Marketing FINAL exam multiple choice questions

A company incurs fixed costs of $35,000 and average variable costs of $7 per item. This company sells 10,000 units and just breaks even. The unit selling price for the product is: $7.35 $10.00 $17.00 $10.50

$10.50

The management at Fries, a potato chips manufacturer, is calculating their quarterly profits. According to the official data, the firm has sold 200,000 units of their chips priced at $2 per unit for the quarter. The firm had spent $100,000 on production, processing and other costs. The profit made by Fries for the quarter is: $300,000. $100,000. $200,000. $400,000.

$300,000

A 5 percent increase in the price of milk that results in a 2 percent decrease in the quantity of milk demanded yields a price elasticity of demand for milk of: 0.5. 1.0. 1.4. 0.4.

0.4

A 5 percent increase in the price of corn flour that results in a 15 percent increase in the quantity supplied yields a price elasticity of supply for corn flour of: 3.0. 3.5. 2.5. 2.0.

3.0

Mignon d'Armitage manufactures jewelry. This firm is planning to introduce a new necklace and is trying to determine how many units it must sell in order to break even. Fixed costs are $100,000 and variable costs for each unit will be $20. At the price of $45 each, the number of units that must be sold in order to break even is: -7,500. -2,500. -4,000. -5,000.

4,000

Which of the following actions is most likely to be taken by a company in order to implement the value pricing objective? -Convincing consumers that the quality of their lower-priced product is the same as that of a comparatively higher-priced product sold by a competitor -Distributing free samples of the product to create awareness about the product among the consumers -Distributing free gifts along with the product during its introductory stage -Convincing consumers of the prestige associated with the product

Convincing consumers that the quality of their lower-priced product is the same as that of a comparatively higher-priced product sold by a competitor

Marco decided to write down all his expenses for one day. He had a lot of errands: he filled his car with gas, and he did his grocery shopping for the week, including items to host a TGIF party with beer, wine, and soda. Even though Marco is trying to cut down on his smoking, he did buy a carton of cigarettes. Every time he paid a tax, he recorded it, so his notes include both the words "sales tax" and "excise tax." ​ ​Required: What is the difference between excise taxes and sales taxes? -Excise taxes are calculated as a percentage of the base price. -Sales taxes are levied only on certain items in specific stores. -Sales taxes and excise taxes are terms for the same levy. -Excise taxes can limit sales and reduce product demand. -Sales taxes are included in the base price of products.

Excise taxes can limit sales and reduce product demand.

Which of the following is an example of a rebate offered to buyers? -Getting $25 off a $100 purchase on exchange of a used product. -Getting $100 off a $1,000 purchase for buying in bulk quantities. -Getting $5 returned by mail after a $100 purchase for making the purchase. -Getting $3 off a $100 purchase for paying the bill within 10 days.

Getting $5 returned by mail after a $100 purchase for making the purchase.

​Demand for the hiking sandals marketed by the SoftShoe Company is highly elastic. As a pricing strategy consultant, you have been hired to help the firm reduce this elasticity. Choose the recommendation you would be least likely to make. -Promise to undercut the price of any comparable brand. -​Introduce a unique sandal that is custom-made for hikers with significant foot problems, like deformed toes or large bunions. -Market the sandal as a prestigious luxury for hikers. -Increase the sandal's price. -Market the sandal as a necessity for hikers.

Increase the sandal's price

Which of the following is a pricing method that attempts to use only those costs that are directly attributable to a specific output in setting prices? -Cost-plus -Breakeven -Incremental-cost -Full-cost

Incremental-cost

Which of the following is true of the Robinson-Patman Act? -It prohibited imposing taxes on the products that are being exported to other countries. -It applies only to price discrimination between geographic areas, injuring local sellers. -It was intended primarily to create more jobs in grocery chain stores. -It prohibited selling at an unreasonably low price to eliminate competition.

It prohibited selling at an unreasonably low price to eliminate competition.

Which of the following exemplifies a yield management pricing strategy? -Introducing a pack of oatmeal breakfast cereals at a price of $3 which actually cost $5 -Charging an exorbitant price for a designer outfit to signal quality and exclusiveness -Selling a brand of soap at 20 percent discount for a limited time period during its introductory stage -Lowering cab rental rates on weekends compared to weekdays

Lowering cab rental rates on weekends compared to weekdays

Danielle and her roommate Sile are comparing the charges on their telephone bills. Both women get their Internet service bundled with their mobile phone charges. Danielle has a smartphone and Sile has a device with only basic features, so Danielle pays more for data downloading. Both women were surprised at the significant amount they are each charged annually for "regulatory cost recovery fees." ​ ​Required: What service is included in "regulatory cost recovery fees"? -Erection of more rural cell phone relay towers is included. -​No service is included; fees are additional telephone company revenue. -Collaboration with federal, state, and local regulators is included. -Outreach to other telephone providers to share facilities is included. -​Improvement to increase the speed of Internet downloading is included.

