accessory products sold with the main product
89) Federal legislation on price fixing requires that sellers set their prices ________.
B) without communication from competitors
97) ________ occurs when a seller states price savings that are not actually available to consumers.
C) Deceptive pricing
50) When a firm varies its price by the season, it is using ________.
D) time-based pricing
118) Sellers cannot influence or use consumers' reference prices when setting prices.
FALSE
106) Thinking Cap Corp. prices its various cap designs at different price levels, ranging from $2.05 to $5.95. This is an example of optional product pricing.
FALSE
101) Pricing strategies tend to change and evolve as the average product passes through its life cycle.
TRUE
108) When a manufacturer seeks a market for by-products and accepts a price that covers more than the cost of storing and delivering those by-products, the manufacturer is able to reduce the main product's price to make it more competitive.
TRUE
41) Trade-in allowances are most commonly used in the ________ industry.
B) automobile
62) Which of the following is an adverse effect of using promotional pricing?
A) It makes shopping stressful if used by multiple stores simultaneously.
28) Which of the following is true of product bundle pricing?
A) It promotes the sale of products that consumers might not otherwise buy.
23) Which of the following companies uses captive product pricing?
A) Photo Genie, which sells inexpensive cameras that run only on their own expensive batteries
100) Noticing that the themed envelopes aren't selling well, Charles Payton decides to offer customers a special "letter writing" kit, He prices the kit—which comprises letter paper, matching envelopes, and pens—at $5, even though the combined prices of the individual items is $8. Which of the following pricing strategies is he using?
B) product bundle pricing
27) Which of the following product mix pricing strategies involves pricing multiple products to be sold together?
B) product bundle pricing
61) Low-interest financing and longer warranties are both examples of ________.
B) promotional pricing
82) When a competitor cuts its price, a company should ________ if it believes it will not lose much market share or would lose too much profit by cutting its own prices.
C) maintain its current prices and profit margin
2) Companies facing the challenge of setting prices for the first time can choose between two broad strategies: market-penetration pricing and ________.
C) market-skimming pricing
90) If a large retailer sold numerous items below cost with the intention of punishing small competitors and gaining higher long-run profits by putting those competitors out of business, the retailer would be guilty of ________.
C) predatory pricing
87) When sellers set prices after talking to competitors and engaging in collusion, they are involved in ________.
C) price fixing
31) Which of the following price adjustment strategies involves reducing prices to reward customer responses such as volume purchases, paying early, or promoting the product promptly?
E) discount and allowance pricing
17) Which of the following product mix pricing strategies involves pricing additional/accessory products sold along with the main product?
E) optional product pricing
91) Savings for You, a discount retail chain, is highly competitive. When entering a new market, Savings for You often cuts prices so deeply that it sells below costs, effectively pushing smaller companies with less purchasing power out of the market. Savings for You is most likely guilty of ________.
E) predatory pricing
116) In segmented pricing, the difference in prices is based on differences in costs.
FALSE
119) Customers located close to a firm are less likely to benefit from FOB-origin pricing than customers located further away.
FALSE
120) The uniform-delivered pricing strategy means that the goods sold are placed free on board a carrier with the customer paying the freight from the factory to the destination.
FALSE
121) Dynamic pricing is least prevalent online.
FALSE
105) In product line pricing, the price steps should account for differences in customer perceptions of the value of different features.
TRUE
111) Consumers who have no past experience with a product are especially likely to judge it by its price.
TRUE
113) Online flash sales are used to create buying urgency and make buyers feel lucky to have gotten in on the deal.
TRUE
12) Electrowhip, a company that manufacturers blenders and electric whisks, has decided to use a market-penetration pricing strategy. Which of the following, if true, proves their decision to be a wise one?
C) Electrowhip operates in a market with many competitors.
55) ________ are formed by noting current prices, remembering past prices, or assessing the buying situation.
C) Reference prices
22) In the case of services, captive product pricing is called ________ pricing.
C) two-part
80) Which of the following is true of price changes?
D) A drop in price can adversely affect how consumers view the brand.
65) Under which type of geographic pricing strategy does each customer take responsibility for the freight charges for the product from the factory to its destination?
D) FOB-origin pricing
115) Constantly reduced prices can erode a brand's value in the eyes of customers.
TRUE
Champion, Inc. is a manufacturer of lunch boxes, school bags, and school stationery. Charles Payton, the CEO of Champion, hopes to sell the products at a low price to penetrate the market quickly.
For #99 and #100
124) Price discrimination is permissible if if the seller manufactures different qualities of the same product for different retailers and can prove that the price difference is proportional.
TRUE
104) Pricing is difficult because various products have related demand and costs, and producers face different degrees of competition.
TRUE
117) For segmented pricing to be an effective strategy, the prices should reflect real differences in customers' perceived value.
TRUE
123) Launching a fighter brand is an effective way to deal with a situation in which the market segment being lost is price sensitive and will not respond to arguments of higher quality.
TRUE
122) Excess capacity leads to companies initiating an increase in price.
