Ch 14

question

Price is best defined as

answer

the overall sacrifice a consumer is willing to make to acquire a specific product or service

question

Competition, channel members, costs, customers, and company objectives are the five critical components of

answer

pricing

question

True or false: A firm with a primary objective of very high sales growth will have the same pricing strategy as a firm with a primary objective of being a quality leader.

answer

False

Pricing strategies should support and allow the firm to reach its overall objectives, which, in this case, are different. The different objectives should lead to different pricing strategies.

question

Which of the following are strategies that can be used as part of the profit orientation?

Maximizing profits

Competitive parity

Value-based pricing

Target profit pricing

answer

Maximizing profits

Target profit pricing

question

When a firm is aiming for a particular amount of profit as its overriding concern, it usually implements

answer

target profit pricing

question

Which of the following is a firm implementing when it uses a mathematical model to identify the price at which the firm will make the most money possible?

answer

Maximizing profits strategy

question

Which of the following are considered part of the five Cs of pricing?

answer

Company objectives

Customers

Channel members

Competition

question

What type of orientation is exemplified by target return pricing?

answer

Profit

question

Sometimes firms selling a pioneering product will set a very low price in order to attract many customers before competitors enter the market. Which type of orientation does this demonstrate?

answer

Sales

question

Which of the following types of theories is the maximizing profits strategy based on?

answer

Economic Theory

question

Firms engaged in competitor orientation might use which of the following strategies?

answer

Competitive parity

Status quo pricing

question

Under competitive [...] , companies set their prices close to those of their major competitors.

answer

parity

question

Firms that are less concerned with the level of profits and more interested in the rate at which profits are generated relative to their investments tend to use

answer

target return pricing

question

Which strategy is used by firms that believe increasing volume of sales will help the firm more than increasing profits?

answer

Sales-oriented strategy

question

A firm may set low prices to do which of the following?

answer

Encourage current firms to leave the market

Discourage new firms from entering the market

Take market share away from competitors

question

What type of orientation has a firm adopted when it measures itself primarily against firms that challenge it for customers?

answer

Competitor

question

What kind of pricing is being used when a firm sets prices similar to major rivals' prices?

answer

Competitive parity

question

Which of the following accurately characterize demand curves?

answer

They show how much consumers will demand during a specific period at different prices.

They relate demand to prices while assuming everything else remains unchanged.

question

For most products, demand increases as the price decreases. Because of this general trend, demand curves usually have a(n) ______ slope.

answer

downward

question

Compared to other company objectives, a sales-oriented firm ______.

answer

sets prices very low to generate new sales, even if profits suffer

question

A demand curve shows that a company will sell 10,000 units if it prices its new product at $200 per unit, but it will sell 20,000 units if it reduces the price to $75. Where should the company set the price of the new product in order to maximize profits?

answer

$200

question

What is the premise behind the pricing of prestige products or services?

answer

The higher the price, the greater the status

question

The equation for price elasticity of demand is the percentage change in quantity demanded divided by percentage change in ______.

answer

price

question

Assuming the economy and other factors stay the same, a downward-sloping demand curve for a product shows which of the following?

answer

As price increases,

demand decreases.

As price decreases, demand increases.

question

A demand curve enables a firm to examine prices ______.

answer

in terms of demand and the firm's objectives

question

What term describes the ratio of change in a price and its effect on the quantity of the product demanded?

answer

Price elasticity of demand

question

When a 10% decrease in price produces more than a 10% increase in quantity sold, the product or service is responsive to price changes and is considered to be ______.

answer

elastic

question

Price insensitive

answer

Apple increases the price of the new iPhone by 25% and sales decrease less than 1%.

question

Price sensitive

answer

Pepsi drops the price of a six-pack by 50% and sales increase 78%.

question

If a company needs to raise the prices of some its products, it should choose to raise the prices of ______ products because relatively fewer customers will stop buying the product as a result.

answer

inelastic

question

If a restaurant reduces the price of a hamburger by 25% and sales increase by more than 50%, which of the following describe the demand for the hamburger?

answer

price sensitive

elastic

question

When a 10% decrease in price results in a less than 10% increase in quantity sold, the demand for the product or service is described as ______.

answer

inelastic

question

True or false: In general, customers are more sensitive to price increases than to price decreases.

answer

True

question

When there are many substitute products available, the price elasticity of demand for a given product will likely be ______.

answer

higher

question

As people make more money, their spending behavior changes. This is known as ______.