No service is included; fees are additional telephone company revenue.

Which of the following is true of products priced as "FOB origin"? -The transportation costs of these products are uniformly distributed among all channel members including the final purchaser. -The legal title and responsibility of these products lies with the seller until it is delivered to the buyer. -The purchase of these products permits the buyers to subtract transportation expenses from their bills. -The buyer pays all the freight charges to transport the product from the manufacturer's loading dock.

The buyer pays all the freight charges to transport the product from the manufacturer's loading dock.

Consumers today perceive that, within price limits, there is: a need for discounts and incentives. no perceivable difference in major product brands. obvious opportunity for psychological pricing. a direct relationship between the quality and price of a product.

a direct relationship between the quality and price of a product.

Transfer pricing becomes especially complex when the global market is involved because: -issues of quality control can be serious, even when divisions of the same firm are involved. -shipping materials across national lines involves payment of duties and taxes, and these become part of the total price of the goods. -a firm with activities in several countries can use transfer pricing as a tax-avoidance device and governments frown upon such activities. -the temperature and humidity differences between origins and destinations often damage the products.

a firm with activities in several countries can use transfer pricing as a tax-avoidance device and governments frown upon such activities.

A Swedish telephone maker transfers phones costing $10 to produce to its U.S. subsidiary for a transfer price of $20. The U.S. subsidiary sells the phones to retailers for $25 each and spends $5 per phone in promotion and distribution expense. The U.S. subsidiary: -makes a total of $25 on the deal because the phones are effectively free. -makes $15, all of which is taxable in the United States. -breaks even on the deal because it spends all its revenues. -makes $10, on which it pays U.S. taxes.

breaks even on the deal because it spends all its revenues.

Perfect Digitals offers a UV lens and a sun protection cover for its camera lens for a wide range of its digital cameras, all at a single price. This strategy used by the company is referred to as: -unit pricing. -price flexibility policy. -bundle pricing. -competitive pricing.

bundle pricing

Psychological pricing is based on the premise that: -setting a limited number of prices for a selection of merchandise has a certain appeal. -lower-than-normal prices as part of recurring marketing initiatives creates demand. -certain prices or price ranges make products more appealing to buyers than others. -one-price policies appeal to most people and suit mass-marketing programs.

certain prices or price ranges make products more appealing to buyers than others.

Firms that adopt volume objectives believe that: -companies should focus on maximizing profits rather than maximizing sales. -companies should continue to expand sales as long as their total profits do not drop below a specified minimum return. -companies should focus on the image and prestige associated with their products. -companies should offer huge discounts even at the cost of running into losses with their products.

companies should continue to expand sales as long as their total profits do not drop below a specified minimum return.

Retailers such as Home Depot and Lowe's, who offer to meet and beat the best price offered by their competitors, use the strategy of _____ pricing. penetration competitive skimming cost-plus

competitive

The process by which buyers ask a number of potential suppliers to submit price quotes on a proposed purchase or contract, of which the lowest will be accepted, is called: specification. competitive bidding. noncompetitive bidding. competitive pricing.

competitive bidding

Which of the following pricing strategies tries to reduce the emphasis on price as a competitive weapon?

competitive pricing

Stefan has worked in the restaurant industry for over 20 years and recently signed a lease and plans to open his own restaurant in the next several months. He's working with his chef and bar manager to determine menu items and pricing. Of course, his pricing must be competitive as well as enable the business to cover costs and earn a profit. He decides that he will utilize a 60% mark-up on costs and informs the chef and bar manager to utilize this basis when determining prices for menu items. What method of pricing is Stefan utilizing?​ -​value-add pricing -​incremental-cost pricing -​full-cost pricing -​cost-plus pricing

cost-plus pricing

An office supply wholesaler offers a 15 percent discount for retailers who purchase goods worth $ 20,000 over a period of nine months and a 20 percent discount for purchases worth $ 25,000 during the same time period. This is an example of a _____ discount. trade cumulative quantity noncumulative quantity recurring

cumulative quantity

Which of the following terms represents the measure of responsiveness of purchasers and suppliers to a change in price? Captivity Selectivity Sensitivity Elasticity

elasticity

Firms with high fixed costs often expand their markets, quoting the same prices to all customers regardless of shipping expenses, under the plan called: zone pricing. freight absorption pricing. the basing-point system. uniform-delivered pricing.

freight absorption pricing

The use of bots to search out price quotes on specified products forces Internet marketers to: keep their prices low. use printer-disabling viruses. close their websites. install "bot-stoppers."

keep their prices low.

