MKT101 - CHAPTER 10 - Custom Scholars
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MKT101 – CHAPTER 10

question
1) ________ is the amount of money charged for a product or service.
A) Value
B) A demand
C) Price
D) A wage
E) Salary
answer
C
question
2) Price is the only element in the marketing mix that produces ________.
A) revenue
B) variable costs
C) expenses
D) outfixed costs
E) stability
answer
A
question
3) ________ is an important element in the marketing mix. It is the only element that does not represent costs.
A) Profit maximization
B) Market share leadership
C) Price
D) Product quality leadership
E) The target market
answer
C
question
4) Consumer perceptions of the product's value set the ________ for prices.
A) demand curve
B) floor
C) ceiling
D) variable cost
E) image
answer
C
question
5) Product costs set a(n) ________ to a product's price.
A) demand curve
B) floor
C) ceiling
D) break-even cost
E) experience curve
answer
B
question
6) Which of the following is a customer-oriented approach to pricing?
A) customer value-based pricing
B) sealed-bid pricing
C) break-even pricing
D) target profit pricing
E) C and D
answer
A
question
7) ________ uses buyers' perceptions of what a product is worth, not the seller's cost, as the key to pricing.
A) Customer value-based pricing
B) Cost-based pricing
C) Variable cost
D) Price elasticity
E) Product image
answer
A
question
8) In ________, price is considered along with the other marketing mix variables before the marketing program is set.
A) value-based pricing
B) cost-based pricing
C) variable costs
D) price elasticity
E) markup pricing
answer
A
question
9) Value-based pricing is the reverse process of ________.
A) variable cost pricing
B) cost-plus pricing
C) cost-based pricing
D) good-value pricing
E) value-added pricing
answer
C
question
10) With ________, price is set to match consumers' perceptions of product value.
A) variable cost pricing
B) cost-plus pricing
C) cost-based pricing
D) value-based pricing
E) everyday low pricing
answer
D
question
11) Measuring ________ can be difficult. A company might conduct surveys or experiments to test this in the different products it offers.
A) price elasticity
B) the demand curve
C) perceived value
D) break-even pricing
E) quantity supplied
answer
C
question
12) Underpriced products sell very well, but they produce less revenue than they would have if price were raised to the ________ level.
A) perceived
B) elastic
C) variable
D) demand curve
E) price-floor
answer
A
question
13) If a seller charges ________ than the buyer's perceived value, the company's sales will ________.
A) more; benefit
B) more; suffer
C) less; increase
D) less; suffer
E) none of the above
answer
B
question
14) Some companies have adopted a(n) ________ strategy, offering just the right combination of quality and good service at a fair price.
A) value-based pricing
B) good-value pricing
C) cost-plus pricing
D) low-price image
E) elastic-pricing
answer
B
question
15) When McDonald's and other fast food restaurants offer "value menu" items at surprisingly low prices, they are using ________.
A) break-even pricing
B) target profit pricing
C) good-value pricing
D) cost-plus pricing
E) bundling
answer
C
question
16) Walmart is famous for using what important type of value pricing?
A) competition-based pricing
B) everyday low pricing
C) cost-plus pricing
D) break-even pricing
E) penetration pricing
answer
B
question
17) ________ involves charging a constant, everyday low price with few or no temporary price discounts.
A) High-low pricing
B) Target pricing
C) Cost-plus pricing
D) EDLP
E) Penetration pricing
answer
D
question
18) ________ involves attaching features and services to differentiate a company's offers and to support charging higher prices.
A) Break-even pricing
B) Target pricing
C) Value-added pricing
D) Cost-plus pricing
E) Pricing-down
answer
C
question
19) When there is price competition, many companies adopt ________ rather than cutting prices to match competitors.
A) pricing power
B) value-added strategies
C) fixed costs
D) price elasticity
E) image pricing
answer
B
question
20) Ryanair offers free flights to a quarter of its customers and rock-bottom prices to many of its other customers. Ryanair then charges for all extra services, such as baggage handling and in-flight refreshments. Which of the following best describes Ryanair's pricing method?
A) value-added pricing
B) good-value pricing
C) cost-plus pricing
D) high-low pricing
E) image pricing
answer
B
question
21) ________ pricing involves setting prices based on the costs for producing, distributing, and selling the product plus a fair rate of return for the company's efforts and risks.
A) Value-based
B) Fixed cost
C) Cost-based
D) Variable
E) Skimming
answer
C
question
22) Fixed costs ________ as the number of units produced increases.
A) decrease
B) increase
C) divide in half
D) remain the same
E) increase at a diminishing rate
answer
D
question
23) Costs that do not vary with production or sales level are referred to as ________.
A) fixed costs
B) variable costs
C) target costs
D) total costs
E) unit costs
answer
A
question
24) Rent, electricity, and executive salaries are examples of ________.
A) fixed costs
B) variable costs
C) accumulated costs
D) total costs
E) marketing costs
answer
A
question
25) Costs that vary directly with the level of production are referred to as ________.
A) fixed costs
B) variable costs
C) target costs
D) total costs
E) unit costs
answer
B
question
26) ________ are the sum of the ________ and ________ for any given level of production.
A) Fixed costs; variable; total costs
B) Fixed costs; total; variable costs
C) Variable costs; fixed; total costs
D) Total costs; fixed; variable costs
E) Break-even costs; fixed; total costs
answer
D
question
27) SRAC is the acronym for which concept related to costs at different levels of production?
