marketing exam 2

8. A manufacturer has fixed costs of $100,000, a variable cost of $10 per unit of output, and break-even volume of 50,000 units. What should the manufacturer's unit cost be in order to break even? a) $10 b) $12 c) $14 d) $16 e) $20

$12

38. In segmented pricing, the difference in prices is based on differences in costs. a) True b) False

false

costs that do not vary with production or sales level

fixed costs (overhead)

setting prices for customers located in different parts of the country or world

geographical pricing

promotional money paid by manufacturers to retailers in return for an agreement to feature the manufacturer's product in some way

allowance

42. Plasticine Palace supplies its products exclusively to Arts & Crafts, a chain of stationery stores across the country. The chain then makes the plasticine available to end-consumers. This is an example of ________. a) a direct marketing channel b) intensive distribution c) an indirect marketing channel d) disintermediation e) extensive distribution

an indirect marketing channel

41. Lifebelt Insurance sells insurance only through its door-to-door salespeople. What type of marketing channel does Lifebelt use? a) inclusive b) multitiered c) indirect d) direct e) selective

direct

a straight reduction in price on purchases during a stated period of time or in larger quantities

discount

24. Which of the following is a price adjustment strategy? a) product bundle pricing b) by-product pricing c) product line pricing d) optional product pricing e) discount and allowance pricing

discount and allowance pricing

a channel arrangement in which two or more companies at one level join together to follow a new marketing opportunity

horizontal marketing system

the logistics concept that emphasizes teamwork - both inside the company and among all the marketing channel organizations - to maximize the performance of the entire distribution system

integrated logistics management

54. Whitelight stocks its toothpastes in all convenience stores across the country. This is an example of ________ distribution. a) exclusive b) selective c) hybrid d) intensive e) normal

intensive

stocking the product in as many outlets as possible

intensive distribution

combining two or more modes of transportation

intermodal transportation

3. Cost-plus pricing ________. a) is a complex pricing method b) involves pricing that accurately reflects production costs c) involves adding a standard markup for profit d) aims at breaking even on the costs of making and marketing a product e) is a value-based pricing method

involves adding a standard markup for profit

20. Which of the following is true of optional product pricing? a) It involves capitalizing on low value by-products. b) It involves pricing accessory products sold with the main product c) It is used to price a company's main product. d) It involves setting geographically-specific prices. e) It is used to price products that must be used with the company's main product.

it involves pricing accessory products sold with the main product

56. For which of the following would a company use an exclusive distribution strategy? a) luxury cars b) newspapers c) chewing gum d) dairy products e) soft drinks

luxury cars

an independent logistics provider that performs any or all of the functions required to get a client's product to market

third-party logistics provider

37. Consumers who have no past experience with a product are especially likely to judge it by its price. a) True b) False

true

60. Producers use intermediaries because they create greater efficiency in making goods available to target markets. a) True b) False

true

14. Which of the following is true with regard to pure competition? a) Under pure competition, no single buyer or seller has much effect on the going market price. b) In a purely competitive market, marketing research is of utmost importance. c) In a purely competitive market, product development is the focus of most firms. d) Under pure competition, the market consists of many buyers and sellers who trade over a range of prices rather than a single market price. e) Under pure competition, the market consists of only a few large sellers

under pure competition, no single buyer or seller has much effect on the going market price

a network composed of the company, suppliers, distributors, and ultimately, customers who partner with each other to improve the performance of the entire system in delivering customer value

value delivery network

attaching value-added features and services to differentiate a company's offers and charging higher prices

value-added pricing

46. When KFC came into conflict with its franchisees over the brand's "Unthink KFC" repositioning, which emphasized grilled chicken over its traditional Kentucky fried chicken, KFC experienced ________ conflict. a) equilateral b) vertical c) multitiered d) communal e) horizontal

vertical

48. A(n) ________ marketing system consists of producers, wholesalers, and retailers acting as a unified system. a) horizontal b) vertical c) multitiered d) communal e) equilateral

vertical

a channel structure in which producers, wholesalers, and retailers act as a unified system. One channel member owns the others, has contracts with them, or has so much power that they all cooperate.

