marketing chapter 9
8) According to the law of demand, which of the following is true? a. If prices decrease, customers will buy more. b. Customers are not aware of small price changes. c. The effect on demand from changes in price cannot be accurately predicted. d. Demand equals supply. e. If prices increase, customers will buy more.
a. If prices decrease, customers will buy more.
96) After looking at the ads in her Sunday paper, Ruby decided to visit a local nursery and buy potting soil at $1.99 a bag. The regular price is $4.99 a bag. While Ruby was there she also purchased three bushes, six flowering plants, and a bird bath. You can infer from this information that the nursery used the bags of potting soil as a(n) ________. a. loss leader b. assimilator c. bait-and-switch d. price line e. reference price
a. loss leader
27) When setting prices, a company must consider factors in its pricing environment. ________ such as the business cycle, economic growth, and consumer confidence can have a significant impact on the firm's pricing strategies. a. Consumer trends b. Economic trends c. Competitors' responses d. Regulations e. Market structures
b. Economic trends
18) ________ do not vary with the number of units produced. a. Liquidity costs b. Fixed costs c. Variable costs d. Marginal costs e. Everyday costs
b. Fixed costs
78) Many people rely on a prescription drug to control their cholesterol. An increase in the price of the drug would have little effect on the quantity demanded because there are no substitutes for the drug and because people who take it have no choice but to continue taking it if they wish to stay healthy. The demand for the cholesterol drug is ________. a. elastic b. inelastic c. cross-elastic d. supply-driven e. asymmetrical
b. inelastic
58) Which of the following is a set price or price range in consumers' minds that they refer to in evaluating a product's price? a. dynamic price b. internal reference price c. suggested retail price d. captive price e. value price
b. internal reference price
92) Manufacturers of which of the following would be most likely to use freight absorption pricing? a. chocolate candy b. laptop computers c. furniture polish d. feline flea collars e. repair parts for vacuum cleaners
b. laptop computers
51) A quantity discount is a price reduction to buyers who purchase ________. a. frequently b. large volumes c. close outs d. bundled products e. seasonal products
b. large volumes
65) From a marketer's point of view, price lining is a way to do which of the following? a. control supply b. maximize profits c. make the business more socially responsible d. pass shipping costs on to consumers e. eliminate price elasticity concerns
b. maximize profits
28) In a market with ________, there are many sellers, each offering a slightly different product. Firms can differentiate products and focus on nonprice competition. a. pure competition b. monopolistic competition c. oligopolistic competition d. a pure monopoly e. socialism
b. monopolistic competition
94) A local restaurant sells lunch entrees for $7.95, $9.95, and $09.95. From this information, you can infer the restaurant uses which of the following? a. price discrimination b. odd pricing and price lining c. dynamic pricing and price lining d. reference pricing and value pricing e. dynamic pricing and loss leader pricing
b. odd pricing and price lining
3) The value of something we give up in order to obtain something else is referred to as a(n)________. a. transformation cost b. opportunity cost c. exchange d. variable cost e. marginal cost
b. opportunity cost
89) Johnson Boats wants to introduce a new model of boat into mature markets in highly developed countries with the goal of quickly gaining mass-market share. As a consultant, you should recommend a ________ pricing strategy. a. skim b. penetration c. price leadership d. cost-plus e. captive
b. penetration
97) When Circuit Town Electronics sets its televisions at three price levels of $699, $899, and $1,099, it is most likely using ________. a. price fixing b. price lining c. penetration pricing d. skimming pricing e. loss leader pricing
b. price lining
80) Sellers should know that the less elastic the demand for their product is, the more advantageous it is for them to ________. a. drop the price b. raise the price c. maintain the price d. discontinue the item e. bundle the item with another product
b. raise the price
76) When setting prices, a leading manufacturer of nutritional supplements decided to institute a pricing strategy that would support a five percent increase in sales over the next three years. What type of pricing objective has the company set? a. profit b. sales c. competitive effect d. cost-plus e. value
b. sales
52) When a snow blower shop offers a price reduction to customers who buy during the spring and summer, the shop is giving a(n)________ discount. a. functional b. seasonal c. annual d. trade e. allowance
b. seasonal
87) Valeo Fashions has just introduced a new line of fashion dresses for teens. The line will initially enter the market at high prices in a ________ strategy. a. penetration pricing b. skimming pricing c. price leadership d. yield management pricing e. value pricing
b. skimming pricing
41) A new product carries a low price for a limited period of time to attract customers in what type of pricing strategy? a. price skimming b. trial pricing c. penetration pricing d. specialty pricing e. price bundling
