16. Prices 4 money paid ina transaction, not important to buyers © of limited interest to sellers. the most inflexible marketing mix decision variable the value that is exchanged for products in 2 marketing transaction ANS: E PTs: 1 DIE: Easy OBJ: 12-01 Understand the rote of price NAT: AACSB: Analytic | MKTG: Pricing MSC: Knowledge 18. What do all ofthe following have in common: tuition. fee, premium, retainer, dues? ‘2 They all must be paid in cash, 1b They are forms of exchange similar to, but not identical with, money © They are forms of exchange similar to, bt aot identical with, barter They are different terms for the concept of price. They have nothing in commen, ANS: D PIS: 1 DIF: Easy OBJ: 12-01 Understand the role of price. NAT: AACSB: Reflective Thinking | MKTG: Pricing MSC: Knowledge 19. ‘The tuition and fees each student paid for this semester of eolleze are both terms for a expenses bb charges. © bills a price © exchange valuations ANS: D. PTS: 1 DIF: Easy24. Suppose Tommy Hilfiger ie introducing anew line of moni ties. The designer believes thatthe tarpat market for tase tes eompnises men who are very satus-conscious. In keeping with this assessment, department stores sellin the es should 2 charge price based on thei ost 1D charge prices consistent with their exiting te. © discount the ies 4 nopotiats the price with indvical te shoppers. use price symbolically ANS: E PIs: 1 DIF: Moderate (85: 12-01 Understand the rola of price NAT: AACSB: Analytic MKTG: Pricing MSC: Application 25. ‘When marketers emphasize price as an issue and match or beat the prices of other companies, they are using 12 price competition 1 nonprive competition, (© comparative pricing strategies 4 demand based prcine © supply-based pricing ANS: A prs. 1 DIP: Moderate 22, Price isa key clement inthe marketing mix because it relates directly to the size ofthe sales free 1b the speed of an exchange. © quality controls. 4 the generation of total revenue, © brand image. ANS: D PIs: 1 DIF: Moderate27. Advertisements for Suave shampoos emphasize that other shampoos may cost more but dant work any better than Suave. In this example, Suave is competing onthe bass of > marketshare © pce. selection. © packaging ANS: © PIs: 1 DIF Easy (BF: 12-02 Identity the characteristics of price and nonprice competition NAT: AACSB: Analytic | MKTG: Pricing ‘MSC: Application 28. A danger associated with engaging in price competition is that competitors can also change prices quickly and agaressively, which can result in (a) that wall be harmful to both companies. 1 reduetion in cost price war © competitive draw industry collapse advertising battle ANS: B pas. 1 DIE: Eas 20. Which of the following is the most flexible variable in the marketing mix? a Product Price © | Advertising 4 Personal selling © | Distribution ANS: B prs: 1 DIF. Basy OBS: 12-01 Understand the role of price. NAT: AACSB: Analytic | MKTG: Pricing | MKTG: Marketing Plan MSC: Knowledge 21, What equation shows organizations the relationship betwaan price and profit? ‘Total Variable Costs + Total Fixed Coste ~ Sales 0 Profit Price = Profit par Item -Numbar of Unite Sold © | @rice. Quantity Sold) 5 Total Costs = Profits 4 @rice D Profits) . Total Costs = Sales © | Total Costs = (Price - Quantity Sold) 0 Profits ANS: © PIs: 1 DIF: Difficult29, Sellers that emphasize distinctive product features ta encourage brand preferences among customers are practicing 12 | product competition. | nonprice competition | brand differentiation, price competition © | competitor differentiation ANS: B prs: 1 DIF: Moderace ‘OBJ: 12-02 Identify the characteristics of price and nouprice compctition, NAT: AACSB: Reflective Thinldng | MKTG. Pricina MSC: ‘Knowledge 30. One advantage of nonprice competition is that | a firm can seact quickly to compeitive efforts 1b | market share Becomes less important © | firm can build customer loyalty | marketing efforts are completely eliminated © pricing ie we longer a factor. ANS: ¢ PIs: 1 DIF: Moderate 31. Which ofthe following statements about nonprice competition is false? a Companies that use nonprice competition do not need to keep track of their competitors prices b A company must be able to distinguish ite brand through some uniqua feature in order to successfully engage in nonprice competition. A fim using nonprice competition can build loyalty to both its company and its products. d_ When using nonprice competition, a company should promote the distinguishing characteristics ofits brand © Buyers must view the distinguishing characteristics of a product offered through nonprice competition as beine important. ANS: A PIs: 1 DIE: Difficult OBI. 12-02 Identify the charactoristics of price and nonprice competition NAT: AACSB: Reflective Thinking | MKTG: Pricing MSC: Knowledge32. A product under nonprice competition would most likely not succeed in the market if © anew advertising campaign i established for it 36, A graph of the quantity of products marketers expect to sell at various prices if other factors remain constant is a price graph. supply curve, € prive/quantity graph. d_ marginal revenue curve fe demand eurve. : E PIs: 1 DIF: Moderate | 40. If Seagram's marketers found that the firm's Crown Royal bourbon was a prestige product and raised its prico, which ofthe following would moztlkely happen? | The quantity demanded would immediately fall. 