Marketing Final #16
As a short-term pricing objective, which of the following can be effectively used on a temporary basis to sell off excessive inventory? a. profit-oriented pricing b. market share pricing c. profit maximization d. sales maximization
D Sales maximization pricing is a short-term price reduction to increase sales.
Safeway will place well-known brands on the shelves at high prices while offering its own Safeway brand at lower prices. This practice is an example of which of the following? a. brand cutting b. illegal pricing c. price pressurization d. selling against the brand
D Selling against the brand with private labels causes sales of the higher-priced brands to decline.
Although many factors can influence price, what are the primary determinants? a. the demand for the good and the cost to the seller b. demand by the consumer and perceived quality c. stage of the product life cycle and costs to the consumer d. costs of manufacturing and distribution
A
At a price of $6 each, 314 people want to buy sun visors designed especially for volunteers at the Peachtree Road Race, and only 314 such visors were available. In this example, a state of which of the following has been achieved? a. price equilibrium b. symmetry c. marketing balance d. commerce stability
A
If a company's pricing objective is to meet the competition or to maintain existing prices, what type of pricing is it using? a. status quo b. target return on investment c. market share d. head-on
A
In a discount store Lee found a "sun kit" containing a beach towel, a sun visor, and sun block. The items, which were sold together, retailed at $18.50, but were marked down to $12.99. The retailer sold one for $18.50 and six at $12.99. Demand for the sun kit package is which of the following? a. elastic b. inelastic c. synergistic d. unitary
A
The quantity of products that will be sold in the market at various prices for a specified time period is referred to as which of the following? a. demand b. supply c. equity d. inventory
A
The typical break-even model assumes a given fixed cost and which of the following? a. constant average variable cost b. variable per unit cost c. constant inventory turnover d. markup cost attained through keystoning
A
What are yield management systems used for? a. to profitably fill unused capacity b. to determine the availability of product substitutes in complex industries that are experiencing rapid change c. to predict necessary service levels to achieve revenue goals d. to determine whether it is financially more feasible to buy a new product or repair a broken one
A
What is the term for the quantity of a product that will be offered to the market by suppliers at various prices for a specified period? a. supply b. equity c. demand d. inventory
A
What measures the overall effectiveness of management in generating profits with its available assets? a. return on investment b. efficiency maximization c. target-on-sales d. retained earnings
A
When consumers are sensitive to price changes, which of the following occurs? a. elastic demand b. inelastic supply c. elastic supply d. inelastic demand
A
Which of the following is defined as the quantity of a product that will be sold at various prices for a specified period? a. demand b. market share c. supply d. revenue
A
Which of the following use complex mathematical software to profitably fill unused capacity? a. yield management systems b. service management systems c. capacity correlation systems d. capacity management software
A
Under which of the following conditions will companies with low market share be most likely to fail? a. competing in an industry requiring market power and economies of scale b. competing in a slow-growth industry c. competing in an industry with few product changes d. competing in an industry that makes frequently purchased items
A A larger market share is required to boost economies of scale and market power.
Entertainment Central makes video game consoles, which it sells for $500. It estimates its variable costs to be $200 per console. It figures its fixed costs to be $600,000 per year. How many consoles does it have to sell to break even? a. 2,000 b. 2,500 c. 3,000 d. 1,200
A Break-even quantity equals the total fixed costs ($600,000) divided by the fixed cost contribution per unit ($500 - $200 = $300).
Amanti Lighting sells a lamp kit for making personalized lighting. The company sells each lamp kit for $22. The average variable cost for each lamp kit is $13, and the total annual fixed costs for plant operation is $78,300. What is the break-even point in units? a. 8,700 b. 2,237 c. 6,023 d. 3,559
A Break-even quantity equals the total fixed costs ($78,300) divided by the fixed cost contribution per unit ($22 - $13 = $9) + 8,700.
Critics claim bank ATMs take advantage of which customers who suffer a poverty of time and have a strong need for convenience? a. customers with inelastic demand schedule b. customers with elasticity of demand c. customers with unitary supply and demand d. customers with supply characteristics
A Customers are paying a premium for the convenience of ATM use.
