MKTG ch20

If the product price is $100, average variable cost $40 per unit, and the total fixed costs are $120,000, what is the breakeven point?

2,000 units

A price developed in the consumer's mind through experience with the product is called a(n)

Internal reference price

What a price means or what it communicates to customers is called

Interpretation

For most products, a(n) ____ relationship exists between the price of a particular product and the quantity demanded.

Inverse

Justin Caprese phones Ben Kirkland of Southside Furniture to inform him that if he will increase his recent order of 15 mattress sets to 20, he will receive a 14 percent price reduction. This offer is due to a recent overstock condition at the factory and will not be available in the future. The discount offered here is

Noncumulative

A danger associated with engaging in price competition is that competitors can also change prices quickly and aggressively, which can result in a(n) _____ that will be harmful to both companies.

Price war

If Ralph Lauren offers to reduce the price of its women's blazers when retailers buy more than 100 pieces, the designer is offering a ____________ discount.

Quantity

If Wilson Sporting Goods faces a standard demand curve that exists for most products, as it raises the price of its tennis rackets, the

Quantity demanded goes down

Mary's profits would equal

a loss of $32,000

What is the variable cost per person for Highland?

$30

The type of prices most likely to appear in advertising is

Bargain

Costs that do not vary with changes in the number of units produced and sold are called ____ costs

Fixed

Price is

value that is exchanged for products in a marketing transaction

The amount of profit a channel member expects depends on

what the intermediary could earn if it were handling a competing product instead.

Tim O'Brien gets the invoice for a load of gravel he purchased last week...If Tim pays the invoice in five weeks, he will owe

$55.00.

What equation shows organizations the relationship between price and profit?

(Price x Quantity sold)-Total costs=Profits

Both the Federal Trade Commission Act and the Wheeler-Lea Act prohibit

Deceptive pricing

A graph of the quantity of products marketers expect to sell at various prices if other factors remain constant is a

Demand curve

What do all of the following have in common: tuition, fee, premium, retainer, dues?

Different terms for the concept of price

Which of the following is not a discount provided to business customers?

Differentiated

A product under nonprice competition would most likely not succeed in the market if

It is easy to duplicate

What assumption does breakeven analysis make that limits its overall usefulness?

It relies on demand for a product being inelastic

At what point does a firm maximize profit?

MC = MR

Which of the following is most likely to have an inelastic demand curve?

Nonelective surgery

Which of the following is the most flexible variable in the marketing mix?

Price

What type of discount is given to a business purchaser for performing activities such as transporting, storing, and selling?

Trade

If a company increased its price from $100 to $120 and the quantity demanded fell by 40 percent, the price elasticity of demand for this product is

-2

Markum would break even at ___________ units.

1,167

How many groups of customers must O'Charley's serve per year in order to break even?

5,000

If Seagram's marketers found that the firm's Crown Royal bourbon was a prestige product and raised its price, which of the following would most likely happen?

Above some price level, the quantity demanded would begin to decrease

A concession in price in business markets to achieve a desired goal is called a(n)

Allowance

Below the breakeven point, a firm is operating

At a loss

If Roberts Electronics finds that the average total cost of its radar detectors and the marginal cost of its radar detectors are both $85, then

Average total cost is at its lowest level

Which of the following is not a method used to determine transfer prices?

Discounted standard cost

For most firms in the United States, demand curves are

Downward sloping

If Carnival Cruise Lines increased the price of its seven-day cruise package by 10 percent and, as a result, experienced a 20 percent decline in customer bookings, Carnival's demand would be

Elastic

When a customer is considering the purchase of a product in a less-familiar product category, that individual is likely to rely more heavily on

External reference prices

Lucy buys a new dress at T.J. Maxx that has a price tag with "Compare at $50.00. Our Price $29.99." This is an example of the use of

External references prices

A marketer sometimes uses temporary price reductions to

Gain market share

If a firm currently produces 2,500 products per month and decides to produce 2,501, it will incur

Marginal cost

Which of the following is not a major factor for firms making price decisions?

Previous sales

Advertisements for Suave shampoos emphasize that other shampoos may cost more but don't work any better than Suave. In this example, Suave is competing on the basis of

Price

The tuition and fees each student paid for this semester of college are both terms for

Price

To determine the breakeven point in units, divide the fixed costs by

Price - VC

For most consumers, there is an assumed relationship between

Price and quality

Which of the following prohibits price discrimination that lessens competition among wholesalers and retailers?

Robinson-Patman Act

Premium-priced products are usually marketed through

Selective or exclusive distribution

When Cadillac buys headlights from Delco (both of which are divisions of General Motors), ___________ pricing occurs.

Transfer

Suppose that the frozen foods division of Swanson purchases food trays and boxes from the packaging division. The form of pricing used to charge the frozen foods division is called

Transfer pricing

A company trying to position itself as value oriented should not

Use premium pricing for its products

Tommy Hilfiger, in keeping with this assessment, department stores selling the ties should

Use price symbolically

Costs that vary directly with changes in the number of units produced or sold are called

Variable costs

If the terms of a business exchange are 2/10 net 30, this means that the transaction

involves a cash discount if paid within ten days

The perception of price depends on a

product's actual price and consumers' expectations regarding price

To gain market share, when Hyundai first entered the U.S. car market it did so with a comparatively low price strategy. One of the negative side effects of making this pricing decision is

A negative impact on the consumers' perception of quality

The oldest form of exchange—trading of products—is known as

Barter

Suppose managers at Caterpillar have determined the costs associated with producing hay balers are equal to the price that they charge for the hay balers. This indicates that Caterpillar is producing at the ___________ point.

