16. Prices 4 money paid in transaction, not important to buyers © of limited interest to sellers. d- the most inflexible marketing mix decision variable the value that is exchanged for products in a marketing transaction. ANS: E PTs: 1 DIE: Easy OBE: 12-01 Understand the role 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 | MTG: Pricing MSC: Knowledge 19. The tuition and fees each student paid for this semester of college 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 men's ties. The designer believes thatthe tarpot market for tase tes eompnises men who are very satus-conscious. In keeping with this assessment, department stores selling the ues should 2 charge price based on thei cost 'b charge prices consistent with ther exiting te. (© discount the is, 4 nopotiato the price with individual te shoppers. 2 use price symbolically ANS: E PIs: 1 DIF: Moderate (O85: 12-01 Understand the rola of price NAT: AACSB: Analytic METO: Pricing MSC: Application 25._‘When marketers emphasize price as an issue and match or best the prices of other companies, they are using 12 price competition 'b nonprive competition, (© | comparative pricing strategies 4 demand based prcine © supply-based pricing ANS: A BIS 1 DIP: Moderate 22, Price isa key clement in the marketing mix because it relates directly to the size ofthe sales free the speed of an exchange. © quality controls d the generation of total revenue. © brand image. ANS: D PIs: 1 DIF: Moderate2, 28 Advertisements for Suave shampoos emphasize that other shampoos may cost more but don't work any better than Suave. In this example, Suave is competing onthe bass of marketshare © price 4 sslaction 8 packaging. ANS: & prs: 1 DIF. Easy (OBE: 12-02 Identify the characteristics of price and nonprice competition NAT: AACSB: Analytic | MKTG: Pacing ‘MSC: Application A danger associated with engaging in prica competition is that competitors can also change prices ‘quickly and agaressively, which can result in (a) that willbe harmful to both companies, ‘© reduetion in cost 1b price war ‘© competitive draw d indusiry collapse © advertising batle ANS: B pas. 1 DIE:_Eas 20. Which of the following is the most flexible variable in the marketing mix? a > @ ANS: ons: NAT. sc Product Price Advertising Personal selling Distribution B prs: 1 DIF. Basy 12-01 Understand the role of price AACSB: Analytic | MKTG: Pricing | MKTG: Marketing Plan Knowledge “What aquation shows organizations the relationship betwasn price and profit? ANS: ‘Total Variable Costs ~ Total Fixed Costs ~ Saleu © Profit Price = Profit par am - Numbar of Unite Sold (Price . Quantity Seld) 0 Total Costs = Profits (Price 0 Profits). Total Coste = Sales Total Costs = (Price . Quantity Sold) 1 Profits c PIs: 1 DIF: Difficult29, Sellers that emphasize distinctive product features to encourage brand preferences among customers are practicing ‘2 | product competition. | nonprice competition | brand differentiation, price competition © | competitor differentiation ANS: B prs: 1 DIF: Moderate ‘OBJ: 12-02 Identify the characteristics of price and nouprice competition, NAT: AACSB: Reflective Thinlang | MKTG: Pricing MSC: Knowledge 30. One advantage of nonprice competition is that ‘| a frm ean react quickly to competitive efforts ' | marketshare Become Tess important © | # firm can build customer tovalty | marketing efforts ave completely eliminated (© | peiing se ne longer a factor. ANS: ¢ prs: 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 its brand through some uniqua feature in order to successfully enage in nonprice competition. A fim using nonprice competition can build loyalty to both its company and its products. 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 ORT. 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 bits easy to duplicate (© itis packaged differently stom similar products. itis priced near the competitors’ price, ‘2 its quality has been upgraded. ANS: B pis: 1 DIF: Moderate 36, A graph of the quantity of products marketers expect to sell at various prices if other factors remain constant is a a price graph. supply eurve, © price/quantity graph, 4 marginal revenue curve demand curve. ANS: E PIs: 1 DIF: Moderate | 40. If Seapram's marketers found that the firm's Crown Royal bourbon was a prestige product and raised its price, which ofthe following would moztkely happen? ‘2 | The quantity demanded would immediately fall. 