Chapter.14 Verified Test Bank Arriving At The Final Price

Chapter 14

Arriving at the Final Price

Multiple Choice Questions

Amazon wanted lower retail prices for e-books to

A.	lower royalties to authors.

B.	eliminate distributors.

C.	raise prices overall for printed books.

D.	undermine its rival, Nook.

E.	build its e-book business.

To accommodate the changes in the book selling market, publishers changed their pricing approach so that

A.	rebates could be paid to the bookstores.

B.	readers would pay more so that distributors would continue to profit.

C.	distributors would no longer get a commission on every e-book sold.

D.	distributors would get a commission on every e-book sold.

E.	eventually e-books would be free to distribute.

With the introduction of e-books, distributors could still set their own retail prices, but with a restriction. Distributors could set prices below a publisher's retail list price so long as they

A.	matched the commission received from a publisher.

B.	exceeded the commission received from a publisher.

C.	did not exceed the commission received from a publisher.

D.	did not increase prices to the readers.

E.	prevented discounts to competitors.

Identifying pricing objectives and constraints occurs during __________ of the price-setting process.

Step 1

Step 2

Step 3

Step 4

Step 5

Estimating demand and revenue occurs during __________ of the price-setting process.

Step 1

Step 2

Step 3

Step 4

Step 5

Determining cost, volume, and profit relationships occurs during __________ of the price-setting process.

Step 2

Step 3

Step 4

Step 5

Step 6

Which of the following is the fourth step in setting a final price for a product?

A.	set list or quoted price

B.	select an approximate price level

C.	scan competitors for prices of similar products or services

D.	determine cost, volume, and profit relationships

E.	identify pricing objectives and constraints

The key to setting a final price for a product is finding an approximate price level to use as a reasonable starting point. Four common approaches to selecting an approximate price level are (1) demand-oriented, (2) __________, (3) profit-oriented, and (4) competition-oriented approaches.

A.	cost-oriented

B.	cause-oriented

C.	revenue-oriented

D.	stakeholder-oriented

E.	distribution-oriented

The key to setting a price for a product is finding an approximate price level to use as a reasonable starting point. Four common approaches to selecting an approximate price level are (1) demand-oriented, (2) cost-oriented, (3) __________, and (4) competition-oriented approaches.

A.	stakeholder-oriented

B.	revenue-oriented

C.	profit-oriented

D.	distribution-oriented

E.	cause-oriented

10.

The key to setting a final price for a product is finding an approximate price level to use as a reasonable starting point. Four common approaches to selecting an approximate price level are (1) demand-oriented, (2) cost-oriented, (3) profit-oriented, and (4) __________ approaches.

A.	revenue-oriented

B.	distribution-oriented

C.	stakeholder-oriented

D.	competition-oriented

E.	cause-oriented

11.

Which of the following statements about the price-setting process is most accurate?

A.	When selecting a strategy for setting an initial price, it doesn't matter which one you use as long as you stick with it.

B.	Sometimes pricing strategies overlap, and a seasoned marketer will consider several strategies when choosing an approximate price level.

C.	Demand-oriented pricing approaches rely heavily on competitors' prices.

D.	Skimming pricing is a competition-oriented pricing strategy.

E.	Penetration pricing is the best pricing strategy for companies trying to meet the goals of a profit-oriented pricing approach.

12.

Demand-oriented approaches weigh factors that underlie expected __________ more heavily than such factors as cost, profit, and competition when selecting a price level.

A.	total revenue

B.	stakeholder concerns

C.	prevailing prices

D.	product substitutes

E.	customer tastes

13.

All of the following are demand-oriented approaches to selecting an approximate price level except

odd-even.

B.	yield management.

C.	customary.

bundle.

prestige.

14.

Skimming pricing is considered to be a __________ approach to pricing.

A.	demand-oriented

B.	cost-oriented

C.	profit-oriented

D.	competition-oriented

E.	service-oriented

15.

When introducing a new or innovative product, setting the highest initial price that customers who really desire the product are willing to pay is referred to as a(n)

A.	skimming strategy.

B.	penetration strategy.

C.	price-lining strategy.

D.	experience-curve pricing strategy.

E.	prestige pricing strategy.

16.

Skimming pricing refers to

A.	setting the lowest initial price possible when introducing a new or innovative product in order to "skim" sales from competitors.

B.	setting the highest initial price that customers who really desire the product are willing to pay.

C.	setting a low initial price on a new product to appeal immediately to the mass market.

D.	the practice of replacing promotional allowances with higher manufacturer list prices.

E.	setting a high price so that quality- or status-conscious consumers will be attracted to the product and buy it.

17.

Skimming pricing is a strategy that introduces a new or innovative product by

A.	following a price elastic strategy.

B.	creating multiple price points.

C.	setting a high initial price.

D.	setting a low initial price.

E.	setting the price at the average of competitors' prices.

18.

A skimming pricing policy is likely to be most effective when (1) __________; (2) the high initial price will not attract competitors; (3) lowering the price has only a minor effect on increasing the sales volume and reducing the unit cost; and (4) customers interpret the high price as signifying high quality.

A.	consumers tend to be price-sensitive

B.	enough prospective customers are willing to buy immediately at the high initial price to make these sales profitable

C.	it will be easier to set measurable sales unit goals

D.	a lower price will significantly reduce unit costs

E.	consumers perceive your product to be similar to other products in the market

19.

A skimming pricing policy is likely to be most effective when (1) enough prospective customers are willing to buy immediately at the high initial price to make these sales profitable; (2) __________; (3) lowering the price has only a minor effect on increasing the sales volume and reducing the unit cost; and (4) customers interpret the high price as signifying high quality.

A.	the high initial price will not attract competitors

B.	consumers tend to be price-sensitive

C.	it will be easier to set measurable sales unit goals

D.	a lower price will significantly reduce unit costs

E.	consumers perceive your product to be similar to other products on the market

20.

A skimming pricing policy is likely to be most effective when (1) enough prospective customers are willing to buy immediately at the high initial price to make these sales profitable; (2) the high initial price will not attract competitors; (3) __________; and (4) customers interpret the high price as signifying high quality.

A.	enough prospective customers are willing to buy immediately at the high initial price to make these sales profitable

B.	consumers tend to be price-sensitive

C.	it will be easier to set measurable sales unit goals

D.	lowering the price has only a minor effect on increasing the sales volume and reducing the unit cost

E.	consumers perceive your product to be similar to other products on the market

21.

A skimming pricing policy is likely to be most effective when (1) enough prospective customers are willing to buy immediately at the high initial price to make these sales profitable; (2) the high initial price will not attract competitors; (3) lowering the price has only a minor effect on increasing the sales volume and reducing the unit cost; and (4) __________.

A.	enough prospective customers are willing to buy immediately at the high initial price to make these sales profitable

B.	consumers tend to be price-sensitive

C.	customers interpret the high price as signifying high quality

D.	lowering the price has a major effect on increasing the sales volume

E.	consumers perceive your product to be similar to other products on the market

22.

A skimming pricing policy is likely to be most effective when

A.	consumers tend to be price-sensitive.

B.	it will be easier to set measurable sales unit goals.

C.	a lower price will significantly lower fixed costs.

D.	consumers perceive your product to be similar to other products on the market.

E.	customers are willing to buy immediately at the high initial price.

23.

A skimming pricing policy is likely to be most effective when

A.	consumers perceive one product to be similar to other products on the market.

B.	a lower price will significantly lower fixed costs.

C.	competitors will be attracted to the market due to the potential for high sales revenues.

D.	consumers tend to be price-sensitive.

E.	the high initial price will not attract competitors.

24.

A skimming pricing policy is likely to be most effective when

A.	lowering the price has only a minor effect on increasing the sales volume and reducing the unit cost.

B.	consumers tend to be price-sensitive.

C.	it is easier to set measurable sales unit goals.

D.	a lower price will significantly lower fixed costs.

E.	consumers perceive your product to be similar to other products on the market.

25.

A skimming pricing policy is likely to be most effective when

A.	consumers perceive your product to be similar to other products on the market.

B.	a lower price will significantly lower fixed costs.

C.	customers interpret the high price as signifying high quality.

D.	consumers tend to be price-sensitive.

E.	it is easier to set measurable sales unit goals.

26.

A manufacturer of a digital video recorder (DVR) is thinking of using a skimming pricing strategy for its new product. Which of the following conditions would argue against using a skimming pricing strategy for the DVR?

A.	large potential market, even at a high price

B.	technological problems still exist for competitors

C.	increasing volume reduces production costs substantially

D.	consumers perceive a price-quality relationship

E.	consumers are innovators

27.

Hallmark was the official supplier of flowers at the last Winter Olympics. Hallmark presented each Olympic winner with a special bouquet of roses designed to resemble the Olympic torch. Consumers were able to buy a smaller version of this same bouquet at the Hallmark website for $74.95. The Olympic bouquet that consumers could buy contained two dozen yellow roses, yet you could buy the same two dozen yellow roses for less than $35 at most supermarkets. If Hallmark is treating the Olympic bouquet as an innovative product, then it is using which demand-oriented pricing approach?

A.	bundle pricing

B.	yield management pricing

C.	skimming pricing

D.	target return-on-sales pricing

E.	penetration pricing

28.

When microwave ovens were in the introduction stage of their product life cycle, some consumers were willing to pay exorbitant prices for these innovative ovens. Taking advantage of this strong consumer desire, marketers set the price for microwave ovens at the highest initial price possible. Marketers of microwave ovens used a __________ pricing strategy.

skimming

B.	penetration

prestige

D.	price lining

bundle

29.

The first Apple iPhone was introduced in 2007 at an initial price of $600. People waited in line overnight so they could be one of the first to own this unique smartphone. Which pricing strategy did Apple use to help recoup its costs for developing the smartphone?

A.	penetration pricing

B.	experience curve pricing

C.	customary pricing

D.	skimming pricing

E.	target pricing

30.

The first Apple iPad was introduced in 2010 at an initial price of $650 for the 16 GB version. People waited in line overnight so they could be one of the first to own this unique tablet device. Which pricing strategy did Apple use to help recoup its costs for developing the iPad?

A.	price lining

B.	penetration pricing

C.	skimming pricing

D.	customary pricing

E.	target pricing

31.

Penetration pricing is considered to be a __________ approach to pricing.

A.	demand-oriented

B.	cost-oriented

C.	profit-oriented

D.	competition-oriented

E.	service-oriented

32.

Penetration pricing refers to

A.	charging different prices to different buyers for goods of like grade and quality.

B.	setting the highest initial price that customers really desiring the product are willing to pay.

C.	setting a low initial price on a new product to appeal immediately to the mass market.

D.	setting a market price for a product or product class based on a subjective feel for the competitors' prices or market price.

E.	setting prices a few dollars or cents under an even number.

33.

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

A.	target pricing.

B.	penetration pricing.

C.	price lining.

D.	odd-even pricing.

E.	prestige pricing.

34.

Penetration pricing is intended to appeal to which market?

A.	highly selective, quality-seeking consumers

B.	price-insensitive markets

C.	specialty product markets

D.	the same markets as those targeted with a skimming pricing strategy

E.	the mass market

35.

Which of the following statements about penetration pricing is most accurate?

A.	Penetration pricing is a profit-oriented approach to pricing.

B.	Penetration pricing is a cost-oriented pricing method.

C.	Penetration pricing encourages competitors to enter a market.

D.	Penetration pricing is more effective in a marketplace with price-sensitive consumers.

E.	Penetration pricing usually precedes a skimming pricing.

36.

A penetration pricing policy is most likely to be effective when (1) __________; (2) a low initial price discourages competitors from entering the market; and (3) unit production and marketing costs fall dramatically as production volumes increase.

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

37.

A penetration pricing policy is most likely to be effective when (1) many segments of the market are price-sensitive; (2) __________; and (3) unit production and marketing costs fall dramatically as production volumes increase.

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.	a low initial price discourages competitors from entering the market

E.	enough prospective customers are willing to buy immediately at the high initial price to make these sales profitable

38.

A penetration pricing policy is most likely to be effective when (1) many segments of the market are price-sensitive; (2) a low initial price discourages competitors from entering the market; and (3) _________.

A.	unit production and marketing costs fall dramatically as production volumes increase

B.	enough prospective customers are willing to buy immediately at the high initial price to make these sales profitable

C.	lowering the price has only a minor effect on increasing the sales volume and reducing the unit cost

D.	the high initial price will not attract competitors

E.	customers interpret the high price as signifying high quality

39.

A penetration pricing policy is most likely to be effective when

A.	lowering the price has only a minor effect on increasing the sales volume and reducing the unit cost.

B.	many segments of the market are price-sensitive.

C.	the high initial price will not attract competitors.

D.	customers interpret the high price as signifying high quality.

E.	enough prospective customers are willing to buy immediately at the high initial price to make these sales profitable.

40.

A penetration pricing policy is most likely to be effective when

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.	a low initial price discourages competitors from entering the market.

D.	customers interpret the high price as signifying high quality.

E.	enough prospective customers are willing to buy immediately at the high initial price to make these sales profitable.

41.

A penetration pricing policy is most likely to be effective when

A.	unit production and marketing costs fall dramatically as production volumes increase.

B.	enough prospective customers are willing to buy immediately at the high initial price to make these sales profitable.

C.	lowering the price has only a minor effect on increasing the sales volume and reducing the unit cost.

D.	the high initial price will not attract competitors.

E.	customers interpret the high price as signifying high quality.

42.

