MKTG Chapter 11 Pretest
According to the law of demand, which of the following is true? A) If prices decrease, customers will buy more. B) Customers are not aware of small price changes. C) The effect on demand from changes in price cannot be accurately predicted. D) Demand equals supply. E) If prices increase, customers will buy more.
A) If prices decrease, customers will buy more.
Which of the following occurs when price is inelastic? A) Price and revenue change in the same direction. B) Revenues decrease when price increases. C) Revenue is unaffected by price changes. D) Quantity demanded increases when price increases. E) The demand curve is more horizontal.
A) Price and revenue change in the same direction.
Which of the following is true about noncumulative quantity discounts? A) They encourage large single orders. B) They encourage a strong relationship between buyer and seller. C) They are based on a total quantity purchased within a set time period. D) They typically involve giving the buyer a credit to use against future orders. E) They encourage small, regularly spaced orders.
A) They encourage large single orders.
A firm is using ________ when it charges a high, premium price for a new product with the intention of reducing the price in the future. A) a skimming price B) trial pricing C) value pricing D) penetration pricing E) prestige pricing
A) a skimming price
Trade or functional discounts are offered by manufacturers to which of the following? A) channel intermediaries who perform wholesaling tasks that the manufacturer would otherwise have to perform B) consumers who earn a price reduction for buying in bulk C) intermediaries who pay their bills before they are due D) manufacturers that agree to exclusive distribution contracts E) the government market and other organizations that require bid proposals
A) channel intermediaries who perform wholesaling tasks that the manufacturer would otherwise have to perform
The changes in prices of other products affect the demand for an item. This is a phenomenon called ________. A) cross-elasticity of demand B) complementary elasticity C) interdependent elasticity D) parallel elasticity E) variable demand
A) cross-elasticity of demand
Which of the following is NOT a type of pricing objective? A) elasticity B) market share C) profit D) competitive effect E) image enhancement
A) elasticity
The break-even point is the point at which ________. A) the total revenue and total costs lines intersect B) demand equals supply C) the production of one more unit will not increase profit D) the company can pay all of its long-term debt E) a firm's profit goal is reached
A) the total revenue and total costs lines intersect
When setting prices, a company must consider factors in its pricing environment. ________ such as the business cycle, economic growth, and consumer confidence can have a significant impact on the firm's pricing strategies. A) Consumer trends B) Economic trends C) Competitors' responses D) Regulations E) Market structures
B) Economic trends
________ do not vary with the number of units produced. A) Liquidity costs B) Fixed costs C) Variable costs D) Marginal costs E) Everyday costs
B) Fixed costs
Why do marketers consider prestige products to be an exception to the law of demand? A) The demand curve for prestige products slopes downward and to the right. B) Increasing the price of prestige products can make them seem more desirable. C) Demand for prestige products often is greater than supply. D) Prestige products such as diamonds, sapphires, and emeralds are nonrenewable resources. E) Customers are more aware of any price changes to prestige products.
B) Increasing the price of prestige products can make them seem more desirable.