b. trial pricing
73) Which of the following occurs when manufacturers or wholesalers attempt to force retailers to charge a certain price for their products? a. horizontal price fixing b. vertical price fixing c. predatory pricing d. internal reference pricing e. assimilation pricing
b. vertical price fixing
74) Competition Act on price-fixing requires that sellers set their prices ________. a. based on their fixed and variable costs b. without communication with competitors c. to achieve a specified profit margin d. consistently with all customers e. consistently throughout a region
b. without communication with competitors
43) ________ is a pricing tactic a firm uses for two products that work only when used together. The firm sells one item at a very low price and then makes its profit on the second high-margin item. a. Two-part pricing b. Price bundling c. Captive pricing d. Penetration pricing e. Skim pricing
c. Captive pricing
55) In a(n)________, all of the buyers know the highest price bid at any point in time. a. reverse auction b. dynamic auction c. open auction d. reserve auction e. price-lining auction
c. open auction
100) Savings for You, a discount retail chain, is highly competitive. When entering a new market, Savings for You often cuts prices so deeply that it sells below costs, effectively pushing smaller companies with less purchasing power out of the market. Savings for You is most at risk of being accused of ________. a. skimming prices b. price-fixing c. predatory pricing d. deceptive pricing e. loss leader pricing
c. predatory pricing
11) Which of the following is a measure of the sensitivity of customers to changes in price? a. a liquidity ratio b. demand sensitivity c. price elasticity of demand d. marginal analysis e. basing-point
c. price elasticity of demand
95) A hamburger stand near the local mall sells hamburgers for $3.99, drinks for $1.99, and fries for $1.49, while a gourmet restaurant nearby sells entrees for $20, $30, and $45. Both of these restaurants are using ________. a. demand-based pricing b. cost-based pricing c. psychological pricing d. prestige pricing e. penetration pricing
c. psychological pricing
85) Swatch surveyed the market and identified an unserved segment of watch buyers. Using these results, they created a watch at a price consumers were willing to pay. The unorthodox order of this marketing mix decision is an example of ________. a. competition-based pricing b. cost-plus pricing c. target costing d. value pricing e. penetration pricing
c. target costing
6) A company that intends to maintain low-end pricing policies to make the market unattractive for its competitors is using which of the following pricing objectives in its price planning? a. sales b. profit c. break-even d. competitive effect e. customer satisfaction
d. competitive effect
30) The most common cost-based approach to pricing is ________. a. demand-based pricing b. psychological pricing c. yield management pricing d. cost-plus pricing e. cost-minus pricing
d. cost-plus pricing
79) When Joe's Coffee Nook raised the price of a latte, Joe noticed a substantial change in how many lattes he sold daily. A price reduction caused his sales to increase. From this information, you can assume the demand for lattes is ________. a. static b. supply-driven c. asymmetrical d. elastic e. inelastic
d. elastic
68) Some retailers advertise items at very low prices or even below cost just to get customers into the store. The rationale for implementing this ________ strategy is the belief that once a customer is in the store she will buy the advertised item as well as other items at regular prices. a. bait-and-switch b. price lining c. predatory pricing d. loss leader pricing e. dynamic pricing
d. loss leader pricing
54) Which of the following allow shoppers to bid on everything from bobble heads to health-and-fitness equipment? a. freenomics b. shopbots c. reverse auctions d. online auctions e. list prices
d. online auctions
39) A firm is using a(n)________ strategy when it introduces a product at a very low price to gain market share early on. a. skimming pricing b. trial pricing c. intensive pricing d. penetration pricing e. price bundling
d. penetration pricing
75) By using ________, a company deliberately sets a low price with the intention of driving its competition out of business. a. price-fixing b. price lining c. contrast pricing d. predatory pricing e. loss leader pricing
d. predatory pricing
99) Bayer AG agreed to pay $46 million as part of a law settlement for conspiring with Archer-Daniels-Midland (ADM) to keep prices of citric acid at a certain level. These two international companies were guilty of ________. a. price lining b. skimming pricing c. predatory pricing d. price-fixing e. placebo pricing
d. price-fixing
48) A list price is also referred to as a(n)________. a. captive price b. bundled price c. channel price d. suggested retail price e. basing-point price
d. suggested retail price
35) Two forms of demand-based pricing are ________. a. price bundling and captive pricing b. price skimming and penetration pricing c. fixed pricing and variable pricing d. target costing and yield management pricing e. price leadership and everyday low pricing
d. target costing and yield management pricing
88) When a beverage maker came out with a new drink and priced it at half price for a month to attract buyers, the company was using a(n)________ strategy. a. penetration pricing b. skim pricing c. everyday low price d. trial pricing e. price leadership
