Chapter 19 Questions
price elasticity of demand equation
% change in quantity demanded / % change in price
Anthony has purchased a new shipment of 50 Bluetooth earbuds that he plans to sell for $99.99 each. The manufacturer informs Anthony that each product will cost Anthony $52, but this does not include the cost of transportation. Even with the extra transportation costs, Anthony is not worried. He believes he can sell all 50 earbuds by the end of the month. After adding up inventory, transportation, storage, and other costs, he determines that his total costs will be $3,750. Refer to Scenario 19.4. Anthony thinks that he can sell all 50 Bluetooth earbuds for $99.99 each. His total costs are estimated to be $3,750. However, by the end of the month Anthony has only sold 33 earbuds. What is his profit?
. -$450.33 To determine profit, the price of the product should be multiplied by the quantity sold. The costs are then subtracted from it. The amount of profit from selling 33 earbuds is -$450.33. Anthony experiences a loss.
breakeven point equation
= fixed costs/price-variable costs
ACME Corp.'s widgets have elastic demand. If ACME raises the price of widgets, what will be the result?
A decrease in total revenue
Spacely Inc.'s sprockets have inelastic demand. If Spacely raises the price of sprockets, what will be the result?
An increase in total revenue
price war
Involves two or more companies engaging in intense price competition, often in an effort to boost market share
Profit Equation
Profit = Total Revenue - Total Cost
demand curve
a graph of the relationship between the price of a good and the quantity demanded
price competition
a marketer emphasizes price as an issue and matches or beats the prices of competitors
price elasticity of demand
a measure of the sensitivity of demand to changes in price
ACME Corp. and Spacely Inc. are engaged in intense price competition in order to boost market share of their widgets. This is best described as _______.
a price war
Which of the following is calculated by dividing the variable costs by the number of units produced?
average variable cost
To compete effectively on a price basis, a firm should _______.
be the low-cost seller of the product
Which of the following is the point at which the costs of producing a product equals the revenue made from selling the product?
breakeven point
variable costs
costs that vary with the quantity of output produced
Which of the following shows the quantity of products a firm expects to sell at various prices if other factors remain constant?
demand curve
fixed costs
do not vary with changes in the number of units produced or sold
Which of the following is NOT one of the factors that influence the assessment of value?
elasticity of demand
True/False Because gas is inelastic, this makes it a prestige product.
false
True/False Fred is angry. He claims his roommate, Edward, stole his idea for a new mobile app. Now Edward has successfully released the app to much fanfare. Fred is demanding that he be compensated for his idea and names what he believes to be a fair price. Edward argues that he is the one who spent the resources developing the app and marketing it. Edward claims that you cannot assess an idea using price as a factor because it is intangible and involved nothing more than having an insightful thought for a new app. Edward is correct in his assertion.
false
A company's rental of production space is an example of a _______.
fixed cost
Grant 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 Grant is correct in his assumption, what should happen when he sells this additional unit?
marginal cost will exceed marginal revenue
What happens if revenue and cost remain constant?
prices could be set for maximum profits
Price is a key element in the marketing mix because it relates directly to the generation of total _______.
revenue
total cost
sum of average fixed costs and average variable costs times the quantity produced
marginal revenue
the change in total revenue from an additional unit sold
marginal cost
the extra cost a firm incurs when its produces one more unit of a product
average fixed cost
the fixed cost per unit produced and is calculated by dividing fixed costs by the number of units produced
breakeven point
the point at which the costs of producing a product equal the revenue made from selling the product
average total cost
the sum of the average fixed cost and the average variable cost
Barter
the trading of products
average variable cost
variable cost divided by the number of units produced