Chapter 14

Samson rents rooms in his hotel for an average of $100 per night. The variable cost per rented room is $20, to cover maid service and utilities. His fixed costs are $100,000 and his profit last year was $20,000. For Samson, the contribution per unit is

$80

If the fixed costs of manufacturing a new cell phone are $10,000, the sales price is $60, and variable cost per unit is $20, the break-even point is

250 units

Assume the demand for electricity, a necessity with few substitutes, is −0.2. If the electric company raised its rates by 10 percent, we would expect

a 2 percent decrease in quantity demanded

For which of the following is demand likely to be most sensitive to price increases?

a specific brand of soft drink

In developing marketing strategies, why is price often the most challenging of the four Ps to manage?

because it is the least understood element of the marketing mix

In general, prices should not be based on costs because

consumers make their purchase decisions based on perceived value

A "no-haggle" pricing policy is a type of _____ pricing strategy.

customer-oriented

Managers of Wendy's fast-food restaurants keep track of prices at competitors such as McDonald's, Burger King, and Arby's, knowing that a decrease in the prices at these other fast-food restaurants will

decrease demand for Wendy's products

The price elasticity of demand for a teeth-whitening kit is −1.5. The market for this product is considered

elastic

Break-even analysis is useful because it allows managers to

estimate the quantity they will need to sell at a given price to break even

Which of the following is the most logical example of complementary products?

hot dogs and hot dog buns

A study found that, among addicted smokers, a 10 percent increase in the price of cigarettes resulted in a 2 percent decrease in quantity demanded. For these consumers, cigarettes have a(n) ________ price elasticity demand.

inelastic

There is often only one provider of cable television services in each region of the country: Time Warner is in New York, Comcast is in most of New England, and so forth. When Comcast recently proposed a plan to buy Time Warner, the purchase ultimately could not be completed, mostly due to concerns that it would have caused Comcast to become an overly large ________ with too much power.

monopolist

In a market with ________ there are many firms providing differentiated products.

monopolistic competition

Rita knew that her established customers liked her product much better than her competitor's. She was planning to expand into new markets, and she was considering pricing. She was leaning toward charging a higher price than competitors to help demonstrate that hers was a high-quality product. Rita was considering

premium pricing

For which of the following is demand likely to be least sensitive to price increases?

prescription drugs

There is an old saying "If you have to ask the price of a yacht, you cannot afford it." Products like yachts are most likely to be associated with

prestige pricing

A demand curve shows the relationship between ________ during a specific period of time.

price and demand

Juliannna wants her firm's gourmet snacks to be the leading brand in the U.S. market. When adopting a pricing strategy designed to gain market share, she should remember that

rarely is the lowest price offering the dominant brand in a market

Many years ago Honda's Accord and Ford's Taurus were the two top-selling cars in the United States. As the year was coming to an end, Ford cut the price of the Taurus, hoping to outsell the Accord and allow Ford to claim that "Taurus is the best-selling car in America." Ford was using a ________ pricing strategy.

sales orientation

Which of the following markets is most likely to be characterized by oligopolistic competition in the United States?

smartphone service providers

Byron gave the manager of his convenience store a set of binoculars so she could see the gasoline prices charged by the other convenience store at that intersection. Byron told the manager to always match the gasoline prices of the other store. Byron is using a ________ pricing strategy.

status-quo

Because there are many firms in monopolistic competition markets,

the many competitors will focus on product differentiation

Raoul was known for driving 20 miles just to save a dollar on the price of his favorite beverage. Raoul perceived price as ________ for a good or service, while most consumers recognize price as the ________ made to acquire a good or service.

the money paid; overall sacrifice

There are many options available to consumers when it comes to breakfast cereals. So, if Kellogg's significantly increases the price of Rice Krispies, consumers are more apt to buy alternate cereals instead. This illustrates which concept?

the substitution effect