'b | The quantity demanded would always incroase, ‘© | Above some price level, the quantity demanded would begin to decrease 4d 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8 French Quarter Inns drops the price ofa suite from $225 to $195 per night and experiences a reduction 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 reverie-demand inferior © standard 4 sevondary-demand © prestige ANS: E prs: 1 DIF; Moderate OBE: 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? ‘2 tis astraight line where the quantity sold continues to inerease asthe price of each product increases. b- Iisa curve where the highest and the lowest prices yield the greatest quantity sold and ‘mid-range prices produce the fewest sales. © i forms a curve where the greatest quantity sold comes at a medium price and the ‘quantities fall as the price increases or decreases. 4 forms a straight vertical line because of the prestige of the product, and quantity sold ill remain stable regardless ofthe price © Htslopes from left to right at a very mild slope; that is, as quantity increases, price decreases slowly ANS: PTs: 1 DIF:_ Difficult 43, 1 Commival Cruise Lines increased the price ofits seven-day cruise packaze by 10 pereeat and, a8 a ‘result, experienced a 20 percent decline ia customer bookings, Carnivals demand would be a steady inelastic © clastic, prestige © maesina. ANS: C PIS: 1 DIF: Moderate| 41. Which of the following products is most fizely to have an inverted C-shaped demand curve? ‘2 Levijeane Giorgio perfume ¢ Maxwell House coffee ¢) Pillsbury cake mix © Ford Taurss ANS: B prs: 1 DIF: Moderate OBJ: 12-03 Explore demand curves and price elasticity of demand. NAT: AACSB: Analytic | MRTG: Pricing ‘MSC: Application 42. A measure of sensitivity of demand in relation to changes in price is 2 ademand curve ba prestige graph © marginal analysis d-price elasticity of demand. © quantity elasticity, ANS: D PIs: 1 DIE: Moderate44. Which ofthe following is most likely to have aa inelastic demand curve? ‘¢ Automobile > Vacation © Nonelective urge 4) Recreational vehicle = Computes ANS: C PIS: 1 DIF Easy OBI. 12-03 Explore demand curves and price elasticity of demand. NAT: AACSB: Analytic| MKTG: Pricing ‘MSC: Application 485. If product hasan inelastic demand and the manufacturer raises ts price, ‘tral revenue wall sncease, ‘> quantity demanded will decrease (© the demand schedole will sid 4 the demand will become aire inelastic. © total revenue will deeresse ANS: A PIS 1 DIF: Moderate 46. Which of the following statements about price elasticity is false? ‘a Steak is an example of a product tat has an elastic demand for most people, because ‘when price goes up quantity demanded goes dowa proportionally more. b Elasticity of demand is the relative responsiveness of a cliange in quantity demanded to changes in price. © If marketers can determine price elasticity, then setting prices at optimum levels is muelt easier When price is raised on a product that has an inelastic demand, then total revenue will docrease, © A product like electricity has an inelastic demand. PTS: 1 DIF: Difficult47. If Pacific Power and Light increased its rates 10 percent and experienced only a 2 percent reduction ia ) the demand for power, the demand would be a | olastic. b prestige 4 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 not vary with changes inthe number of wits produced and sold are called costs a fixed b tal © invariable variable © st ANS: A PIS: 1 DIF: Easy OBJ: 12-04 Examine the relationships among demand, costs, and profits NAT: AACSB: Reflective Thinking | MKTG: Pricing MSC: Knowledge 52. Which ofthe following is most likey tobe a fixed cost? 8 Component parts b Raw materiale © Rent & Bleotreity © Transportation ANS: © PTS: 1 DIF: Easy | 53. Costs that vary directly with changes in the number of unite produced or sold are called 12 changeables, 1b variable costs © direst cots, fixed costs marginal costs ANS: B PIS: 1 DIE: Easy OB): 12-04 Examine the relationships among demand, costs, and profits NAT: AACSB: Reflective Thinking | MKTG: Pricing MSC: Knowledge $4, 1a firm curently produces 2,500 products per mouth and desides to produce 2.50, it wil incur ‘1 more fixed costs, 1 igher average fixed costs © fewer variable costs, da marginal