Q&A Hero

Q: If the formula for elasticity results in a measure of elasticity (E) equal to 1, the increase in sales exactly offsets the decrease in price so that total revenue remains the same.

Q: If the formula for elasticity results in a measure of elasticity (E) greater than 1, demand is said to be inelastic.

Q: If demand for milk is inelastic, consumers will not change their purchasing habits greatly when the price of milk changes.

Q: Profit maximization is the price at which supply and demand are equal, and there is no inclination for prices to rise or fall.

Q: When pricing goals are mainly sales oriented, cost considerations usually dominate.

Q: Status quo pricing objectives suggest that the firm should try to keep its price consistent regardless of what competition does with its prices.

Q: Maximization of cash should be a long-term objective.

Q: Sales-oriented pricing objectives are either based on market share or dollar or unit sales.

Q: A marketer using a profit maximization strategy will charge the highest prices the market will bear.

Q: Today's firms must develop specific, measurable, and attainable pricing objectives if they hope to survive in highly competitive markets.

Q: Profit is equal to the price charged to customers multiplied by the number of units sold.

Q: Price is defined as the perceived value of a good or service that is exchanged for a certain dollar amount.

Q: Which pricing method (skimming, penetration, or status quo) would be most appropriate for each of the following products: (1) a new kind of automatic vacuum cleaner; (2) brightly colored wooden blocks to be used as a child's toy; (3) a new, low-cost, no-calorie fat substitute; (4) a home computer; and (5) a designer perfume. Briefly justify your answers.

Q: List the three basic pricing methods. Name one advantage and one disadvantage associated with using each method.

Q: Name and describe the three basic strategies for setting a price on a new good or service. Under what conditions is each of the three basic pricing methods successful?

Q: What activities occur once the marketing manager has established pricing goals? Why are these activities important?

Q: List in order the four steps used to set the right price for a product.

Q: Discuss how consumers use the price-quality relationship to evaluate goods and explain how marketers can take advantage of this consumer response.

Q: What is the impact of the Internet on pricing strategies?

Q: How does price interact with the other three Ps of the marketing mix?

Q: As a product moves through its life cycle, the demand for the product and the competitive conditions tend to change. For each stage in the product life cycle, discuss pricing strategies appropriate for that stage.

Q: Name two advantages and two disadvantages associated with the use of break-even analysis.

Q: What is a break-even point? The Catera Company makes and sells cotton candy machines. What is the break-even volume for Catera machines in units?Catera Machines Financial InformationSalesperson salary $ 40,000Advertising 100,000Research and development 20,000Production equipment 20,000Overhead allocation 20,000 Catera's selling price $600Average variable cost $350

Q: What is marginal revenue? Based on the provided schedule from the Chesapeake Bay Swing Company, at which quantity should Chesapeake Bay stop producing additional swings?Quantity Marginal Revenue Marginal Cost Total Profit1 $260 $160 $2002 110 140 2703 190 120 3404 170 140 3705 160 160 3706 150 180 3407 120 220 240

Q: Calculate answers for the following scenarios if retailer markups are based on their selling price: a) A retailer sells a set of measuring cups for $2.50 after adding $.50 to the original cost. What is the markup percentage? b) The cost of a food blender for the retailer is $40 and the retailer applies a markup of $60. What is the retail markup percentage? c) A retailer marks up all products by 20 percent. If a set of glasses costs the retailer $10, what will the final selling price be? d) A retailer marks up all products by 75 percent. If the selling price of a set of plastic bowls is $4, what was the cost to the retailer?

Q: What is the difference between fixed and variable costs? Give examples of each type of cost.

Q: What are the problems associated with the use of a cost-based pricing strategy? What contribution does cost make to the setting of prices?

Q: Explain yield management systems (YMS) and discuss the types of industry were they are most appropriate.

Q: List five factors that affect elasticity of demand and briefly describe how each affects demand.

Q: Define elasticity of demand and compare and contrast the three types of demand: elastic, inelastic, and unitary. What would the demand curve for elastic and inelastic demand look like when graphed?

Q: The daily demand for bottled water is 35 bottles when the price is set at $1. However, if the price is raised to $5, the demand is only 5 bottles. The bottled water producer is willing to supply 40 bottles if the price is set at $5 per bottle, but will only supply 10 bottles if the price is set at $2. Draw the supply and demand curves for the water bottles on the graph below. Label each curve and each axis. At what level does equilibrium occur? What are the areas of surplus and shortage?

Q: List the two primary determinants of price. What other factors can affect price setting?

Q: Last quarter Abingdon Company sold 1,000 decorative decals for $1 each, Cedar Decaliania sold 200 decorative decals at $4 each, Creative Decals sold 500 decals at $2 each, and Donnelly, Inc. sold 300 decals for $4 apiece. Assuming the four companies are the only firms competing in the decorative decal market, calculate unit and dollar market share for each company for last quarter. For each company, which market share figure might be used in an advertisement for that company?

