CHAPTER 10 MKT
Price fixing occurs when two or more companies conspire to ________. A) keep prices at a certain level B) use predatory pricing C) use loss-leader pricing D) use bait-and-switch tactics E) prohibit competitors from entering a market
A) keep prices at a certain leveL
After looking at the ads in her Sunday paper, Ruby decided to visit a local nursery and buy potting soil for her plants at $1.99 a bag. The regular price is $4.99 a bag. While Ruby was there she also purchased three bushes, six flowering plants, and a bird bath. You can infer from this information that the nursery used the bags of potting soil as a ________. A) loss leader B) freemium C) bait-and-switch D) price line E) reference price
A) loss leader
In a(n) ________, sellers compete for the right to provide a product to a buyer. A) reverse auction B) dynamic auction C) open auction D) reserve auction E) price-lining auction
A) reverse auction
When a company charges the same rate to ship a product anywhere in the United States, it is using which form of pricing? A) freight absorption B) F.O.B. factory C) F.O.B. origin D) uniform delivered E) F.O.B. delivered
D) uniform delivered
According to the law of demand, which of the following is true? A) If prices decrease, customers will buy more. B) Customers are not aware of small price changes. C) The effect on demand from changes in price cannot be accurately predicted. D) Demand equals supply. E) If prices increase, customers will buy more.
A) If prices decrease, customers will buy more.
When consumers are unable to judge the quality of a product through examination or prior experience, they usually do which of the following? A) Make a price-quality inference. B) Depend on an internal reference price. C) Assess the fair price. D) Experience an assimilation effect. E) Experience a price-placebo effect.
A) Make a price-quality inference.
Which of the following occurs when price is inelastic? A) Price and revenue change in the same direction. B) Revenues decrease when price increases. C) Revenue is unaffected by price changes. D) Quantity demanded increases when price increases. E) The demand curve is more horizontal.
A) Price and revenue change in the same direction.
Which of the following is true about noncumulative quantity discounts? A) They encourage large single orders. B) They encourage a strong relationship between buyer and seller. C) They are based on a total quantity purchased within a set time period. D) They typically involve giving the buyer a credit to use against future orders. E) They encourage small, regularly spaced orders.
A) They encourage large single orders.
A firm is using ________ when it charges a high, premium price for a new product with the intention of reducing the price in the future. A) a skimming price B) trial pricing C) value pricing D) penetration pricing E) prestige pricing
A) a skimming price
The average price Xerox charged when it introduced the first stand-alone fax machine was $12,700. This premium price was a way for Xerox to recoup some of the research and development costs that went into production. Xerox used ________. A) a skimming price B) a trial price C) penetration pricing D) prestige pricing E) target costing
A) a skimming price
(n) ________ strategy is implemented when a store places two similar items next to each other, highlighting the fact that the price of one item is slightly lower than that of the other item. A) assimilation effect B) contrast effect C) price-placebo effect D) penetration pricing E) skimming price
A) assimilation effect
Trade or functional discounts are offered by manufacturers to which of the following? A) channel intermediaries who perform wholesaling tasks that the manufacturer would otherwise have to perform B) consumers who earn a price reduction for buying in bulk C) intermediaries who pay their bills before they are due D) manufacturers that agree to exclusive distribution contracts E) the government market and other organizations that require bid proposals
A) channel intermediaries who perform wholesaling tasks that the manufacturer would otherwise have to perform
The changes in prices of other products affect the demand for an item. This is a phenomenon called ________. A) cross-elasticity of demand B) complementary elasticity C) interdependent elasticity D) substitute demand E) variable demand
A) cross-elasticity of demand
Which of the following is NOT a type of pricing objective? A) elasticity B) market share C) profit D) competitive effect E) image enhancement
A) elasticity
For a company that manufactures plastic signs, the printing press to make the signs, the manager's salary, and the utilities are all examples of ________. A) fixed costs B) average fixed costs C) variable costs D) marginal costs E) everyday costs
A) fixed costs