'b | The quantity demanded would always incroase, ‘© | Above some price level, the quantity demanded would begin to decrease d_| The demand curve for the product would always shift to the right. © | The demand curve for the product would always shift to the left ANS: C PTS: 1 DE: EasyBS French Quarter Inns drops the price of a suite from $225 to $195 per night and experiences a reduetion in the quantity of rooms demanded of an average of five per night. This isan indication that suites at this hotel are apparently an example of a(n) product. a reverse-demand b- inferior © standard 4 secondary-demand © prestige ANS: E PTS: 1 DIF: Moderate OBJ. 12-03 Explore demand curves and price elasticity of demand. NAT: AACSB: Analytic | MKTG: Pricing ‘MSC: Application 39. What does the demand curve for a prestige product look like? Iisa straight line where the quantity sold continues to increase asthe price of each product increases, b_Itis acurve where the highest and the lowest prices yield the greatest quantity sold and ‘mid-range prices produce the fewest sales. © It forms a curve where the greatest quantity sold comes at a medium price and the ‘quantities fll as the price increases or decreases 4-H forms a straight vertical ine because of the prestige of the product, and quantity sold ‘will remain stable renardless ofthe price © Wslopes from left to right at a very mild slope; that is, as quantity increases, price decreases slowly ANS: ¢ prs: 1 DIF:_ Difficult 43, 16Cormival Cruise Lines increased the price ofits seven-day cruise packaze by 10 perceat and, a8 a ‘result, experienced a 20 percent decline in customer bookings, Carnivals demand would be a seady. inelastic © clastic, prestige © maesina. ANS: C PIS: 1 DIF: Moderate| 41. Which of the following products is most itely to have an inverted C-shaped demand curve? a Lev, Giorgio perfume ‘© Maxwell House coffee 4 Pillsbury cake mix Ford Taurvs PTS: 1 DIF: Moderate 03 Explore demand curves and price elasticity of demand. NAT: AACSB: Analytic | MKTG: Pricing MSC: Application 42. Ameasure of sensitivity of demand ia relation to changes in price is 8 ademand curve ba prestige eraph, © marginal analysi. 4 price elasticity of demand. © quantity elasheiy, ANS: D PIs: 1 DIE: Moderate44. Which of the following is most likely 9 have an inelastic demand curve? Y= Auenobite Vacation © Nonelsctive surgery 4 Recreational vehicle © Computer ANS: C PIS: 1 DIF Easy (OBI: 12-03 Explore demand curves and price elastics of demand. NAT: AACSB: Analytic | MKTG: Pricing "MSC: Application 45. If producthas an inelastic demand and the manufacturer nis ts price 2 total revenue wi ‘quantity demanded will decrease (© the demand schedule wil shift 4 the demand will besome store inelastic. € total revenue will decrease ANS: A PIS 1 DIF: Moderate 46. Which of the following statements about price elasticity is false? ‘4 Steak is an example of a product that has an elastic demand for most people, because ‘when price goes up quantity demanded goes down proportionally more. b Elasticity of demand is the relative responsiveness of a change in quantity demanded to changes in price. © Ifmarketers ean determine price elasticity, then setting prices at optimum levels is much dd When price is raised on a product that bas an inelastic demand, then total revenue will decrease, A product like electricity has an inelastic demand ANS: D PTS: 1 DIF: Difficult47. IfPacific Power and Light increased its rates 10 percent and experienced only a 2 percent reduction in tte demand for power, the demand would be a | elastic. b prestige d- horizontal © | inelastic ANS: E PTS: 1 DIF: Easy 49. Dividing the percentage change in quantity demanded by the percentage change in price gives the prestige demand curve, b breakeven point © | marginal cost curve. price sensitivity curve, © price elasticity of demand. ANS: E PIS: 1 DIF: ModerateSL. Costs that do NAL AAUSE: Anaiyue | mR1U: erteme ‘Mist: apputcation a | xed 55. Roberts Electronics caleulate that if it produces 15 radar detectors, its coats are $1,500, and ifit i produces 16 radar dotectors, is costs are $1,590. In this instance, $00 isthe firm's "cost ‘otal 8 average © invariat b fixed é variable © variable © st & marginal ANS: A © average variable ORF 12.04 = NAT: AACS ANS: D PTS: DIF: Moderate 52. Which of the following is mast Tikaly tobe a Tixed gost? 8 Component parts b Raw materials © Rent Electricity Transportation | 53. Costs that vary directly with changes in the number of units produced or sold are called 1 changeables, 1b variable costs © direst costs, d ixed costs. © munginal cots, ANS: B PIs: 1 DIF; Easy GBF 12.04 Examine the relationships among demand, costs, and profits, NAT: AACSB: Reflective Thinking | MRTG: Pricing ‘MSC: Knowledge SA. Ifa frm cusrently produces 2,00 products