Which of the following factors directly affect the elasticity of demand? a. the other uses of a product b. the inputs needed to manufacture the product c. the unavailability of substitute goods d. a product's warranty
A Inputs at time of manufacture only indirectly affect the demand, if at all.
Monthly output at Vincent Sheds and Outbuildings changed from 15 to 16 outdoor storage buildings, and the total costs changed from $27,000 to $28,500. What was the marginal cost for the company? a. $1,500 b. $2,000 c. $1,200 d. $10,000
A Marginal cost is the change in total costs associated with a one-unit change in output.
The pricing policy used by Middleton Industries, manufacturer of Renaissance charms for bracelets and necklaces, is to set prices so that its retail prices are as high as the market will tolerate. Additionally, Middleton strives to keep its costs at an industry low by using silver and gold overlays over charms made of cheap base metal. This is an example of what type of policy? a. profit maximization b. market share pricing c. demand-oriented d. sales maximization
A Profit maximization means setting prices so that total revenue is as large as possible relative to total costs.
Queeg Industries sells all types of artists' paint brushes. When the owner of Queeg learned that Patterson Art, one of its biggest competitors, had lowered its prices on all synthetic brushes by 5 percent, he did the same. This is an example of what type of pricing? a. status quo b. cost-plus c. market share d. predatory
A Status quo pricing is best described as meeting the competition.
Benito is the manager of a souvenir shop in Panama City, Florida. He has decided to graph the demand per week for fresh orange juice because its price varies as the supply of fresh oranges varies. The graph indicates a demand schedule that slopes downward and to the right. This graph indicates that the quantity of juice demanded increases as which of the following occurs? a. price decreases b. cost increases c. price increases d. supply increases
A The lower the price, the more goods or services will be demanded.
Concha y Toro, a Chilean wine, has reduced the price of one bottle from $10 to $8. It previously sold 420 bottles in the month prior to the price reduction, and it now sells 525 bottles per month. What is being experienced? a. unitary elasticity b. elastic demand c. consumer surplus d. inelastic demand
A Under unitary elasticity, the increase in demand exactly offsets the decrease in price. 420 × $10 and 525 × $8 = $4,200.
When Richard opened The Kite Hut, he charged $7 for kites and could not keep up with demand. The Kite Hut has raised the price to $10, and now Richard is still selling all the kites he carries, but he is not forced to reorder on a daily basis. The $10 price is probably which of the following? a. a price equilibrium b. an inelastic price c. a symmetrical price d. an inventory equalizer
A When demand and supply are approximately equal, price equilibrium is reached.
Which of the following statements about YMS is true? a. YMS are mathematically complex systems to make use of underutilized capacity and reduce the cost of perishability. b. YMS are complex pricing systems used to set equilibrium pricing points. c. The first use of YMS was in the car industry as it looked for ways to compete with imports. d. YMS cannot be used by any other businesses but services.
A YMS was first used in the airline industry, but it is now used by automobile manufacturers to make use of underutilized capacity.
Which of the following BEST describes extranets between suppliers and customers? a. They cannot be used by a traditional bricks-and-mortar store. b. They save significant amounts associated with the changing of prices. c. They cost more than they save. d. They will someday replace marketing inventory systems.
B Extranets are cost saving. They are widely used by both click-and-mortar stores and brick-and-mortar stores. Extranets are unrelated to marketing inventory systems.
Al has opened a auto repair shop. The monthly payment on the tools he recently purchased, the rent on his business location, and his business license are all examples of what type of costs? a. marginal b. fixed c. demand d. variable
B Fixed costs do not change as output changes.
In the mature and highly competitive furniture industry, you would expect furniture manufacturers to engage in which of the following? a. prestige pricing b. a price war c. geographical pricing d. price escalation
B In the maturity stage, with heavy competition, below-market pricing leads to price wars.
