MKT 3013 Chapter 14

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 ______.

$200

Assuming the economy and other factors stay the same, a downward-sloping demand curve for a product shows which of the following?

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

Which of the following are considered part of the five Cs of pricing?

-Competition -Competition -Channel members -Company objectives

How does penetration pricing discourage rival companies from entering the market?

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

Break-even analysis examines the relationships between which of the following?

-Cost -Price

A firm may set low prices to do which of the following?

-Encourage current firms to leave the market -Take market share away from competitors -Discourage new firms from entering the market

Which of the following do you need to know to calculate target return price?

-Expected unit sales -Fixed costs -Variable costs

The types of strategies that could be implemented in a profit orientation strategy include which of the following?

-Maximizing profits strategy -Target return pricing

Which of the following are drawbacks of a market penetration pricing strategy?

-Setting low prices may indicate to consumers that the product is not of high quality. -Setting the price lower than the item's value "leaves money on the table." -Companies need to have a large production capacity.

Firms engaged in competitor orientation might use which of the following strategies?

-Status quo pricing -Competitive parity

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.

Which of the following are reasons that firms implement a market penetration pricing strategy?

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

Channel members include which of the following?

-Wholesalers -Manufacturers -Retailers

If McDonald's reduces the price of a Big Mac by 25% and sales increase by more than 50%, the firm could describe demand as which of the following?

-elastic -price sensitive

Which of the following is an example of a monopoly?

A county water board that is the sole provider of water to the county

Price insensitive

Apple increases the price of the new iPhone by 25% and sales decrease less than 1%.

What advantage is there for a company to offer products at prices below actual market value?

Customers are more likely to try the product because they are not risking as much money.

Which of the following types of theories is the maximizing profits strategy based on?

Economic

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.

False

True or false: Puffery is illegal in advertising.

False

Which of the following is another term for target return percentage?

Markup

Price sensitive

Pepsi drops the price of a six-pack by 50% and sales increase 78%.

________ ________ occurs when a company has a very low price for its product(s) in order to drive its competition out of business.

Predatory ; pricing

Target return pricing is an example of what type of orientation?

Profit

Which strategy is used by firms that believe increasing volume of sales will help the firm more than increasing profits?

Sales-oriented strategy

Which of the following is an example of a monetary sacrifice included in the overall price of a product or service?

Shipping

On which of the following does brand loyalty have the most significant effect?

Substitution effect

______ makes up one of the Cs of the five Cs of pricing.

The customer

Which of the following is an example of an oligopoly?

The oil industry, with a limited number of providers

How do managers use break-even analysis?

To find a production quantity where, for a given price, costs are equal to revenues

True or false: Customers are one of the five Cs of pricing.

True

True or false: In general, customers are more sensitive to price increases than to price decreases.

True

When a new product is launched in a market where similar items are already being sold, how is the price typically determined?

Value-based methods

When firms compete by lowering price at retail, they are engaged in ______.

a price war

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 ______.

break-even analysis

The point at which the number of units sold generates enough revenue to equal total costs is known as ______.

break-even point

Status quo pricing ______.

changes prices only to meet those of competition

The five Cs of pricing include ______.

channel members

The five Cs of pricing include ______.

company objectives

One of the five Cs of pricing is ______.

competition

The five Cs of pricing are company objectives, customers, cost, channel members, and ________.

competition

If a firm sets prices similar to major competitors' prices, this is an example of ______ pricing.

competitive parity

If firms strategize according to the premise that they should measure themselves primarily against firms challenging them directly for customers, they have adopted a ______ orientation.

competitor

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

When firms use a penetration pricing strategy, they expect the experience ________ effect to occur.

curve

A national retail chain has signs throughout its stores that say: "Sale! 50% off our regular price!" Journalists investigate and discover that the company has never sold any merchandise at what it calls its regular price. The business has engaged in ______.

deceptive reference pricing

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.

demand

Profit alone ______ how many units should be sold before a firm breaks even.

does not indicate

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

downward

Prestige products or services do not follow the ______ curve.

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 ______.

elastic

With the ______ pricing strategy, a company adopts retail prices that are typically somewhere between the product's regular price and the sharply discounted sale prices that competitors occasionally offer.

everyday low

The strategy of ______ appeals to consumers because it reduces their need to spend time comparing prices at various stores.

everyday low pricing (EDLP)

Sometimes the cost per unit of a new product will decrease as the total sales increase. This is known as the ______ effect.

experience curve

The ______ pricing strategy features frequent sales, during which prices are lowered for a short time.

high/low

When consumers relish the challenge of getting the lowest price and are willing to expend the time and effort to seek out the lowest price every time, retailers should use the ______ pricing strategy.

high/low

When there are many substitute products available, the price elasticity of demand for a given product will likely be ______.

higher

A demand curve enables a firm to examine prices ______.

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 ______.

increase

If a company needs to raise the prices of some its products, it should choose to raise the prices of ______ products because relatively fewer customers will stop buying the product as a result.

inelastic

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 ______.

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.

market penetration

In many geographic areas, utilities such as water and electricity are available from only one provider. This is an example of a level of competition called a(n) ______.

monopoly

When only a few firms dominate a market, it is known as ______ competition.

oligopolistic

Under competitive ________, companies set their prices close to those of their major competitors.

parity

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.

penetration pricing

A firm that opens new stores in a community and sets artificially low prices with the sole purpose of driving competing stores in the area out of business is said to engage in a type of behavior called ______ pricing.

predatory

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 ______.

predatory pricing

Products that cost a lot of money but that people buy anyway because of the status and exclusivity that they project to others are called ________ products.

prestige

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

price

The overall sacrifice a consumer makes to acquire a product or service is known as ________.

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 ______.

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 demand

In preparation for introducing a new doll to the market, a toy company advertises and creates so much demand that little girls are lined up at the stores, determined to be the first to own one. The toy company sells these first dolls at twice their actual retail value. This is an example of ______.

price skimming

When Apple first introduced the iPhone, some consumers were willing to pay the premium $599 price tag. Apple was using a(n) ______ strategy

price skimming

Competition, channel members, costs, customers, and company objectives are the five critical components of ______

pricing

Competition, channel members, costs, customers, and company objectives are the five critical components of ______.

pricing

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

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.

sales

Compared to other company objectives, a sales-oriented firm ______.

sets prices very low to generate new sales, even if profits suffer

With ________ quo pricing, companies change their prices only to meet those of their competitors.

status

The five Cs of pricing are examples of pricing ______.

strategies

A pricing ______ is the general way a company decides how its prices will be determined over the long term, based on the five Cs of pricing.

strategy

When a firm is aiming for a particular amount of profit as its overriding concern, it usually implements ______.

target profit 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 ______.

target return pricing

When incomes drop, the demand for an elastic product ______.

tends to decrease

As people make more money, their spending behavior changes. This is known as ______.

the income effect

Setting the price for a new product is less difficult when other products like it are already being sold. This is true because ______.

the market will have established a general value for that sort of item

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

Price is best defined as ______.

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

Loyalty toward a particular brand makes other brands seem less substitutable, which decreases ______

the price elasticity of demand

Consumers' ability to replace other products with the focal brand is known as ______.

the substitution effect

An example of a nonmonetary sacrifice made in acquiring a product or service is ______

time

The _____ is fixed costs plus the sum of the variable costs.

total cost

Price times quantity is ______.

total revenue

Variable cost per unit times quantity equals ______.

total variable cost

Total cost is ______.

variable costs plus fixed costs

A price ________ occurs when oligopolistic companies compete with each other by repeatedly lowering their prices.

war

At the break-even point, profits on the sale of a product are ______.

zero