Marketing chapter 20
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
At the breakeven point, a) the money a company brings in from selling products equals the amount spent producing the products. b) the total fixed costs are exactly equal to the total variable costs. c) profits are exactly equal to the difference between revenue and total variable costs. d) the marginal revenue of a product is exactly equal to the marginal cost of producing one more unit. e) the marginal cost curve and the average cost curve will be identical for a particular product.
a
Costs that do not vary with changes in the number of units produced and sold are called ____ costs. a) fixed b) total c) invariable d) variable e) set
a
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
Suppose managers at Caterpillar have determined the costs associated with producing hay balers are equal to the price that they charge for the hay balers. This indicates that Caterpillar is producing at the ___________ point. a) breakeven b) marginal revenue less than marginal cost c) profit margin d) competitive price e) profit maximizing
a
Temporary price reductions through sales, rebates, and special discounts are often used to a) raise cash quickly. b) decrease costs. c) increase profitability. d) run off the competition. e) create a value image.
a
The ___________ prohibits price fixing among firms in an industry. a) Sherman Antitrust Act b) Federal Trade Commission Act c) Wheeler-Lea Act d) Robinson-Patman Act e) Clayton Act
a
A company trying to position itself as value oriented should not a) set prices that are reasonable relative to product quality. b) use premium pricing for its products. c) set prices similar to those of its competitors. d) use any advertising for its products. e) consider costs when determining the price of products.
b
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
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
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
Costs that vary directly with changes in the number of units produced or sold are called a) changeables. b) variable costs. c) direct costs. d) fixed costs. e) marginal costs.
b
For most products, a(n) ____ relationship exists between the price of a particular product and the quantity demanded. a) inelastic b) inverse c) positive d) unknown e) elastic
b
If the product price is $100, average variable cost $40 per unit, and the total fixed costs are $120,000, what is the breakeven point? a) 500 units b) 2,000 units c) 1,200 units d) 300 units e) 3,000 units
b
In conducting an assessment of her accounting firm, Pauline Santana discovers the following annual results: average charge per customer = $250; rent = $12,000; total billings = $150,000; employee compensation and benefits = $60,000; and other costs = $110,000. Given these results, Mary's profits would equal a) a loss of $20,000. b) a loss of $32,000. c) $28,000. d) $40,000. e) $222,000.
b
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
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
Which of the following products is most likely to have an inverted C-shaped demand curve? a) Levi jeans b) Giorgio perfume c) Maxwell House coffee d) Pillsbury cake mix e) Ford Taurus
b
Which of the following products is most likely to involve personal selling? a) Blenders b) Riding lawn mowers c) Fresh peaches d) Picture frames e) Footballs
b
Which of the following prohibits price discrimination that lessens competition among wholesalers and retailers? a) Sherman Antitrust Act b) Robinson-Patman Act c) Lanham Trademark Act d) Federal Trade Commission Act e) Wheeler-Lea Act
b
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
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
The type of prices most likely to appear in advertising is a) prestige. b) future. c) bargain. d) internal reference. e) cost-plus.
c
The types of prices that appear least often in ads are ___________ prices. a) reference b) discount c) premium d) comparison e) sale
c
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
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
What does the demand curve for a prestige product look like? a) It is a straight line where the quantity sold continues to increase as the price of each product increases. b) It is a curve where the highest and the lowest prices yield the greatest quantity sold and mid-range prices produce the fewest sales. c) It forms a curve where the greatest quantity sold comes at a medium price and the quantities fall as the price increases or decreases. d) It forms a straight vertical line because of the prestige of the product, and quantity sold will remain stable regardless of the price. e) It slopes from left to right at a very mild slope; that is, as quantity increases, price decreases slowly.