Deco Furniture sells reproductions of furniture and collectibles that were seen during the early part of the 20th century. The store's owner does not take into account competition when pricing the store's merchandise. The markup on all items in the store is 100 percent over cost (or double the cost). What is Deco Furniture using? a. break-even pricing b. keystoning c. target ROI pricing d. double sourcing
B
During the off-season, Parrish Farms, a bed-and-breakfast inn, offers a 25 percent reduction on its weekend rates to entice customers to make last-minute reservations at its website. This is an example of pricing strategy used as which of the following? a. a direct sales tool b. a promotion strategy c. a product strategy d. an Internet enhancer
B
Generally speaking, a firm can set its price higher when which of the following is true? a. demand is more fixed b. demand is more inelastic c. demand is more elastic d. demand is more variable
B
How can manufacturers regain some control over the price their products are sold for at the retail level? a. by developing brand loyalty in consumers by delivering low prices b. by avoiding doing business with price-cutting discounters c. by outsourcing d. by using an exclusive computerized inventory system
B
The responsiveness or the sensitivity of consumer demand to changes in price occurs when consumers buy more or less of a product when the price changes. What is this called? a. the break-even point b. elasticity of demand c. the point of equilibrium d. unitary revenue
B
What is an organization using when it sets its prices so that total revenue is as large as possible relative to total costs? a. sales maximization b. profit maximization c. status quo pricing d. market share pricing
B
What is another name for on-line price comparison engines? a. extranets b. shopbots c. price "tickers" d. virtual spreadsheets
B
What is the change in total costs associated with a one-unit change in output? a. variable cost b. marginal cost c. flex cost d. elastic cost
B
What is the most popular method used by wholesalers and retailers in establishing a sales price? a. formula pricing b. markup pricing c. break-even pricing d. marginal revenue pricing
B
When does profit maximization occur? a. when marginal variable costs equal average revenues b. when marginal revenue equals marginal cost c. when total costs equals average fixed revenue d. when total costs equal total variable costs
B
When is demand inelastic? a. if price stays the same and revenue goes down b. if price goes down and revenue goes down c. if price goes up or down and revenue stays the same d. if price goes up and revenue goes down
B
Which of the following determine what sales volume must be reached for a product before the company's total costs equal total revenue and no profits are earned? a. price equilibrium analyses b. break-even analyses c. marginal revenue estimates d. marginal costs of goods sold
B
During sporting events at the local high school, Megan runs a concession stand. The costs associated with the purchase of hot dogs, mustard, relish, ketchup, chips, sodas, paper napkins, and cups are all examples of what type of costs? a. fixed b. variable c. liquidity d. promotional
B A cost that changes with the level of output is called a variable cost.
When Laser Technology developed and introduced a high-tech crash investigation system to be used by law enforcement officers, the company determined that demand for the product was inelastic, and there was no existing competition. What should be the pricing strategy for the system? a. low initial price, rising constantly through growth and into maturity b. high initial price, falling slightly when entering the growth stage c. high price, continuing through growth and maturity d. low initial price, rising slightly when entering the growth stage
B A high initial price is used when a new product faces little competition, needs to recoup R&D costs, and has inelastic demand. Prices will fall slightly when entering the growth stage.
How do shopbots affect pricing strategies? a. They create inelastic demand. b. They provide a means for comparison shopping. c. They create opportunities for prestige pricing. d. They link manufacturers, suppliers, and customers.
B Alternative B is the definition of extranets.
Which of the following describes a disadvantage associated with markup pricing? a. how difficult it is to implement b. its inability to consider product demand c. its dependence on marginal costs d. too many factors influence it
B Because the method ignores demand, overpricing and/or underpricing can occur. PTS: 1 DIF: Comprehension REF: p. 523 OBJ: 5
As long as the revenue of the last unit produced and sold is greater than the cost of the last unit produced and sold, what should a firm do? a. reach its break-even point very shortly b. continue manufacturing c. continue using price equilibrium d. consider using sales maximization pricing
B Diminishing returns have not set in, so the firm should continue manufacturing.