________ are the per-unit costs of production that will fluctuate depending on how many units or individual products a firm produces. A) Fixed costs B) Variable costs C) Average fixed costs D) Marginal costs E) Everyday costs
B) Variable costs
Which of the following is an external influence that affects pricing decisions? A) the salaries of production management B) competition C) the salaries of finance management D) overall pricing objectives E) the company's overall marketing strategy
B) competition
How is the price elasticity of demand calculated? A) averaging previous demand levels with new demand levels B) dividing percentage change in quantity demanded by percentage change in price C) dividing the new quantity demanded by the percentage change in price times 100 D) multiplying the percentage change in quantity demanded by the percentage change in price E) dividing the percentage change in price by the percentage change in quantity demanded
B) dividing percentage change in quantity demanded by percentage change in price
Which of the following is an example of a pricing strategy that focuses on customers' needs? A) price leadership B) everyday low pricing C) distribution-based pricing D) cost-plus pricing E) skimming
B) everyday low pricing
When demand is ________, increases in price result in increases in total revenues, while decreases in price result in decreases in total revenue. A) elastic B) inelastic C) flexible D) supply-driven E) cross-elastic
B) inelastic
In a market with ________, there are many sellers, each offering a slightly different product. Firms can differentiate products and focus on nonprice competition. A) pure competition B) monopolistic competition C) oligopolistic competition D) a pure monopoly E) socialism
B) monopolistic competition
The value of something we give up in order to obtain something else is referred to as a(n) ________. A) transformation cost B) opportunity cost C) exchange D) variable cost E) marginal cost
B) opportunity cost
A new product carries a low price for a limited period of time to attract customers in what type of pricing strategy? A) price skimming B) trial pricing C) penetration pricing D) specialty pricing E) price bundling
B) trial pricing
________ is a pricing tactic a firm uses for two products that work only when used together. The firm sells one item at a very low price and then makes its profit on the second high-margin item. A) Two-part pricing B) Price bundling C) Captive pricing D) Penetration pricing E) Skim pricing
C) Captive pricing
Another name for F.O.B. factory pricing is ________ pricing. A) captive B) F.O.B destination C) F.O.B. origin D) F.O.B. delivered E) basing-point
C) F.O.B. origin
________ lets marketers look at cost and demand at the same time and identify the output and the price that will generate the maximum profit. A) Break-even analysis B) SWOT analysis C) Marginal analysis D) Competitive analysis E) Supply-demand analysis
C) Marginal analysis
________ is the assignment of value, or the amount a consumer must give to receive a product. A) Profit B) Exchange C) Price D) Demand E) Yield
C) Price
________ refers to the sale of two or more goods or services as a single package for one price. A) Two-part pricing B) Captive pricing C) Price bundling D) List pricing E) Everyday low pricing
C) Price bundling
Which of the following statements about price is true? A) Pricing is the least important marketing mix element. B) Price is always a monetary value. C) Price can mean exchange of nonmonetary goods or services. D) Most consumers believe price has little influence on their purchase decisions. E) Pricing is unaffected by changes in the business cycle.
C) Price can mean exchange of nonmonetary goods or services.
In price planning, a firm would be most likely to set a profit objective for which of the following products? A) a commodity such as coal B) toothpaste C) a fad such as Beanie Babies D) lightbulbs E) construction materials
C) a fad such as Beanie Babies
To determine the break-even point, a firm needs to first do which of the following? A) determine what percentage of the market it wants B) determine the point at which supply equals demand C) calculate the contribution per unit D) conduct an environmental audit E) determine total market share
C) calculate the contribution per unit
Lawyers, accountants, and other professionals typically price by adding a standard markup for profit. This is known as ________. A) target costing B) value pricing C) cost-plus pricing D) break-even pricing E) penetration pricing
C) cost-plus pricing
The method of setting prices in which marketers total all the costs for the product and then add an amount to arrive at the selling price is called ________. A) supply-based pricing B) target costing C) cost-plus pricing D) yield management pricing E) demand-based pricing
C) cost-plus pricing
Break-even analysis is used to examine the relationship between ________. A) fixed costs and variable costs B) costs and contributions C) costs and price D) demand and costs E) demand and profits
C) costs and price
In which type of pricing is the selling price based on an estimate of volume or quantity a firm can sell in different markets at different prices? A) capacity management B) target costing C) demand-based D) penetration E) distribution-based
C) demand-based
What is the first step a marketer should take to estimate a product's potential sales? A) determine maximum production levels B) conduct a survey of buyers' intentions C) estimate total demand for the product in the market D) determine how to expand market share E) predict the company's market share
C) estimate total demand for the product in the market
In a market with ________, the market consists of many buyers and a few sellers who are likely to have similar pricing. A) pure competition B) monopolistic competition C) oligopolistic competition D) a pure monopoly E) socialism
C) oligopolistic competition
Which of the following is a measure of the sensitivity of customers to changes in price? A) a liquidity ratio B) demand sensitivity C) price elasticity of demand D) marginal analysis E) basing-point
C) price elasticity of demand
With ________, the seller pays both the cost of loading and transporting the product to the customer. A) uniform delivered pricing B) basing-point pricing C) F.O.B. origin pricing D) F.O.B. delivered pricing E) F.O.B. factory pricing
D) F.O.B. delivered pricing
Which of the following statements about marginal analysis is true? A) Marginal analysis is typically a straightforward procedure to apply in real-life situations. B) An important factor in marginal analysis is predicting demand, which is an exact science. C) Marginal revenue is also the demand curve, so it represents the amount customers will buy at different prices. D) Profit is maximized at the point at which marginal cost is exactly equal to marginal revenue. E) The cost of producing a unit beyond the point when marginal cost equals marginal revenue is much less than the revenue from the sale of that unit.
