Chapter 10 marketing practice

Greg is the owner of a full-service car wash. For the month of December he paid $2,000 in rent, $700 in utilities, $2,950 in salaries, and $50 on advertising. A full service car wash costs $10.50. Unit variable costs per car wash are $2.50. How many full-service car washes does Greg need to sell to break-even each month?

625

A section in a contract that ensures that providers of goods and services do not encounter unreasonable financial hardship as a result of uncontrollable increases in the costs of or decreases in the availability of something required to deliver products to customers is referred to as a(n)

escalator clause

A profit maximization strategy is used during the growth and maturity stages of the product life cycle.

false

An odd pricing tactic prices items in odd dollar amounts such as $4.95 instead of in even amounts like $4.88.

false

Underpricing is a pricing strategy whereby companies charge an amount just below cost in order to generate sales in the introductory stage of a product's life cycle.

false

Branded products sold through legal but unauthorized distribution channels is referred to as the

gray market

Deceptive pricing involves

intentionally misleading customers with price promotions.

Which of the following is NOT a fixed cost?

material

Bowman's shoe store just received a shipment of dress boots. The manufacturer's suggested retail price for the boots is $150.00, but Bowman's decides to price the boots at $149.95. What pricing tactic is Bowman's most likely using?

odd pricing

Volume maximization is also referred to as

penetration pricing

One of the most important concepts in marketing is the price elasticity of demand, which is the

percentage change in quantity demanded in response to a percentage change in price.

The degree to which the price of a product affects consumers' purchasing behavior is referred to as

price sensitivity

The amount a product sells for above the total cost of the product itself is called

profit margin

Justine went to the specialty grocery store by her office after work. When looking at the offerings at the meat counter, she was surprised to see ground beef selling for $4.49/lb. At her normal grocery store, she can get the same quality beef for $3.29/lb., a price Justine feels is reasonable. $3.29/lb. for ground beef is Justine's

reference price

Yield management is a strategy for maximizing a firm's

revenue

Consumers will be more price sensitive when

the price they have to pay is more than they anticipated.

Customers are more price sensitive the higher the product's price is relative to the customers' price expectation.

true

Unbundling provides value for customers who are focused on a specific price point rather than the complete product offering.

true

What technological advancement created for mobile devices has unleashed a new era of pricing transparency for consumers?

wireless apps

Joey set up a lawn-mowing business in his neighborhood. He currently has 7 customers that want their lawns mowed each week for which he charges them $25.00 each. Joey spends $10.00 a week in gas and another $17.00 in yard waste bags and stickers. What is Joey's weekly profit?

$148.00

Joey set up a lawn-mowing business in his neighborhood. He currently has 7 customers that want their lawns mowed each week for which he charges $25.00 each. Joey spends $10.00 a week in gas and another $17.00 in yard waste bags and stickers. What is Joey's weekly revenue?

$175.00

Which of the following statements regarding the gray market is TRUE?

Gray market goods allow consumers to purchase items for less than they could normally.

In the price-setting process, the next step after demand has been evaluated is to

determine the costs

The protectionist strategy in which a company sells its exports to another country at a lower price than it sells the same product in its domestic market is referred to as

dumping

A pricing strategy that involves constantly updating prices to reflect changes in supply, demand, or market conditions is called

dynamic pricing

For an airline, the price of economy-class seats on any given flight may fluctuate over time. For example, the airline may try to fill economy-class seats by lowering the price as the day of the flight draws closer, or try to fill business-class seats first by raising prices on economy tickets. This is an example of

dynamic pricing

An auto dealership reduced the price of its new SUVs by $3,000 in hopes of generating more sales. However, the lower price only resulted in a few more sales of the vehicle. This represents an elastic demand situation.

false

An escalator clause ensures that the customer does not incur financial hardship as a result of increases to the cost of a product.

false

A couple living in the United States travels to China and buys huge amounts of designer purses for a much lower price than could be purchased at home. They import the purses back into the States where they sell them for less than the normal market price. The purses are considered to be

gray market goods

According to your text, which of the elements of the marketing mix is one of the most watched and regulated activities?

price

The amount of something (money, time, or effort) that a buyer exchanges with a seller to obtain a product is referred to in marketing terms as

price

Located on a college campus, Ben's Burger Barn charges $4.99 for its burger basket. However, students receive a 10% discount off the price for showing their student ID. This is an example of

price discrimination

The Robinson-Patman Act was passed in 1936 and

requires sellers to charge everyone the same price for a product.

Taxes on imports and exports between countries are called

tariffs

Which of the following has allowed for easier import/export transactions between the United States, Mexico, and Canada?

the absence of tariffs

If a personal care products manufacturer decides to package both its shampoo and conditioner together and sell it for one price, it would be using a price bundling strategy.

true

Pricing is one of the most important strategic decisions a firm faces because it reflects the value the product delivers to consumers as well as the value it captures for the firm.

true

Rent on an office building would be considered a fixed cost, while sales commissions would be considered a variable cost.

true

Tariffs may raise the price that foreign customers must pay for goods produced in the U.S., negatively impacting a U.S. firm's ability to be price competitive in those markets.

true

The gray market form of buying and selling often occurs when the price of an item is significantly higher in one country than another.

true

All of the following are legal under the Robinson-Patman Act EXCEPT:

allowing a significant price reduction on an artificially high retail price.

According to your text, pricing resembles a game of

chess

The first step in the price-setting process is to

define the pricing objectives

In November the appliance store priced its front-loading washing machines at $899.00 and sold 50 units. In December they reduced the price to $799.00 and sold 53 units. Which of the following statements is accurate regarding this situation?

Demand is inelastic and total revenue fell from November to December.

Because it could be considered an attempt to create a monopoly, which pricing strategy is illegal under U.S. law but is difficult to prove?

predatory pricing