c
What equation shows organizations the relationship between price and profit? a) Total Variable Costs + Total Fixed Costs = Sales - Profit b) Price = Profit per Item × Number of Units Sold c) (Price × Quantity Sold) - Total Costs = Profits d) (Price - Profits) × Total Costs = Sales e) Total Costs = (Price × Quantity Sold) - Profits
c
When marginal cost is equal to marginal revenue, the firm should a) produce more to increase profits. b) produce less to decrease total costs. c) stop producing additional units to maximize profits. d) provide discounts to encourage purchases. e) intensify distribution to increase sales.
c
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
Which of the following is most likely to have an inelastic demand curve? a) Automobile b) Vacation c) Nonelective surgery d) Recreational vehicle e) Computer
c
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
___________ consumers are concerned about both the price and the quality aspects of a product. a) Price-conscious b) Prestige-sensitive c) Value-conscious d) Price-conscious and prestige-sensitive e) Quality-conscious
c
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
The tuition and fees each student paid for this semester of college are both terms for a) expenses. b) charges. c) bills. d) price. e) exchange valuations.
d
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
A price developed in the consumer's mind through experience with the product is called a(n) a) external reference price. b) value-price guideline. c) frame of reference. d) internalized price. e) internal reference price.
e
Below the breakeven point, a firm is operating a) with fixed costs only. b) with minimal variable costs. c) with no revenue. d) profitably. e) at a loss.
e
Dividing the percentage change in quantity demanded by the percentage change in price gives the a) prestige demand curve. b) breakeven point. c) marginal cost curve. d) price sensitivity curve. e) price elasticity of demand.
e
For most firms in the United States, demand curves are a) upward sloping. b) completely horizontal. c) completely vertical. d) c-shaped. e) downward sloping.
e
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
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
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
If the terms of a business exchange are 2/10 net 30, this means that the transaction a) involves a cumulative discount if paid in 30 days. b) involves a noncumulative discount. c) offers a discount if the buyer lives within a ten-mile radius. d) price does not include the cost of freight. e) involves a cash discount if paid within ten days.
e
Lucy buys a new dress at T.J. Maxx that has a price tag with "Compare at $50.00. Our Price $29.99." This is an example of the use of a) internal referencing. b) cumulative discounts. c) seasonal discounts. d) base-point pricing. e) an external reference price.
e
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
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
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
For most consumers, there is an assumed relationship between a) price and quality. b) value and cost. c) internal and external reference prices. d) value and price consciousness. e) prestige prices and value.
a
Generally, customers are most likely to rely on the price-quality association when a) they cannot judge the quality of the product for themselves. b) the product is a well-known brand. c) customers can judge the product's quality for themselves. d) the product is purchased through the use of the Internet. e) products are being purchased from well-established retailers that are familiar to customers.
a
If Ralph Lauren offers to reduce the price of its women's blazers when retailers buy more than 100 pieces, the designer is offering a ____________ discount. a) quantity b) cash c) seasonal d) trade e) complementary
a
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
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
If a product has an inelastic demand and the manufacturer raises its price, a) total revenue will increase. b) quantity demanded will decrease. c) the demand schedule will shift. d) the demand will become more inelastic. e) total revenue will decrease.
a
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
The Panama Jack Company utilizes a special strategy to sell its ECO-shirt line. Its basic promotional tool is the discount. These discounts offered to middlemen for performing certain channel activities are referred to as ____________ discounts. a) trade b) cumulative c) noncumulative d) push e) intermediary
a
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
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
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
When marketers emphasize price as an issue and match or beat the prices of other companies, they are using a) price competition. b) nonprice competition. c) comparative pricing strategies. d) demand-based pricing. e) supply-based pricing.
a
Which of the following statements about nonprice competition is false? a) Companies that use nonprice competition do not need to keep track of their competitor's prices. b) A company must be able to distinguish its brand through some unique feature in order to successfully engage in nonprice competition. c) A firm using nonprice competition can build loyalty to both its company and its products. d) When using nonprice competition, a company should promote the distinguishing characteristics of its brand. e) Buyers must view the distinguishing characteristics of a product offered through nonprice competition as being important.