According to the text, which of the following statements about price is true? a. Price and revenue are synonyms. b. Price is not necessarily based on the satisfaction consumers receive from a product. c. High prices result in high profits. d. Price always equals some monetary figure.
B Price can relate to anything with perceived value, not just money. The price paid is based on the satisfaction consumers expect to receive from a product, not necessarily what they actually receive.
Parrish Farms produces homemade cheese. Last year, it managed to exceed its target ROI for the current fiscal year. The following results were found on its financial statements: Gross Revenues: $250,000 Total Assets: $500,000 Gross Profits: $100,000 Total Liabilities: $200,000 Net Profits after Tax: $ 50,000 Owner's Equity: $300,000 What was the actual return on investment (ROI) for Parrish Farms? a. 6.67 percent b. 10 percent c. 28 percent d. 22 percent
B ROI is net profits after taxes divided by total assets: $50,000 ? 500,000 = 10.
Which of the following statements describes an advantage of status quo pricing? a. Status quo pricing causes price wars. b. Status quo pricing requires little planning. c. Status quo pricing is derived from actual costs of manufacturing. d. Status quo pricing maintains the organization's differential advantage.
B Status quo pricing requires little planning because it involves just copying the competitions' pricing policies.
According to the text, which of the following statements about the impact of the Internet on pricing strategy is true? a. Setting prices on the Internet offers retailers few advantages. b. One area where the Internet is having a major impact on pricing is the bargaining power between buyers and sellers. c. The promise of pricing efficiency on the Internet has been realized. d. Extranets are on-line price-comparison engines.
B The promise was not fulfilled. Setting prices on the Internet offers retailers several advantages. Internet marketers have found it difficult to determine exactly what price consumers will pay. Shopbots are on-line price-comparison engines.
Autumn Fair sells reusable plastic stencils for use in decorating. When graphed, the demand schedule for Autumn Fair brand stencils forms a straight line. If at $3 per stencil, 500 stencils are demanded, and at $4 per stencil, 450 stencils are ordered, how many will be ordered at a price of $6 per stencil? a. 333 b. 350 c. 400 d. 375
B With a linear demand curve, the slope of the line will remain constant. In this example, for every $1 that price increases, sales will decrease by 50 stencils.
For convenience, pricing objectives can be divided into three categories. What are they? a. perceived, actual, and unique-situational b. profit-oriented, sales-oriented, and status quo c. monopolistic, fixed, and variable d. refundable, competitive, and attainable
B PTS: 1 DIF: Definition REF: p. 513 OBJ: 2
A firm develops a satisfactory product/service, evaluates the total expense of the product/service, and sets a price that covers all expenses and a target profit. This type of pricing is product/service driven. What is being described? a. marginal revenue-based pricing b. market-driven pricing c. cost-based pricing d. demand-based pricing
C
The maintenance costs of WestJetLite's airplane storage facilities represents what type of cost? a. variable b. inelastic c. fixed d. elastic
C
The quantity of a product that people will buy/demand is most dependent on which of the following? a. supply b. quality parameters c. price d. promotion strategy
C
What is the extra revenue associated with selling an additional unit of output? a. average variable cost b. marginal cost c. marginal revenue d. net profit
C
When a seller determines the selling price by adding to cost an amount for profit and expenses not previously accounted for, what type of pricing is the seller using? a. demand-oriented pricing b. profit maximization pricing c. markup pricing d. target return pricing
C
Which costs do not change as output is increased or decreased? a. status quo b. variable c. fixed d. asset
C
Which of the following BEST describes revenue? a. It equals price minus costs. b. It equals quantity sold times profit margin. c. It equals price of goods times quantity sold. d. It equals return on investment.
C
Which of the following BEST describes selling against the brand? a. It helps manufacturers gain shelf visibility. b. It has resulted in manufacturers slowly gaining control of distribution channels. c. It has resulted in the sales declines of manufacturer brands. d. It has been a losing battle for private-label brands.
