chapter 21 *

A firm is determining the price of a new product and uses a mark-up of 50%. If direct out-of-pocket cost is $50,000 and fully loaded manufacturing cost is $150,000, what price should be suggested if the firm uses cost-plus pricing? a.) $75,000 b.) $150,000 c.) $200,000 d.) $225,000

d

According to the text, _______________ pricing suggests setting the price based on the competitor's price. a.) skimming b.) penetration c.) vertical d.) price parity

d

All of the following are advantages of cost-plus pricing EXCEPT: a.) profitability b.) simplicity c.) defensibility d.) all selections are advantages of cost-plus pricing

d

All of the following are examples of fixed costs EXCEPT: a.) Managerial salaries b.) Depreciation c.) Administrative expenses d.) Raw materials

d

All of the following are mentioned in the text as disadvantages of cost-plus pricing systems EXCEPT: a.) Implicit limits on growth and profit potential. b.) Arbitrary cost measurement. c.) Prices are not matched to market realities. d.) Difficult to implement this pricing system

d

In skim pricing, the firm prices close to costs; it expects high market share in the short run with profits delayed and ultimately secured from high volumes and low margins.

false

The formula for price elasticity of demand is percentage change in price/percentage change in demand.

false

In which of the following approaches to measuring customer value does the firm offer a test product at different prices in different market areas, like geographic locations? a.) Price experiment b.) Dollarmetric method c.) Direct value assessment d.) Economic analysis

a

Many grocery items are examples of which of the following market-level price sensitive situations? a.) price-elastic b.) price-inelastic c.) positive-sloping d.) negative-sloping

a

Which of the following costs do not vary directly with the volume of sales or production? a.) Fixed costs b.) Marginal costs c.) Variable costs d.) Segmented costs

a

Which of the following is NOT an appropriate condition in which a firm can offer high customer value superior to competitors? a.) price-inelastic market b.) desire to deter competitors c.) deep pockets to absorb initially low profit margins d.) sufficient capacity to fulfill increased demand

a

Which of the following is the correct formula for the Price Elasticity of Demand? a.) Percentage change of demand/percentage change in price b.) Percentage change in price/percentage change in demand c.) Percentage change in supply/percentage change in demand d.) Percentage change in demand/percentage change in supply

a

A _______________ demand curve occurs when volume increases significantly as price decreases. a.) price-elastic b.) price-inelastic c.) positive-sloping d.) negative-sloping

a

All of the following are critical considerations that should enter into pricing decisions EXCEPT: a.) Governmental intervention b.) Perceived customer value c.) Competition d.) Strategic objectives

a

All of the following are major strategic options for developing market strategy EXCEPT: a.) introduce a fighting brand b.) increase volume and/or market share c.) maximize profits d.) maximize cash flow

a

Electricity and heart pacemakers are examples of which of the following market-level price sensitive situations? a.) price-elastic b.) price-inelastic c.) positive-sloping d.) negative-sloping

a

Which of the following is the first step in using the perceived value analysis method to measure an offer's perceived value? a.) Identify customers' required benefits and values b.) Weigh benefits and values c.) Rate each offer from the various suppliers d.) Develop benefit/value scores

a

Which of the following types of costs is defined as the cost to make and sell one additional unit? a.) marginal costs b.) fully loaded costs c.) variable costs d.) fixed costs

a

_______________ is a method of estimating the price equivalence of the firm's versus competitive products. a.) Perceived value analysis b.) Conjoint analysis c.) Value-in-use analysis d.) Perceptual mapping

a

According to the text, a _______________ demand curve occurs when volume is relatively insensitive to changes in price. a.) price-elastic b.) price-inelastic c.) positive-sloping d.) negative-sloping

b

According to the text, which of the following strategies is the most-used pricing method? a.) Conjoint pricing b.) Cost-plus pricing c.) Competitive pricing d.) Comparative pricing