Breakeven

Provisions of the Robinson-Patman Act, as well as those of the ___________, limit the use of price differentials.

Clayton Act

Which of the following statements about nonprice competition is false?

Companies that use nonprice competition do not need to keep track of their competitor's prices

What can Consolidated conclude?

Consolidated mustard is a prestige good

Marketers generally view _____ as the minimum price a product can be sold for.

Costs

A deduction from list price for purchasing large quantities aggregated over a stated period of time is a

Cumulative quantity discount

Sellers that emphasize distinctive product features to encourage brand preferences among customers are practicing

Nonprice competition

French Quarter Inns drops price...This is an indication that suites at this hotel are apparently an example of a(n) ___________ product.

Prestige

Safe Auto advertises its low-cost automobile insurance as "minimum coverage for minimum budgets." Safe Auto is engaging in

Price competition

When marketers emphasize price as an issue and match or beat the prices of other companies, they are using

Price competition

A measure of sensitivity of demand in relation to changes in price is

Price elasticity of demand

When marginal cost is equal to marginal revenue, the firm should

Stop producing additional units to maximize profits

Marginal analysis involves examining

What happens to a firm's costs and revenues when production is changed by one unit

The fact that a gas station in Texas pays less for fuel than a gas station in Maine from a producer in Louisiana suggests that refineries are using which of the following pricing methods?

Zone pricing

One advantage of nonprice competition is that

a firm can build customer loyalty

Rob Johnson orders 16 dozen fishing lures from Strike Right for $375. When he gets the invoice, he is furious that $25 in freight charges has been tacked onto his bill because he thought the price included freight costs. Rob should have been certain that the order terms were

FOB destination

If a retailer orders a quantity of merchandise to be delivered to his store in Phoenix and is quoted a price that does not include shipping charges, the retailer is paying a(n) ___________ price.

FOB factory

Price is a key element in the marketing mix because it relates directly to

Generation of total revenue

Reductions for transportation and other costs related to the physical distance between buyer and seller are known as

Geographic pricing

Which of the following products is most likely to have an inverted C-shaped demand curve?

Giorgio perfume

If Pacific Power and Light increased its rates 10 percent and experienced only a 2 percent reduction in the demand for power, the demand would be

Inelastic

What does the demand curve for a prestige product look like?

It forms a curve where the greatest quantity sold comes at a medium price and the quantities fall as the price increases or decreases.

To maintain market share and revenue in an increasingly price-sensitive market, companies have focused on quality, used labor-saving technologies, and used efficient manufacturing processes. These tactics have provided gains in productivity that have translated into ___________ for the consumer.

Lower costs for the company and lower prices

Roberts Electronics calculates that if it produces 15 radar detectors, its costs are $1,500, and if it produces 16 radar detectors, its costs are $1,590. In this instance, $90 is the firm's ___________ cost.

Marginal

Michelin notices that when the number of tires it sells increases from 1,000,000 to 1,000,001, total revenue rises $35. The $35 represents the firm's

Marginal revenue

Suppose that the watchband department of Timex sells completed watchbands to the finished watch department. The finished watch department is charged the price it would have to pay an outside watchband manufacturer less a discount to reflect low sales and transportation costs. This method of pricing is called _______ pricing.

Market-based cost

Which of the following is most likely to be a fixed cost?

Rent

The ___________ prohibits price fixing among firms in an industry.

Sherman Antitrust Act

Which factor is least likely to affect pricing decisions?

Shifting stock values

Which of the following acts does not directly affect pricing decisions?

Simpson-Marshall Act

Generally, customers are most likely to rely on the price-quality association when

They cannot judge the quality of the product themselves

In the long run, the J. F. Smucker Company must view ___________ as the absolute lowest price for its Jif brand peanut butter.

Total costs

If a product has an inelastic demand and the manufacturer raises its price,

Total revenue will increase

Laura Spangler, of North Central Novelties, reduces the price of games sold to Robertson's Entertainment by 10 percent to allow for expenses associated with Robertson's promoting the games to consumers. This is an example of a ___________ discount.

Trade

Which of the following statements about price elasticity is false?

When price is raised on a product that has an inelastic demand, then total revenue will decrease

Marketers have no flexibility in setting prices under conditions of

Perfect competition

The types of prices that appear least often in ads are ___________ prices.

Premium

If a company provides price differentials that harm competition by giving one or more buyers a competitive advantage, it is committing

Price discrimination

The Panama Jack Company utilizes a special strategy to sell its ECO-shirt line. Its basic promotional tool is the discount. These discounts offered to middlemen for performing certain channel activities are referred to as ____________ discounts.

Trade

Which of the following products is most likely to involve personal selling?

Riding lawn mowers

Dividing the percentage change in quantity demanded by the percentage change in price gives the

Price elasticity of demand

Temporary price reductions through sales, rebates, and special discounts are often used to

Raise cash quickly

The degree to which the price of a product enhances a customer's satisfaction with the purchase experience and with the product after the purchase is part of their

Response