chapter 19

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. a) 1,167 b) 1,000 c) 1,750 d) 2,500 e) 700

a) 1,167

At what point does a firm maximize profit? a) The point at which marginal cost equals marginal revenue b) The point at which the firm sells its product at the highest price c) The breakeven point plus the adjusted marginal cost d) The point at which marginal profits equal marginal revenue e) The point at which marginal cost equals marginal profits

a) The point at which marginal cost equals marginal revenue

Which of the following is most likely to be a fixed cost? a) Component parts b) Raw materials c) Rent d) Electricity e) Transportation

c) Rent

One advantage of nonprice competition is that a) a firm can react quickly to competitive efforts. b) market share becomes less important. c) a firm can build customer loyalty. d) marketing efforts are completely eliminated. e) pricing is no longer a factor.

c) a firm can build customer loyalty.

When Cadillac buys headlights from Delco (both of which are divisions of General Motors), ___________ pricing occurs. a) base-point b) zone c) transfer d) uniform geographic e) matrix

c) transfer

The amount of profit a channel member expects depends on a) the amount of discounts for large orders provided by the producers. b) the number of channel support activities provided by the producers. c) what the intermediary could earn if it were handling a competing product instead. d) the type of distribution channels involved. e) the amount of effort required to carry the product.

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

Provisions of the Robinson-Patman Act, as well as those of the ___________, limit the use of price differentials. a) Simpson-Marshall Act b) Federal Trade Commission Act c) Wheeler-Lea Act d) Clayton Act e) Sherman Antitrust Act

d) Clayton Act

What do all of the following have in common: tuition, fee, premium, retainer, dues? a) They all must be paid in cash. b) They are forms of exchange similar to, but not identical with, money. c) They are forms of exchange similar to, but not identical with, barter. d) They are different terms for the concept of price. e) They have nothing in common.

d) They are different terms for the concept of price.

Which of the following statements about price elasticity is false? a) Steak is an example of a product that has an elastic demand for most people, because when price goes up quantity demanded goes down proportionally more. b) Elasticity of demand is the relative responsiveness of a change in quantity demanded to changes in price. c) If marketers can determine price elasticity, then setting prices at optimum levels is much easier. d) When price is raised on a product that has an inelastic demand, then total revenue will decrease. e) A product like electricity has an inelastic demand.

d) When price is raised on a product that has an inelastic demand, then total revenue will decrease.

If a firm currently produces 2,500 products per month and decides to produce 2,501, it will incur a) more fixed costs. b) higher average fixed costs. c) fewer variable costs. d) a marginal cost. e) higher average variable costs.

d) a marginal cost.

Marketers generally view _____ as the minimum price a product can be sold for. a) fixed costs b) variable costs c) profits d) costs e) moderate losses

d) costs

If Colgate-Palmolive wants to maximize profit on its toothpaste, it should operate at the point where a) total costs and total revenues are equal. b) marginal revenue is at its highest level. c) marginal revenue exceeds marginal cost. d) marginal revenue equals marginal cost. e) demand is most elastic.

d) marginal revenue equals marginal cost.

Buyers who focus on purchasing products that signify prominence and status are a) value-conscious consumers. b) price-conscious consumers. c) socially elite buyers. d) prestige-sensitive buyers. e) brand aware consumers.

d) prestige-sensitive buyers.

A measure of sensitivity of demand in relation to changes in price is a) a demand curve. b) a prestige graph. c) marginal analysis. d) price elasticity of demand. e) quantity elasticity.

d) price elasticity of demand.

Price is a key element in the marketing mix because it relates directly to a) the size of the sales force. b) the speed of an exchange. c) quality controls. d) the generation of total revenue. e) brand image.

d) the generation of total revenue.

What type of discount is given to a business purchaser for performing activities such as transporting, storing, and selling? a) Quantity b) Cash c) Geographic d) Service e) Trade

e) Trade

A graph of the quantity of products marketers expect to sell at various prices if other factors remain constant is a a) price graph. b) supply curve. c) price/quantity graph. d) marginal revenue curve. e) demand curve.

e) demand curve.

A concession in price in business markets to achieve a desired goal is called a(n) a) allowance. b) objective-oriented discount. c) cash discount. d) trade discount. e) cumulative discount.

a) allowance.