FALSE
16) Which of the following companies uses product line pricing?
B) Mobile Point, which launched a range of cell phone models, each priced according to its features
43) ________ allowances are payments or price reductions that reward dealers for participating in advertising and sales support programs.
A) Promotional
15) Which of the following is true of product line pricing?
A) The price steps take cost differences between products in the line into account.
64) Which of the following is a geographical pricing strategy?
A) basing-point pricing
34) Which of the following price adjustment strategies offers a price reduction to buyers who pay their bills promptly?
A) cash discount
95) Price discrimination may be used to match competition as long as the strategy is temporary, localized, and ________.
A) defensive
37) A seller offers a ________ to trade-channel members who perform certain functions, such as selling, storing, and record keeping.
A) functional discount
48) Sparkling Valley, a luxury resort, prices cottages facing the lake higher than cottages that do not, even though the cottages and services offered are identical in every other aspect. This form of pricing is called ________.
A) location-based pricing
4) When a company sets a high price for a new product with the intention of reducing the price in the future, it is using the ________ pricing strategy.
A) market-skimming
86) The Sherman, Clayton, and Robinson-Patman Acts are all federal laws that were enacted to curb the formation of ________.
A) monopolies
14) Tone Zone plans to introduce four mp3 player models over the next year. These models range from basic players at $99 per unit, to more sophisticated players at $399 per unit. The more features a model has, the more expensive it is. What pricing strategy is Tone Zone using for its range of mp3 players?
A) product line pricing
47) Under ________, different versions of the product are priced differently but not according to differences in their costs.
A) product-form pricing
59) Hearth & Home, a store which sells household products, has announced a one-week sale on its new carpet line. This is an example of ________.
A) promotional pricing
45) By definition, ________ is used when a firm sells a product or service at two or more prices, even though the difference in price is not based on differences in cost.
A) segmented pricing
78) The "bottom of the pyramid" refers to ________.
A) the world's poorest consumers
71) In which of the following geographic pricing strategies would customers located close to the company pay the same amount as customers in distant locations?
A) uniform-delivered pricing
93) The ________ seeks to prevent unfair price discrimination by ensuring that sellers offer the same price terms to customers at a given price level.
B) Robinson-Patman Act
85) Which of the following is true of public policies and pricing?
B) The Robinson-Patman Act governs interstate commerce.
40) ________ allowances are price reductions given for turning in an old item when buying a new one.
B) Trade-in
70) ________ is a pricing strategy in which the company sets up two or more clearly identified geographic regions within which all customers pay the same total price.
B) Zone pricing
92) Which of the following would be considered predatory pricing?
B) a company which prices below cost to drive out competitors
36) A quantity discount is a price reduction for buyers who ________.
B) buy merchandise in bulk
74) The Internet offers ________, where the price can easily be adjusted to meet changes in demand.
B) dynamic pricing
72) With which pricing strategy does the seller take responsibility for part or all of the actual freight charges in order to get the desired business?
B) freight-absorption pricing
63) Which of the following involves adjusting prices to account for the physical location of customers?
B) geographic pricing
49) When theaters vary their seat prices because of audience preferences for seats in coveted rows, they use ________.
B) location-based pricing
10) In a bid to attract more customers in a market which has several competitors, Barrymore's Bakery slashed the prices of all its products by 50%. Managers at the firm reasoned that lower prices would draw in even more customers, making up for the reduction in price several times over. Which of the following pricing strategies are they using?
B) market-penetration pricing
7) Companies which set a low price for a new product in order to attract a large number of buyers and a large market share are using the ________ strategy.
B) market-penetration pricing
11) Whizz Corp. wishes to introduce a new hybrid car into mature markets in developed countries with the goal of gaining mass-market share quickly. Which of the following pricing strategies would help the firm meet its goal?
B) market-penetration pricing
5) Midnight Magic, a perfume manufacturing company, plans to release a new fragrance during the holiday season at $99 per bottle. The company intends to bring the price down to $49 within six months of its release to attract buyers who couldn't afford the initial price. Which of the following pricing strategies is Midnight Magic using?
B) market-skimming pricing
52) Which of the following is a price adjustment strategy that considers how a customer's perception of a product is influenced by its price?
B) psychological pricing
54) Which term refers to prices that buyers carry in their minds and check with when they look at a given product?
B) reference prices
96) Mark's Markers, a manufacturer of white board markers, has required its dealers to charge a specified retail price for its markers. Mark's is most likely guilty of ________.
B) retail price maintenance
1) Companies set not a single price, but a pricing ________ which covers different items in its line and changes over time as products move through their life cycles.
B) structure
51) Segmented pricing is only effective when ________.
B) the cost of segmenting does not exceed the revenue obtained from the price difference
81) Competitors are most likely to react to a price change when ________.
B) the product is uniform
25) Cellpoint uses two-part pricing for its long-distance call charges. Because this is a service, the price is broken into a fixed fee plus a(n) ________ rate.