C
With respect to pricing, what has retailers' presence on the Internet resulted in? a. retailers gaining firmer control of market pricing at the expense of the end user b. the retailers' ability to charge what the market will bear c. the end user having more ability to comparison shop thus resulting in a larger measure of control over prices charged by retailers d. vast economies of scale resulting in higher profit margins for retailers
C
Regency Inc. makes disposable cap and gown sets for graduations. Each cap and gown set sells for $15. The average variable cost for manufacturing 10 cap and gown sets is $100. Total fixed costs for the year equal $65,000. What is the break-even point in units? a. 4,334 b. 1,300 c. 13,000 d. 765
C Break-even = $65,000/(15 - (100/10)) = 13,000
Ceylon Express sells bottled pasteurized tea to retailers. It has the following revenues and costs: Sales price per bottle: $0.50 Variable costs per bottle: $0.30 Total fixed costs (annual): $50,000 Tax rate: 20 percent What is the annual break-even point in unit for the company? a. 100,000 b. 50,000 c. 250,000 d. 166,667
C Break-even quantity is the total fixed costs ($50,000) divided by fixed cost contribution per unit ($.20) = $250,000.
Which way do most demand curves slope? a. upward and to the right b. vertically c. downward and to the right d. downward and to the left
C For most products when prices increase, demand will decrease.
According to the text, which of the following statements describes a limitation associated with break-even analysis? a. It can be expressed only as a break-even point in dollar amounts. b. It considers only demand. c. It is sometimes difficult to ascertain whether a cost is fixed or variable. d. It requires the calculation of marginal revenue.
C Not all costs are easily categorized because a cost may be fixed when viewed in the short term but variable when considered over a longer period of time.
An office supply store can buy an office chair for $30. If the store owner sells the office chair for $45, what is the markup based on the selling price? a. 25 percent b. 30 percent c. 50 percent d. 15 percent
C Price = Cost + Markup $45 = $30 + (.5) markup 15 = (.5)markup 50 percent = markup
An event planner wants to determine a price for a package of garland of silk flowers. Its cost is $7.00. She wants a markup of 30 percent based on selling price. Which of the following is closest to the price she should charge her customers? a. $15 b. $18 c. $10 d. $12
C Price = Cost + Markup Price = 7.00 + (.3) = $9.10 Price = $10
Which of the following pay for every activity of the company? a. investments b. prices c. revenues d. profits
C Revenue is price times units sold, or the total inflow of capital that is available to pay for the costs of manufacturing the good and running the business.
At the end of February, the Hearts and Flowers store reduced the price on all of its Valentine's Day's candy by 50 percent in order to liquidate this inventory. What type of pricing strategy is being used in this example? a. target return on investment b. satisfactory profit c. sales maximization d. profit maximization
C Sales maximization ignores profit and competition for the purpose of raising cash.
Mickaela McAuliffe wants to open a store to sell quilting supplies. She cannot decide whether to base her store's pricing objectives on market share, dollar sales, or unit sales. Regardless of which she chooses, how can her firm's pricing objective be categorized? a. as profit-oriented b. as cost-oriented c. as sales-oriented d. as status quo
C Sales-oriented pricing objectives are based on either market share or dollar or unit sales.
HeartGood Eggs decided to offer a much larger than customary profit margin to grocery wholesalers and retailers on its new low-cholesterol eggs. This pricing strategy is designed to do all of the following EXCEPT which one? a. develop wide and convenient distribution b. encourage trial by consumers if priced low by retailers c. maximize profit margin for the producer d. give dealers an incentive to promote the new product
C The egg producer is passing a large portion of the profit margin on to the wholesalers and retailers, not maximizing profit margin for itself.
Hal Macini, owner of Evergreen Landscaping, is more interested in earning customer goodwill than striving for maximum profit. He determines his prices by maintaining the company's profitability at a level that gives him a good living but will never make him a rich man. What is Macini basing his pricing policy on? a. creating the most sales possible b. maintaining stable sales levels c. earning satisfactory profits d. decreasing consumer demand
C The objective of satisfactory profits is characterized by seeking a level of profits that is satisfactory to management and owner(s).