Q: List the three categories of pricing objectives and then two specific strategies in each category that a marketer could implement to achieve those objectives.

Q: One of the most stressful and pressure-filled tasks of the marketing manager is attempting to set the right price. Specify three aspects of the current pricing environment in consumer markets that have contributed to the difficulty in setting correct prices.

Q: Define price and discuss the two roles price plays in the evaluation of product alternatives.

Q: NARRBEGIN: Apple iPhoneApple iPhoneApple Inc. iPhone went on sale on June 29, 2007. Apple's loyal and enthusiastic customer base is known for rushing to purchase its new products and the iPhone enjoyed a tremendous amount of "buzz" before its introduction. As expected, the iPhone entered the market at what many believed to be a high price ($599). However, within weeks the price was reduced to $399. By the end of 2007 over 8 million iPhones had sold in the U.S. marketplace. By most, if not all measures, the original iPhone was a huge success for Apple and it exclusive U.S. carrier AT&T.On July 11th, 2008, Apple Inc. released the iPhone 3G, which it advertised as twice as fast as the original iPhone for half the cost. However, in order to obtain an iPhone at the new price of $199, buyers had to agree to a two-year service contract with AT&T. This allows iPhone users to receive phone calls and email, and search the web on the same device. A single charge of $59.99 from AT&T included 450 minutes of cellular calls, with free nights and weekend minutes, unlimited data, visual voicemail, 200 text messages, rollover minutes, and unlimited mobile-to-mobile service within the AT&T network. This approach succeeded and over a million iPhone 3Gs were sold during the introductory weekend.NARRENDRefer to Apple iPhone. Apple and AT&T have several options available for competing with Samsung and its Instinct phone. If Apple and AT&T choose to compete by pricing their product at a low price to drive Samsung out of the market, this would be considered _____.a. price fixingb. retail price maintenancec. price discriminationd. predatory pricinge. fair competition

Q: NARRBEGIN: Apple iPhoneApple iPhoneApple Inc. iPhone went on sale on June 29, 2007. Apple's loyal and enthusiastic customer base is known for rushing to purchase its new products and the iPhone enjoyed a tremendous amount of "buzz" before its introduction. As expected, the iPhone entered the market at what many believed to be a high price ($599). However, within weeks the price was reduced to $399. By the end of 2007 over 8 million iPhones had sold in the U.S. marketplace. By most, if not all measures, the original iPhone was a huge success for Apple and it exclusive U.S. carrier AT&T.On July 11th, 2008, Apple Inc. released the iPhone 3G, which it advertised as twice as fast as the original iPhone for half the cost. However, in order to obtain an iPhone at the new price of $199, buyers had to agree to a two-year service contract with AT&T. This allows iPhone users to receive phone calls and email, and search the web on the same device. A single charge of $59.99 from AT&T included 450 minutes of cellular calls, with free nights and weekend minutes, unlimited data, visual voicemail, 200 text messages, rollover minutes, and unlimited mobile-to-mobile service within the AT&T network. This approach succeeded and over a million iPhone 3Gs were sold during the introductory weekend.NARRENDRefer to Apple iPhone. Best Buy also carries the iPhone. If Best Buy, AT&T, and Apple meet to agree on a price for the iPhone, it could be said that _____ has occurred.a. price fixingb. retail price maintenancec. price discriminationd. penetration pricinge. price skimming

Q: NARRBEGIN: Apple iPhoneApple iPhoneApple Inc. iPhone went on sale on June 29, 2007. Apple's loyal and enthusiastic customer base is known for rushing to purchase its new products and the iPhone enjoyed a tremendous amount of "buzz" before its introduction. As expected, the iPhone entered the market at what many believed to be a high price ($599). However, within weeks the price was reduced to $399. By the end of 2007 over 8 million iPhones had sold in the U.S. marketplace. By most, if not all measures, the original iPhone was a huge success for Apple and it exclusive U.S. carrier AT&T.On July 11th, 2008, Apple Inc. released the iPhone 3G, which it advertised as twice as fast as the original iPhone for half the cost. However, in order to obtain an iPhone at the new price of $199, buyers had to agree to a two-year service contract with AT&T. This allows iPhone users to receive phone calls and email, and search the web on the same device. A single charge of $59.99 from AT&T included 450 minutes of cellular calls, with free nights and weekend minutes, unlimited data, visual voicemail, 200 text messages, rollover minutes, and unlimited mobile-to-mobile service within the AT&T network. This approach succeeded and over a million iPhone 3Gs were sold during the introductory weekend.NARRENDRefer to Apple iPhone. Samsung recently introduced its Instinct cellular phone, apparently to compete directly with the iPhone. If Samsung checked the price of the iPhone at the Apple Store and AT&T locations and then set the price of the Instinct to match the iPhone's price, it would be using a _____ pricing approach.a. bracketingb. penetrationc. status quod. retain maintenancee. skimming

