Chapter 11

An umbrella manufacturing company's fixed costs are $275,000. The variable cost per unit is $5 and each umbrella is sold at $10. How many units should the firm sell in order to break even? 5,500 55,000 18,000 1,819 27,500

55,000

Which of the following is a possible trap of a price-cutting strategy? Consumers might not demand price concessions in the future. The company can initiate price cuts to dominate the market through lower costs. Low prices usually achieve increases in both market share and market loyalty when customers switch. Competitors that match low prices might have longer staying power because of deep cash reserves. The company might need additional business because it has excess plant capacity.

Competitors that match low prices might have longer staying power because of deep cash reserves.

A firm in a homogeneous market that has the ability to augment its product is more likely to need to meet a competitive price reduction than one that does not have the ability to augment its product.

False

In a compensation deal, the seller sells a plant, equipment, or technology to another country and agrees to accept as partial payment products manufactured with the supplied equipment.

False

Price is one of the two elements of the marketing mix that produces revenue

False

A company must consider the product's stage in the life cycle and its importance in the company's portfolio before responding to a competitor's price cut.

True

Loss leader pricing dilutes a company's brand image.

True

Psychological discounting involves setting an artificially high price and then offering the product at substantial savings.

True

Total costs consist of the sum of the fixed and the variable costs for any given level of production.

True

When museums charge a lower admission fee to students and senior citizens, this form of pricing is known as ________. perceived value pricing third-degree price discrimination second-degree price discrimination psychological discounting first-degree price discrimination

third-degree price discrimination