per month and desides to produce 2.501, it wil incur more fixed costs, 1b higher average fixed costs © fewer variable costs, 4 amarginal cos © ‘higher average variable costs ANS: D PIs: 1 DIF; Moderate7. Michelin notes hat when the umber of ies it sells increases fom 100,000 t 1,000.01, ttl evens rites $35, The $35 represents the fms ‘b marginal venue © pice elasticity average vanabl evens © average total cost ANS: B Pre: 1 DE: Euy ‘OB. 12-04 Examine the weationships amone demand, oss, and pros. NAT: AACSB, Analitic| MKTG: Pricing MS: Apptiation 58. At what pint does a fim maximize rot? {The point a which marginal cost equals arpnal revenve 1) The pinta which he fm sells its product the hihest pice ©The breakeven point pls the adjusted marginal cost 4 The pont at which marsinal profits equal marginal revenue The point a which marginal cost qual marginal pote ANS A PIs: 1 DIF: Basy| 59. When marginal cost is equal to marginal revenue, the firm should 3) | & produce more to inerease profits b produce less to decrease total costs ¢ stop producing additional units to maximize profits provide discounts to encourage purchases. © intensify distribution to increase sales ANS: C PTs: 1 DIF: Moderate OBY: 12-04 Examine the relationships among demand, costs, and profits NAT: AACSB: Analytic | MKTG: Pricing | MKTG: Stratezy MSC: Comprehension 60, If Colgate-Palmolive wants to maximize profit on its toothpaste, it should operate at the point where 8 total costs and total revenues are equal bb marginal revenue is at its highest level € | marginal revenne exceeds marginal cost marginal revenue equals marginal cost © demand is most elastic. ANS: D PTs: 1 DIF: Difficult 61. Atthe breakeven point, the money a company brings in from selling products equals the amount spent producing the products. 1b the total fixed costs are exactly equal to the total variable costs. © profits are exactly equal to the difference between revenue and total variable costs, the marginal revenue of a produet is exeetly equal to the marginal cost of produeing one ‘more unit. € the marginal cost curve and the average cost curve will be identical for a particular product. ANS: A PIs: 1 DIF: Moderate62 The point at which dhe costs of producing a product qual the revenue cael om selling the product 38D esc food ie brekeven po © aia conte price elastic 64. To determine the breakeven point in units, divide the fixed costs by | total costs | variable costs time price, © price minus variable costs. d_ price per unit. total revenue minus fixed costs. ANS: C PIs: 1 DIF: Difficult 2 competitive price © profit maximizing A PTS: 1 DIF: Moderate©. oy Below the breakeven point, a firm is operating a with fixed costs only, > with minimal variable costs © with no revenue. 4 profitably. ata loss, ANS: E PIs: 1 DIF: Easy OBJ: 12-04 Examine the relationships among demand, costs, and profits NAT: AACSB: Reflective Thinking | MKTG: Pricing MSC: Knowledge ‘What assumption does breakeven analysis make that limits its overall usefulness? 1 It focuses on hove to achieve a price objective. b Tassumes a company wants to gain a certain market shave © Ttrelies on demand for a product being inelastic, 4 Te focuses only on competitive factors and not costs © Itasstunes demand is elastic for the product. ANS: C PIs: 1 DIF: Moderate TR. Which ofthe following is not a discount provided to business customers? a Trade b Cumulative © Cash Seasonal © Difieren ANS: E PIS: 1 DIF: Difficult OBJ: 12-06 Consider issues affecting the pricing of products for business markets. NAT: AACSB: Analytic | MKTG: Pricing MSC: Knowledge[108 What ype of discount is given to a business purchaser for performing activities such as transporting, storing, and selling? Quantity Cash © Geographic ad Service © Trade ANS: E PIS: 1 DIF: Difficult OBJ. 12-06 Consider issues affecting the pricing of products for business markets ‘NAT: AACSB: Reflective Thinking | MKTG: Pricing ‘MSC: Knowledge WBE The Panama Jack Company utilizes a spocial stratozy 10 sell ts ECO shirt line. Tt basic promotional tool isthe discount. These discounts offered to middlemen for performing certain channel activities are referred to as discounts, a trade b cumulative © Roncumulative push © intermediaryGF. Laura Spangler, of North Central Novelties, reduces the price of games sold to Robertson's Entertainment by 10 percent to allow for expenses associated with Robertson's promoting the games to consumers, This is an example of a___ discount, a quantity b cash © seasonal do trade © complementary ANS: D PIs: 1 DIF: Easy OBI: 12-06 Consider issues affecting the pricing of products for business markets. NAT: AACSB: Analytic | MKTG: Pricing | MKTG: Strategy MSC: Applicationos ea Si ec i ig it ots az Wo ay SOO Fes, a quastiy b cash © seasonal € trade © complementary ANS: A PIS: 1 DIF: Moderate ‘OBJ. 12-06 Consider issves affecting the pricing of produets for business markets NAT: AACSB: Analytic | MRTG: Pricing ‘MSC: Application {108. A deduction from list price for purchasing large quantities agarepated over tated period of time isa 4 noncunulative