eos. © higher average variable costs ANS: D prs: 1 DIF: ModerateNAL: AAUSB: Analyte | MIU: Pree ‘MSU: Appiication 55. Roberts Electronics calculates that if it produces 15 radar detectors, its costs are $1,500, and ifit produces 16 radar detectors, is costs are $1,590. ln this anstance, $90 is the firm's "cost fixed © variable 6 marginal © average variable ANS: D PTS: 1 DIF: Moderate 57. Michelin ntives that when the numberof ies it sells increases fom 100,000 f 1,000,001, total ovens ree $35. Tho $35 represent the fms 1 marina revere © pice elasticity 4 svorage vanabl evenoe, average total cost. ANS: B PIs: 1 DIF Basy (ORE 12.04 Examine the celationships among damand, costs, and prot. NAT: AACSB: Analytic! MRTG: Pring "MSC: Apliation 8. At vat point does im maximize pros? ‘The point at wich margal cost equals marginal vente ‘>The point at wich the Sm ells its product tthe hihest pice {©The breakeven point ps the adjusted marpinl cost {4 The point at wich marginal pris qual marginal revense The point at which marginal cost qua marginal profits ANS A PIs; 1 DIF Easy| 59. When marginal cost is equal to marginal revenue, the firm should §) produce more to incremse profits, b produce less to decrease total costs € stop producing additional units to maximize profits. provide discounts to encourage purchases. © intensify distribution to inesease sales, ANS: C PIs: 1 DIF: Moderate OBI: 12-04 Examine the relationships among demand. cotts, and profits NAT: AACSB: Analytic | MKTG: Pricing |MKTG: Strategy MSC: Comprehension 60, If Colgate-Palmolive wants to maximize profit om its toothpaste, it should operate at the point where total coats and total revenues are equal. bb marginal revenue is at its highest level. © marginal revenue 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. 1 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 product is exactly equal to the marginal cost of producing one ‘more unit, © the marginal cost eurve and the average cost curve will be identical for a particular product. ANS: A PIS: 1 DIF: Moderate62. ) 63 The point which he costs of producing a product equal te revenue eared from sling the product, fe elasticity of demand. we rekeven poi © acaba price elasticity © the um of fixed and variable coats ANS: B BTS: 1 DIF: Easy OBE: 12-04 Examine the clationships among demand, costs, and profits, NAT: AACSB" Analytic | MKTG: Pricing| MKTG: Strategy MSC: Comprehension Suppose managers at Caterpillar have determined the costs associated with producing hay balers are equal tothe price that they charge forthe hay balers. This indicates that Cateplla is producing a the ae point a breakeven "6 marainal eovenue loss than marginal cost © profit margin 4 compestve price © profit maximizing ANS: A. PTS: 1 DIF: Moderate 64. To determine the breakeven point in units, divide the fixed costs by a | total costs | variable costs time price, © price minus variable costs. d_ price per unit. | total revenue minus fixed costs. ANS: C PTs: 1 DIF: Difficult69. 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 70. What assumption does breakeven analysis make that limits its overall usefulness? 1 It focuses on hove to achieve a price objective. b Ttassumes a company wants to gain a certain market share, © Ttrelies on demand for a product being inelastic, 4 Te focuses only on competitive factors and not costs Itasstumes demand is elastic for the product. ANS: C PIs: 1 DIF: ModerateTE. Which ofthe following is no a discount provided to business customers? a Trade b Cumulative © Cash Seasonal © Differe ANS: E PTS: 1 DIF: Difficult OBE: 12-06 Consider issues affecting the pricing of produets for business markets. NAT: AACSB: Analytic | MKTG: Pricing MSC: Knowledge |H05. What roof discounts given oa business purchaser for performing stvtes sch a ransportne, SG Cash | Geographic ad Service © Trade ANS: E PIs: 1 DIF Difficult OBI. 12-06 Consider issues affecting the pricing of products for business markets NAT: AACSB: Reflective Thinking | MKTG: Pricing ‘MSC: Knowledge HOB. The Panama Jack Company utilizes a special strategy to sel its ECO-shirt fine. Its basic promotional tool is the discomnt. These discounts offered to middlemen for performing certain channel activities are refered tos discounts, a | trade b cumulative © | noncumulative push © intermediary ANS: A PTS. DIF: