question
Price is
answer
the value that is exchanged for products in a marketing transaction.
question
The oldest form of exchange trading of products is known as
answer
barter.
question
What do all of the following have in common: tuition, fee, premium, retainer, dues?
answer
They are different terms for the concept of price.
question
The tuition and fees each student paid for this semester of college are both terms for
answer
price.
question
Which of the following is the most flexible variable in the marketing mix?
answer
Price
question
What equation shows organizations the relationship between price and profit?
answer
(Price × Quantity Sold)-Total Costs = Profits
question
Price is a key element in the marketing mix because it relates directly to
answer
the generation of total revenue.
question
In conducting an assessment of her accounting firm, Pauline Santana discovers the following annual results: average charge per customer = $250; rent = $12,000; total billings = $150,000; employee compensation and benefits = $60,000; and other costs = $110,000. Given these results, Mary's profits would equal
answer
a loss of $32,000.
question
Suppose Tommy Hilfiger is introducing a new line of men's ties. The designer believes that the target market for these ties comprises men who are very status-conscious. In keeping with this assessment, department stores selling the ties should
answer
use price symbolically.
question
When marketers emphasize price as an issue and match or beat the prices of other
companies, they are using
companies, they are using
answer
price competition.
question
Which of the following is not a concern of the practice of price competition?
answer
Focus on product features
question
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 on the basis of
answer
price.
question
A danger associated with engaging in price competition is that competitors can also change prices quickly and aggressively, which can result in a(n) _____ that will be harmful to both companies.
answer
price war
question
Sellers that emphasize distinctive product features to encourage brand preferences among customers are practicing
answer
nonprice competition.
question
One advantage of nonprice competition is that
answer
a firm can build customer loyalty.
question
Which of the following statements about nonprice competition is false?
answer
Companies that use nonprice competition do not need to keep track of their competitor's prices.
question
A product under nonprice competition would most likely not succeed in the market if
answer
it is easy to duplicate.
question
For most firms in the United States, demand curves are
answer
downward sloping.
question
If Wilson Sporting Goods faces a standard demand curve that exists for most products, as it raises the price of its tennis rackets, the
answer
quantity demanded goes down.
question
For most products, a(n) ____ relationship exists between the price of a particular product and the quantity demanded.
answer
inverse
question
A graph of the quantity of products marketers expect to sell at various prices if other factors remain constant is a
answer
demand curve.
question
When marketers at Consolidated Mustard Company tried to determine demand for their product, they found that at 50 cents, consumers wanted 2,000 jars; at $1.00, they wanted 6,000 jars; and at $1.50, they wanted 4,000 jars. What can Consolidated conclude?
answer
Consolidated mustard is a prestige good.
question
French Quarter Inns drops the price of a 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 is an indication that suites at this hotel are apparently an example of a(n) ___________ product.
answer
prestige
question
What does the demand curve for a prestige product look like?
answer
It forms a curve where the greatest quantity sold comes at a medium price and
the quantities fall as the price increases or decreases.
the quantities fall as the price increases or decreases.
question
If Seagram's marketers found that the firm's Crown Royal bourbon was a prestige product and raised its price, which of the following would most likely happen?
answer
Above some price level, the quantity demanded would begin to decrease.
question
Which of the following products is most likely to have an inverted C-shaped demand curve?
answer
Giorgio perfume
question
A measure of sensitivity of demand in relation to changes in price is
answer
price elasticity of demand.
question
Which of the following products is most likely to have an elastic demand curve?
answer
Airline tickets for vacation travel
question
Which of the following is most likely to have an inelastic demand curve?
answer
Nonelective surgery
question
If a product has an inelastic demand and the manufacturer raises its price,
answer
total revenue will increase.
question
Which of the following statements about price elasticity is false?
answer
When price is raised on a product that has an inelastic demand, then total revenue will decrease.
question
If Pacific Power and Light increased its rates 10 percent and experienced only a 2 percent reduction in the demand for power, the demand would be
answer
inelastic.
question
If a company increased its price from $100 to $120 and the percentage change in quantity demanded was 40 percent, the price elasticity of demand for this product is
answer
-2.
question
Dividing the percentage change in quantity demanded by the percentage change in price gives the
answer
price elasticity of demand.
question
Marginal analysis involves examining
answer
what happens to a firm's costs and revenues when production is changed by one unit.
question
Costs that do not vary with changes in the number of units produced and sold are called ____ costs.
answer
fixed
question
Which of the following is most likely to be a fixed cost?
