Practice Quiz 5 - Mod 12

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loss leader

a product is priced below cost in order to build traffic and promote sales of other, more profitable, products

differential pricing

charging different prices to different buyers of the same product aka price discrimination

price competition

emphasizing low price, and competing on that basis

marginal analysis

examining the effect on revenues and costs of producing and selling one additional unit

price lining

pricing a line of similar goods at certain predetermined prices, with clear price breaks

price leader

pricing a product at or even below cost in order to build traffic

captive pricing

pricing an additional product relatively low, when other products must be purchased. ex: printers and ink or razors and blades

transfer pricing

pricing of products which are sold within the firm

penetration pricing

setting a very low price for new product

pricing objectives

survival, profits, return on investment, market share, etc.

basis for pricing

the basis used to calculate selling price- cost, demand, competition, etc.

marginal revenue

the change in revenue from selling one additional unit

marginal cost

the cost to produce one additional unit

markup

the difference between cost and selling point

price elasticity of demand

the extent to which changing price changes the quantity demanded

breakeven point

the point at which total cost equals total revenue

total cost

the sum of all fixed costs and variable costs

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.

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

​$55.00.

​A measure of sensitivity of demand in relation to changes in price is

​price elasticity of demand

​Dividing the percentage change in quantity demanded by the percentage change in price gives the

​price elasticity of demand.

​The newest version of a product like Bose headphones is likely to use _____, while the new version of Red Bull is likely to use _____ .

​price skimming; penetration pricing

​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.

​quantity

​A price-skimming strategy assumes that

​the initial demand is highly inelastic. setting the additional price very high, early in the product lifecycle

At the breakeven point,

​the money a company brings in from selling products equals the amount spent producing the products.

​In the long run, the J. F. Smucker Company must view ____ as the absolute lowest price for its Jif brand peanut butter.

​total costs

​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?

​Consolidated mustard is a prestige good.

​What does the demand curve for a prestige product look like?

​It forms a curve where the greatest quantity sold comes at a medium price and the quantities fall as the price increases or decreases.

​What assumption does breakeven analysis make that limits its overall usefulness?

​It relies on demand for a product being inelastic.

​Which of the following is most likely to have an inelastic demand curve?

​Nonelective surgery

​_____________ is pricing a product at a moderate level and positioning it next to a more expensive model or brand.

​Reference pricing

​When Mia and Shane are planning their honeymoon, their travel agent tells them that if they buy a special package, their trip to Paris will include meals, tickets to the theater, and a rental car in addition to airfare and a hotel. This is an example of the use of

​bundle pricing.

​A market share objective

​can be used effectively whether total industry sales are rising or falling.

​The federal government often uses ____ pricing when it grants defense contracts.

​cost-plus

​A graph of the quantity of products marketers expect to sell at various prices if other factors remain constant is a

​demand curve.

​The three primary bases for developing prices are

​demand, competition, and cost.

​A price developed in the consumer's mind through experience with the product is called a(n)

​internal reference price.

​The decision of Macy's to use even prices such as $60 for a Ralph Lauren Polo is an application of ____; where ____ prices are often used to _____.

​odd-even pricing; even; give a product an upscale or exclusive image.

​If Wilson Sporting Goods faces a standard demand curve that exists for most products, as it raises the price of its tennis rackets,

​the quantity demanded goes down.

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

​transfer

​A company trying to position itself as value-oriented should not

​use premium pricing for its products. -pricing a product at a high level in order to enhance quality perceptions


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