A) strategic reasoning and costs
B) short-run accounting costs
C) short-run average cost
D) strategic rights and company
E) strategic revenues and costs
answer
C
question
28) The LRAC is most closely related to which of the following?
A) long-term marketing plans
B) long-term business plans
C) the cost of producing a greater quantity of units
D) the cost of promoting a greater quantity of units
E) the legal responsibility of a company
answer
C
question
29) The learning curve is also referred to as the ________.
A) LRAC
B) experience curve
C) demand curve
D) break-even curve
E) price elasticity curve
answer
B
question
30) As production workers become better organized and more familiar with equipment, the average cost per unit decreases. This is called the ________.
A) demand curve
B) experience curve
C) short-run average cost curve
D) long-run average cost curve
E) marginal utility
answer
B
question
31) With a higher volume of product, most companies can expect to ________.
A) gain economies of scale
B) become less efficient
C) see fixed costs increase
D) have a straight, horizontal learning curve
E) find competitors using the experience curve strategically
answer
A
question
32) The experience curve reveals that ________.
A) repetition in production lowers costs
B) repetition in production enhances efficiency
C) the average cost drops with accumulated production experience
D) A, B, and C
E) none of the above
answer
D
question
33) When a downward-sloping experience curve exists, a company should usually ________ the selling price of that product in order to bring in higher revenues.
A) increase
B) greatly increase
C) decrease
D) not alter
E) level
answer
C
question
34) Which of the following is a risk a company takes when building a strategy around the experience curve?
A) Competitors will likely not be able to meet the company's price cuts.
B) Existing technologies are likely to become more expensive as the company expands.
C) The method does not take competitors' prices into account.
D) The method may cause consumers to become frustrated with changing prices.
E) Aggressive pricing may give the product a cheap image, causing customers to lose interest.
answer
E
question
35) A company building its pricing strategy around the experience curve would be most likely to ________.
A) price its products low
B) price its products high
C) engage in break-even pricing
D) avoid cost-based pricing
E) engage in value-added pricing
answer
A
question
36) The company designs what it considers to be a good product, totals the expenses of making the product, and sets a price that adds a standard markup to the cost of the product. This approach to pricing is called ________.
A) value-based pricing
B) fixed cost pricing
C) cost-plus pricing
D) variable pricing
E) skimming pricing
answer
C
question
37) Lawyers, accountants, and other professionals typically price by adding a standard markup for profit. This is known as ________.
A) variable costs
B) cost-plus pricing
C) value-based pricing
D) break-even price
E) penetration pricing
answer
B
question
38) The simplest pricing method is ________.
A) value-based pricing
B) sealed-bid pricing
C) markup pricing
D) value-added pricing
E) target profit pricing
answer
C
question
39) Which of the following is a reason why markup pricing is NOT practical?
A) Sellers earn a fair return on their investment.
B) By tying the price to cost, sellers simplify pricing.
C) When all firms in the industry use this pricing method, prices tend to be similar.
D) This method ignores demand.
E) With a standard markup, consumers know when they are being overcharged.
answer
D
question
40) One reason ________ remains popular is that sellers are more certain about costs than about demand.
A) markup pricing
B) skimming pricing
C) inelasticity pricing
D) elasticity pricing
E) penetration pricing
answer
A
question
41) Price competition is minimized when all firms in an industry use which pricing method?
A) variable pricing
B) markup pricing
C) elasticity pricing
D) value-added pricing
E) value-based pricing
answer
B
question
42) Many people feel that ________ pricing is fairer to both buyers and sellers. Sellers earn a fair return on their investment but do not take advantage of buyers when buyers' demand becomes great.
A) skimming
B) markup
C) elasticity
D) inelasticity
E) penetration
answer
B
question
43) Which of the following is a cost-based approach to pricing?
A) value-based pricing
B) going-rate pricing
C) target return pricing
D) good value pricing
E) A and C
answer
C
question
44) Break-even pricing, or a variation called ________, is when the firm tries to determine the price at which it will break even or make the profit it is seeking.
A) competition-based pricing
B) target return pricing
C) fixed cost pricing
D) value-based pricing
E) customer-based pricing
answer
B
question
45) Target return pricing uses the concept of a(n) ________, which shows the total cost and total revenue expected at different sales volume levels.
A) value-based chart
B) break-even chart
C) competition-based chart
D) demand curve
E) experience curve
answer
B
question
46) The break-even volume is the point at which ________.
A) the total revenue and total costs lines intersect
B) demand equals supply
C) the production of one more unit will not increase profit
D) the company can pay all of its long-term debt
E) a firm's profit goal is reached
answer
A
question
47) Which of the following statements about break-even analysis is true?
A) It is used to determine how much production experience a company must have to achieve desired efficiencies.
B) It is a technique used to calculate fixed costs.
C) It determines the amount of retained earnings a company will have during an accounting period.
D) It is a technique marketers use to examine the relationship between supply and demand.
E) It is calculated using variable costs, the unit price, and fixed costs.
answer
E
question
48) As a manufacturer increases price, the ________ drops.
A) target
B) break-even volume
C) cost-plus pricing
D) total cost
E) profit margin
answer
B
question
49) Which of the following involves setting prices based on competitors' strategies, costs, prices, and market offerings?