answer
Rent
question
Costs that vary directly with changes in the number of units produced or sold are called
answer
variable costs.
question
If a firm currently produces 2,500 products per month and decides to produce 2,501, it will incur
answer
a marginal cost.
question
Roberts Electronics calculates that if it produces 15 radar detectors, its costs are $1,500, and if it produces 16 radar detectors, its costs are $1,590. In this instance, $90 is the firm's ___________ cost.
answer
marginal
question
If Roberts Electronics finds that the average total cost of its radar detectors and the marginal cost of its radar detectors are both $85, then
answer
average total cost is at its lowest level.
question
Michelin notices that when the number of tires it sells increases from 1,000,000 to 1,000,001, total revenue rises $35. The $35 represents the firm's
answer
marginal revenue.
question
At what point does a firm maximize profit?
answer
The point at which marginal cost equals marginal revenue
question
When marginal cost is equal to marginal revenue, the firm should
answer
stop producing additional units to maximize profits.
question
If Colgate-Palmolive wants to maximize profit on its toothpaste, it should operate at the point where
answer
marginal revenue equals marginal cost.
question
At the breakeven point,
answer
the money a company brings in from selling products equals the amount spent producing the products.
question
The point at which the costs of producing a product equal the revenue earned from selling the product is
answer
the breakeven point.
question
Suppose managers at Caterpillar have determined the costs associated with producing hay balers are equal to the price that they charge for the hay balers. This indicates that Caterpillar is producing at the ___________ point.
answer
breakeven
question
To determine the breakeven point in units, divide the fixed costs by
answer
price minus variable costs.
question
If the product price is $100, average variable cost $40 per unit, and the total fixed costs are $120,000, what is the breakeven point?
answer
2,000 units
question
Markum Industries determines that for its air compressors the following results are achieved at a price of $250: total costs = $250,000; variable costs per unit = $100; fixed costs = $175,000. Given these figures, Markum would break even at ___________ units.
answer
1,167
question
A certain location of O'Charley's Restaurant has annual fixed costs of $200,000. If an
average tab at the restaurant is $60 and the variable costs per tab is $20, how many groups of customers must O'Charley's serve per year in order to break even?
average tab at the restaurant is $60 and the variable costs per tab is $20, how many groups of customers must O'Charley's serve per year in order to break even?
answer
5,000
question
The Highland Racquet Club found that with annual fixed costs of $60,000, its breakeven point is 2,000 members when the membership charge is $60 per person per year. What is the variable cost per person for Highland?
answer
$30
question
Immediately after the breakeven point, a firm starts to
answer
make profits.
question
What assumption does breakeven analysis make that limits its overall usefulness?
answer
It relies on demand for a product being inelastic.
question
Which factor is least likely to affect pricing decisions?
answer
Shifting stock values
question
Which of the following is not a major factor for firms making price decisions?
answer
Previous sales
question
A company trying to position itself as value oriented should not
answer
use premium pricing for its products.
question
A marketer sometimes uses temporary price reductions to
answer
gain market share.
question
A firm might temporarily sell products below their cost in order to
answer
match competition or generate cash flow.
question
Marketers generally view _____ as the minimum price a product can be sold for.
answer
costs
question
In the long run, the J. F. Smucker Company must view ___________ as the absolute lowest
price for its Jif brand peanut butter.
price for its Jif brand peanut butter.
answer
total costs
question
To maintain market share and revenue in an increasingly price-sensitive market, companies have focused on quality, used labor-saving technologies, and used efficient manufacturing
processes. These tactics have provided gains in productivity that have translated into ___________ for the consumer.
processes. These tactics have provided gains in productivity that have translated into ___________ for the consumer.
answer
lower costs for the company and lower prices
question
For most consumers, there is an assumed relationship between
answer
price and quality.
question
Premium-priced products are usually marketed through
answer
selective or exclusive distribution.
question
The type of prices most likely to appear in advertising are
answer
bargain.
question
The types of prices that appear least often in ads are ___________ prices.
answer
premium
question
Which of the following products is most likely to involve personal selling?
answer
Riding lawn mowers
question
The amount of profit a channel member expects depends on
answer
what the intermediary could earn if it were handling a competing product instead.
question
What a price means or what it communicates to customers is called
answer
interpretation.
question
The degree to which the price of a product enhances a customer's satisfaction with the
purchase experience and with the product after the purchase is part of their
purchase experience and with the product after the purchase is part of their
answer
response.
