Chapter 14 Questions

A demand curve shows that a company will sell 10,000 units if it prices its new product at $200 per unit, but it will sell 20,000 units if it reduces the price to $75. If the company wants to maximize profits, it should price the new product at ______. - $75 - $200 - $275 - $50

- $200

Assuming the economy and other factors stay the same, a downward-sloping demand curve for a product shows which of the following? (Select all that apply.) - As price decreases, demand decreases. - As price increases, demand decreases. - As price increases, demand increases. - As price decreases, demand increases.

- As price increases, demand decreases. - As price decreases, demand increases.

How does penetration pricing discourage rival companies from entering the market? (Select all that apply.) - Competitors who enter the market will temporarily face higher unit costs. - Usually, none of the companies make much profit in this situation. - It encourages price skimming, which is too risky for most companies to engage in. - It negates the experience curve effect, which usually helps competitors.

- Competitors who enter the market will temporarily face higher unit costs. - Usually, none of the companies make much profit in this situation.

Which of the following types of theories is the maximizing profits strategy based on? - Social - Political - Economic - Psychological

- Economic

Which of the following do you need to know to calculate target return price? (Select all that apply.) - Expected unit sales - Break-even point - Fixed costs - Variable costs

- Expected unit sales - Fixed costs - Variable costs

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. True False

- False

Which of the following is another term for target return percentage? - Markup - Contribution per unit - Break-even point - Profit

- Markup

Strategies that can be used as part of the profit orientation strategy include which of the following? (Select all that apply.) - Competitive parity - Maximizing profits - Target profit pricing - Value-based pricing

- Maximizing profits - Target profit pricing

Break-even analysis examines the relationships between which of the following? (Select all that apply.) - Value - Price - Cost - Unions

- Price - Cost

Target return pricing is an example of what type of orientation? - Competitor - Customer - Sales - Profit

- Profit

Which strategy is used by firms that believe increasing volume of sales will help the firm more than increasing profits? - Repeat-return strategy - Competitor-oriented strategy - Profit-oriented strategy - Sales-oriented strategy

- Sales-oriented strategy

______ makes up one of the Cs of the five Cs of pricing. - Council professionals - Company staff - Channel flexibility - The customer

- The customer

Which of the following accurately characterize demand curves? - They relate demand to prices while assuming everything else remains unchanged. - They show how much consumers will demand during a specific period at different prices. - They are identical for all products and services in a given industry. - They are completely accurate prediction models.

- They relate demand to prices while assuming everything else remains unchanged. - They show how much consumers will demand during a specific period at different prices.

Which of the following are reasons that firms implement a market penetration pricing strategy? (Select all that apply.) - To resist change - To discourage competitors - To build sales - To earn profits - To establish market share - To raise production costs above the competition

- To discourage competitors - To build sales - To earn profits - To establish market share

Channel members include which of the following? (Select all that apply.) - Consumers - Wholesalers - Retailers - Manufacturers

- Wholesalers - Retailers - Manufacturers

When firms compete by lowering price at retail, they are engaged in ______. - monopolistic pricing - oligopolistic pricing - a price war - pure pricing

- a price war

Price fixing is the illegal tactic of cooperating with other firms to ______ prices. - artificially establish - constantly reduce - discretely hide - publicly list

- artificially establish

A useful technique that enables managers to examine the relationships among cost, price, revenue, and profit over different levels of production and sales is called ______. - cross-price elasticity - cost-benefit analysis - fixed costs - break-even analysis

- break-even analysis

Fill in the blanks to complete the sentence. The percentage change in the quantity of one product demanded compared with the percentage change in price in another product is called ______________ price elasticity

- cross

In the United States, it is considered unethical and illegal for advertisements to ______ the consumer so much that the person is harmed. - overcharge - manipulate - persuade - deceive

- deceive

The graph that shows how many units of a product or service consumers will want during a specific period at different prices is known as the ______ curve. - supply - price versus sales - consumer - demand

- demand

For most products, demand increases as the price decreases. Because of this general trend, demand curves usually have a(n) ______ slope. - vertical - upward - horizontal - downward

- downward

Prestige products or services do not follow the ______ curve. - upward-sloping demand - elastic demand - downward-sloping demand - unitary demand