Q: NARRBEGIN: Apple iPhoneApple iPhoneApple Inc. iPhone went on sale on June 29, 2007. Apple's loyal and enthusiastic customer base is known for rushing to purchase its new products and the iPhone enjoyed a tremendous amount of "buzz" before its introduction. As expected, the iPhone entered the market at what many believed to be a high price ($599). However, within weeks the price was reduced to $399. By the end of 2007 over 8 million iPhones had sold in the U.S. marketplace. By most, if not all measures, the original iPhone was a huge success for Apple and it exclusive U.S. carrier AT&T.On July 11th, 2008, Apple Inc. released the iPhone 3G, which it advertised as twice as fast as the original iPhone for half the cost. However, in order to obtain an iPhone at the new price of $199, buyers had to agree to a two-year service contract with AT&T. This allows iPhone users to receive phone calls and email, and search the web on the same device. A single charge of $59.99 from AT&T included 450 minutes of cellular calls, with free nights and weekend minutes, unlimited data, visual voicemail, 200 text messages, rollover minutes, and unlimited mobile-to-mobile service within the AT&T network. This approach succeeded and over a million iPhone 3Gs were sold during the introductory weekend.NARRENDRefer to Apple iPhone. When the iPhone 3G was released at half the cost of the current iPhone, it appeared that Apple's strategic focus had shifted from maximizing profits to gaining market share. Its lowered price was consistent with the _____ pricing approach.a. price-bracketingb. penetration pricingc. price-liningd. price-fixinge. price skimming

Q: NARRBEGIN: Apple iPhoneApple iPhoneApple Inc. iPhone went on sale on June 29, 2007. Apple's loyal and enthusiastic customer base is known for rushing to purchase its new products and the iPhone enjoyed a tremendous amount of "buzz" before its introduction. As expected, the iPhone entered the market at what many believed to be a high price ($599). However, within weeks the price was reduced to $399. By the end of 2007 over 8 million iPhones had sold in the U.S. marketplace. By most, if not all measures, the original iPhone was a huge success for Apple and it exclusive U.S. carrier AT&T.On July 11th, 2008, Apple Inc. released the iPhone 3G, which it advertised as twice as fast as the original iPhone for half the cost. However, in order to obtain an iPhone at the new price of $199, buyers had to agree to a two-year service contract with AT&T. This allows iPhone users to receive phone calls and email, and search the web on the same device. A single charge of $59.99 from AT&T included 450 minutes of cellular calls, with free nights and weekend minutes, unlimited data, visual voicemail, 200 text messages, rollover minutes, and unlimited mobile-to-mobile service within the AT&T network. This approach succeeded and over a million iPhone 3Gs were sold during the introductory weekend.NARRENDRefer to Apple iPhone. When Apple Inc. introduced the iPhone at a high price it was probably using a _____ strategy to maximize profits.a. price-bracketingb. penetration pricingc. price-liningd. price-fixinge. price skimming

Q: NARRBEGIN: Smelly FruitSmelly FruitAt first glance there is little to like about the durian. The durian is a fruit popular in Thailand that is spiky outside and stinky on the inside. When confronted with the durian for the first time, the Wall Street Journal recently reported that westerners often describe its distinctive sulphurous smell with words like stinky socks and manure. However, the durian is so popular in Thailand that one variety of the durian fruit, called the Kan Yao, has been selling for as high as $200. Even at that price, supply of the Kan Yao cannot keep up with demand. There are approximately 30 varieties of the durian grown in Thailand, with the most plentiful selling in the $15 range. The yellow flesh of the durian, the part you eat, has very powerful smell, but possesses a sweet, nutty taste that Thais cannot seem to get enough of at any price.NARRENDRefer to Smelly Fruit. The durian fruit is a very unique product. To many Thai's no other fruit taste or smells anything like the durian. It's uniqueness, in the eyes of the customer, would tend to have which of the followinga. It would have little affect.b. It would tend to make the durian more price elastic.c. It would tend to make the durian more price inelastic.d. It would tend to raise the price in comparison to purchasing power.e. It would tend to impact the durian's stage in the PLC.

Q: NARRBEGIN: Smelly FruitSmelly FruitAt first glance there is little to like about the durian. The durian is a fruit popular in Thailand that is spiky outside and stinky on the inside. When confronted with the durian for the first time, the Wall Street Journal recently reported that westerners often describe its distinctive sulphurous smell with words like stinky socks and manure. However, the durian is so popular in Thailand that one variety of the durian fruit, called the Kan Yao, has been selling for as high as $200. Even at that price, supply of the Kan Yao cannot keep up with demand. There are approximately 30 varieties of the durian grown in Thailand, with the most plentiful selling in the $15 range. The yellow flesh of the durian, the part you eat, has very powerful smell, but possesses a sweet, nutty taste that Thais cannot seem to get enough of at any price.NARRENDRefer to Smelly Fruit. Over the past two years the price for Kan Yao durian fruit has increased by 50%. If the amount sold has remained almost constant, we would say that demand is _____ :a. elasticb. inelasticc. unitaryd. Highly elastice. Moderately elastic

