Q&A Hero

Q: A skimming pricing policy is likely to be most effective whenA. consumers perceive your product to be similar to other products on the market.B. a lower price will significantly lower fixed costs.C. customers interpret the high price as signifying high quality.D. consumers tend to be price sensitive.E. it will be easier to set measurable sales unit goals.

Q: A hardware store advertises a 3/8" Black and Decker Power Drill for $29.95. You enter the store intending to purchase the drill. The salesperson informs you that they are all sold out. She tells you that the sale drills were factory seconds and that if you are going to be doing any kind of serious woodworking, you should buy the Model 3309, which sells for $49.99. This scenario has elements of which type of illegal pricing practice? A. predatory pricing B. price discrimination C. price fixing D. bait and switch E. conditional bargains

Q: A skimming pricing policy is likely to be most effective when A. lowering the price has only a minor effect on increasing the sales volume and reducing the unit cost. B. consumers tend to be price sensitive. C. it will be easier to set measurable sales unit goals. D. a lower price will significantly lower fixed costs. E. consumers perceive your product to be similar to other products on the market.

Q: When a firm offers a very low price on a product to attract customers to a store, and once in the store, the customer is persuaded to purchase a higher-priced item, the practice is referred to as A. predatory pricing. B. deceptive pricing. C. price discrimination. D. caveat emptor. E. bait and switch.

Q: To promote their business, some psychics advertise free tarot-card readings and other insights into their customers' futures on television. Unfortunately, this "free reading" has cost some unsuspecting callers as much as $700 in phone charges. This sort of pricing practice would be primarily monitored by the A. Consumer Protection Agency. B. U.S. Department of Justice. C. Federal Trade Commission. D. Federal Communications Commission. E. Consumer Product Safety Commission.

Q: A skimming pricing policy is likely to be most effective when A. consumers tend to be price sensitive. B. it will be easier to set measurable sales unit goals. C. a lower price will significantly lower fixed costs. D. consumers perceive your product to be similar to other products on the market. E. customers are willing to buy immediately at the high initial price.

Q: Deceptive pricing practices are outlawed by legislation and enforced by which federal agency? A. Consumer Protection Agency B. U.S. Department of Justice C. Federal Communications Commission D. U.S. Department of Commerce E. Federal Trade Commission

Q: Price deals that mislead consumers fall into the category of A. predatory pricing. B. deceptive pricing. C. price discrimination. D. caveat emptor. E. resale price maintenance.

Q: Skimming pricing refers to A. setting the lowest initial price possible when introducing a new or innovative product in order to skim sales from competitors. B. setting the highest initial price that customers really desiring the product are willing to pay when introducing a new or innovative product. C. setting a low initial price on a new product to appeal immediately to the mass market. D. the practice of replacing promotional allowances with higher manufacturer list prices. E. setting a high price so that quality- or status-conscious consumers will be attracted to the product and buy it.

Q: In one of its least favorite actions, Amazon.com was caught fiddling with its prices. Avid DVD buyers, buying in quantity for resale, found that the online retailer was offering different customers different prices for the same DVD, and complained vociferously. Company officials admitted that the company was trying to see how much it could charge for an item before buyers balked. Amazon was caught attempting A. horizontal price-fixing. B. price discrimination. C. resale price maintenance. D. predatory pricing. E. bait and switch pricing.

Q: Setting the highest initial price that customers really desiring the product are willing to pay when introducing a new or innovative product is referred to as a A. skimming strategy. B. penetration strategy. C. price-lining strategy. D. experience-curve pricing strategy. E. prestige pricing strategy.

Q: Price discrimination is illegal under the A. Sherman Act. B. Consumer Goods Pricing Act. C. Robinson-Patman Act. D. Federal Trade Commission Act. E. Anti-Competitive Act.

Q: Skimming pricing is considered to be a __________ approach to pricing. A. demand-oriented B. cost-oriented C. profit-oriented D. competition-oriented E. service-oriented

Q: The practice of charging different prices to different buyers for goods of like grade and quality is referred to as A. horizontal price-fixing. B. resale price maintenance. C. price discrimination. D. predatory pricing. E. bait and switch pricing.

