MKTG ch20
If the product price is $100, average variable cost $40 per unit, and the total fixed costs are $120,000, what is the breakeven point?
2,000 units
A price developed in the consumer's mind through experience with the product is called a(n)
Internal reference price
What a price means or what it communicates to customers is called
Interpretation
For most products, a(n) ____ relationship exists between the price of a particular product and the quantity demanded.
Inverse
Justin Caprese phones Ben Kirkland of Southside Furniture to inform him that if he will increase his recent order of 15 mattress sets to 20, he will receive a 14 percent price reduction. This offer is due to a recent overstock condition at the factory and will not be available in the future. The discount offered here is
Noncumulative
A danger associated with engaging in price competition is that competitors can also change prices quickly and aggressively, which can result in a(n) _____ that will be harmful to both companies.
Price war
If Ralph Lauren offers to reduce the price of its women's blazers when retailers buy more than 100 pieces, the designer is offering a ____________ discount.
Quantity
If Wilson Sporting Goods faces a standard demand curve that exists for most products, as it raises the price of its tennis rackets, the
Quantity demanded goes down
Mary's profits would equal
a loss of $32,000
What is the variable cost per person for Highland?
$30
The type of prices most likely to appear in advertising is
Bargain
Costs that do not vary with changes in the number of units produced and sold are called ____ costs
Fixed
Price is
value that is exchanged for products in a marketing transaction
The amount of profit a channel member expects depends on
what the intermediary could earn if it were handling a competing product instead.
Tim O'Brien gets the invoice for a load of gravel he purchased last week...If Tim pays the invoice in five weeks, he will owe
$55.00.
What equation shows organizations the relationship between price and profit?
(Price x Quantity sold)-Total costs=Profits
Both the Federal Trade Commission Act and the Wheeler-Lea Act prohibit
Deceptive pricing
A graph of the quantity of products marketers expect to sell at various prices if other factors remain constant is a
Demand curve
What do all of the following have in common: tuition, fee, premium, retainer, dues?
Different terms for the concept of price
Which of the following is not a discount provided to business customers?
Differentiated
A product under nonprice competition would most likely not succeed in the market if
It is easy to duplicate
What assumption does breakeven analysis make that limits its overall usefulness?
It relies on demand for a product being inelastic
At what point does a firm maximize profit?
MC = MR
Which of the following is most likely to have an inelastic demand curve?
Nonelective surgery
Which of the following is the most flexible variable in the marketing mix?
Price
What type of discount is given to a business purchaser for performing activities such as transporting, storing, and selling?
Trade
If a company increased its price from $100 to $120 and the quantity demanded fell by 40 percent, the price elasticity of demand for this product is
-2
Markum would break even at ___________ units.
1,167
How many groups of customers must O'Charley's serve per year in order to break even?
5,000
If Seagram's marketers found that the firm's Crown Royal bourbon was a prestige product and raised its price, which of the following would most likely happen?
Above some price level, the quantity demanded would begin to decrease
A concession in price in business markets to achieve a desired goal is called a(n)
Allowance
Below the breakeven point, a firm is operating
At a loss
If Roberts Electronics finds that the average total cost of its radar detectors and the marginal cost of its radar detectors are both $85, then
Average total cost is at its lowest level
Which of the following is not a method used to determine transfer prices?
Discounted standard cost
For most firms in the United States, demand curves are
Downward sloping
If Carnival Cruise Lines increased the price of its seven-day cruise package by 10 percent and, as a result, experienced a 20 percent decline in customer bookings, Carnival's demand would be
Elastic
When a customer is considering the purchase of a product in a less-familiar product category, that individual is likely to rely more heavily on
External reference prices
Lucy buys a new dress at T.J. Maxx that has a price tag with "Compare at $50.00. Our Price $29.99." This is an example of the use of
External references prices
A marketer sometimes uses temporary price reductions to
Gain market share
If a firm currently produces 2,500 products per month and decides to produce 2,501, it will incur
Marginal cost
Which of the following is not a major factor for firms making price decisions?
Previous sales
Advertisements for Suave shampoos emphasize that other shampoos may cost more but don't work any better than Suave. In this example, Suave is competing on the basis of
Price
The tuition and fees each student paid for this semester of college are both terms for
Price
To determine the breakeven point in units, divide the fixed costs by
Price - VC
For most consumers, there is an assumed relationship between
Price and quality
Which of the following prohibits price discrimination that lessens competition among wholesalers and retailers?
Robinson-Patman Act
Premium-priced products are usually marketed through
Selective or exclusive distribution
When Cadillac buys headlights from Delco (both of which are divisions of General Motors), ___________ pricing occurs.
Transfer
Suppose that the frozen foods division of Swanson purchases food trays and boxes from the packaging division. The form of pricing used to charge the frozen foods division is called
Transfer pricing
A company trying to position itself as value oriented should not
Use premium pricing for its products
Tommy Hilfiger, in keeping with this assessment, department stores selling the ties should
Use price symbolically
Costs that vary directly with changes in the number of units produced or sold are called
Variable costs
If the terms of a business exchange are 2/10 net 30, this means that the transaction
involves a cash discount if paid within ten days
The perception of price depends on a
product's actual price and consumers' expectations regarding price
To gain market share, when Hyundai first entered the U.S. car market it did so with a comparatively low price strategy. One of the negative side effects of making this pricing decision is
A negative impact on the consumers' perception of quality
The oldest form of exchange—trading of products—is known as
Barter
Suppose managers at Caterpillar have determined the costs associated with producing hay balers are equal to the price that they charge for the hay balers. This indicates that Caterpillar is producing at the ___________ point.