Marginal analysis involves examining a) what happens to a firm's costs and revenues when production is changed by one unit. b) the extra revenue produced by the sale of one more product. c) the extra cost incurred by the production of one more unit. d) the difference between marginal revenue and total revenue. e) the difference between marginal cost and total cost.

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

A marketer sometimes uses temporary price reductions to a) increase the number of competitors. b) gain market share. c) decrease volume sold. d) increase revenue per item. e) control demand.

b) gain market share.

A product under nonprice competition would most likely not succeed in the market if a) a new advertising campaign is established for it. b) it is easy to duplicate. c) it is packaged differently from similar products. d) it is priced near the competitors' price. e) its quality has been upgraded.

b) it is easy to duplicate.

The point at which the costs of producing a product equal the revenue earned from selling the product is a) elasticity of demand. b) the breakeven point. c) variable costs. d) price elasticity. e) the sum of fixed and variable costs.

b) the breakeven point.

The Highland Racquet Club found that with annual fixed costs of $60,000, its breakeven point is 2,000 members when the membership charge is $60 per person per year. What is the variable cost per person for Highland? a) $45 b) $50 c) $30 d) $25 e) $40

c) $30

The fact that a gas station in Texas pays less for fuel than a gas station in Maine from a producer in Louisiana suggests that refineries are using which of the following pricing methods? a) Price differentiation b) Base-point pricing c) Freight absorption pricing d) Transfer pricing e) Zone pricing

e) Zone pricing

The perception of price depends on a a) product's actual price and consumers' expectations regarding price. b) consumer's analysis of competitive prices. c) consumer's reference price. d) consumer's expectation of price. e) product's actual price in comparison with the manufacturer's suggested price.

a) product's actual price and consumers' expectations regarding price.

If Wilson Sporting Goods faces a standard demand curve that exists for most products, as it raises the price of its tennis rackets, the a) quantity demanded goes down. b) demand remains constant. c) quantity demanded increases. d) demand increases. e) breakeven increases.

a) quantity demanded goes down.

The degree to which the price of a product enhances a customer's satisfaction with the purchase experience and with the product after the purchase is part of their a) response. b) reference. c) interpretation. d) price satisfaction. e) price-consciousness.

a) response.

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 a) survival. b) cash flow. c) competition. d) return on investment. e) profit.

c) competition.

A deduction from list price for purchasing large quantities aggregated over a stated period of time is a a) noncumulative quantity discount. b) additive cash discount. c) cumulative quantity discount. d) cumulative discount allowance. e) additive quantity reduction.

c) cumulative quantity discount.

If Carnival Cruise Lines increased the price of its seven-day cruise package by 10 percent and, as a result, experienced a 20 percent decline in customer bookings, Carnival's demand would be a) steady. b) inelastic. c) elastic. d) prestige. e) marginal.

c) elastic.

To maintain market share and revenue in an increasingly price-sensitive market, companies have focused on quality, used labor-saving technologies, and used efficient manufacturing processes. These tactics have provided gains in productivity that have translated into ___________ for the consumer. a) higher costs for the company and higher prices b) higher costs for the company and lower prices c) lower costs for the company and lower prices d) lower costs for the company and higher prices e) no change in the costs for either the company or

c) lower costs for the company and lower prices

Marketers have no flexibility in setting prices under conditions of a) a monopoly. b) an oligopoly. c) perfect competition. d) monopolistic competition. e) no competition.

c) perfect competition.

The types of prices that appear least often in ads are ___________ prices. a) reference b) discount c) premium d) comparison e) sale

c) premium

If Roberts Electronics finds that the average total cost of its radar detectors and the marginal cost of its radar detectors are both $85, then a) its marginal costs are falling. b) average total cost is at its maximum. c) average total costs are rising. d) demand is elastic. e) average total cost is at its lowest level.

e) average total cost is at its lowest level.

If Pacific Power and Light increased its rates 10 percent and experienced only a 2 percent reduction in the demand for power, the demand would be a) elastic. b) prestige. c) common. d) horizontal. e) inelastic.

e) inelastic.

Suppose Tommy Hilfiger is introducing a new line of men's ties. The designer believes that the target market for these ties comprises men who are very status-conscious. In keeping with this assessment, department stores selling the ties should a) charge a price based on their cost. b) charge prices consistent with their existing ties. c) discount the ties. d) negotiate the price with individual tie shoppers. e) use price symbolically.

e) use price symbolically.

