Chapter 10 Study Questions
New, premium movie theaters offer features such as online reserved seating, high-backed leather executive chairs with armrests and footrests, the latest in digital sound and super-wide screens, and other amenities for which they charge a higher price. This is an example of which type of pricing?
value-added pricing
Which of the following is a cost-based pricing approach? A. Break-even pricing B. Competition-based pricing C. High-low pricing D. EDLP pricing E. Value added pricing
A
What is the first step in a value-based pricing strategy?
Assess customer needs and value perceptions.
Which of the following statements is true regarding costs? A. Costs do not vary with different levels of production. B. Average cost tends to decrease with accumulated production experience. C. Experience curve pricing is a low-risk strategy. D. Totals costs are the sum of long run average costs and short run average costs. E. Variable costs vary directly with the level of sales.
Average cost tends to decrease with accumulated production experience. This is because workers learn shortcuts and become more familiar with their equipment, the work becomes better organized, the company finds better equipment and production processes, and with higher volume, the company becomes more efficient and gains economies of scale.
__________ uses buyers' perceptions of value as the key to pricing.
Customer value-based pricing
Which of the following is true regarding the price-demand relationship? A. Demand and price are directly relatedlong dashthe higher the price, the greater the demand. B. If demand is inelastic, a small change in price will result in a large change in demand. C. Price elasticity measures how responsive price will be to a change in demand. D. If demand is elastic, sellers will consider lowering their price. E. A demand curve shows the number of units a company will produce in a given time period at different prices that might be charged.
D
Which of the following statements does not apply to the description of prices? A. Pricing is the number-one problem facing many marketing executives. B. Price is the amount of money charged for a product or a service. C. Historically, price has been the major factor affecting buyer choice. D. In recent decades price factors have gained increasing importance. E. Price remains one of the most important elements that determine a firm's market share.
D; In recent decades, nonprice factors have gained increasing importance.
Which of the following statements is correct regarding different types of markets? A. In a pure monopoly, the market consists of many buyers and sellers trading over a range of prices. B. Under pure competition, sellers spend considerable time on marketing strategy and pricing decisions. C. Under monopolistic competition, the market is dominated by one seller. D. Under oligopolistic competition, the market consists of many buyers and sellers trading in a uniform commodity and sellers do not spend much time on marketing strategy. E. Under oligopolistic competition, each seller is alert and responsive to competitors' pricing strategies and marketing moves.
E
Which of the following statements does NOT describe price? A. Price remains one of the most important elements that determine a firm's market share and profitability. B. Price is one of the most flexible marketing mix elements. C. Prices can be changed quickly. D. Price is the sum of all the values that customers give up to gain the benefits of having or using a product or service. E. Price is the only element in the marketing mix that represents costs.
E; Price is the only element in the marketing mix that produces revenue because all other elements represent costs.
Which of the following statements about price is correct? A. Marketers do not a have lot of flexibility in setting and changing price. B. Price is not an important competitive asset. C. Prices have no impact on a firm's bottom line. D. Pricing is not a problem for marketing executives. E. Customers have put increasing pricing pressures on many companies.
E; Value-seeking customers have put increased pricing pressure on many companies due to tight economic times, the pricing power of the Internet, and value-driven retailers.
The goal of the competition-based pricing is __________.
not to match or beat competitors' prices. Rather, the goal is to set prices according to the relative value created versus competitors. If a company creates greater value for customers, higher prices are justified.
The amount of money charged for a product or service is its ______.
price; price is the sum of all the values that customers give up to gain the benefits of having or using a product or service.
Price is the only part of the marketing mix that __________.
produces revenue
Variable costs vary directly with the level of ________
production
Under __________, the market consists of many buyers and sellers trading in a uniform commodity.
pure competition; wheat, copper, or financial securities. No single buyer or seller has much effect on the going market price.
Beyond the market and the economy, what other factors in its external environment must a company consider when setting prices?
resellers and how they react to various prices, the government, and various social concerns.
__________ reverses the usual process of first designing a new product, determining its cost, and then asking, "Can we sell it for that?"
target costing; starts with an ideal selling price based on customer value considerations
monopolistic competition
the market consists of many buyers and sellers trading over a range of prices.
In a broad sense, price is __________.
the sum of all the values that customers give up to gain the benefits of having or using a product or service
Internal factors that affect pricing include ________.
the company's overall marketing strategy, objectives, and marketing mix, as well as other organizational considerations.