vertical marketing system (VMS)

44. Conflict which occurs among firms at the same level of the marketing channel is known as ________ conflict. a) multitiered b) horizontal c) vertical d) equilateral e) exterior

horizontal

4. Herbie Inc., a firm manufacturing sandwich makers, has fixed costs of $250,000, variable costs of $20 per unit of output, and expected unit sales of 50,000 units. What is the unit cost of a sandwich maker manufactured by Herbie? a) $15 b) $25 c) $30 d) $50 e) $75

$25

12. There was a 35 percent increase in demand for a product after the seller decreased its price by 14 percent. Therefore, the price elasticity of demand is ________. a) 0.25 b) 0.4 c) -2.5 d) 2.5 e) -25

-2.5

a geographical pricing strategy in which the company charges the same price plus freight to all customers, regardless of their location

uniform-delivered pricing

26. A(n) ________ refers to promotional money paid by manufacturers to retailers in return for an agreement to feature the manufacturer's products in some way. a) allowance b) sample c) discount d) tax credit e) tax exemption

allowance

a geographical pricing strategy in which the seller designates some city as a basing point and charges all customers the freight cost from that city to the customer

basing-point pricing

5. Target return pricing is a variation of which of the following cost-oriented pricing approaches? a) cost-plus pricing b) break-even pricing c) markup pricing d) value-based pricing e) fixed cost pricing

break-even pricing

setting price to break even on the costs of making and marketing a product, or setting price to make a target return

break-even pricing (target return pricing)

22. Using ________ pricing, companies are able to turn their trash into cash, allowing them to make the price of their main product more competitive. a) product bundle b) optional product c) captive product d) by-product e) product line

by-product

21. Multiprint, a printer manufacturing firm, sells ink cartridges for each of its specific models. Only Multiprint cartridges are compatible with Multiprint printers, and no two of the firm's models share the same specifications. What type of pricing does Multiprint use? a) product line pricing b) optional product pricing c) captive product pricing d) by-product pricing e) product bundle pricing

captive product pricing

setting a price for products that must be used alone with a main product, such as blades for a razor and games for a video game console

captive-product pricing

25. Which of the following price adjustment strategies offers a price reduction to buyers who pay their bills promptly? a) cash discount b) season discount c) quantity discount d) trade discount e) functional discount

cash discount

disagreements among marketing channel members on goals, roles, and rewards - who should do what and for what rewards

channel conflict

a layer of intermediaries that performs some work in bringing the product and its ownership closer to the final buyer

channel level

setting price based on buyers' perceptions of value rather than on the seller's cost

customer value-based pricing

35. ________ occurs when a seller states price savings that are not actually available to consumers. a) Comparative pricing b) Scanner fraud c) Deceptive pricing d) Market skimming e) Price collusion

deceptive pricing

53. ________ distribution is a strategy in which producers of convenience products and raw materials stock their products in as many outlets as possible. a) Direct b) Intensive c) Inclusive d) Exclusive e) Selective

intensive

50. Which of the following is a disadvantage of adding new channels in a multichannel distribution system? a) decreasing complexity of markets b) decreasing control over the system c) reducing opportunities for franchising d) lowering sales and market coverage e) minimizing publicity needs

decreasing control over the system

a curve that shows the number of units the market will buy in a given time period, at different prices that might be changed

demand curve

a marketing channel that has no intermediary levels

direct marketing channel

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

total costs

costs that vary directly with the level of production

variable costs

a geographical pricing strategy in which the company sets up two or more zones. All customers within a zone pay the same total price; the more distant the zone, the higher the price

zone pricing

7. Mansfield Pharmaceuticals markets Zipro, an antibiotic. The firm has fixed costs of $1,000,000 and variable costs of $2 per bottle of 50 tablets priced at $10 per bottle. What is the break-even volume? a) 25,000 b) 55,000 c) 100,000 d) 115,000 e) 125,000

125,000

a geographical pricing strategy in which goods are placed free on board a carrier; the customer pays the freight from the factory to the destination

FOB-origin pricing

1. Which of the following is true with regard to price? a) Historically, price has had the least perceptible impact on buyer choice. b) Price is the least flexible element in the marketing mix. c) Unlike product features and channel commitments, prices cannot be changed quickly. d) Price is the sum of all the values that customers give up to gain the benefits of having a product. e) Prices only have an indirect impact on a firm's bottom line.