Q: Price discrimination refers toA. the practice of charging different prices to different buyers for goods of like grade and quality.B. an arrangement a manufacturer makes with a reseller to handle only its products and not those of a competitor.C. the practice of charging a very low price for a product with the intent of driving competitors out of business.D. a conspiracy among firms to set prices for a product or service.E. a seller's requirement that the purchaser of one product also buy another product in the line.

Q: Demand-oriented approaches weigh factors that underlie expected __________ more heavily than such factors as cost, profit, and competition when selecting a price level. A. total revenue B. stakeholder concerns C. prevailing prices D. product substitutes E. customer tastes

Q: Mark Johnson, the manager of a discount consumer electronics store, was approached by the manufacturer's representative on behalf of a marketer of a popular and profitable line of storage racks. The manufacturer's representative implied that if Johnson doesn't raise the retail prices for the storage racks to those paid by the marketer's non-discount customers, Johnson's supply of racks may be severely curtailed. The manufacturer's representative is guilty of attempting A. horizontal price-fixing. B. vertical price-fixing. C. price discrimination. D. predatory pricing. E. bait and switch pricing.

Q: Which of the following statements about the price-setting process is most accurate? A. When selecting a strategy for setting an initial price, it does not matter which one you use as long as you stick with it. B. Sometimes pricing strategies overlap, and a seasoned marketer will consider several strategies when choosing an approximate price level. C. Demand-oriented pricing approaches rely heavily on competitors' prices. D. Skimming pricing is a competition-oriented pricing strategy. E. Penetration pricing is the best pricing strategy for companies trying to meet the goals of a profit-oriented pricing approach.

Q: Vertical price fixing refers toA. two or more competitors explicitly or implicitly setting prices.B. the practice of charging different prices to different buyers for goods of like grade and quality.C. controlling agreements between independent buyers and sellers whereby sellers are required not to sell products below a minimum retail price.D. a conspiracy among firms to set prices for a product or service.E. a seller's requirement that the purchaser of one product also buy another product in the line.

Q: Figure 11-2 Figure 11-2 above represents the four approaches to selecting an appropriate price level. Box D includes customary and loss leader so it represents which approach? A. competition-oriented approach B. cost-oriented approach C. profit-oriented approach D. results-oriented approach E. demand-oriented approach

Q: Controlling agreements between independent buyers and sellers whereby sellers are required to not sell products below a minimum retail price is called A. competitive collusion. B. price cooperation. C. horizontal price fixing. D. lateral price fixing. E. vertical price fixing.

Q: Figure 11-2 Figure 11-2 above represents the four approaches to selecting an appropriate price level. Box C includes target profit and target return on sales so it represents which approach? A. demand-oriented approach B. profit-oriented approach C. competition-oriented approach D. cost-oriented approach E. results-oriented approach

Q: Two or more competitors explicitly or implicitly setting prices is referred to as __________. A. competitive collusion B. vertical price fixing C. horizontal price fixing D. lateral price fixing E. price cooperation

Q: Figure 11-2 Figure 11-2 above represents the four approaches to selecting an appropriate price level. Box B includes standard markup and cost-plus so it represents which approach? A. demand-oriented approach B. profit-oriented approach C. competition-oriented approach D. results-oriented approach E. cost-oriented approach

Q: Price fixing is illegal under the A. Sherman Act. B. Consumer Goods Pricing Act. C. Robinson-Patman Act. D. Federal Trade Commission Act. E. Clayton Act.

Q: Figure 11-2 Figure 11-2 above represents the four approaches to selecting an appropriate price level. Box A represents which approach? A. cost-oriented approach B. profit-oriented approach C. competition-oriented approach D. demand-oriented approach E. results-oriented approach

Q: Price fixing refers to A. an arrangement a manufacturer makes with a reseller to handle only its products and not those of a competitor. B. the practice of charging a very low price for a product with the intent of driving competitors out of business. C. the practice of charging different prices to different buyers for goods of like grade and quality. D. a conspiracy among firms to set prices for a product. E. a seller's requirement that the purchaser of one product also buy another product in the line.

