Chapter 11

Deceptive pricing involves

Intentionally misleading customers with price promotions

Which piece of legislation is also called the Advertising Act?

Wheeler-Lea Act

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

false

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

price

What is calculated in a break-even analysis?

the sales volume needed to achieve a profit of zero

Volume maximization is the same thing as penetration pricing.

true

Variable costs are defined as costs that

vary depending on the number of units produced or sold

Your Internet provider offers the lowest price in town for Internet service if you sign a two-year contract; however, the low price offer only lasts the first year. Which pricing strategy is the Internet company using to attract customers?

volume maximization

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

wireless apps

Which statement regarding the gray market is true?

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

The Robinson-Patman Act was passed in 1936 and

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

Yield management is a strategy for maximizing a firm's

revenue

________ is/are calculated by multiplying units sold by price, whereas ________ is calculated by subtracting costs from revenue.

revenue; profit

Armando is the owner of a full-service pet grooming business. For the month of October he paid $2,000 in rent, $700 in utilities, $2,950 in salaries, and $50 on advertising. A full service pet grooming costs $25.00. Unit variable costs per grooming are $5.00. How many full-service pet groomings does Armando need to sell to break-even each month?

250

Which type of cost is a variable cost?

delivery cost

Because price discrimination could be considered an attempt to create a monopoly, it is illegal under U.S. law.

false

A strategy in which two or more products are packaged together and sold at a single price is called price

bundling

A local diner offers a lunch special during the week for $5.99. On Wednesdays, senior citizens can get the same lunch special for $4.99. This is a form of predatory pricing.

false

The practice of charging different customers different prices for the same product is called

price discrimination

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

price sensitivity

Since consumers have the tendency to compare prices on almost everything they buy, marketers setting prices should attempt to capitalize on this tendency by determining the price consumers will consider fair and reasonable for a product. This is known as the

reference price

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

true

Once a firm has established its break-even point for a product, it has a starting point for estimating how much revenue it must generate to earn a profit.

true

Price elasticity of demand is a measure of price sensitivity.

true

The 1936 law that requires sellers to charge everyone the same price for a product is the Robinson-Patman Act.

true

Compare the following statements and select the one that is accurate regarding a profit maximization strategy.

Profit maximization assumes that customers value a product's differentiating attributes and are willing to pay a higher price to take advantage of those attributes.

A recreational watersports dealer reduced the price of its new jet skis by $1,000 in hopes of generating more sales. However, the lower price only resulted in a few more sales of the jet skis. This represents an elastic demand situation.

false

Break-even analysis is an accurate measure of price sensitivity.

false

Shrinkflation is when manufacturers "shrink" or reduce the price of their products during times of inflation.

false

Under pricing 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

A pricing tactic in which a firm prices products a few cents below the next dollar amount is called

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.

If luxury brands such as Hermès clothing, Maserati automobiles, and Gucci purses wanted to promote an image of superior quality and exclusivity to customers, they wouldmost likely use which pricing tactic?

prestige pricing

A measure of price sensitivity that gives the percentage change in quantity demanded in response to a percentage change in price is known as

price elasticity of demand

The three largest manufacturers of telecommunications wire conspired together so that all three firms would charge the same price for coaxial cables. This is an example of

price fixing

When Superior Cellular released its first smartphone, it charged customers $999. Shortly thereafter, it reduced the price to $599 for the exact same device. Superior's decision to set a relatively high price for a period of time after the product launched and then decrease the price to a level that would be more sustainable over time reflects which pricing strategy?

profit maximization

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

When booking a flight for your upcoming trip, you notice the airline company now charges extra fees for baggage, assigned seats, and early boarding when these items used to be included in the price. This pricing strategy is referred to as

unbundling

Charging someone less than they are willing to pay is a practice referred to as

underpricing