Moderate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 d 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ose i ec i ig it ots zs Wo ay TOO Fes, a quasty 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 lst price for purchasing large quantities ageegated over a tated period of time isa 4 noncunulative quantity discount. b additive eash discount © cumulative quantity discount. ¢ cumulative dicount allowance, © additive quantity eduction, ANS: ¢ prs. 1fa retailer orders a quantity of merchandise to be delivered to his store in Phoenix and is quoted a quaatity m price that does not include shipping charges, the retailer is paying a{a) pice. a FOB. destination b FOB. factory © transfer 4 postage-stamp © base-point ANS: B PTS: 1 DIF: Difficult OBE: 12-06 Consider issues affecting the pricing of produets for business markets. NAT: AACSB: Analytic | MKTG: Pricing MSC: Application 193. A concession in price in business markets to achieve a desired goal is called a(u) | a allowance. 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 a Redstions Ser racepottion and oe: costs melted to the pssel dance betes bayer end vler 7 tse eit ne. 'b freight absorption pricing © price zoning. 4 Tocation pricing. © peopraphic pricing ANS: E PIs: 1 DIF Moderste26. Rob Jolson orders 16 dozen fishing lures from Stake Raght for $3/9. When he gets the mvorce, he 1s forious thar $25 in freight charges has been tacked onto bis bill because he thought the price included freight costs. Rob should have been certain that the order terms were a FOB. origin, > FOB factory © COD. 4 2/10, 030 © FOB. destination, ANS: E PIS: 1 DIF: Difficult ORT: 12-08 Consider issues affecting the pricing of products for business markets AT: AACSB: Analytic | MKTG: Priciag ‘MSC: Application HIE. The fac shat a gas station in Tenas pays less for fel than a gas station in Maine from a produce in Louisiana suggests that refineries are using which of the following psicing methods? a rice diferentiation 1 Bese-poiat pricing © Freight absoxption pricing 6 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 & zone © transfer form geographic © mais ANS: C PIS: 1 DIF: Difficult OBJ: 12-06 Consider issues affecting the pricing of products for business markets Nat: AACSB: AnaiyieIMKTO: Pring MSC: Application BB. Which othe following is nora method wed to dtemnine transfer prises? 2 Discounted standard cost 'b Actual full cost © Staadard full cost 4 Cost plus investment © Market-based cost ANS: A PIS: 1 DIF: DifficultT6. When establishing prices, a marketer’ frst step is t0 ‘determine demand. develop pricing objectives. select a pricing 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 of the process used to establish prices. NAT: AACSB: Reflective Thinking | MKTG: Pricing MSC: Knowledge | BR 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 . overall: marketing ©. marketing: promotional d ‘overall: promotional overall: revenue ANS: B PIs: 1 DIF: Moderate REF: p. 628 (OBJ: 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 organizations expenses, stn aid fo employ a objective ‘market share ‘cath low 6 tam on ivestment d sunuval © pit ANS: D prs 1 DIF Easy REF p.620) (ORF 13-02 Explore issue slated to developing pricing objectives. NAT: AACSR® Reflective Thinking | MKTG: Pricing “MSC: Knowledge 2 status cu >. pti. © Binal d. maret share. recovery ANS: C prs 1 DIF: Difficult REF: p29 OBI: 13.02 Bxplore issues related to developing pricing objectives. NAT. AACSB. Analytic | MKTO: Pricing MSC: Compretension BE. Westin inc. has an objective of achieving. 25 percent rete from its overall sales. This is an example ofa pricing objective ‘market share cath ow (eta on investment profit fe satus uo ANS: D prs 1 DIF. Moderate REF. p.629 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. ‘marketshare cash flow return on investment survival profit ANS: © PTS: 1 DIF: Difficult — REF: p.629 OBJ: 13-02 Explore issues related to developing pricing objectives. NAT: AACSB: Analytic | MKTG: Pricing MSC: Knowledge29) A marketer is most lily to sat prices according to a cash-flow ebjective when a ‘8. trial-and-error approach to the market is acceptable, certain market share must be maintained. © quick return on investment is desired 4. higher price is acceptable to the fim 2 prodult is expected to have a long life ovele, ANS: © prs: 1 DIF: Moderate