When the seller takes on part or all of the cost of shipping, it is called ________. A) freight absorption B) F.O.B. factory C) F.O.B. origin D) uniform delivered E) two-part pricing
A) freight absorption
Which of the following occurs when competitors making the same product jointly determine what price each will charge customers for the item? A) horizontal price fixing B) vertical price fixing C) predatory pricing D) internal reference pricing E) assimilation pricing
A) horizontal price fixing
________ refers to the sale of two or more goods or services as a single package for one price. A) Two-part pricing B) Captive pricing C) Price bundling D) Decoy pricing E) Trial pricing
C) Price bundling
The break-even point is the point at which ________. A) the total revenue and total costs lines intersect B) demand equals supply C) the production of one more unit will not increase profit D) the company can pay all of its long-term debt E) a firm's profit goal is reached
A) the total revenue and total costs lines intersect
Using ________, marketers charge different prices to different customers in order to manage capacity and maximize revenue. A) yield management pricing B) keystoning C) high/low pricing D) promo pricing E) trial pricing
A) yield management pricing
When setting prices, a company must consider factors in its pricing environment. ________ such as the business cycle, economic growth, and consumer confidence can have a significant impact on the firm's pricing strategies. A) Consumer trends B) Economic trends C) Competitors' responses D) Regulations E) Market structures
B) Economic trends
________ do not vary with the number of units produced. A) Liquidity costs B) Fixed costs C) Variable costs D) Marginal costs E) Everyday costs
B) Fixed costs
________ is a new business strategy of offering a basic version of a product free of charge and then charging for upgraded versions of the product. A) Prestige pricing B) Freemium C) Price segmentation D) Reverse marketing E) Dynamic marketing
B) Freemium
Why are prestige products often an exception to the law of demand? A) The demand curve for prestige products slopes downward and to the right. B) Increasing the price of prestige products can make them seem more desirable. C) Demand for prestige products often is greater than supply. D) Prestige products such as diamonds, sapphires, and emeralds are nonrenewable resources. E) Customers are more aware of any price changes to prestige products.
B) Increasing the price of prestige products can make them seem more desirable.
________ are the per-unit costs of production that will fluctuate depending on how many units or individual products a firm produces. A) Fixed costs B) Variable costs C) Average fixed costs D) Marginal costs E) Everyday costs
B) Variable costs
(n) ________ occurs when customers decide that two different brands of pain reliever have the same product quality because they have basically the same product characteristics and similar prices. A) clouding effect B) assimilation effect C) bundling effect D) contrast effect E) price-placebo effect
B) assimilation effect
As a manufacturer increases price, the ________ drops. A) target B) break-even point C) marginal revenue D) total cost E) variable cost
B) break-even point
Which of the following is an external influence that affects pricing decisions? A) the salaries of production management B) competition C) the salaries of finance management D) overall pricing objectives E) the company's overall marketing strategy
B) competition
As a result of the ________, Rick decided the candy priced at $2.50 per pound could not be nearly as good as the candy priced at $9.50 per pound. A) assimilation effect B) contrast effect C) fair price effect D) reference effect E) clouding effect
B) contrast effect
How is the price elasticity of demand calculated? A) averaging previous demand levels with new demand levels B) dividing percentage change in quantity demanded by percentage change in price C) dividing the new quantity demanded by the percentage change in price times 100 D) multiplying the percentage change in quantity demanded by the percentage change in price E) dividing the percentage change in price by the percentage change in quantity demanded
B) dividing percentage change in quantity demanded by percentage change in price
On the Internet, price can easily be adjusted to meet changes in the marketplace. This is called ________. A) captive pricing B) dynamic pricing C) promo pricing D) price bundling E) payment pricing
B) dynamic pricing
If a product has a close substitute, its demand will likely be ________. A) inelastic B) elastic C) cross-elastic D) fixed E) break-even
B) elastic
Which of the following is an example of a pricing strategy that focuses on customers' needs? A) price leadership B) everyday low pricing C) distribution-based pricing D) keystoning E) skimming
B) everyday low pricing
