Question 1

Which of the following is a typical example of a variable cost?

Accepted Answer

A)   shipping costs
B)   rent on a building
C)   executive salaries
D)   insurance premiums
E)   leases on delivery trucksF) A) and C)
G) All of the above

Question 2

Predatory pricing is

Accepted Answer

A)   an arrangement a manufacturer makes with a reseller to handle only its products and not those of a competitor.
B)   the practice of charging different prices to different buyers for goods of like grade and quality.
C)   the practice of charging a very low price for a product with the intent of driving competitors out of business.
D)   a conspiracy among firms to set prices for a product or service.
E)   a seller's requirement that the purchaser of one product must also buy another product in the line.F) C) and D)
G) B) and D)

Question 3

Which of the following statements regarding a trade-in allowance is most accurate?

Accepted Answer

A)   A trade-in allowance is a noncash exchange of one product for another of equal or lesser value.
B)   A trade-in allowance is an effective way to lower the price a buyer has to pay without formally reducing the list price.
C)   A trade-in allowance is a cash-back payment when a more expensive item is replaced with a less expensive one.
D)   A trade-in allowance is the return of money based on proof of purchase.
E)   A trade-in allowance is a cash payment to a retailer for extra in-store support or special featuring of the brand.F) A) and D)
G) A) and C)

Question 4

Price fixing is illegal under the

Accepted Answer

A)   Sherman Act.
B)   Consumer Goods Pricing Act.
C)   Robinson-Patman Act.
D)   Federal Trade Commission Act.
E)   Clayton Act.F) D) and E)
G) A) and B)

Question 5

A reduction from the list price that a seller gives a buyer as a reward for some activity of the buyer that is favorable to the seller is called

Accepted Answer

A)   the pretax price.
B)   the list price.
C)   the manufacturer's suggested retail price (MSRP) .
D)   a discount.
E)   a trade-in allowance.F) A) and D)
G) B) and D)

Question 6

Which of the following would be an example of a fixed cost for a company that makes carbon monoxide monitoring systems for workers to wear in hazardous areas?

Accepted Answer

A)   the lithium batteries that are used in each monitor
B)   the chest harness used to wear the monitor
C)   the insurance for the company's factory
D)   the free training videos that are sent to each new customer
E)   the stainless-steel, water-resistant cases in which the monitors are containedF) C) and D)
G) A) and E)

Question 7

The break-even point (BEP) = [Fixed cost / (Unit price - __________) ].

Accepted Answer

A)   Total cost
B)   Total expense
C)   Marginal revenue
D)   Unit variable cost
E)   Total number of units produced or quantityF) All of the above
G) A) and D)

Question 8

The pricing strategy that is almost the exact opposite of skimming pricing is

Accepted Answer

A)   target pricing.
B)   penetration pricing.
C)   price lining.
D)   odd-even pricing.
E)   prestige pricing.F) B) and E)
G) All of the above

Question 9

Setting a price to achieve an annual target return-on-investment (ROI) is referred to as

Accepted Answer

A)   target return-on-investment pricing.
B)   target return-on-profit pricing.
C)   target return-on-sales pricing.
D)   target profit pricing.
E)   customary pricing.F) B) and C)
G) All of the above

Question 10

Three different objectives relate to a firm's profit,which have different implications for pricing strategy.The three profit-oriented objectives include __________,managing current profit,and achieving a target return.

Accepted Answer

A)   accumulating profits
B)   managing for long-run profits
C)   reinvesting profits
D)   redistributing profits
E)   maximizing gross marginF) C) and D)
G) C) and E)

Question 11

Several factors indicate that a penetration pricing policy would most likely be effective when introducing a new product,including situations in which

Accepted Answer

A)   lowering the price has only a minor effect on increasing the sales volume and reducing the unit cost.
B)   the high initial price will not attract competitors.
C)   customers interpret the high price as signifying high quality.
D)   enough prospective customers are willing to buy immediately at the high initial price to make these sales profitable.
E)   many segments of the market are price-sensitive.F) C) and E)
G) A) and D)

Question 12

Delta Air Lines offers vacation packages that include airfare,car rental,and lodging.Delta is using a(n) __________ pricing strategy.

Accepted Answer

A)   penetration
B)   prestige
C)   bundle
D)   odd-even
E)   standard markupF) None of the above
G) C) and D)

Question 13

Factors that determine consumers' willingness and ability to pay for products and services are referred to as

Accepted Answer

A)   supply factors.
B)   demand factors.
C)   affordability factors.
D)   elasticity factors.
E)   macro environmental factors.F) C) and D)
G) A) and B)

Question 14

Three pricing objectives relate to a firm's profit.In one known as __________,a company gives up immediate profit in exchange for achieving a higher market share in the hopes of penetrating competitive markets.