Q: NARRBEGIN: Smelly FruitSmelly FruitAt first glance there is little to like about the durian. The durian is a fruit popular in Thailand that is spiky outside and stinky on the inside. When confronted with the durian for the first time, the Wall Street Journal recently reported that westerners often describe its distinctive sulphurous smell with words like stinky socks and manure. However, the durian is so popular in Thailand that one variety of the durian fruit, called the Kan Yao, has been selling for as high as $200. Even at that price, supply of the Kan Yao cannot keep up with demand. There are approximately 30 varieties of the durian grown in Thailand, with the most plentiful selling in the $15 range. The yellow flesh of the durian, the part you eat, has very powerful smell, but possesses a sweet, nutty taste that Thais cannot seem to get enough of at any price.NARRENDRefer to Smelly Fruit. At $200 per Kan Yao demand for the fruit appears to be higher than supply. Suppose at a price of $225, the amount demanded exactly meets the amount farmers are willing and able to supply. In this case the $225 price would be considered the _____ price.a. Price equilibriumb. Sales maximizationc. Profit maximizationd. ROI maximizatione. Yield management

Q: NARRBEGIN: Smelly FruitSmelly FruitAt first glance there is little to like about the durian. The durian is a fruit popular in Thailand that is spiky outside and stinky on the inside. When confronted with the durian for the first time, the Wall Street Journal recently reported that westerners often describe its distinctive sulphurous smell with words like stinky socks and manure. However, the durian is so popular in Thailand that one variety of the durian fruit, called the Kan Yao, has been selling for as high as $200. Even at that price, supply of the Kan Yao cannot keep up with demand. There are approximately 30 varieties of the durian grown in Thailand, with the most plentiful selling in the $15 range. The yellow flesh of the durian, the part you eat, has very powerful smell, but possesses a sweet, nutty taste that Thais cannot seem to get enough of at any price.NARRENDRefer to Smelly Fruit. Suppose you have decided to buy land in Thailand and become a durian producer. You see that the customary price for a Kan Yao is $200, so that is the price you decide to charge for your durian crop. This suggests you are using a _____ approach to setting your price.a. Profit maximizationb. Market sharec. Return on investment (ROI)d. Sales maximizatione. Status quo

Q: NARRBEGIN: Smelly FruitSmelly FruitAt first glance there is little to like about the durian. The durian is a fruit popular in Thailand that is spiky outside and stinky on the inside. When confronted with the durian for the first time, the Wall Street Journal recently reported that westerners often describe its distinctive sulphurous smell with words like stinky socks and manure. However, the durian is so popular in Thailand that one variety of the durian fruit, called the Kan Yao, has been selling for as high as $200. Even at that price, supply of the Kan Yao cannot keep up with demand. There are approximately 30 varieties of the durian grown in Thailand, with the most plentiful selling in the $15 range. The yellow flesh of the durian, the part you eat, has very powerful smell, but possesses a sweet, nutty taste that Thais cannot seem to get enough of at any price.NARRENDRefer to Smelly Fruit. Suppose a Thai farmer sells 10 Kan Yao durians in the marketplace at the going rate of $200 each. If it cost a Thai farmer $125 to produce and market the Kan Yao durian that she has sold, the difference between these two numbers ($75), times the number sold (10), represents the farmers _____.a. ROIb. revenuec. profitd. returnse. COGS

Q: NARRBEGIN: Smelly FruitSmelly FruitAt first glance there is little to like about the durian. The durian is a fruit popular in Thailand that is spiky outside and stinky on the inside. When confronted with the durian for the first time, the Wall Street Journal recently reported that westerners often describe its distinctive sulphurous smell with words like stinky socks and manure. However, the durian is so popular in Thailand that one variety of the durian fruit, called the Kan Yao, has been selling for as high as $200. Even at that price, supply of the Kan Yao cannot keep up with demand. There are approximately 30 varieties of the durian grown in Thailand, with the most plentiful selling in the $15 range. The yellow flesh of the durian, the part you eat, has very powerful smell, but possesses a sweet, nutty taste that Thais cannot seem to get enough of at any price.NARRENDRefer to Smelly Fruit. If it cost a Thai farmer $100 to produce and $25 to market the Kan Yao durian that she sells for $200 at the marketplace, her revenue, for each durian sold, would be _____.a. $125b. $200c. $25d. $100e. $325

Q: NARRBEGIN: American Girl DollAmerican Girl DollThe American Girl catalog began as a concept to introduce today's girls to girls who lived in the past. Each historically accurate doll is carefully crafted and dressed and has books to describe her life. For example, Kristen is an 1854 pioneer girl who is growing up in Minnesota. Her story begins with her long sea voyage from Sweden. The basic doll dressed in a calico dress and striped apron plus the hardcover story of how she got to Minnesota costs $90. Six more hardback books of Kristen's life are available for $74.95. Kristen's nightgown costs $20, and a matching one for the doll owner is an additional $38. Buy both together and the price is only $50. A hand-painted wooden bed and trunk for Kristen are available for $213. Shipping costs vary with the price of the merchandise ordered.NARRENDRefer to the American Girl Doll. You can buy a doll at Wal-Mart for $5.99. The high price of the American Girl doll is used to promote a high-quality image. The American Girl uses a _____ pricing strategy.a. markupb. demand-basedc. prestiged. penetratione. supply-derived