quantity discount 1b additive cash discount © cumulative quantity discount. ¢ cumulative dicount allowance, © additive quantity reduction, ANS: ¢ prs 1HIS. fa retailer orders a quantity of merchandise tobe delivered to his store in Phoenix and is quoted a pice that does not include shipping charges the retailer is paying a(n) price @ FOB, destination & FOB. factory © transfer d postage-stump fe base-point ANS: B PIS: 1 DIF: Difiicult OBE: 12-06 Consider issues affecting the pricing of produets for business markets. NAT: AACSB: Analytic | MKTG: Pricing MSC: Application 93. A concession in price in business markets to achieve a desired goal is called a(u) } a allowanee. objective-ortented discount. © cash discount 4 trade discount, cumulative discount ANS: A PIS: 1 DIF: Moderate OBE 12-06 Consider issues affecting the pricing of products for business markets, NAT: AACSB: Reflective Thinking | MKTG: Preing MSC: Knowledge HE. Reductions for transportation and other costs related to the physical distance between buyer and seller co 'b eight absorption pricing c price zoning 4 Tocation pricing. @ peographic pricing, ANS: E PIs: 1 DIF Moderste[106 Rob Johnson orders 16 dozen fishing lures from Stake Rught for $319. When he gets the mvorce, he forious thar $25 in freight charges has been tacked onto bis bill because he thought the price included 8 ee cons Rob shone ve been ce at then ems wae 1 EOD casin > FOB factory. © COD. 4 2/10, 030 © FOB. destination, ANS: E PTS: 1 DIF: Difficult ORT 12-06 Consider issues affecting the pricing of products for business markets, NAT: AACSB: Analytic | METG: Pricing MSC: Application HBR. The fac shat a gos station in Teaas pays less for fel than a gas station in Maine from a produce in Louisiana suggests that refineries are using which of the following psiing methods? a Price difereatiation Bose-poia pricing © Freight absoxption pricing Transfer pricing © Zone pricing ANS: E PIs 1 DIF. Moderate119. When Cadillac buys headlights from Delco (both of which are divisions of General Motors), pricing occur a base-point b zone © trae dtiform geographic © mati ANS: C PIS: 1 DIF: Difficult OBI: 12-06 Consider issues affectine the pricing of products for business markets, Nat: AACS»: AmaiyieIMKTO: Pring MSC: Application BBB. Which othe following is nora method wed to determine transfer prises? 2 Discounted standard cost b Actual fll cast, © Standard full cost 4 Cost plus investment © Market-based cost ANS: A PIS: 1 DIF: DifficultI. when establishing prices, marketer’ frst step isto determine demand. develop pricing objectives. select» prising policy, evaluate competitors prices. determine a pricing method ANS: B PIs: 1 DIF: Moderate REF: p. 628 OBE: 13-01 Describe the six major stages ofthe process used to establish prices. NAT: AACSB: Reflective Thinking | MKTG: Pricing ‘MSC: Knowledge | HF. Marketers must take steps to make sure that the pricing objectives they set are consistent with the organization's objectives and objectives a, advertising; marketing b. overall: marketing c. marketing: promotional 4. overall; promotional overall: revenue ANS: B PTs: 1 DIF: Moderate REF: p. 628 (OBE: 13-01 Describe the six major stages of the process used to establish prices. NAT: AACSB: Analytic | MKTG: Pricing ‘MSC: Knowledge WH. When a company adjusts price levels so that it can increase sales volume to Jevels that match the organization's expenses, tad fo employ a objective ‘market share 1b cath low (6 tum on ivestment ad suruval © pit ANS: D prs 1 DIF. Easy REF p62 (ORK 13-02 Explore issue slated to developing pricing objectives. NAT: AACSR® Reflective Thinking | MKTG: Pricing “MSC: Knowledpe 2 status au. >. profit. © Binal A. mast share recovery ANS: C prs 1 DIF: Difficult REF: p.629 OBI: 13.02 Bxplore issues related to developing pricing objectives. NAT. AACSB. Analytic | MKTG: Pricing ‘MSC- Compretension BE. Westin inc. has an objective of achieving a 25 percent retem from its overall sales. This is an example ofa pricing objective marketshare cash How tum on investment profit stats quo ANS: D prs 1 DIF. Moderate REF. p.629 paperBB. Most pricing objectives based on _are achieved by trial and error because not all cost and revenue data are available when prices are se. market share ». cash flow © retum on investment survival profit ANS: C PIs: DIF: Difficult REF: p. 629 OBJ: 13-02 Explore issves related to developing pricing objectives. NAT: AACSB: Analytic | MKTG: Pricing MSC: KnowledgeA marketer is most lily to sat prices according to a cash-flow objective when 2 ‘2. tal-and-error approach to the market is acceptable certain market share must be maintained. © quick rerurn on snvestment i= desired 4. higher price is acceptable te the finn © product is expected te have a long life cycle, ANS: € ers 1 DIF: Moderate REF. p. 629 BF 13.02 Explore issues related to daveloping pricing abject NAT: AACSB: Analytic | MRTG: Pricing MSC: Knowledge Gambrell Designs thinks its new produet, the Automatic Dog Walker, will have a short product life velo; therefore, its marketing dapartment sata sts primary pricing