Q: The key to setting a final price for a product is finding an approximate price level to use as a reasonable starting point. Four common approaches to selecting an approximate price level are: (1) demand-oriented; (2) cost-oriented; (3) profit-oriented; and (4) __________ approaches. A. revenue-oriented B. distribution-oriented C. stakeholder-oriented D. competition-oriented E. cause-oriented

Q: A conspiracy among firms to set prices for a product is referred to as A. price discrimination. B. price fixing. C. predatory pricing. D. tying arrangements. E. exclusive dealing.

Q: The key to setting a price for a product is finding an approximate price level to use as a reasonable starting point. Four common approaches to selecting an approximate price level are: (1) demand-oriented; (2) cost-oriented; (3) __________; and (4) competition-oriented approaches. A. stakeholder-oriented B. revenue-oriented C. profit-oriented D. distribution-oriented E. cause-oriented

Q: Four pricing practices are closely scrutinized because of potential unethical or illegal actions. They include: (1) predatory pricing; (2) price discrimination; (3) deceptive pricing; and (4) __________. A. price discounting B. flexible pricing C. price fixing D. delayed payment penalties E. price elasticity

Q: The key to setting a final price for a product is finding an approximate price level to use as a reasonable starting point. Four common approaches to selecting an approximate price level are: (1) demand-oriented; (2) __________; (3) profit-oriented; and (4) competition-oriented approaches. A. cost-oriented B. cause-oriented C. revenue-oriented D. stakeholder-oriented E. distribution-oriented

Q: Four pricing practices are closely scrutinized because of potential unethical or illegal actions. They include: (1) price fixing; (2) predatory pricing; (3) deceptive pricing; and (4) __________. A. price discounting B. lateral price fixing C. regional rollbacks D. delayed payment penalties E. price discrimination

Q: Calculate a firm's total revenue (TR) using the following information: the unit price (P) for a product is $40; the quantity sold (Q) is 2,000; the fixed cost (FC) is $50,000; and the variable cost (VC) is $20,000. A. $10,000 B. $50,000 C. $110,000 D. $150,000 E. cannot be determined with the information provided

Q: Four pricing practices are closely scrutinized because of potential unethical or illegal actions. They include: (1) price fixing; (2) price discrimination; (3) predatory pricing; and (4) __________. A. price discounting B. deceptive pricing C. lateral price fixing D. regional rollbacks E. delayed payment penalties

Q: A firm's profit equation equals A. Total cost + Total revenue or [(Fixed cost + Variable cost) + (Unit price Quantity sold)]. B. Total revenue - Total cost or [(Unit price Quantity sold) - (Fixed cost + Variable cost)]. C. Total cost - Marginal cost or [(Fixed cost + Variable cost) - (Unit price Quantity sold)]. D. Total cost - Variable cost or [(Fixed cost + Variable cost) - (Unit price Quantity sold)]. E. Total revenue/Total cost or [(Unit price Quantity sold) (Fixed cost + Variable cost)].

Q: Four pricing practices are closely scrutinized because of potential unethical or illegal actions. They include: (1) price fixing; (2) price discrimination; (3) deceptive pricing; and (4) __________. A. predatory pricing B. price discounting C. lateral price fixing D. regional rollbacks E. delayed payment penalties

Q: The formula, Total revenue - Total cost or [(Unit price Quantity sold) - (Fixed cost + Variable cost)] represents __________. A. the value equation B. the sales ratio C. average revenue D. the break-even point E. the profit equation

Q: All of the following are legal or ethical considerations when setting a final price EXCEPT: A. price discrimination. B. predatory pricing. C. showrooming. D. price fixing. E. deceptive pricing.