A) target return pricing
B) good-value pricing
C) added-value pricing
D) market-based pricing
E) competition-based pricing
answer
E
question
50) Which of the following is an external factor that affects pricing decisions?
A) the salaries of production management
B) demand
C) the salaries of finance management
D) funds expensed to clean production equipment
E) A, B, and C
answer
B
question
51) ________ that influence pricing decisions include the nature of the market and other environmental factors.
A) Internal factors
B) Value factors
C) External factors
D) Target factors
E) Domestic factors
answer
C
question
52) In order to form a consistent and effective integrated marketing program, price decisions should be coordinated with each of the following EXCEPT ________.
A) product design
B) distribution
C) competitors' prices
D) promotion decisions
E) marketing objectives
answer
C
question
53) With target costing, marketers will first ________ and then ________.
A) build the marketing mix; identify the target market
B) identify the marketing mix; determine product cost
C) design the product; determine its cost
D) use skimming pricing; penetrating pricing
E) determine a selling price; target costs to ensure that the price is met
answer
E
question
54) A company that wants to emphasize the premium quality of its product and enhance the product's allure would be most likely to position its product on ________.
A) high prices
B) nonprice qualities
C) low prices
D) value prices
E) target costing
answer
A
question
55) Price setting is usually determined by ________ in small companies.
A) top management
B) marketing departments
C) sales departments
D) divisional managers
E) cross-functional teams
answer
A
question
56) Price setting is usually determined by ________ in large companies.
A) top management
B) divisional managers
C) product line managers
D) pricing departments
E) both B and C
answer
E
question
57) In industrial markets, ________ typically has the final say in setting the pricing objectives and policies of a company.
A) the sales manager
B) top management
C) the production manager
D) the finance manager
E) the sales staff
answer
B
question
58) In industries in which pricing is a key factor, ________ often set the best prices or help others in setting them.
A) sales managers
B) salespeople
C) production managers
D) finance managers
E) pricing departments
answer
E
question
59) Under ________, the market consists of many buyers and sellers trading in a uniform commodity such as wheat, copper, or financial securities.
A) pure competition
B) monopolistic competition
C) oligopolistic competition
D) a pure monopoly
E) anti-trust agreements
answer
A
question
60) Under ________, the market consists of many buyers and sellers who trade over a range of prices rather than a single market price.
A) pure competition
B) monopolistic competition
C) oligopolistic competition
D) a pure monopoly
E) socialism
answer
B
question
61) Firms are less affected by competitors' pricing strategies under ________ than under ________.
A) monopolistic competition; oligopolistic competition
B) pure competition; monopolistic competition
C) oligopolistic competition; pure competition
D) oligopolistic competition; monopolistic competition
E) pure competition; a pure monopoly
answer
A
question
62) Under ________, the market consists of one seller.
A) a pure monopoly
B) monopolistic competition
C) oligopolistic competition
D) pure competition
E) capitalism
answer
A
question
63) The relationship between the price charged and the resulting demand level can be shown as the ________.
A) demand curve
B) variable cost
C) target cost
D) break-even pricing
E) experience curve
answer
A
question
64) Which of the following is true about the demand curve?
A) It is used to illustrate the effect of price on the quantity supplied.
B) It is always graphically depicted by a straight line.
C) It shows the quantity of product customers will buy in a market during a period of time even if other factors change.
D) It usually slopes upward and to the right.
E) It shows the relationship between product demand and product price.
answer
E
question
65) Ascot Tires has decided to decrease its prices. The company can expect that ________ for its product will increase.
A) cost-plus pricing
B) value-based pricing
C) demand
D) the experience curve
E) competition
answer
C
question
66) ________ describes how responsive demand will be to a change in price.
A) Price elasticity
B) Break-even pricing
C) The demand curve
D) Target costing
E) Supply
answer
A
question
67) If demand hardly changes with a small change in price, we say the demand is ________.
A) variable
B) inelastic
C) value-based
D) at break-even pricing
E) market penetrating
answer
B
question
68) If demand changes greatly with a small change in price, we say the demand is ________.
A) variable
B) inelastic
C) value-based
D) elastic
E) fixed
answer
D
question
69) Price elasticity of demand is ________ divided by ________.
A) percent change in quantity demanded; percent change in price
B) demand; price
C) percent change in price; percent change in quantity demanded
D) the going price; the asking price
E) retail value; list price
answer
A
question
70) Buyers are less price sensitive in all of the following situations EXCEPT ________.
A) when the product they are buying is unique
B) when the product they are buying is high in quality
C) when substitute products are hard to find
D) when the total expenditure for a product is high relative to their income
E) when the product is exclusive
answer
D
question
71) The less ________ the demand, the ________ it benefits the seller to raise the price.
A) focused; more
B) elastic; more
C) elastic; less
D) constant; more
E) concentrated; more
answer
B
question
72) Dips in the economy and the instant price comparisons made possible by the Internet have both contributed to ________.
A) decreased consumer price sensitivity
B) increased consumer price sensitivity
C) a less direct relationship between supply and demand
D) a more direct relationship between supply and demand
E) decreased brand loyalty
answer
B
question
73) In the aftermath of the Great Recession, consumers have become ________.