D) Profit is maximized at the point at which marginal cost is exactly equal to marginal revenue.
________ are the sum of the ________ and ________ for any given level of production. A) Fixed costs; variable costs; marginal costs B) Fixed costs; break-even costs; variable costs C) Variable costs; fixed costs; marginal costs D) Total costs; fixed costs; variable costs E) Break-even costs; fixed costs; total costs
D) Total costs; fixed costs; variable costs
A company that intends to maintain low-end pricing policies to make the market unattractive for its competitors is using which of the following pricing objectives in its price planning? A) sales B) profit C) break-even D) competitive effect E) customer satisfaction
D) competitive effect
The most common cost-based approach to pricing is ________. A) demand-based pricing B) psychological pricing C) yield management pricing D) cost-plus pricing E) cost-minus pricing
D) cost-plus pricing
A firm is using a(n) ________ strategy when it introduces a product at a very low price to gain market share early on. A) skimming pricing B) trial pricing C) intensive pricing D) penetration pricing E) price bundling
D) penetration pricing
A list price is also referred to as a(n) ________. A) captive price B) bundled price C) channel price D) suggested retail price E) basing-point price
D) suggested retail price
Two forms of demand-based pricing are ________. A) price bundling and captive pricing B) price skimming and penetration pricing C) fixed pricing and variable pricing D) target costing and yield management pricing E) price leadership and everyday low pricing
D) target costing and yield management pricing
When a company charges the same rate to ship a product anywhere in the United States, it is using which form of pricing? A) freight absorption B) F.O.B. factory C) F.O.B. origin D) uniform delivered E) basing-point
D) uniform delivered
Which of the following statements about the break-even point is true? A) It is used to determine how many more units need to be sold to increase market share by a specific amount. B) It is a technique used to calculate fixed costs. C) It determines the amount of retained earnings a company will have during an accounting period. D) It is a technique marketers use to examine the relationship between supply and demand. E) It is calculated using contribution per unit costs and total fixed costs.
E) It is calculated using contribution per unit costs and total fixed costs.
Which of the following is true about the demand curve? A) It is used to illustrate the effect of price on the quantity supplied. B) It is always graphically depicted by a straight line. C) It shows the quantity of product customers will buy in a market during a period of time even if other factors change. D) It usually slopes upward and to the right. E) It shows the relationship between product demand and product price.
E) It shows the relationship between product demand and product price.
Which of the following should be true for a skimming price to be successful? A) Target consumers should be price sensitive. B) Supply should exceed demand. C) Demand must be stabilizing. D) The producer should use intensive distribution. E) There should be little chance that competitors can quickly enter the market.
E) There should be little chance that competitors can quickly enter the market.
Demand would most likely be inelastic for which of the following? A) lamb chops and t-bone steaks B) gourmet cheese C) symphony tickets D) luxury watches E) basic necessities
E) basic necessities
With target costing, marketers first ________ and then ________. A) build the marketing mix; identify the target market B) identify target markets; set different prices for each market C) design the product; determine its cost D) use skimming pricing; use penetration pricing E) determine a reasonable selling price; target costs to ensure that the price is met
E) determine a reasonable selling price; target costs to ensure that the price is met
Whether a firm sells to businesses or directly to consumers, most pricing structures are built around which of the following? A) distribution costs B) channel length C) trade discounts D) sales promotions E) list prices
E) list prices
Which of the following is a reason that a marketer would choose a penetration pricing strategy? A) to ensure the company has the ability to increase prices once demand decreases B) to focus on the rapid achievement of profit objectives C) to appeal to different consumer segments with different levels of price sensitivity D) to create markets for highly technical products E) to discourage competition from entering the market
E) to discourage competition from entering the market