Practice Quiz 5 - Mod 12
loss leader
a product is priced below cost in order to build traffic and promote sales of other, more profitable, products
differential pricing
charging different prices to different buyers of the same product aka price discrimination
price competition
emphasizing low price, and competing on that basis
marginal analysis
examining the effect on revenues and costs of producing and selling one additional unit
price lining
pricing a line of similar goods at certain predetermined prices, with clear price breaks
price leader
pricing a product at or even below cost in order to build traffic
captive pricing
pricing an additional product relatively low, when other products must be purchased. ex: printers and ink or razors and blades
transfer pricing
pricing of products which are sold within the firm
penetration pricing
setting a very low price for new product
pricing objectives
survival, profits, return on investment, market share, etc.
basis for pricing
the basis used to calculate selling price- cost, demand, competition, etc.
marginal revenue
the change in revenue from selling one additional unit
marginal cost
the cost to produce one additional unit
markup
the difference between cost and selling point
price elasticity of demand
the extent to which changing price changes the quantity demanded
breakeven point
the point at which total cost equals total revenue
total cost
the sum of all fixed costs and variable costs
The Panama Jack Company utilizes a special strategy to sell its ECO-shirt line. Its basic promotional tool is the discount. These discounts offered to middlemen for performing certain channel activities are referred to as ____ discounts.
trade
Tim O'Brien gets the invoice for a load of gravel he purchased last week. The price of the gravel was $55, and the terms are 2/10, n/45. If Tim pays the invoice in five weeks, he will owe
$55.00.
A measure of sensitivity of demand in relation to changes in price is
price elasticity of demand
Dividing the percentage change in quantity demanded by the percentage change in price gives the
price elasticity of demand.
The newest version of a product like Bose headphones is likely to use _____, while the new version of Red Bull is likely to use _____ .
price skimming; penetration pricing
If Ralph Lauren offers to reduce the price of its women's blazers when retailers buy more than 100 pieces, the designer is offering a ____ discount.
quantity
A price-skimming strategy assumes that
the initial demand is highly inelastic. setting the additional price very high, early in the product lifecycle
At the breakeven point,
the money a company brings in from selling products equals the amount spent producing the products.
In the long run, the J. F. Smucker Company must view ____ as the absolute lowest price for its Jif brand peanut butter.
total costs
When marketers at Consolidated Mustard Company tried to determine demand for their product, they found that at 50 cents, consumers wanted 2,000 jars; at $1.00, they wanted 6,000 jars; and at $1.50, they wanted 4,000 jars. What can Consolidated conclude?
Consolidated mustard is a prestige good.
What does the demand curve for a prestige product look like?
It forms a curve where the greatest quantity sold comes at a medium price and the quantities fall as the price increases or decreases.
What assumption does breakeven analysis make that limits its overall usefulness?
It relies on demand for a product being inelastic.
Which of the following is most likely to have an inelastic demand curve?
Nonelective surgery
_____________ is pricing a product at a moderate level and positioning it next to a more expensive model or brand.
Reference pricing
When Mia and Shane are planning their honeymoon, their travel agent tells them that if they buy a special package, their trip to Paris will include meals, tickets to the theater, and a rental car in addition to airfare and a hotel. This is an example of the use of
bundle pricing.
A market share objective
can be used effectively whether total industry sales are rising or falling.
The federal government often uses ____ pricing when it grants defense contracts.
cost-plus
A graph of the quantity of products marketers expect to sell at various prices if other factors remain constant is a
demand curve.
The three primary bases for developing prices are
demand, competition, and cost.
A price developed in the consumer's mind through experience with the product is called a(n)
internal reference price.
The decision of Macy's to use even prices such as $60 for a Ralph Lauren Polo is an application of ____; where ____ prices are often used to _____.
odd-even pricing; even; give a product an upscale or exclusive image.
If Wilson Sporting Goods faces a standard demand curve that exists for most products, as it raises the price of its tennis rackets,
the quantity demanded goes down.
When Cadillac buys headlights from Delco (both of which are divisions of General Motors), ____ pricing occurs.
transfer
A company trying to position itself as value-oriented should not
use premium pricing for its products. -pricing a product at a high level in order to enhance quality perceptions