Marketing Ch. 14

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A customer orientation toward pricing implicitly invokes the concept of
a. the income effect.
b. profit.
c. knowing the dimensions of the target market.
d. positioning.
e. value.

value

Which of the following markets is MOST likely to be characterized by oligopolistic competition in the United States?
a. electrical service to the home
b. men’s clothing
c. soft drinks
d. pens and pencils
e. soybeans

soft drinks

Gray markets can be a challenge to marketers because
Select one:
a. they are just as illegal as black markets.
b. consumers are against them, but retailers support them.
c. they may tarnish the manufacturer’s image.
d. they are legal in some states and illegal in others.
e. they may result in price increases across the board.

they may tarnish the manufacturer’s image

Marketers spend millions of dollars annually trying to create or reinforce brand loyalty. Brand loyalty changes the demand curve for the firm’s products by
Select one:
a. reducing the price elasticity of demand.
b. increasing the income effect.
c. making demand more oligopolistic and less monopolistic.
d. reducing fixed costs and increasing the gray marketing effect.
e. shifting the market from a monopoly to pure competition.

reducing the price elasticity of demand

A _________________ strategy involves accurately measuring all the factors needed to predict sales and profits at various price levels, so that the price level that produces the highest return can be chosen.
Select one:
a. maximizing profits
b. sales orientation
c. target profit
d. target return
e. status quo

maximizing profits

Because there are many firms in monopolistic competition markets,
Select one:
a. price controls may be implemented.
b. the many competitors will focus on product differentiation.
c. producers do not have to consider the reactions of rival firms.
d. government often encourages consolidation to reduce the number of competitors.
e. everyone is a price taker.

the many competitors will focus on product differentiation

Bill is a yacht broker in the southeastern United States. For years he has had difficulty selling large yachts locally because there were few places to dock these boats. Yachts and spaces to dock them are an example of
Select one:
a. status quo pricing products.
b. complementary products.
c. substitute products.
d. competitive parity products.
e. purely competitive products.

complementary products

If a telecommunications company drastically cuts the price for cellular phone service to eliminate local competitors, the company could be charged with
Select one:
a. loss leader pricing.
b. price fixing.
c. unfair slotting.
d. bait and switch pricing.
e. predatory pricing.

predatory pricing

Diane owns a bakery where she sells cupcakes. Two blocks down there is another bakery, CC’s Bakery, that sells cupcakes for $1 less than Diane. Diane decides to lower her price and match CC’s Bakery prices. What type of pricing strategy is Diane implementing?
Select one:
a. internal pricing
b. customer-oriented pricing
c. profit-oriented pricing
d. sales-oriented pricing
e. competitor-oriented pricing

competitor-oriented pricing

If a firm in a purely competitive market can differentiate its product or service, it becomes part of a _______________ market.
Select one:
a. duopoly
b. monopoly
c. oligopolistic competition
d. pure competition
e. monopolistic competition

monopolistic competition

A demand curve is built assuming that
Select one:
a. a change in quantity demanded causes a change in price.
b. the firm does not advertise.
c. income is derived from demand.
d. price remains the same, and fixed costs change.
e. everything but price and demand remains the same.

everything but price and demand remains the same

Price is the _____________ a consumer is willing to make to acquire a specific product or service.
Select one:
a. fixed cost
b. target return
c. overall sacrifice
d. variable cost
e. amount of money

overall sacrifice

David manages a Shoney’s restaurant. He is considering staying open later in the evening. For David, the variable costs associated with staying open longer hours will include all of the following EXCEPT
Select one:
a. hours worked by cooks.
b. hours worked by the waiters and waitresses.
c. rent on the restaurant building.
d. energy costs.
e. ingredients used in preparing food.