question
Generally, customers are most likely to rely on the price-quality association when
answer
they cannot judge the quality of the product for themselves.
question
To gain market share, when Hyundai first entered the U.S. car market it did so with a
comparatively low price strategy. One of the negative side effects of making this pricing decision is
comparatively low price strategy. One of the negative side effects of making this pricing decision is
answer
a negative impact on consumers' perceptions of quality.
question
A price developed in the consumer's mind through experience with the product is called a(n)
answer
internal reference price.
question
When a customer is considering the purchase of a product in a less-familiar product category, that individual is likely to rely more heavily on
answer
external reference prices.
question
Lucy buys a new dress at T.J. Maxx that has a price tag with "Compare at $50.00. Our Price $29.99." This is an example of the use of
answer
an external reference price.
question
The perception of price depends on a
answer
product's actual price and consumers' expectations regarding price.
question
___________ consumers are concerned about both the price and the quality aspects of a
product.
product.
answer
Value-conscious
question
Buyers who focus on purchasing products that signify prominence and status are
answer
prestige-sensitive buyers.
question
A customer who is ___________ is likely to say, "People notice when you buy the most
expensive brand of a product."
expensive brand of a product."
answer
prestige-sensitive
question
ACE Electronics introduces a new voice-activated personal computer that no longer requires a keyboard. ACE charges the high price of $11,000 per unit, thus generating large profits because it has a 20 percent market share. ACE's major problem in the future will most likely be
answer
competition.
question
Monopolies usually keep their prices at a level that generate a reasonable, but not excessive, return primarily because
answer
they want to avoid government regulations on their pricing.
question
Marketers have no flexibility in setting prices under conditions of
answer
perfect competition.
question
The ___________ prohibits price fixing among firms in an industry.
answer
Sherman Antitrust Act
question
Which of the following acts does not directly affect pricing decisions?
answer
Simpson-Marshall Act
question
Both the Federal Trade Commission Act and the Wheeler-Lea Act prohibit
answer
deceptive pricing.
question
If a company provides price differentials that harm competition by giving one or more buyers a competitive advantage, it is committing
answer
price discrimination.
question
Which of the following prohibits price discrimination that lessens competition among wholesalers and retailers?
answer
Robinson-Patman Act
question
Provisions of the Robinson-Patman Act, as well as those of the ___________, limit the use
of price differentials.
of price differentials.
answer
Clayton Act
question
Which of the following is not a discount provided to business customers?
answer
Differentiated
question
What type of discount is given to a business purchaser for performing activities such as transporting, storing, and selling?
answer
Trade
question
The Panama Jack Company utilizes a special strategy to sell its ECO-shirt line. Its basic promotional tool is the discount. These discounts offered to middlemen for performing certain channel activities are referred to as ____________ discounts.
answer
trade
question
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.
answer
trade
question
If Ralph Lauren offers to reduce the price of its women's blazers when retailers buy more than 100 pieces, the designer is offering a ____________ discount.
answer
quantity
question
A deduction from list price for purchasing large quantities aggregated over a stated period of time is a
answer
cumulative quantity discount.
question
Justin Caprese phones Ben Kirkland of Southside Furniture to inform him that if he will increase his recent order of 15 mattress sets to 20, he will receive a 14 percent price
reduction. This offer is due to a recent overstock condition at the factory and will not be available in the future. The discount offered here is
reduction. This offer is due to a recent overstock condition at the factory and will not be available in the future. The discount offered here is
answer
noncumulative.
question
Tim O'Brien gets the invoice for a load of gravel he purchased last week. The price of the gravel was $55, and the terms are 2/10, n/45. If Tim pays the invoice in five weeks, he will owe
answer
$55.00.
question
If the terms of a business exchange are 2/10 net 30, this means that the transaction
answer
involves a cash discount if paid within ten days.
question
A concession in price in business markets to achieve a desired goal is called a(n)
answer
allowance.
question
Reductions for transportation and other costs related to the physical distance between buyer and seller are known as
answer
geographic pricing.
question
If a retailer orders a quantity of merchandise to be delivered to his store in Phoenix and is quoted a price that does not include shipping charges, the retailer is paying a(n) ___________ price.
answer
F.O.B. factory
question
Rob Johnson orders 16 dozen fishing lures from Strike Right for $375. When he gets the invoice, he is furious that $25 in freight charges has been tacked onto his bill because he thought the price included freight costs. Rob should have been certain that the order terms were
answer
F.O.B. destination.