Often consumers base their perception of price on what they perceive to be the customary or ________. A) dynamic price B) fair price C) target price D) list price E) assimilated price
B) fair price
Which of the following is an example of a variable cost for an amusement park? A) salary of the park manager B) food cart supplies C) liability insurance D) interest on the property's mortgage E) property taxes
B) food cart supplies
Consumers usually perceive higher-priced products as ________. A) out of reach for all but the wealthy B) having high quality C) having low profit margins D) having cost-based prices E) being in the introductory stage of the product life cycle
B) having high quality
When a beverage maker came out with a new drink and priced it at half price for a month to attract buyers, the company was using a(n) ________ strategy. A) penetration pricing B) skimming price C) everyday low price D) trial pricing E) promo pricing
D) trial pricing
Many people rely on a prescription drug to control their cholesterol. An increase in the price of the drug would have little effect on the quantity demanded because there are no substitutes for the drug and because people who take it have no choice but to continue taking it if they wish to stay healthy. The demand for the cholesterol drug is ________. A) elastic B) inelastic C) cross-elastic D) supply-driven E) asymmetrical
B) inelastic
When demand is ________, increases in price result in increases in total revenues, while decreases in price result in decreases in total revenue. A) elastic B) inelastic C) flexible D) supply-driven E) cross-elastic
B) inelastic
Which of the following is a set price or price range in consumers' minds that they refer to in evaluating a product's price? A) dynamic price B) internal reference price C) suggested retail price D) captive price E) value price
B) internal reference price
Manufacturers of which of the following would be most likely to use freight absorption pricing? A) chocolate candy B) laptop computers C) furniture polish D) feline flea collars E) repair parts for vacuum cleaners
B) laptop computers
A quantity discount is a price reduction to buyers who purchase ________. A) frequently B) large volumes C) close outs D) bundled products E) seasonal products
B) large volumes
From a marketer's point of view, price lining is a way to do which of the following? A) control supply B) maximize profits C) make the business more socially responsible D) pass shipping costs on to consumers E) eliminate price elasticity concerns
B) maximize profits
In a market with ________, there are many sellers, each offering a slightly different product. Firms can differentiate products and focus on nonprice competition. A) pure competition B) monopolistic competition C) oligopolistic competition D) vertical integration E) inflation
B) monopolistic competition
A local restaurant sells lunch entrees for $7.95, $9.95, and $11.95. From this information, you can infer the restaurant uses which of the following? A) price discrimination B) odd-even pricing and price lining C) dynamic pricing and price lining D) reference pricing and value pricing E) dynamic pricing and loss leader pricing
B) odd-even pricing and price lining
The value of something we give up in order to obtain something else is referred to as a(n) ________. A) transformation cost B) opportunity cost C) exchange D) variable cost E) marginal cost
B) opportunity cost
Johnson Boats wants to introduce a new model of boat into mature markets in highly developed countries with the goal of quickly gaining mass-market share. As a consultant, you should recommend a ________ pricing strategy. A) skimming B) penetration C) price leadership D) cost-plus E) value
B) penetration
When Circuit Town Electronics sets its televisions at three price levels of $699, $899, and $1,099, it is most likely using ________. A) price fixing B) price lining C) penetration pricing D) skimming pricing E) loss leader pricing
B) price lining
The Robinson-Patman Act does NOT include regulations that ________. A) apply to resellers B) protect final consumers C) prohibit selling the same product to different retailers at different prices D) prohibit offering such "extras" as discounts, rebates, premiums, and coupons to some but not all customers E) prohibit price discrimination in interstate commerce
B) protect final consumers
Sellers should know that the less elastic the demand for their product, the more advantageous it is for them to ________. A) drop the price B) raise the price C) maintain the price D) discontinue the item E) bundle the item with another product
B) raise the price
When setting prices, a leading manufacturer of nutritional supplements decided to institute a pricing strategy that would support a five percent increase in sales over the next three years. What type of pricing objective has the company set? A) profit B) sales C) competitive effect D) cost-plus E) value
