mindtap chap 12

Marginal cost will exceed marginal revenue.

Juan thinks he has reached the point where he has maximized his profit. However, because this can be tricky to determine, he is not sure. He decides to test it by selling one more unit. If Juan is correct in his assumption, what should happen when he sells this additional unit?

Dynamic pricing

LEGOLAND is implementing a new type of pricing. When demand increases and more customers visit the parks, the price will increase. When demand dips during the slow season, prices will decrease. This is a way to help balance out supply and demand. What is another name for the type of pricing that LEGOLAND is using?

Evaluating competitors' prices

Lexi operates a service business that engages in systematically collecting data on brands and prices at competitors' stores for her business customers. For which stage of the price establishment process would this service be most appropriate?

Cost-plus

Lin is attempting to price a piece of custom-made equipment for a gym. The production costs of the equipment are hard to assess. She decides it would just be easier to add a specified dollar amount to the total cost. What type of pricing is Lin using?

Determining the final price

Malcolm has decided that he wants to open up his own law practice. The time has come to establish prices for his services. Due to his extensive experience and legal background, he believes that his fees should not relate directly to the time or effort spent on specific cases. Now that Malcolm has chosen the pricing strategy he wants to use, what is his next step?

Assessing the target market's evaluation of price

Miguel is setting prices for new couches. The couch he is currently looking at is higher quality and expected to last longer than a traditional couch. Miguel expects to set the price of the couch high because he knows that consumers anticipate paying more for longer-lasting products. What stage of the pricing process is Miguel currently at?

nonprice competition

Apple has long promoted the style, design, and quality of its products and has become very successful because many consumers consider these characteristics desirable. Apple can best be described as operating in an environment of _______.

purchase situation

Daniel always has to purchase popcorn whenever he goes to the movies. Popcorn is typically marked up 1,275 percent. However, Daniel is willing to pay this price. For Daniel the _______ is influencing his view of price.

Product quality

If Peloton seeks to lead the electronics industry in innovation, what type of pricing objective will it most likely adopt?

inelastic

Refer to Scenario 12.1. When Chantel raised the price of her rose gold bracelets by $75 to cover unexpected expenses, she was surprised to see that demand appeared to increase. She was making more sales at a higher price. This means the rose gold bracelets are _______.

Comparison discounting

Refer to Scenario 12.4. Which of the following pricing strategies is Forouzan planning to adopt?

Cash

Refer to Scenario 12.5. What type of discount is the supplier offering David?

A cash discount

ACE Corp. offers a price discount to encourage prompt payment. Which of the following is it likely to use?

A decrease in total revenue

ACE Corp.'s products have elastic demand. If ACE raises the price of products, what will be the result?

market share objective

Artemis Inc. has a pricing objective to increase its primary product's sales relative to total industry sales. This is best described as a _______.

Evaluation of competitors' prices

Camila is undergoing the eight-step process for establishing prices for a newly launched product. She has just finished assessing the target market's evaluation of possible prices. What is Camila's next step?

Customary

Danny has a dilemma. He works for a chocolate company and the price of chocolate is going up. The most logical solution would be to raise the price. However, Danny knows from his history in the business that their loyal customers would not look favorably on a price increase. For customers, candy bars are one of those items where the price rarely changes. Danny's firm has sold its candy bars for $0.99 for the past two decades. Danny feels that the next best solution to absorbing the extra costs is to make the candy bars slightly smaller without lowering the price. Danny's company is most likely using which of the following pricing strategies?

Negotiated pricing

Felipe goes to a Toyota dealership looking for a new car. He finds a Toyota Corolla he really likes. The time has come to meet with the salesperson. What type of pricing strategy is the salesperson likely to adopt with Felipe?

yield management

Firefly Space Shuttles is using a strategy of maximizing revenues by making numerous price changes in response to demand, competitors' prices, or environmental conditions. This is best described as _______.

Evaluating competitors' prices

Refer to Scenario 12.4. When Forouzan is examining the list of prices, she is most likely in which of the following stages?

$950; $912

Refer to Scenario 12.5. How much would David have to pay if he pays in 25 days? In 19 days?

40

Scenario 12.1. Chantel, a resident of Denver, Colorado, decided to open up her own fine jewelry store. To do so, she used her life savings and a loan from the bank. Chantel was able to open up a store with sufficient inventory. She markets the jewelry as the "finest jewelry in the West." The most popular item Chantel sells is a rose gold bracelet that sells for $550. During one month, Chantel's fixed costs are $6,000. Her variable costs average about $400. Refer to Scenario 12.1. How many rose gold bracelets would Chantel have to sell to break even?

Price skimming

Scenario 12.3. Eduardo's company is about to release a new electronics product. The electronics product is estimated to have a short life cycle before it is replaced by an upgraded one. The company would like to recover the capital spent to produce the product. It therefore decides to charge the highest possible price for the product upon release. Eduardo's firm recognizes this might provide an advantage to competitors who may release the product at a lower price, but it believes customers will feel that the higher price signals higher quality. Refer to Scenario 12.3. What type of pricing strategy is Eduardo's company using for this product?

market share

Scenario 12.4. Forouzan works at a firm that wants to develop a new pricing strategy for one of its products. The company has decided that its main objective for this product is to increase the product's sales in relation to industry sales. Forouzan has obtained a list of prices that tell her how much similar products are being sold for. Forouzan is particularly interested in the industry's top competitor because it has so much market share. After determining the price of its major competitor, Forouzan decided to undercut their price by several dollars. She believes putting a sign in their stores that features her company's discounted price next to the price of their major competitor for the same product will show consumers that Forouzan's company offers them a much better deal. However, she knows that she has to be careful not to misrepresent the competitor's price in the process. Refer to Scenario 12.4. Forouzan's firm has adopted a _______ pricing objective.

2.5; elastic

Scenario 12.5. A few months ago, a major B2B supplier raised prices of its products by 10 percent to compensate for changes in market conditions. One of its sales reps, Tamika, was surprised when orders from her regular customers plummeted. Her normal order was $1,100. After the price increase, the average order dropped by 25 percent. Tamika became concerned that customers might look elsewhere. For this reason, she decided to start offering discounts. When one of her loyal customers, David, purchases $950 worth of product for his firm, the supplier gives David the terms "4/20 net 30." She wants to maintain her relationship with David and would ideally like to receive payment in less than a month. Refer to Scenario 12.5. Consider how the average order amount changed when prices were raised $75. The elasticity of demand is _______. With this in mind, the product can best be described as