Demand often shows: -less elasticity in the long run than in the short run. -less elasticity in the short run than in the long run. -the same elasticity in the short run and in the long run. -more elasticity in the short run than in the long run.

less elasticity in the short run than in the long run.

_____ cost is the change in total cost that results from producing an additional unit of output. Additional Variable Marginal Fixed

marginal

A firm maximizes its profits when: -marginal costs equal marginal revenues. -the marginal revenue curve runs parallel to the marginal cost curve. -the marginal revenue curve runs much below the marginal cost curve. -marginal costs are more than marginal revenues.

marginal costs equal marginal revenues

A _____ pricing strategy makes more flexible arrangements, compared to other strategies, to set prices according to local marketplace conditions. dual standard market-differentiated product-line

market-differentiated

The global pricing strategy that allows the greatest flexibility in setting prices to reflect local marketplace conditions is: -dual pricing. -everyday low pricing. -standard worldwide pricing. -market-differentiated pricing.

market-differentiated pricing

Volume-related pricing objective with the goal of controlling a portion of the market for a firm's product is known as a ______ objective. -market-share -target-return -prestige -meeting competition

market-share

The Swim Store is a manufacturer and ​distributor of swim-related products for competitive swimming athletes and also offer products for lifeguards. They are expanding their reach to Europe and believe their line of products will be well received however, due to the adoption of the Euro single currency system, competition is strong. Which pricing objective would be most appropriate for the company as they expand to the European Union markets? ​stability ​profitability ​prestige ​meeting competition

meeting competition

Which of the following market structures involves a heterogeneous product and product differentiation among competing suppliers, allowing the marketer some degree of control over prices? -Monopoly -Pure competition -Monopolistic competition -Complementary monopoly

monopolistic competition

In which of the following market structures individual firms have the highest control over product prices? -Monopolistic competition -Pure competition -Monopoly -Oligopoly

monopoly

In which of the following market structures the entry of new firms into the industry is regulated by the government? Monopolistic competition Oligopoly Monopoly Pure competition

monopoly

Which of the following is a market structure in which only one seller of a product exists and for which there are no close substitutes? Monopolistic competition Monopoly Pure competition Oligopoly

monopoly

A _____ is the amount by which the average transportation charge exceeds the actual cost of shipping. -transfer price -phantom freight -list price -rebate

phantom freight

The Robinson-Patman Act specifically prohibits: -price discrimination in sales to wholesalers, retailers, and other producers. -charging the same price to everyone for everything you sell. -earning excess profits, that is, more than the average for an industry. -imposing taxes on the products that are being exported to other countries.

price discrimination in sales to wholesalers, retailers, and other producers.

When a men's clothing store sells suits at four price levels ($295, $455, $525, $650), the store's retail policy is _____ pricing. promotional product-line unit psychological

product-line

"Buy three shock absorbers and get the fourth free," as advertised by an auto repair shop, is an example of _____ pricing. -unit -promotional -variable -product-line

promotional

A cosmetics company offers incentives to its retailers for advertising its new shampoo by placing it in a special display unit near the billing counters. This incentive offered by the manufacturer is an example of a _____. trade-in rebate cash discount promotional allowance

promotional allowance

A retailer wants to increase the number of customers shopping in her store. Which of the following has the greatest potential for success? -Price flexibility -Unit pricing -Promotional pricing -Prestige pricing

promotional pricing

Which of the following is a market structure characterized by homogeneous products in which there are so many buyers and sellers that none has a significant influence on price? -Monopoly -Monopolistic competition -Pure competition -Oligopoly

pure competition

A promotional allowance is an incentive offered by manufacturers to retailers to: -refund the shipping costs paid by the retailer for home-delivery of products. -return a certain amount spent by the retailers on advertising and providing sales support. -reward a retailer for not advertising a product below a certain price. -provide one-time reductions in the list price of products for purchasers of large quantities.

return a certain amount spent by the retailers on advertising and providing sales support.

The demand side of the pricing equation focuses on: -revenue curves. -price curves. -value curves. -cost curves.

revenue curves

A skimming pricing strategy is more commonly used by firms to: -reduce the raised prices of products to the original level. -set stable wholesale prices that undercut offers competitors make to retailers. -set a relatively low price for a product when they enter new markets characterized by dozens of competing brands. -set a market-entry price for distinctive goods or services with little or no initial competition.

set a market-entry price for distinctive goods or services with little or no initial competition.