Price is the sum of all the values that customers give up to gain the benefits of having a product

a vertical marketing system that coordinates successive stages of production and distribution through the size and power of one of the parties

administered VMS

setting price for by-products in order to make the main product's price more competitive

by-product pricing

47. Which of the following is true of conventional distribution channels? a) Channel members have complete control over each other. b) Channel members seek to maximize their own profits. c) Channel conflict is governed by formal mechanisms. d) Channel members are assigned roles according to a clearly defined framework. e) Channel members work exclusively for the good of the organization.

channel members seek to maximize their own profits

setting prices based on competitors' strategies, prices, costs, and market offerings

competition-based pricing

a vertical marketing system in which independent firms at different levels of production and distribution join together through contracts

contractual VMS

a channel consisting of one or more independent producers, wholesalers, and retailers, each a separate business seeking to maximize its own profits, perhaps even at the expense of profits for the system as a whole

conventional distribution channel

a vertical marketing system that combines successive stages of production and distribution under single ownership - channel leadership is established through common ownership

corporate VMS

setting prices based on the costs of producing, distributing, and selling the product plus a fair rate of return for effort and risk

cost-based pricing

adding a standard markup to the cost of the product

cost-plus pricing (markup pricing)

51. ________ occurs when product or service producers cut out intermediaries and go directly to final buyers or when radically new types of channel intermediaries displace traditional ones. a) Extensive distribution b) Multichannelization c) Disintermediation d) Inclusive distribution e) Cross merchandising

disintermediation

52. The Bookworm began delivering books directly to customers through mail instead of selling through "brick-and-mortar" companies. This is an example of ________. a) indirect marketing b) disintermediation c) franchising d) exclusive distribution e) intensive distribution

disintermediation

the cutting out of marketing channel intermediaries by product or service producers or the displacement of traditional resellers by radical new types of intermediaries

disintermediation

a large, highly automated warehouse designed to receive goods from various plants and supplies, take orders, fill them efficiently, and deliver goods to customers as quickly as possible

distribution center

30. The Internet offers ________, where the price can easily be adjusted to meet changes in demand. a) captive pricing b) dynamic pricing c) basing-point pricing d) price bundling e) cost-plus pricing

dynamic pricing

adjusting prices continually to meet the characteristics and need of individual customers and situations

dynamic pricing

55. With which of the following strategies would a company give only a limited number of dealers the right to distribute its products in their territories? a) exclusive distribution b) extensive distribution c) moderate distribution d) primary distribution e) intensive distribution

exclusive distribution

giving a limited number of dealers the exclusive right to distribute the company's products in their territories

exclusive distribution

the drop in average per-unit production cost that comes with accumulated production experience

experience curve (learning curve)

36. Thinking Cap Corp. prices its various cap designs at different price levels, ranging from $2.05 to $5.95. This is an example of optional product pricing. a) True b) False

false

a contractual vertical marketing system in which a channel member, called a franchisor, links several stages in the production-distribution process

franchise organization

a geographical pricing strategy in which the seller absorbs all or part of the freight charges in order to get the desired business

freight-absorption pricing

setting a low price for a new product in order to attract a large number of buyers and a large market share

market-penetration pricing

setting a high price for a new product to skim maximum revenues layer by layer from the segments willing to pay the high price; the company makes fewer but more profitable sales

market-skimming pricing (price skimming)