rent on the restaurant building

In a __________ pricing tactic, sellers advertise low prices and then aggressively pressure customers to purchase higher-priced versions of the product advertised with the low price.
Select one:
a. seasonal
b. reference
c. cost-based
d. fixed offer
e. bait and switch

bait and switch

In general, prices should not be based on costs because
Select one:
a. producers rarely know what their costs are.
b. customers are always right.
c. consumers are cost-conscious.
d. producers need to avoid creating a cost competitive parity debate.
e. consumers make their purchase decisions based on perceived value.

consumers make their purchases based on perceived value

At the break-even point,
Select one:
a. price is maximized.
b. contribution per unit is zero.
c. fixed costs are zero.
d. profits are zero.
e. costs are zero.

profits are zero

Jason rents rooms in his hotel for an average of $100 per night. The variable cost per rented room is $20. His fixed costs are $100,000 and his target profit is $20,000. For Jason, to earn his target profit, he will need to rent out ________ rooms.
Select one:
a. It cannot be determined from the information provided.
b. 1,500
c. 100
d. 20,000
e. 1,000

1,500

Odd prices often suggest __________ to consumers.
Select one:
a. foreign-made goods
b. uniqueness
c. superior quality
d. expired merchandise
e. low quality

low quality

Cross-price elasticity is the
Select one:
a. change in quantity of a product demanded divided by the change in its price.
b. change in price of product A divided by change in quantity demanded for product B.
c. change in quantity of a product demanded divided by the change in its elasticity.
d. percentage change in quantity demanded of product A compared to the percentage change in price of product B.
e. percentage change in quantity of a product demanded divided by the percentage change in its price.

percentage change in quantity demanded of product A compared to the percentage change in price of product B

Bill desperately needed tires for his car, and he found an ad with an incredibly low price. When he got there, he found out that those had been sold out, and he was pressured into buying tires that were more expensive than he wanted. Bill found out later that Marcelo had had the same experience at the store a few weeks earlier. It’s quite possible that both Bill and Marcelo had become the victim of a deceptive pricing tactic known as
Select one:
a. off-season deceptions.
b. desperation selling.
c. loss leader pricing.
d. inventory reduction pricing.
e. bait and switch.

bait and switch

What type of pricing tactic is being used when several airlines agree to charge the same fare for a single route?
Select one:
a. Vertical price discrimination
b. Horizontal price discrimination
c. Vertical price fixing
d. Loss leader pricing
e. Horizontal price fixing

horizontal price fixing

A study found that, among addicted smokers, a 10 percent increase in the price of cigarettes resulted in a 2 percent decrease in quantity demanded. For these consumers, cigarettes have a ________________ price elasticity demand.
Select one:
a. substitution effect
b. cross-price
c. income effect
d. elastic
e. inelastic

inelastic

Margaret has been invited to a fancy dinner party and wants to bring a good bottle of wine as a gift for the host. Since she does not know much about wine, she will likely use the price of the wines as
Select one:
a. a measure of the income effect.
b. an indicator of the variety.
c. a measure of scarcity.
d. a reflection of status quo pricing.
e. an indicator of quality.

an indicator of quality

Variable costs change with
Select one:
a. changes in cross-price elasticity.
b. changes in fixed costs.
c. changes in target return pricing.
d. changes in the quantity being produced.
e. competitive parity.

changes in the quantity being produced

Which of the following is the most logical example of complementary products?
Select one:
a. VCRs and DVD players
b. Honda cars and Toyota cars
c. Hot dogs and hamburgers
d. A university and a corporation
e. Hot dogs and hot dog buns

hot dogs and hot dog buns

Traditional demand curve economic theory is used by marketers to understand _______________ in the five Cs of pricing.
Select one:
a. competitors
b. cost
c. channel members
d. company objectives
e. customers

customers

It is the responsibility of __________ to determine the ethical approach to setting prices so consumers find value and the firm can make a profit.
Select one:
a. industry standards boards
b. federal regulators
c. the Better Business Bureau
d. marketers themselves
e. the American Marketing Association

marketers themselves

Health clubs often use a low, introductory offer price to get people to join their club. These low prices represent a ______________ pricing strategy.
Select one:
a. status quo
b. maximizing profits
c. target profit
d. sales orientation
e. target return