In some cases, penetration pricing may follow which pricing strategy?

A.	experience curve

B.	target ROI

odd-even

D.	above market

skimming

43.

In some cases, penetration pricing may follow skimming pricing. The skimming pricing would help __________ and the penetration pricing would help __________.

A.	increase market share; attract price-insensitive customers

B.	attract price-sensitive customers; increase market share

C.	recoup initial research and development costs; increase market share

D.	recoup initial research and development costs; improve firm reputation

E.	increase market share; attract price insensitive customers

44.

When Amazon introduced the Kindle Fire tablet device at $199 while Apple was selling the lowest price iPad for $499, Amazon was using a __________ pricing strategy.

skimming

B.	price lining

BOGO

D.	penetration

E.	loss-leader

45.

Wrigley recently introduced a new flavor of Orbit brand sugar-free chewing gum—mint mojito. The introductory price was low so that it quickly created loyal customers for the flavor. In this example, Wrigley used

A.	skimming pricing.

B.	penetration pricing.

C.	price lining.

D.	odd-even pricing.

E.	loss-leader pricing.

46.

When Hallmark cards introduced a line of 99-cent cards (about half the price of the previously least expensive cards it sold), the greeting card company was trying to appeal to a mass market that was price-sensitive. Hallmark was using a(n) __________ pricing strategy.

prestige

skimming

C.	target ROI

D.	penetration

E.	experience-curve

47.

When the Swiss watchmaker TAG Heuer raised the average price of its watches from $250 to $1,000, its sales volume jumped sevenfold. The likely cause of this volume increase is

A.	because the watch market is highly conservative.

B.	because economies of scale in production would be substantial.

C.	because retailers are not willing to carry new brands of watches in this category.

D.	because once the initial price is set, it is nearly impossible to lower the price without alienating early buyers.

E.	because watches in this category have an element of prestige pricing, so that lower prices may result in lower sales.

48.

Prestige pricing is considered to be a __________ approach to pricing.

A.	demand-oriented

B.	cost-oriented

C.	profit-oriented

D.	competition-oriented

E.	service-oriented

49.

Prestige pricing refers to

A.	charging different prices to different buyers for goods of like grade and quality.

B.	setting a low initial price on a new product to appeal immediately to the mass market odd-even pricing.

C.	setting a market price for a product or product class based on a subjective feel for the competitors' price or market price.

D.	setting a high price so that quality- or status-conscious consumers will be attracted to the product and buy it.

E.	setting a price that is dictated by tradition, a standardized channel of distribution, or other competitive factors.

50.

Setting a high price so that quality- or status-conscious consumers will be attracted to the product and buy it is referred to as

A.	skimming pricing.

B.	status pricing.

C.	price lining.

D.	value pricing.

E.	prestige pricing.

51.

A manufacturer using __________ is setting a high price so that quality- or status-conscious consumers will be attracted to the product and buy it.

A.	skimming pricing

B.	penetration pricing

C.	price lining

D.	odd-even pricing

E.	prestige pricing

52.

In response to Duracell's introduction of the Duracell Ultra battery, Energizer introduced an Advanced Formula battery. But unlike Duracell, Energizer priced its batteries at a low initial price to attract the mass market. In this case, Energizer used

A.	penetration pricing.

B.	prestige pricing.

C.	skimming pricing.

D.	price lining.

E.	cost-plus fixed-fee pricing.

53.

In response to Duracell's introduction of the Duracell Ultra battery, Energizer introduced an Advanced Formula battery. But unlike Duracell, Energizer priced its battery at a low initial price to attract the mass market. Was Energizer's pricing strategy to take market share from Duracell a success?

A.	No, because consumers are price-insensitive when it comes to batteries.

B.	Yes, because of the positive association with the "Energizer Bunny" marketing campaign.

C.	No, because consumers were unable to perceive the improved quality due to the low price.

D.	Yes, because consumers typically respond positively to cost-plus pricing.

E.	Yes, because the demand for batteries has unitary elasticity.

54.

Talbots sells women's clothes. A long-sleeved scoopneck T-shirt with the Talbots label costs $45. By comparison, you can buy a T-shirt for $5 at a Family Dollar Store, but it won't have the prestigious Talbots label or quality. What kind of demand-oriented approach to pricing does Talbots use?

A.	experience curve pricing

B.	skimming pricing

C.	demand-backward pricing

D.	prestige pricing

E.	flexible pricing

55.

You can buy a General Electric dishwasher for $399 or you can buy a similar Bosch brand dishwasher for $989. Since Bosch uses its pricing strategy to project a high-quality product image, it is most likely using __________ pricing.

bundle

B.	standard markup

prestige

D.	penetration

E.	cost plus fixed-fee

56.

A Patek Philippe Sky Moon Tourbillion men's wristwatch is among the most expensive in the world, costing more than $1.5 million in 2013. This is an example of a __________ strategy.

A.	penetration pricing

B.	target pricing

C.	bundle pricing

D.	loss-leader pricing

E.	prestige pricing

57.

Price lining is considered to be a __________ approach to pricing.

A.	cost-oriented

B.	demand-oriented

C.	profit-oriented

D.	competition-oriented

E.	service-oriented

58.

Setting the price of a line of products at a number of different specific price points is referred to as

A.	odd-even pricing.

B.	bundle pricing.

C.	cost-plus pricing.

D.	price lining.

E.	prestige pricing.

59.

Price lining refers to

A.	charging different prices to different buyers for goods of like grade and quality.

B.	setting a low initial price on a new product to appeal immediately to the mass market.

C.	setting a market price for a product or product class based on a subjective feel for the competitors' price or market price as the benchmark.

D.	setting prices a few dollars or cents under an even number.

E.	setting the price of a line of products at a number of different specific pricing points.

60.

When using a price lining strategy, a marketer will

A.	set the price of a line of products at a number of different specific pricing points.

B.	set the price slightly higher than necessary to protect against losses resulting from adverse environmental forces.

C.	adjust the price of a product so it is "in line" with the price of its largest competitor.

D.	set a low initial price on a new product to appeal immediately to the mass market.

E.	set a market price for a product or product class based on a subjective feel for the competitors' price or market price as the benchmark.

61.

The assumption that demand is elastic at a number of price points but is inelastic between these price points leads to which pricing approach?

A.	product-line pricing

B.	skimming pricing

C.	penetration pricing

D.	price lining

E.	odd-even pricing

62.

Which of the following statements regarding price lining is most accurate?

A.	In order for price lining to be effective, there should be at least five specified price points.

B.	Price lining assumes that demand is inelastic at each price point but elastic between price points.

C.	Price lining assumes that demand is elastic at each price point but inelastic between price points.

D.	Price lining is the preferred pricing strategy for governmental contracts.

E.	Price lining is the same as above-, at-, or below-market pricing.

63.

In some cases, manufacturers design products for different price points and retailers apply __________ to achieve the three or four different price points offered to consumers.

A.	progressively higher markup percentages

B.	different markup percentages depending on how long the item remains on their shelves

C.	above-, at-, or below-market pricing

D.	approximately the same markup percentages

E.	elasticity of demand pricing calculations

64.

A retailer purchased a gross (144) of silk shells each costing exactly $17. Although the only difference between the shells was color, when they were put on the floor, the primary colors were marked $25, the pastel colors were marked $28, and the black and white shells were marked $30. These prices were set most likely because

A.	retailers using a price lining strategy will occasionally mark up items based on color, style, and expected consumer demand.

B.	fewer people buy black and white shells, so the retailer has to charge a higher price to break even.

C.	the retailer is using prestige pricing; black and white shells are more elegant.

D.	the primary colors were priced using a penetration strategy, the pastels were priced using a skimming strategy, and the black and white shells were priced using prestige pricing.

E.	price lining is essentially the same as above-, at-, or below market pricing.

65.

Odd-even pricing is considered to be a __________ approach to pricing.

A.	cost-oriented

B.	profit-oriented

C.	demand-oriented

D.	competition-oriented

E.	service-oriented

66.

Odd-even pricing refers to

A.	setting prices one way for product lines and another way for individual brands.

B.	setting prices of luxury items at even price points and setting the price of necessities at odd price points.

C.	setting prices a few dollars or cents under an odd number.

D.	adding a fixed percentage to the cost of all items in a specific product class.

E.	setting prices a few dollars or cents under an even number.

67.

Setting prices a few dollars or cents under an even number is referred to as

A.	odd-even pricing.

B.	prestige pricing.

C.	price lining.

D.	above-, at-, or below-market pricing.

E.	every day fair pricing.

68.

Odd-even pricing is based on

A.	retailers' perceptions of price.

B.	customers' perceptions of price.

C.	wholesalers' markups.

D.	manufacturers' perceptions of price.

E.	government regulators' perceptions of price.

69.

To be successful, odd-even pricing depends on

A.	a retailers' ranges of prices.

B.	the wholesalers' markups.

C.	a manufacturer's costs.

D.	competitors' price assumptions.

E.	customers' perceptions of price.

70.

Odd-even pricing is most closely related to

A.	retailers' perceptions of price.

B.	customers' perceptions of price.

C.	wholesalers' markups.

D.	a manufacturer's costs.

E.	competitors' perceptions of price.

71.

Which of the following statements regarding odd-even pricing is most accurate?

A.	Odd-even pricing is designed to give the consumer a better set of pricing alternatives.

B.	Odd-even pricing can be used in conjunction with a skimming pricing strategy, but should not be used with a penetration pricing strategy.

C.	Odd-even pricing does not work if the product is health care-related.

D.	Overuse of odd-ending prices tends to mute its effect on demand.

E.	Odd-ending prices are best used with large ticket items; it loses its effectiveness with moderate- to low-ticket items.

72.

The prices for all furniture sold at American Furniture Warehouse end in $9.99, such as $599.99, $899.99, etc. American Furniture Warehouse uses

A.	odd-even pricing.

B.	dynamic pricing.

C.	price lining.

D.	bundle pricing.

E.	product-line pricing.

73.

Target pricing is considered to be a __________ approach to pricing.

A.	cost-oriented

B.	profit-oriented

C.	demand-oriented

D.	competition-oriented

E.	service-oriented

74.

Target pricing refers to

A.	a method of selecting specific prices wholesalers and retailers are willing to pay based upon the elasticity of each given item.

B.	a method of charging different prices to maximize revenue for a set amount of capacity at any given time.

C.	the practice of simultaneously increasing product and service benefits while maintaining or decreasing price.

D.	a method of estimating the price that ultimate consumers would be willing to pay for a product, then working backward through markups taken by retailers and wholesalers to determine what price to charge wholesalers.

E.	a method of estimating the price that ultimate consumers would be willing to pay for a product, then determining how much wholesalers wish to charge its customers, deliberately adjusting the composition and features of the product to achieve the price to consumers.

75.

The pricing approach that (1) estimates the price that ultimate consumers would be willing to pay for a product; (2) works backward through markups taken by retailers and wholesalers to determine what price to charge wholesalers; and (3) results in the manufacturer deliberately adjusting the composition and features of the product to achieve the price to consumers is referred to as

A.	cost-benefit pricing.

B.	cost-plus percentage-of-cost pricing.

C.	target pricing.

D.	cost-plus fixed-fee pricing.

E.	product feature pricing.

76.

Which of the following pricing techniques is most sensitive to customers' responses to price?

A.	cost-plus percentage-of-cost pricing

B.	target pricing

C.	experience curve pricing

D.	cost-plus fixed-fee pricing

E.	standard markup pricing

77.

Which of the following pricing techniques results in the manufacturers deliberately adjusting the composition and features of a product to achieve the desired price for consumers?

A.	cost-plus percentage-of-cost pricing

B.	standard markup pricing

C.	cost-plus fixed-fee pricing

D.	experience curve pricing

E.	target pricing

78.

The Swedish manufacturer of Asko dishwashers concluded that consumers would be willing to pay approximately $989 for a dishwasher that was quieter than any other dishwasher on the market. Based on this price, Asko determined the margins that would have to be given to wholesalers and retailers to arrive at the $989 retail price. Asko used

A.	prestige pricing.

B.	price lining.

C.	cost-plus pricing.

D.	target pricing.

E.	customary pricing.

79.

Bundle pricing is considered to be a __________ pricing practice.

A.	demand-oriented

B.	cost-oriented

C.	profit-oriented

D.	competition-oriented

E.	product line-oriented

80.

Which of the following is a demand-oriented approach to pricing?

A.	customary pricing

B.	target profit pricing

C.	standard markup pricing

D.	bundle pricing

E.	service-oriented pricing

81.

Marketing two or more products in a single package price is referred to as

A.	package pricing.

B.	loss-leader pricing.

C.	bundle pricing.

D.	tie-in pricing.

E.	multi-product pricing.

82.

Bundle pricing refers to

A.	an extra amount of "free goods" awarded sellers in the channel of distribution for promoting a product.

B.	marketing two or more products in a single package price.

C.	using BOGOs—requiring customers to "buy one to get one free" as a strategy to increase sales and profits.

D.	setting the price of a line of products at two specific pricing points.

E.	the practice of charging two or more prices depending upon the outlet carrying the product.

83.

Which one of the following statements regarding bundle pricing is most accurate?

A.	Bundle pricing is intended to benefit the consumer, not the seller.

B.	Bundle pricing is really "bundle packaging" since the price charged is for two or more of the same products that are shrink-wrapped together.

C.	Bundle pricing is often associated with a skimming strategy.

D.	Bundle pricing often provides a lower total cost to buyers and lower marketing costs to sellers.

E.	Bundle pricing is based on the idea that consumers value the individual items more than they value the group contained in the package.