Q: A firm's profit equation demonstrates that profit equals __________. A. Total cost + Total revenue B. Total revenue - Total cost C. Marginal revenue - Marginal cost D. Price Quantity E. Total revenue + Marginal cost

Q: A manufacturing company that introduces a product must know or anticipate what specific price its __________ currently charge or may charge in the future. A. present and potential competitors B. financial institutions C. suppliers D. unions E. regulators

Q: The __________ equation = (Unit price Quantity sold) - Total cost. A. total revenue B. variable cost C. net present value D. profit E. break-even point

Q: Which of these is true about a pair of $200 designer denim jeans?A. The labor to make them comprises the largest percentage of the final price.B. The marketer must cover all of its operating costs while earning a profit.C. The specialty retailers that sell them account for only 25% of the cost so that the jeans can experience demand pull.D. The contract manufacturer for the jeans receives the least percentage of the final price.E. Material suppliers for designer denim jeans take the largest percentage of the final price.

Q: If you wanted to buy a McDonald's Big Mac, small fries, and a small drink separately, it will you cost you $6.19. However, if you purchased these three items together as part of the firm's Extra Value Meal package, you would pay only $4.39, savings 80 cents. This "Extra Value Meal" price serves as __________ to you and other consumers, who compare the costs and benefits of substitute items to a bundle containing those items. A. a marginal analysis B. a profit equation C. a reference value D. a break-even analysis E. price elasticity of demand

Q: Which of the following statements is most accurate? A. Nonprofit organizations are exempt from having to cover the costs of producing and/or marketing their products. B. Socially responsible corporations should have the pricing constraint of covering all costs of producing and marketing their products, but they should not price their products to earn a profit. C. Marketers must ensure that firms in their channels of distribution make an adequate profit or they will be cut off from their customers. D. Price elasticity of demand makes it virtually impossible for companies to cover all their marketing and production costs at all times. E. Marketing and production costs are the most difficult and expensive aspect of pricing because they draw so much capital away from other departments in the organization.

Q: In the purchase of the sugar substitute Splenda, you may compare it to something you know about like real sugar. Although Splenda is more expensive than sugar, is purchased by many consumers because it contains no calories. This situation involves the consumer considering A. a marginal analysis. B. a profit equation. C. a break-even analysis. D. price elasticity of demand. E. a reference value.

Q: Which of the following statements regarding pricing constraints is most accurate? A. When a product is in the introductory stage of the product life cycle, there is very little latitude in setting the initial price since consumers still don't know what the product can really do. B. A company has more latitude in setting an initial price if the product is in the introductory stage of its life cycle. C. The greater the number of products in a company's product line, the less the product features of similar products can affect price. D. The newest addition to a company's product line should always have the highest price in order to maintain the value of existing brands. E. To avoid cannibalization, the newest product addition to a company's product line should never have a price lower than the other offerings in the line.

Q: Which of the following statements about the product life cycle as a pricing constraint is most accurate? A. The newer a product is, the higher the price that can usually be charged. B. The later in the product life cycle a product is, the higher the price that can usually be charged. C. Once a product is considered nostalgic, the price will continue to rise indefinitely. D. Fads will generally have only two price points - high and low - but the values of those price points usually be within 10 percent of each other. E. Prices should not be changed until a product reaches its maturity stage.

Q: A reference value involves comparing the costs and benefits of __________. A. substitute items B. items of equal or greater value C. products with which a consumer is familiar and items the consumer has not seen or used before D. items from one particular distributor E. intangible items

Q: Most consumers realize that the quality of diamonds varies, and most believe the higher the price of a diamond, the higher its quality. This is an example of price influencing the perception of overall quality, and therefore __________ to consumers. A. acceptable cost B. perceptual investment C. barter potential D. return on investment E. value

Q: Which of the following statements regarding pricing constraints is most accurate? A. Generally, the greater the demand for a product, the higher the price that can be set. B. At the corporate level, when setting pricing constraints, a firm must disregard current conditions in the marketplace because they are too temporal for long-term planning. C. Pricing constraints must always be set, but they are rarely enforced. D. It is possible to create pricing constraints with the greatest range possible in order to anticipate any and all changes in the marketing environment. E. Even if a firm is trying to satisfy its obligations to its customers and society in general, it should ignore setting pricing constraints.