B) sales
When a snow blower shop offers a price reduction to customers who buy during the spring and summer, the shop is giving a(n) ________ discount. A) functional B) seasonal C) annual D) trade E) allowance
B) seasonal
Valeo Fashions has just introduced a new line of fashion dresses for teens. The line will initially enter the market at high prices in a ________ strategy. A) penetration pricing B) skimming price C) keystoning D) yield management pricing E) value pricing
B) skimming price
A new product carries a low price for a limited period of time to attract customers in what type of pricing strategy? A) price skimming B) trial pricing C) penetration pricing D) specialty pricing E) price bundling
B) trial pricing
Which of the following occurs when manufacturers or wholesalers attempt to force retailers to charge a certain price for their products? A) horizontal price fixing B) vertical price fixing C) predatory pricing D) internal reference pricing E) assimilation pricing
B) vertical price fixing
Federal legislation on price-fixing requires that sellers set their prices ________. A) based on their fixed and variable costs B) without communication with competitors C) to achieve a specified profit margin D) consistently with all customers E) consistently throughout a region
B) without communication with competitors
Which pricing tactic calls for offering three similar products, one that is lower priced and less attractive and two that are comparable but more expensive? A) price skimming B) decoy pricing C) Bottom of the Pyramid pricing D) keystoning E) high/low pricing
C) Bottom of the Pyramid pricing
________ is a pricing tactic a firm uses for two products that work only when used together. The firm sells one item at a very low price and then makes its profit on the second high-margin item. A) Two-part pricing B) Price bundling C) Captive pricing D) Decoy pricing E) Keystoning
C) Captive pricing
Another name for F.O.B. factory pricing is ________ pricing. A) captive B) CIF pricing C) F.O.B. origin D) F.O.B. delivered E) freight absorption pricing
C) F.O.B. origin
________ is the assignment of value, or the amount a consumer must give to receive a product. A) Profit B) Exchange C) Price D) Demand E) Yield
C) Price
Which of the following statements about price is true? A) Pricing is the least important marketing mix element. B) Price is always a monetary value. C) Price can mean exchange of nonmonetary goods or services. D) Most consumers believe price has little influence on their purchase decisions. E) Pricing is unaffected by changes in the business cycle.
C) Price can mean exchange of nonmonetary goods or services.
Which of the following is an advantage of using cost-based pricing methods? A) They consider external factors such as competition. B) They include consideration of the effects of demand. C) They are relatively simple to calculate. D) They make accurate cost estimating a simple process. E) They take the product life cycle into consideration.
C) They are relatively simple to calculate.
In price planning, a firm would be most likely to set a profit objective for which of the following products? A) a commodity such as coal B) toothpaste C) a fad such as Beanie Babies D) lightbulbs E) construction materials
C) a fad such as Beanie Babies
Enforcing laws against ________ is complicated because such practices are similar to the legal practice of "trading up." A) price bundling B) captive pricing C) bait-and-switch tactics D) prestige pricing E) placebo effect pricing
C) bait-and-switch tactics
To determine the break-even point, a firm needs to first do which of the following? A) determine what percentage of the market it wants B) determine the point at which supply equals demand C) calculate the contribution per unit D) conduct an environmental audit E) determine total market share
C) calculate the contribution per unit
Mach 5 razor blades must be used in the Mach 5 razor. Which type of pricing is most likely used for the razor blades? A) penetration B) value C) captive D) two-part
C) captive
When Home Depot stores entered the Canadian market, there were already stores providing similar services and products. To get people to try Home Depot, the chain deliberately sold merchandise below the price that the Canadians were used to. What type of pricing objective did Home Depot use? A) market share B) profit C) competitive effect D) customer satisfaction E) image enhancement
C) competitive effect
Joe Bergerson makes and sells maple racks for cooling cakes and cookies. Joe knows that it costs $15 to make one rack, and he wants to earn a 25 percent profit on each rack. Which approach to pricing is Joe most likely to use? A) demand-based pricing B) target costing C) cost-plus pricing D) yield management pricing E) value pricing
C) cost-plus pricing