84.

If you were to buy one peach tree and one apple tree from the Stark Bros. fruit trees and landscaping catalog in two separate orders, you would pay a total of $109.99. However, if you order the peach and apple tree together in the same order, you pay only $89.99 each. When purchasing the two trees together, what pricing strategy does Stark Bros. employ?

A.	product-line pricing

B.	prestige pricing

C.	price lining

D.	discount pricing

E.	bundle pricing

85.

When Dell sells various laptops, it also pre-installs Microsoft Office and other software that customers order at a discount before a laptop is shipped. This is an example of

A.	price lining.

B.	product-line pricing.

C.	bundle pricing.

D.	customary pricing.

E.	prestige pricing.

86.

A box of Cascade dishwasher detergent shrink-wrapped with a bottle of Jet Dry for 10 cents more than the regular price of the dishwasher detergent is an example of __________ pricing.

A.	penetration

prestige

bundle

odd-even

E.	standard markup

87.

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

A.	penetration

prestige

bundle

odd-even

E.	standard markup

88.

Yield management is considered to be a __________ approach to pricing.

A.	demand-oriented

B.	cost-oriented

C.	profit-oriented

D.	competition-oriented

E.	service-oriented

89.

Yield management pricing refers to

A.	controlling the production of products based upon seasonal demand.

B.	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.

C.	charging the same prices during different times of the day or days of the week to reflect variations in supply for the service.

D.	offering significant price discounts to wholesalers that agree to purchase products in advance for a period of a year or more at a time.

E.	charging different prices to maximize revenue for a set amount of capacity at any given time.

90.

Charging different prices to maximize revenue for a set amount of capacity at any given time is referred to as

A.	demand backward pricing.

B.	target pricing.

C.	skimming pricing.

D.	yield management pricing.

E.	penetration pricing.

91.

A __________ approach often changes prices based on time, day, week, or season.

A.	skimming pricing

B.	bundle pricing

C.	yield management pricing

D.	target return on investment pricing

E.	standard markup pricing

92.

Yield management pricing is most consistent with services trying to deal with

A.	perceived risk.

B.	capacity management.

C.	cognitive dissonance.

D.	inelasticity of demand.

E.	new product strategy development.

93.

While __________ often changes price based upon color or style, __________ often changes prices based on time, day, week, or season.

A.	prestige pricing; skimming pricing

B.	yield management pricing; bundle pricing

C.	price lining; yield management pricing

D.	target pricing; target return on investment pricing

E.	bundle pricing; standard markup pricing

94.

Airlines, hotels, and car rental firms all engage in __________ by varying prices based on time, day, week, or season to match supply and demand.

A.	skimming pricing

B.	yield management pricing

C.	bundle pricing

D.	target pricing

E.	prestige pricing

95.

One problem in the interstate trucking industry is the number of trucks that return empty after making a delivery. There is a website where independent interstate truckers can look for loads to carry on their return trips, known as backhauls. Because the trucks would normally return empty, truckers who use this website to generate business they would not have had otherwise receive a reduced shipping rate. This reduced rate for a backhaul is an example of

A.	penetration pricing.

B.	target pricing.

C.	cost-plus pricing.

D.	odd-even pricing.

E.	yield management pricing.

96.

Which of the following is a cost-oriented pricing method?

A.	loss-leader pricing

B.	standard markup pricing

C.	at-, above-, or below-market pricing

D.	price lining

E.	penetration pricing

97.

Which of the following is a cost-oriented approach to pricing?

A.	cost-plus pricing

B.	skimming pricing

C.	prestige pricing

D.	loss-leader pricing

E.	bundle pricing

98.

Which of the following is a cost-oriented approach to pricing?

A.	skimming pricing

B.	prestige pricing

C.	loss-leader pricing

D.	experience curve pricing

E.	bundle pricing

99.

With a __________ pricing strategy, a price setter stresses the __________ side of the pricing problem.

A.	demand-oriented; cost

B.	supply-oriented; target ROI

C.	competition-oriented; marketing channel

D.	cost-oriented; cost

E.	profit-oriented; revenue

100.

With cost-oriented approaches, a price setter stresses the cost side of the pricing problem, not the __________ side.

A.	shareholder equity

income

service

supply

demand

101.

With cost-oriented approaches to pricing, a price setter stresses the __________ side of the pricing problem, not the __________ side.

A.	cost; revenue

B.	cost; demand

C.	cost; profit

D.	cost; supply

E.	cost; service

102.

With a cost-oriented pricing strategy, a price setter stresses the __________ side of the pricing problem and the price is set by looking at __________.

A.	demand; revenue

B.	production and marketing; profit

C.	demand; target sales

D.	cost; production and marketing costs

E.	cost; consumer tastes

103.

Which of the following statements regarding cost-oriented approaches is most accurate?

A.	These methods focus on the demand side of the pricing problem.

B.	These methods focus on production and marketing expenses.

C.	Target return on investment is an example of a cost-oriented method.

D.	Experience curve pricing is simple to use because costs predictably decrease by 25 percent with each doubling of production.

E.	Cost-oriented approaches are a subcategory of competition-oriented methods.

104.

Standard markup pricing is considered to be a __________ approach to pricing.

A.	demand-oriented

B.	profit-oriented

C.	cost-oriented

D.	competition-oriented

E.	service-oriented

105.

Standard markup pricing refers to

A.	adjusting the price of a product so it is "in line" with that of its largest competitor.

B.	setting the price of a line of products at a number of different price points.

C.	setting prices to achieve a profit that is a specified percentage of the sales volume.

D.	increasing the price slightly to protect against undue profit losses from unforeseen environmental forces.

E.	adding a fixed percentage to the cost of all items in a specific product class.

106.

Adding a fixed percentage to the cost of all items in a specific product class is referred to as

A.	target profit pricing.

B.	standard markup pricing.

C.	target return-on-investment pricing.

D.	customary pricing.

E.	everyday low pricing.

107.

All of the following statements about standard markup pricing are true except

A.	high-volume products usually have smaller markups than do low-volume products.

B.	the percentage markup depends on the type of retail store and the product involved.

C.	markups must cover all expenses of the store, pay for overhead costs, and contribute something to profits.

D.	summing the total unit cost of providing a product or service and adding a specific amount to the cost to arrive at a price.

E.	supermarket managers have such a large number of products that estimating the demand for each product as a means of setting price is impossible.

108.

Creative Quilts Studio sells hundreds of colors and types of fabric and thread. To price its inventory, the owners add 50 percent to the cost of each bolt of fabric and every spool of thread. What is this pricing approach called?

A.	target return-on-sales pricing

B.	flexible pricing

C.	cost-plus pricing

D.	standard markup pricing

E.	customary pricing

109.

Assume it costs Lady Marion Seafood, Inc., $30 to catch, process, freeze, package, and ship five-pound packages of Alaskan salmon. The firm adds 60 percent to the cost of its salmon products and charges customers a total of $48 for a postage-paid vacuum-sealed package. What type of pricing does Lady Marion Seafood use to arrive at its final price?

A.	target return-on-sales pricing

B.	bundle pricing

C.	standard markup pricing

D.	target profit pricing

E.	customary pricing

110.

Supermarket managers use standard markup pricing because it is particularly suited to situations when

A.	there is a large number of products and estimating the demand for each would be difficult and time consuming.

B.	there is a large number of product lines, all with basically the same product attributes.

C.	there is a specific profit goal that needs to be achieved.

D.	there is a policy of selling every item in a product line at the same price regardless of the product class.

E.	the products are perishable or seasonal.

111.

Summing the total unit cost of providing a product or service and adding a specific amount to the cost to arrive at a price is referred to as

A.	standard markup pricing.

B.	experience curve pricing.

C.	cost-plus pricing.

D.	product-line pricing.

E.	target return-on-investment pricing.

112.

Cost-plus pricing refers to

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.	setting the price of a line of products at a number of different price points.

C.	adding a fixed percentage to the cost of all items in a specific product class.

D.	setting prices to achieve a profit that is a specified percentage of the sales volume.

E.	increasing the price slightly to protect against undue profit losses from unforeseen environmental forces.

113.

The two forms of cost-plus pricing are

A.	cost-plus-fixed-fee pricing and cost-plus-variable-fee pricing.

B.	cost-plus-ROI pricing and cost-minus-ROI pricing.

C.	target return on sales pricing and target return on investment pricing.

D.	cost-plus-percentage-of-cost pricing and cost-plus-fixed-fee pricing.

E.	dynamic pricing and flexible pricing.

114.

Setting the price of a product or service by adding a fixed percentage to the total unit cost is referred to as

A.	cost-plus-fixed-percentage fee pricing.

B.	target pricing.

C.	cost-plus-percentage-of-cost pricing.

D.	experience curve percentage pricing.

E.	target return on investment pricing.

115.

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

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.

116.

Which of the following type of business is most likely to use cost-plus-percentage-of-cost pricing?

A.	real estate agency

B.	insurance company

C.	power company

D.	space shuttle contractor

architect

117.

A pricing method where a supplier is reimbursed for all costs, regardless of what they may be, and who also receives an agreed upon dollar amount of profit that is independent of the final cost of the project, is referred to as

A.	target return on investment pricing.

B.	cost-plus-percentage-of-cost pricing.

C.	target return on sales pricing.

D.	experience curve pricing.

E.	cost-plus-fixed-fee pricing.

118.

When buying highly technical, few-of-a-kind products such as hydroelectric power plants, governments have found that general contractors are reluctant to specify a formal, fixed price for the procurement. Therefore, these contractors use __________ to compensate them for any cost overruns.

A.	cost-plus-percentage-of-cost pricing

B.	experience curve pricing

C.	cost-plus-fixed-fee pricing

D.	standard markup pricing

E.	yield management pricing

119.

What pricing strategy did the National Aeronautics and Space Administration (NASA) use to pay Lockheed Martin for the Orion lunar spacecraft?

A.	cost-plus-percentage-of-cost pricing

B.	experience curve pricing

C.	standard markup pricing

D.	yield management pricing

E.	cost-plus-fixed-fee pricing

120.

The Brazilian government wants to build a global positioning satellite (GPS) system. The satellite manufacturer will receive a mutually agreed upon profit over and above all costs associated with the project. The pricing approach the satellite manufacturer uses is called

A.	standard markup pricing.

B.	experience curve pricing.

C.	cost-plus-percentage-of-cost pricing.

D.	cost-plus-fixed-fee pricing.

E.	bundle pricing.

121.

The most commonly used pricing method for business products is

A.	target return on investment.

B.	customary.

C.	standard markup.

D.	target profit.

E.	cost-plus pricing.

122.

While the most commonly used pricing method for business products is cost-plus pricing, this method is becoming more and more popular among __________ in the service sector.

A.	e-businesses

B.	business-to-consumer firms

C.	business-to-government sellers

D.	nonprofit organizations

E.	business-to-business marketers

123.

Architectural firms that specialize in designing and constructing one-of-a-kind custom buildings such as the Rock Hall of Fame often use which pricing strategy?

A.	cost-plus pricing

B.	experience curve pricing

C.	standard markup pricing

D.	yield management pricing

E.	price lining

124.

Rather than billing clients by the hour, some lawyers and their clients agree on a fixed fee based on expected costs plus an agreed upon level of profit for the law firm. Which pricing approach are they using?

A.	target pricing

B.	cost-plus pricing

C.	customary pricing

D.	experience curve pricing

E.	bundle pricing

125.

Experience curve pricing is considered to be a __________ approach to pricing.

A.	demand-oriented

B.	cost-oriented

C.	profit-oriented

D.	competition-oriented

E.	service-oriented

126.

Experience curve pricing refers to

A.	the method of pricing where the price of a product often rises following the expansion of costs associated with the firm's producing and selling an increased volume of the product.

B.	the point at which profits double, then double again, as more consumers buy the product.

C.	a predictive pricing plan based upon the knowledge that the prices will fluctuate in a predictable pattern within a given industry based on the diffusion of innovation.

D.	a method of pricing based on the learning effect, which holds that the unit cost of many products and services declines by 10 percent to 30 percent each time a firm's experience at producing and selling them doubles.

E.	a pricing strategy that uses price estimates based upon the consensus of the salesforce and the firm's top management team.

127.

Which cost-oriented pricing method holds that a product's unit costs predictably decline by 10 to 30 percent each time its production volume doubles?

A.	experience curve pricing

B.	cost-plus-percentage-of-cost pricing

C.	capacity management pricing

D.	standard markup pricing

E.	derived demand pricing

128.

Which pricing approach complements the demand-oriented pricing strategy of skimming followed by penetration pricing?

A.	cost-plus-percentage-of-cost pricing

B.	cost-plus-fixed-fee pricing

C.	standard markup pricing

D.	derived demand pricing

E.	experience curve pricing

129.

According to the textbook, which industry typically adopts an experience curve pricing approach?

logging

B.	space exploration

C.	ready-to-eat cereal

D.	electronics

mining

130.

If a firm estimates that its costs will fall by 10 percent each time volume doubles for its product, then the cost of the l,000^th unit produced and sold will be about 90 percent of the cost of the 500^th unit, and the 2,000^th unit will be 90 percent of the l,000^th unit. Therefore, if the cost of the 500^th unit is $100, the cost of the 4,000^th unit would be

$0.

$72.90.

$81.00.

$90.00.

$100.00.

131.

