ch.12
Myrna's company just purchased $600 worth of supplies from Staples. The terms for payment are 2/10 net 30. If Myrna's firm pays in the next week, it will pay ___________. If Myrna's company waits three weeks to pay Office Depot, it will pay _____________.
$588; $600
JCPenney pays $16.50 for a six-ounce bottle of cologne and sells it for $25.95. Its markup as a percentage of cost is approximately ____ % for this product.
57
Which of the following is true about price competition?
A major advantage of price competition is flexibility.
For custom-made equipment or commercial construction projects, which pricing method is most likely to be used? Turnkey
Cost-plus
Which of the following bases for pricing is most commonly used by retailers?
Markup pricing
Which of the following is most likely to have an inelastic demand curve?
Nonelective surgery
Target released a promotional campaign with the tagline, "Expect more. Pay less." Which of the following pricing strategies is Target most likely using?
Psychological pricing
What type of pricing objective would an organization use if it were in a favorable position and desired nothing more?
Status quo
Which of the following statements about price elasticity is false?
When price is raised on a product that has an inelastic demand, then total revenue will decrease.
Odd-number pricing is
a psychological pricing strategy.
A concession in price in business markets to achieve a desired goal is called a(n)
allowance.
Robin is a marketing consultant who specializes in small businesses. Her current client is very interested in estimating the costs for the coming year in order to find the breakeven point. Robin knows this is an important financial statistic because below the breakeven point, the firm is operating
at a loss.
Mike is developing a business plan for a new type of bicycle shoe. He is interested in finding the point at which the costs of producing the shoe will equal the revenue earned from selling the product. Mike is interested in finding the
breakeven point.
The primary reason that retailers favor rigid markups is
convenience.
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.
Ted is excited because he has obtained the price list of his company's major competitor. His supervisor, Hank, is also optimistic. However, he has much more experience in the industry than Ted and cautions him that just because they have access to their competitor's price list
doesn't mean they reflect the actual prices at which competitive products are sold.
A product under nonprice competition would most likely not succeed in the market if
it is easy to duplicate.
Charlotte Russe, a women's clothing retailer, employs a commonly used cost-based pricing method called
markup pricing.
A problem associated with ____ is that consumers can predict when prices will be lowered and delay purchases until that time.
periodic discounting
The General Auto Insurance advertises its automobile insurance as "For a great low rate you can get online, go to The General and save some time!" General is engaging in
price competition.
Maintaining a certain market share, meeting competitors' prices, maintaining a favorable image, and achieving price stability are all associated with a ____ pricing objective.
status quo
Paperclips is an office supplies company that has just adjusted its price levels so that it can increase its sales volume to match its expenses. Paperclips is most likely employing a ____ objective.
survival
Hopper 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, Hopper would break even at ____ units.
1,167
Refer to Scenario 12.1. To break even, Concession Supply should sell ____ cases of hot dogs per day at Wrigley Field.
120
Moon is setting a price for her store's newest item. She purchased the item for $45 and decides to sell it for $54 using markup pricing. If she wanted to calculate the markup as percentage of cost, it would be ______________. If she wanted to calculate the markup as the percentage of the selling price, it would be ______________.
20%; 16.7%
Which of the following statements is the best explanation for the marketing head's decision to leave the existing pricing objectives in place with no change?
A status quo pricing objective can reduce a firm's risks by helping stabilize demand for its products.
The owner of Big Jim's Motorcycles is opening a new retail location. Which of the following is most likely to be a fixed cost for Big Jim's?
Building rent
The manager at HomeGoods puts a sign up next to a Samsung audio system that reads, "Only $299.99! $60 less than at Best Buy." This is an example of what type of pricing strategy?
Comparison discounting
If Bubly sets its twelve-pack price to match the price charged by LaCroix, Bubly is using which of the following pricing methods?
Competition-based
___ does not necessarily take into account supply and demand, but it is straightforward and easy to implement.
Cost-based pricing
______ does not necessarily take into account supply and demand, but it is straightforward and easy to implement.
Cost-based pricing
After selecting a pricing strategy, what is the next step in the establishment of prices?
Determining a specific price
Which of the following is not a discount provided to business customers?
Differentiated
Department stores such as Kohl's and Macy's are interested in learning how much their competitors are charging for similar merchandise. Which of the following practices would these retailers most likely utilize to identify competitors' prices?
Employing comparative shoppers who systematically collect data on prices at competing stores
Which of the following products is most likely to have an inverted C-shaped demand curve?
Eternity perfume
Gil orders 16 dozen fishing lures from Good Day Fishing for $375. When he gets the invoice, he is furious that $25 in freight charges has been tacked onto his bill because he thought the price included freight costs. Gil should have been certain that the order terms were
F.O.B. destination.