b

In _______________, the product cost is incremented upward by a margin to establish the selling price. a.) conjoint pricing b.) cost-plus pricing c.) competitive pricing d.) comparative pricing

b

Which of the following is NOT a disadvantage of cost-plus pricing? a.) Profit limitations b.) Defensibility c.) Inappropriate treatment of fixed costs d.) Arbitrary overhead allocations

b

_____________ proceeds by identifying product costs, then adding a predetermined profit margin. a.) Conjoint pricing b.) Cost-plus pricing c.) Competitive pricing d.) Comparative pricing

b

_______________ is focused internally and does not take into account external market realities. a.) Conjoint pricing b.) Cost-plus pricing c.) Competitive pricing d.) Comparative pricing

b

According to the text, costs have all of the following important price-setting roles EXCEPT: a.) birth control b.) death control c.) cultural control d.) profit planning

c

For manufactured products, ____________ usually include raw materials, utilities to power production machines, direct labor, and sales commissions. a.) fixed costs b.) marginal costs c.) variable costs d.) segmented costs

c

In which of the following pricing strategies does the firm provide significant customer value by setting prices close to costs? a.) partity pricing b.) vertical pricing c.) penetration pricing d.) skim pricing

c

Perceived value is created primarily by all of the following elements in the marketing mix EXCEPT: a.) Product b.) Promotion c.) Price d.) Distribution

c

The customer value map displays the ______________ positions. a.) benefits/value b.) price/cost c.) value/price d.) cost/price

c

_______________ vary directly with the volume of sales and production, increasing as volume increases and decreasing as volume decreases. a.) Fixed costs b.) Marginal costs c.) Variable costs d.) Segmented costs

c

In which of the following pricing strategies does the firm earn high profit margins by pricing high, but provides less value to its relatively few customers? a.) partity pricing b.) vertical pricing c.) penetration pricing d.) skim pricing

d

Which of the following is NOT mentioned in the text as an advantage of cost-plus pricing systems? a.) They are legally acceptable and in certain cases may be required. b.) If sales are made, they should be profitable with this pricing method. c.) Assuming costs are known, the pricing task is simple. d.) Prices are matched to market realities.

d

Which of the following methods of measuring customer value compares each options with the others? Then for each pair of option, customers would say which they prefer and how much extra they would pay. a.) direct value assessment b.) perceived value analysis c.) price experiment d.) dollarmetric method

d

Which of the following specific methodologies is NOT mentioned in the text as being available for measuring perceived value? a.) Direct value assessment b.) Perceived value analysis c.) The dollarmetric method d.) Factor analysis

d

___________ include all incremental costs related to a new product, including incremental overhead. a.) Variable costs b.) Fixed costs c.) Marginal costs d.) Fully loaded costs

d

____________ include overhead and allocated items like depreciation, rent, salaries, and selling, general and administrative expenses. e.) Fixed costs f.) Marginal costs g.) Variable costs h.) Segmented costs

e

A price-inelastic demand curve occurs when volume increases significantly as price decreases.

false

According to the text, a price-elastic demand curve occurs when volume is relatively insensitive to changes in price.

false

Cost-plus pricing is a pricing technique that considers customer value

false

Dollarmetric pricing is often used in situations such as supermarket pricing where many different products must be priced.

false

According to the text, cost-plus pricing is focused internally and does not take into account external market realities.

true

According to the text, fixed costs do not vary directly with the volume of sales or production

true

Electricity is an example of an item with price-inelastic demand

true

Grocery store items are examples of products with price-elastic demand.

true

Perceived value analysis is a method of estimating the price equivalence of the firm's product versus competitive products.

true

Price elasticity of demand helps estimate market demand when price changes

true

Pricing at what the market will bear is not useful advice because the market will bear many prices.

true

Product, promotion, distribution, and service are the non-price elements in the marketing mix that a firm uses to create value for customers.

true

Variable costs vary directly with the volume of sales and production, increasing as volume increases and decreasing as volume decreases.

true