objective as 2 market share cash flow. profit, 6. product quality. fe Barus quo, ANS: B prs 1 DIF: Difficult REF: p. 630 OBJ. 13-02 Explore issues related to developing pricing objectiv« NAT: AACSB: Analytic | MRTG: Pricing MSC: Application Maintaining a certain market share, meeting competiters' prices, maintaining a favorable image, and. achioving price stability are all associated witha pricing objective. ‘a produet quality bart share ©. survival profit eStats quo ANS: E prs: 1 DIF: Moderate REF: p. 630 ©Bs. 13-02 Explore issues related to developing pricing objectives NAT: AACSB: Reflective Thinking | MKTG: Pricing, MSC: Knowledge Which pricing objective de-emphasizes price and can Tead to a climate of nonprice competition in an. industry? ‘a Status quo 1b. Return on investment ©. Market share @ Survival © Cash flow ANS: A prs: 1 DIF: Difficult, REF: p. 630 GBs 15-02 Explore issues related to developing pricing objectives AT: AACSB: Reflective Thinking | MKTG: Pricing ‘MSC: Comprehension \What type of pricing objective would an organization nee if it were in a favotabla position and dasitee nothing more? ‘a. Return on investment Cash How © Profit Status que fe Surival ANS: D PIs: 1 DIF: Moderate REF: p.IE Nabisco had established a pricing objective of selling one out of every three crackers consumed in ‘thel world, it would have established an objective based on a cash flow b. market share. © survival 4d. retum on investment. fe. dollar sales volume. ANS: B PIs: 1 DIF. Easy REF: p.629 ORT: 15-02 Explore issues related to developing pricing objectives NAT: AACSR: Analytic | MKTG: Pricing ‘MSC: Application A market share objective 1s not recommended when sales for the total industry are declining, 'b. isnot especially ueefel when eales for the total industry are mereasing © is not espeetally useful when sales for the total mdustry are Mat. 4. is usofel primarily in an sndustry whore total saloa aro increasing. © can be used affectively whether total industry sales are rising of falling ANS: E prs: 1 DIF: Moderate REF: p. 629 OBS. 13-02 Explore issues related to developing pricing objectives NAT: AACSR: Analytic | MKTG: Pricing ‘MSC: Knowledge A fitm establishes which of the following pricing objectives to maintain or increase its product's sales ‘in rolation to total industry sales?” ‘a. Cash flow b. Sales potential © Product quality Market share fe. Status que ANS: D PIs: 1 DIF. Easy REF: p.629 ORT: 15-02 Explore issues related to developing pricing objectives NAT: AACSB: Reflective Thinking | MKTG: Pricing MSC: Knowledge Which of the following pricing objectives sats prices te recover cash as quickly as possible? a. Market share 1b Profit ©. Cash fow 4. Retum on investment ©. Product quality ANS: © prs: 1 DIF: Difficult REF: p. 630 OBI: 15-02 Explore issues related to developing pricing objectives NAT: AACSB: Reflective Thinking | MKTG: Pricing MSC: Knowledge1G Which type of pricing objective can teduce a firm's risk by helping to stabilize demand for its products? Status quo Market share Survival Cash flow Return on investment ANS: A PIS: 1 DIF: Moderate REF: p. 630 OBJ 13-02 Explore neues related to developing pricing objectives NAT: AACSB: Reflective Thinking | MKTG: Pricing | MKTG: Strategy MSC: Knowledge paper [tf an organization sets prices to recover research and development expenses and establish a premium qualty image for its product, t would be using a___ pricing objective a. survival b. return on investment c. market share product quality cash flow ANS: D PIS: 1 DIF: Moderate REF: p. 630 OBI: 13-02 Explore issues related to developing pricing objectives NAT: AACSB: Analytic | MKTG: Pricing | MKTG: Strategy MSC: Knowledge {8 Tho pricing of Clinique makeup considerably highor than brands such as Cover Git, Revion, and ‘Maybelline is used to communicate which isthe company’s primary pricing objective market share product quality Ftatos quo profitabitity cash How ANS: B prs: 1 DIF: Moderate REF: p. 630 OBJ: 13-02 Explore issues related to developing priciag objectives NAT: AACSB: Analytic | MKTG: Pricing | MKTG: Stratepy MSC: Application §. Research indicates that both market share and —_are 200d indicators of profitability ow pricing produet quality limited competition sales growth ROI preing ANS: B PIS: 1 DIF: Moderate REF: p. 630 OBI: 13-02 Explore issues related to developing priciag objectives NAT: AACSD: Reflective Thinking | MKTG: Pricing | MKTG: Strateey MSC: Comprehension51 When a seller's costs are usually determined during or after a product is made and then a specified percentage or dollar amount is added to the cost to establish a price, an organization is using pricing, a. markup) demand-based cifferential costplus expensed-based ANS: D PIs: 1 DIF: Moderate REF: p. 633 OBJ: 13-05 Describe the basis used for setting prices. NAT: AACSB: Reflective Thinking | MKTG: Pricing MSC: Knowledge 6. For custom-made equipment or commercial construction projects, which pricing method is most likely used? Prestige Premium Differential Return-on-investment Cost-plusse: Application If a product is priced