MKT 300 Ch.19

39. Which type of quantity discount is a deduction from the list price that applies to a single order? a. Base discount b. Cumulative discount c. Noncumulative discount d. Cash discount e. Functional discount

c. Noncumulative discount

5. In which of the following countries is Procter & Gamble MOST likely to sell razor blades using a penetration pricing strategy? a. the United States b. France c. Bangladesh d. Japan e. Canada

d. Japan

42. A discount off the base price to customers who pay immediately, or within a specified time period, is called a: a. functional discount. b. quantity discount. c. base discount. d. cash discount. e. promotional allowance.

d. cash discount.

30. After managers understand both the legal and the marketing consequences of price strategies, they should set a _____ price--the general level at which a company expects to sell a good or service. a. functional b. zone c. demand d. leader e. base

e. base

40. What happens when demand is elastic? a. As price goes up, revenue goes down. b. As price goes down, revenue goes down. c. As price goes up, revenue goes up. d. As price goes up, revenue does not change. e. As price goes down, revenue does not change.

a. As price goes up, revenue goes down. If demand is elastic, an increase in price will decrease demand by a larger amount, reducing total revenue

15. _____ is equal to net profit after taxes divided by total assets. a. Return on investment b. Economic order quantity c. Target-on-sales d. Retained earnings e. Efficiency maximization

a. Return on investment This is the definition of return on investment (ROI).

33. Last year, a single infield box ticket for an Atlanta Braves baseball game cost $40, but fans who bought a season pass for the same seat got a reduced price. This $40 price was a _____ price. a. base b. zone c. demand d. channel leader e. functional

a. base

38. A(n) _____ discount is a deduction from list price that applies to the buyer's total purchases made during a specific period. a. cumulative quantity b. noncumulative quantitative c. functional d. cash e. integrated

a. cumulative quantity

50. The greater the number of different uses for a product, the more _____ demand tends to be. a. elastic b. inelastic c. unitary d. volatile e. stable

a. elastic If a product has only one use, the quantity purchased probably will not vary as price varies.

46. When Nesco brand food hydrators sold for $59.99, Nesco sold 90 dehydrators. When the company dropped the price of its dehydrators to $44.95, it sold 145 dehydrators. Demand for the food dehydrators appears to be: a. elastic. b. inelastic. c. unitary. d. symmetrical. e. asymmetrical.

a. elastic. The first price is $59.99 with total revenue of $5,399.10; the second price is $44.95 with total revenue of $6,517.75. Therefore, price dropped, and total revenue went up.

34. When the price of a product is set at a level where demand and supply are the same, price _____ has been achieved. a. equilibrium b. stability c. leverage d. symmetry e. status quo

a. equilibrium Price equilibrium is the price at which demand and supply are equal.

58. All of the following are geographic pricing methods EXCEPT: a. latitude pricing. b. FOB origin pricing. c. zone pricing. d. freight absorption pricing. e. basing-point pricing.

a. latitude pricing. Another geographic pricing method is uniform delivered pricing.

11. When a firm introduces a new product at a relatively low price because it hopes to reach the mass market, it is following a _____ strategy. The low price is designed to capture a large share of a substantial market and produce lower production costs. a. penetration pricing b. price-insensitive demand c. price skimming d. price elasticity e. cost bundling

a. penetration pricing Penetration pricing means charging a relatively low price for a product in order to reach the mass market.

15. Pharmacies are a new addition to Sam's Clubs. They could exert a greater influence on the marketplace for prescription drugs than their newness indicates. Sam's has a stated philosophy of marking up merchandise a maximum of 14 percent. When that philosophy is applied to prescription drugs, especially generics, warehouse club prices can be dramatically lower than those of conventional drugstores, supermarkets, or discount store pharmacies. Sam's is using a _____ strategy to convince consumers to use its pharmacies rather than its competitors. a. penetration pricing b. price-insensitive demand c. price skimming d. price elasticity e. cost bundling

a. penetration pricing When a firm introduces a new product at a relatively low price because it hopes to reach the mass market, it is following a penetration pricing strategy. The low price is designed to capture a large share of a substantial market and produce lower production costs.