- downward-sloping demand

When a 10% decrease in price produces more than a 10% increase in quantity sold, the product or service is responsive to price changes and is considered to be ______. - in high demand - elastic - inelastic - unaffected

- elastic

The strategy of ______ appeals to consumers because it reduces their need to spend time comparing prices at various stores. - loss leader pricing - odd/even pricing - everyday low pricing (EDLP) - benchmark reference pricing - image pricing

- everyday low pricing (EDLP)

The ______ pricing strategy features frequent sales, during which prices are lowered for a short time. - high/low - everyday low - reference - odd

- high/low

A demand curve enables a firm to examine prices ______. - relative to each of the orientation strategies simultaneously - in terms of demand and the firm's objectives - relative to profits - in terms of supply or how many producers offer the same good or service

- in terms of demand and the firm's objectives

When the price of DVD players drops, theoretically based on demand elasticity, the demand for DVDs is likely to ______. - decrease - increase - first increase then decrease - remain unchanged

- increase

When a 10% decrease in price results in less than a 10% increase in quantity sold, demand for the product or service is described as ______. - commodity-like - inelastic - price sensitive - elastic

- inelastic

The goal of a(n) ______ strategy is to generate profit and establish a new product or service in the market as quickly as possible. - reference point - price skimming - improvement-value

- market penetration

When a new product or service is launched, companies that use a ______ strategy will attempt to attract customers quickly by offering a very low price at first. - value-based - penetration pricing - price skimming - reference point

- penetration pricing

A firm sets extremely low prices for its products so that most customers will stop shopping elsewhere. This will cause other companies to go out of business and leave the firm with no more competition. The firm has engaged in ______. - price fixing - gray market pricing - price discrimination - predatory pricing

- predatory pricing

The equation for price elasticity of demand is the percentage change in quantity demanded divided by percentage change in ______. - perceptions - profits - price - supply

- price

To achieve target profit pricing, a company uses _____________ to stimulate sales at a specific profit level.

- price

If a firm sells the same product to different resellers at different prices, it can be considered ______. - uniform delivery - price discrimination - loss-leader pricing - deceptive reference pricing

- price discrimination

The ratio of change in a price and its effect on the quantity of the product demanded is known as ______. - price elasticity of supply - price elasticity of demand - prestige products and services -the e downward-sloping demand curve

- price elasticity of demand

When Apple first introduced the iPhone, some consumers were willing to pay the premium $599 price tag. Apple was using a(n) ______ strategy. - reference point - value-based - price skimming - market penetration

- price skimming

Competition, channel members, costs, customers, and company objectives are the five critical components of ______. - variety - quality - promotion - pricing

- pricing

Prestige products or services follow the premise that ______ associated with the product. - the higher the price, the greater the status - the lower the price, the greater the status - the higher the price, the lower the value - the lower the price, the higher the value

- the higher the price, the greater the status

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 - the target profit pricing strategy - the target return pricing strategy - competitive parity

- the maximizing profits strategy

Price is best defined as ______. - the overall sacrifice a consumer will make to obtain one of the five Cs - the consumer's break-even point - the overall sacrifice a consumer is willing to make to acquire a specific product or service - the last element of the marketing mix a consumer will always agree with

- the overall sacrifice a consumer is willing to make to acquire a specific product or service

Total cost is ______. - fixed costs divided by variable costs - variable costs plus fixed costs - variable costs minus fixed costs - variable costs times fixed costs

- variable costs plus fixed costs

a price _________ occurs when oligopolistic companies compete with each other by repeatedly lowering their prices.

- war

By focusing on target profit pricing, maximizing profits, or target return pricing, a firm is implementing a ______ orientation. - profit - customer - competitor - sales

- 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. - customer - sales - competitor - profit

- sales

The five Cs of pricing are examples of pricing ______. - ethics - tactics - strategies - errors

- strategies

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 ______. - competitive parity - premium pricing - target return pricing - contribution per unit calculations

- target return pricing

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 ______. - premium pricing - target return pricing - contribution per unit calculations - competitive parity

- target return pricing

True or false: Price discrimination is illegal under all conditions. True False

- False

The _____ is fixed costs plus the sum of the variable costs. - net contribution per unit - break-even point - profit margin - total cost

- total cost

True or false: Puffery is illegal in advertising. True False

- False

What are the 5 C's of pricing?

1. company objectives, 2. customers, 3. costs, 4. competition, 5. channel members