REF: p 629 OBJ. 13-02 Explore issues related to developing pricing objectives NAT: AACSB: Analytic | MRTG: Pricing MSC: Knowledge Gambrell Designs thinks sts new produet, the Automatic Dog Walker, will have a short product life velo; thorefore, ils marketing department sots sts primary pricing ebjective as 2 market share, b. cash flow. ©. profit, product quality fe Hams quo. ANS: B prs: 1 DIF: Difficult’ — REF: p. 630 OBE 13-02 Explore sssues related to developing pricing objectives AT: AACSB: Analytic | MRTG: Pricing ‘MSC: Application “Maintaining a certain market share, meeting competitors prices, maintaining a favorable image, and achieving price stability are all associated with a pricing objective. ‘a. product quality 1b market share © survival 6. profit fe Hamas quo ANS: E prs 1 DIF: Moderate REF. p.630 OBS. 13-02 Explore sues related to davaloping pricing objectives NAT; AACSB: Reflective Thinking | MKTG: Pricing MSC: Knowledge Which pricing objective de-emphasizes price and can lead to a climate ef nonprice competition in an industry? a Statue quo Return on investment ©. Market share @ Survival © Cath flow ANS: A prs: 1 DIF: Difficult, REF: p. 630 OBs. 13-02 Explore issues related to developing pricing objectives. NAT: AACSB: Reflective Thinking | MKTG: Pricing. MSC: Comprehension ‘What type of pricing objective would an organization use sft were im a favorable position and desired nothing more? ‘a. Return on investment Cash flow ©. Profit ‘ prs: 1 DIF: Moderate REF:Lf Nabisco had established a pricing objective of selling one out of every three crackers consumed in. ‘thelworld, it would have established an objective based on a cash flow b. market share © survival 4d. retum on investment. ©. dollar sales volume. ANS: B PTs: 1 DIF! Easy REF: p.629 OBI: 15-02 Explore issues related to developing pricing objectives, NAT: AACSR: Analyte | MKTG: Pricing ‘MSC: Application § A market share objective 1s not recommended when sales for the total industry are declining, 'b. isnot especially useful when ales for the total industry are mcreasing ©. isnot espectally 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: & prs: 1 DIF: Moderate REF: p. 629 OBS. 13-02 Explore issues related to developing pricing objectives NAT: AACSR: Analytic | MKTG: Pricing ‘MSC: Knowledge J. A firm establishes which of the following pricing objectives to maintain or increase its product's sales in relation to total mdustry sales?” ‘a. Cash flow b. Sales potential © Product quality . Market share fe. Status que ANS: D PIs: 1 DIF. Easy REP: p. 629 ORF 13-02 Explore issues slated to developing, pricing objectives NAT: AACSB: Reflective Thinking | MKTG. Pating MSC: Knowledge Which of the following pricing objectives sets prices to recover cash as quickly ae possible? a. Market share Profit ©. Cash flow @_Retum on investment & Product quality ANS: C prs: 1 DIF: Difficult REF: p. 630 OBI: 13-02 Explore issues related to developing pricing objectives, NAT: AACSB: Reflective Thinking | MKTG: Pricing MSC: KnowledgeH._Which ype of pricing objective can reduce 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 ODT. 15.02 Explore issues related to developing pricing objectives NAT: AACSB: Reflective Thinking | MKTG: Pricing | MKTG: Strategy MSC: Knowledge paper [iran organization set priees to recover research and development expenses and establish a premium “ality image fr its product, would be using a pricing objective survival retun on investment market share product quality fash flow ANS: D prs: 1 DIF: Moderato REF: p. 630 OBE. 15.02 Explore issues related to developing pricing objectives NAT: AACSB: Analytic / MKTG: Prising [MKTG Strategy MSC: Knowlodgo aooor $6. The prising of Clinique makeup considerably higher than brands such as Cover Gitl, Revion, and Maybelline is used to communteate whichis tho company's primary pricing objective marketshare product quality tutus quo profitability fash flow ANS: B PIs: 1 DIF: Moderate REF: p. 630 OBE 15.02 Explore issues related to developing pricine objectives NAT: AACSB: Analytic MKTG: Pricing [MKTG Statogy MSC: Application aeoor 9. Research indicates that both market share and —_are good indicators of profitability ow pricing ‘produet quality limited competition sales growth ROI preing ANS: B PIs: 1 DIF: Moderate REF: p. 630 OBJ: 13-02 Explore issues related to