Chapter 14
A demand curve shows that a company will sell 10,000 units if it prices its new product at $200 per unit, but it will sell 20,000 units if it reduces the price to $75. If the company wants to maximize profits, it should price the new product at ______.
$200
The percentage change in the quantity of one product demanded compared with the percentage change in price in another product is called _____ -price elasticity.
cross
To achieve target profit pricing, a company uses _____ to stimulate sales at a specific profit level.
pricing
Channel members include which of the following? (Choose every correct answer.) A) Retailers B) Manufacturers C) Consumers D) Wholesalers
A) Retailers B) Manufacturers D) Wholesalers
Which of the following accurately characterize demand curves? (Choose every correct answer.) A) They are completely accurate prediction models. B) They relate demand to prices while assuming everything else remains unchanged. C) They are identical for all products and services in a given industry. D) They show how much consumers will demand during a specific period at different prices.
B) They relate demand to prices while assuming everything else remains unchanged. D) They show how much consumers will demand during a specific period at different prices.
If a firm sells the same product to different resellers at different prices, this can be considered ______.
Price discrimination
A useful technique that enables managers to examine the relationships among cost, price, revenue, and profit over different levels of production and sales is called ______.
break-even analysis
When a 10% decrease in price produces more than a 10% increase in quantity sold, the product or service is responsive to price changes and is considered to be ______.
elastic
When a 10% decrease in price results in less than a 10% increase in quantity sold, demand for the product or service is described as ______.
inelastic
The ratio of change in a price and its effect on the quantity of the product demanded is known as ______.
price elasticity of demand
In preparation for introducing a new doll to the market, a toy company advertises and creates so much demand that little girls are lined up at the stores, determined to be the first to own one. The toy company sells these first dolls at twice their actual retail value. This is an example of ______.
price skimming
When Apple first introduced the iPhone, some consumers were willing to pay the premium $599 price tag. Apple was using a ______ strategy.
price skimming
A pricing ______ is the general way a company decides how its prices will be determined over the long term, based on the five Cs of pricing
strategy
When a firm is aiming for a particular amount of profit as its overriding concern, it usually implements ______.
target profit pricing
Firms that are less concerned with the level of profits and more interested in the rate at which profits are generated relative to their investments tend to use ______.
target return pricing
Prestige products or services follow the premise that ______ associated with the product.
the higher the price, the greater the status
When a firm uses a mathematical model to identify the price at which the firm will make the most money possible, it is implementing ______
the maximizing profits strategy
Price is best defined as ______.
the overall sacrifice a consumer will make to obtain one of the five Cs
A price _____ occurs when oligopolistic companies compete with each other by repeatedly lowering their prices.
war
Which of the following belong to the five Cs of pricing? (Select all that apply.) A) Channel members B) Corporations C) Company objectives D) Consistency E) Costs
A) Channel members C) Company objectives E) Costs
Which of the following are considered part of the five Cs of pricing? (Choose every correct answer.) A) Customers B) Change management C) Channel members D) Company objectives E) Charter membership F) Competition
A) Customers C) Channel members D) Company objectives F) Competition
Which of the following is another term for target return percentage? A) Markup B) Contribution per unit C) Profit D) Break-even point
A) Markup
Assuming the economy and other factors stay the same, a downward-sloping demand curve for a product shows which of the following? (Choose every correct answer.) A) As price increases, demand increases. B) As price increases, demand decreases. C) As price decreases, demand increases. D) As price decreases, demand decreases.
B) As price increases, demand decreases. C) As price decreases, demand increases.
Which is one of the five Cs of pricing? A) Cost uniqueness B) Company objectives C) Channel dynamics D) Customer salaries
B) Company objectives
How does penetration pricing discourage rival companies from entering the market? (Choose every correct answer.) A) It negates the experience curve effect, which usually helps competitors. B) Competitors who enter the market will temporarily face higher unit costs. C) The profit potential in the market is relatively low. D) It encourages price skimming, which is too risky for most companies to engage in.
B) Competitors who enter the market will temporarily face higher unit costs. che profit potential in the market is relatively low.
The types of strategies that could be implemented in a profit orientation strategy include which of the following? (Choose every correct answer.) A) Status quo pricing B) Maximizing profits strategy C) Target return pricing D) Sales orientation strategy
B) Maximizing profits strategy C) Target return pricing
Break-even analysis examines the relationships between which of the following? (Choose every correct answer.) A) Unions B) Price C) Value D) Cost
B) Price D) Cost
Target return pricing is an example of what type of orientation? A) Competitor B) Profit C) Sales D) Customer
B) Profit
A firm may set low prices to do which of the following? (Choose every correct answer.) A) Expand the entire market for additional firms B) Take market share away from competitors C) Discourage new firms from entering the market D) Encourage current firms to leave the market E) Encourage new competitors to the market
B) Take market share away from competitors C) Discourage new firms from entering the market D) Encourage current firms to leave the market
Which of the following types of theories is the maximizing profits strategy based on? A) Social B) Political C) Psychological D) Economic
D) Economic
Which strategy is used by firms that believe increasing volume of sales will help the firm more than increasing profits? A) Competitor-oriented strategy B) Profit-oriented strategy C) Repeat-return strategy D) Sales-oriented strategy
D) Sales-oriented strategy
______ makes up one of the Cs of the five Cs of pricing. A) Company staff B) Council professionals C) Channel flexibility D) The customer
D) The customer
Price discrimination is illegal under all conditions.