Q: NARRBEGIN: American Girl DollAmerican Girl DollThe American Girl catalog began as a concept to introduce today's girls to girls who lived in the past. Each historically accurate doll is carefully crafted and dressed and has books to describe her life. For example, Kristen is an 1854 pioneer girl who is growing up in Minnesota. Her story begins with her long sea voyage from Sweden. The basic doll dressed in a calico dress and striped apron plus the hardcover story of how she got to Minnesota costs $90. Six more hardback books of Kristen's life are available for $74.95. Kristen's nightgown costs $20, and a matching one for the doll owner is an additional $38. Buy both together and the price is only $50. A hand-painted wooden bed and trunk for Kristen are available for $213. Shipping costs vary with the price of the merchandise ordered.NARRENDRefer to the American Girl Doll. In terms of producing the doll and its accessories, the calico fabric used to make Kristen's dress is an example of a(n):a. markup costb. variable costc. fixed costd. derived coste. elastic cost

Q: NARRBEGIN: American Girl DollAmerican Girl DollThe American Girl catalog began as a concept to introduce today's girls to girls who lived in the past. Each historically accurate doll is carefully crafted and dressed and has books to describe her life. For example, Kristen is an 1854 pioneer girl who is growing up in Minnesota. Her story begins with her long sea voyage from Sweden. The basic doll dressed in a calico dress and striped apron plus the hardcover story of how she got to Minnesota costs $90. Six more hardback books of Kristen's life are available for $74.95. Kristen's nightgown costs $20, and a matching one for the doll owner is an additional $38. Buy both together and the price is only $50. A hand-painted wooden bed and trunk for Kristen are available for $213. Shipping costs vary with the price of the merchandise ordered.NARRENDRefer to the American Girl Doll. In terms of the costs of producing the doll and its accessories, the salary of the graphic designer who does the layout for the American Girl catalog is a(n):a. markup costb. variable costc. fixed costd. derived coste. elastic cost

Q: NARRBEGIN: American Girl DollAmerican Girl DollThe American Girl catalog began as a concept to introduce today's girls to girls who lived in the past. Each historically accurate doll is carefully crafted and dressed and has books to describe her life. For example, Kristen is an 1854 pioneer girl who is growing up in Minnesota. Her story begins with her long sea voyage from Sweden. The basic doll dressed in a calico dress and striped apron plus the hardcover story of how she got to Minnesota costs $90. Six more hardback books of Kristen's life are available for $74.95. Kristen's nightgown costs $20, and a matching one for the doll owner is an additional $38. Buy both together and the price is only $50. A hand-painted wooden bed and trunk for Kristen are available for $213. Shipping costs vary with the price of the merchandise ordered.NARRENDRefer to the American Girl Doll. Based on the information in the narrative above, which of the following factors is most likely to affect the elasticity of demand for the doll?a. the absence of substitutesb. the existence of complementary productsc. the price relative to purchasing powerd. product durabilitye. a variety of alternative uses for the product

Q: NARRBEGIN: American Girl DollAmerican Girl DollThe American Girl catalog began as a concept to introduce today's girls to girls who lived in the past. Each historically accurate doll is carefully crafted and dressed and has books to describe her life. For example, Kristen is an 1854 pioneer girl who is growing up in Minnesota. Her story begins with her long sea voyage from Sweden. The basic doll dressed in a calico dress and striped apron plus the hardcover story of how she got to Minnesota costs $90. Six more hardback books of Kristen's life are available for $74.95. Kristen's nightgown costs $20, and a matching one for the doll owner is an additional $38. Buy both together and the price is only $50. A hand-painted wooden bed and trunk for Kristen are available for $213. Shipping costs vary with the price of the merchandise ordered.NARRENDRefer to the American Girl Doll. The popularity of the American girl dolls is so great that an increase in the price of the basic Kristen doll and books by 5 percent will not significantly affect the demand for the product. The means that the demand for the American Girl doll is:a. elasticb. derivedc. a multiplierd. inelastice. symmetrical

Q: NARRBEGIN: American Girl DollAmerican Girl DollThe American Girl catalog began as a concept to introduce today's girls to girls who lived in the past. Each historically accurate doll is carefully crafted and dressed and has books to describe her life. For example, Kristen is an 1854 pioneer girl who is growing up in Minnesota. Her story begins with her long sea voyage from Sweden. The basic doll dressed in a calico dress and striped apron plus the hardcover story of how she got to Minnesota costs $90. Six more hardback books of Kristen's life are available for $74.95. Kristen's nightgown costs $20, and a matching one for the doll owner is an additional $38. Buy both together and the price is only $50. A hand-painted wooden bed and trunk for Kristen are available for $213. Shipping costs vary with the price of the merchandise ordered.NARRENDRefer to the American Girl Doll. American Girl is the primary seller of historically accurate dolls with accompanying books in a market where there is very little competition. It has no cash flow problems and is not interested in maximizing its sales. From this information, you should know American Girl has _____ pricing objectives.a. status quob. psychologicalc. profit-orientedd. sales-orientede. supply-derived