developing priciag objectives NAT: AACSB: Reflective Thinking | MKTG: Pricing | MKTG: Stratesy MSC: Comprehension5] 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 costpls 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-nlusse: Application 5S. 1fa product is priced based on how many er how few people want it ata particular time and place, pricing is boing need a. markup b. demand-based ce) competitive d. peak ©) differential ANS: B prs: 1 DIF: Moderate REF: p. 634 OBE 13-05 Describe the basis used for setting prices. NAT: AACSB: Analytic | MKTG: Pricing MSC: Knowledge (86. Amtrak prices its tickets so that it is less expensive to travel on weekends than during the week when there is heavy business travel, This illustrates pricing. cost-plus demand-based competitive secondary markup seasonal paneer ANS: B PIs: 1 DIF: Easy REF: p.6348 used when costs and revenues are secondary to competitors’ prices. b. not useful as a method of increasing market share. c. not useful if the competing products are homogeneous. 4. not able to increase sales. €. used when competing products are heterogeneous. ANS: A PIS: 1 DIF: Difficult REF: p. 635 OBJ: 13-05 Describe the basis used for setting prices NAT: AACSB: Analytic | MKTG: Pricing. MSC: Knowledge 0. When products in an industry are relatively homogeneous and price is a key purchase consideratic competition-based pricing becomes more important, demand-based pricing dominates pricing decisions. firms tend to use secondary-market pricing. cost-based methods like markup pricing are dominant. customary pricing is often used ANS: APTS: 1 DIF: _Moderate___REF: _p. 635|L1f General Mills looks at Kellogg's cereal prices asthe primary method of determining its own prices, General Mills using a. price fixing b. price discrimination. . demand-based pricing 4. market share pricing. © competition-based pricing ANS: E PTs: 1 DIF Easy REF: p.635 ‘OBI: 13-05 Describe the basis used for setting prices, NAT: AACSB: Analytic | MKTG: Pricing MSC: Application Il IfPepsiCo sets its twelve-pack price at $3.9 to match the price charged by Coca-Cola, Pepsi is using ‘which ofthe following pricing methods? Demand-based Cost-based Reference pricing Competition-based Price leader ANS: D PIs: 1 DIF: Easy REF: p. 635 OBI: 13.05 Desoribe the basis used for setting prices NAT: AACSB: Analytic | MTG: Pricing MSC: Application ee price-line promotional professional differential psychological ANS: D PIS: 1 DIF: Moderate REF: p. 636 ‘OBJ: 13-06 Explain the different types of pricing strategies. NAT: AACSB: Analytic | MKTG: Pricing MSC: Application paoee peooe IL. Executives in Japan decided to price Lexus luxury cars in the United States at $55,000 while pricing them at $66,000 in their own country. This is an example of secondary-market pricing price skimming. bait pricing. prestige pricing random discounting ANS: A. PTs: 1 DIF Moderate REF. p. 637 ‘OBJ: 13-06 Explain the different types of pricing stratezies. NAT: AACSB: Analytic | MKTG: Pricing | MKTG: Strategy MSC: Application pares{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-markt pricing. reference pricing negotiated pricing price ining. professional pricing ANS: C PTs: 1 DIF) Moderate REF: p 637 OBJ: 13-06 Explain the different types of pricing strategres NAT. AACSB: Analytic | MKTG: Pricing| MKTG: Strategy MSC: Application ppeee 6. A problem associated with is that consumers can predict when prices will be lowered and delay purchases until that time random discounting penetration pricing seference pricing everyday low pricing periodic discounting ANS: E PIS: 1 DIF: Moderate REF: p.637 OBJ. 13-06 Explain the different types of pricing strategres NAT. AACSB: Reflective Thinking | MKTG: Preing MSC: Knowledge peeee {Lae "White Sale" that many department stores have every year a few weeks after Christmas is an example of secondary pricing off-peak pricing periodic 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|B. 1fa business decides to reduce its prices once in a while on an unsystematic basis, it is using price reduction planning. 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 procuct will pay, they are using premium pricing prestige lining. captive pricing. price skimming, penetration pricing. ANS: D PIS: 1 DIF: Easy REF: p. 638A. 