39. A ________ is a set of interdependent organizations that help make a product or service available for use or consumption by the consumer or business user. a) product line b) product delivery network c) marketing channel d) consumer base e) resource bank

marketing channel

a set of interdependent organizations that help make a product or service available for use or consumption by the consumer or business user

marketing channel (or distribution channel)

designing effective marketing channels by analyzing customer needs, setting channel objectives, identifying major channel alternatives, and evaluating those alternatives

marketing channel design

selecting, managing, and motivating individual channel members and evaluating their performance over time

marketing channel management

planning, implementing, and controlling the physical flow of materials, final goods, and related information from points of origin to points of consumption to meet customer requirements at a profit

marketing logistics (physical distribution)

15. Under ________, the market consists of many buyers and sellers who trade over a range of prices rather than a single market price. a) pure competition b) monopolistic competition c) oligopolistic competition d) a pure monopoly e) the dominant firm model

monopolistic competition

49. Movie Giants offers DVD rentals through its Web site. It also offers DVD rentals via Star City stores. This is an example of a(n)________ distribution system. a) conventional b) inclusive c) intensive d) extensive e) multichannel

multichannel

a distribution system in which a single firm sets up two or more marketing channels to reach one or more customer segments

multichannel distribution system

34. If a large retailer sold numerous items below cost with the intention of punishing small competitors and gaining higher long-run profits by putting those competitors out of business, the retailer would be guilty of ________. a) price collusion b) price fixing c) predatory pricing d) competitive pricing e) penetration pricing

predatory pricing

the amount of money charged for a product or service, or the sum of the values that customers exchange for the benefits or having or using the product or service

price

40. ________ play an important role in matching supply and demand by providing consumers with a broad assortment of products in small quantities. a) Virtual banks b) Intermediaries c) Price consultants d) Uniform-delivery networks e) Upstream partners

price consultants

a measure of the sensitivity of demand to changes in price

price elasticity

33. When sellers set prices after talking to competitors and engaging in collusion, they are involved in ________. a) interstate commerce b) comparative pricing c) price fixing d) skimming pricing e) price bundling

price fixing

23. Which of the following product mix pricing strategies involves pricing multiple products to be sold together? a) product line pricing b) product bundle pricing c) optional product pricing d) by-product pricing e) captive product pricing

product bundle pricing

combining several products and offering the bundle at a reduced price

product bundle pricing

2. What sets the floor for product prices? a) consumer perceptions of the product's value b) product costs c) competitors' strategies d) advertising budgets e) market competition

product costs

59. Which of the following is NOT a major logistics function? a) inventory management b) product designing c) warehousing d) transportation e) packaging

product designing

setting the price steps between various products in a product line based on cost differences between the products, customer evaluations of different features, and competitor's prices

product line pricing

29. What type of pricing is being used when a company temporarily prices its product below the list price to create buying excitement and urgency? a) segmented pricing b) international pricing c) reference pricing d) promotional pricing e) basing-point pricing

promotional pricing

temporarily pricing products below the list price, and sometimes even below cost, to increase short-run sales

promotional pricing

pricing that considers the psychology of prices and not simply the economics; the price is used to say something about the product

psychological pricing

28. Which term refers to prices that buyers carry in their minds and check with when they look at a given product? a) product line prices b) reference prices c) location-based prices d) product-form prices e) time-based prices

reference prices

the use of more than one but fewer than all of the intermediaries who are willing to carry the company's products

selective distribution

managing upstream and downstream value-added flows of materials, final goods, and related information among suppliers, the company. resellers, and final consumers

supply chain management

offering just the right combination of quality and good service at a fair price

good-value pricing

43. The greater the number of channel levels in a marketing channel, the ________. a) less distance between producer and end-consumer b) greater the channel complexity c) less time it takes for products to reach end-consumers d) greater the control producers have over the distribution of their products e) greater the control producers have over the demand of their products

greater the channel complexity

selling a product or service at two or more prices, where the difference in prices is not based on differences in costs

segmented pricing

45. Managers at the Imperial Hotel-Chicago complained that the chain's overall image was hurt because Imperial Hotel-Dallas was overcharging guests and providing poor service. The Imperial Hotel was experiencing ________ conflict. a) equilateral b) vertical c) multitiered d) communal e) horizontal

horizontal

a marketing channel containing one or more intermediary levels

indirect marketing channel

10. If demand hardly changes with a small change in price, the demand is ________. a) variable b) inelastic c) highly elastic d) derived e) negative

inelastic

31. Which of the following is true of FOB-origin pricing? a) It is a strategy in which the company charges the same price plus freight to all customers. b) It is a costly option for customers who are located near the company. c) It charges all customers the freight cost from a base city to the customer location. d) It is an expensive alternative for customers in distant locations. e) It is a strategy in which the seller absorbs all or part of the freight charges.