based on how many ar how few people want it at a particular time and place, pricing is being used. a. markup b. demand-based fe) competitive d. peak differential ANS: B prs: 1 DIF: Moderate REF: p. 634 GBI 13-05 Deseribe the basis used for setting prices: NAT: AACSB: Analytic | MKTG: Pricing MSC: Knowledge fe very yonuncos eras a. cost-plus b. demand-based ©. competitive 4. secondary markup fe. seasonal nso — amy ANS: B PIs: 1 DIF: Easy REF: p.634a. used when costs and revenues are secondary to competitors' prices. b, not usefil as a method of increasing market share ¢. not useful if the competing products are homogeneous, 4d, not able to increase sales. €. used when competing products are heterogeneous. ANS: A PTS: 1 DIF: Difficult REF: p. 635 OBE: 13-05 Describe the basis used for setting prices NAT: AACSB: Analytic | MKTG: Pricing MSC: Knowledge 86. When products in an industry are relatively homogeneous and price is a key purchase consideratis 8. competition-based pricing becomes more important. b, demand-based pricing dominates pricing decisions. c. firms tend to use secondary-market pricing. 4. cost-based methods like markup pricing are dominant. €. customary pricing is often used. ANS: A PTS: 1 DIF:__Moderate___REF: _p. 635[L. 1€ General Mills looks at Kellogg's cereal prices asthe primary method of determining its own prices, General Mills i using price fixing price discrimination dernanid- based pricing. ‘market share pricing compettion-based pricing ANS: E PIs: 1 DIF. Easy REF: p.635 ‘OBI: 13-05 Describe the basis used for setting prices NAT: AACSB: Analytic | MKTG: Pricing MSC: Application paces | Lf PepsiCo sets its twelve pack price at $3.99 to match the price charged by Coca-Cola, Pepsi is using ‘which ofthe following pricing methods? Demmand-based Cost-based Reference pricing Competition-based Price leader ANS: D PTs: 1 DIF. Easy REF: p.635 ‘OBJ: 13-05 Describe the basis used for setting prices, NAT: AACSB: Analytic | MKTG: Pricing ‘MSC: Application cas price-line promotional professional differential psychological ANS: D PTs. 1 DIF Moderate REF. p 636 ‘OBJ: 13-06 Explain the different types of pricing strategies. NAT: AACSB: Analytic | MKTG: Pricing MSC: Application p paces paoee Executives in Japan decided to price Lexus luxury cars in the United States at $55,000 while pricing them at $66,000 mn their own country. This isan example of| secondary-market pricing pce skimming. bait pricing. prestige pricing, random discounting ANS: A. PTS: 1 DIF. Moderate REF) p. 637 ‘OBE: 13-06 Explain the different types of pricing strategies. NAT: AACSB: Analytic | MKTG: Pricing | MKTG: Strategy MSC: Application paoee{85 Maria recently put her house on the market at an asking price of $260,000. She realizes, however, that in order to sell the house, she may have to use secondary-maskt pricing. reference pricing negotiated pricing price lining. professional pricing ANS: C PIs: 1 DIF Moderate REF: p. 637 OBJ. 13-06 Explain the different types of pricing strategies, NAT: AACSB: Analytic | MKTG: Pricing| MKTG: Strategy MSC: Application pppoe @. Aproblem associated with is that consumers can predict when prices will be lowered and delay purchases until that time ' random discounting ’._ penetration pricing c. reference pricing 4. everyday low pricing periodic discounting ANS: E prs: 1 DIF: Moderate REF: p. 637 (OBJ: 13-06 Explain the different types of pricing strategies, NAT: AACSB: Reflective Thinking | MKTG: Pricing MSC: Knowledge [Tho "White Salo" that many department stores have every year a few weeks after Christmas is an example of secondary pricing. off-peak pricing periodie discounting. random discounting captive pricing, ANS: C PIS: 1 DIF Difficult REF: p.637 (OBJ: 13.06 Explain the different types of pricing strategies NAT: AACSB: Analytic| MKTG: Pricing) MKTG: Strategy MSC: Application pppoe| 68. Ifa business decides to reduce its prices ouce in a while on an unsystematic basis, itis using a. price reduction planning. b. random discounting. bait pricing periodic discounting €. penetration pricing ANS: B PIS: 1 DIF: Moderate REF: p. 638 Price skimming and penetration pricing are both strategies used for product-line pricing. business products only. psychological pricing, new-product pricing. promotional pricing ANS: D PTS: 1 DIF: Easy REF: p. 638 OBJ: 13-06 Explain the different types of pricing strategies, NAT: AACSB: Reflective Thinking | MKTG: Pricing MSC: Knowledge ‘When businesses charge the highest possible price that customers who really want the new product swill pay, they are using premium pricing prestige lining. captive pricing. price skimming, penetration pricing. ANS: D PIS: 1 DIF: Easy REF: p. 638J. Sony management decided to use skimming as a pricing strategy for its newest line of high-definition television (HDTV) sets. It should be aware that ths strategy does not ‘generate capital to cover zesearch and developmeat costs, discourage competitors fom entering the marke. provide flexibility inthe introductory base price. protect the firm from covering costs if prices are set to low. reduce