sales orientation

When Ursula decides how to price new products in her gift store, she measures the value of her product offerings against those of the other stores in her area. Ursula uses a __________________ pricing strategy.
Select one:
a. target profit
b. maximizing profits
c. competitor-oriented
d. sales oriented
e. target return

competitor oriented

Julia wants her firm’s gourmet snacks to be the leading brand in the U.S. market. When adopting a pricing strategy designed to gain market share, she should remember that
Select one:
a. price wars are the way to become the dominant brand.
b. total value equals total cost minus variable costs leading to price escalation.
c. prestige products need to be competitively priced.
d. companies can gain market share by offering low-quality products at a high price.
e. rarely is the lowest-price offering the dominant brand in a market.

rarely is the lowest price offering the dominant brand in a market

Break-even analysis is useful because it allows managers to
Select one:
a. quantify the relationship between price elasticity and product elasticity.
b. estimate the quantity they will need to sell at a given price to break even.
c. reposition products based on their break-even positioning revenue.
d. determine the relationship between price and quantity demanded.
e. analyze the different elements contributing to their variable costs.

estimate the quantity they will need to sell at a given price to break even

Mario is the first retailer in town to sell games for Sony’s new PlayStation 3 machine. Mario wants to quickly capture as much of the market for the new games as possible. Mario will likely use a __________ pricing strategy.
Select one:
a. skimming
b. reference
c. price fixing
d. bundling
e. market penetration

market penetration

Price is often the most challenging of the four Ps to manage, partly because it is often ______________ in developing marketing strategies.
Select one:
a. difficult to calculate markups
b. the subject of cross-shopping differentiation
c. the least important aspect
d. calculated by senior consultants
e. treated as an afterthought

treated as an afterthought

Naomi tells her sales representatives the goal is to generate at least a 20 percent return on investment for all of the industrial building supplies they sell. Naomi is using a _______________ pricing strategy.
Select one:
a. status quo
b. sales orientation
c. target return
d. target profit
e. competitive parity

target return

Earl was known for driving 30 miles to save a dollar on the price for his favorite beverage. Earl perceived price as ________________, while most consumers recognize price as the ______________ made to acquire a good or service.

A.
money paid; overall sacrifice

B.
variable cost; fixed cost

C.
fixed cost; variable payment

D.
overall sacrifice; monetary payment

E.
break-even amount; price elasticity

money paid; overall sacrifice

The full price of a product or service includes all of the following EXCEPT

A.
taxes.

B.
shipping.

C.
travel costs.

D.
the price of alternative products and services.

E.
value of the consumer’s time.

the price of alternative products and services

Gerald has a number of customers for his lawn care service who never question his bill but expect their lawns to be perfect. These customers do not want low prices, they want

A.
a sales orientation.

B.
fixed costs.

C.
cross-price discounts.

D.
a target return.

E.
high value.

high value

Unlike product, promotion, or place, price is the only part of the marketing mix

A.
that offers the opportunity for an oligopoly.

B.
that is subject to gray market manipulation.

C.
that leads to competition.

D.
that generates revenue.

E.
that is determined by the consumer.

that generates revenue

Historically, prices were

A.
the center of attention in almost all marketing strategies.

B.
analyzed and changed constantly.

C.
calculated to minimize contribution per unit.

D.
allowed to vary seasonally as cross-shopping tendencies fluctuated.

E.
rarely changed except in response to radical shifts in market conditions.

rarely changed except in response to radical shifts in market conditions

Which of the following is NOT one of the five Cs of pricing?

A.
customers

B.
channel members

C.
cost

D.
collaboration

E.
company objectives

collaboration

Tess is the marketing manager for a fast food restaurant chain. She uses a target return pricing strategy because her firm’s primary objective is to

A.
increase profits.

B.
increase sales.

C.
decrease competition.

D.
build customer satisfaction.

E.
broaden the product line.

increase profits

Gary is the marketing manager for an automobile dealership. His boss tells him the firm’s primary goal is to increase its local market share from 15 to 30 percent. His firm is using a ________ orientation.