Q: NARRBEGIN: American Girl DollAmerican Girl DollThe American Girl catalog began as a concept to introduce today's girls to girls who lived in the past. Each historically accurate doll is carefully crafted and dressed and has books to describe her life. For example, Kristen is an 1854 pioneer girl who is growing up in Minnesota. Her story begins with her long sea voyage from Sweden. The basic doll dressed in a calico dress and striped apron plus the hardcover story of how she got to Minnesota costs $90. Six more hardback books of Kristen's life are available for $74.95. Kristen's nightgown costs $20, and a matching one for the doll owner is an additional $38. Buy both together and the price is only $50. A hand-painted wooden bed and trunk for Kristen are available for $213. Shipping costs vary with the price of the merchandise ordered.NARRENDRefer to the American Girl Doll. What is the revenue to American Girl if it sells 20 basic Kristen doll and books?a. $90.00b. $100.95c. $427.95d. $1,800.00e. $3,600

Q: NARRBEGIN: Specialty CakesSpecialty CakesImagine you're planning an after-symphony fund-raising party, and you need a life-size grand piano cake. Or, you are a developer proposing a new shopping center to a group of investors, and you want to serve a cake shaped like an architectural rendition of the center. Is this impossible? No, you just need to contact Cecilia Villaveces Cakes. She actually built a life-size grand piano for a gala in Macon, Georgia. You can expect to pay anywhere from $75 to $10,000 for one of Cecilia's artistic creations, depending on complexity of design and size. She uses only the best ingredients, and no two cakes are ever quite alike.NARRENDRefer to Specialty Cakes. There are many occasions for which people may need to buy a cake, but most people do not have the time or interest to learn about cakes and their bakers. These people who do not know about the quality of the Cecilia Villaveces Cakes might choose them because they:a. equate price and qualityb. know cakes are in the mature stage of their product life cyclec. realize that this is a monopolistic industryd. believe there is not a relationship between price and qualitye. desire value-added services

Q: NARRBEGIN: Specialty CakesSpecialty CakesImagine you're planning an after-symphony fund-raising party, and you need a life-size grand piano cake. Or, you are a developer proposing a new shopping center to a group of investors, and you want to serve a cake shaped like an architectural rendition of the center. Is this impossible? No, you just need to contact Cecilia Villaveces Cakes. She actually built a life-size grand piano for a gala in Macon, Georgia. You can expect to pay anywhere from $75 to $10,000 for one of Cecilia's artistic creations, depending on complexity of design and size. She uses only the best ingredients, and no two cakes are ever quite alike.NARRENDRefer to Specialty Cakes. To set the price of her cakes, Cecilia simply doubles her costs, which often include several hours of labor and expensive raw materials. This method of price setting is called:a. mark-on pricingb. premium pricingc. keystoningd. add-on pricinge. superimposed pricing

Q: NARRBEGIN: Specialty CakesSpecialty CakesImagine you're planning an after-symphony fund-raising party, and you need a life-size grand piano cake. Or, you are a developer proposing a new shopping center to a group of investors, and you want to serve a cake shaped like an architectural rendition of the center. Is this impossible? No, you just need to contact Cecilia Villaveces Cakes. She actually built a life-size grand piano for a gala in Macon, Georgia. You can expect to pay anywhere from $75 to $10,000 for one of Cecilia's artistic creations, depending on complexity of design and size. She uses only the best ingredients, and no two cakes are ever quite alike.NARRENDRefer to Specialty Cakes. Which of the following is the BEST example of a variable cost for Cecilia Villaveces Cakes?a. life insurance on Ceciliab. flour and sugarc. ovens used for cooking cakesd. business licensee. interest payment to the bank

Q: NARRBEGIN: Specialty CakesSpecialty CakesImagine you're planning an after-symphony fund-raising party, and you need a life-size grand piano cake. Or, you are a developer proposing a new shopping center to a group of investors, and you want to serve a cake shaped like an architectural rendition of the center. Is this impossible? No, you just need to contact Cecilia Villaveces Cakes. She actually built a life-size grand piano for a gala in Macon, Georgia. You can expect to pay anywhere from $75 to $10,000 for one of Cecilia's artistic creations, depending on complexity of design and size. She uses only the best ingredients, and no two cakes are ever quite alike.NARRENDRefer to Specialty Cakes. Which of the following is the BEST example of a fixed cost for Cecilia Villaveces Cakes?a. eggs, butter, sugarb. delivery costsc. part-time employeesd. electricity consumptione. food preparation licenses