the stress that may be placed on the firm's production capabilities. ANS: B PIS: 1 DIF: Moderate REF: p. 638 OBE: 13-06 Explain the different types of pricing strategies. NAT: AACSB: Analytic | MKTG: Pricing |MKTG: Strategy MSC: Application 1S. When Sharp first introduced its line of graphing calculators, it set the price quite high: it has lowered the price as competitors have entered the muavket. The pricing strategy initially used by Sharp is called 4a. customary pricing . odd-even pricing. ©. penetration pricing price skimming prestige pricing ANS: D PIS: 1 DIF: Difficult REF: p. 638 IBA price-skimning strategy assumes that 2 the initial demand is highly elastic. Bb. the producti efficient ¢. twill be difficult to recoup development costs i. all consumers have homogencous tates. the intial demand is highly inelatie. ANS: E PIs: 1 DIF: Moderate REF: p. 638 OBI: 13-06 Explain the different types of pricing strategies, NAT: AACSB: Reflective Thinking | MKTG: Pricing MSC: Knowledge 77. A penetration pricing strategy is particularly appropriate when demand is increasing b. highly elastic. ©. highly inelastic. d. decreasing, ©. inefficient. ANS: B PTS: 1 DIF: Difficult REF: _p. 639Lf Nabisco want to quickly gain a large matket share with its new line of recuced-fat snack crackers, it should use penetration pricing ‘random discounting. captive pricing price skimming, ‘everyday low prices. ANS: A PIS: 1 DIE Easy REF. p. 639 OBI. 13-08 Explain she diferent typos of pricing stzragies, NAT: AACSB: Analytic | MKTG: Pricing | MKTG: Strategy MSC> Application ‘The management at Allied Electronic is having difficulty in rising the introductory price on system. components to cover the increased costs of producing the sensing devices for home security systems. Apparently, Allied used a(n) __ strategy in pricing these components. 3. odd-cven skimming © lining penetration @ peychological ANS: D PIs 1 DIF: Difficult REF: p 639 (OBJ: 13-06 Explain the different types of pricing strategies. NAT: AACSB: Reflective Thinking | MTG: Pricing MSC: Application ‘Which ofthe following would be used in setting the price of a new product if considerable competition is expected? Peyehological pricing Penetration pricing (Odk-even pricing Price skimming Prestige pricing ANS: B PIs: 1 DIF: Moderste REF: p 639 (OBJ: 13-06 Explain the diferent types of pricing strategies, NAT: AACSB: Analytic | MRTG: Pricing | MRTG: Strategy MSC: Comprehension All ofthe following ae pricing strategies used by companies establishing prices of multiple products within a product line excep premium pricing rice lining captive pricing bast pricing penetration pricing ANS. E PIS. 1 DIF: Moderate REF. p. 639BPricing the basic product in a product fine low while pricing telare items at a higher level is called premium pacias b. bait picing © captive pricing 4 price skimming © ntce lining ANS: C PIS: I DIF. Moderate REF. p. 639 (OBS: 15-06 Explain the different types of pricing strategies NAT: AACSB: Redlective Thinking MSC° Knowledge MKTG: Pricing | MKTG: Strateay _ Leumack sells some of its color printers for about $100, but the refill cartridges cost over $30 each. “Lexmatk’s pricing strategy would he best Iabsled a5 bait pncing. ‘coptve pricing ‘customary pricing price lining ‘complementary pricing ANS: B PIS: I DIF. Moderate REF. p. 639 (OBS: 15-06 Explain the different types of pricing strategies NAT: AACSB: Analytic | MKTG; Pricing| MKTG: Strategy MSC. Application ppeee {B.A prod that as more features than those ofits competition, or thats prceived tobe of higher ‘quality, warrants using which type of pricing strategy? Costom pricing Special event pricing Premium pci Pace lning ‘Bait pricing ANS: PIS: 1 DIF. Moderate REF. p. 640 BY. 13-06 Explain the different sper of picing eategies NAT: AACSB: Analytic | MKTG: Pricing| MKTG: Strategy MSC: Knowledge 1B. Breyers produces a varity ofc cream favors and lines of varying qualities. The higher quai ice cream vats are ped hughe than the basi ones. Breyer towing fo pice sce cea. coptive prom pice haine Premium prices bat premg diferent pricing ANS: PIS: 1 DIF. Moderate REF: p. 640& When an organization sets a numberof pees fr selected groups of merchandise, this is commonly seferedto38 prestige pricing price fining ‘customary pricing. ‘odd-even pricing ethical pricing ANS: B prs: 1 DIF: Moderate REF: p40 OBJ. 13-06 Explain the different types of pricing strategies NAT: AACSB: Reflective Thinking | MRTG: Pricing | MRTG: Staregy MSC: Knowledge The pricing strategy that assumes that demand is relatively inelastic over certain price ranges is called. price hning ‘odd-even pricing price skimming prestige prising ‘customary pricing. ANS: A PTS: I DIF Easy REF p.si0 OBJ. 13-06 Explain the different types of pricing strategies NAT. AACSB: Reflective Thinking | MKING: Pacing | MKTG: Strategy MSC: Knowledge 4] When a company attempt te inluence a consumers perception of pice to make a product's price more atactive and reduce "sticker shock,” itis using 9 pricing strategy ‘competition-based professional promotional ‘comparison psychological ANS: E PIS: I DIF Easy REF pot OBJ. 13-06 Explain the different types of pricing strategiesAll ofthe following are psychological techniques except a. customary priemg, prestige pricing €. reference pricing. 