A) more value conscious
B) less value conscious
C) more interested in prestige pricing
D) less interested in price cutting
E) more loyal to prestigious products
answer
A
question
74) A company should set prices that will allow ________ to receive a fair profit.
A) resellers
B) producers
C) consumers
D) the market
E) competitors
answer
A
question
75) When companies set prices, the government and social concerns are two ________ affecting pricing decisions.
A) external factors
B) internal factors
C) economic conditions
D) demand curves
E) temporary influences
answer
A
question
76) Amos Zook, an Amish farmer, sells organically grown produce. Often he will trade some of his produce for dairy products produced by other Amish farmers. The sum of the values exchanged for the produce is the ________.
A) price
B) cost-plus price
C) dynamic price
D) common value price
E) penetration price
answer
A
question
77) Trader Joe's offers an assortment of exclusive gourmet products at impossibly low prices. These prices are not limited-time offers or special discounts. Instead, they reflect Trader Joe's ________ strategy.
A) everyday low pricing
B) cost-plus pricing
C) dynamic pricing
D) value-based pricing
E) cost-based pricing
answer
A
question
78) Xbox 360 decides to add a free subscription to XBOX magazine with every game bought in an effort to differentiate its offering from PS3 games. This is an example of ________.
A) good-value pricing
B) add-on pricing
C) product-support pricing
D) value-added pricing
E) cost-based pricing
answer
D
question
79) The long-run average cost curve (LRAC) helps the producer understand which of the following?
A) how large a business should be in order to be most efficient
B) how to deal with competitors' prices
C) how to deal with external factors
D) how to price under conditions of inelastic demand
E) how to price under conditions of elastic demand
answer
A
question
80) Assume a manufacturer with fixed costs of $100,000, a variable cost of $10, and expected sales of 50,000 units wants to earn a 20 percent markup on sales. What is the manufacturer's markup price?
A) $14
B) $15
C) $18
D) $18.50
E) none of the above
answer
B
question
81) General Motors prices its automobiles to achieve a 15 to 20 percent profit on its investment. This approach is called ________.
A) value-based pricing
B) going-rate pricing
C) cost-plus pricing
D) low-price image
E) target-return pricing
answer
E
question
82) A company faces fixed costs of $100,000 and variable costs of $8.00/unit. It plans to directly sell its product to the market for $12.00. How many units must it produce and sell to break even?
A) 20,000
B) 25,000
C) 40,000
D) 50,000
E) not enough information to calculate
answer
B
question
83) Ecstasy Pharmaceuticals faces fixed costs with its new drug of $1,000,000. The company sells the drug in bottles of 50 pills for $10.00. It estimates that it must sell 200,000 bottles to break even. What is the total cost to produce a bottle of 50 pills?
A) $2.50
B) $5.00
C) $6.00
D) $7.50
E) not enough information to calculate
answer
B
question
84) A manufacturer is trying to determine its break-even volume. With fixed costs of $100,000, a variable cost of $10, and expected sales of 50,000 units, what should the manufacturer's unit cost be to break even?
A) $10
B) $12
C) $16
D) $20
E) none of the above
answer
B
question
85) As a manufacturer decreases price, ________ volume increases.
A) target
B) break-even
C) cost-plus pricing
D) total cost
E) sales
answer
B
question
86) P&G surveyed the market and identified an unserved segment of the electric toothbrush market. Using these results, P&G created Spinbrush. The unorthodox order of this marketing mix decision is an example of ________.
A) competition-based pricing
B) cost-plus pricing
C) target costing
D) value-based pricing
E) penetration pricing
answer
C
question
87) PoolPak produces climate-control systems for large swimming pools. The company's customers are more concerned about service support for maintaining a system than its initial price. PoolPak may use this knowledge to become more competitive through ________.
A) target costing
B) value pricing
C) cost-plus pricing
D) a nonprice position
E) skimming pricing
answer
D
question
88) By pledging to be a leader in providing clean, renewable energy sources and developing products and services that help consumers protect the environment, Green Mountain Power competes successfully against "cheaper" brands that focus on more price-sensitive consumers. Green Mountain Power has the firm belief that even kilowatt-hours can be ________.
A) cost-plus priced
B) represented by a demand curve
C) differentiated
D) value-based priced
E) none of the above
answer
C
question
89) In Vin del Mar, Chile, there are a dozen stores specializing in selling the same quality of seafood products on one street. An individual store dare not charge more than the going price without the risk of losing business to the other stores that are selling the fish at a common price. This is an example of what type of market?
A) pure competition
B) monopolistic competition
C) oligopolistic competition
D) pure monopoly
E) socialist
answer
A
question
90) Companies are fortunate to have demand that is more ________ because they may be able to set higher prices.
A) elastic
B) external
C) internal
D) inelastic
E) fixed
answer
D
question
91) If demand falls by 1 percent when price is increased by 2 percent, then ________.
A) elasticity is -1/2
B) demand is inelastic
C) demand is elastic
D) buyers are not price sensitive
E) A and B
answer
E
question
92) Jimmy's Hardware, an independent local retailer, is losing business to Walmart. This is most likely because he cannot match Walmart's pricing strategy of ________.
A) EDLP
B) EFGF
C) fixed prices
D) value-added pricing
E) skimming pricing
answer
A
question
93) Consumers who have less time and patience for watching for supermarket specials and clipping coupons would most likely prefer ________.