answer

the income effect

question

Loyalty toward a particular brand makes other brands seem less substitutable, which decreases ______.

answer

the price elasticity of demand

question

What information is gained by adding variable and fixed costs together?

answer

Total cost

question

What term describes consumers' ability to replace the focal brand with other products?

answer

Substitution effect

question

On which of the following does brand loyalty have the most significant impact?

answer

Substitution effect

question

What is a useful technique that enables managers to examine the relationships among cost, price, revenue, and profit over different levels of production and sales?

answer

Break-even analysis

question

The percentage change in the quantity of one product demanded compared with the percentage change in price in another product is called

answer

cross price elasticity.

question

What term describes the point at which the number of units sold generates enough revenue to equal total costs?

answer

Break-even point

question

How is total cost calculated?

answer

Variable costs plus fixed costs

question

Profit alone ______ how many units should be sold before a firm breaks even.

answer

does not indicate

question

Break-even analysis examines the relationships between which of the following?

answer

Cost

Price

question

How do managers use break-even analysis?

answer

To find a production quantity where, for a given price, costs are equal to revenues

question

Which of the following is another term for target return percentage?

answer

Markup

question

Of the following, which best describes a monopoly?

answer

One firms controls the market.

question

At the break-even point, profits on the sale of a product are ______

answer

zero

question

What type of competition occurs when only a few firms dominate a market?

answer

Oligopolistic

question

Variable cost per unit times quantity equals ______.

answer

total variable cost

question

A [...] occurs when oligopolistic companies compete with each other by repeatedly lowering their prices.

answer

price war

question

Which of the following do you need to know to calculate target return price?

answer

Expected unit sales

Variable costs

Fixed costs

question

[...] occurs when a company has a very low price for its product(s) in order to drive its competition out of business.

answer

Predatory pricing

question

Antitrust laws are designed to protect consumers from:

answer

the high prices charged by monopolies for their products.

question

Channel members include which of the following?

answer

Manufacturers

Retailers

Wholesalers

question

Which of the following is an example of an oligopoly?

answer

The oil industry, with a limited number of providers

question

When firms compete by lowering prices, they are engaged in ______.

answer

a price war

question

A firm that opens new stores in a community and sets artificially low prices with the sole purpose of driving competing stores in the area out of business is said to engage in a type of behavior called ______ pricing.

answer

predatory

1 of 59

question

Price is best defined as

answer

the overall sacrifice a consumer is willing to make to acquire a specific product or service

question

Competition, channel members, costs, customers, and company objectives are the five critical components of

answer

pricing

question

True or false: A firm with a primary objective of very high sales growth will have the same pricing strategy as a firm with a primary objective of being a quality leader.

answer

False

Pricing strategies should support and allow the firm to reach its overall objectives, which, in this case, are different. The different objectives should lead to different pricing strategies.

question

Which of the following are strategies that can be used as part of the profit orientation?

Maximizing profits

Competitive parity

Value-based pricing

Target profit pricing

answer

Maximizing profits

Target profit pricing

question

When a firm is aiming for a particular amount of profit as its overriding concern, it usually implements

answer

target profit pricing

question

Which of the following is a firm implementing when it uses a mathematical model to identify the price at which the firm will make the most money possible?

answer

Maximizing profits strategy

question

Which of the following are considered part of the five Cs of pricing?

answer

Company objectives

Customers

Channel members

Competition

question

What type of orientation is exemplified by target return pricing?

answer

Profit

question

Sometimes firms selling a pioneering product will set a very low price in order to attract many customers before competitors enter the market. Which type of orientation does this demonstrate?

answer

Sales

question

Which of the following types of theories is the maximizing profits strategy based on?

answer

Economic Theory

question

Firms engaged in competitor orientation might use which of the following strategies?

answer

Competitive parity

Status quo pricing

question

Under competitive [...] , companies set their prices close to those of their major competitors.

answer

parity

question

Firms that are less concerned with the level of profits and more interested in the rate at which profits are generated relative to their investments tend to use

answer

target return pricing

question

Which strategy is used by firms that believe increasing volume of sales will help the firm more than increasing profits?

answer

Sales-oriented strategy

question

A firm may set low prices to do which of the following?

answer

Encourage current firms to leave the market

Discourage new firms from entering the market

Take market share away from competitors

question

What type of orientation has a firm adopted when it measures itself primarily against firms that challenge it for customers?

answer

Competitor

question

What kind of pricing is being used when a firm sets prices similar to major rivals' prices?

answer

Competitive parity

question

Which of the following accurately characterize demand curves?

answer

They show how much consumers will demand during a specific period at different prices.