GlaxoSmithKline wants to price its newest medication product so that it earns a 35% return on investment. It chose this pricing objective because of the significant amount of resources it spent on research and development. What is one challenge of using return on investment as a pricing strategy?
It typically involves trial and error.
Which of the following would be used in setting the price of a new product if considerable competition is expected?
Penetration pricing
____________ is setting the price lower than competing brands in order to enter a market and quickly gain a significant market share.
Penetration pricing
A product that has more features than those of its competition, or that is perceived to be of higher quality, warrants using which type of pricing strategy?
Premium pricing
Which of the following pricing strategies often results in a retailer losing money on the product?
Price leader
In its advertisement, Timberland gives a close-up of one of its boots to show its fine craftsmanship. At the bottom of the advertisement is "Est. 1973," followed by the phrase "Best Then. Better Now." What type of pricing objective is Timberland using?
Product quality
is pricing a product at a moderate level and positioning it next to a more expensive model or brand.
Reference pricing
Which pricing objective de-emphasizes price and can lead to a climate of nonprice competition in an industry?
Status quo
Based on this information, which of the following explanations do you give her for why this situation occurs?
The demand for the company's products is elastic, so total revenue declines when prices are raised.
Based on this information, which of the following explanations could explain why the competitor's total sales revenue increased?
The demand for the company's products is inelastic, so total sales revenue increases when prices are raised.
Which of the following is true about the target market's evaluation of price?
The importance of price depends on the type of product.
At what point does a firm maximize profit?
The point at which marginal cost equals marginal revenue
What type of discount is given to a business purchaser for performing activities such as transporting, storing, and selling?
Trade
If a firm currently produces 2,500 products per month and decides to produce 2,501, it will incur
a marginal cost.
If Albertson's advertises 2-liter bottles of Coca-Cola for 89 cents to generate store traffic that will purchase other items at regular prices, the grocer is using
a price leader.
Dividing fixed costs by the number of units produced yields
average fixed costs.
Suppose managers at Case IH have determined the costs associated with producing combine harvesters are equal to the price that they charge for the combines. This indicates that Case IH is producing at the ____ point.
breakeven
Lisa and Nick recently purchased a 25-year-old home and are currently undergoing in a kitchen remodel, which includes replacing countertops, cabinets, and kitchen appliances. They are shopping for appliances and visited several retailers to compare prices and determine which brands best met their requirements. One retailer is offering the GE brand refrigerator, cook top, built-in oven, dishwasher, and warming drawer for $5,999, while another retailer has a set of LG appliances that includes a larger refrigerator, range/oven combination, dishwasher, and wine cooler for $5,450. Lisa and Nick are meeting with their kitchen designer to finalize their plans for the kitchen and think that either one of these packages will fit their requirements. The appliance retailers are utilizing a ______ pricing strategy.
bundle
A market share objective
can be used effectively whether total industry sales are rising or falling.
Theatergoers in the Midwest were pleasantly surprised when they arrived at the cinema to see the latest release and learned that a price reduction had just gone into effect. The Wehrenberg Theater chain, which is the oldest theater company and operates in 15 Midwest locations, decided to drop matinee prices from $7.75 to $4.50 per person and reduce evening prices from $9.75 to $7.50 per person. The price decrease is a result of decreased traffic at the theater and the trend of consumers waiting to stream movies at home. The Starplex Cinemas operating in the same communities as Wehrenberg followed suit and reduced their prices to attract consumers as well. The two movie theater chains are utilizing the ______ pricing basis.
competition-based
When products in an industry are relatively homogeneous and price is a key purchase consideration,
competition-based pricing becomes more important.
The three primary bases for developing prices are
demand, competition, and cost.
If a product is priced based on how many or how few people want it at a particular time and place, ____ pricing is being used.
demand-based
The belief that it is better to take a lower profit margin on a sale than no revenue at all is behind
demand-based pricing.
The fact that senior citizens are charged a lower price at movie theaters than younger adults is an example of ____ pricing
differential
For most firms in the United States, demand curves are
downward sloping to the right.
The percentage change in quantity demanded caused by a percentage change in price is much greater for products with
elastic demand.
If Norwegian Cruise Lines increased the price of its seven-day cruise package by 10% and, as a result, experienced a 20% decline in customer bookings, Norwegian's demand would be
elastic.
Business product pricing strategies that address transportation and other delivery costs are known as
geographic pricing.
Consumers may view relatively expensive products to have great value if the products
have desirable features or characteristics.
If Florida Gas and Electric increased its rates by 10% and experienced a 2% reduction in the demand for power, the demand would be You Answered elastic.
inelastic.