A.
profit

B.
sales

C.
competitive

D.
customer satisfaction

E.
product development

sales

Bernard’s firm has set corporate direction to become one of the leaders in each of its significant market segments. It was Bernard’s job to examine the pricing to determine how to maximize market share, even at the expense of profits in the short run. What kind of company objective would guide Bernard’s effort?

A.
industry-oriented

B.
sales-oriented

C.
competitor-oriented

D.
innovation-oriented

E.
customer-oriented

sales-oriented

Many years ago Honda’s Accord and Ford’s Taurus were the top two selling cars in the United States. As the year was coming to an end, Ford cut the price of the Taurus, hoping to outsell the Accord and allow Ford to claim that "Taurus is the best-selling car in America." Ford was using a ___________________ pricing strategy.

A.
maximizing profits

B.
target profit

C.
sales orientation

D.
status quo

E.
target return

sales orientation

Sharon knew that her established customers liked her product much better than her competitor’s. She was planning to expand into new markets, and she was considering pricing. She was leaning toward charging a higher price than competitors to help demonstrate that hers was a high-quality product. Sharon was considering

A.
a top of market strategy.

B.
the value of quality.

C.
advantageous pricing.

D.
premium pricing.

E.
differential pricing.

premium pricing

Ryan gave the manager of his convenience store a set of binoculars so she could see the gasoline prices charged by the other convenience store at that intersection. Ryan told the manager to always match the gasoline prices of the other store. Ryan is using a _____________________ pricing strategy.

A.
maximizing profits

B.
target profit

C.
target return

D.
status quo

E.
sales

status quo

When firms set prices similar to those of competitors, they are following a strategy of

A.
me-too pricing.

B.
copycat pricing.

C.
competitive parity.

D.
market-broadening pricing.

E.
industry-standard pricing.

competitive parity

In many high-end resort markets, Westin hotels compete directly with Crown Plaza hotels. Each firm weighs the comparative advantages and disadvantages of its offerings to determine whether to price above, equal to, or below the other hotel. In these markets, the hotels are using a _______________ pricing strategy.

A.
maximizing profits

B.
target profit

C.
target return

D.
competitive parity

E.
sales oriented

competitive parity

A no-haggle pricing policy is a type of _______________ pricing strategy.

A.
maximizing profits

B.
sales orientation

C.
target return

D.
status quo

E.
customer-oriented

customer-oriented

Julia’s is an upscale women’s clothing store. Prices are based on customers’ beliefs about the value of the clothing. The store focuses on a limited target market and provides excellent customer service. Julia’s is using a ________________ pricing strategy.

A.
customer-oriented

B.
target profit

C.
target return

D.
status quo

E.
maximizing profits

customer-oriented

A strategy of setting prices based on how customers develop their perceptions of value can often be the most effective pricing strategy, especially if the strategy

A.
leads the marketer to being the low-cost seller.

B.
is supported by consistent advertising and distribution strategies.

C.
challenges consumers to discard their perceptions of value.

D.
is consistent with a competitive target return strategy.

E.
is measured against the competition.

is supported by consistent advertising and distribution strategies

Customers must see value in a product or service before they are willing to exchange time or money to obtain it, but not all customers see the same value in a product. To analyze how many units will be sold at any given price point, marketers draw on

A.
a demand curve.

B.
the law of averages.

C.
multiple regression analyses.

D.
target return strategies.

E.
a sales orientation.

a demand curve

A demand curve shows the relationship between ___________________ in a period of time.