Q: NARRBEGIN: Specialty CakesSpecialty CakesImagine you're planning an after-symphony fund-raising party, and you need a life-size grand piano cake. Or, you are a developer proposing a new shopping center to a group of investors, and you want to serve a cake shaped like an architectural rendition of the center. Is this impossible? No, you just need to contact Cecilia Villaveces Cakes. She actually built a life-size grand piano for a gala in Macon, Georgia. You can expect to pay anywhere from $75 to $10,000 for one of Cecilia's artistic creations, depending on complexity of design and size. She uses only the best ingredients, and no two cakes are ever quite alike.NARRENDRefer to Specialty Cakes. Many party planners in the Southeast will only use Cecilia Villaveces Cakes at their parties--no matter what the price is. They know that Cecilia's cakes can make a party a success. Moreover, the cakes are what people remember most about the parties. From this description, you should assume Cecilia Villaveces Cakes have a(n):a. elastic demandb. unitary elasticityc. inelastic supplyd. inelastic demande. elastic supply

Q: NARRBEGIN: Specialty CakesSpecialty CakesImagine you're planning an after-symphony fund-raising party, and you need a life-size grand piano cake. Or, you are a developer proposing a new shopping center to a group of investors, and you want to serve a cake shaped like an architectural rendition of the center. Is this impossible? No, you just need to contact Cecilia Villaveces Cakes. She actually built a life-size grand piano for a gala in Macon, Georgia. You can expect to pay anywhere from $75 to $10,000 for one of Cecilia's artistic creations, depending on complexity of design and size. She uses only the best ingredients, and no two cakes are ever quite alike.NARRENDRefer to Specialty Cakes. Although many factors determine the prices charged by Cecilia Villaveces Cakes, the two primary determinants are:a. costs of manufacturing and distribution costsb. stage of the product life cycle and costs to the consumersc. the demand for the good and cost to the sellerd. demand by the consumer and perceived qualitye. distribution and promotion strategies used by the cake maker

Q: NARRBEGIN: Tesla MotorsTesla Motors"Going green" doesn"t have to be boring. The Tesla Roadster Sport is an electric car that goes from 0 to 60 in four seconds and drives more like a race car than an environmentally-friendly ride. But that level of performance will set you back $128,500. As of 2009, Silicon Valley-based Tesla Motors, Inc. was the only company offering highway-compatible electric cars. Most Roadster Sport buyers are car enthusiasts and are buying them for the "fun toy" aspect of having an electric car rather than for environmental reasons.NARRENDRefer to Tesla Motors. Tesla set the price of the Roadster high because the company wanted to promote a high-quality image. What type of pricing does this represent?a. prestige pricingb. elite pricingc. penetration pricingd. quality pricinge. complete pricing

Q: NARRBEGIN: Tesla MotorsTesla Motors"Going green" doesn"t have to be boring. The Tesla Roadster Sport is an electric car that goes from 0 to 60 in four seconds and drives more like a race car than an environmentally-friendly ride. But that level of performance will set you back $128,500. As of 2009, Silicon Valley-based Tesla Motors, Inc. was the only company offering highway-compatible electric cars. Most Roadster Sport buyers are car enthusiasts and are buying them for the "fun toy" aspect of having an electric car rather than for environmental reasons.NARRENDRefer to Tesla Motors. If total fixed costs are $23,400,000 and the average variable costs is $50,500, how many Roadsters must Tesla sell to break-even?a. 130b. 182c. 250d. 300e. 463

Q: NARRBEGIN: Tesla MotorsTesla Motors"Going green" doesn"t have to be boring. The Tesla Roadster Sport is an electric car that goes from 0 to 60 in four seconds and drives more like a race car than an environmentally-friendly ride. But that level of performance will set you back $128,500. As of 2009, Silicon Valley-based Tesla Motors, Inc. was the only company offering highway-compatible electric cars. Most Roadster Sport buyers are car enthusiasts and are buying them for the "fun toy" aspect of having an electric car rather than for environmental reasons.NARRENDRefer to Tesla Motors. What is the fixed cost contribution for the Roadster given average variable costs of $50,500?a. $50,500b. $78,000c. $128,500d. $179,000e. $500,000

Q: NARRBEGIN: Tesla MotorsTesla Motors"Going green" doesn"t have to be boring. The Tesla Roadster Sport is an electric car that goes from 0 to 60 in four seconds and drives more like a race car than an environmentally-friendly ride. But that level of performance will set you back $128,500. As of 2009, Silicon Valley-based Tesla Motors, Inc. was the only company offering highway-compatible electric cars. Most Roadster Sport buyers are car enthusiasts and are buying them for the "fun toy" aspect of having an electric car rather than for environmental reasons.NARRENDRefer to Tesla Motors. If Tesla had assets of $5 million and net profits after taxes of $550,000, what is Tesla's return on investment (ROI)?a. 1 percentb. 9 percentc. 11 percentd. $14,135e. $4,450,000