29. When Microsoft introduced its Zune MP3 player, many people thought it would capture the MP3 player market by pricing its product so low that a smaller competitor, like the Apple iPod, would be unable to compete. If Microsoft had used this approach, it would have been would be guilty of: a. predatory pricing. b. unfair trade practices. c. channel manipulation pricing. d. price fixing. e. price discrimination.

a. predatory pricing. Predatory pricing is the practice of charging a very low price for a product with the intent of driving competitors out of business or out of a market.

10. The DCS Stainless Steel Gas Grill for outside cooking costs $3,995. The market for a grill that could easily replace a kitchen range is limited even though a lot of people have seen articles about this grill in cooking magazines and in the cooking section of newspapers. There is no potential competitor for this grill. The _____ strategy is probably best. a. price skimming b. penetration pricing c. status quo d. cost bundling e. price lining

a. price skimming

11. An organization is using _____ when it sets its prices so that total revenue is as large as possible relative to total costs. a. profit maximization b. market share pricing c. demand-oriented pricing d. sales maximization e. status quo pricing

a. profit maximization Profit maximization is a type of profit-oriented pricing objective and means setting prices so that total revenue is as large as possible relative to total costs.

13. When Insight Research Associates quotes a marketing research project, management will first estimate the cost to conduct the research and produce and deliver the final client report. The next step in determining the price is to add 30 percent to that cost estimate. This becomes the price estimate given to the potential research client. This suggests that Insight Research Associates uses a(n) _____ pricing objective. a. profit-oriented b. market share maximization c. status quo d. sales maximization e. supply-demand equalization

a. profit-oriented Target return on investment is one of the most common types of profit-oriented pricing objectives.

25. When the local Shell station raises or lowers its prices on its gasoline, the Marathon station across the street makes the same changes in its pricing. This is an example of _____ pricing. a. status quo b. target return c. market share d. predatory e. cost-plus

a. status quo Status quo pricing is best described as meeting the competition.

1. Price is best described as: a. that which is given up in exchange to acquire a good or service b. money exchanged for a good or service c. the psychological results of purchasing d. the cost in dollars for a good or service as set by the producer e. the value of a barter good in an exchange

a. that which is given up in exchange to acquire a good or service Price is that which is given up in exchange to acquire a good or service.

21. State laws that put a lower limit on wholesale and retail prices are called _____. In states that have these laws, selling below cost is illegal. a. unfair trade practice acts b. price floor laws c. protectionism acts d. transparency laws e. price edicts

a. unfair trade practice acts

61. If a company decides to divide its market area into segments or regions and charge a flat rate for freight to all customers in a given region, the company is using _____ pricing. a. zone b. uniform delivered c. freight absorption d. FOB origin e. basing-point

a. zone

16. Pierre's Ice Cream Company produces ultra-rich ice cream, which it sells in the Cleveland, Ohio, area. Last year, it managed to exceed its target return on investment (ROI) for the current fiscal year. The following results were found on its financial statements: Gross revenues: $250,000 Total assets: $500,000 Gross profits: $100,000 Total liabilities: $200,000 Net profits after tax: $ 50,000 Owner's equity: $300,000 What was the actual ROI for Peirre's Ice Cream Company? a. 6.67 percent b. 10 percent c. 22 percent d. 28 percent e. 100 percent

b. 10 percent ROI is net profits after taxes divided by total assets: $50,000 500,000 = 10 percent.

35. Redline Editorial Services sent a $1,000 invoice to a customer for copyediting a booklet. According to the terms of the invoice, the customer would receive a 3 percent discount on the invoice price if the invoice was paid within 15 days. This is an example of a: a. Quantity discount. b. Cash discount. c. Rebate. d. Functional discount. e. Promotional allowance.

b. Cash discount. This is the definition of a cash discount.