A) variable pricing
B) high-low pricing
C) EDLP
D) break-even pricing
E) value-added pricing
answer
C
question
94) ________ pricing works only if that price actually brings in the expected level of sales.
A) Elasticity
B) Markup
C) Variable
D) Inelasticity
E) Target return
answer
E
question
95) If Canon Camera Company follows a high-price, high-margin strategy, what will competitors such as Nikon, Minolta, and Pentax most likely do?
A) They will go out of business.
B) They will want to compete against Canon.
C) They will advertise less.
D) They will bundle their products.
E) none of the above
answer
B
question
96) If Canon Camera Company follows a low-price, low-margin strategy for a product, what will competitors most likely do?
A) They will decide to decide to target underserved niches.
B) They will want to compete in the same markets against Canon.
C) They will advertise less.
D) They will advertise more.
E) none of the above
answer
A
question
97) Consumers usually perceive higher-priced products as ________.
A) out of reach for most people
B) having high quality
C) having target-cost prices
D) having cost-based prices
E) being in the introductory stage of the product life cycle
answer
B
1 of 97
question
1) ________ is the amount of money charged for a product or service.
A) Value
B) A demand
C) Price
D) A wage
E) Salary
answer
C
question
2) Price is the only element in the marketing mix that produces ________.
A) revenue
B) variable costs
C) expenses
D) outfixed costs
E) stability
answer
A
question
3) ________ is an important element in the marketing mix. It is the only element that does not represent costs.
A) Profit maximization
B) Market share leadership
C) Price
D) Product quality leadership
E) The target market
answer
C
question
4) Consumer perceptions of the product's value set the ________ for prices.
A) demand curve
B) floor
C) ceiling
D) variable cost
E) image
answer
C
question
5) Product costs set a(n) ________ to a product's price.
A) demand curve
B) floor
C) ceiling
D) break-even cost
E) experience curve
answer
B
question
6) Which of the following is a customer-oriented approach to pricing?
A) customer value-based pricing
B) sealed-bid pricing
C) break-even pricing
D) target profit pricing
E) C and D
answer
A
question
7) ________ uses buyers' perceptions of what a product is worth, not the seller's cost, as the key to pricing.
A) Customer value-based pricing
B) Cost-based pricing
C) Variable cost
D) Price elasticity
E) Product image
answer
A
question
8) In ________, price is considered along with the other marketing mix variables before the marketing program is set.
A) value-based pricing
B) cost-based pricing
C) variable costs
D) price elasticity
E) markup pricing
answer
A
question
9) Value-based pricing is the reverse process of ________.
A) variable cost pricing
B) cost-plus pricing
C) cost-based pricing
D) good-value pricing
E) value-added pricing
answer
C
question
10) With ________, price is set to match consumers' perceptions of product value.
A) variable cost pricing
B) cost-plus pricing
C) cost-based pricing
D) value-based pricing
E) everyday low pricing
answer
D
question
11) Measuring ________ can be difficult. A company might conduct surveys or experiments to test this in the different products it offers.
A) price elasticity
B) the demand curve
C) perceived value
D) break-even pricing
E) quantity supplied
answer
C
question
12) Underpriced products sell very well, but they produce less revenue than they would have if price were raised to the ________ level.
A) perceived
B) elastic
C) variable
D) demand curve
E) price-floor
answer
A
question
13) If a seller charges ________ than the buyer's perceived value, the company's sales will ________.
A) more; benefit
B) more; suffer
C) less; increase
D) less; suffer
E) none of the above
answer
B
question
14) Some companies have adopted a(n) ________ strategy, offering just the right combination of quality and good service at a fair price.
A) value-based pricing
B) good-value pricing
C) cost-plus pricing
D) low-price image
E) elastic-pricing
answer
B
question
15) When McDonald's and other fast food restaurants offer "value menu" items at surprisingly low prices, they are using ________.
A) break-even pricing
B) target profit pricing
C) good-value pricing
D) cost-plus pricing
E) bundling
answer
C
question
16) Walmart is famous for using what important type of value pricing?
A) competition-based pricing
B) everyday low pricing
C) cost-plus pricing
D) break-even pricing
E) penetration pricing
answer
B
question
17) ________ involves charging a constant, everyday low price with few or no temporary price discounts.
A) High-low pricing
B) Target pricing
C) Cost-plus pricing
D) EDLP
E) Penetration pricing
answer
D
question
18) ________ involves attaching features and services to differentiate a company's offers and to support charging higher prices.
A) Break-even pricing
B) Target pricing
C) Value-added pricing
D) Cost-plus pricing
E) Pricing-down
answer
C
question
19) When there is price competition, many companies adopt ________ rather than cutting prices to match competitors.
A) pricing power
B) value-added strategies
C) fixed costs
D) price elasticity
E) image pricing
answer
B
question
20) Ryanair offers free flights to a quarter of its customers and rock-bottom prices to many of its other customers. Ryanair then charges for all extra services, such as baggage handling and in-flight refreshments. Which of the following best describes Ryanair's pricing method?
A) value-added pricing
B) good-value pricing
C) cost-plus pricing
D) high-low pricing
E) image pricing
answer
B
question
21) ________ pricing involves setting prices based on the costs for producing, distributing, and selling the product plus a fair rate of return for the company's efforts and risks.