4 odd-even pricing. @. price skimming ANS: E prs: 1 DIF. Easy REF. p. 641 OBI 13-06 Explain the different types of pricing strategies, NAT: AACSB: Reflective Thinking | MTG: Priemg | MKTG: Strategy MSC: Knowledge Reference pricing is a. listing the manufacturer's suggested retail price on the price tag along with the store's lower price. b, mentioning the price that other retailers charge forthe same product on the display for the product. . using a consumer's internal perceptions of what the appropriate price should be to help price a firm's products. 4. pricing a product at a moderate level and positioning it next to a more expensive model or brand. €. using prices in advertising so that customers will have a point of reference when they come to the retail facility ANS: D prs: 1 DIF: Moderate REF: p. 641 OBJ: 13-06 Explain the different types of pricing strategies, NAT: AACSB: Reflective Thinking | MKTG: Pricing | MKTG: Strategy ‘MSC: Knowledge A Macy's manager designs the casual clothing department such that one of Macy's private label pairs of jeans, priced at $24.99, is positioned next to a national brand of jeans, such as Levis, priced at $39.99. What is the manager attempting to accomplish? a. Everyday low prices strategy Odd-even pricing strategy Prestige pricing strategy Special-event pricing strateay Reference pricing strategy ANS: E prs: 1 DIF. Easy REF: p. 64198, When Mia and Shane are planing theirhoneymoon, thei tavel agent tells them thet they buy a special package, their mp to Paris will inelode meal kets to the theater, and a rental earn aéition to irfre and a hotel. This isan example ofthe use of 8, multiple-unit pricing b. bundle pricing, . prestige pricing. 4. price lining ©. price packaging ANS: B PIS: 1 DIF: Easy REF: p.641 OBE: 13-06 Explain the different types of pricing strategies. NAT: AACSB: Analytic | MKTG: Pricing MSC: Application IE. Product ach a tight bab, canned soft drinks, and ie eream sandwiches ae usualy priced using nnofiple-ust pricing reference pricing pee lining trundle pricing oadi-even pricing ANS: A PTS: 1 DIF: Easy REF: p.642100. Goods that are priced primarily based on the way they have always been priced are examples of traditional pricing. professional pricing. everyday low prices. price lining. customary pricing. ANS: E PIs: 1 DIF: Easy REF: p. 643 GD Price leaders, comparison discounting, and special-event pricing are applications of psychological pricing. b. professional pricing. ¢. produet-line pricing. 4, € bait-and switch. promotional pricing. ANS: E PTS: 1 _ DIF: Moderate REP: p. 644A product is a price leader when. 1. itis sold at the highest price its price maximizes profits © aminctease or decrease in price leads to increased revenue or lower costs. 4. iti soldat less than cost in the hope that sales of other products will increase fe. ite pice leads the industry in sales, ANS: D PTS: 1 DIF. Difficult REF: p. 644 OBJ: 13-06 Explain the different types of pricing strategies. NAT: AACSB: Reflective Thinking | MKTG: Prcing | MKTG: Stateay MSC: Comprehension ‘To attract customers into a store, Safeway advertises its milk at Jess than cost, hoping that customers swill purchase other aro rice lining. special-event pricing differential pricing. comparison discounting, price leader pricing. ANS: E PTS. 1 DIF. Moderste REF. p. 644 OBJ: 13-06 Explain the difzrent types of pricing strategies. NAT: AACSB: Analytic | MKTG: Pricing MKTG: Strategy MSC: Application sas well. This pricing strategy is called papee Which of the following pricing strategies often results in 2 retailer losing money on the product? a. Price leader 2. Prychological discounting Penetration pricing 4. Special-event preme © Ethical pricing ANS: A PTs: 1 DIF: Difficult REF: p. 644 OBJ: 13-06 Explain the different types of pricing strategies NAT: AACSB: Reflective Thinking | MKTG: Pricing MSC: Comprehension ‘Acsale at The Boa Marche the day after Thanksgiving to kick off the Christmas season would be ‘considered psychological pricing comparison discounting, customary pricing. special event pricing captive pricing, ANS: D PTs: 1 DIF. Easy REF: p. 644 OBJ: 13-06 Explain the different types of pricing strategies. NAT: AACSB: Analytic | MKTG: Pricing | MKTG: Strategy MSC: Application peree Showing a product's price along with its previous price, the price of a competing brand, or the price at nother retail outlet i called ccompetition-bated pricing reference pricing comparison discounting, captive pricing. psychological pricing ANS: C PIS: 1 DIF: Easy REF: p 644 peree109. The manager at Best Buy puts a signup next toa Pioneer audio system that rads, "Only $199.99! S60 less than Circuit City." This is an example of what type of pricing strategy? a. Random discounting b. Periodic discounting ©. Comparison discounting dd, Penotration pricing ©. Everyday low prices ANS: C PTS: DIF: Easy REF: p.644