3. Which of the following is a pricing policy whereby a firm charges a high introductory price, often coupled with heavy promotion? a. Penetration pricing b. Price skimming c. Price capping d. Profit pricing e. Price maximization

b. Price skimming This is the definition of price skimming, which is sometimes called a "market-plus" approach to pricing because is denotes a high price relative to the prices of competing products.

21. At the end of the summer, the Bloomin' Garden Center reduced the price on all of its plants, fertilizer, and potting soil by 50 percent in order to liquidate this inventory. What type of pricing strategy is being used in this example? a. Supply oriented b. Sales maximization c. Target return on investment d. Satisfactory profit e. Profit maximization

b. Sales maximization Sales maximization ignores profit and competition for the purpose of raising cash.

37. Ace Hardware's spring snow blower sale is an example of which of the following pricing tactics? a. Quantity discount b. Seasonal discount c. Temporal discount d. Promotional allowance e. Functional discount

b. Seasonal discount

33. _____ is the quantity of a product that will be offered to the market at various prices for a specified period. a. Distribution b. Supply c. Price d. Equilibrium e. Elasticity

b. Supply

47. Demand for which of the following products or services is most likely inelastic? a. Fishing boats b. Wheat bread c. Pedicures d. Filet mignon steaks e. Digital cameras

b. Wheat bread If there is a crop shortage, prices escalate, but consumers still maintain the same level of demand because food—particularly bread—is a necessity.

28. The quantity of a product that will be sold in the market at various prices for a specified period is called: a. market share. b. demand. c. supply. d. value. e. revenue.

b. demand. This is the definition of demand.

32. The _____ is the quantity of a product that will be sold in the market at various prices for a specified period, and _____ is the quantity of a product that will be offered to the market by suppliers at various prices for a specified period. a. demand; inventory b. demand; supply c. supply; demand d. inventory; demand e. inventory; supply

b. demand; supply

2. After establishing pricing goals, managers should estimate total revenue at a variety of prices. Next, they should _____. Only after performing this task are they are ready to estimate how much profit and how much market share can be earned at each possible price. a. choose the ROI target b. determine corresponding costs for each price c. estimate industry supply d. implement pricing segmentation e. establish geographic pricing heuristics

b. determine corresponding costs for each price

16. A penetration strategy tends to be effective in a price-sensitive market. Thus, one of the purposes of penetration pricing is to: a. recoup product development costs quickly. b. discourage competitors from entering the market. c. produce a large margin of profit per unit. d. develop exclusive distribution. e. attract the price-insensitive buyer who demands the latest in technology.

b. discourage competitors from entering the market A low price will mean a low profit margin and will only be attractive if a large volume of business can be seized. The first company on the market that uses penetration pricing has a great advantage.

14. Thompson Pool and Patio is known for quality pool installations, excellent customer service, and reasonable prices. If you want to have a Thompson pool, you will have to wait about six months due to demand for their product. While Thompson could probably price its product higher, given the demand, they don't. Instead, the company sets its price so that it will earn a reasonable level of profits. Thompson seems to base its pricing policy on: a. profit maximization. b. earning satisfactory profits. c. creating retained earnings. d. making the most money as possible. e. decreasing consumer demand.

b. earning satisfactory profits. The objective of satisfactory profits is characterized by seeking a level of profits that is satisfactory to management and owner(s).

40. Quantity discounts are most often used to: a. reward the buyer who pays in cash. b. encourage buying in multiple units. c. increase supply for a specific raw material. d. reward a channel intermediary for performing some service. e. shift the storage function backward to the supplier.

b. encourage buying in multiple units.

43. When price decreases and total revenue falls, demand is: a. elastic. b. inelastic. c. absolute. d. unitary. e. stable.

b. inelastic. This is characteristic of inelastic demand, which means that an increase or decrease in price will not significantly affect the demand for the product.