Accepted Answer

A)   maximizing current profit
B)   target return
C)   break-even strategy
D)   minimizing risk
E)   managing for long-run profitsF) A) and B)
G) A) and C)

Question 15

Loss-leader pricing refers to

Accepted Answer

A)   a pricing method where the price the seller charges is below the actual cost to make the product.
B)   setting a low initial price and gradually but consistently increasing that price so as not to antagonize the consumer.
C)   deliberately selling a product below its customary price, not to increase sales, but to attract customers' attention in hopes that they will buy other products as well.
D)   a method of pricing based on a product's tradition, standardized channel of distribution, or other competitive factors.
E)   pricing a product between 8 and 10 percent lower than nationally branded competitive products.F) B) and C)
G) C) and D)

Question 16

What are the three major steps involved in setting prices?

Accepted Answer

Step 1: Select an approximate price leve...

Question 17

Cost-plus-percentage-of-cost pricing refers to

Accepted Answer

A)   summing the total unit cost of providing a product or service and adding a specific amount to the cost to arrive at the price.
B)   adding a fixed percentage to the cost of all items in a specific product class.
C)   setting a price that is dictated by tradition, a standardized channel of distribution, or other competitive factors.
D)   setting the price of a product or service by adding a fixed percentage to the total unit cost.
E)   charging different prices to different buyers for goods of like grade and quality.F) A) and B)
G) A) and E)

Question 18

Figure 11-6a 
-In the break-even chart in Figure 11-6a,the red (darkest) wedge ABC represents the firm's

Accepted Answer

A)   fixed costs.
B)   break-even point.
C)   loss.
D)   profit.
E)   total revenue.F) A) and B)
G) A) and C)

Question 19

Why do manufacturers offer seasonal discounts to channel members?
 Provide an example of how one would work.

Accepted Answer

To encourage buyers to stock inventory e...

Question 20

The acronym EDLP stands for

Accepted Answer

A)   estimated discount leveling policy.
B)   extended discounts for loss-leader products.
C)   everyday low pricing.
D)   either (free)  delivery or lower prices.
E)   extended discounts in lieu of lower pricing.F) A) and D)
G) A) and E)

Exam 11: Pricing Products and Services

Why do manufacturers offer seasonal discounts to channel members? Provide an example of how one would work.

Correct AnswerverifiedTo encourage buyers to stock inventory e...View AnswerShow Answer

The pricing strategy that is almost the exact opposite of skimming pricing is

Correct AnswerverifiedShow Answer

Which of the following is a typical example of a variable cost?

Correct AnswerverifiedShow Answer

Cost-plus-percentage-of-cost pricing refers to

Correct AnswerverifiedShow Answer

Which of the following statements regarding a trade-in allowance is most accurate?

Correct AnswerverifiedShow Answer

Several factors indicate that a penetration pricing policy would most likely be effective when introducing a new product,including situations in which

Correct AnswerverifiedShow Answer

Three different objectives relate to a firm's profit,which have different implications for pricing strategy.The three profit-oriented objectives include __________,managing current profit,and achieving a target return.

Correct AnswerverifiedShow Answer

Factors that determine consumers' willingness and ability to pay for products and services are referred to as

Correct AnswerverifiedShow Answer

Price fixing is illegal under the

Correct AnswerverifiedShow Answer

Predatory pricing is

Correct AnswerverifiedShow Answer

A reduction from the list price that a seller gives a buyer as a reward for some activity of the buyer that is favorable to the seller is called

Correct AnswerverifiedShow Answer

Loss-leader pricing refers to

Correct AnswerverifiedShow Answer

Which of the following would be an example of a fixed cost for a company that makes carbon monoxide monitoring systems for workers to wear in hazardous areas?

Correct AnswerverifiedShow Answer

The acronym EDLP stands for

Correct AnswerverifiedShow Answer

The break-even point (BEP) = [Fixed cost / (Unit price - __________) ].

Correct AnswerverifiedShow Answer

Delta Air Lines offers vacation packages that include airfare,car rental,and lodging.Delta is using a(n) __________ pricing strategy.

Correct AnswerverifiedShow Answer

What are the three major steps involved in setting prices?

Correct AnswerverifiedStep 1: Select an approximate price leve...View AnswerShow Answer

Figure 11-6a -In the break-even chart in Figure 11-6a,the red (darkest) wedge ABC represents the firm's

Correct AnswerverifiedShow Answer

Setting a price to achieve an annual target return-on-investment (ROI) is referred to as

Correct AnswerverifiedShow Answer

Three pricing objectives relate to a firm's profit.In one known as __________,a company gives up immediate profit in exchange for achieving a higher market share in the hopes of penetrating competitive markets.

Correct AnswerverifiedShow Answer

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To encourage buyers to stock inventory e...
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Step 1: Select an approximate price leve...
View Answer

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