A.
income and demand

B.
demand and cost

C.
price and elasticity

D.
profit and price

E.
price and demand

price and demand

According to a typical demand curve, the higher the price,

A.
the greater the income effect.

B.
the lower the quantity consumers will buy.

C.
the lower the output of producers.

D.
the greater the production costs.

E.
the lower the cross-price elasticity.

the lower the quantity consumers will buy

There is an old saying, "If you have to ask the price of a yacht, you cannot afford it." Products like yachts are most likely to be associated with

A.
cross-shopping.

B.
competitive parity pricing.

C.
target return value.

D.
prestige pricing.

E.
break-even point pricing.

prestige pricing

_________________ measures consumers’ sensitivity to price changes.

A.
Cross-price elasticity of demand

B.
Price elasticity of demand

C.
Income elasticity of demand

D.
Competitive profit elasticity of demand

E.
Inelastic demand price parity

price elasticity of demand

For which of the following is demand likely to be least sensitive to price increases?

A.
spring break vacations

B.
a specific brand of cereal

C.
prescription drugs

D.
theater tickets

E.
restaurant meals

prescription drugs

For which of the following is demand likely to be most sensitive to price increases?

A.
prescription drugs

B.
college tuition for last-semester seniors

C.
electricity

D.
hospital care

E.
a specific brand of soft drink

a specific brand of soft drink

If a 1 percent decrease in price results in more than a 1 percent increase in quantity demand, demand is

A.
cross-price elastic.

B.
price inelastic.

C.
price elastic.

D.
status quo elasticity.

E.
derived demand inelastic.

price elasticity

Assume the demand for electricity, a necessity with few substitutes, is -0.2. If the electric company raised its rates by 10 percent, we would expect

A.
a 10 percent decrease in quantity demanded.

B.
a 2 percent increase in quantity demanded.

C.
a 10 percent increase in quantity demanded.

D.
a 2 percent decrease in quantity demanded.

E.
a 5 percent decrease in quantity demanded.

a 2 percent decrease in quantity demanded

If a 1 percent decrease in price results in less than a 1 percent increase in the quantity demanded, demand is

A.
cross-price elastic.

B.
price inelastic.

C.
price elastic.

D.
status quo elasticity.

E.
derived demand inelastic.

price inelastic

Barry customizes Harley-Davidson motorcycles. No two cycles are alike. He notices that very few customers even ask the price of his motorcycles before they decide to purchase them. Demand for his motorcycles is probably

A.
price sensitive.

B.
price elastic.

C.
price inelastic.

D.
income elastic.

E.
cross-price elastic.

price inelastic

The observation that consumers are generally more sensitive to price increases than to price decreases suggests that

A.
most consumers cannot remember what price they paid the last time they bought a particular product.

B.
it is easier to lose customers with a price increase than to gain customers with a price decrease.

C.
most consumers would rather skip buying a product than pay a higher price.

D.
most consumers are emotionally attached to their favorite products and are unlikely to change, even if the price changes.

E.
firms gain more customers with price decreases than they lose with price increases.

it is easier to lose customers with a price increase than to gain customers with a price decrease

Sales of national brands of orange juice tend to increase when the economy is doing well, while sales of generic orange juice increase when the economy is not doing well. This is an example of how ____________ affects demand for products.

A.
the substitution effect

B.
the price inelasticity coefficient

C.
the income effect

D.
the target return effect

E.
cross-price elasticity

the income effect

Rodi owns Hallman’s auto repair service. He has observed over the years that customers keep their high-mileage cars longer when the economy is doing poorly, creating demand for his maintenance and repair service. Rodi has observed the impact of ______________ on demand for his service.