They relate demand to prices while assuming everything else remains unchanged.

question

For most products, demand increases as the price decreases. Because of this general trend, demand curves usually have a(n) ______ slope.

answer

downward

question

Compared to other company objectives, a sales-oriented firm ______.

answer

sets prices very low to generate new sales, even if profits suffer

question

answer

$200

question

What is the premise behind the pricing of prestige products or services?

answer

The higher the price, the greater the status

question

The equation for price elasticity of demand is the percentage change in quantity demanded divided by percentage change in ______.

answer

price

question

Assuming the economy and other factors stay the same, a downward-sloping demand curve for a product shows which of the following?

answer

As price increases,

demand decreases.

As price decreases, demand increases.

question

A demand curve enables a firm to examine prices ______.

answer

in terms of demand and the firm's objectives

question

What term describes the ratio of change in a price and its effect on the quantity of the product demanded?

answer

Price elasticity of demand

question

When a 10% decrease in price produces more than a 10% increase in quantity sold, the product or service is responsive to price changes and is considered to be ______.

answer

elastic

question

Price insensitive

answer

Apple increases the price of the new iPhone by 25% and sales decrease less than 1%.

question

Price sensitive

answer

Pepsi drops the price of a six-pack by 50% and sales increase 78%.

question

If a company needs to raise the prices of some its products, it should choose to raise the prices of ______ products because relatively fewer customers will stop buying the product as a result.

answer

inelastic

question

If a restaurant reduces the price of a hamburger by 25% and sales increase by more than 50%, which of the following describe the demand for the hamburger?

answer

price sensitive

elastic

question

When a 10% decrease in price results in a less than 10% increase in quantity sold, the demand for the product or service is described as ______.

answer

inelastic

question

True or false: In general, customers are more sensitive to price increases than to price decreases.

answer

True

question

When there are many substitute products available, the price elasticity of demand for a given product will likely be ______.

answer

higher

question

As people make more money, their spending behavior changes. This is known as ______.

answer

the income effect

question

Loyalty toward a particular brand makes other brands seem less substitutable, which decreases ______.

answer

the price elasticity of demand

question

What information is gained by adding variable and fixed costs together?

answer

Total cost

question

What term describes consumers' ability to replace the focal brand with other products?

answer

Substitution effect

question

On which of the following does brand loyalty have the most significant impact?

answer

Substitution effect

question

What is a useful technique that enables managers to examine the relationships among cost, price, revenue, and profit over different levels of production and sales?

answer

Break-even analysis

question

The percentage change in the quantity of one product demanded compared with the percentage change in price in another product is called

answer

cross price elasticity.

question

What term describes the point at which the number of units sold generates enough revenue to equal total costs?

answer

Break-even point

question

How is total cost calculated?

answer

Variable costs plus fixed costs

question

Profit alone ______ how many units should be sold before a firm breaks even.

answer

does not indicate

question

Break-even analysis examines the relationships between which of the following?

answer

Cost

Price

question

How do managers use break-even analysis?

answer

To find a production quantity where, for a given price, costs are equal to revenues

question

Which of the following is another term for target return percentage?

answer

Markup

question

Of the following, which best describes a monopoly?

answer

One firms controls the market.

question

At the break-even point, profits on the sale of a product are ______

answer

zero

question

What type of competition occurs when only a few firms dominate a market?

answer

Oligopolistic

question

Variable cost per unit times quantity equals ______.

answer

total variable cost

question

A [...] occurs when oligopolistic companies compete with each other by repeatedly lowering their prices.

answer

price war

question

Which of the following do you need to know to calculate target return price?

answer

Expected unit sales

Variable costs

Fixed costs

question

[...] occurs when a company has a very low price for its product(s) in order to drive its competition out of business.

answer

Predatory pricing

question

Antitrust laws are designed to protect consumers from:

answer

the high prices charged by monopolies for their products.

question

Channel members include which of the following?

answer

Manufacturers

Retailers

Wholesalers

question

Which of the following is an example of an oligopoly?

answer

The oil industry, with a limited number of providers

question

When firms compete by lowering prices, they are engaged in ______.

answer

a price war

question

answer

predatory

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Ch 14

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