48. All of the following factors directly affect the elasticity of demand EXCEPT: a. a product's other uses. b. inputs needed to manufacture the product. c. availability of substitute goods. d. price relative to a consumer's purchasing power. e. product durability.

b. inputs needed to manufacture the product. Inputs at time of manufacture only indirectly affect the demand, if at all.

20. At a price of $1,192,057, the Bugatti Veyron may be the most expensive street-legal car on the market today. Obviously, Bugatti is NOT using a(n) _____ pricing objective in setting the price for this car. a. inelastic or supply-oriented b. market share or sales maximization c. profit maximization or target return on investment d. status quo or satisfactory profits e. demand-oriented or supply-oriented

b. market share or sales maximization A lower price allows a company to maximize sales and build market share, but Bugatti's high price is geared towards the other options.

13. The market for turkey products is large. If a major producer of turkeys were to introduce a boneless fresh turkey wrapped around savory dressing, most of the large market for this new product would be aware of its existence. The market is price sensitive, and there is some potential competition. The appropriate strategy would be: a. price skimming. b. penetration pricing. c. status quo. d. cost bundling. e. price lining.

b. penetration pricing. The market for the new product is price sensitive and has greater competitive pressure.

28. The practice of char28. The practice of charging a very low price for a product with the intent of driving competitors out of business or out of a market is called: a. price discrimination. b. predatory pricing. c. price fixing. d. price manipulation. e. anti-competitive pricing.

b. predatory pricing.

24. South Africa's Competition Commission accused South African Airways of conspiring with its partner, Germany's Lufthansa, to set prices on flights between Cape Town, Johannesburg, and Frankfurt. As a result, the two airlines were charged with: a. price discrimination. b. price fixing. c. bait pricing. d. unfair trade practices. e. channel control pricing tactics.

b. price fixing. Price fixing is an agreement between two or more firms on the price they will charge for a product.

2. At Walmart, Randi saw a bag of daffodil flower bulbs and a box of plant fertilizer. The items, which were sold together, retailed at $28.50 but were marked down to $19.99. The $19.99 is the: a. revenue. b. price. c. profit. d. liquidity value. e. amortized value.

b. price. Price is that which is given in exchange to acquire a product.

12. When Apple, Inc. originally introduced its iPhone, it was priced at what many believed to be about as high as the market would allow. Within weeks, Apple lowered the price of the iPhone. It appears that Apple entered the market with a _____ approach to pricing the iPhone. a. market share pricing b. profit maximization c. demand-oriented d. sales maximization e. status quo pricing

b. profit maximization Profit maximization means setting prices so that total revenue is as large as possible relative to total costs.

34. When a buyer pays a lower price for buying multiple units or above a specified dollar amount for a single order, the buyer is receiving a _____ discount. a. promotional b. quantity c. frequent buyer d. functional e. cumulative

b. quantity A quantity discount is a price reduction offered to buyers buying in multiple units or above a specified dollar amount.

18. A company using market share pricing has a _____ pricing objective. a. profit-oriented b. sales-oriented c. demand-oriented d. supply-oriented e. status quo

b. sales-oriented Sales-oriented pricing objectives are based either on market share or on dollar or unit sales.

27. Although many factors can influence price, the primary determinants are: a. costs of manufacturing and distribution b. the demand for the good and the cost to the seller c. demand by the consumer and perceived quality d. distribution and promotion strategies e. stage of the product life cycle and costs to the consumer

b. the demand for the good and the cost to the seller The price that managers set for each product depends mostly on two factors: the demand for the good or service and the cost to the seller for that good or service.