A.
breakeven points

B.
the price inelasticity ratio

C.
the income effect

D.
target profit pricing

E.
cross-price elasticity

the income effect

The more substitutes that exist in a market,

A.
the lower the price elasticity for each product.

B.
the greater the income elasticity for each product.

C.
the easier it will be to utilize a target profit pricing strategy.

D.
the more sensitive consumers will be to changes in the price of a particular product.

E.
the more likely the market will be characterized as an oligopoly.

the more sensitive consumers will be to changes in the price of a particular product

Brad always buys and uses Nike brand golf balls. If he finds a Titleist or Callaway ball in the rough, he gives it away. Brand loyal golfers like Brad allow Nike to charge a higher price and not lose many sales. By building a strong brand, Nike has effectively

A.
increased the income effect for its products.

B.
increased the cross-price elasticity for its products.

C.
focused on the competitive parity point for its products.

D.
shifted the golf ball market from a monopoly to pure competition.

E.
reduced the price elasticity of demand for its products.

reduced the price elasticity of demand for its products

If the price for a product increases, the demand for the complementary product will

A.
decrease.

B.
increase.

C.
stay the same.

D.
become more elastic.

E.
become more inelastic.

decrease

Frank’s Heating and Air Conditioning Company specializes in electric heat pumps. Frank keeps track of the price of natural gas, knowing that

A.
natural gas creates more environmental greenhouse effects than coal.

B.
an increase in the price of natural gas will increase demand for his electrical heating systems.

C.
gas heating systems and electrical heating systems are complementary goods.

D.
when the price of natural gas goes up, the quantity demanded also rises.

E.
the demand for natural gas is price elastic.

an increase in the price of natural gas will increase demand for his electrical heating systems

Managers of Wendy’s fast food restaurants keep track of prices at competitors such as McDonald’s, Burger King, and Arby’s, knowing that a decrease in the prices at these other fast food restaurants will

A.
increase the income effect for Wendy’s products.

B.
increase demand for Wendy’s products.

C.
decrease the income effect for Wendy’s products.

D.
increase the complementary effect for Wendy’s products.

E.
decrease demand for Wendy’s products.

decrease demand for Wendy’s products

One problem in relying on price elasticity and demand curves when setting prices is that

A.
the way a product or service is marketed can have a profound impact on price elasticity.

B.
the underlying ideas of the demand curve and elasticity are less relevant in the modern economy.

C.
only economists can properly analyze demand curves and set prices using this tool.

D.
competitors can construct the same demand curves, so there is no advantage in using them.

E.
marketing split from economics over the ideas of demand and elasticity.

the way a product or service is marketed can have a profound impact on price elasticity

Labor, materials, and energy are typically __________ costs.

A.
fixed

B.
incidental

C.
prestige

D.
inelastic

E.
variable

variable

Raymond estimates that the fixed costs associated with opening a new bank branch are $500,000. He expects the branch to attract 1,000 new customer accounts in the first year, each of which will cost $50 per year to service. He also expects to generate $100,000 per year in revenue. For Raymond, the total cost of opening the new branch and remaining open for one year will be:

A.
$500,000.

B.
$550,000.

C.
$650,000.

D.
$450,000.

E.
$605,000.

$550,000

The break-even point is estimated by

A.
multiplying revenue per unit times the quantity sold.

B.
dividing fixed contribution per unit by variable costs.

C.
multiplying fixed costs by contribution per unit.

D.
dividing fixed costs by contribution per unit.

E.
dividing variable costs by fixed costs.

dividing fixed costs by contribution per unit

If the fixed costs of manufacturing a new cell phone are $10,000, the sales price is $60, and variable cost per unit is $20, the break-even point is

A.
100 units.

B.
4,000 units.

C.
20 units.

D.
1,000 units.

E.
250 units.

250 units

Jacob rents rooms in his hotel for an average of $100 per night. The variable cost per rented room is $20, to cover maid service and utilities. His fixed costs are $100,000 and his profit last year was $20,000. For Jacob, the contribution per unit is

A.
$100.

B.
$80.

C.
$800.

D.
$1,000.

E.
It cannot be determined from the information provided.

$80

The contribution per unit is

A.
price minus total costs.

B.
price minus total variable cost.

C.
price minus variable cost per unit.

D.
total revenue minus total cost.

E.
break-even quantity divided by total fixed costs.

price minus variable cost per unit

One of the limitations associated with break-even analysis is that

A.
it assumes fixed costs are zero.

B.
it cannot adjust for high variable costs.

C.
it only tells marketers what price is needed to break even.

D.
it assumes that there is only one price.

E.
it assumes that demand is extremely inelastic.

it assumes that there is only one price

Because there are only a few firms in markets with oligopolistic competition,

A.
everyone is a price taker.

B.
producers do not have to consider the reactions of rival firms.

C.
government often encourages consolidation to reduce the number of competitors.

D.
price wars may occur.

E.
the many competitors will focus on product differentiation.

price wars may occur

In a market with _______________, there are many firms providing differentiated products.