The manufacturer of safety wallets is determining the retail price to charge for each unit sold. Which approach should the manufacturer use that supports the psychological pricing strategy? ​ -​set the price at $25.00 for the first item and $5 for the second -​set the price according to the number of variations of the wallet style -set the price at $24.97 -set the first unit sold at full price and the second purchased at half price -​set the price according to the number of unrelated products sold

set price at $24.97

Which of the following pricing approaches is best suited for a company that is expanding into the global market and will be facing rather low foreign marketing costs? Transfer pricing Dual pricing Market-differentiated pricing Standard worldwide price

standard worldwide price

The payment offered to a channel member for performing marketing functions is called a _____. trade discount cash discount quantity discount rebate

trade discount

State laws requiring sellers to maintain minimum prices for comparable merchandise are called _____ laws. unfair-trade loss-leader tax-exemption price-discrimination

unfair-trade

Brenda is shopping for mouth wash and is trying to compare prices of the popular Listerine ​brand to the Walgreens brand. However, the sizes of the containers are different. The Listerine brand is 48 ounces while the Walgreens brand is 74 ounces. Fortunately, shelf tags under each product display the per-ounce price so that Brenda can easily determine which product is less expensive. What type of pricing is included on the shelf tag? ​even pricing ​unit pricing ​odd pricing ​penetration pricing

unit pricing

Which of the following pricing policies began to be widely used during the late 1960s to make price comparisons more convenient between products packaged in different sizes? Unit pricing Product-line pricing Odd pricing Promotional pricing

unit pricing

Which of the following is the purpose of adopting a meeting-competition pricing objective? Value pricing Sales maximization Market share Profit maximization

value pricing

A cost that changes with the level of production is called a(n) _____ cost. average total variable marginal fixed

variable

A local eye doctor is seeking to expand its practice and entice new customers to visit for their annual eye exam and purchase glasses or contacts if prescribed. The office is offering 2 pairs of glasses for $69 with the goal of attracting a large number of new patients. What type of pricing objective is utilized by the office?​ ​volume ​meeting competition ​prestige ​profitability

volume

Which of the following is employed by theatrical productions when they charge higher prices for their weekend shows than for the shows on weekdays even though the cost of producing the show remains the same on all days? Marginal pricing Incremental pricing Yield management Modified breakeven analysis

yield management

You are asked by a non-marketing executive of your hip-hop music company to clarify some financial language she heard at a recent annual presentation to investors. She asks you to give her a simple one-sentence definition of "breakeven analysis." ​ ​Required: Which of the following definitions meets her request for a simple one-sentence definition of "breakeven analysis"?" -​"We first figure out the number of records we need to sell at a set price minus records returned for refunds. That amount of money must be enough to cover the total costs of our producing the records." -"We have been cutting records for years, so our customers are used to paying a certain amount for our albums. We keep our price constant to get repeat business." -"We use all our information from the previous year's sales, then we add 10 percent to the production and 10 percent to the price." -"We first do our research to find out what price our competitors are selling their records for. Then we use that number to figure out how many records we need to cut to make a larger profit than our competitors." -​"We want to make sure that we sell all the albums that we produce, so we start out at a full price, and make discount adjustments along the way."

​"We first figure out the number of records we need to sell at a set price minus records returned for refunds. That amount of money must be enough to cover the total costs of our producing the records."

Which of the following products would most likely have an inelastic demand curve?​ -​photocopier paper -​pencils -​HP genuine ink for an HP printer -paper towels​

​HP genuine ink for an HP printer

Which of the following is TRUE regarding the concept of elasticity in pricing strategy?​ -​If the elasticity of demand is less than 1.0, that demand is said to be elastic -​If the elasticity of supply is greater than 1.0, that demand is said to be inelastic -​If the elasticity of supply equals 1.0, that demand is said to be elastic -​If the elasticity of demand is greater than 1.0, that demand is said to be elastic

​If the elasticity of demand is greater than 1.0, that demand is said to be elastic

​You've attempted to maximize profits on sales of your bakery's gluten-free bread by taking a number of steps: for example, by responding quickly to competitors' discounts, setting target return objectives, and marketing the product as a necessity for people who are allergic to wheat. Unfortunately, profits still haven't reached your goals. You hope to explain the disappointing results to your partners in a way that won't reflect poorly on your marketing judgment. Which of the following explanations do you choose? -The demand curve for the product is unclear. -The price of your brand is too high. -The market for gluten-free bread -- people with wheat allergies -- is much smaller than you projected. -The cost structure of the business is unclear. -Your advertising budget is inadequate.