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 development costs. discourage competitors from 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 TS. 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 market. The pricing strategy initially used by Sharp is called 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 the initial demand is highly elastic. the producti efficient. it wil be difficult o recoup development costs all consumers have homogeneous tastes. the initial demand is highly inelastic ANS: E PIs: 1 DIF: Moderate REF: p. 638 OBJ: 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 . imereasing 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 market 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 Ea REF. p. 639 (OBI. 13-06 Explain ihe different types of pricing strategies, NAT: AACSB: Analytic | MRTG: Pricing | MRTG: Strategy MSC: Application ‘The management at Aled Electronics is having dificuly in rising the introductory price on system components to caver the increased costs of producing the sensing devices for home security systems Apparently, Allied used af) __ strategy n pricing these components. a odd-even 2. skimming © fining 4 penetration © psychological ANS: D PIS: 1 DIF: Difficult REF. p. 639 (OBI 13-08 Explain she different typos of pricing st=rages, NAT: AACSB: Reflective Thinking | MKTG: Pricing MSC: Application Which of the following would be used in setting the price of a new product if considerable competition is expected? 2. Psychological pricing ‘8 enetration pricing © Odé-even pricing 4. Price skimming (© Prestige pricing ANS: B PIS: 1 DIF: Moderste REF. p. 639 (OBI. 13-06 Explain ihe different types of pricing strategies. NAT: AACSB: Analytic | MKTG: Pricing | MKTG: Strategy MSC> Comprehension All ofthe following ae pricing strategies used by companies establishing prices of multiple products within a product line excep? premium pricing ‘price lining captive pricing ban pacing. ‘© penetration pricing ANS. E PIS. 1 DIF: Moderate REF. p.639Bricing the basic product ina product fine low while pricing elared items at a higher level is called premium pacing batt pricing captive pricing pce skims rico ining ANS: € PIs: DIF. Moderato REF: p.639 OBJ, 13.06 Explain the flea! types of pricing statesies. NAT: AACSB: Rellecive Thinking | MKTG: Pacing | MRTG: Suategy MSC: Kaowiedge epeee 3. Lexmark sells come ofits color printers for about $100, but the refill cartridges cost over $30 each, LLenmadés pricing ststegy would be best labeled a ‘oat pricing captive pricing customary pricing price lining ‘complementary pricing. peree ANS: B PIS: 1 DIF: Moderate REF> p. 639 OBJ. 13-06 Explain the different oypes of pricing strategies. NAT: AACSB: Analytic | MKTG: Pricing | MKTG: Strategy MSC: Application A product that has more features than those ofits competition, or that is perceived to be of higher quality, warrants using which type of pricing strategy” Costom pacing Special event pricing Premium pricing, Pace lms Bait pricing epeee ANS: PIS: 1 DIF: Moderate REF: p. 640 OBJ. 13-06 Explain the different types of pricing stratesies. NAT: AACSB: Anafytic| MKTG: Pricing| MKTG: Strategy MSC: Knowledge BB Breyers produces a variety of ce cream flavors ané lines of varying qualities. The higher quality ice ream Varieties ate pice higher than the basic ones. reyereissing to price is ice cea. captive pricing price baring premium pacing bait pricing lferenial pricing ANS: PIS: 1 DIF. Moderate REF: p. 640 peree& When an organization sets a numberof pees for selected groups of merchandise, this is commonly refered to 38 2 prestige pricing price lining customary pricing 4d odd-even pricing © ethical pricing ANS: B PIs: 1 DIF. Moderate REF: p. 640 ‘OBJ. 13.06 Explain the diferent types of pricing statepiet. NAT: AACSH: Reflective Thinking | MKTG: Pricing | MKTG: Strategy MSC: Knowledge “The pricing strategy that assumes that demand is celatively inelastic over certain price ranges is called pricing strategy ly price ranges 2 price hning b. odé-even pricing. price skimming prestige pnicing fe customary pricing ANS: A PIs: 1 DIF. Easy REF. p64 ‘OBI: 13-06 Explain the diferent rypes of pricing strategies, NAT: AACSH: Reflective Thinking | MKTG: Pricing | MKTG: Strategy MSC: Knowledge 1 When 2 company attempts to influence 2 consumer's perception of price to make a product's price more atuactive and reduce "sticker