d. trial pricing
46) When a company charges the same rate to ship a product anywhere in the United States, it is using which form of pricing? a. freight absorption b. F.O.B. factory c. F.O.B. origin d. uniform delivered e. basing-point
d. uniform delivered
64) A business using price lining is doing which of the following? a. trying to avoid the use of psychological pricing, which may be negatively received by customers b. trying to recoup its research and development costs for a new product c. attempting to attain a large market share before any competitors can enter the marketplace d. using price points to determine its pricing strategy e. engaging in potentially unethical pricing
d. using price points to determine its pricing strategy
62) Rough diamond seller De Beers, for example, currently faces a price fixing class action law suit that alleges that they have led a world-wide diamond cartel that has had anti-competitive impact on Canadian .This is an example of _________________. a. Price Maintenance b. Bait and Switch c. Loss Leader Pricing d. Price Discrimination e. Bid Rigging
a. Price Maintenance
13) Which of the following occurs when price is inelastic? a. Price and revenue change in the same direction. b. Revenues decrease when price increases. c. Revenue is unaffected by price changes. d. Quantity demanded increases when price increases. e. The demand curve is more horizontal.
a. Price and revenue change in the same direction.
93) Odd (Even) number pricing reported in dollar and cents such as - $1.99, $2.98,$56.95 is an example of_____________. a. Psychological Tactics b. Geographical Pricing c. Price Lining d. Two Part Pricing e. Zone Pricing
a. Psychological Tactics
50) Which of the following is true about noncumulative quantity discounts? a. They encourage large single orders. b. They encourage a strong relationship between buyer and seller. c. They are based on a total quantity purchased within a set time period. d. They typically involve giving the buyer a credit to use against future orders. e. They encourage small, regularly spaced orders.
a. They encourage large single orders.
37) A firm is using ________ when it charges a high, premium price for a new product with the intention of reducing the price in the future. a. a skimming price b. trial pricing c. value pricing d. penetration pricing e. prestige pricing
a. a skimming price
86) The average price Xerox charged when it introduced the first stand-alone fax machine was $12,700. This premium price was a way for Xerox to recoup some of the research and development costs that went into production. Xerox used ________. a. a skimming price b. a trial price c. penetration pricing d. prestige pricing e. target costing
a. a skimming price
49) Trade or functional discounts are offered by manufacturers to which of the following? a. channel intermediaries who perform wholesaling tasks that the manufacturer would otherwise have to perform b. consumers who earn a price reduction for buying in bulk c. intermediaries who pay their bills before they are due d. manufacturers that agree to exclusive distribution contracts e. the government market and other organizations that require bid proposals
a. channel intermediaries who perform wholesaling tasks that the manufacturer would otherwise have to perform
16) The changes in prices of other products affect the demand for an item. This is a phenomenon called ________. a. cross-elasticity of demand b. complementary elasticity c. interdependent elasticity d. parallel elasticity e. variable demand
a. cross-elasticity of demand
4) Which of the following is NOT a type of pricing objective? a. elasticity b. market share c. profit d. competitive effect e. image enhancement
a. elasticity
82) For a company that manufactures plastic signs, the printing press used to make the signs, the manager's salary, and the utilities are all examples of ________. a. fixed costs b. average fixed costs c. variable costs d. marginal costs e. everyday costs
a. fixed costs
72) Which of the following occurs when competitors making the same product jointly determine what price each will charge customers for the item? a. horizontal price fixing b. vertical price fixing c. predatory pricing d. internal reference pricing e. assimilation pricing
a. horizontal price fixing
71) Price fixing occurs when two or more companies conspire to ________. a. keep prices at a certain level b. use predatory pricing c. use loss-leader pricing d. use bait-and-switch tactics e. prohibit competitors from entering a market
a. keep prices at a certain level
29) In a market with ________, the market consists of many buyers and a few sellers who are likely to have similar pricing. a. pure competition b. monopolistic competition c. oligopolistic competition d. a pure monopoly e. socialism
c. oligopolistic competition
22) The break-even point is the point at which ________. a. the total revenue and total costs lines intersect b. demand equals supply c. the production of one more unit will not increase profit d. the company can pay all of its long-term debt e. a firm's profit goal is reached
a. the total revenue and total costs lines intersect
60) An illegal marketing practice in which an advertised price special is used as bait to get customers into the store with the intention of switching them to a higher-priced item is called_______________________. a. Predatory Pricing b. Bait and Switch c. Loss Leader Pricing d. Price Discrimination e. Bid Rigging