B) variable usage
76) Which of the following factors would most likely lead to a company initiating a price cut?
B) weakened economy
83) When faced with a competitor who has cut its product's price, which of the following is the most cost-effective way for a company to maintain its own price but raise the perceived value of its offer?
C) by altering the company's marketing communications
19) Which of the following product mix pricing strategies involves pricing products that must or can only be used with the main product?
C) captive product pricing
29) Which of the following companies uses product bundle pricing?
E) Panizza, whose combo meals are priced lower than its individual components sold together
35) Leicestershire Renovations has a history of problems with customers who do not pay their bills on time. Leicestershire Renovations wants to improve its cash situation, reduce bad debts, and reduce credit-collection costs. Which of the following forms of pricing would most likely help the firm achieve its goal?
C) cash discounts
32) A(n) ________ is a straight reduction in price on purchases during a stated period of time or of larger quantities.
C) discount
75) Big Mike's Health Food Store sells nutritional energy foods. The price of the products sold varies according to individual customer accounts and situations. For example, long-time customers receive discounts. This strategy is an example of ________.
C) dynamic pricing
53) Consumers are less likely to use price to judge the quality of a product when they ________.
C) have experience with the product
94) Price discrimination is legal when a ________.
C) seller can prove its costs are different when selling to different retailers
8) A market-penetration pricing policy should LEAST likely be used for a new product when ________.
C) the product's quality and image support a high price
24) When amusement parks charge customers for admission and later for food and beverages, they are following a ________ pricing strategy.
C) two-part
66) Which of the following is true of FOB-origin pricing?
D) It is an expensive alternative for customers in distant locations.
26) Using ________ pricing, companies are able to turn their trash into cash, allowing them to make the price of their main product more competitive.
D) by-product
21) Which of the following product mix pricing strategies did Polaroid use when it set the general price range of its cameras low and the markup on its film high?
D) captive product pricing
33) Solar Tanning Salon prices tanning sessions at $25 per visit. It also offers seasonal passes for $175 which permit the customer to visit the salon multiple times in a year. This is an example of a(n) ________.
D) discount
77) Which of the following would most likely lead to a company initiating a price increase?
D) overdemand
58) What type of pricing is being used when a company temporarily prices its product below the list price or even below cost to create buying excitement and urgency?
D) promotional pricing
57) A supermarket places its store brand of blackberry jam priced at $5 per jar in the fruit preserves aisle, alongside the jam jars of a better known brand—whose products are priced at $8 apiece. Store managers reason that customers are more likely to choose the store brand instead of the better known brand when they realize the price difference. What price adjustment strategy is evident in the supermarket's reasoning?
D) psychological pricing
56) La Belle released a a cut glass bottle of perfume at $299 per item, even though its major competitor prices its signature scent at $99 per item. La Belle reasons that customers in search of luxury goods will prefer its product because they are likelier to believe that high price indicates superior quality. What price adjustment strategy is evident in its reasoning?
D) psychological pricing
42) Shoe Trends, a company that manufactures formal shoes for men and women, offers to give its customers $10 for an old pair of shoes when they buy a new pair. In essence, they're reducing the price of the new shoes by $10. What is this type of price adjustment called?
D) trade-in allowance
67) Which form of geographic pricing is a company using when it charges the same rate to ship a product anywhere in the United States?
D) uniform-delivered pricing
68) If Detroit DLX charges the same price for the delivery of its product to customers located within the Great Lakes states, but a different price to customers elsewhere, the company is using ________.
D) zone pricing
99) Which of the following best supports a market-penetration strategy for Champion?
E) The market for the products is highly price sensitive.
88) A number of top fashion-modeling agencies would most likely be charged with ________ for jointly determining what commissions they charge for models.
E) price fixing
13) Which of the following product mix pricing strategies involves setting prices across an entire product range based on cost differences between the products, customer evaluations of different features, and competitors' prices?
E) product line pricing
112) A seasonal discount is a price reduction to buyers who buy merchandise while the products are in season.
FALSE
103) When The Candy Store sets a low initial price in order to get its "foot in the door" and to quickly attract a large number of buyers, the company is practicing market-skimming pricing.
FALSE
107) In addition to its customary services, On the Spot, a house mover, also sells the boxes and padding that are used when moving household furniture. This is an example of customer-segmented pricing.
FALSE
109) Some industries commonly use two-part pricing, breaking the price down into a fixed fee and a fixed usage rate.
FALSE
110) When using product bundle pricing, sellers combine several of their products and offer the bundle at an increased price for increased profit.
FALSE
114) If used infrequently, price promotions create "deal-prone" customers who wait until brands go on sale before buying them.
FALSE
125) The widespread use of scanner-based computer checkouts has eradicated complaints of retailers overcharging their customers.
FALSE
98) Failure to enter the current price into a retailer's system may result in charges of ________.
B) scanner fraud
38) The discount offered by Glamor Gifts to customers who bought Valentine-themed merchandise the week following Valentines Day is an example of a ________.
B) seasonal discount