The method of setting prices in which marketers total all the costs for the product and then add an amount to arrive at the selling price is called ________. A) supply-based pricing B) target costing C) cost-plus pricing D) yield management pricing E) demand-based pricing
C) cost-plus pricing
Break-even analysis is used to examine the relationship between ________. A) fixed costs and variable costs B) costs and contributions C) costs and price D) demand and costs E) demand and profits
C) costs and price
In which type of pricing is the selling price based on an estimate of volume or quantity a firm can sell in different markets at different prices? A) value B) keystoning C) demand-based D) penetration E) peak load
C) demand-based
What is the first step a marketer should take to estimate a product's potential sales? A) determine maximum production levels B) conduct a survey of buyers' intentions C) estimate total demand for the product in the market D) determine how to expand market share E) predict the company's market share
C) estimate total demand for the product in the market
The manufacturer's suggested retail price is also referred to as the ________. A) break-even price B) marginal price C) list price D) markup E) markdown
C) list price
In a market with ________, the market consists of many buyers and a few sellers who are likely to have similar pricing. A) pure competition B) monopolistic competition C) oligopolistic competition D) vertical integration E) inflation
C) oligopolistic competition
In a(n) ________, all of the buyers know the highest price bid at any point in time. A) reverse auction B) dynamic auction C) open auction D) reserve auction E) price-lining auction
C) open auction
Which of the following is a measure of customers' sensitivity to changes in price? A) liquidity ratio B) break-even point C) price elasticity of demand D) marginal analysis E) basing-point
C) price elasticity of demand
A hamburger stand near the local mall sells hamburgers for $3.99, drinks for $1.99, and fries for $1.49, while a gourmet restaurant nearby sells entrees for $20, $30, and $45. Both of these restaurants are using ________. A) demand-based pricing B) cost-based pricing C) psychological pricing D) prestige pricing E) penetration pricing
C) psychological pricing
Using ________, a company raises the price of its product as demand goes up and lowers it as demand declines. A) price skimming B) decoy pricing C) surge pricing D) keystoning E) high/low pricing
C) surge pricing
Swatch surveyed the market and identified an unserved segment of watch buyers. Using these results, Swatch created a watch at a price consumers were willing to pay. The unorthodox order of this marketing mix decision is an example of ________. A) competition-based pricing B) cost-plus pricing C) target costing D) value pricing E) penetration pricing
C) target costing
With ________, the seller pays both the cost of loading and transporting the product to the customer. A) uniform delivered pricing B) basing-point pricing C) F.O.B. origin pricing D) F.O.B. delivered pricing E) F.O.B. factory pricing
D) F.O.B. delivered pricing
A company that intends to maintain low-end pricing policies to make the market unattractive for its competitors is using which of the following pricing objectives in its price planning? A) sales B) profit C) break-even D) competitive effect E) customer satisfaction
D) competitive effect
The most common cost-based approach to pricing is ________. A) demand-based pricing B) psychological pricing C) yield management pricing D) cost-plus pricing E) high/low pricing
D) cost-plus pricing
When Joe's Coffee Nook raised the price of a latte, Joe noticed a substantial change in his daily latte sales. A price reduction caused his sales to increase. From this information, you can assume the demand for lattes is ________. A) static B) supply-driven C) across-elastic D) elastic E) inelastic
D) elastic
Some retailers advertise items at very low prices or even below cost just to get customers into the store. The rationale for implementing this ________ strategy is the belief that once a customer is in the store she will buy the advertised item as well as other items at regular prices. A) bait-and-switch B) price lining C) predatory pricing D) loss-leader pricing E) keystoning
D) loss-leader pricing
Each member of a channel of distribution adds a ________ to create the price at which they will sell the product. A) break-even point B) percentage of sales C) list price D) markup E) contribution per unit
D) markup
Which of the following allow shoppers to bid on everything from bobble heads to health-and-fitness equipment? A) freemiums B) shopbots C) reverse auctions D) online auctions E) extranets
D) online auctions
A firm is using a(n) ________ strategy when it introduces a product at a very low price to gain market share early on. A) skimming price B) trial pricing C) intensive pricing D) penetration pricing E) high/low