8. When the Mosquito Magnet was introduced, it was designed to rid the immediate area of mosquitoes and other annoying insects. The technology for the Mosquito Magnet had taken years to develop. It is a patented grill-like apparatus that emits carbon dioxide to attract bugs to a fan that draws them into the device where they die. What type of pricing policy would you recommend the company use to introduce this product to the market? a. Status quo pricing b. Penetration pricing c. Price skimming d. Flexible pricing e. Leader pricing

c. Price skimming The price skimming strategy will recoup the research and development costs quickly. Also, patents will limit or prohibit direct competition.

41. An Internet picture frame manufacturer offers retailers reduced prices on any combination of size or style frames purchased. The discount is shown as they shop and adjusted as the quantity of frames purchased increases. What common form of purchase discount is the frame manufacturer using? a. Rebate b. Cash discount c. Quantity discount d. Promotional allowance e. Functional discount

c. Quantity discount

42. _____ occurs when an increase in sales exactly offsets a decrease in price so that total revenue remains exactly the same. a. Inelastic demand b. Functional elasticity of demand c. Unitary elasticity d. Highly elastic demand e. Fixed elasticity

c. Unitary elasticity

60. An Alabama-based catalog retailer sells fireplace equipment such as screens and andirons. Its customers in New England are charged one shipping rate, and customers west of the Rocky Mountains are charged a different rate. Customers in the midwestern states are charged yet another rate. What kind of geographic pricing is the catalog retailer using? a. FOB origin pricing b. FOB factory c. Zone pricing d. Freight absorption pricing e. Uniform delivered pricing

c. Zone pricing

23. In 2008, United Airlines and American Airlines disclosed settlements in a class-action lawsuit over allegations of airfreight price fixing. This means the companies: a. tried to charge fees for airfreight that were below costs. b. charged customers different amounts for the same shipments. c. agreed on the price they would charge customers for airfreight. d. used uniform geographic pricing. e. created an artificial demand for shipping.

c. agreed on the price they would charge customers for airfreight Price fixing is an agreement between two or more firms on the price they will charge for a product.

29. The price of the good or service is a key decision for a marketer because it most significantly and directly affects the product's: a. distribution. b. costs. c. demand. d. promotion. e. quality.

c. demand. The quantity of a product that people will buy depends on its price.

38. When consumers are sensitive to price changes, _____ occurs. a. inelastic demand b. elastic supply c. elastic demand d. inelastic supply e. unitary elasticity

c. elastic demand

36. When the salesperson from Affiliated Food, Inc., a grocery distributor, calls on a grocery store, she is authorized to offer a 15 percent discount from the list price in recognition of activities (such as unpacking items and stocking shelves) that retailers perform for the distributor. This 15 percent discount is a: a. quantity discount. b. promotional allowance. c. functional discount. d. seasonal discount. e. channel allowance.

c. functional discount.

41. If price _____ and revenue _____, demand is elastic. a. goes up; goes down b. goes down; goes down c. goes down; goes up d. down; stays the same e. goes up; stays the same

c. goes down; goes up

17. A penetration pricing strategy tends to be most effective: a. when demand is relatively inelastic. b. under unitary conditions. c. in price-sensitive markets. d. when the company can only perform small production runs. e. if unit costs are high.

c. in price-sensitive markets. Penetration pricing is the logical choice given an elastic demand curve.

12. Marketers must take care when using _____ since a lower price often signals to consumers that product quality is also low. a. price skimming b. status quo pricing c. penetration pricing d. unbundling e. cost sharing

c. penetration pricing Penetration pricing uses low prices to gain market share.

26. Acme Lawnmowers sells its mowers to retailers at different prices, depending on whether they are independent stores or members of a national chain. It uses: a. unfair trade practices. b. price fixing. c. price discrimination. d. predatory pricing. e. bait pricing.

c. price discrimination. Price discrimination occurs when sellers charge different customers different prices for the same products.