The retail price of mobile phones (unsubsidized) has decreased from $4,000 in 1983 when Motorola commercialized the device, to less than $99 today as the volume increased from zero to millions of units sold. This is due in large part to which type of pricing approach?

A.	skimming pricing

B.	prestige pricing

C.	experience curve pricing

D.	odd-even pricing

E.	customary pricing

132.

The retail price of fax machines has decreased from over $10,000 in the early 1970s to less than $100 today. This is due in large part to

A.	skimming pricing.

B.	prestige pricing.

C.	odd-even pricing.

D.	experience curve pricing.

E.	customary pricing.

133.

The retail price of DVD players has decreased from $900 in the mid-1990s to about $50 today. This is due in large part to

A.	skimming pricing.

B.	prestige pricing.

C.	odd-even pricing.

D.	customary pricing.

E.	experience curve pricing.

134.

Which of the following is a profit-oriented approach to pricing?

A.	skimming pricing

B.	target pricing

C.	loss-leader pricing

D.	target profit pricing

E.	standard markup pricing

135.

Which of the following is a profit-oriented pricing method?

A.	target return-on-sales pricing

B.	loss-leader pricing

C.	above-, at-, or below-market pricing

D.	price lining

E.	penetration pricing

136.

All of the following are profit-oriented approaches to select an approximate price level except

A.	target ROI pricing.

B.	target profit pricing.

C.	target return-on-sales pricing.

D.	target return-on-investment pricing.

E.	cost-plus-percentage-of-cost pricing.

137.

With profit-oriented approaches to pricing, a price setter may choose to balance both __________ and __________ to set price.

A.	revenue; profit

B.	tangible goods; services

C.	cost; revenue

D.	demand; supply

E.	cost; demand

138.

Target profit pricing refers to

A.	adjusting the price of a product so it is "in line" with that of its largest competitor.

B.	setting an annual target of a specific dollar volume of profit.

C.	setting the price of a line of products at a number of different price points.

D.	adding a fixed percentage to the cost of all items in a specific product class.

E.	setting prices to achieve a profit that is a specified percentage of production costs.

139.

Setting an annual target of a specific dollar volume of profit is referred to as

A.	target profit pricing.

B.	target return-on-investment pricing.

C.	loss-leader pricing.

D.	at-, above-, or below-market pricing.

E.	yield management pricing.

140.

A critical assumption when using target profit pricing is that

A.	a higher average price will not cause the demand for a product to fall.

B.	a higher average price will cause the demand for a product to rise.

C.	a higher average price will always cause the demand for a product to fall.

D.	this form of pricing is extremely risky because profit is tied to the current value of the dollar.

E.	being first is essential if you increase your average price since all of your competitors will do the same.

141.

What is the critical assumption when using target profit pricing?

A.	A higher average price will usually cause the demand to fall.

B.	A higher average price will always cause the demand to fall.

C.	Profit is relative to the current value of the dollar so this form of pricing is extremely risky.

D.	A higher average price will not cause the demand to fall.

E.	If the average price is increased, all a firm's competitors will do the same.

142.

A custom tailor wishes to use target profit pricing to establish a price for a custom-designed business suit. Assume variable cost is $200 per suit, fixed cost is $44,000, and the target profit is $50,000 based on a volume of 50 suits. What price should be charged for a typical custom suit?

$520

$1,040

$1,880

$2,080

$10,000

143.

Lady Marion Seafood, Inc., sells five-pound packages of Alaskan salmon. Assume that its unit variable cost per package is $30 and its fixed cost is $250,000. It wants a target profit of $38,000 based on a volume of 16,000 packages. What should the firm charge for a five-pound package of salmon?

$25.00

$33.94

$40.00

$48.00

$61.25

144.

The manager of a small gasoline station observes that while gasoline sales have been steady, the service side of the business has declined, and mechanics are often idle. He decides to offer a promotion—a $20 off coupon for an oil change that is to be mailed to 800 households within a two-mile radius from the gas station. The cost of printing and mailing is $1,000. The normal cost of an oil change is $40. Materials and labor per oil change costs $15. If 200 customers use the coupon, what will be the total profit of the promotion based on the profit equation?

-$4,000

-$1,000

$1,000

$4,000

145.

Target return-on-sales pricing refers to

A.	adjusting the price of a product so it is "in line" with that of its largest competitor.

B.	setting the price of a line of products at a number of different price points.

C.	adding a fixed percentage to the cost of all items in a specific product class.

D.	setting prices to achieve a profit that is a specified percentage of the sales volume.

E.	setting a price based on a specific annual dollar target profit volume.

146.

Setting a price to achieve a profit that is a specified percentage of the sales volume is referred to as

A.	target return-on-investment pricing.

B.	target return-on-sales pricing.

C.	loss-leader pricing.

D.	target pricing.

E.	standard markup pricing.

147.

What pricing method is often used because of the difficulty in establishing a benchmark of sales or investment to show how much of a firm's effort is needed to achieve the target?

A.	target return-on-investment pricing

B.	target return-on-sales pricing

C.	standard markup pricing

D.	target pricing

E.	loss-leader pricing

148.

The owner of a store that sells custom kitchen cabinets wishes to use a target return-on-sales pricing approach to establish a price for a typical section of cabinets. Assume that variable costs total $200 per unit, fixed cost is $44,000, and the storeowner desires a target profit of 20 percent return on sales at an annual volume of 400 cabinets. What price should be charged for a typical cabinet section?

$263.50

$311.00

$387.50

$445.50

$775.00

149.

Target return-on-investment pricing refers to

A.	setting a price to achieve an annual target ROA.

B.	adding a fixed percentage to the cost of all items in a specific product class.

C.	setting prices to achieve a profit that is a specified percentage of the sales volume.

D.	setting a price to achieve an annual target ROI.

E.	setting a price based on an annual specific dollar target volume of profit.

150.

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

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.

151.

Which of the following companies would be most likely to use target return-on-investment pricing?

a farmer

B.	a supermarket chain

C.	a book publisher

D.	a veterinarian

E.	an automobile manufacturer

152.

Target return-on-investment (ROI) is frequently used by

A.	contractors.

B.	public utilities.

C.	business-to-business markets.

D.	supermarkets.

E.	small privately owned firms.

153.

Which of the following is a competition-oriented approach to pricing?

A.	skimming pricing

B.	target pricing

C.	loss-leader pricing

D.	target return-on-sales pricing

E.	standard markup pricing

154.

All of the following are competition-oriented approaches to selecting an approximate price level except

A.	loss-leader pricing.

B.	customary pricing.

C.	above-market pricing.

skimming.

E.	at-market pricing.

155.

Rather than emphasize demand, cost, or profit factors, a price setter can stress what __________ doing.

A.	the service sector is

B.	competitors are

C.	the global economy is

D.	suppliers are

E.	the financial markets are

156.

Customary pricing refers to

A.	a pricing method where the price the seller quotes includes all transportation costs.

B.	setting the same price for similar customers who buy the same product and quantities under the same conditions.

C.	deliberately selling a product below its list price to attract attention to it.

D.	setting a price that is dictated by tradition, a standardized channel of distribution, or other competitive factors.

E.	pricing based on what the market will bear.

157.

Setting a price that is dictated by tradition, a standardized channel of distribution, or other competitive factors is referred to as

A.	cost-plus pricing.

B.	customary pricing.

C.	standard markup pricing.

D.	loss-leader pricing.

E.	target profit pricing.

158.

Southern gardeners normally pay $5 for a two-cubic-foot bag of pine bark mulch that they buy at their local gardening-supply and home-improvement stores to keep the weeds down in their gardens. If the price being charged by a retailer is not within a narrow range that gardeners feel is appropriate, they will use substitutions—newspaper, grass clippings, or some other kind of covering. When pricing pine bark mulch, a garden-supply or home-improvement retailer should use

A.	customary pricing.

B.	at-market pricing.

C.	loss-leader pricing.

D.	penetration pricing.

E.	bundle pricing.

159.

Consumers buy water and soda from vending machines. Traditionally, the price of each of these products is about $1.25. If a marketer charges a significantly higher price for such products dispensed by vending machines, such as $2.00 per item, sales are likely to decline. In order to avoid declines in sales, marketers tend to be very consistent in the prices they charge for vending machine products. This is an example of marketers employing a __________ strategy.

A.	below-market pricing

B.	skimming pricing

C.	penetration pricing

D.	loss-leader pricing

E.	customary pricing

160.

Setting a market price for a product or product class based on a subjective feel for the competitors' price or market price as the benchmark is referred to as

A.	customary pricing.

B.	above-, at-, or below-market pricing.

C.	standard markup pricing.

D.	competitive margin pricing.

E.	experience curve pricing.

161.

The __________ of a product is what customers are generally willing to pay.

A.	customary price

B.	asking price

C.	target price

D.	discount price

E.	market price

162.

For most products, it is difficult to identify a specific market price for a product or product class. Still, marketing managers often have a subjective feel for the competitors' price or market price. Using this benchmark, they then may deliberately choose a strategy of

A.	above-, at-, or below-market pricing.

B.	loss-leader pricing.

C.	penetration pricing.

D.	standard markup pricing.

E.	experience curve pricing.

163.

According to the textbook, clothing manufacturer Christian Dior and retailer Neiman Marcus use __________ pricing.

A.	above-market

at-market

C.	below-market

D.	prestige pricing

E.	everyday low pricing

164.

Rolex, a company that takes pride in emphasizing that it makes one of the most expensive watches you can buy, would probably use which competition-oriented pricing approach?

A.	customary pricing

B.	above-market pricing

C.	loss-leader pricing

D.	at-market pricing

E.	penetration pricing

165.

According to the textbook, Revlon cosmetics uses __________ pricing.

A.	above-market

at-market

C.	below-market

D.	prestige pricing

E.	everyday low pricing

166.

Manufacturers of private brands use which method of competition-oriented pricing?

A.	penetration pricing

B.	below-market pricing

C.	loss-leader pricing

D.	prestige pricing

E.	skimming pricing

167.

An ad campaign by Suave shampoo asked television viewers to identify the heads of hair of women who used Suave shampoo and conditioner and those that used the much more expensive salon hair-care products. The idea of the ad was that no one could tell which woman used the much cheaper Suave brand. By making price its selling point, Suave is most likely using

A.	customary pricing.

B.	loss-leader pricing.

C.	prestige pricing.

D.	skimming pricing.

E.	below-market pricing.

168.

Companies use a __________ to assess whether its products and brands are above, at, or below the market.

A.	customary price

B.	prestige price

C.	price premium

D.	price lining

benchmark

169.

Companies use a price premium to assess whether their products and brands are priced above, at, or below the market. More specifically, a price premium is the percentage by which the actual price charged for a specific brand exceeds or falls short of a benchmark established for a similar product or basket of products. This price premium equals

A.	unit volume market share for a brand divided by dollar sales market share for a brand, minus one.

B.	dollar sales market share for a brand divided by unit volume market share for a brand, plus one.

C.	dollar sales market share for a brand divided by unit volume market share for a brand, minus one.

D.	dollar sales market share for a brand, divided by unit volume market share for a brand, plus one.

E.	dollar sales market share for a brand, divided by unit volume market share for a brand, minus the number of competitors against which a brand is being measured.

170.

Loss-leader pricing refers to

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.

171.

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, is referred to as

A.	loss-leader pricing.

B.	bundle pricing.

C.	magnet pricing.

D.	predatory pricing.

E.	below-market pricing.

172.

Using __________, many retailers deliberately sell products below their normal prices (and sometimes below cost) to attract attention and additional store traffic.

A.	customary pricing

B.	below-market pricing

C.	prestige pricing

D.	penetration pricing

E.	loss-leader pricing

173.

When Kroger, a national supermarket chain, uses a special promotion to price a six-pack of soda at $2.09 (which is below its customary price level of $4.29), it is attempting to

A.	drive its competition out of business.

B.	attract customers in hopes they will buy other products as well.

C.	fill its parking lot so its store will look successful.

D.	work with the local bottler to move products that are close to their expiration dates.

E.	help stimulate the local economy and generate good will with its customers.

174.

Setting one price for all buyers of a product or service is referred to as

A.	customary pricing.

B.	a fixed-price policy.

C.	a dynamic pricing policy.

D.	standard markup pricing.

E.	uniform pricing.

175.

A fixed-price policy refers to

A.	setting different prices for products and services in real time in response to supply and demand conditions.

B.	setting the price of an entire line of products at a single specific pricing point.

C.	simultaneously setting prices for all items in a product line to cover the total cost and produce a profit for the complete line, not necessarily for each item.

D.	adding a fixed percentage to the cost of all items in a specific product class.

E.	setting one price for all buyers of a product or service.

176.

Another name for a fixed-price policy is

A.	customary pricing.

B.	one-price policy.

C.	dynamic pricing.

D.	standard markup pricing.

E.	uniform pricing.

177.

When you buy a used car from a CarMax dealership, you are offered the car at a "no haggle" price. You can buy it or not, but there is no negotiating the published price because of the seller's

A.	customary pricing strategy.

B.	fixed-price policy.

C.	uniform pricing policy.

D.	dynamic pricing policy.

E.	dynamic pricing strategy.

178.

Family Dollar Stores, like Dollar Value Stores and 99¢ Only Stores, use what type of pricing policy?

A.	dynamic pricing

B.	customary pricing

C.	flexible pricing

D.	fixed-price

E.	at-market pricing

179.

Tendollars.com offers thousands of gifts, all priced at $10. This is an example of

A.	a skimming pricing approach.

B.	a loss-leader pricing approach.

C.	a fixed-price policy.

D.	a penetration pricing approach.

E.	an everyday low pricing approach.

180.