A) Value-based
B) Fixed cost
C) Cost-based
D) Variable
E) Skimming
answer
C
question
22) Fixed costs ________ as the number of units produced increases.
A) decrease
B) increase
C) divide in half
D) remain the same
E) increase at a diminishing rate
answer
D
question
23) Costs that do not vary with production or sales level are referred to as ________.
A) fixed costs
B) variable costs
C) target costs
D) total costs
E) unit costs
answer
A
question
24) Rent, electricity, and executive salaries are examples of ________.
A) fixed costs
B) variable costs
C) accumulated costs
D) total costs
E) marketing costs
answer
A
question
25) Costs that vary directly with the level of production are referred to as ________.
A) fixed costs
B) variable costs
C) target costs
D) total costs
E) unit costs
answer
B
question
26) ________ are the sum of the ________ and ________ for any given level of production.
A) Fixed costs; variable; total costs
B) Fixed costs; total; variable costs
C) Variable costs; fixed; total costs
D) Total costs; fixed; variable costs
E) Break-even costs; fixed; total costs
answer
D
question
27) SRAC is the acronym for which concept related to costs at different levels of production?
A) strategic reasoning and costs
B) short-run accounting costs
C) short-run average cost
D) strategic rights and company
E) strategic revenues and costs
answer
C
question
28) The LRAC is most closely related to which of the following?
A) long-term marketing plans
B) long-term business plans
C) the cost of producing a greater quantity of units
D) the cost of promoting a greater quantity of units
E) the legal responsibility of a company
answer
C
question
29) The learning curve is also referred to as the ________.
A) LRAC
B) experience curve
C) demand curve
D) break-even curve
E) price elasticity curve
answer
B
question
30) As production workers become better organized and more familiar with equipment, the average cost per unit decreases. This is called the ________.
A) demand curve
B) experience curve
C) short-run average cost curve
D) long-run average cost curve
E) marginal utility
answer
B
question
31) With a higher volume of product, most companies can expect to ________.
A) gain economies of scale
B) become less efficient
C) see fixed costs increase
D) have a straight, horizontal learning curve
E) find competitors using the experience curve strategically
answer
A
question
32) The experience curve reveals that ________.
A) repetition in production lowers costs
B) repetition in production enhances efficiency
C) the average cost drops with accumulated production experience
D) A, B, and C
E) none of the above
answer
D
question
33) When a downward-sloping experience curve exists, a company should usually ________ the selling price of that product in order to bring in higher revenues.
A) increase
B) greatly increase
C) decrease
D) not alter
E) level
answer
C
question
34) Which of the following is a risk a company takes when building a strategy around the experience curve?
A) Competitors will likely not be able to meet the company's price cuts.
B) Existing technologies are likely to become more expensive as the company expands.
C) The method does not take competitors' prices into account.
D) The method may cause consumers to become frustrated with changing prices.
E) Aggressive pricing may give the product a cheap image, causing customers to lose interest.
answer
E
question
35) A company building its pricing strategy around the experience curve would be most likely to ________.
A) price its products low
B) price its products high
C) engage in break-even pricing
D) avoid cost-based pricing
E) engage in value-added pricing
answer
A
question
36) The company designs what it considers to be a good product, totals the expenses of making the product, and sets a price that adds a standard markup to the cost of the product. This approach to pricing is called ________.
A) value-based pricing
B) fixed cost pricing
C) cost-plus pricing
D) variable pricing
E) skimming pricing
answer
C
question
37) Lawyers, accountants, and other professionals typically price by adding a standard markup for profit. This is known as ________.
A) variable costs
B) cost-plus pricing
C) value-based pricing
D) break-even price
E) penetration pricing
answer
B
question
38) The simplest pricing method is ________.
A) value-based pricing
B) sealed-bid pricing
C) markup pricing
D) value-added pricing
E) target profit pricing
answer
C
question
39) Which of the following is a reason why markup pricing is NOT practical?
A) Sellers earn a fair return on their investment.
B) By tying the price to cost, sellers simplify pricing.
C) When all firms in the industry use this pricing method, prices tend to be similar.
D) This method ignores demand.
E) With a standard markup, consumers know when they are being overcharged.
answer
D
question
40) One reason ________ remains popular is that sellers are more certain about costs than about demand.
A) markup pricing
B) skimming pricing
C) inelasticity pricing
D) elasticity pricing
E) penetration pricing
answer
A
question
41) Price competition is minimized when all firms in an industry use which pricing method?
A) variable pricing
B) markup pricing
C) elasticity pricing
D) value-added pricing
E) value-based pricing
answer
B
question
42) Many people feel that ________ pricing is fairer to both buyers and sellers. Sellers earn a fair return on their investment but do not take advantage of buyers when buyers' demand becomes great.
A) skimming
B) markup
C) elasticity
D) inelasticity
E) penetration
answer
B
question
43) Which of the following is a cost-based approach to pricing?
A) value-based pricing
B) going-rate pricing
C) target return pricing
D) good value pricing
E) A and C
answer
C
question
44) Break-even pricing, or a variation called ________, is when the firm tries to determine the price at which it will break even or make the profit it is seeking.
A) competition-based pricing
B) target return pricing
C) fixed cost pricing
D) value-based pricing
E) customer-based pricing
answer
B
question
45) Target return pricing uses the concept of a(n) ________, which shows the total cost and total revenue expected at different sales volume levels.