36. Bottles of Pure Hawaiian Air contain air that smells like the floral bouquet that greets tourists as they get off the plane in Hawaii. When a tourist shop began selling Pure Hawaiian Air, it charged $5 per bottle and could not keep up with the demand. It has since raised the price to $7. Now the shop is still selling all the bottles of Pure Hawaiian Air it carries, but the owner is not forced to reorder on a daily basis. The $7 price is probably a(n): a. supply schedule. b. symmetrical price. c. price equilibrium. d. inventory equalizer. e. inelastic price.

c. price equilibrium. When demand and supply are approximately equal, price equilibrium is reached.

4. A 16-ounce bottle of Prairie Herb vinegar sells for $4.95, and a 16-ounce bottle of Heinz vinegar costs $1.05. Prairie Herb vinegar is new to the market, perceived to be of higher quality, and provides a unique flavor to foods even though it is used in the same way as Heinz vinegar. Prairie Herb vinegar is most likely using a _____ policy. a. penetration pricing b. status quo pricing c. price skimming d. bundling cost pricing e. geodemographic pricing

c. price skimming Price skimming is common for products in the introductory stage of their product life cycle.

119. Refer to American Girl Doll. American Girl is the primary seller of historically accurate dolls with accompanying books in a market where there is very little competition. It has no cash flow problems and is not interested in maximizing its sales. From this information, you should know American Girl has _____ pricing objectives. a. status quo b. psychological c. profit-oriented d. sales-oriented e. supply-derived

c. profit-oriented Because it has no competitors to speak of, status quo objectives are unlikely. It is not interested in maximizing its sales, so sales-oriented objectives are also not likely.

24. If a company's pricing objective is to meet the competition or to maintain existing prices, it is using _____ pricing. a. head-on b. target return on investment c. status quo d. market share e. demand-oriented

c. status quo This defines status quo pricing.

20. JCPenney sends representatives to shop at similar retailers to make sure it is charging comparable prices for its products. JCPenney probably uses a _____ strategy. a. leader pricing b. preemptive pricing c. status quo pricing d. flexible pricing e. functional pricing

c. status quo pricing

49. Which of the following would imply elastic demand? a. Price is low relative to purchasing power b. Nondurable product c. Low inflation rate d. Many substitute products e. All of these choices

d. Many substitute products When there are many substitute products, the consumer can easily switch from one product to another, making demand elastic. The other situations make demand inelastic

19. _____ is a company's product sales as a percentage of total sales for that industry. a. Return on investment b. Profit share c. Revenue share d. Market share e. Contribution

d. Market share This is the definition of market share, and sales can be reported in dollars or in units of product.

14. Jones Soda Company and Big Sky Brands have introduced Jones Soda Carbonated Candy, a candy that delivers a blast of the most popular Jones Soda flavors along with an oddly enjoyable tongue-tingling sensation. Which pricing strategy would be appropriate if the company wants to convince price-sensitive consumers to try it and not buy some other brand? a. Price lining b. Price fixing c. Status quo pricing d. Penetration pricing e. Price skimming

d. Penetration pricing

9. For which of the following situations would a price skimming strategy be most appropriate? a. The addition of a new comic book series with a gay protagonist b. The introduction of a new brand of bottled water c. The elimination of demand for low-wattage light bulbs d. The introduction of a unique, roomy automobile model that has extremely low energy and fuel costs e. The introduction of a Barbie Olympic champion doll by Mattel and the International Olympic Committee

d. The introduction of a unique, roomy automobile model that has extremely low energy and fuel costs The automobile will justify a price skimming strategy because the manufacturer will need to recoup research and development costs, and it will take several years for the competition to catch up.

27. All of the following elements must be present for a pricing practice to be considered discriminatory under the Robinson-Patman Act EXCEPT: a. The seller must charge different prices to different customers for the same product. b. The seller must make two or more actual sales within a reasonably short time. c. The transaction must occur in interstate commerce. d. The products sold must not be commodities. e. There must be significant competitive injury.

d. The products sold must not be commodities.