The Pizza Depot is an independent retailer of pizzas and deli sandwiches. Which of the following is the BEST example of one of its fixed costs? a. paper napkins b. boxes for pizza delivery c. payment on leased pizza ovens d. electric and gas for baking
C The payment on leased equipment remains the same, no matter how many pizzas are produced, and therefore, is a fixed cost.
The price of the good or service is a key decision for a marketer because it most significantly and directly affects which of the following? a. the product's promotion b. the product's distribution c. the product's demand d. the product's quality
C The quantity of a product that people will buy depends on its price.
Sunny Florist is a flower shop that has recently moved to a new, larger location. At this new location, it has been unable to attract sufficient customers. Bonita Cho, its owner, does not have the cash to pay the current loan installment due on the building and inventory. Cho has decided to reduce all merchandise prices by at least 50 percent for a weekend sale so she can at least make her loan payment. Her pricing objective can be classified as which of the following? a. satisfactory profits b. asset maximization c. sales maximization d. market share maximization
C The strategy described will maximize sales dollars, but will not maximize or improve any of the other objectives in the long term.
The point at which marginal cost and marginal revenue are equal always results in which of the following? a. maximization of revenue b. maximization of costs c. maximization of profits d. break-even equilibrium
C Until the point where MC = MR, each unit of sales has contributed to additional profit; therefore, profit, not revenue or costs, has been maximized at MC = MR.
What is the biggest advantage associated with markup pricing? a. its inability to be decoded by customers b. its reliance on marginal costs c. its simplicity d. the fact that merchandise is never underpriced with this technique
C What could be easier than multiplying one number by another to get a price?
Procter & Gamble dropped the price of Pringle Potato Chips due to price competition and consumer demand. As a result of the price reduction, Procter & Gamble increased unit sales and earnings by 10 percent due to which of the following? a. market share fluctuations b. increases in both supply and demand c. elasticity of demand d. price wars with other snack food makers
C When Procter & Gamble reduced prices, sales and revenues increased. This shows that the demand for chips is elastic.
What happens when pricing is used as part of a promotion strategy? a. It must be accompanied by personal selling. b. It cannot be used as a public relations tool. c. It can be effectively used in trade promotions. d. It makes the establishment of a price-to-quality relationship unnecessary.
C PTS: 1 DIF: Comprehension REF: p. 532 OBJ: 6
The Fenton Company produces memorial bricks, which veterans' organizations, Chambers of Commerce, and other service organizations sell as fund raisers. The company has a target return on investment of 13 percent. This means that the Fenton Company has what type of pricing objective? a. sales maximization b. status quo c. market share maximization d. profit-oriented
D Targeted ROI is one of the most common types of profit-oriented pricing objectives.
A company using market share pricing has what type of pricing objective? a. profit-oriented b. demand-oriented c. supply-oriented d. sales-oriented
D
According to the text, how is price best described? a. the cost in dollars for a good or service as set by the producer b. the value of a barter good in an exchange c. money exchanged for a good or service d. the perceived value of a good or service
D
Aviation fuel for WestJetLite Airlines represents what type of cost? a. inelastic b. marginal c. fixed d. variable
D
Consumers exhibit less price sensitivity for all of the following reasons EXCEPT which one? a. when the product they are buying is unique b. when substitutes are hard to find c. when the product in question is in high demand d. when the total expenditure for a product is high relative to their income
D
What is a cost that changes with the level of output? a. an elastic cost b. a fixed cost c. a liquidity cost d. a variable cost
D
What is keystoning? a. the practice of maintaining variable costs at one-half of total fixed costs b. a method used for determining the point of elasticity c. a method of changing consumers' perceptions about price d. the practice of marking up prices by 100 percent
D
What is money left over after paying for company activities? a. a current asset b. return on investment c. a contribution margin d. profit
D
What is the point at which there is no inclination for the price to rise or fall? a. price symmetry b. price stability c. price status quo d. price equilibrium
D
What is the practice of marking up prices by 100 percent (or doubling the cost to set the selling price)? a. symmetrical pricing b. mark-on adding c. margin pricing d. keystoning
D
What occurs when an increase in sales exactly offsets a decrease in price so that total revenue remains exactly the same? a. highly elastic demand b. fixed elasticity c. inelastic demand d. unitary elasticity
D
When price decreases and total revenue falls, demand is which of the following? a. absolute b. stable c. elastic d. inelastic
D
Hostlight Industries operate a chain of moderately priced motels across Canada. The company has many businesses competing for tourist dollars, and some nights during the tourist season its motels are only half full. Other nights, Hostlight has to turn away guests because there are no vacancies. Assuming the quality of the room and the services provided by the motels remain the same, Hostlight Industries could use which of the following to fill unused rooms? a. service forecasting tools b. a capacity correlation system c. capacity maintenance tools d. a yield management system
D A yield management system is complex mathematical software used to profitably filled unused capacity.