A) value-based chart
B) break-even chart
C) competition-based chart
D) demand curve
E) experience curve
answer
B
question
46) The break-even volume is the point at which ________.
A) the total revenue and total costs lines intersect
B) demand equals supply
C) the production of one more unit will not increase profit
D) the company can pay all of its long-term debt
E) a firm's profit goal is reached
answer
A
question
47) Which of the following statements about break-even analysis is true?
A) It is used to determine how much production experience a company must have to achieve desired efficiencies.
B) It is a technique used to calculate fixed costs.
C) It determines the amount of retained earnings a company will have during an accounting period.
D) It is a technique marketers use to examine the relationship between supply and demand.
E) It is calculated using variable costs, the unit price, and fixed costs.
answer
E
question
48) As a manufacturer increases price, the ________ drops.
A) target
B) break-even volume
C) cost-plus pricing
D) total cost
E) profit margin
answer
B
question
49) Which of the following involves setting prices based on competitors' strategies, costs, prices, and market offerings?
A) target return pricing
B) good-value pricing
C) added-value pricing
D) market-based pricing
E) competition-based pricing
answer
E
question
50) Which of the following is an external factor that affects pricing decisions?
A) the salaries of production management
B) demand
C) the salaries of finance management
D) funds expensed to clean production equipment
E) A, B, and C
answer
B
question
51) ________ that influence pricing decisions include the nature of the market and other environmental factors.
A) Internal factors
B) Value factors
C) External factors
D) Target factors
E) Domestic factors
answer
C
question
52) In order to form a consistent and effective integrated marketing program, price decisions should be coordinated with each of the following EXCEPT ________.
A) product design
B) distribution
C) competitors' prices
D) promotion decisions
E) marketing objectives
answer
C
question
53) With target costing, marketers will first ________ and then ________.
A) build the marketing mix; identify the target market
B) identify the marketing mix; determine product cost
C) design the product; determine its cost
D) use skimming pricing; penetrating pricing
E) determine a selling price; target costs to ensure that the price is met
answer
E
question
54) A company that wants to emphasize the premium quality of its product and enhance the product's allure would be most likely to position its product on ________.
A) high prices
B) nonprice qualities
C) low prices
D) value prices
E) target costing
answer
A
question
55) Price setting is usually determined by ________ in small companies.
A) top management
B) marketing departments
C) sales departments
D) divisional managers
E) cross-functional teams
answer
A
question
56) Price setting is usually determined by ________ in large companies.
A) top management
B) divisional managers
C) product line managers
D) pricing departments
E) both B and C
answer
E
question
57) In industrial markets, ________ typically has the final say in setting the pricing objectives and policies of a company.
A) the sales manager
B) top management
C) the production manager
D) the finance manager
E) the sales staff
answer
B
question
58) In industries in which pricing is a key factor, ________ often set the best prices or help others in setting them.
A) sales managers
B) salespeople
C) production managers
D) finance managers
E) pricing departments
answer
E
question
59) Under ________, the market consists of many buyers and sellers trading in a uniform commodity such as wheat, copper, or financial securities.
A) pure competition
B) monopolistic competition
C) oligopolistic competition
D) a pure monopoly
E) anti-trust agreements
answer
A
question
60) Under ________, the market consists of many buyers and sellers who trade over a range of prices rather than a single market price.
A) pure competition
B) monopolistic competition
C) oligopolistic competition
D) a pure monopoly
E) socialism
answer
B
question
61) Firms are less affected by competitors' pricing strategies under ________ than under ________.
A) monopolistic competition; oligopolistic competition
B) pure competition; monopolistic competition
C) oligopolistic competition; pure competition
D) oligopolistic competition; monopolistic competition
E) pure competition; a pure monopoly
answer
A
question
62) Under ________, the market consists of one seller.
A) a pure monopoly
B) monopolistic competition
C) oligopolistic competition
D) pure competition
E) capitalism
answer
A
question
63) The relationship between the price charged and the resulting demand level can be shown as the ________.
A) demand curve
B) variable cost
C) target cost
D) break-even pricing
E) experience curve
answer
A
question
64) Which of the following is true about the demand curve?
A) It is used to illustrate the effect of price on the quantity supplied.
B) It is always graphically depicted by a straight line.
C) It shows the quantity of product customers will buy in a market during a period of time even if other factors change.
D) It usually slopes upward and to the right.
E) It shows the relationship between product demand and product price.
answer
E
question
65) Ascot Tires has decided to decrease its prices. The company can expect that ________ for its product will increase.
A) cost-plus pricing
B) value-based pricing
C) demand
D) the experience curve
E) competition
answer
C
question
66) ________ describes how responsive demand will be to a change in price.
A) Price elasticity
B) Break-even pricing
C) The demand curve
D) Target costing
E) Supply
answer
A
question
67) If demand hardly changes with a small change in price, we say the demand is ________.
A) variable
B) inelastic
C) value-based
D) at break-even pricing
E) market penetrating
answer
B
question
68) If demand changes greatly with a small change in price, we say the demand is ________.
A) variable
B) inelastic
C) value-based
D) elastic
E) fixed
answer
D
question
69) Price elasticity of demand is ________ divided by ________.