chock,” itis using a pricing ctategy ‘competiton-hased professional promotional ‘comparison psychological ANS: E PIS: 1 DIF Easy REF pot ‘OBJ: 13-06 Explain the different types of pricing stratescs.BA. All of the following are psychological techniques excepr a. customary pricing. prestige pricing ¢. reference pricing 4 odd-even pricing e. price skimming ANS: E PTs: 1 DIF: Easy REF: p. 641 OBI: 13-06 Explain the different types of pricing strategies NAT: AACSB: Reflective Thinking | MKTG: Pricing | MKTG: Strategy ‘MSC: Knowledge 5B Reference pricing is listing the manufacturer's suggested retail price on the price tag along with the store's ower price. 'b. mentioning the price that other retailers charge for the 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 produet at a moderate level and positioning it next toa more expensive model or brand. ©. using prices in advertising so that customers will have a point of reference when they come to the retal facility ANS: D PTs: 1 DIF: Moderate REF: p. 641 OBI: 13-06 Explain the different types of pricing strategies NAT: AACSB: Reflective Thinking | MKTG: Pricing | MKTG: Strategy MSC: Knowledge BBA Macy's manager desions the easual clothing department such that one of Macy's private label pits of jeans, priced at $24.99, is positioned next toa national brand of jeans, such as Levis, priced at $39.99, Whats the manager atempting to accomplish? 2. Everyday low prices strategy ©. Odd-even pricing stra ¢. Prestige pricing strategy 4 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 Pars will inelade meal ikets to the theater, and a rental earn addition to irfre and a hotel. This isan example ofthe use of a. -multiple-nit pricing ‘b, bundle pricing, c._ prestige pricing price ining 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 such a fight bab, canned soft drinks, and ie eream sandwiches ae usualy priced using moftiple-unit pricing reference pricing pee lining trundle pricing oai-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 ining. customary pricing. ANS: E PIs: 1 DIF: Easy REF: p. 643 WO Price leaders, comparison discounting, and special-event pricing are applications of psychological pricing. professional pricing. ‘product-line pricing. baitand-switch promotional pricing ANS: E PIS: _DIF: Moderate REF: p. 644A product is price leader when. ‘a. iti 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 diferent types of pricing strategies NAT: AACSB: Reflective Thinking | MKTG: Pricing | MKTG: Strategy ‘MSC: Comprehension ‘To attract customers into a store, Safeway advertises its milk at less than cost, hoping that customers ‘will purchase other groceries as well. This pricing strategy is called price fining special event pricing differential pricing. comparison discounting, price leader pricing. ANS: E PTS: 1 DIF: Moderate REF: p. 644 OBJ: 13-06 Explain the different types of pricing strategies. NAT: AACSB: Analytic |MKTG: Pricing) MKTG: Strategy MSC: Application ‘Which of the following pricing strategies often results in a retailer losing money on the product? a. Price leader 1b Peychological discounting c. Peneuation pricing 4. Special-event pricing e Ethical pricing ANS: A PTS: 1 DIF. Difficult REF: p. 644 OBJ: 13-06 Explain the diffeent types of pricing strategies. NAT: AACSB: Reflective Thinking | MKTG: Pricing MSC; Comprehension ‘A.sale at The Bon Marche the day after Thanksgiving to kick off the Christmas season would be considered a. psychological pricing © comparison discounting c customary pricing 4. spectal-cvent pricing. ©. captive pricing, ANS: D PIs. 1 DIF. Easy REF. p. 644 OBI: 13-06 Explain the difzrent types of pricing strategies. NAT: AACSB: Analytic | MKTG: Pricing | MKTG: Strategy MSC: Application Showing a product's price along with its previous price, the price of a competing brand, or the price at nother retail outlet is called competition- based pricing. seference pricing comparison discounting, captive pricing. psychological pricing ANS: PIS: 1 DIF; Easy REF: p 644109. The manager at Best Buy puts a signup next toa Pioneer audio system that rads, "Only $199.99! S60 less than Cireuit City." This is an example of what type of pricing strategy? fa. Random discounting b. Periodic discounting ©. Comparison discounting dd. Penotration pricing ©. Everyday low prices ANS: C PIS: 1 DIF: Easy REF: p. 644