44. If price goes up or down and revenue stays the same: a. elasticity is universal. b. elasticity is quantum. c. elasticity is solitary. d. elasticity is unitary. e. None of the above.

d. elasticity is unitary. If price goes up or down and revenue stays the same, elasticity is unitary.

43. When a channel intermediary is compensated for the ordinary services and tasks performed within the channel of distribution, the compensation usually comes in the form of a discount from base price. This discount is called a: a. seasonal discount. b. promotional allowance. c. cumulative or noncumulative quantity discount. d. functional (or trade) discount. e. rebate or refund.

d. functional (or trade) discount.

31. Peggy's Twist Shack sells soft-serve ice cream. Peggy graphed the demand per week for vanilla ice cream cones. The graph indicates a demand schedule that slopes downward and to the right. This graph indicates that the quantity of vanilla ice cream cones demanded increases as: a. cost increases. b. supply decreases. c. price increases. d. price decreases. e. supply increases.

d. price decreases. The lower the price, the more goods or services will be demanded.

10. For convenience, pricing objectives can be divided into three categories. They are: a. refundable, competitive, and attainable b. perceived, actual, and unique-situational c. differentiated, niche, and undifferentiated d. profit oriented, sales oriented, and status quo e. monopolistic, fixed, and variable

d. profit oriented, sales oriented, and status quo Profit-oriented objectives include profit maximization, satisfactory profits, and target return on investment. Sales-oriented pricing objectives are based either on market share or on dollar or unit sales. Status quo pricing seeks to maintain existing prices or to meet the competition's prices.

32. All of the following are tactics for fine-tuning the base price EXCEPT: a. functional discounts. b. cash discounts. c. rebates. d. quality discounts. e. quantity discounts.

d. quality discounts.

23. As a short-term pricing objective, _____ can be effectively used on a temporary basis to sell off excessive inventory. a. profit maximization b. profit-oriented pricing c. status quo pricing d. sales maximization e. market share pricing

d. sales maximization Sales maximization pricing is a short-term price reduction to increase sales.

22. Dixie Furniture Company has recently moved to a new, larger location. At this new location, it has been unable to attract sufficient customers. Its owner did not have the cash to pay the current loan installment due on the building and inventory, so he decided to reduce all merchandise prices by at least 50 percent for a weekend sale to earn enough to make his loan payment. His pricing objective can be classified as: a. market share maximization. b. satisfactory profits. c. asset maximization. d. sales maximization. e. target ROI.

d. sales maximization. The strategy described will maximize sales dollars but will not maximize or improve any of the other objectives in the long term.

19. A firm charging a price identical to or very close to the competition's price is using a _____ strategy. a. differentiation pricing b. penetration pricing c. preemptive pricing d. status quo pricing e. leader pricing

d. status quo pricing

1. The marketing manager of Icruise.com (a travel Web site targeted to consumers who want a luxury vacation) finds that the firm can gain market share and become the industry leader if it slashes prices by 50 percent during the month of December. However, the VP of finance is committed to reporting a 25 percent return on investment at all times. This conflict illustrates: a. a need to eliminate low-profit products. b. a lack of corporate concentration on the marketing concept. c. how pricing operates in a mature marketplace. d. the need for trade-offs in pricing objectives. e. how target markets can be ignored.

d. the need for trade-offs in pricing objectives.

26. Which of the following statements describes an advantage of status quo pricing? a. Status quo pricing is derived from actual costs of manufacturing. b. Status quo pricing maintains the organization's differential advantage. c. Status quo pricing is active, not reactive. d. Status quo pricing causes price wars. e. Status quo pricing requires little planning.

e. Status quo pricing requires little planning. Status quo pricing requires little planning because it involves just copying the competitions' pricing policies.

7. The price skimming strategy is sometimes called a "market-plus" approach to pricing because it denotes a high price relative to the prices of competing products. This strategy works best when: a. competition is abundant. b. revenues are equal to expenses. c. supply is greater than demand. d. production capacity is large and flexible. e. The product is perceived as having unique advantages.

e. The product is perceived as having unique advantages.