b. Bait and Switch
70) The ______________________was recently amended to enable civil (as well as criminal) action to more quickly and effectively stop unfair, deceptive, or otherwise anti- competitive behaviour. a. Consumer Packaging and Labelling Act b. Competition Act c. Textile Labelling Act d. Precious Metals Marking Act e. Grey Marketing Act
b. Competition Act
9) Why do marketers consider prestige products to be an exception to the law of demand? a. The demand curve for prestige products slopes downward and to the right. b. Increasing the price of prestige products can make them seem more desirable. c. Demand for prestige products often is greater than supply. d. Prestige products such as diamonds, sapphires, and emeralds are nonrenewable resources. e. Customers are more aware of any price changes to prestige products.
b. Increasing the price of prestige products can make them seem more desirable.
17) ________ are the per-unit costs of production that will fluctuate depending on how many units or individual products a firm produces. a. Fixed costs b. Variable costs c. Average fixed costs d. Marginal costs e. Everyday costs
b. Variable costs
90) A skimming price strategy would likely be most effective in selling which of the following? a. any convenience item b. an electronic device which involved a great deal of research and development to bring to market c. shampoo and bath soap d. anything easily copied by competitors e. most items at EDLP retailers such as Walmart
b. an electronic device which involved a great deal of research and development to bring to market
57) Freenomics is a new business model based on pricing goods ________. a. based on psychological factors b. at zero or close to zero c. using crowdsourcing d. using odd-even pricing e. using the price-placebo effect
b. at zero or close to zero
83) As a manufacturer increases price, the ________ drops. a. target b. break-even point c. marginal revenue d. total cost e. variable cost
b. break-even point
26) Which of the following is an external influence that affects pricing decisions? a. the salaries of production management b. competition c. the salaries of finance management d. overall pricing objectives e. the company's overall marketing strategy
b. competition
12) How is the price elasticity of demand calculated? a. averaging previous demand levels with new demand levels b. dividing percentage change in quantity demanded by percentage change in price c. dividing the new quantity demanded by the percentage change in price times 100 d. multiplying the percentage change in quantity demanded by the percentage change in price e. dividing the percentage change in price by the percentage change in quantity demanded
b. dividing percentage change in quantity demanded by percentage change in price
53) On the Internet, price can easily be adjusted to meet changes in the marketplace. This is called ________. a. captive pricing b. dynamic pricing c. basing-point pricing d. price bundling e. freenomics
b. dynamic pricing
36) Which of the following is an example of a pricing strategy that focuses on customers' needs? a. price leadership b. everyday low pricing c. distribution-based pricing d. cost-plus pricing e. skimming
b. everyday low pricing
59) Often consumers base their perception of price on what they perceive to be the customary or ________. a. dynamic price b. fair price c. target price d. list price e. assimilated price
b. fair price
81) Which of the following is an example of a variable cost for an amusement park? a. salary of the park manager b. food cart supplies c. liability insurance d. interest on the property's mortgage e. property taxes
b. food cart supplies
63) Consumers usually perceive higher-priced products as ________. a. out of reach for all but the wealthy b. having high quality c. having low profit margins d. having cost-based prices e. being in the introductory stage of the product life cycle
b. having high quality
15) When demand is ________, increases in price result in increases in total revenues, while decreases in price result in decreases in total revenue. a. elastic b. inelastic c. flexible d. supply-driven e. cross-elastic
b. inelastic
44) Another name for F.O.B. factory pricing is ________ pricing. a. captive b. F.O.B destination c. F.O.B. origin d. F.O.B. delivered e. basing-point
c. F.O.B. origin
24) ________ lets marketers look at cost and demand at the same time and identify the output and the price that will generate the maximum profit. a. Break-even analysis b. SWOT analysis c. Marginal analysis d. Competitive analysis e. Supply-demand analysis
c. Marginal analysis
1) ________ is the assignment of value, or the amount a consumer must give to receive a product. a. Profit b. Exchange c. Price d. Demand e. Yield
c. Price
42) ________ refers to the sale of two or more goods or services as a single package for one price. a. Two-part pricing b. Captive pricing c. Price bundling d. List pricing e. Everyday low pricing
c. Price bundling
2) Which of the following statements about price is true? a. Pricing is the least important marketing mix element. b. Price is always a monetary value. c. Price can mean exchange of nonmonetary goods or services. d. Most consumers believe price has little influence on their purchase decisions. e. Pricing is unaffected by changes in the business cycle.