Setting different prices for products and services in real time in response to supply and demand conditions is referred to as

A.	price lining.

B.	a dynamic pricing policy.

C.	customary pricing.

D.	price fixing.

E.	discretionary pricing.

181.

Dynamic pricing policy refers to

A.	setting the price of a line of products at a number of different specific pricing points.

B.	setting the prices for all items in a product line to cover the total cost and produce a profit for the complete line, not necessarily for each item.

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.	setting different prices for products and services in real time in response to supply and demand conditions.

E.	adding a fixed percentage to the cost of all items in a specific product class.

182.

Another name for a dynamic pricing policy is

A.	target pricing.

B.	fluid pricing.

C.	price lining.

D.	market-based pricing.

E.	a flexible-price policy.

183.

A dynamic pricing policy allows marketers to respond to

A.	requests for allowances.

B.	threats of discrimination.

C.	success measures for the firm's previous promotions.

D.	changes in demand, cost, and competitive factors.

E.	inquiries by government agencies.

184.

A dynamic pricing policy gives marketers __________ in setting the final price in light of demand, cost, and competitive factors.

no leeway

B.	total freedom

C.	little discretion

D.	considerable discretion

E.	limited competitive authority

185.

Which of the following is a form of dynamic pricing?

A.	odd-even pricing

B.	yield management pricing

C.	above-, at-, and below-market pricing

D.	target pricing

E.	cost-plus pricing

186.

Yield management pricing is a form of

A.	target pricing.

B.	loss-leader pricing.

C.	dynamic pricing.

D.	customary pricing.

E.	price lining.

187.

The way that a person navigates through an online marketer's website is called

A.	surf-shopping behavior.

B.	cross-channel shopping.

C.	the clickstream.

D.	one-click shopping.

E.	the shopper pathway.

188.

The setting of prices for all items in a product line to cover the total cost and produce a profit for the complete line, not necessarily for each item, is referred to as

A.	line item pricing.

B.	product-line pricing.

C.	price lining.

D.	customary pricing.

E.	discretionary pricing.

189.

Product-line pricing refers to

A.	setting the price of a line of products at a number of different specific pricing points.

B.	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.

C.	adding a fixed percentage to the cost of all items in a specific product class.

D.	setting of prices for all items in a product line to cover the total cost and produce a profit for the complete line, not necessarily for each item.

E.	the marketing of two or more products in a single package.

190.

Product-line pricing involves determining (1) the lowest-priced product and price; (2) __________; and (3) the price differentials for all other products in the line.

A.	the single most popular item in the line

B.	the least vulnerable product in the line

C.	the highest-priced product and price

D.	the most frequently sold product in the line

E.	the most price insensitive product in the line

191.

Product-line pricing involves determining (1) the lowest-priced product and price; (2) the highest-priced product and price; and (3) __________.

A.	the single most popular item in the line

B.	the least vulnerable product in the line

C.	the most frequently sold product in the line

D.	the most price-insensitive product in the line

E.	the price differentials for all other products in the line

192.

When establishing product-line pricing, the highest priced item is typically positioned as

A.	the oldest product item in the line.

B.	the premium item in the line in terms of quality and features.

C.	the largest selling product item in the line.

D.	the loss-leader item for the rest of the product line.

E.	the most price-insensitive product item in the line.

193.

When establishing product-line pricing, the lowest-priced item is typically positioned as

A.	the youngest product item in the line.

B.	the smallest selling product item in the line.

C.	the lost-cost item in the line in terms of quality and features.

D.	the profit leader for the rest of the product line.

E.	the traffic builder designed to capture the attention of first-time buyers.

194.

When establishing product-line pricing, the price differentials between items in the line should make sense to customers and reflect differences in terms of the

A.	perceived value of the products offered.

B.	actual costs of the features offered.

C.	perceived risk.

D.	quantity discounts and price allowances offered.

E.	market segments targeted.

195.

Different brands within a company's product line generally have different profit margins; for example, items with higher price lines have higher profit margins. Assume that Nike Variety tennis shoes have variable costs of $6 and sell for $24. Also assume that Nike Wimbledon tennis shoes have variable costs of $38 and sell for $48, but when fixed overhead is added, the shoe is unprofitable by $2 per pair. Which statement is most accurate regarding Nike's pricing approach with these two product lines?

A.	Demand for each shoe line is unrelated to price.

B.	Nike is using a cost-plus-percentage-of-cost pricing strategy.

C.	Nike is using a product-line pricing strategy.

D.	Demand for each shoe line is unrelated to product quality.

E.	Consumers do not use price as an indication of quality.

196.

The price for Nintendo's Wii video game console was likely insufficient to cover its fixed and variable costs. However, the price of its video games was set high enough to cover its video game console's loss and deliver a handsome profit for all Nintendo products. This example illustrates Nintendo's use of

A.	bundle pricing.

B.	product-line pricing.

C.	price lining.

D.	customary pricing.

E.	loss-leader pricing.

197.

Frito-Lay recognizes that its tortilla chip products are partial substitutes for one another. Its bean and cheese dips and salsa sauces complement its tortilla chips. Frito-Lay uses this knowledge to set prices for each item in order to ensure that the entire line is profitable. This pricing strategy is known as

A.	bundle pricing.

B.	price lining.

C.	customary pricing.

D.	product-line pricing.

E.	loss-leader pricing.

198.

Toro decided to augment its traditional hardware retail distribution channel by also selling through mass merchandisers such as Walmart and Target and setting prices for its products substantially below those of its traditional hardware outlets. As a result, many hardware stores abandoned Toro products in favor of other manufacturers. This is an example of a firm failing to consider __________ effects when setting its final list or quoted price.

company

B.	social responsibility

C.	regulatory

D.	competitive

customer

199.

The successive price cutting by competitors to increase or maintain their unit sales or market share is referred to as

A.	everyday even lower pricing.

B.	a price war.

C.	fair trade pricing.

D.	a market war.

E.	a price reduction.

200.

Price war refers to

A.	competition between sellers and resellers to maintain or attain the largest market share of potential customers.

B.	conflicts between manufacturers and distributors regarding acceptable percentages they each charge relative to one another.

C.	when one channel member believes another channel member is engaged in pricing behavior that prevents it from achieving its profitability goals.

D.	the successive price cutting by competitors to increase or maintain their unit sales or market share.

E.	the practice of replacing promotional allowances with lower manufacturer list prices.

201.

Which of the following statements regarding price cutting is most accurate?

A.	Marketers should only consider price cutting if primary demand for a product class will remain stable.

B.	Marketers should only consider price cutting if the price cut can be made across all items in a product line and all product lines in a product mix.

C.	Marketers should only consider price cutting if the price cut is confined to customers within specific target market segments.

D.	Marketers should only consider price cutting if the firm also increases advertising.

E.	Marketers should never consider price cutting unless a product is in the introductory stage of its product life cycle.

202.

It is relatively easy to measure the incremental cost of a new advertising campaign; what is not as easy is

A.	measuring the extra fixed cost involved.

B.	measuring the extra variable cost involved.

C.	measuring the incremental revenue generated by the new advertising campaign.

D.	determining whether customers who stop buying the product are reacting negatively to the advertisement or to some other aspect of the product itself.

E.	determining what percentage of the ad-generated revenue should be reinvested into additional advertisements of the same form.

203.

Incremental analysis might take the form of such questions as, "Should we extend our hours to include Sundays?" or "What if we put more apples in the pie?" The basic principle is that

A.	as long as a marketing action breaks even, the action is worth taking.

B.	expected incremental revenues from pricing and other marketing actions must more than offset incremental costs.

C.	you "don't rock the boat" if your program is making a profit; "leave well enough alone."

D.	if you are not willing to take risks, even if the numbers tell you otherwise, your business will ultimately fail.

E.	marketing and finance are two different animals: "If it feels right in your gut…go for it."

204.

The manager of a small gasoline station observes that while gasoline sales have been steady, the service side of the business has declined, and mechanics are often idle. He decides to offer a promotion—a $20 off coupon for an oil change that is to be mailed to 800 households within a two-mile radius from the gas station. The cost of printing and mailing is $1,000. The normal cost of an oil change is $40. Materials and labor per oil change cost is $15. How many additional maintenance service jobs must result for the promotion to break even?

25 jobs

40 jobs

50 jobs

67 jobs

200 jobs

205.

The three major types of special adjustments to list or quoted price are

A.	demand-oriented, cost-oriented, and profit-oriented adjustments.

B.	one price, flexible price, and discounts.

C.	discounts, allowances, and marginal adjustments.

D.	discounts, allowances, and geographical adjustments.

E.	discounts, incremental costs and revenues, and geographical adjustments.

206.

Two of the three types of adjustments to list or quoted price are

A.	profit-oriented and marginal adjustments.

B.	fixed-price and dynamic price adjustments.

C.	discounts and marginal adjustments.

D.	discounts and allowances.

E.	incremental costs and incremental revenues.

207.

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

A.	the pretax price.

B.	the list price.

C.	the manufacturer's suggested retail price (MSRP).

D.	a discount.

E.	a trade-in allowance.

208.

Discounts are reductions from the __________ that a seller gives a buyer as a reward for some activity of the buyer that is favorable to the seller.

A.	final price

B.	list price

C.	wholesaler's cost

D.	manufacturer's cost

E.	retailer's cost

209.

The four types of discounts are

A.	quantity, trade-in, promotional, and cash.

B.	quantity, seasonal, trade (functional), and cash.

C.	quantity, seasonal, promotional, and FOB.

D.	cash, trade-in, seasonal, and promotional.

E.	trade-in, promotional, geographic, and functional.

210.

Reductions in unit costs for a larger order are referred to as

A.	promotional allowances.

B.	economic order discounts.

C.	penetration pricing.

D.	quantity discounts.

E.	case allowances.

211.

Quantity discounts refers to

A.	price reductions in unit costs for placing a larger order.

B.	price reductions for placing long-term pre-scheduled orders.

C.	price reductions to encourage retailers to stock inventory earlier than their normal demand would require.

BOGOs.

E.	reductions in unit costs for taking merchandise that will soon be replaced by new and improved versions of the original product.

212.

Your local instant photocopying service charges 10 cents a copy up to 25 copies, 9 cents a copy for 26 to 99 copies, and 8 cents a copy for 100 copies or more. What kind of adjustment to its list or quoted price of 10 cents per copy is the photocopying service using?

A.	experience curve pricing

B.	loss-leader pricing

C.	a quantity discount

D.	a promotional discount

E.	everyday low pricing

213.

Mike Morgan, a sales representative for a major food service distributor of Betty Crocker's Warm Delights, wanted to encourage repeat purchases by his grocery customers—supermarkets, mass merchandisers, etc. To accomplish this objective, Morgan offered the following discounts to his customers: a 10 percent discount for buying 1 to 49 cases of Warm Delights within a calendar month. The discount increases to 12 percent if 50 to 99 cases of Warm Delights are purchased and to 15 percent if 100 or more cases of Warm Delights are purchased within the same calendar month. What type of discount was Morgan offering his customers?

A.	a seasonal discount

B.	a quantity discount

C.	a cash discount

D.	a trade discount

E.	a case allowance discount

214.

A discount that is based on the size of an individual purchase order rather than a series of repeat orders is referred to as

A.	a cumulative quantity discount.

B.	bundle pricing.

C.	an economic order discount.

D.	a noncumulative quantity discount.

E.	a promotional allowance.

215.

Noncumulative quantity discounts refers to

A.	discounts that are based on a series of orders rather than on the size of an individual order.

B.	onetime discounts per customer or household.

C.	onetime discounts that must be used within a certain time frame or they will become null and void.

D.	discounts used to place new products on supermarket shelves.

E.	discounts that are based on the size of an individual purchase order rather than a series of orders.

216.

Which of the following statements regarding quantity discounts is most accurate?

A.	Noncumulative quantity discounts encourage large individual purchase orders, not a series of orders.

B.	Noncumulative quantity discounts encourage repeat buying by a single customer to a far greater degree than do cumulative quantity discounts.

C.	Quantity discounts are primarily used to undercut competitors' prices.

D.	Noncumulative quantity discounts encourage smaller long-term repeat purchases rather than less frequent larger short-term purchases.

E.	Quantity discounts can basically be used only once with each reseller or the price will increase.

217.

Discounts that are designed to encourage repeat buying by a single customer over a given time period, such as a year, are referred to as

A.	promotional allowances.

B.	cumulative quantity discounts.

C.	cash discounts.

D.	functional discounts.

E.	noncumulative quantity discounts.

218.

Cumulative quantity discounts refers to

A.	reductions in unit costs for a larger order.

B.	cumulative cash payments or extra amounts of "free goods" awarded sellers in the channel of distribution for undertaking certain advertising or selling activities to promote a product.

C.	discounts offered to sellers for first-time purchases of a new product as incentives for providing shelf space.

D.	an accumulation of discounts for every additional rebuy in which the discount becomes incrementally higher.

E.	discounts that apply to the accumulation of purchases of a product over a given time period, typically a year.

219.

Which of the following statements regarding quantity discounts is most accurate?

A.	Cumulative quantity discounts encourage repeat buying by a single customer to a far greater degree than do noncumulative quantity discounts.

B.	Noncumulative quantity discounts encourage repeat buying by a single customer to a far greater degree than do cumulative quantity discounts.