question
The fact that a gas station in Texas pays less for fuel than a gas station in Maine from a
producer in Louisiana suggests that refineries are using which of the following pricing methods?
producer in Louisiana suggests that refineries are using which of the following pricing methods?
answer
Zone pricing
question
Suppose that the frozen foods division of Swanson purchases food trays and boxes from the packaging division. The form of pricing used to charge the frozen foods division is called
answer
transfer pricing.
question
When Cadillac buys headlights from Delco (both of which are divisions of General Motors), ___________ pricing occurs.
answer
transfer
question
Which of the following is not a method used to determine transfer prices?
answer
Discounted standard cost
question
Suppose that the watchband department of Timex sells completed watchbands to the finished watch department. The finished watch department is charged the price it would have to pay an outside watchband manufacturer less a discount to reflect low sales and transportation costs. This method of pricing is called _______ pricing.
answer
market-based cost
question
Concession Supply sells hotdogs, buns, and nacho ingredients to several major league ballparks across the country. Currently, Concession Supply has the following pricing information for one case of hotdogs sold at Wrigley Field: Total fixed costs = $1,200, Selling price = $16, and Variable costs = $6.
To break even, Concession Supply should sell ___________ cases of hot dogs per day at
Wrigley Field.
To break even, Concession Supply should sell ___________ cases of hot dogs per day at
Wrigley Field.
answer
120
question
What is the breakeven point in dollar sales volume?
answer
$1,920
question
If Concession Supply increased its price by 10 percent and experienced only a 2 percent decrease in the demand for hotdogs, the demand would be
answer
inelastic.
question
If Concession Supply wanted to make a profit of $800 on each case, it would need to sell ___________ cases.
answer
200
question
The BASF Chemical Company in Germany has developed a new rubberized coating. The product has an application for cellphones and other hand-held electronic devices that gives them protection from falls and scratches. BASF plans to market the product directly to businesses who manufacture the casings for these type of products. BASF currently uses a
system of salespeople headquartered in Germany, while its primary business customers are in China.
BASF has decided to offer discounts to its businesses customers in the form of the following: For each order of $100,000 or more during the next 90 days, the buyer will receive a rebate of 5 percent. This type of pricing would be an example of __________ discounts.
system of salespeople headquartered in Germany, while its primary business customers are in China.
BASF has decided to offer discounts to its businesses customers in the form of the following: For each order of $100,000 or more during the next 90 days, the buyer will receive a rebate of 5 percent. This type of pricing would be an example of __________ discounts.
answer
cumulative
question
BASF is considering the problem of actual distance in delivering its product from the plant in Germany to some of its customers in China. Which pricing strategy would help overcome this problem?
answer
Geographic
question
If BASF were to employ pricing that includes the price at the factory plus freight charges from a chosen point nearest the buyer, this would be an example of ___________ pricing.
answer
base-point
question
If BASF were to price its product in barrels from the factory, before it is loaded on the carrier, this would be an example of _________ pricing.
answer
F.O.B. factory
question
Price is the value that is exchanged for products in a marketing transaction.
answer
TRUE
question
Barter is the oldest form of exchange.
answer
TRUE
question
Price should be defined in terms of money only.
answer
FALSE
question
Because buyers have unlimited purchasing power, they do not have to allocate it to the most desired products.
answer
FALSE
question
The value of an idea cannot be assessed by price.
answer
FALSE
question
The purpose of the pricing concept is to quantify and express the value of items in a market exchange.
answer
TRUE
question
Marketers have more difficulty adjusting their prices than they do any other marketing mix variable.
answer
FALSE
question
Price is the most easily adjusted ingredient in the marketing mix.
answer
TRUE
question
The major disadvantage of using price competition is that it takes a long time to implement the changes in price.
answer
FALSE
question
Price is a crucial marketing mix component.
answer
TRUE
question
Total costs are influenced by quantities sold.
answer
TRUE
question
Profits for a firm are computed as follows: Profits = TR FC.
answer
FALSE
question
Price is a major component of the profit equation.
answer
TRUE
question
A seller can change prices quickly in a price-competition situation.
answer
TRUE
question
A firm that competes on a price basis is unable to change prices frequently.
answer
FALSE
question
Price competition is a very flexible marketing strategy.
answer
TRUE
question
Nonprice competition emphasizes distinctive product features, service, and product quality.
answer
TRUE
question
Nonprice competition does not permit unique product features, higher product quality, and customer service.
answer
FALSE
question
Nonprice competition allows a company to increase its brand's unit sales through means other than changing the brand's price.