c. Price can mean exchange of nonmonetary goods or services.
5) In price planning, a firm would be most likely to set a profit objective for which of the following products? a. a commodity such as coal b. toothpaste c. a fad such as Beanie Babies d. lightbulbs e. construction materials
c. a fad such as Beanie Babies
67) Enforcing laws against ________ is complicated because such practices are similar to the legal practice of "trading up." a. price bundling b. captive pricing c. bait-and-switch tactics d. prestige pricing e. placebo effect pricing
c. bait-and-switch tactics
23) To determine the break-even point, a firm needs to first do which of the following? a. determine what percentage of the market it wants b. determine the point at which supply equals demand c. calculate the contribution per unit d. conduct an environmental audit e. determine total market share
c. calculate the contribution per unit
91) Mach 3 razor blades must be used in the Mach 3 razor. Which type of pricing is most likely used for the razor blades? a. penetration b. value c. captive d. two-part e. basing-point
c. captive
77) When Home Depot stores entered the Canadian market, there were already stores providing similar services and products. To get people to try the Home Depot stores, the chain deliberately sold merchandise below the price that the Canadians were used to. What type of pricing objective did Home Depot use? a. market share b. profit c. competitive effect d. customer satisfaction e. image enhancement
c. competitive effect
31) The method of setting prices in which marketers total all the costs for the product and then add an amount to arrive at the selling price is called ________. a. supply-based pricing b. target costing c. cost-plus pricing d. yield management pricing e. demand-based pricing
c. cost-plus pricing
32) Lawyers, accountants, and other professionals typically price by adding a standard markup for profit. This is known as ________. a. target costing b. value pricing c. cost-plus pricing d. break-even pricing e. penetration pricing
c. cost-plus pricing
84) Joe Bergerson makes and sells maple racks for cooling cakes and cookies. Joe knows that it costs $15 to make one rack, and he wants to earn a 25 percent profit on each rack. Which approach to pricing is Joe most likely to use? a. demand-based pricing b. target costing c. cost-plus pricing d. yield management pricing e. value pricing
c. cost-plus pricing
20) Break-even analysis is used to examine the relationship between ________. a. fixed costs and variable costs b. costs and contributions c. costs and price d. demand and costs e. demand and profits
c. costs and price
33) In which type of pricing is the selling price based on an estimate of volume or quantity a firm can sell in different markets at different prices? a. capacity management b. target costing c. demand-based d. penetration e. distribution-based
c. demand-based
10) What is the first step a marketer should take to estimate a product's potential sales? a. determine maximum production levels b. conduct a survey of buyers' intentions c. estimate total demand for the product in the market d. determine how to expand market share e. predict the company's market share
c. estimate total demand for the product in the market
56) The idea of externalities is the basis of ________. a. dynamic pricing b. e-commerce c. freenomics d. reserve pricing e. price sensitivity
c. freenomics
45) With ________, the seller pays both the cost of loading and transporting the product to the customer. a. uniform delivered pricing b. basing-point pricing c. F.O.B. origin pricing d. F.O.B. delivered pricing e. F.O.B. factory pricing
d. F.O.B. delivered pricing
61) T he illegal practice of offering the same product of like quality and quantity to different business customers at different prices, thus lessening competition is called ______________________. a. Predatory Pricing b. Bait and Switch c. Loss Leader Pricing d. Price Discrimination e. Bid Rigging
d. Price Discrimination
25) Which of the following statements about marginal analysis is true? a. Marginal analysis is typically a straightforward procedure to apply in real-life situations. b. An important factor in marginal analysis is predicting demand, which is an exact science. c. Marginal revenue is also the demand curve, so it represents the amount customers will buy at different prices. d. Profit is maximized at the point at which marginal cost is exactly equal to marginal revenue. e. The cost of producing a unit beyond the point when marginal cost equals marginal revenue is much less than the revenue from the sale of that unit.