30. Most demand curves slope: a. horizontally b. upward and to the right c. downward and to the left d. vertically e. downward and to the right

e. downward and to the right For most products when prices increase, demand will decrease.

39. While the sales of the Apple iPhone have been great from the beginning, when Apple released its iPhone 4S and cut the price of the iPhone 4 from $399 to $199, sales exploded with one million iPhone 4s sold the first weekend. Demand for the iPhone appears to be: a. unitary. b. predictable. c. synergistic. d. inelastic. e. elastic.

e. elastic.

37. Consumers' responsiveness or sensitivity to changes in price is known as: a. break-even. b. Equilibrium. c. unitary revenue. d. asymmetrical demand. e. elasticity of demand.

e. elasticity of demand.

45. When the NES Group lowered the price of its professional-grade meat slicers from $2,300 to $1,600, demand doubled from four units sold per month to eight units per month. However, total revenue dropped. This is an example of: a. substitute goods b. unitary elasticity c. elastic demand d. consumer shortage e. inelastic demand

e. inelastic demand Inelastic demand is characterized by price and revenue both falling.

35. At a price of $6,000, only 191 of the Moulton 60 model bicycle are being made. If Moulton sells each one of the bicycles at that price, then a state of _____has been achieved. a. symmetry b. marketing balance c. unitary economics d. commerce stability e. price equilibrium

e. price equilibrium Price equilibrium is achieved at the price at which supply is equal to demand.

6. A shortage of blood for transfusions for injured animals has resulted in the introduction of a synthesized product called Oxyglobin, which can be used effectively as a blood replacement. The manufacturer of the product has put a high price on the product in order to recoup its research and development costs. The manufacturer of Oxyglobin is using a _____ policy. a. price banding b. penetration pricing c. price lining d. bundling costs e. price skimming

e. price skimming Price skimming is a pricing policy whereby a firm charges a high introductory price.

22. States developed unfair trade practice acts to: a. enforce the Sherman Act that makes bait pricing illegal. b. prevent oligopoly leaders from getting together and fixing prices at the highest the market will bear. c. establish penalties for companies that break the Clayton Act by engaging in predatory pricing. d. make sure that all pricing policies are equitable. e. protect small local firms from giant companies that operate efficiently on razor-thin profit margins.

e. protect small local firms from giant companies that operate efficiently on razor-thin profit margins. Unfair practice acts protect small businesses.

17. Britney is fifteen years old and wants to open her own business selling cupcakes to local coffee shops and restaurants. She is having a tough time deciding whether to base her pricing objectives on market share, dollar sales, or unit sales. Regardless of which she chooses, her pricing objective can be categorized as: a. status quo. b. profit oriented. c. need oriented. d. cost oriented. e. sales oriented.

e. sales oriented. Sales-oriented pricing objectives are based on either market share or dollar or unit sales.

44. A _____ is a price reduction that shifts the storage function forward to the purchaser and enables manufacturers to maintain steady production year-round. a. functional discount b. base allowance c. promotional allowance d. quantity discount e. seasonal discount

e. seasonal discount

127. Refer to Smelly Fruit. Suppose that you have decided to buy land in Thailand and become a durian producer. You see that the customary price for a Kan Yao is $200, so that is the price you decide to charge for your durian crop. This suggests you are using a _____ approach to setting your price. a. profit maximization b. market share c. return on investment (ROI) d. sales maximization e. status quo

e. status quo Status quo pricing seeks to maintain existing prices or to meet competition's price.

18. Penetration pricing means charging a relatively low price for a product as a way to reach the mass market. The low price is designed to capture a large share of a substantial market. Thus, penetration pricing: a. tends to be more effective in a less price-sensitive market. b. tempts competitors to enter the market. c. provides a large profit per unit sold. d. recoups product development costs quickly. e. tends to lower production costs.

e. tends to lower production costs.