C.	Quantity discounts are primarily used to undercut competitors' prices.

D.	Noncumulative quantity discounts encourage smaller long-term repeat purchases rather than less frequent large quantity purchases.

E.	Quantity discounts are designed to reward wholesalers and retailers for marketing functions they will perform in the future.

220.

Manufacturers use seasonal discounts to

A.	get rid of expired merchandise.

B.	prevent retailers from purchasing competitors' products.

C.	extend the peak seasonal selling season.

D.	encourage buyers to stock inventory earlier than their normal demand would require.

E.	temporarily spur primary demand during periods of soft sales, such as the beginning of a month, after which prices will return to normal when selective demand picks up.

221.

Seasonal discounts are used by manufacturers to

A.	get rid of dated merchandise.

B.	prevent retailers from purchasing competitors' products.

C.	prolong the peak seasonal selling season.

D.	establish an immediate feeling of goodwill between the buyer and seller that hopefully will continue when prices return to normal.

E.	entice dealers to purchase seasonal merchandise earlier in the selling season.

222.

To encourage buyers to stock inventory earlier than their normal demand would require, manufacturers often use

A.	noncumulative discounts.

B.	cumulative discounts.

C.	seasonal discounts.

D.	trade discounts.

E.	functional discounts.

223.

To reward wholesalers and retailers for the risk they accept in assuming increased inventory carrying costs, manufacturers offer

A.	noncumulative discounts.

B.	cumulative discounts.

C.	trade discounts.

D.	seasonal discounts.

E.	functional discounts.

224.

To reward wholesalers and retailers for having supplies in stock at the time customers want, manufacturers offer

A.	noncumulative discounts.

B.	seasonal discounts.

C.	trade discounts.

D.	cumulative discounts.

E.	functional discounts.

225.

What type of discount would Toro, a domestic yard machinery company, most likely offer its channel members to carry and sell its riding lawn mowers during the winter?

A.	noncumulative discounts

B.	cumulative discounts

C.	functional discounts

D.	seasonal discounts

E.	trade discounts

226.

The reward a manufacturer gives to wholesalers and retailers for marketing functions they will perform in the future is referred to as

A.	seasonal discounts.

B.	cash discounts.

C.	promotional allowances.

D.	trade discounts.

E.	trade-in allowances.

227.

To reward wholesalers and retailers for marketing functions they will perform in the future, a manufacturer often gives __________ discounts.

seasonal

cash

trade

quantity

E.	cumulative

228.

What is it called when a manufacturer offers discounts to resellers in the marketing channel on the basis of where they are in the channel?

A.	seasonal discounts

B.	trade discounts

C.	cash discounts

D.	promotional allowances

E.	trade-in allowances

229.

Functional discounts are offered to resellers in the marketing channel on the basis of where they are in the channel and

A.	the size of the order.

B.	the frequency of the order.

C.	when orders are placed during the year.

D.	the length of the relationship with the manufacturer.

E.	the marketing activities they are expected to perform in the future.

230.

Trade discounts are offered to resellers in the marketing channel on the basis of where they are in the channel and

A.	the marketing activities they are expected to perform in the future.

B.	the frequency of the order.

C.	when orders are placed during the year.

D.	the length of the relationship with the manufacturer.

E.	the size of the order.

231.

Trade discounts are offered to resellers in the marketing channel on the basis of the marketing activities they are expected to perform in the future and

A.	the frequency of the order.

B.	where they are in the channel.

C.	when orders are placed during the year.

D.	the length of the relationship with the manufacturer.

E.	the size of the order.

232.

Suppose a manufacturer quotes price in the following form: List price—$100 less 30/10/5. When calculating this trade discount, the first number "30" in the percentage sequence always refers to the

A.	discount to the ultimate consumer.

B.	manufacturer's cost.

C.	retail end of the channel.

D.	channel intermediary closest to the manufacturer.

E.	original unit cost.

233.

If the terms of the trade discount are listed as "20/10/5," the number "20" represents

A.	20 percent of the suggested retail price that is available to the retailer to cover costs and provide a profit.

B.	20 percent of the suggested wholesale price that is available to the wholesaler to cover costs and provide a profit.

C.	20 percent of the suggested retail price that is available to the jobber to cover costs and provide a profit.

D.	20 percent of the manufacturer's suggested retail price that is available to the ultimate consumer.

E.	20 percent of the suggested retail price that is the profit margin to the manufacturer.

234.

If the terms of the trade discount are listed 20/10/5, the number "5" represents

A.	5 percent of the suggested retail price that is available to the retailer to cover costs and provide a profit.

B.	5 percent of the suggested retail price that is available to the wholesaler to cover costs and provide a profit.

C.	5 percent of the suggested retail price that is available to the jobber to cover costs and provide a profit.

D.	5 percent of the suggested retail price that is available to the ultimate consumer.

E.	5 percent of the suggested retail price that is the profit margin to the manufacturer.

235.

A manufacturer does marketing research and estimates that consumers will accept a manufacturer's suggested retail price of $50 for a jacket. The manufacturer expects to offer trade discount terms of 40/10/5 to retailers, wholesalers, and agents in its marketing channel. What price will the manufacturer receive for the jacket?

$47.50

$45.00

$30.00

$27.50

$25.65

236.

A manufacturer estimates that consumers will accept a price of $275 for a snowboard. If the manufacturer expects to offer trade discounts of 35/15/5 to retailers, wholesalers, and jobbers, respectively, what price will the manufacturer receive for the snowboard?

$275.00

$178.75

$151.94

$144.34

$100.00

237.

A manufacturer offers a suggested list price for a cashmere sweater of $250. The trade discount is 40/20/10. What amount does the manufacturer expect to receive for the sweater?

$175.00

$225.00

$108.00

$125.00

$100.00

238.

Within the channel of distribution for certain types of imported furniture, the typical trade terms are 40/15/10. If a dining room table has a list price of $1,000, how much would the manufacturer sell the table to a jobber for?

$1,000

$600

$510

$459

$400

239.

A glassblowing studio makes fine pieces of art glass. It has decided on a retail list price of $2,000 for one of its vases. They sell only through wholesalers and retailers who receive 50/10 terms. How much will the studio receive from selling this vase?

$2,000

$1,000

$900

$800

$100

240.

To encourage retailers to pay their bills quickly, manufacturers offer them

A.	quantity discounts.

B.	cash discounts.

C.	flexible pricing policies.

D.	promotional allowances.

E.	manufacturer's inducements.

241.

The purpose of a cash discount is to

A.	reward retailers for making large quantity purchases.

B.	encourage purchasing items during periods of low demand.

C.	prevent competitors from obtaining shelf space.

D.	counteract the introduction of a new product by a competitor.

E.	encourage retailers to pay their bills promptly.

242.

If the cash discount terms for a $500 purchase are 4/10 net 30, the number $500 refers to

A.	the original price owed on the merchandise.

B.	the total amount owed if paid within 10 days.

C.	the total discount in dollars if the bill is paid on time in 30 days.

D.	the manufacturer's suggested wholesale price.

E.	the total penalty in dollars if the bill is paid after 10 days.

243.

If the cash discount terms for a $500 purchase are 4/10 net 30, the number 4 refers to

A.	the percentage markup on the product.

B.	the percentage discount if the bill is paid within 10 days.

C.	the percentage increase in price if the bill is not paid within 10 days.

D.	the discount in dollars per unit if the order is paid on time within 30 days.

E.	the penalty in dollars if the bill is not paid within 10 days.

244.

If the cash discount terms for a $500 purchase are 4/10 net 30, the number 10 refers to

A.	the percentage discounted if the bill is paid within 30 days.

B.	the percentage increase in price if the bill is not paid within 10 days.

C.	the number of days for which the discount is valid.

D.	the discount in dollars per unit if the order is paid on time within 30 days.

E.	the penalty in dollars if the bill is not paid within 10 days.

245.

A construction company was offered a 3 percent reduction in price off all invoices from a lumberyard for paying within 10 days of issue. The lumberyard was offering a

A.	trade discount.

B.	cash discount.

C.	promotional allowance.

rebate.

E.	flexible price.

246.

Larry's Lawn Care allows customers to use a credit card for purchases. Larry pays 4 percent of the sale to the credit card company. To promote more business, Larry decides to offer a lower price to customers paying cash—that price being 3 percent less than the standard list price. Larry is giving his customers

A.	a functional discount.

B.	a trade-in allowance.

C.	a promotional allowance.

D.	a cash discount.

E.	an everyday low price.

247.

When Sherman bought gas, he noticed the convenience store offered him a 2 percent reduction in price if he paid cash rather than if he used his credit card to pay for his purchase. The convenience store was offering him a

A.	trade discount.

B.	cash discount.

C.	promotional allowance.

rebate.

E.	functional discount.

248.

Allowances, like discounts, are

A.	rewards given to retailers to encourage early payment.

B.	payment extensions given to cash-strapped consumers during the current recession.

C.	list price deductions based on surges in consumer demand.

D.	list price deductions based on sudden drops in consumer demand.

E.	reductions from list or quoted prices to buyers for performing some activity.

249.

Reductions from list or quoted prices to buyers for performing some activity are referred to as

A.	allowances.

B.	subsidies.

C.	remittances.

D.	noncumulative deductions.

E.	list price deductions.

250.

A price reduction given when a used product is part of the payment on a new product is referred to as a

A.	cash discount.

B.	seasonal discount.

C.	trade-in allowance.

D.	promotional allowance.

E.	subsidy discount.

251.

A trade-in allowance is

A.	a noncash exchange of one product for another of equal or greater value.

B.	a cash-back payment when a more expensive item is replaced with a less expensive item.

C.	the return of money based on proof of purchase.

D.	a cash payment to a retailer for extra in-store support or special featuring of the brand.

E.	a price reduction given when a used product is part of the payment on a new product.

252.

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

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.

253.

A new car dealer can reduce the list price of a new Ford F-150 pickup truck by offering you a __________ of $1,000 for your 2006 Nissan Altima.

A.	cash discount

B.	functional discount

C.	seasonal discount

D.	trade-in allowance

E.	promotional allowance

254.

Cash payments or an extra amount of "free goods" awarded sellers in the channel for undertaking certain advertising or selling activities to promote the product is referred to as a

A.	promotional allowance.

B.	promotional quantity discount.

C.	seasonal discount.

D.	promotional purchase inducement.

E.	dynamic pricing policy.

255.

A promotional allowance is

A.	a onetime discount to promote the product that must be used within a certain time frame.

B.	the cash payments or an extra amount of "free goods" awarded sellers in the marketing channel for undertaking certain advertising or selling activities to promote the product.

C.	the return of money to promote the product based on proof of purchase.

D.	a short-term price reduction when consumer demand takes a significant and unexpected dip.

E.	an incentive, such as trips, cruises, jewelry, etc., presented to brand-loyal customers.

256.

The practice of replacing promotional allowances with lower manufacturer list prices is referred to as

A.	everyday low pricing.

B.	everyday fair pricing.

C.	trade-in allowances.

D.	markdown pricing.

E.	everyday value pricing.

257.

Everyday low pricing refers to

A.	the pricing strategy of "extreme value" stores to maintain high price-quality images for the products they sell.

B.	the pricing strategy of starting a product at standard list price and then lowering the price by a certain percentage until it is sold.

C.	short-term price reductions when consumer demand takes a significant and unexpected dip.

D.	the practice of replacing promotional allowances with lower manufacturer list prices.

E.	a form of predatory pricing used solely for the purpose of undercutting competitors' prices.

258.

The acronym EDLP stands for

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.

259.

Instead of everyday low prices (EDLP), supermarkets prefer a(n) __________ approach, which is based on frequent specials where prices are temporarily lowered for a brief period of time and then raised again.

A.	lo-hi pricing

B.	alternative pricing

C.	hi-lo pricing

D.	bundle-pricing

E.	dynamic pricing policy

260.

After offering a promotional allowance, the price of a product returns to its regular price level. When this happens, the retail store's gross margin on that product __________ on those items that were bought with the allowance but not sold during the price special promotion.

A.	decreases substantially

B.	increases substantially

C.	remains the same

D.	fluctuates wildly

vanishes

261.

Which of the following statements about everyday low pricing (EDLP) is most accurate?

A.	EDLP encourages manufacturer allowances.

B.	Supermarkets have hailed EDLP as the most effective form of value pricing.

C.	Some argue that EDLP without price specials is boring for many grocery shoppers.

D.	EDLP allows supermarkets to use deeply discounted price specials.

E.	EDLP can increase average retail prices by as much as 10 percent.

262.

Which of the following statements about everyday low pricing (EDLP) is most accurate?

A.	For supermarkets, EDLP means "everyday low profits!"

B.	Supermarkets have hailed EDLP as value pricing at its most effective.

C.	EDLP allows supermarkets to use deeply discounted price specials.

D.	EDLP can increase average retail prices by as much as 10 percent.

E.	If retailers pass on their allowances to customers, they cannot make a profit.

263.

Geographic adjustments are made by manufacturers or wholesalers to cover

A.	production costs.

B.	administrative costs.

C.	selling costs.

D.	promotional costs.

E.	transportation costs.

264.

Manufacturers or even wholesalers make geographical adjustments to list or quoted prices to reflect

A.	warehouse inventory carrying and loading costs.

B.	the cost of transportation of the products from seller to buyer.

C.	changes in price due to tariffs the Federal Trade Commission imposes on the transport of goods from the United States.

D.	changes in price due to fuel excise taxes on inefficient diesel trucks.

E.	the need some firms have of recouping the costs of developing different versions of their products for different global markets.