A.
pure competition

B.
oligopolistic competition

C.
monopolistic competition

D.
a monopoly

E.
a duopoly

monopolistic competition

In _______________, many firms provide similar products that are considered substitutes for each other.

A.
pure competition

B.
oligopolistic competition

C.
monopolistic competition

D.
a monopoly

E.
a duopoly

pure competition

Which of the following is most likely to be characterized by pure competition in the United States?

A.
soybeans

B.
cereal

C.
soft drinks

D.
computer operating systems

E.
fast food restaurants

soybeans

Because there are many firms with similar products in purely competitive markets,

A.
price is determined by the laws of supply and demand.

B.
consumers develop personal preferences.

C.
firms find it easy to build strong, distinct brands.

D.
advertising is heavily used.

E.
the many competitors will focus on variable cost pricing.

price is determined by the laws of supply and demand

How can a company find its way out of a market characterized by pure competition?

A.
Consistently offer the lowest price until other competitors leave the market.

B.
Increase prices and attract different, quality-oriented customers.

C.
Decrease the amount of available product until the market reacts.

D.
Increase the amount of available product to flood the market.

E.
Differentiate the product in some way, even by packaging, so customers will see it as distinct.

differentiate the product in some way, even by packaging, so customers will see it as distinct

To discourage consumers from buying in gray markets, some manufacturers have

A.
warned consumers that their warranty is null and void if purchased through a gray market supplier.

B.
shifted advertising resources from gray markets to black markets.

C.
increased the price to gray markets while maintaining existing prices to blue markets.

D.
petitioned government regulators to impose price controls.

E.
lowered the quality of their products to reduce gray market demand.

warned consumers that their warranty is null and void if purchased through a gray market supplier

The point at which the number of units sold generates enough revenue to equal the total costs of running an operation is known as the

A.
contribution per unit.

B.
fixed cost margin.

C.
break-even point.

D.
unit cost.

E.
marginal revenue.

break even point

The commercial airline industry is considered what type of market?

A.
duopoly

B.
monopoly

C.
monopolistic competition

D.
pure competition

E.
oligopolistic competition

oligopolistic competition

A reference price is

A.
the actual price.

B.
the price against which buyers compare the actual selling price.

C.
the manufacturer’s cost.

D.
a cumulative quantity discount price.

E.
the external horizontal fixed price.

the price against which buyers compare the actual selling price

In determining the price for his company’s new pocket digital camera, Matt determines what consumers consider the regular or original price for similar cameras available in the market. Matt is assessing the influence of __________ on pricing strategy.

A.
improvement value

B.
odd-even prices

C.
everyday low pricing

D.
reference prices

E.
cost of ownership

reference prices

Developing pricing strategies for __________ is one of the most challenging tasks a manager can undertake.

A.
cost-based pricing

B.
seasonal rebate items

C.
new products

D.
zone pricing products

E.
quantity discounts

new products

Charging a relatively high price for new and innovative products to those consumers most willing and able to pay the high price is called price

A.
penetration.

B.
bundling.

C.
fixing.

D.
referencing.

E.
skimming.

skimming

Price skimming focuses on selling products to __________ and __________ in the consumer adoption process model.

A.
innovators; early adopters

B.
early adopters; early majority

C.
early majority; late majority

D.
late majority; laggards

E.
laggards; innovators

innovators; early adopters

When Burroughs Wellcome introduced the first anti-AIDS drugs, it initially set the price at $10,000 for a year’s supply. Burroughs Wellcome was probably pursuing a __________ pricing strategy.

