BA 370 Chapter 14
A firm may set low prices to:
-Encourage current firms to leave the market -Take market share away from competitors -Discourage firms from entering the market
When there are many firms competing for customers in a given market, but the products are differentiated, it is known as ______.
monopolistic competiton
Price minus the variable cost per unit equals ______.
contribution per unit
Which of the following theories is the maximizing profits strategy based on?
Economic
True or false: A firm with a primary objective of very high sales growth will have the same pricing strategy as a firm with a primary objective of being a quality leader.
False: Pricing strategies should support and allow the firm to reach its overall objectives, which in this case are different. The different objectives should lead to different pricing strategies.
The customer orientation strategy increases value by doing which of the following?
Focusing on customer satisfaction Setting prices to match consumer expectations
Channel members include which of the following?
Manufacturers, retailers, wholesalers
The types of strategies that could be implemented in a profit orientation strategy include which of the following?
Maximizing profits strategy Target return pricing
Firms engaged in competitor orientation might use which of the following strategies?
Status quo pricing Competitive Parity
Which of the following is an example of monopolistic competition? (Monopolistic competition is NOT a monopoly.)
The apparel industry, with many providers that seek ways to differentiate themselves and claim market share
How do managers use break-even analysis?
To find a production quantity where, for a given price, costs are equal to revenues.
The point at which the number of units sold generates enough revenue to equal total costs is known as ______.
break-even point
If a firm sets prices similar to major competitors' prices, this is an example of ______ pricing.
competitive parity
Status quo pricing ______.
changes prices only to meet those of the competition
If firms strategize according to the premise that they should measure themselves primarily against firms challenging them directly for customers, they have adopted a ______ orientation.
compeititor
Break-even analysis examines the relationships between which of the following?
cost, price, revenue, and profit
Some specialty retailers attempt to compete not by setting low prices but by justifying higher prices through high levels of personalized service. This is an example of a ______ orientation to pricing.
customer
Profit alone ______ how many units should be sold before a firm breaks even.
does not indicate
Which of the following is another term for target return percentage?
markup
________ occurs when a company has a very low price for its product(s) in order to drive its competition out of business.
predatory pricing
Firms engage in price wars to ______.
preserve their market share
To achieve target profit pricing, a company uses _____________ to stimulate sales at a specific profit level.
price
A ___________ occurs when oligopolistic companies compete with each other by repeatedly lowering their prices.
price war
Competition, channel members, costs, customers, and company objectives are the five critical components of ______.
pricing
By focusing on target profit pricing, maximizing profits, or target return pricing, a firm is implementing a ______ orientation.
profit
Sometimes firms selling a pioneering product will set a very low price in order to attract many customers before competitors enter the market. This is an example of a ______ orientation.
sales
Compared to other company objectives, a sales-oriented firm ______.
sets prices very low to generate new sales, even if profits suffer
Which of the following is an example of a monetary sacrifice included in the overall price of a product or service?
shipping
When a firm is aiming for a particular amount of profit as its overriding concern, it usually implements ______.
target profit pricing
Strategies that can be used as part of the profit orientation strategy include which of the following?
target profit pricing maximizing profits
Firms that are less concerned with the level of profits and more interested in the rate at which profits are generated relative to their investments tend to use ______.
target return pricing (profit orientation)
When a firm uses a mathematical model to identify the price at which the firm will make the most money possible, it is implementing ______.
the maximizing profits strategy
Price is best defined as ______.
the overall sacrifice a consumer is willing to make to acquire a specific product or service
An example of a nonmonetary sacrifice made in acquiring a product or service is ______.
time
The _____ is fixed costs plus the sum of the variable costs.
total cost
Price times quantity is ______.
total revenue
Variable cost per unit times quantity equals ______.
variable cost
Which of the following do you need to know to calculate target return price? (Select all that apply.)
variable costs fixed costs expected unit sales