Breakeven
Provisions of the Robinson-Patman Act, as well as those of the ___________, limit the use of price differentials.
Clayton Act
Which of the following statements about nonprice competition is false?
Companies that use nonprice competition do not need to keep track of their competitor's prices
What can Consolidated conclude?
Consolidated mustard is a prestige good
Marketers generally view _____ as the minimum price a product can be sold for.
Costs
A deduction from list price for purchasing large quantities aggregated over a stated period of time is a
Cumulative quantity discount
Sellers that emphasize distinctive product features to encourage brand preferences among customers are practicing
Nonprice competition
French Quarter Inns drops price...This is an indication that suites at this hotel are apparently an example of a(n) ___________ product.
Prestige
Safe Auto advertises its low-cost automobile insurance as "minimum coverage for minimum budgets." Safe Auto is engaging in
Price competition
When marketers emphasize price as an issue and match or beat the prices of other companies, they are using
Price competition
A measure of sensitivity of demand in relation to changes in price is
Price elasticity of demand
When marginal cost is equal to marginal revenue, the firm should
Stop producing additional units to maximize profits
Marginal analysis involves examining
What happens to a firm's costs and revenues when production is changed by one unit
The fact that a gas station in Texas pays less for fuel than a gas station in Maine from a producer in Louisiana suggests that refineries are using which of the following pricing methods?
Zone pricing
One advantage of nonprice competition is that
a firm can build customer loyalty
Rob Johnson orders 16 dozen fishing lures from Strike Right for $375. When he gets the invoice, he is furious that $25 in freight charges has been tacked onto his bill because he thought the price included freight costs. Rob should have been certain that the order terms were
FOB destination
If a retailer orders a quantity of merchandise to be delivered to his store in Phoenix and is quoted a price that does not include shipping charges, the retailer is paying a(n) ___________ price.
FOB factory
Price is a key element in the marketing mix because it relates directly to
Generation of total revenue
Reductions for transportation and other costs related to the physical distance between buyer and seller are known as
Geographic pricing
Which of the following products is most likely to have an inverted C-shaped demand curve?
Giorgio perfume
If Pacific Power and Light increased its rates 10 percent and experienced only a 2 percent reduction in the demand for power, the demand would be
Inelastic
What does the demand curve for a prestige product look like?
It forms a curve where the greatest quantity sold comes at a medium price and the quantities fall as the price increases or decreases.
To maintain market share and revenue in an increasingly price-sensitive market, companies have focused on quality, used labor-saving technologies, and used efficient manufacturing processes. These tactics have provided gains in productivity that have translated into ___________ for the consumer.
Lower costs for the company and lower prices
Roberts Electronics calculates that if it produces 15 radar detectors, its costs are $1,500, and if it produces 16 radar detectors, its costs are $1,590. In this instance, $90 is the firm's ___________ cost.
Marginal
Michelin notices that when the number of tires it sells increases from 1,000,000 to 1,000,001, total revenue rises $35. The $35 represents the firm's
Marginal revenue
Suppose that the watchband department of Timex sells completed watchbands to the finished watch department. The finished watch department is charged the price it would have to pay an outside watchband manufacturer less a discount to reflect low sales and transportation costs. This method of pricing is called _______ pricing.
Market-based cost
Which of the following is most likely to be a fixed cost?
Rent
The ___________ prohibits price fixing among firms in an industry.
Sherman Antitrust Act
Which factor is least likely to affect pricing decisions?
Shifting stock values
Which of the following acts does not directly affect pricing decisions?
Simpson-Marshall Act
Generally, customers are most likely to rely on the price-quality association when
They cannot judge the quality of the product themselves
In the long run, the J. F. Smucker Company must view ___________ as the absolute lowest price for its Jif brand peanut butter.
Total costs
If a product has an inelastic demand and the manufacturer raises its price,
Total revenue will increase
Laura Spangler, of North Central Novelties, reduces the price of games sold to Robertson's Entertainment by 10 percent to allow for expenses associated with Robertson's promoting the games to consumers. This is an example of a ___________ discount.
Trade
Which of the following statements about price elasticity is false?
When price is raised on a product that has an inelastic demand, then total revenue will decrease
Marketers have no flexibility in setting prices under conditions of
Perfect competition
The types of prices that appear least often in ads are ___________ prices.
Premium
If a company provides price differentials that harm competition by giving one or more buyers a competitive advantage, it is committing
Price discrimination
The Panama Jack Company utilizes a special strategy to sell its ECO-shirt line. Its basic promotional tool is the discount. These discounts offered to middlemen for performing certain channel activities are referred to as ____________ discounts.
Trade
Which of the following products is most likely to involve personal selling?
Riding lawn mowers
Dividing the percentage change in quantity demanded by the percentage change in price gives the
Price elasticity of demand
Temporary price reductions through sales, rebates, and special discounts are often used to
Raise cash quickly
The degree to which the price of a product enhances a customer's satisfaction with the purchase experience and with the product after the purchase is part of their
Response