CH 18

In a deflationary market, in order to win the trust of consumers, it is essential for a company to:

keep prices low and raise brand value.

An important selling technique to alleviate high prices and capital shortages for capital equipment is the ________.

leasing system

A(n) ________ means that once the seller has accepted the credit, the buyer cannot alter it in any way without permission of the seller

letter of credit

Which of the following characterizes the variable-cost pricing approach?

In this approach, any contribution to fixed cost after variable costs are covered is profit to the company.

Which of the following is true of the full-cost pricing approach?

In this approach, prices are often set on a cost-plus basis, that is, total costs plus a profit margin.

________ are levied as a percentage of the value of the goods imported.

Ad valorem duties

Which of the following is true of international currencies?

All major currencies are floating freely relative to one another.

________, a practice often used by companies to maintain high retail margins to encourage retailers to maintain the exclusive-quality image of a product, can create a favorable condition for parallel importing.

Exclusive distribution

Which of the following is true of countertrading?

Frequently there is inadequate time to conduct a market analysis in a countertrade negotiation.

Which of the following is true of free trade zones (FTZs)?

In an FTZ, payment of import duties is postponed until the product leaves the FTZ area and enters the host country.

Which of the following would be considered an advantage of leasing equipment rather than owning it?

Leasing helps guarantee better maintenance on overseas equipment.

________ is a practical approach to pricing when a company has high fixed costs and unused production capacity.

Marginal-cost pricing

Floral Group Inc., an importing organization in New York, buys perfumes from GS Inc. in France for $13 a unit. Unknown to GS, Floral Group sells this product in the United States for $15 a unit. This leads to a loss of revenue for GS Inc. as it also sells its perfume in the United States but for a higher price of $18. Which of the following best describes the above scenario?

Parallel importing

Which of the following is true of price quotations for international sale?

Price quotations must specify the currency to be used and the credit terms of the transaction.

In general, price decisions are viewed in two ways. Which of the following is one of them?

Pricing is an active instrument of accomplishing marketing objectives.

Which of the following is true of open accounts?

Sales on open accounts are not generally recommended when there is political unrest in the importer's country.

Which of the following is most likely to be true of a company that views prices as an active instrument of accomplishing marketing objectives?

The company sets prices to achieve specific objectives.

What do barter houses do?

They specialize in trading goods acquired through barter arrangements.

Which of the following is the most probable reason a manufacturer would choose to conduct its manufacturing operations in a third country?

To reduce manufacturing costs

What is the function of a countervailing duty?

To restrict the amount a country will import

The creation of a free trade zone leads to:

a reduction in the price escalation

Lower prices to the buyer may also mean lower tariffs, because most tariffs are levied on a(n) ________ basis.

ad valorem

In general, the end goal of all ________ is to reduce the impact of price competition or eliminate it.

administered pricing activities

The use of countertrade in international trade:

allows trade with countries short of hard currency.

________ is the typical payment procedure for established customers where the goods are delivered and the customer is billed on an end-of-the-month basis.

an open account

One approach to defining the pricing policy of dumping is to say that it is a case where a product is sold in the international market:

at a price below the cost of production.

________ are the primary outside source of aid for companies beset by the uncertainty of a countertrade.

barter houses

With ________, the seller assumes all risk until the actual dollars are received.

bills of exchange

A ________ exists when various companies producing similar products or services work together to control markets for the types of goods and services they produce.

cartel

Which of the following is an example of a price-fixing arrangement?

cartels

When the value of the dollar is weak relative to the buyer's currency, sellers generally employ ________.

cost-plus pricing

When Polar Inc., an American fast-food company, wanted to market its burgers and fries in France, it was asked to import French wine to the United States in return. This is an example of:

countertrade

For ________ to be levied on a product, it must be shown that prices are lower in the importing country than in the exporting country and that producers in the importing country are being directly harmed by the dumping of the product.

countervailing duties

Dumping in the world markets is most likely to increase when:

demand in the home country is low

By shipping unassembled goods to a free trade zone (FTZ) in an importing country, a marketer can typically lower costs because:

duties are assessed at lower rates for unassembled goods

A company that views pricing as a static element in a business decision most probably:

exports only excess inventory.

In ________, a company has an ongoing relationship with a bank that routinely buys its short-term accounts receivable at a discount.

factoring

In a(n) ________, the seller makes a one-time arrangement with a bank or other financial institution to take over responsibility for collecting the account receivable.

forfaiting transaction

Companies following the ________ philosophy insist that no unit of a similar product is different from any other unit in terms of cost and that each unit must bear its full share of the total fixed and variable cost.

full-cost pricing

Which of the following approaches to pricing is most suitable when a company has high variable costs relative to its fixed costs?

full-cost pricing

A ________, which restricts the amount a country will import, may be imposed on foreign goods benefiting from subsidies, whether in production, export, or transportation.

minimum access volume

Drew's company imports materials and parts into a free trade zone (FTZ) within the United States and then has the finished products imported into the United States. Her company will most likely:

not have to pay tariffs on the products while they are in the FTZ.

Which of the following leaves sellers in a position where most of the problems of international commercial finance work to their disadvantage?

open accounts

A ________ policy is used to stimulate market and sales growth by deliberately offering products at low prices.

penetration pricing

The crucial problem confronting a seller in a countertrade negotiation is determining the ________ for the goods offered as payment.

potential demand

________ results from the added costs incurred as a result of exporting products from one country to another.

price escalation

A company uses ________ when the objective is to reach a segment of the market that is relatively price insensitive and thus willing to pay a premium price for the value received.

price skimming

If the supply of a product in a market is limited, a company may follow a ________ approach to maximize revenue and to match demand to supply.

price skimming

Lush Cosmetics Corp., a U.S.-based firm, has recently started exporting cosmetics to India. Lush has introduced a new range of mineral-based makeup products for the first time in the Indian market. As Lush has no competitors in this segment of the Indian cosmetics market, it has set a very high price for its products in order to reach the premium, price insensitive segment of the market. This is an example of ________

price skimming

When the Indian rupee depreciated against the U.S. dollar, PC manufacturers who were dependent on imported components had to either absorb the increased cost or ________.

raise the price of PCs

Assembly in the importing country is a way companies attempt to lower prices and avoid dumping charges. These assembly plants are known as _______

screwdriver plants

Assuming that an international marketer has produced the right product, used the proper channel of distribution, and promoted the goods correctly, the effort is most likely to fail if the international marketer fails to:

set the right price for the goods or services.

A(n) ________ is a flat charge per physical unit imported

specific duty

________ are the primary discriminatory tax that must be taken into account in reckoning with foreign competition.

tariffs

Firms that are unfamiliar with overseas marketing and firms that produce industrial goods orient their pricing solely on the basis of:

the costs of production of the goods.

In most cases, the reason why products cost relatively little in one country and cost more in another is:

the higher costs of exporting

When a company exports a product from the United States to another country, the company is most likely to be unable to determine the ultimate price of a product if:

the middleman markups are not standardized.

The costs of production may be lowered if a firm ships unassembled goods to a free trade zone (FTZ) in an importing country because:

unassembled goods may qualify for lower freight rates

In ________, a firm is concerned only with the marginal or incremental cost of producing goods to be sold in overseas markets.

variable-cost pricing

A marketer may face lower costs by shipping unassembled goods to a free trade zone (FTZ) in an importing country because:

wages may be lower in the importing country.