265.

Geographical adjustments are made by manufacturers or even wholesalers to list or quoted prices to reflect

A.	loyalty to the local economy whether it be city, state, or nationally designated.

B.	changes in price due to tariffs or excise taxes.

C.	the cost of transportation of the products from seller to buyer.

D.	the differentiated aspect of the particular product or service.

E.	simplicity in pricing structures.

266.

The two general methods for quoting prices related to transportation costs are FOB origin pricing and

A.	uniform delivered pricing.

B.	mode of transportation pricing.

C.	regional pricing.

D.	flexible pricing.

E.	FOB destination pricing.

267.

The two general methods for quoting prices related to transportation costs are uniformed delivered pricing and

A.	regional pricing.

B.	flexible pricing.

C.	mode of transportation pricing.

D.	FOB origin pricing.

E.	FOB destination pricing.

268.

The acronym FOB stands for

A.	freight on board.

B.	free on board.

C.	freight of buyer.

D.	forward onto buyer.

E.	freight owner bonus.

269.

The word Free in relation to the acronym FOB signals the point or location where the seller is

A.	free of responsibility for customer invoicing.

B.	free of product liability.

C.	free to choose method of transportation.

D.	free to choose the point of loading.

E.	free to choose the method of payment.

270.

Free on board (FOB) origin pricing is

A.	a method of pricing where the price the seller sets includes all transportation costs.

B.	a method of pricing where taxes and tariffs are adjusted based upon the city, state, or country of origin of a product and not its destination.

C.	the price the seller quotes that includes only the cost of loading the product onto or into a vehicle and specifies the name of the location where the loading is to occur (seller's factory or warehouse).

D.	a method of pricing where taxes and tariffs are adjusted based upon the city, state, or country destination of a product and not its place of origin.

E.	the buyer's naming the location of this loading as the seller's factory or warehouse.

271.

A method of pricing where the price the seller quotes includes only the cost of loading the product onto the vehicle and specifies the name of the location where the loading is to occur is referred to as

A.	free on board (FOB) origin pricing.

B.	free on board (FOB) destination pricing.

C.	mode of transportation pricing.

D.	uniform delivered pricing.

E.	free on board (FOB) geographical pricing.

272.

Central Ice Machine Co. is located in Omaha, Nebraska, and sells Frick, Sullair, York, and Fes Fuller ammonia refrigeration parts. The company ships these parts using FOB origin pricing. Which of the following statements about the shipment of a Frick reciprocating compressor is most accurate?

A.	Central Ice Machine will pay all shipping costs.

B.	Central Ice Machine splits the shipping costs with its customers regardless of where the compressor is shipped.

C.	It will cost Central Ice Machine more to ship to Charlotte, North Carolina, than to Topeka, Kansas.

D.	A buyer in Albany, New York, will pay significantly more shipping charges than a buyer in Lincoln, Nebraska.

E.	All buyers will pay the same shipping costs, regardless of the destination.

273.

The fashion buyer for Neiman Marcus is in Italy to view the new collections and to order for the coming season. In Milan, she negotiates a good price for a quantity of shoes in a range of sizes and styles, FOB factory. This means that

A.	the factory selects the mode of transportation, pays the freight charges, and is responsible for any damage because the seller retains title to the goods until they are delivered to Neiman Marcus.

B.	the factory selects the mode of transportation but Neiman Marcus pays freight charges and is responsible for any damage while the shoes are in transit because title passes to the firm at the point of loading.

C.	Neiman Marcus and the factory will split the freight costs.

D.	the factory pays the freight cost to a designated port (airport or seaport) in the United States while Neiman Marcus pays the freight from that port to its final destination within the United States.

E.	the factory passes the title when the goods are loaded but will pay all shipping costs.

274.

Uniform delivered pricing refers to

A.	the price the seller quotes that includes all transportation costs.

B.	the price the seller quotes that excludes all transportation costs.

C.	the price the seller quotes that includes a fixed allowance whereby the buyer pays all additional costs.

D.	the price the seller quotes includes a fixed percentage of transportation costs for which it will be responsible.

E.	the guarantee that a retailer will be charged the same transportation fee for all its outlets regardless of where they are located.

275.

With uniform delivered pricing, the price the seller quotes

A.	includes all transportation costs.

B.	excludes all transportation costs.

C.	includes a fixed allowance whereby the buyer pays any costs above that allowance.

D.	includes a fixed percentage of transportation costs for which the seller will be responsible.

E.	will guarantee that a retailer will be charged the same transportation fee for all its outlets regardless of where they are located.

276.

The price the seller quotes that includes all transportation costs is referred to as

A.	inclusive transport pricing.

B.	geomodal pricing.

C.	uniform delivered pricing.

D.	FOB origin pricing.

E.	FOB destination pricing.

277.

A method of pricing where the price the seller quotes includes all transportations costs, and the seller is responsible for any damage that may occur because the seller retains title to the goods until delivered to the buyer, is referred to as

A.	FOB destination pricing.

B.	FOB origin pricing.

C.	geographical allowance.

D.	uniform delivered pricing.

E.	transportation allowance.

278.

Many cruise lines pay the customer's airfare to the point of cruise departure. What type of price adjustment are the cruise lines using?

A.	skimming pricing

B.	promotional pricing

C.	loss-leader pricing

D.	prestige pricing

E.	uniform delivered pricing

279.

A pricing method where all buyers pay the same delivered price for the products, regardless of their distance from the seller, is referred to as

A.	single-zone pricing.

B.	multiple-zone pricing.

C.	freight absorption pricing.

D.	FOB origin pricing.

E.	basing-point pricing.

280.

A company placing an order from the Lab Safety Supply catalog is instructed to add $25 to the total cost of the order to pay for shipping regardless of the buyer's location. Which method of shipping does this catalog supplier use?

A.	FOB origin pricing

B.	multiple-zone pricing

C.	freight absorption pricing

D.	single-zone pricing

E.	basing-point pricing

281.

When a firm divides its selling territory into geographic areas, it is referred to as

A.	single-zone pricing.

B.	multiple-zone pricing.

C.	geographic pricing.

D.	FOB origin pricing.

E.	basing-point pricing.

282.

Multiple-zone pricing refers to

A.	establishing a distribution center in each major geographical region or zone in which a firm's product is sold.

B.	establishing retail outlets in the same vicinity as all the firm's manufacturing plants.

C.	a firm's decision to charge the same price regardless of geographic regions or zones where it operates.

D.	a firm's division of its selling territory into geographic areas or zones.

E.	a firm's decision to divide its business between multiple carriers to provide flexibility should transportation prices rise with one and fall with another.

283.

After extensive analysis, a mail order company has decided to embark on a policy of multiple-zone pricing. In which step of the price-setting process would the mail order firm have made this decision?

A.	Step 6: Make special adjustments to the list or quoted price.

B.	Step 4: Select an approximate price level.

C.	Step 2: Estimate demand and revenue.

D.	Step 1: Identify price constraints and objectives.

E.	Step 5: Set list or quoted price.

284.

A company in Virginia that manufactures and sells peanut brittle to retailers charges higher shipping costs for orders sent to customers living west of the Mississippi River. This Virginia company is using

A.	single-zone pricing.

B.	FOB origin pricing.

C.	freight absorption pricing.

D.	multiple-zone pricing.

E.	basing-point pricing.

285.

A pricing strategy where the buyer is allowed to deduct freight expenses from the list price of the goods so the seller pays the transportation costs is referred to as

A.	FOB factory pricing.

B.	FOB absorption pricing.

C.	FOB origin pricing.

D.	basing-point pricing.

E.	FOB with freight-allowed pricing.

286.

Another name for freight-absorption pricing is

A.	FOB factory pricing.

B.	FOB absorption pricing.

C.	FOB with freight-allowed pricing.

D.	FOB basing-point pricing.

E.	FOB origin pricing.

287.

Selecting one or more geographical locations from which the list price for products plus freight expenses are charged to the buyer is referred to as

A.	FOB origin pricing.

B.	basing-point pricing.

C.	single-zone pricing.

D.	multiple-zone pricing.

E.	freight absorption pricing.

288.

Basing-point pricing refers to

A.	selecting a single geographical location from which the list price for products plus freight expenses are charged to the seller.

B.	selecting two or more geographical locations from which the list price for products plus freight expenses are charged to the seller.

C.	having all buyers pay the same delivered price for the products, regardless of their distance from the seller.

D.	a firm dividing a selling territory into geographic areas or zones and charging the same delivered price to all buyers within the same zone, but charging different prices in for different zones depending on distance from the factory or warehouse.

E.	selecting one or more geographical locations from which the list price for products plus freight expenses are charged to the buyer.

289.

For which of the following products is its manufacturer most likely to use basing-point pricing?

pet food

furniture

C.	crystal glass bowls

coal

E.	cut flowers

290.

Which of the following statements about geographical adjustments to price is most accurate?

A.	In FOB origin pricing, the seller selects the mode of transportation.

B.	In FOB with freight-allowed pricing, the buyer subtracts the transportation costs from the list price.

C.	Multiple-zone pricing is sometimes referred to as "spider web" pricing.

D.	Basing-point pricing seems to have been used in industries where freight expenses are only a minor part of the total cost to the buyer.

E.	Geographical adjustments can be subject to government regulation if the firm cannot supply objective data (lists of mountains, rivers, weather conditions, etc.) explaining why those adjustments need to be made.

291.

Which of the following statements about geographical adjustments to price is most accurate?

A.	In FOB origin pricing, the seller selects the mode of transportation.

B.	In FOB with freight-allowed pricing, the seller must pay for all transportation costs.

C.	Multiple-zone pricing is sometimes referred to as "spider web" pricing.

D.	Basing-point pricing methods have been used in industries where freight expenses are a significant part of the total cost to the buyer.

E.	Geographical adjustments can be subject to government regulation if the firm cannot supply objective data (lists of mountains, rivers, weather conditions, etc.) explaining why those adjustments need to be made.

292.

Five pricing practices are scrutinized because of potential unethical or illegal actions. They are (1) price fixing, (2) price discrimination, (3) deceptive pricing, (4) geographical pricing, and (5) __________.

A.	predatory pricing

B.	discount pricing

C.	lateral price fixing

D.	regional rollback pricing

E.	delayed payment pricing

293.

Five pricing practices are scrutinized because of potential unethical or illegal actions. They are (1) price fixing, (2) price discrimination, (3) predatory pricing, (4) geographical pricing, and (5) __________.

A.	price discounting

B.	deceptive pricing

C.	lateral pricing

D.	regional rollback pricing

E.	delayed payment penalties

294.

Five pricing practices are scrutinized because of potential unethical or illegal actions. They are (1) price fixing, (2) predatory pricing, (3) deceptive pricing, (4) geographical pricing, and (5) __________.

A.	price discounting

B.	lateral price fixing

C.	regional rollbacks

D.	delayed payment pricing

E.	price discrimination

295.

Five pricing practices are scrutinized because of potential unethical or illegal actions. They are (1) predatory pricing, (2) price discrimination, (3) deceptive pricing, (4) geographical pricing, and (5) __________.

A.	price discounting

B.	lateral price fixing

C.	price fixing

D.	delayed payment pricing

E.	price discrimination

296.

Five pricing practices are scrutinized because of potential unethical or illegal actions. They are (1) price fixing, (2) price discrimination, (3) deceptive pricing, (4) predatory pricing, and (5) __________.

A.	geographical pricing

B.	price discounting

C.	lateral price fixing

D.	delayed payment penalties

E.	price discrimination

297.

A conspiracy among firms to set prices for a product is referred to as

A.	price discrimination.

B.	price fixing.

C.	predatory pricing.

D.	tying arrangements.

E.	exclusive dealing.

298.

Price fixing refers to

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 a very low price for a product with the intent of driving competitors out of business.

C.	the practice of charging different prices to different buyers for goods of like grade and quality.

D.	a conspiracy among firms to set prices for a product.

E.	a seller's requirement that the purchaser of one product also buy another product in the line.

299.

Price fixing is illegal under the

A.	Sherman Act.

B.	Consumer Goods Pricing Act.

C.	Robinson-Patman Act.

D.	Federal Trade Commission Act.

E.	Clayton Act.

300.

Price fixing is illegal per se under the Sherman Act. What does per se mean?

A.	according to

B.	in lieu of

C.	in regard to

D.	in and of itself

E.	without exception

301.

Two or more competitors explicitly or implicitly setting prices is referred to as

A.	competitive collusion.

B.	vertical price fixing.

C.	horizontal price fixing.

D.	lateral price fixing.

E.	price cooperation.

302.

Controlling agreements between independent buyers and sellers whereby sellers are required to not sell products below a minimum retail price is called

A.	competitive collusion.

B.	price cooperation.

C.	horizontal price fixing.

D.	lateral price fixing.

E.	vertical price fixing.

303.

Vertical price fixing refers to

A.	two or more competitors explicitly or implicitly setting prices.

B.	the practice of charging different prices to different buyers for goods of like grade and quality.

C.	controlling agreements between independent buyers and sellers whereby sellers are required to not sell products below a minimum retail price.

D.	a conspiracy among firms to set prices for a product or service.

E.	a seller's requirement that the purchaser of one product also buy another product in the line.

304.

Vertical price fixing involves controlling agreements between independent buyers and sellers whereby sellers are required to not sell products below a minimum retail price. This practice is also called

A.	price discrimination.

B.	predatory pricing.

C.	a tying arrangement.

D.	resale price maintenance.

E.	exclusive dealing.

305.