To gain market share, when Hyundai first entered the U.S. car market it did so with a comparatively low price strategy. One of the negative side effects of making this pricing decision is a) a negative impact on consumers' perceptions of quality. b) competitive matching. c) a high return on investment level affecting tax balances owed. d) poor survival chances. e) higher developmental costs.

a) a negative impact on consumers' perceptions of quality.

Which of the following is the most flexible variable in the marketing mix? a) Product b) Price c) Advertising d) Personal selling e) Distribution

b) Price

A danger associated with engaging in price competition is that competitors can also change prices quickly and aggressively, which can result in a(n) _____ that will be harmful to both companies. a) reduction in cost b) price war c) competitive draw d) industry collapse e) advertising battle

b) price war

If Seagram's marketers found that the firm's Crown Royal bourbon was a prestige product and raised its price, which of the following would most likely happen? a) The quantity demanded would immediately fall. b) The quantity demanded would always increase. c) Above some price level, the quantity demanded would begin to decrease. d) The demand curve for the product would always shift to the right. e) The demand curve for the product would always shift to the left.

c) Above some price level, the quantity demanded would begin to decrease.

Which of the following acts does not directly affect pricing decisions? a) Sherman Antitrust Act b) Federal Trade Commission Act c) Wheeler-Lea Act d) Clayton Act e) Simpson-Marshall Act

e) Simpson-Marshall Act

When a customer is considering the purchase of a product in a less-familiar product category, that individual is likely to rely more heavily on a) internal reference prices. b) symbol prices. c) high value products. d) discounted reference prices. e) external reference prices.

e) external reference prices.

Suppose that the watchband department of Timex sells completed watchbands to the finished watch department. The finished watch department is charged the price it would have to pay an outside watchband manufacturer less a discount to reflect low sales and transportation costs. This method of pricing is called _______ pricing. a) zone b) actual full cost c) standard full cost d) cost plus investment e) market-based cost

e) market-based cost

French Quarter Inns drops the price of a suite from $225 to $195 per night and experiences a reduction in the quantity of rooms demanded of an average of five per night. This is an indication that suites at this hotel are apparently an example of a(n) ___________ product. a) reverse-demand b) inferior c) standard d) secondary-demand e) prestige

e) prestige

Safe Auto advertises its low-cost automobile insurance as "minimum coverage for minimum budgets." Safe Auto is engaging in a) non-price competition. b) demand-based pricing. c) prestige pricing. d) price differentiation. e) price competition.

e) price competition.

Premium-priced products are usually marketed through a) complex marketing channels. b) intensive or selective distribution. c) exclusive or intensive distribution. d) exclusive distribution only. e) selective or exclusive distribution.

e) selective or exclusive distribution.

If a company provides price differentials that harm competition by giving one or more buyers a competitive advantage, it is committing a) price discrimination. b) price-consciousness. c) functional discounting. d) price competition. e) price fixing.

a) price discrimination.

If a retailer orders a quantity of merchandise to be delivered to his store in Phoenix and is quoted a price that does not include shipping charges, the retailer is paying a(n) ___________ price. a) F.O.B. destination b) F.O.B. factory c) transfer d) postage-stamp e) base-point

b) F.O.B. factory

What assumption does breakeven analysis make that limits its overall usefulness? a) It focuses on how to achieve a price objective. b) It assumes a company wants to gain a certain market share. c) It relies on demand for a product being inelastic. d) It focuses only on competitive factors and not costs. e) It assumes demand is elastic for the product.

c) It relies on demand for a product being inelastic.

To determine the breakeven point in units, divide the fixed costs by a) total costs. b) variable costs time price. c) price minus variable costs. d) price per unit. e) total revenue minus fixed costs.

c) price minus variable costs.

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. a) quantity b) cash c) seasonal d) trade e) complementary

d) trade

Tim O'Brien gets the invoice for a load of gravel he purchased last week. The price of the gravel was $55, and the terms are 2/10, n/45. If Tim pays the invoice in five weeks, he will owe a) a penalty. b) $53.90. c) $56.10. d) $58.30. e) $55.00.

e) $55.00.

Price is a) money paid in a transaction. b) not important to buyers. c) of limited interest to sellers. d) the most inflexible marketing mix decision variable. e) the value that is exchanged for products in a marketing transaction.

e) the value that is exchanged for products in a marketing transaction.

Which of the following is not a major factor for firms making price decisions? a) Costs b) Competition c) Previous sales d) Channel member expectations e) Legal and regulatory issues

c) Previous sales