Trident makes luxury bicycles. Its target market has been people who willingly pay $1,000 or more for their bicycles, and it acknowledges that its prices are high. Trident has lowered prices to target customers who want a good bike but who can't or won't spend $1,000 for one. Trident is most likely using what type of pricing objective? a. status quo or satisfactory profits b. profit maximization or target return on investment c. demand-oriented or supply-oriented d. market share or sales maximization
D By lowering prices, Trident can attract new buyers, thus increasing market share and sales volume.
Which of the following is most likely to be a variable cost for a manufacturer of amusement park rides? a. annual lease of a tractor-trailer used to deliver rides to buyers b. warehouse rent to store semi-finished and finished rides c. executive salaries d. steel, lumber, and aluminum used in construction of rides
D Cost of materials is the only item that varies depending upon the amount of units manufactured.
What happens when demand is elastic? a. As price goes up, revenue does not change. b. As price goes down, revenue goes down. c. As price goes down, revenue does not change. d. As price goes up, revenue goes down.
D If demand is elastic, price increases will decrease demand by a larger amount, reducing total revenue.
Antique Reproductions pays a manufacturer $800 for a hand-forged iron fireplace screen, and it sells the fireplace screen to a customer for $1,600. What is the markup on the screen? a. $160 b. $240 c. $400 d. $800
D Mark-up is selling price minus cost: $1,600 - $800 = $800.
An analyst at Onyx, a company that makes bakers' racks, has calculated the sales volume at which the company's costs equal revenue. This analyst announced at the company's quarterly sales meeting that 13,000 racks at an average cost of $150 must be sold to retail stores during the next quarter to reach this point. Which important factor has been excluded from his analysis? a. fixed and variable cost determination b. break-even analysis c. market share d. consumer demand
D Onyx's analyst includes only company costs and does not consider consumer demand.
Dosta Mattress Company manufactures and sells mattresses to retailers that then put their own store brand names on the product. At a price of $1,000, it sold 100 mattresses. It dropped its price to $600 and sold 175 mattresses. Regarding elasticity, what is demand for the mattresses? a. unitary b. inelastic c. asymmetrical d. elastic
D The first price is $1,000 with total revenue of $100,000; the second price is $600 with total revenue of $100,500. Therefore, price dropped, and total revenue went up.
Aviary Industries produces and markets unfinished birdhouses to craft retailers. When graphed, the demand schedule for its birdhouses is a straight line. If one birdhouse costs $20, 5,000 unfinished houses are sold. At $25, 4,500 birdhouses are sold. How many birdhouses will be sold if the price per house is increased to $30? a. 3,750 b. 3,500 c. 4,250 d. 4,000
D With a linear demand curve, the slope of the line will remain constant. In this example, for every $5 increase in price, sales will decrease by 500 birdhouses.
Why are marketing managers finding it more difficult to set prices in today's environment? a. Inflationary and recessionary periods have made customers less price sensitive. b. Fewer dealer and generic brands are available because the competition has been eliminated. c. Marketing managers are finding it difficult to compare prices between suppliers. d. The high rate of new product introductions has led to careful re-evaluation by consumers.
D With constant new product introductions, consumers have many alternative goods to choose from, and selecting the right price becomes a very complicated task for the marketing manager.