D) penetration pricing
By using ________, a company deliberately sets a low price with the intention of driving its competition out of business. A) price-fixing B) price lining C) surge pricing D) predatory pricing E) loss leader pricing
D) predatory pricing
In some states, unfair trade practices acts are designed to ________. A) regulate the markups used by various industries B) control the sale of agricultural products and raw materials C) regulate all forms of psychological pricing D) prohibit the selling of products below cost E) ban the use of price lining
D) prohibit the selling of products below cost
A business using price lining is doing which of the following? A) trying to avoid the use of psychological pricing, which may be negatively received by customers B) trying to recover its research and development costs for a new product C) attempting to achieve a large market share before any competitors can enter the marketplace D) selling items in a product line at different prices E) engaging in potentially unethical pricing
D) selling items in a product line at different prices
Which of the following consumer trends is a response to the frequent reports of terrorism and political unrest? A) buying time B) vertical integration C) eating greener D) shopping for control E) keystoning
D) shopping for control
A list price is also referred to as a ________. A) captive price B) bundled price C) channel price D) suggested retail price E) basing-point price
D) suggested retail price
Two forms of demand-based pricing are ________. A) price bundling and captive pricing B) price skimming and penetration pricing C) fixed pricing and variable pricing D) target costing and yield management pricing E) price leadership and everyday low pricing
D) target costing and yield management pricing
Which of the following statements about the break-even point is true? A) It is used to determine how many more units need to be sold to increase market share by a specific amount. B) It is a technique used to calculate fixed costs. C) It determines the amount of retained earnings a company will have during an accounting period. D) It is a technique marketers use to examine the relationship between supply and demand. E) It is calculated using contribution per unit costs and total fixed costs.
E) It is calculated using contribution per unit costs and total fixed costs.
Which of the following is true about the demand curve? A) It is used to illustrate the effect of price on the quantity supplied. B) It is always graphically depicted by a straight line. C) It shows the quantity of product customers will buy in a market during a period of time even if other factors change. D) It usually slopes upward and to the right. E) It shows the relationship between product demand and product price.
E) It shows the relationship between product demand and product price.
Which of the following should be true for a skimming price to be successful? A) Target consumers should be price sensitive. B) Supply should exceed demand. C) Demand must be stabilizing. D) The producer should use intensive distribution. E) There should be little chance that competitors can quickly enter the market.
E) There should be little chance that competitors can quickly enter the market.
With target costing, marketers first ________ and then ________. A) build the marketing mix; identify the target market B) segment and identify target markets; set different prices for each market C) design the product; determine its cost based on target profits D) use skimming pricing; use penetration pricing E) determine a selling price market segments will pay; target costs to ensure that the price is met
E) determine a selling price market segments will pay; target costs to ensure that the price is met
A retailer that uses the list price for products but runs frequent promotions that heavily discount some products is using which type of pricing strategy? A) price skimming B) trial pricing C) penetration pricing D) peak load pricing E) high/low pricing
E) high/low pricing
Which of the following is a pricing strategy that reverses the typical assumption about price-demand relationships? A) penetration pricing B) price bundling C) assimilation effect pricing D) placebo effect pricing E) prestige pricing
E) prestige pricing
Which of the following is a reason that a marketer would choose a penetration pricing strategy? A) to ensure the company has the ability to increase prices once demand decreases B) to focus on the rapid achievement of profit objectives C) to appeal to different consumer segments with different levels of price sensitivity D) to create markets for highly technical products E) to discourage competition from entering the market
E) to discourage competition from entering the market