A.
skimming

B.
introductory

C.
slotting allowance

D.
market penetration

E.
cost-based

skimming

When Apple Computer company introduced the iPhone—a combination phone, MP3 player, and Internet access device—in 2007, it was priced at $499, considerably higher than either the iPod or competing cell phones. Apple was probably pursuing a __________ pricing strategy.

A.
market penetration

B.
slotting allowance

C.
price fixing

D.
reference price

E.
skimming

skimming

With a __________ pricing strategy, marketers set a low initial price for the introduction of a new product or service.

A.
market penetration

B.
bundling

C.
price fixing

D.
reference

E.
skimming

market penetration

The major objectives associated with a market penetration pricing strategy are to

A.
capture the high end of the market demand curve and lower introduction costs.

B.
quickly build sales and market share.

C.
minimize customer dissatisfaction and maximize reference price value.

D.
provide an incentive to purchase a less desirable product to obtain a more desirable product.

E.
match competitors’ prices and communicate high quality.

quickly build sales and market share

The __________ occurs when unit cost drops as the quantity sold increases.

A.
slotting allowance benefit

B.
price fixing return

C.
improvement value effect

D.
experience curve effect

E.
cumulative bundling benefit

experience curve effect

Production of the DeLorean car, made famous in the film Back to the Future, never got above 25,000 units during its lifetime. Automobile industry analysts estimate that production of this car needed to reach around 300,000 units to achieve the __________, a decrease in unit cost as product volume increases.

A.
slotting allowance benefit

B.
price fixing return

C.
improvement value effect

D.
experience curve effect

E.
cumulative bundling benefit

experience curve effect

Marlie designs and manufactures specialty furniture. She has a number of unique products but can only produce in limited quantities. Marlie will probably NOT use a market penetration strategy because

A.
there are few barriers to competitive entry in the market.

B.
she could not meet a rapid rise in demand.

C.
a low price would indicate low quality.

D.
she would have to determine zone pricing discounts.

E.
the experience curve effect would drop unit costs too rapidly.

she could not meet a rapid rise in demand

Yurgen is opening a financial consulting service for high-income retirees in his area. This target market is used to paying for quality and associates high quality with high prices. Yurgen should probably NOT use a market penetration pricing strategy because

A.
he might be missing out on customers who would pay more for his products.

B.
there are moderate barriers to competitive entry in the market.

C.
a low price might signal low quality.

D.
he would have to determine zone pricing discounts.

E.
the experience curve effect would drop unit costs too rapidly.

a low price might signal low quality

Price advertisements should never

A.
include puffery.

B.
deceive customers to the point of doing harm.

C.
include the price.

D.
use advertising allowances to increase sales promotion.

E.
use price skimming after using price penetration.

deceive customers to the point of doing harm

For marketers to advertise a price as their __________, the Better Business Bureau recommends that at least 50 percent of the sales of a product occur at that price.

A.
fixed price

B.
zone price

C.
regular price

D.
leader price

E.
cost-based price

regular price

Marketers advertising an artificially high regular price are unethically attempting to influence consumers’__________ perceptions.

A.
fixed price

B.
reference price

C.
seasonal price

D.
leader price

E.
cost-based price

reference price

__________ pricing tactics lower the price of a product below cost.

A.
Fixed

B.
Zone

C.
Regular

D.
Loss leader

E.
Cost-based

loss leader

__________ is the practice of colluding with other firms to control prices.

A.
Competitive favoritism

B.
Industry tightening

C.
Monopolistic competition

D.
Price fixing

E.
Regressive pricing

price fixing

__________ price fixing occurs when competitors collude to control prices, and __________ price fixing occurs within a marketing channel to control prices passed on to consumers.

A.
Industry; supply chain

B.
General; specific

C.
Widespread; integrated

D.
Strategic; tactical

E.
Horizontal; vertical

horizontal; vertical

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