a
A certain location of O'Charley's Restaurant has annual fixed costs of $200,000. If an average tab at the restaurant is $60 and the variable costs per tab is $20, how many groups of customers must O'Charley's serve per year in order to break even? a) 2,000 b) 5,000 c) 10,000 d) 3,333 e) 2,500
b
Justin Caprese phones Ben Kirkland of Southside Furniture to inform him that if he will increase his recent order of 15 mattress sets to 20, he will receive a 14 percent price reduction. This offer is due to a recent overstock condition at the factory and will not be available in the future. The discount offered here is a) cash. b) noncumulative. c) seasonal. d) trade. e) cumulative.
b
Michelin notices that when the number of tires it sells increases from 1,000,000 to 1,000,001, total revenue rises $35. The $35 represents the firm's a) average revenue. b) marginal revenue. c) price elasticity. d) average variable revenue. e) average total cost.
b
Monopolies usually keep their prices at a level that generate a reasonable, but not excessive, return primarily because a) they want to avoid new competitors entering their market. b) they want to avoid government regulations on their pricing. c) they try to satisfy the demands of value-conscious consumers. d) firms can increase market share more rapidly this way. e) customers will discontinue use of these products if prices rise.
b
Sellers that emphasize distinctive product features to encourage brand preferences among customers are practicing a) product competition. b) nonprice competition. c) brand differentiation. d) price competition. e) competitor differentiation
b
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
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
Advertisements for Suave shampoos emphasize that other shampoos may cost more but don't work any better than Suave. In this example, Suave is competing on the basis of a) service. b) market share. c) price. d) selection. e) packaging.
c
Both the Federal Trade Commission Act and the Wheeler-Lea Act prohibit a) freezing prices. b) independent pricing policies. c) deceptive pricing. d) price fixing. e) price differentials.
c
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
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
In the long run, the J. F. Smucker Company must view ___________ as the absolute lowest price for its Jif brand peanut butter. a) a 10 percent return on investment b) product development costs c) total costs d) advertising expenditures e) Nestlé's prices
c
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
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
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
What a price means or what it communicates to customers is called a) reference. b) response. c) interpretation. d) internalization. e) signaling.
c
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
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
If a company increased its price from $100 to $120 and the quantity demanded fell by 40 percent, the price elasticity of demand for this product is a) 2. b) 1/2. c) -1/2. d) -2. e) 4.
d
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
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
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
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
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
Roberts Electronics calculates that if it produces 15 radar detectors, its costs are $1,500, and if it produces 16 radar detectors, its costs are $1,590. In this instance, $90 is the firm's ___________ cost. a) average b) fixed c) variable d) marginal e) average variable
d
The oldest form of exchange—trading of products—is known as a) credit. b) buying. c) purchasing. d) barter. e) pricing.
d
When marketers at Consolidated Mustard Company tried to determine demand for their product, they found that at 50 cents, consumers wanted 2,000 jars; at $1.00, they wanted 6,000 jars; and at $1.50, they wanted 4,000 jars. What can Consolidated conclude? a) Consolidated did poor market demand research. b) Consolidated has an elastic product. c) Consolidated has an inelastic product. d) Consolidated mustard is a prestige good. e) Consolidated mustard has a normal demand curve.
d
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
A customer who is ___________ is likely to say, "People notice when you buy the most expensive brand of a product." a) price-conscious b) quality-conscious c) value-conscious d) socially conscious e) prestige-sensitive
e
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. Ans: e AACSB: An
e
Reductions for transportation and other costs related to the physical distance between buyer and seller are known as a) base-point pricing. b) freight absorption pricing. c) price zoning. d) location pricing. e) geographic pricing.
e
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
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
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
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
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
Which factor is least likely to affect pricing decisions? a) Competitive prices b) Legal and regulatory issues c) Organizational and marketing objectives d) Customers' interpretation and response e) Shifting stock values
e
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
Which of the following is not a discount provided to business customers? a) Trade b) Cumulative c) Cash d) Seasonal e) Differentiated
e
