Chapter 13

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Price is defined as

The money or other considerations exchanged for the ownership or use of a product

The relationship, or ratio, between a product's perceived benefits and the consumer's costs is known as its

Value

in an industry that has an oligopoly, price wars are likely to benefit only

consumer

An example of a variable cost is

direct labor used to manufacture the product

A product with ___ demand is one in which a slight decrease in price results in a relatively large increase in demand or units sold

elastic

A demand curve enables a firm to examine prices

in terms of quantity sold

To many consumers, price provides information about

the quality of the product

The pricing objective known as unit volume is based on what?

the quantity of product sold

Which of the following may mean that the amount paid is not the same as the list price?

- Discounts - Rebates - Surcharges

Which of the following are essential to consider when setting a price?

- What are customers willing to pay? - What will provide a profit to the company? - What will pay for all associated costs, including marketing?

Order the following steps in setting prices

- identify pricing objectives and constraints - estimate demand and revenue - determine cost, volume and profit relationships - select an approximate price level - set list or quoted price - make special adjustments

If you see picture frames for $120 each, and you have fixed costs of $32,000 and unit variable costs of $40, what is your break-even point?

32,000/120-40 = 400 pictures

legal and regulatory issues and consumer demand are pricing ____ that limit what a company can charge for its products

Constraints

A product with _______ demand is one in which a slight decrease in price results in a relatively large increase in demand or units sold.

Elastic

American firms are sometimes criticized for using which profit-oriented pricing objective, because it results in a short-term orientation?

Maximizing current profit

Strategies that can be used as part of a firm's profit objectives include which two of the following?

Maximizing current profits target return

Which of the following are types of competitive markets?

Oligopoly and Monopolistic competition

Profit = (unit ___ x quantity sold) - (fixed cost + variable cost)

Price

The percentage change in quantity demanded relative to a percentage change in price is known as

Price Elasticity of Demand

In which of the following does the competitive market NOT provide pricing constraint for the marketer?

Pure Monopoly

Why are customers willing to pay extra for a Kohler walk-in tub which eliminates the need to step over the side of the tub?

The safety features enhance the product's value

movement along a demand curve occurs because of

a change in price

A shift in the demand curve is the result of

a change in selling conditions

the demand curve is

a graph relating quantity sold and price

when a successful new product is introduced to the market, the lack of competition (including from your own company) removes

a price constraint

When a board of directors determines profit goal, marketing managers usually implement

a target return objective

the slope of the demand curve shows that

as price increases, demand decreases

The practice of exchanging products and services for other products and services rather than for money is referred to as __________.

barter

Small changes in price

can have comparably big effects on company profit.

A firm's prices are constrained in one way because it must cover all ___ for producing and marketing a product.

cost

In the long run, a firm's ___ and those of its distributors set a floor for its price, allowing the firm to both survive and get its product to consumer

costs

The social responsibility pricing objective often results in

decreased profits

Generally, the greater the ___ for a product, the higher the price that can be set.

demand

The chart that shows how many units of a product or service consumers will demand during a specific period of time at different prices is known as the

demand curve

For a firm, rent, landscaping, and insurance are examples of ___ costs.

fixed

______ cost is the sum of the expenses of the firm that are stable and do not change with the quantity of a product that is produced and sold.

fixed

A product for which nostalgia or fad factors come into play is likely to

have higher prices later in its product life cycle

When there are many substitute products available, the price elasticity of demand for a given product will likely be ___.

higher

the key element in the definition of pure competition is that the products offered by the different firms are perceived by the consumer to be

identical

According to price elasticity, when the price of iPhones drop, the demand for iPhones is likely to

increase

When a 1% decrease in price results in less than a 1% increase in quantity sold, demand for the product or service is

inelastic

Which of the following is an advantage of using break-even analysis?

it is simple

With which profit-orientated pricing objectives is a firm likely to price its products relatively low compared to their cost to develop with the prospect of gaining a high market share?

managing for long-run profits

out-of-control ___ compared to foreign car companies resulted in the US government investing billings of dollars in US car companies, trying to restructure them to make them competitive

manufacturing costs

A pricing objective of increasing sales can have the disadvantage of leading to price cuts that

may reduce the revenues of related products in the firm's line

The situation in which many firms compete for customers in a given market and the products are differentiated is known as

monopolistic competition

Movement along a demand curve implies

no changes have occurred in any demand factors except price

Pricing ___ frequently reflect corporate goals, while pricing ___ often relate to conditions existing in the marketplace.

objectives; constraints

When only a few firms dominate a market, it is known as ___ competition

oligopolistic

which element of the marketing mix is part of the profit equation and therefore, has a direct effect on a firm's profits?

price

If loyalty toward a particular brand makes other brands seem less substitutable, it decreases

price elasticity of demand

Pricing decisions are difficult because

price simultaneously affects total revenue and total cost

A consumer's near-instantaneious access to competitors' prices for the same offering through the use of websites, apps, and smartphones is known as

price transparency

Break-even analysis can help evaluate the impact in ___ and ___ on ___

price; costs; profit

A firm must know its competitors' ___ in order to best set its own

prices

Which two of the following are factors that cause price inelasticity?

products are considered necessities few available products

The three factors influencing the demand curve are consumer tastes, the consumer income and the price and availability of

similar products

Fixed cost divided by unit price less unit variable cost is known as

the break-even point

market share can be measured as the ratio of ___ compared to the total industry units sold.

the firm's units sold

the new a product the earlier it is in its life cycle

the higher the price that can usually be charged

The unit variable cost is

the total variable cost divided by the quantity.

Total revenue equals the product quantity sold times

the unit price

In a pure competition market, the primary purpose for advertising is

to inform buyers that a product is available

break-even analysis analyzes the relationship between which two at various levels of output?

total cost total revenue

A break-even analysis chart shows the intersection of which two curves?

total costs and total revenue

According to the price equation, to find the actual price, you should do which of the following to the list price?

Add extra fees subtract incentives and allowances

Which of the following are the three factors that influence demand?

Consumer Income Consumer tastes price and availability of similar products

An international firm that contracts with suppliers overseas would be most likely to do so for which of these reasons?

The suppliers might have efficiencies and lower hourly wages, reducing production prices.

The cost of changing prices is a pricing constraint; as a result, most firms

change the prices of their products more often if they sell online.

When there are many substitute products available, the price elasticity of demand for a given product will likely be ___

higher

To increase customer value for a given price, the market must

increase perceived benefits

According to the price equation, the actual price is the ___ price less incentives and allowances, plus extra fees

list

When a firm sells more product than it needs to cover its total costs, it will

make a profit

Many Japanese car firms are willing to give up immediate profits for long-term penetration of the market. This is a pricing objective known as

managing for long-run profits

marketing managers may identify profit, market share, social responsibility, or even survival as pricing

objectives

In a pure competition market, advertising

only serves to inform buyers that the product is available

Total revenue less (that is, minus) total cost is known as

profit

When many sellers follow the market price for products the consumer sees as identical it is known as

pure competition

When a consumer is comparing the costs and benefits of substitute items, he or she is developing a

reference value

Firms that set ___ objectives believe that increased revenues will in turn lead to increases in market share and profit.

sales

in a pure competition market, the primary purpose for advertising is

to inform buyers that a product is available

The sum of fixed and variable costs is known as

total cost

Price times quantity sold is

total revenue

The pricing objective known as ___ can be counterproductive if it is achieved by drastic price cutting that drives down profit.

unit volume

Creative marketers engage in ___ when they increase product benefits without changing the price

value pricing

Direct labor and materials are known as

variable costs


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