answer
TRUE
question
Nonprice competition can be used to establish brand loyalty.
answer
TRUE
question
Brand uniqueness is not important in nonprice competition.
answer
FALSE
question
Sellers using nonprice competition are not concerned with prices charged by competitors.
answer
FALSE
question
Demand is best determined by a top management committee.
answer
FALSE
question
For most products, the quantity demanded goes up as the price goes down.
answer
TRUE
question
Demand depends only on the price of the product.
answer
FALSE
question
With prestige products, a firm will always be able to sell more at a higher price.
answer
FALSE
question
The idea behind prestige demand is that many prestige products seem to sell better at a high price than at a low price.
answer
TRUE
question
Changes in buyers' attitudes, other components of the marketing mix, and uncontrollable environmental factors can influence demand.
answer
TRUE
question
Price elasticity of demand measures the sensitivity of demand to changes in price.
answer
TRUE
question
Electricity is an example of a product that is price elastic.
answer
FALSE
question
Pricing decisions can be based on determining whether the demand for a product is price elastic or price inelastic.
answer
TRUE
question
If demand is elastic, a change in price causes a parallel change in total revenue.
answer
FALSE
question
Elastic demand is usually a result of the lack of substitute products.
answer
FALSE
question
Product demand usually becomes more elastic over time because more substitutes are found.
answer
TRUE
question
Fixed costs vary with the number of units produced or sold.
answer
FALSE
question
Rent is usually a fixed cost.
answer
TRUE
question
Marginal revenue is the change in total revenue that occurs when a firm sells an additional unit of product.
answer
TRUE
question
The firm should produce the quantity at which marginal revenue and marginal cost are equal.
answer
TRUE
question
The point at which marginal revenue equals marginal cost is the breakeven point.
answer
FALSE
question
Knowing the number of units necessary to break even is important in setting the price.
answer
TRUE
question
Comparison of various prices and various breakeven points will tell the marketer exactly what price to charge.
answer
FALSE
question
Pricing decisions should be based on the marketer's previous marketing strategies for other successful products and on intuition.
answer
FALSE
question
Organizational goals have little to do with pricing decisions.
answer
FALSE
question
Ideally, pricing decisions have little relation to a firm's marketing objectives.
answer
FALSE
question
Marketers should set prices consistent with marketing goals, not with the corporate mission.
answer
FALSE
question
Costs are a major issue when establishing price.
answer
TRUE
question
A firm can survive in the long run only if its products are sold below cost.
answer
FALSE
question
Factors affecting pricing decisions can include demand, distribution, and the way in which the
product is promoted.
product is promoted.
answer
TRUE
question
Marketing mix variables are highly interrelated.
answer
TRUE
question
Profit margins for marketing channel members must be considered when determining the
price of a product.
price of a product.
answer
TRUE
question
Channel member expectations play no part in a firm's pricing decisions.
answer
FALSE
question
Customers always interpret a higher price to mean higher quality.
answer
FALSE
question
A customer's interpretation and response to a price depends on what the customer receives from a purchase compared to what he or she gives up to make a purchase.
answer
TRUE
question
The more experience the customer has with a product, the more he or she relies on external
reference prices.
reference prices.
answer
FALSE
question
A customer looking for the lowest price on a mattress without concern for the quality of the mattress or the status gained by buying and using a certain brand is a price-conscious customer.
answer
TRUE
question
Knowing the target market's evaluation of price allows the marketer to know how much emphasis to place on price and how to price a product relative to competition.
answer
TRUE
question
In setting price, it is wise to analyze competitors' prices.
answer
TRUE
question
Setting prices for business customers is very similar to setting prices for consumers.
answer
FALSE
question
Producers commonly provide discounts off list prices to intermediaries.
answer
TRUE
question
Noncumulative discounts are one-time reductions in prices based on the number of units purchased, the dollar value of the order, or the product mix purchased.
answer
TRUE
question
Seasonal discounts provide price incentives to customers during peak selling seasons.
answer
FALSE
question
F.O.B. factory denotes the price of the products at the factory. If the price is quoted as F.O.B. shipping, then shipping costs are paid by the seller.
answer
FALSE
question
The legality of uniform geographic pricing has been challenged, and so its use has been abandoned.
answer
FALSE
question
Pricing whereby the buyer absorbs all or part of the freight costs is freight absorption pricing.
answer
FALSE
question
Transfer pricing involves the sale of a product to another unit within the same organization.
answer
TRUE
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