20

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

d) the generation of total revenue.

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.

d) trade

A certain location of O'Charley's Restaurant has annual fixed costs of $200,000. If an average tab at the restaurant is $60 and the variable costs per tab is $20, how many groups of customers must O'Charley's serve per year in order to break even?

b) 5,000

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

b) Giorgio perfume

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) a negative impact on consumers' perceptions of quality.

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

a) allowance.

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

a) breakeven

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

a) fixed

For most consumers, there is an assumed relationship between

a) price and quality.

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

b) Price

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

b) Riding lawn mowers

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

b) Robinson-Patman Act

In conducting an assessment of her accounting firm, Pauline Santana discovers the following annual results: average charge per customer = $250; rent = $12,000; total billings = $150,000; employee compensation and benefits = $60,000; and other costs = $110,000. Given these results, Mary's profits would equal

b) a loss of $32,000.

A marketer sometimes uses temporary price reductions to

b) gain market share.

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

b) inverse

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

b) it is easy to duplicate.

The point at which the costs of producing a product equal the revenue earned from selling the product is

b) the breakeven point.

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

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

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

c) It relies on demand for a product being inelastic.

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

c) Nonelective surgery

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

c) Previous sales

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

c) Rent

___________ consumers are concerned about both the price and the quality aspects of a product.

c) Value-conscious

One advantage of nonprice competition is that

c) a firm can build customer loyalty.

The type of prices most likely to appear in advertising is

c) bargain.

ACE Electronics introduces a new voice-activated personal computer that no longer requires a keyboard. ACE charges the high price of $11,000 per unit, thus generating large profits because it has a 20 percent market share. ACE's major problem in the future will most likely be

c) competition.

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

c) cumulative quantity discount.

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

c) deceptive pricing.

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

c) elastic.

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

c) interpretation.

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.

c) lower costs for the company and lower prices

Monopolies usually keep their prices at a level that generate a reasonable, but not excessive, return primarily because

c) perfect competition.

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

c) premium

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

c) price minus variable costs.

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

c) price.

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

c) stop producing additional units to maximize profits.

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

c) total costs

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

c) transfer

The amount of profit a channel member expects depends on

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

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

d) -2.

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

d) Clayton Act

When marketers at Consolidated Mustard Company tried to determine demand for their product, they found that at 50 cents, consumers wanted 2,000 jars; at $1.00, they wanted 6,000 jars; and at $1.50, they wanted

d) Consolidated mustard is a prestige good.

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

d) They are different terms for the concept of price.

Which of the following statements about price elasticity is false?

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

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

d) a marginal cost.

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

d) barter.

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

d) costs

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

d) marginal

If Colgate-Palmolive wants to maximize profit on its toothpaste, it should operate at the point where

d) marginal revenue equals marginal cost.

Buyers who focus on purchasing products that signify prominence and status are

d) prestige-sensitive buyers.

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

d) price elasticity of demand.

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

d) price.

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

d) transfer pricing.

Tim O'Brien gets the invoice for a load of gravel he purchased last week. The price of the gravel was $55, and the terms are 2/10, n/45. If Tim pays the invoice in five weeks, he will owe

e) $55.00.

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

e) Differentiated

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

e) F.O.B. destination.

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

e) an external reference price.

Below the breakeven point, a firm is operating

e) 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

e) average total cost is at its lowest level.

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

e) demand curve.

For most firms in the United States, demand curves are

e) downward sloping.

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

e) external reference prices.

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

e) geographic pricing.

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

e) inelastic.

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

e) internal reference price.

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

e) involves a cash discount if paid within ten days.

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.

e) market-based cost

French Quarter Inns drops the price of a suite from $225 to $195 per night and experiences a reduction in the quantity of rooms demanded of an average of five per night. This is an indication that suites at this hotel are apparently an example of a(n) ___________ product.

e) prestige

A customer who is ___________ is likely to say, "People notice when you buy the most expensive brand of a product."

e) prestige-sensitive

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

e) price competition.

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

e) price elasticity of demand.

Premium-priced products are usually marketed through

e) selective or exclusive distribution.

Price is

e) the value that is exchanged for products in a marketing transaction.

Suppose Tommy Hilfiger is introducing a new line of men's ties. The designer believes that the target market for these ties comprises men who are very status-conscious. In keeping with this assessment, department stores selling the ties should

e) use price symbolically.

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.

b) price war

The Highland Racquet Club found that with annual fixed costs of $60,000, its breakeven point is 2,000 members when the membership charge is $60 per person per year. What is the variable cost per person for Highland?

c) $30

What equation shows organizations the relationship between price and profit?

c) (Price × Quantity Sold) - Total Costs = Profits

Markum Industries determines that for its air compressors the following results are achieved at a price of $250: total costs = $250,000; variable costs per unit = $100; fixed costs = $175,000. Given these figures, Markum would break even at ___________ units.

a) 1,167

Which of the following statements about nonprice competition is false?

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

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

a) Discounted standard cost

Marketers have no flexibility in setting prices under conditions of

a) Sherman Antitrust Act

At what point does a firm maximize profit?

a) The point at which marginal cost equals marginal revenue

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.

b) F.O.B. factory

Marginal analysis involves examining

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

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?

b) 2,000 units

Which factor is least likely to affect pricing decisions?

e) Shifting stock values

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

e) Simpson-Marshall Act

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.

e) Trade

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

e) Trade

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?

e) Zone pricing

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

a) price competition.

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

a) price discrimination.

The perception of price depends on a

a) product's actual price and consumers' expectations regarding price.

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.

a) 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

a) quantity demanded goes down.

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

a) 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

a) response.

At the breakeven point,

a) the money a company brings in from selling products equals the amount spent producing the products.

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

a) they cannot judge the quality of the product for themselves.

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

a) total revenue will increase.

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

b) marginal revenue.

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

b) noncumulative.

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

b) nonprice competition.

Monopolies usually keep their prices at a level that generate a reasonable, but not excessive, return primarily because

b) they want to avoid government regulations on their pricing.

A company trying to position itself as value oriented should not

b) use premium pricing for its products.

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

b) variable costs.

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?

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