For differential pricing to be effective, the market must consist of
multiple segments with different price sensitivities.
Food King grocery stores offer candy bars in the checkout lanes for $0.99 rather than $1.00. This use of _____ pricing should help increase sales of the candy bars.
odd-number
If Kashi wants to quickly gain a large market share quickly with its new line of reduced-fat snack crackers, it should use
penetration pricing.
If Acer uses _____ pricing for its newest Chromebook, it is probably most interested in obtaining market share; and it is assuming
penetration pricing; that other competitors could enter the market easily.
When marketers emphasize price as an issue and match or beat the prices of other companies, they are using
price competition.
Gloria works for the San Antonio Spurs organization and is responsible for managing ticket sales. She knows that ticket price and season ticket packages are related to consumers' interest in purchasing tickets and she tries to price individual tickets and packages at the level where ticket sales and profitability are maximized for the Spurs home games. Gloria typically tests the _______ of demand by creating special events or special sales where she adjusts the price of tickets so she can determine the best price that maximizes profitability for the organization.
price elasticity
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.
To attract customers into a store, Kroger advertises its milk at less than cost, hoping that customers will purchase other groceries as well. This pricing strategy is called
price leader pricing.
To determine the breakeven point in units, divide the fixed costs by
price minus variable costs.
If Braun introduced a new electric razor that sonically removes hair and priced it first at $175 and then at $150 before reducing the price to $100, the firm's initial pricing strategy is known as
price skimming.
When Texas Instruments first introduced its line of graphing calculators, it set the price quite high; it has lowered the price as competitors have entered the market. The pricing strategy initially used by Texas Instruments is called
price skimming.
Sonya is a product manager for The Container Store, a retailer of storage containers, closet systems, and more. Sales have been declining in the past nine months and her management team is pressuring her to compete based on price discounts. However, Sonya is aware of the dangers associated with engaging in price competition. She knows that competitors can also change prices quickly and aggressively, which can result in a(n) ____ that will be harmful to both companies.
price war
Refer to Scenario 12.2. Given Maui Jim's plan for positioning the new sunglasses line, it should use a ____ strategy when introducing its new product.
price-skimming
Reference pricing is
pricing a product at a moderate level and positioning it next to a more expensive model or brand.
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
product price.
The pricing of Origins makeup, which is priced considerably higher than brands such as Cover Girl, Revlon, and Maybelline, is used to communicate ____, which is the company's primary pricing objective.
product quality
Refer to Scenario 12.2. If Maui Jim selected the prices for its new sunglasses to be $100, $150, or $200, this would most likely be an example of using ____ pricing in order to increase sales of the new line.
product-line
Aloft Hotels, Inc. has an objective of achieving a 25% return from its overall sales. This is an example of a ____ pricing objective.
profit
Price leaders, comparison discounting, and special-event pricing are applications of
promotional pricing.
Markup is measured either as a percentage of ____ or a percentage of ____.
selling price; cost
Organizations that opt to set ______ run the risk of de-emphasizing price as a competitive tool, potentially leading to a climate of nonprice competition, like that in which professionals such as accountants and attorneys often operate.
status quo objectives
The Tommy Bahama 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
Suppose that the frozen foods division of Amy's purchases food trays and boxes from the packaging division. The form of pricing used to charge the frozen foods division is called
transfer pricing.
Marginal analysis involves examining
what happens to a firm's costs and revenues when production is changed by one unit.
If a retailer orders a quantity of merchandise to be delivered to his store in Albuquerque and is quoted a price that does not include freight charges, the retailer is paying a(n) ____ price.
F.O.B. origin
Which of the following is an advantage of utilizing penetration pricing?
It helps the company build market share quickly.
What assumption does breakeven analysis make that limits its overall usefulness?
It relies on demand for a product being inelastic.
Pricing the basic product in a product line low while pricing products that go with the basic product at a higher level is called
captive pricing.
Showing a product's price along with its previous price, the price of a competing brand, or the price at another retail outlet is called
comparison discounting.
Refer to Scenario 12.2. Maui Jim's plan of gathering information about the other brands sold in department stores, including their prices, would most likely be used in a ____ basis for pricing.
competition
If Umbro faces a standard demand curve that exists for most products, as it raises the price of its soccer balls, the
quantity demanded goes down.
Maintaining or increasing market share
can be achieved even if industry sales are flat or decreasing.
A retailer of Sure antiperspirant prices it at $2.00; it costs the retailer $1.40. What is the approximate markup as a percentage of selling price?
30%
A certain location of Hamish'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 Hamish's serve per year in order to break even?
5,000
When Aisha and Darius are planning their honeymoon, their travel consultant 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.
Some grocery stores collect data on competitive prices
by using comparison shoppers.