Chapter 14 Questions (1)

In one year, the Sunrise Hotel incurred $100,000 in fixed costs. Because the hotel booked 10,000 room nights, its total variable cost is $100,000 (10,000 room nights × $10 per room). Thus, its total cost is

$200,000

If the fixed costs of manufacturing a new cell phone are $10,000, the sales price is $60, and variable cost per unit is $20, the break-even point is

250 units

Customers must see value in a product or service before they are willing to exchange time or money to obtain it, but not all customers see the same value in a product. To analyze how many units will be sold at any given price point, marketers draw on

a demand curve

In developing marketing strategies, why is price often the most challenging of the four Ps to manage?

because it is the least understood element of the marketing mix

When firms set prices similar to those of competitors, they are following a strategy of

competitive parity

Dana owns a bakery where she sells cupcakes. Two blocks down there is another bakery, Sweet's Bakery, that sells cupcakes for $1 less than Dana. Dana decides to lower her price and match Sweet's Bakery prices. What type of pricing strategy is Dana implementing?

competitor-oriented pricing

A study found that, among addicted smokers, a 10 percent increase in the price of cigarettes resulted in a 2 percent decrease in quantity demanded. For these consumers, cigarettes have a(n) ________ price elasticity demand

inelastic

The observation that consumers are generally more sensitive to price increases than to price decreases suggests that

it is easier to lose customers with a price increase than to gain customers with a price decrease

If a firm in a purely competitive market can differentiate its product or service, it becomes part of a(n) ________ market

monopolistic competition

French luxury goods manufacturer and retailer Hermès is known for making expensive leather goods. But paying $300,168 for a handbag at auction, which is over the standard retail price of $280,000, is extraordinary, and not for the casual shopper. The handbag is considered a

prestige product

The contribution per unit is

price minus variable cost per unit.

Juliannna wants her firm's gourmet snacks to be the leading brand in the U.S. market. When adopting a pricing strategy designed to gain market share, she should remember that

rarely is the lowest-price offering the dominant brand in a market.

Abdul's firm has set corporate direction to become one of the leaders in each of its significant market segments. It was Abdul's job to examine the firm's pricing strategy to determine how to maximize market share, even at the expense of profits in the short run. What kind of company objective would guide Abdul's effort?

sales-oriented

Which of the following markets is most likely to be characterized by oligopolistic competition in the United States?

smartphone service providers

When the price for Blu-ray players dropped, the demand for DVD players went down, so DVD players and Blu-ray players are

substitute products

According to a typical demand curve, the higher the price,

the lower the quantity consumers will buy

Because there are many firms in monopolistic competition markets,

the many competitors will focus on product differentiation.

Raoul was known for driving 20 miles just to save a dollar on the price of his favorite beverage. Raoul perceived price as ________ for a good or service, while most consumers recognize price as the ________ made to acquire a good or service

the money paid; overall sacrifice

There are many options available to consumers when it comes to breakfast cereals. So, if Kellogg's significantly increases the price of Rice Krispies, consumers are more apt to buy alternate cereals instead. This illustrates which concept?

the substitution effect

One problem in relying on price elasticity and demand curves when setting prices is

the way a product or service is marketed can have a profound impact on price elasticity