Q: Which of the following statements is most accurate?A. For some products, price influences the perception of overall quality, and ultimately value, to consumers.B. A consumer's view of a product's value is always tied to quality.C. A consumer's view of value is a function of his or her education and income.D. Price plays only a small part in a consumer's perceived value of a product or service.E. Price plays a large role in assessing value but a very minor role in assessing quality.

Q: Which of these statements about consumer demand as a pricing constraint is most accurate?A. The number of potential buyers for the product class has little effect on the price a seller can charge.B. The number of potential buyers for the product affects the price a seller can charge, but only if the product is a luxury item.C. The number of potential buyers for the product affects the price a seller can charge, but only if the product is a necessity item.D. The number of potential buyers for the brand affects the price a seller can charge in the growth stage of a product life cycle, but not in the introductory stage.E. The number of potential buyers generally affects the price a seller can charge.

Q: To increase value, marketers may __________, decrease price, or do both. A. decrease benefits B. increase benefits C. increase price D. increase advertising E. do nothing and let the perceived value of the item increase as it matures in the life cycle

Q: All of the following are examples of pricing constraints EXCEPT: A. newness of the product. B. competitors' prices. C. newness of the product (stage in its life cycle). D. social responsibility. E. demand for the product class, product, or brand.

Q: To increase value the most, marketers should A. decrease benefits. B. decrease benefits and increase price. C. decrease price and increase benefits. D. decrease price and decrease benefits. E. do nothing and let the perceived value of the item increase as it matures in its life cycle.

Q: Which term describes factors that limit the range of prices a firm may set? A. price fixings B. pricing constraints C. price elasticities D. pricing demands E. pricing margins

Q: The ratio of perceived benefits to __________ is referred to as value. A. price B. prestige C. perceived quality D. profits E. perceived costs

Q: Pricing constraints refer to A. barriers that must be overcome in order to set pricing objectives. B. competitive pricing advantages one firm has over another. C. different pricing strategies for each of the firm's products. D. factors that limit the range of prices a firm may set. E. barriers to entry a firm faces when launching a new product.

Q: The ratio of __________ to price is referred to as value. A. prestige value B. perceived benefits C. costs D. perceived quality E. profits

Q: Pricing constraints areA. the controllable elements in a firm's marketing mix that allow it to charge the highest price possible.B. formulas used in establishing break-even points, price elasticity of demand, and marginal analysis of revenues and costs.C. factors that limit the range of prices a firm may set.D. high-level goals held by the firm that recommend methods of pricing a firm may use.E. virtual boundaries used when setting the initial price on a new product.

Q: The ratio of perceived benefits to price is referred to as A. the price-quality relationship. B. customer value pricing. C. value-added pricing. D. value analysis. E. value.

Q: Factors that limit the range of prices a firm may set are referred to as __________. A. pricing boundaries B. pricing constraints C. demand factors D. pricing barriers E. pricing restrictions

Q: Suppose you want to buy an all-electric Tesla Model S, the world's leading all-electric, zero-emission car that has a 265-mile range and can be recharged in three hours. The Tesla Model S Performance model has a list price of $87,500. However, you want several options (Performance Plus Package, red multi-coat armor paint, Tech package, Sound Studio Package, home charging station, performance wheels, and others) that will cost $17,500. An extended warranty will add an additional $5,000. However, if you put $50,000 down now and finance the balance over the next year, you will receive a dealer rebate of $5,000 off the list price. The dealer will give you a $7,000 trade-in allowance for your 2008 Honda Civic DX four-door sedan. In addition, you will have to pay a state sales tax of $10,000, an auto registration fee of $1,000 to the state, and a $1,000 destination charge to ship and prep the car. But because the Tesla Model S is an alternative energy vehicle, you qualify for a $2,500 state rebate and a $7,500 federal tax credit! Finally, your total finance charge is $7,000. Applying the price equation, what is your final price for the Tesla Model S? A. $57,000 B. $68,000 C. $87,500 D. $107,000 E. $151,000

Q: A firm may forgo higher profit on sales and follow which of the following pricing objectives because it wants to recognize its stakeholder obligations? A. profit B. market share C. unit volume D. survival E. social responsibility