False
Puffery is illegal in advertising.
False
Price fixing is the illegal tactic of cooperating with other firms to ______ prices
artificially establish
The five Cs of pricing include ______.
channel members
One of the five Cs of pricing is ______. A) competition B) customer advantage C) company knowledge D) cost saving
competition
Prestige products or services do not follow the ______ curve.
downward-sloping demand
The ______ pricing strategy features frequent sales, during which prices are lowered for a short time.
high/low
When a new product or service is launched, companies that use a ______ strategy will attempt to attract customers quickly by offering a very low price at first.
penetration pricing
Sometimes firms selling a pioneering product will set a very low price in order to attract many customers before competitors enter the market. This is an example of a ______ orientation.
sales
Which of the following do you need to know to calculate target return price? (Choose every correct answer.) A) Break-even point B) Variable costs C) Expected unit sales D) Fixed costs
B) Variable costs C) Expected unit sales D) Fixed costs
If McDonald's reduces the price of a Big Mac by 25% and sales increase by more than 50%, the firm could describe demand as which of the following? (Choose every correct answer.) A) inelastic B) price sensitive C) elastic D) price insensitive
B) price sensitive C) elastic
Strategies that can be used as part of the profit orientation strategy include which of the following? (Choose every correct answer.) A) Value-based pricing B) Competitive parity C) Maximizing profits D) Target profit pricing
C) Maximizing profits D) Target profit pricing
True or false: A firm with a primary objective of very high sales growth will have the same pricing strategy as a firm with a primary objective of being a quality leader.
False
True or false: Customers are one of the five Cs of pricing.
True
True or false: In general, customers are more sensitive to price increases than to price decreases.
True
When firms compete by lowering prices, they are engaged in ______.
a price war
The five Cs of pricing are company objectives, customers, cost, channel members, and _____
competition
In the United States, it is considered unethical and illegal for advertisements to ______ the consumer so much that the person is harmed.
deceive
The graph that shows how many units of a product or service consumers will want during a specific period at different prices is known as the ______ curve.
demand
For most products, demand increases as the price decreases. Because of this general trend, demand curves usually have a(n) ______ slope.
downward
With the ______ pricing strategy, a company adopts retail prices that are typically somewhere between the product's regular price and the sharply discounted sale prices that competitors occasionally offer.
everyday low
The strategy of ______ appeals to consumers because it reduces their need to spend time comparing prices at various stores.
everyday low pricing (EDLP)
When consumers relish the challenge of getting the lowest price and are willing to expend the time and effort to seek out the lowest price every time, retailers should use the ______ pricing strategy.
high/low
A demand curve enables a firm to examine prices ______.
in terms of demand and the firm's objectives
According to the cross-price elasticity of demand, when the price of DVD players drops, the demand for DVDs is likely to ______.
increase
If a company needs to raise the prices of some its products, it should choose to raise the prices of ______ products because relatively fewer customers will stop buying the product as a result.
inelastic
The goal of a(n) ______ strategy is to generate profit and establish a new product or service in the market as quickly as possible.
market penetration
A firm sets extremely low prices for its products so that most customers will stop shopping elsewhere. This will cause other companies to go out of business and leave the firm with no more competition. The firm has engaged in ______.
predatory pricing
Products that cost a lot of money but that people buy anyway because of the status and exclusivity that they project to others are called _____ products.
prestige
The equation for price elasticity of demand is the percentage change in quantity demanded divided by percentage change in ______.
price
The _____ is fixed costs plus the sum of the variable costs.
total cost
Competition, channel members, costs, customers, and company objectives are the five critical components of ______.
pricing
Total cost equals ______.
variable costs plus fixed costs
Compared to other company objectives, a sales-oriented firm ______.
sets prices very low to generate new sales, even if profits suffer
Which of the following are reasons that firms implement a market penetration pricing strategy? (Choose every correct answer.) A) To build sales B) To discourage competitors C) To earn profits D) To resist change E) To raise production costs above the competition F) To establish market share
A) To build sales B) To discourage competitors C) To earn profits E) To establish market share
Scheming with other companies to control prices is called ______.
price fixing