Q: NARRBEGIN: Tesla MotorsTesla Motors"Going green" doesn"t have to be boring. The Tesla Roadster Sport is an electric car that goes from 0 to 60 in four seconds and drives more like a race car than an environmentally-friendly ride. But that level of performance will set you back $128,500. As of 2009, Silicon Valley-based Tesla Motors, Inc. was the only company offering highway-compatible electric cars. Most Roadster Sport buyers are car enthusiasts and are buying them for the "fun toy" aspect of having an electric car rather than for environmental reasons.NARRENDRefer to Tesla Motors. The price of the Roadster was set so that total revenue was as large as possible relative to total costs. This represents a _____ approach.a. profit maximizationb. market share pricingc. demand-oriented pricingd. sales maximizatione. status quo pricing

Q: When Microsoft introduced its Zune MP3 player, many people thought it would capture the MP3 player market by pricing its product so low that a smaller competitor, like the Apple iPod, would be unable to compete. If Microsoft had used this approach it have been would be guilty of _____.a. predatory pricingb. unfair trade practicesc. channel manipulation pricingd. price fixinge. price discrimination

Q: The practice of charging a very low price for a product with the intent of driving competitors out of business or out of a market is called: a. price discrimination b. predatory pricing c. price fixing d. price manipulation e. anti-competitive pricing

Q: All of the following elements must be present for a pricing practice to be considered discriminatory under the Robinson-Patman Act EXCEPT: a. The seller must charge different prices to different customers for the same product. b. The seller must make two or more actual sales within a reasonably short time. c. The transaction must occur in interstate commerce. d. The products sold must not be commodities. e. There must be significant competitive injury.

Q: Acme Lawnmowers sells its mowers to retailers at different prices, depending on whether they are independent stores or members of a national chain. It uses _____. a. unfair trade practices b. price fixing c. price discrimination d. predatory pricing e. bait pricing

Q: Which of the following prohibits any firm from selling to two or more different buyers, within a reasonably short time, commodities (not services) of like grade and quality at different prices where the result would be to substantially lessen competition? a. Sherman Act b. Federal Trade Commission Act c. Food and Drug Administration Act d. Anti-Discrimination Act e. Robinson-Patman Act

Q: If Dunn's Best Jams and its distributors agree that the retailers will sell Dunn's jams at a certain price, at or above the price floor, Dunn's and its distributors probably practice _____. a. unfair pricing b. resale price maintenance c. deceptive pricing d. price escalation e. price depression

Q: A situation in which a manufacturer, and its distributors agree that the retailers will sell the manufacturer's products at a certain price, at or above the price floor, is called _____. a. decoy pricing b. resale price maintenance c. functional pricing d. bait pricing e. price pressuring

Q: South Africa's Competition Commission accused South African Airwaysof conspiring with its partner, Germany's Lufthansa, to set prices on flights between Cape Town, Johannesburg, and Frankfurt. As a result, the two airlines were charged with: a. price discrimination b. price fixing c. bait pricing d. unfair trade practices e. channel control pricing tactics

Q: In 2008 United Airlines and American Airlines disclosed settlements in a class-action lawsuit over allegations of airfreight price fixing. This means the companies _____. a. tried to charge fees for air fright that were below costs b. charged customers different amounts for the same shipments c. agreed on the price they would charge customers for air freight d. used uniform geographic pricing e. created an artificial demand for shipping

Q: States developed unfair trade practice acts to a. enforce the Sherman Act that makes bait pricing illegal b. prevent oligopoly leaders from getting together and fixing prices at the highest the market will bear c. establish penalties for companies that break the Clayton Act by engaging in predatory pricing d. make sure that all pricing policies are equitable e. protect small, local firms from giant companies that operate efficiently on razor-thin profit margins

Q: State laws that put a lower limit on wholesale and retail prices are called _____. In states that have these laws, selling below cost is illegal. a. unfair trade practice acts b. price floor laws c. protectionism acts d. transparency laws e. price edicts

Q: JC Penney sends representatives to shop at similar retailers to make sure it is charging comparable prices for its products. JC Penney probably uses a _____ strategy. a. leader pricing b. preemptive pricing c. status quo pricing d. flexible pricing e. functional pricing

Q: A firm charging a price identical to or very close to the competition's price is using a _____ strategy. a. differentiation pricing b. penetration pricing c. preemptive pricing d. status quo pricing e. leader pricing

Q: Penetration pricing means charging a relatively low price for a product as a way to reach the mass market. The low price is designed to capture a large share of a substantial market. Thus, penetration pricing: a. tends to be more effective in a less price-sensitive market b. tempts competitors to enter the market c. provides a large profit per unit sold d. recoups product development costs quickly e. tends to lower production costs

Q: A penetration pricing strategy tends to be most effective: a. when demand is relatively inelastic b. under unitary conditions c. in price-sensitive markets d. when the company can only perform small production runs e. if unit costs are high