Q: Tara is enrolled for spring semester at college. The tuition is $6,000, but she has a scholarship for $1,000 as well as a work-study grant of $1,500. The health fees and student activity fees are $150 for the semester. What is the final price that Tara will pay for the spring semester? A. $2,500 B. $2,650 C. $3,150 D. $3,650 E. $6,150

Q: For years, a local had customers lining up around the building for breakfast. When the city announced that it was building an off ramp from the highway that would conceivably double his customer traffic, the proprietor was delighted. Having had so much success in previous years, he felt certain his savings could hold him over through the three-month construction. Unfortunately, construction delays continued for an additional six months and the work still continued. The owner's best pricing objective at this point would most likely be __________. A. profit B. market share C. unit volume D. survival E. social responsibility

Q: A company that manages apartments decides to buy 15 new dishwashers at a list price of $550 each as replacements for a small apartment complex it owns. Because the company is buying more than 10 dishwashers, it is eligible for a $150-per-unit quantity discount. Financing charges total $20 per unit. The company gets $10 per dishwasher for 15 used trade-ins. What is the final price the company will pay for EACH dishwasher? A. $390 B. $400 C. $410 D. $430 E. $730

Q: Some specialty-toy retailers pursue a __________ pricing objective to generate cash to ward off bankruptcy. A. market share B. survival C. sales revenue D. single product line E. profit

Q: According to the price equation, a product's or service's final price equals its list price minus incentives and allowances plus A. profits. B. commissions. C. trade-ins. D. extra fees. E. taxes.

Q: A negative aspect of selecting unit volume as a pricing objective is that A. production often can not keep up with demand. B. there are increased carrying costs with extensive inventories. C. if price reductions are used to achieve volume objectives, it can sometimes come at the expense of profits. D. it can create competition between divisions within the organization itself causing conflicts over the allocation of resources. E. it always positively correlates with a sales revenue objective.

Q: According to the price equation, final price equals __________ minus incentives and allowances plus extra fees. A. salaries B. list price C. profits D. trade-ins E. taxes

Q: Unit volume as a pricing objective refers to A. the quantity of products to be produced or sold. B. the ratio of price per unit to unit variable cost. C. the ratio of production costs to the minimum sales price that would still generate profit. D. the total quantity of product sold by a firm relative to the total quantity of product sold by all firms in the industry. E. variable cost expressed on a per unit basis for a product.

Q: According to the price equation, final price equals list price minus __________ plus extra fees. A. profits B. commissions C. trade-ins D. taxes E. incentives and allowances

Q: If the CEO of the Clorox Company were to say, "We want to control 60 percent of the bleach market within the next five years," he would have set a __________ pricing objective. A. profit B. sales C. unit volume D. market share E. social responsibility

Q: The use of special fees and surcharges is driven by consumers' zeal for low prices and __________. A. the ease of making price comparisons on the Internet B. value, the idea of getting "more" for their money C. the need for extra accessories D. avoiding state sales taxes from Internet purchases E. a dislike of price haggling or negotiating

Q: The use of special fees and surcharges is driven by consumers' zeal for __________ combined with the ease of making price comparisons on the Internet. A. high prices B. low prices C. quality D. value E. warranties

Q: Which of the following statements regarding a market share pricing objective is most accurate? A. A market share objective is often difficult for product managers since stockholders are looking for immediate dividends (return of profits). B. Although increased market share is a primary goal of some firms, others see it as a means to other ends, such as increased sales or profits. C. Selecting market share as a pricing objective is particularly effective if industry sales are rising. D. An advantage of market share as a pricing objective is that it is particularly insensitive to competitors' actions. E. Ironically, a market share objective is realized by raising prices in order to increase consumer confidence during the decline stage of a product's life cycle.

Q: Barter is the practice of exchanging products and services for other products and services rather than for __________. A. value B. ideas C. promises D. tariffs E. money

Q: Companies often pursue a market share objective when __________. A. industry sales are flat or declining B. profits are increasing C. industry sales are beginning to rise D. there is a sudden increase in production costs E. stockholders are seeking higher dividends