Chapter 13
Price is defined as
The money or other considerations exchanged for the ownership or use of a product
The relationship, or ratio, between a product's perceived benefits and the consumer's costs is known as its
Value
in an industry that has an oligopoly, price wars are likely to benefit only
consumer
An example of a variable cost is
direct labor used to manufacture the product
A product with ___ demand is one in which a slight decrease in price results in a relatively large increase in demand or units sold
elastic
A demand curve enables a firm to examine prices
in terms of quantity sold
To many consumers, price provides information about
the quality of the product
The pricing objective known as unit volume is based on what?
the quantity of product sold
Which of the following may mean that the amount paid is not the same as the list price?
- Discounts - Rebates - Surcharges
Which of the following are essential to consider when setting a price?
- What are customers willing to pay? - What will provide a profit to the company? - What will pay for all associated costs, including marketing?
Order the following steps in setting prices
- identify pricing objectives and constraints - estimate demand and revenue - determine cost, volume and profit relationships - select an approximate price level - set list or quoted price - make special adjustments
If you see picture frames for $120 each, and you have fixed costs of $32,000 and unit variable costs of $40, what is your break-even point?
32,000/120-40 = 400 pictures
legal and regulatory issues and consumer demand are pricing ____ that limit what a company can charge for its products
Constraints
A product with _______ demand is one in which a slight decrease in price results in a relatively large increase in demand or units sold.
Elastic
American firms are sometimes criticized for using which profit-oriented pricing objective, because it results in a short-term orientation?
Maximizing current profit
Strategies that can be used as part of a firm's profit objectives include which two of the following?
Maximizing current profits target return
Which of the following are types of competitive markets?
Oligopoly and Monopolistic competition
Profit = (unit ___ x quantity sold) - (fixed cost + variable cost)
Price
The percentage change in quantity demanded relative to a percentage change in price is known as
Price Elasticity of Demand
In which of the following does the competitive market NOT provide pricing constraint for the marketer?
Pure Monopoly
Why are customers willing to pay extra for a Kohler walk-in tub which eliminates the need to step over the side of the tub?
The safety features enhance the product's value
movement along a demand curve occurs because of
a change in price
A shift in the demand curve is the result of
a change in selling conditions
the demand curve is
a graph relating quantity sold and price
when a successful new product is introduced to the market, the lack of competition (including from your own company) removes
a price constraint
When a board of directors determines profit goal, marketing managers usually implement
a target return objective
the slope of the demand curve shows that
as price increases, demand decreases
The practice of exchanging products and services for other products and services rather than for money is referred to as __________.
barter
Small changes in price
can have comparably big effects on company profit.
A firm's prices are constrained in one way because it must cover all ___ for producing and marketing a product.
cost
In the long run, a firm's ___ and those of its distributors set a floor for its price, allowing the firm to both survive and get its product to consumer
costs
The social responsibility pricing objective often results in
decreased profits
Generally, the greater the ___ for a product, the higher the price that can be set.
demand
The chart that shows how many units of a product or service consumers will demand during a specific period of time at different prices is known as the
demand curve
For a firm, rent, landscaping, and insurance are examples of ___ costs.
fixed
______ cost is the sum of the expenses of the firm that are stable and do not change with the quantity of a product that is produced and sold.
fixed
A product for which nostalgia or fad factors come into play is likely to
have higher prices later in its product life cycle
When there are many substitute products available, the price elasticity of demand for a given product will likely be ___.
higher
the key element in the definition of pure competition is that the products offered by the different firms are perceived by the consumer to be
identical
According to price elasticity, when the price of iPhones drop, the demand for iPhones is likely to
increase
When a 1% decrease in price results in less than a 1% increase in quantity sold, demand for the product or service is
inelastic
Which of the following is an advantage of using break-even analysis?
it is simple
With which profit-orientated pricing objectives is a firm likely to price its products relatively low compared to their cost to develop with the prospect of gaining a high market share?
managing for long-run profits
out-of-control ___ compared to foreign car companies resulted in the US government investing billings of dollars in US car companies, trying to restructure them to make them competitive
manufacturing costs
A pricing objective of increasing sales can have the disadvantage of leading to price cuts that
may reduce the revenues of related products in the firm's line
The situation in which many firms compete for customers in a given market and the products are differentiated is known as
monopolistic competition
Movement along a demand curve implies
no changes have occurred in any demand factors except price
Pricing ___ frequently reflect corporate goals, while pricing ___ often relate to conditions existing in the marketplace.
objectives; constraints
When only a few firms dominate a market, it is known as ___ competition
oligopolistic
which element of the marketing mix is part of the profit equation and therefore, has a direct effect on a firm's profits?
price
If loyalty toward a particular brand makes other brands seem less substitutable, it decreases
price elasticity of demand
Pricing decisions are difficult because
price simultaneously affects total revenue and total cost
A consumer's near-instantaneious access to competitors' prices for the same offering through the use of websites, apps, and smartphones is known as
price transparency
Break-even analysis can help evaluate the impact in ___ and ___ on ___
price; costs; profit
A firm must know its competitors' ___ in order to best set its own
prices
Which two of the following are factors that cause price inelasticity?
products are considered necessities few available products
The three factors influencing the demand curve are consumer tastes, the consumer income and the price and availability of
similar products
Fixed cost divided by unit price less unit variable cost is known as
the break-even point
market share can be measured as the ratio of ___ compared to the total industry units sold.
the firm's units sold
the new a product the earlier it is in its life cycle
the higher the price that can usually be charged
The unit variable cost is
the total variable cost divided by the quantity.
Total revenue equals the product quantity sold times
the unit price
In a pure competition market, the primary purpose for advertising is
to inform buyers that a product is available
break-even analysis analyzes the relationship between which two at various levels of output?
total cost total revenue
A break-even analysis chart shows the intersection of which two curves?
total costs and total revenue
According to the price equation, to find the actual price, you should do which of the following to the list price?
Add extra fees subtract incentives and allowances
Which of the following are the three factors that influence demand?
Consumer Income Consumer tastes price and availability of similar products
An international firm that contracts with suppliers overseas would be most likely to do so for which of these reasons?
The suppliers might have efficiencies and lower hourly wages, reducing production prices.
The cost of changing prices is a pricing constraint; as a result, most firms
change the prices of their products more often if they sell online.
When there are many substitute products available, the price elasticity of demand for a given product will likely be ___
higher
To increase customer value for a given price, the market must
increase perceived benefits
According to the price equation, the actual price is the ___ price less incentives and allowances, plus extra fees
list
When a firm sells more product than it needs to cover its total costs, it will
make a profit
Many Japanese car firms are willing to give up immediate profits for long-term penetration of the market. This is a pricing objective known as
managing for long-run profits
marketing managers may identify profit, market share, social responsibility, or even survival as pricing
objectives
In a pure competition market, advertising
only serves to inform buyers that the product is available
Total revenue less (that is, minus) total cost is known as
profit
When many sellers follow the market price for products the consumer sees as identical it is known as
pure competition
When a consumer is comparing the costs and benefits of substitute items, he or she is developing a
reference value
Firms that set ___ objectives believe that increased revenues will in turn lead to increases in market share and profit.
sales
in a pure competition market, the primary purpose for advertising is
to inform buyers that a product is available
The sum of fixed and variable costs is known as
total cost
Price times quantity sold is
total revenue
The pricing objective known as ___ can be counterproductive if it is achieved by drastic price cutting that drives down profit.
unit volume
Creative marketers engage in ___ when they increase product benefits without changing the price
value pricing
Direct labor and materials are known as
variable costs