it is an expensive alternative for customers in distant locations

32. When a competitor cuts its price, a company should ________ if it believes it will not lose much market share or would lose too much profit by cutting its own prices. a) reduce its production costs b) reduce its marketing costs c) maintain its current prices and profit margin d) increase its marketing budget to raise the perceived value of the product e) increase its production costs to improve the quality of the product

maintain its current prices and profit margin

16. Companies which set a low price for a new product in order to attract a large number of buyers and a large market share are using the ________ strategy. a) market-skimming pricing b) market-penetration pricing c) cost-plus pricing d) inclusive pricing e) exclusive pricing

market-penetration pricing

17. Whizz Corp. wishes to introduce a new hybrid car into mature markets in developed countries with the goal of gaining mass-market share quickly. Which of the following pricing strategies would help the firm meet its goal? a) market-skimming pricing b) market-penetration pricing c) market-segmentation pricing d) cost-plus pricing e) captive-product pricing

market-penetration pricing

19. Which of the following companies uses product line pricing? a) Photo Genie, which sells inexpensive cameras that run only on their own expensive batteries b) Mobile Point, which launched a range of cell phone models, each priced according to its features c) Penguin's Parlor, which offers customers a 20% discount on their birthdays and certain holidays d) Green Thumb, which gives away free watering cans with the purchase of certain potted plants e) Panizza, whose combo meals are priced lower than the individual components sold together

mobile point, while launched a range of cell phone models, each priced according to its features

the pricing of optional or accessory products along with a main product

optional-product pricing

13. Price elasticity of demand is represented by ________ divided by ________. a) percentage change in quantity demanded; percent change in price b) percentage change in units supplied; percentage change in price c) percentage change in price; percentage change in quantity demanded d) fixed costs; variable costs e) cost-plus price; actual cost of production

percentage change in quantity demanded; percent change in price

27. ________ allowances are payments or price reductions that reward dealers for participating in advertising and sales support programs. a) Promotional b) Trade-in c) Segmented d) Functional e) Dynamic

promotional

prices that buyers carry in their minds and refer to when they look at a given product

reference prices

58. ________ management refers to the management of upstream and downstream value-added flows of materials, final goods, and related information among suppliers, the company, resellers, and final consumers. a) Cross b) Supply chain c) Price d) Product cycle e) Customer

supply chain

pricing that starts with an ideal selling price, then targets costs that will ensure that the price is met

target costing

9. Which of the following is an internal factor that affects pricing decisions in a company? a) the nature of the market b) the degree of inflation in the economy c) the overall marketing strategy of the company d) the forces of demand and supply in the market e) consumers' perception of value

the overall marketing strategy of the company

18. Which of the following is true of product line pricing? a) The price steps take cost differences between products in the line into account. b) The pricing strategy cannot be availed of by companies in developed countries. c) The price steps do not account for the prices of similar products from competitors. d) The pricing strategy involves overpricing products so that they appeal to the elite. e) The customer's perception of the value of different features is considered irrelevant.

the price steps take cost differences between products in the line into account

11. Buyers are less price sensitive when ________. a) the product they are buying is of inferior quality b) the product they are buying is low in prestige c) substitute products are easy to find d) the product they are buying is unique e) the product they are buying is non-exclusive

the product they are buying is unique

6. The break-even volume is the point at which ________. a) the total revenue and total cost curves intersect b) demand equals supply c) the production of one more unit will not lead to increase in demand d) the company can pay off all its long-term debt e) a firm exceeds the sales forecast

the total revenue and total cost curves intersect