Resale price maintenance was declared illegal in 1975 under the

A.	Sherman Act.

B.	Consumer Goods Pricing Act.

C.	Robinson-Patman Act.

D.	Federal Trade Commission Act.

E.	Clayton Act.

306.

Mark Johnson, the manager of a discount consumer electronics store, was approached by the manufacturer's representative on behalf of a marketer of a popular and profitable line of DVD storage racks. The manufacturer's representative implied that if Johnson doesn't raise the retail prices for the storage racks to those paid by the marketer's nondiscount customers, Johnson's supply of racks may be severely curtailed. The manufacturer's representative is guilty of attempting

A.	horizontal price fixing.

B.	resale price maintenance.

C.	price discrimination.

D.	predatory pricing.

E.	bait and switch pricing.

307.

Price discrimination refers to

A.	the practice of charging different prices to different buyers for goods of like grade and quality.

B.	an arrangement a manufacturer makes with a reseller to handle only its products and not those of a competitor.

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 also buy another product in the line.

308.

The practice of charging different prices to different buyers for goods of like grade and quality is referred to as

A.	horizontal price fixing.

B.	resale price maintenance.

C.	price discrimination.

D.	predatory pricing.

E.	bait and switch pricing.

309.

Price discrimination is illegal under the

A.	Sherman Act.

B.	Consumer Goods Pricing Act.

C.	Robinson-Patman Act.

D.	Federal Trade Commission Act.

E.	Anti-Competitive Act.

310.

Amazon customers complained when they discovered that the online retailer was offering different customers different prices for the same product. Company officials admitted that the company was trying to see how much it could charge for an item before buyers balked. No matter what the reasoning behind it, Amazon.com was using

A.	horizontal price fixing.

B.	price discrimination.

C.	resale price maintenance.

D.	predatory pricing.

E.	bait and switch pricing.

311.

The Robinson-Patman Act allows for price differentials to different customers under several conditions. Which of the following practices would be permitted?

A.	using price differentials when price differences charged to different customers do not exceed the differences in the cost of manufacture, sale, or delivery resulting from different methods or quantities in which such goods are sold or delivered to buyers

B.	using price differentials when price differences are given on the basis of other family businesses

C.	using price differentials when charging different prices to different buyers for goods of like grade or quality

D.	using price differentials when charging different prices on the basis of religious affiliation

E.	using price differentials when charging the original price for refurbished goods that have been damaged or used and returned but repaired according to company specifications

312.

The Robinson-Patman Act allows for price differentials to different customers under several conditions. Which of the following practices would be permitted?

A.	using price differentials when price differences are given on the basis of other family businesses

B.	using price differentials when charging different prices to different buyers for goods of like grade or quality

C.	using price differentials when charging different prices on the basis of religious affiliation

D.	using price differentials when charging the original price for refurbished goods that have been damaged or used and returned but repaired according to company specifications

E.	using price differentials when price differences result from changing market conditions, avoiding obsolescence of seasonal merchandise, including perishables, or closing out sales

313.

The Robinson-Patman Act allows for price differentials to different customers under several conditions. Which of the following practices would be permitted?

A.	using price differentials when price differences are given on the basis of other family businesses

B.	using price differentials when charging different prices to different buyers for goods of like grade or quality

C.	using price differentials when price differences are quoted to selected buyers in good faith to meet competitors' prices and are not intended to injure competition

D.	using price differentials when charging different prices on the basis of religious affiliation

E.	using price differentials when price differences result from changing market conditions, avoiding obsolescence of seasonal merchandise, including perishables, or closing out sales

314.

The Robinson-Patman Act covers promotional allowances as well as discounts. To legally offer promotional allowances to buyers, the seller must do so on __________ basis to all buyers distributing the seller's products.

A.	a proportionally equal

a limited

C.	a disproportionally equal

D.	a geographical

E.	an across-the-board

315.

Price deals that mislead consumers fall into the category of

A.	predatory pricing.

B.	deceptive pricing.

C.	price discrimination.

D.	caveat emptor.

E.	resale price maintenance.

316.

Advertising such as "Retail Value $100, Our Price $85" is deceptive if

A.	a verified and substantial number of stores in the market area do not price the item at $100.

B.	even one store in that retail chain does not price the item at $100.

C.	a competitor is selling the same item for $75 on sale and the normal price is only $85.

D.	there is not enough product on hand at that price to satisfy the needs of the store's regular customer traffic.

E.	the markup on the original price is more than 200 percent.

317.

A claim that a price is below a manufacturer's suggested or list price may be deceptive if

A.	the items for sale had been purchased from another retailer.

B.	the items for sale were part of a manufacturer's promotional allowance.

C.	the items were part of a bulk order.

D.	few or no sales occur at that price in a retailer's market area.

E.	the items were purchased from the manufacturer at a higher price and the sale was part of a loss-leader promotion.

318.

When a seller represents a price as reduced, the item must have been offered in good faith at a higher price for a substantial previous period. Former price comparisons are deceptive if

A.	the high price tags were from a previous owner or retailer and were purchased that way from the reseller, even though that price didn't originate at the store.

B.	the items for sale were part of a manufacturer's promotional allowance.

C.	a high price was set for the purpose of establishing a reference for a price reduction.

D.	the items for sale were available at the higher price for less than 30 days.

E.	the items were purchased from the manufacturer at a higher price and the sale was part of a loss-leader promotion.

319.

Deceptive pricing practices are outlawed by legislation and enforced by which federal agency?

A.	Consumer Protection Agency

B.	U.S. Department of Justice

C.	Federal Communications Commission

D.	U.S. Department of Commerce

E.	Federal Trade Commission

320.

The practice of offering a bargain that is conditional on the purchase of other products may exist when a buyer is offered the "1-Cent Sales," the "Buy 1, Get 1 Free," or the "Get 2 for the Price of 1" deal. Such pricing is legal only if

A.	the seller is using bundle pricing.

B.	there is a reasonable amount of inventory to satisfy the needs of the retailers normal traffic flow.

C.	the first items are sold at the regular price, not a price inflated for the offer.

D.	the product is not outdated.

E.	the quantity available to the customer is not limited.

321.

To promote their business, some psychics advertise on television free tarot-card readings and other insights into their customers' futures. Unfortunately, this "free reading" has cost some unsuspecting callers as much as $700 in phone charges. This sort of pricing practice would be primarily monitored by the

A.	Consumer Protection Agency.

B.	U.S. Department of Justice.

C.	Federal Trade Commission.

D.	Federal Communications Commission.

E.	Consumer Product Safety Commission.

322.

Five common forms of misleading pricing are bait and switch, bargains conditional on other purchases, comparable value comparisons, comparisons with suggested prices, and former price comparisons. All these practices are

A.	most effective in the growth stage of the product life cycle.

B.	popular techniques preferred by online businesses.

C.	illegal and often difficult to prosecute.

D.	most effective in business-to-business marketing.

E.	effective pricing practices that professional marketers use.

323.

When a firm offers a very low price on a product to attract customers to a store and once in the store the customer is persuaded to purchase a higher-priced item, the practice is referred to as

A.	predatory pricing.

B.	deceptive pricing.

C.	price discrimination.

D.	caveat emptor.

E.	bait and switch.

324.

A hardware store advertises a ⅜-inch Black and Decker Power Drill for $29.95. You enter the store intending to purchase the drill. The salesperson informs you that they are all sold out. She tells you that the "sale" drills were factory seconds and that if you are going to be doing any kind of serious woodworking, you should buy the Model 3309, which sells for $49.99. This scenario has elements of which type of illegal pricing practice?

A.	predatory pricing

B.	price discrimination

C.	price fixing

D.	bait and switch

E.	conditional bargains

325.

Which of the following statements about geographical pricing is most accurate?

A.	Geographical pricing is generally legal and not normally a concern in the U.S. legal system.

B.	Geographical pricing has come under more government scrutiny than any other pricing policy.

C.	FOB freight-allowed pricing practices are illegal.

D.	FOB origin pricing is legal.

E.	Basing-point pricing is the only form of geographical pricing that is not under some type of legal restriction.

326.

The practice of charging a very low price for a product with the intent of driving competitors out of business is referred to as

A.	price fixing.

B.	predatory pricing.

C.	price discrimination.

D.	deceptive pricing.

E.	geographical pricing.

327.

Predatory pricing refers to

A.	the practice of charging a very low price for a product with the intent of driving competitors out of business.

B.	a conspiracy among firms to set prices for a product.

C.	using price differentials when charging different prices on the basis of race, religion, or ethnic affiliation.

D.	using price differentials when charging the original price for refurbished goods that have been damaged or used and returned but repaired according to company specifications.

E.	controlling agreements between independent buyers and sellers whereby sellers are required to not sell products below a minimum retail price.

328.

Predatory pricing is

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.

329.

Predatory pricing is

A.	most effective in the growth stage of the product life cycle.

B.	a popular technique preferred by online businesses.

C.	illegal but often difficult to prosecute.

D.	most effective in business-to-business marketing.

E.	one of the most widely used pricing practices for professional marketers.

330.

In the early 1980s, typical round-trip coach airfares from the East Coast to London were more than $500. Then Freddie Laker introduced the People's Express, a competing service into Newark at $350. Major airlines matched his price—and continued to do so until they drove People's Express out of business. Then prices shot back up to over $500. A lawsuit filed under the Sherman Act resulted in the judgment that the major airlines had explicitly tried to destroy a competitor. The experience of People's Express is an example of __________ on the part of the major airlines.

A.	price fixing

B.	price discrimination

C.	deceptive pricing

D.	predatory pricing

E.	pricing constraints

331.

Bob Biltmore owns dozens of very successful print shops throughout the Midwest. Biltmore's shops specialize in low-cost black-and-white copies and feature user-friendly machines consumers can easily operate. In recent months, Biltmore has noticed many more competitors in the areas where his stores are located. In an attempt to eliminate the competition, Biltmore has decided to charge a very low price for his black-and-white copies, a price so low his competitors will be forced out of business. After the competition has been driven out, Biltmore plans to raise the price of his copies. Biltmore is planning to engage in the illegal and unethical practice of

A.	price fixing.

B.	price inflation.

C.	deceptive pricing.

D.	competitive pricing.

E.	predatory pricing.

332.

Which of the following statements about the legal and regulatory aspect of pricing is most accurate?

A.	The Robinson-Patman Act deals with predatory pricing.

B.	The Consumer Goods Pricing Act is the only federal legislation that deals directly with pricing issues.

C.	The Sherman Act deals only with vertical price fixing.

D.	The Federal Trade Commission Act deals with predatory pricing, deceptive pricing, and geographical pricing issues.

E.	The Consumer Goods Pricing Act and the Robinson-Patman Act deal with price discrimination.

333.

All of the following statements regarding the legal and regulatory aspects of pricing are true except

A.	there has been a movement toward a "rule of reason" in both horizontal and vertical price fixing cases.

B.	the Robinson-Patman Act allows for price differentials to different customers under the "cost justification defense."

C.	a manufacturer's MSRP has been declared illegal per se by a recent U.S. Supreme Court decision.

D.	the "rule of reason" perspective is the direct opposite of the per se rule.

E.	wholesalers can fix the maximum retail price for their products provided the price agreement does not create an "unreasonable restraint of trade."

334.

Carmex uses all of the following approaches to setting the price of its products except

A.	profit-oriented.

B.	competition-oriented.

C.	cost-oriented.

D.	elasticity-oriented.

E.	demand-oriented.

335.

A single jar of original formula Carmex has different prices for the product depending upon where it is sold, but each price will end in a nine ($0.99 at mass merchandisers like Walmart or Target; $1.59 at drugstores; and $1.79 at grocery stores). This pricing strategy is called

A.	standard pricing.

B.	odd-even pricing.

C.	customary pricing.

D.	everyday lower pricing.

E.	at-market pricing.

Short Answer Questions

336.	What are the six major steps involved in setting prices?

337.	What are three special adjustments to the list or quoted price?

338.	There are four common approaches to selecting an approximate price level. List and provide a brief description for each one.

339.	List four of the eight demand-oriented approaches to selecting an approximate price level and define what they are.

340.	When is skimming pricing an effective strategy?

341.	What are the conditions favoring the use of penetration pricing?

342.	Explain why odd-even pricing may be successful.

343.	Give an example of yield management pricing and explain why it is used.

344.	What is standard markup pricing and when would it be used?

345.	What is experience curve pricing and how does it relate to marketing strategies?

346.	What is loss-leader pricing and why do retailers use it?

347.	What is the difference between a fixed-price policy and a dynamic pricing policy?

348.	What are the four kinds of discounts that are especially important in marketing pricing strategy?

349.	What is the difference between noncumulative and cumulative quantity discounts?

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

351.	What are the two general methods for quoting prices related to transportation costs? Explain how each is used.

352.	Define the four kinds of uniform delivered pricing methods and give an example of the use of each.

353.	The Consumer Goods Pricing Act, the Sherman Act, the Federal Trade Commission Act, and the Robinson-Patman Act all address different aspects of deceptive pricing. Select one example for each act and explain which aspects of the practice would be considered illegal.

354.	What are the five most common deceptive pricing practices? Give an example of each one.

355.	Explain the deceptive pricing practice known as bait and switch.

356.	Explain predatory pricing.

357.	Which of the four approaches does Carmex use to set prices for its products?

358.	What is the difference between an EDLP retailer and a high-low retailer? Why does Carmex charge them a different price?

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Chapter 14 Arriving At The Final Price

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