d. Profit is maximized at the point at which marginal cost is exactly equal to marginal revenue.
69) Which unit of Industry Canada, is responsible for ensuring that Canadian businesses ( including foreign businesses that operate in Canada) adhere to federal laws that are designed to maintain and encourage fair competition. a. Immigration Misnistry b. Foreign Trade Department c. Consumer Ministry d. The Competition Bureau e. Prime Minister's Office
d. The Competition Bureau
19) ________ are the sum of the ________ and ________ for any given level of production. a. Fixed costs; variable costs; marginal costs b. Fixed costs; break-even costs; variable costs c. Variable costs; fixed costs; marginal costs d. Total costs; fixed costs; variable costs e. Break-even costs; fixed costs; total costs
d. Total costs; fixed costs; variable costs
21) Which of the following statements about the break-even point is true? a. It is used to determine how many more units need to be sold to increase market share by a specific amount. b. It is a technique used to calculate fixed costs. c. It determines the amount of retained earnings a company will have during an accounting period. d. It is a technique marketers use to examine the relationship between supply and demand. e. It is calculated using contribution per unit costs and total fixed costs.
e. It is calculated using contribution per unit costs and total fixed costs.
7) Which of the following is true about the demand curve? a. It is used to illustrate the effect of price on the quantity supplied. b. It is always graphically depicted by a straight line. c. It shows the quantity of product customers will buy in a market during a period of time even if other factors change. d. It usually slopes upward and to the right. e. It shows the relationship between product demand and product price.
e. It shows the relationship between product demand and product price.
38) Which of the following should be true for a skimming price to be successful? a. Target consumers should be price sensitive. b. Supply should exceed demand. c. Demand must be stabilizing. d. The producer should use intensive distribution. e. There should be little chance that competitors can quickly enter the market.
e. There should be little chance that competitors can quickly enter the market.
14) Demand would most likely be inelastic for which of the following? a. lamb chops and t-bone steaks b. gourmet cheese c. symphony tickets d. luxury watches e. basic necessities
e. basic necessities
34) With target costing, marketers first ________ and then ________. a. build the marketing mix; identify the target market b. identify target markets; set different prices for each market c. design the product; determine its cost d. use skimming pricing; use penetration pricing e. determine a reasonable selling price; target costs to ensure that the price is met
e. determine a reasonable selling price; target costs to ensure that the price is met
98) A number of top fashion-modeling agencies were charged with ________ because they were jointly determining what commissions they would charge for models. a. prestige pricing b. horizontal price lining c. vertical price lining d. vertical price-fixing e. horizontal price-fixing
e. horizontal price-fixing
47) Whether a firm sells to businesses or directly to consumers, most pricing structures are built around which of the following? a. distribution costs b. channel length c. trade discounts d. sales promotions e. list prices
e. list prices
66) Which of the following is a pricing strategy that turns the typical assumption about price-demand relationships on its head? a. penetration pricing b. price bundling c. assimilation effect pricing d. placebo effect pricing e. prestige pricing
e. prestige pricing
40) Which of the following is a reason that a marketer would choose a penetration pricing strategy? a. to ensure the company has the ability to increase prices once demand decreases b. to focus on the rapid achievement of profit objectives c. to appeal to different consumer segments with different levels of price sensitivity d. to create markets for highly technical products e. to discourage competition from entering the market
e. to discourage competition from entering the market