​The demand curve for the product is unclear.

You are a staunch environmentalist. When hybrid vehicles were introduced, the supply was very limited. Buyers were paying a premium over the listed manufacturer's suggested retail price (MSRP). At that time, your budget could not stretch that far, but you still wanted to own a car that does not depend on petroleum products. By waiting, you find that the automobile dealers have announced that their shipments of new hybrid cars have increased by 10 percent. Meanwhile, the average price of regular gasoline rose from $3.30 to $3.63 per gallon. ​ ​Required: If the price elasticity of demand for new hybrid cars is 1.25 and for gasoline is 1.0, what was the effect on the prices of a new hybrid car and on gasoline? -The price of the hybrid car rose by 12.5 percent and the price of gasoline increased by 11.1 percent. -The price of the hybrid car rose by 8 percent, and the price of gasoline increased by 10 percent. -The price of the hybrid car fell by 2.5 percent and the price of gasoline increased by 1.1 percent. -The price of the hybrid car fell by 8 percent, and the price of gasoline increased by 10 percent. -The price of the hybrid car fell by 10 percent as did the price of gasoline.

​The price of the hybrid car fell by 8 percent, and the price of gasoline increased by 10 percent.

Your company specializes in manufacturing oversized spa-type bathtubs for the residential market. You have long been a proponent of using a modified breakeven analysis. You think that this approach is essential to your company's success because you operate in the luxury-item marketplace. ​ ​Required: Which of the following situations is the result of a trend that would prompt you to use a modified breakeven analysis rather than the traditional model? -You find that consumer demand is affected by environmentalists' cautions about water usage. -You have had an increase in the cost of raw materials, which are based on petroleum-derived products. -Your employees are due for a significant salary and benefits increase to match those offered by your competitors. -You find that the price of advertising has been affected by the move to online publishing. -The landlord of your manufacturing facility has announced a sizeable rent increase to cover earthquake readiness.

​You find that consumer demand is affected by environmentalists' cautions about water usage.

As the marketing and sales manager, you are in charge of setting the selling prices of prize-winning music boxes with changeable songs. After you explained two cost-plus approaches to price setting, the CEO chose the straightforward approach of full-cost pricing. The next day, you received an unexpected order for 10,000 units from a Swiss contact with a tight deadline. ​ Required: ​What information do you need immediately to arrive at a selling price that you can justify to the CEO? -​acceptable loss-leader pricing, prescribed rate of return, and financing -manufacturing capacity and customer's price point of willingness to pay -fixed costs of production, variable costs, and revenue -overhead expenses, profit margin, and direct cost per music box -value of resources consumed in the production of the music boxes

​overhead expenses, profit margin, and direct cost per music box

A manufacturer of tablet computers has designed a unique new product that can network with satellites to access streaming video and television channels. This device does not need a Wi-Fi connection and can be accessed anywhere in the world by logging onto the site. Besides serving as a portable computer, this device bypasses the need for a consumer to purchase cable or personal satellite dish access. Which approach to pricing makes the most sense for the company to use first? ​ -set the price to match the manufacturing of the device under a private label -set the price extremely low in order to capture more of the current market share -​set the price to match other computer and television devices sold by competitors -​set the price extremely low in order for consumers to purchase it without needing a coupon -set the price extremely high until competing products are developed

​set the price extremely high until competing products are developed

The manager of a retail furniture store desires to increase the number of prestige sales of pieces handcrafted from natural materials. Which strategy should the manager use to meet this sales objective? ​-​place the pieces near the main entrance for customers to see first -​place a sign on the door advertising environmentally friendly furniture for sale -​identify an area near the cash registers where the pieces are displayed -stage an area on the floor in each room highlighting the pieces and their uses -provide customers with a marketing piece explaining the materials used to make the items

​stage an area on the floor in each room highlighting the pieces and their uses

A multi-hospital healthcare system is considering using each facility's clinical laboratory to run the routine drug screening of new employees instead of outsourcing the laboratory function to an independent vendor. What should the healthcare system's senior leadership consider before implementing this change? ​ -​inviting each laboratory to submit a bid for the cost of the laboratory work -​the scope of drug screening each laboratory can perform -​the fee to charge each profit center for the employees' laboratory work -the amount of time employees will be absent from the work site -awarding the work to the laboratory with the highest fee to promote prestige among the employees

​the fee to charge each profit center for the employees' laboratory work