A) percent change in quantity demanded; percent change in price
B) demand; price
C) percent change in price; percent change in quantity demanded
D) the going price; the asking price
E) retail value; list price
answer
A
question
70) Buyers are less price sensitive in all of the following situations EXCEPT ________.
A) when the product they are buying is unique
B) when the product they are buying is high in quality
C) when substitute products are hard to find
D) when the total expenditure for a product is high relative to their income
E) when the product is exclusive
answer
D
question
71) The less ________ the demand, the ________ it benefits the seller to raise the price.
A) focused; more
B) elastic; more
C) elastic; less
D) constant; more
E) concentrated; more
answer
B
question
72) Dips in the economy and the instant price comparisons made possible by the Internet have both contributed to ________.
A) decreased consumer price sensitivity
B) increased consumer price sensitivity
C) a less direct relationship between supply and demand
D) a more direct relationship between supply and demand
E) decreased brand loyalty
answer
B
question
73) In the aftermath of the Great Recession, consumers have become ________.
A) more value conscious
B) less value conscious
C) more interested in prestige pricing
D) less interested in price cutting
E) more loyal to prestigious products
answer
A
question
74) A company should set prices that will allow ________ to receive a fair profit.
A) resellers
B) producers
C) consumers
D) the market
E) competitors
answer
A
question
75) When companies set prices, the government and social concerns are two ________ affecting pricing decisions.
A) external factors
B) internal factors
C) economic conditions
D) demand curves
E) temporary influences
answer
A
question
76) Amos Zook, an Amish farmer, sells organically grown produce. Often he will trade some of his produce for dairy products produced by other Amish farmers. The sum of the values exchanged for the produce is the ________.
A) price
B) cost-plus price
C) dynamic price
D) common value price
E) penetration price
answer
A
question
77) Trader Joe's offers an assortment of exclusive gourmet products at impossibly low prices. These prices are not limited-time offers or special discounts. Instead, they reflect Trader Joe's ________ strategy.
A) everyday low pricing
B) cost-plus pricing
C) dynamic pricing
D) value-based pricing
E) cost-based pricing
answer
A
question
78) Xbox 360 decides to add a free subscription to XBOX magazine with every game bought in an effort to differentiate its offering from PS3 games. This is an example of ________.
A) good-value pricing
B) add-on pricing
C) product-support pricing
D) value-added pricing
E) cost-based pricing
answer
D
question
79) The long-run average cost curve (LRAC) helps the producer understand which of the following?
A) how large a business should be in order to be most efficient
B) how to deal with competitors' prices
C) how to deal with external factors
D) how to price under conditions of inelastic demand
E) how to price under conditions of elastic demand
answer
A
question
80) Assume a manufacturer with fixed costs of $100,000, a variable cost of $10, and expected sales of 50,000 units wants to earn a 20 percent markup on sales. What is the manufacturer's markup price?
A) $14
B) $15
C) $18
D) $18.50
E) none of the above
answer
B
question
81) General Motors prices its automobiles to achieve a 15 to 20 percent profit on its investment. This approach is called ________.
A) value-based pricing
B) going-rate pricing
C) cost-plus pricing
D) low-price image
E) target-return pricing
answer
E
question
82) A company faces fixed costs of $100,000 and variable costs of $8.00/unit. It plans to directly sell its product to the market for $12.00. How many units must it produce and sell to break even?
A) 20,000
B) 25,000
C) 40,000
D) 50,000
E) not enough information to calculate
answer
B
question
83) Ecstasy Pharmaceuticals faces fixed costs with its new drug of $1,000,000. The company sells the drug in bottles of 50 pills for $10.00. It estimates that it must sell 200,000 bottles to break even. What is the total cost to produce a bottle of 50 pills?
A) $2.50
B) $5.00
C) $6.00
D) $7.50
E) not enough information to calculate
answer
B
question
84) A manufacturer is trying to determine its break-even volume. With fixed costs of $100,000, a variable cost of $10, and expected sales of 50,000 units, what should the manufacturer's unit cost be to break even?
A) $10
B) $12
C) $16
D) $20
E) none of the above
answer
B
question
85) As a manufacturer decreases price, ________ volume increases.
A) target
B) break-even
C) cost-plus pricing
D) total cost
E) sales
answer
B
question
86) P&G surveyed the market and identified an unserved segment of the electric toothbrush market. Using these results, P&G created Spinbrush. The unorthodox order of this marketing mix decision is an example of ________.
A) competition-based pricing
B) cost-plus pricing
C) target costing
D) value-based pricing
E) penetration pricing
answer
C
question
87) PoolPak produces climate-control systems for large swimming pools. The company's customers are more concerned about service support for maintaining a system than its initial price. PoolPak may use this knowledge to become more competitive through ________.
A) target costing
B) value pricing
C) cost-plus pricing
D) a nonprice position
E) skimming pricing
answer
D
question
88) By pledging to be a leader in providing clean, renewable energy sources and developing products and services that help consumers protect the environment, Green Mountain Power competes successfully against "cheaper" brands that focus on more price-sensitive consumers. Green Mountain Power has the firm belief that even kilowatt-hours can be ________.
A) cost-plus priced
B) represented by a demand curve
C) differentiated
D) value-based priced
E) none of the above
answer
C
question
89) In Vin del Mar, Chile, there are a dozen stores specializing in selling the same quality of seafood products on one street. An individual store dare not charge more than the going price without the risk of losing business to the other stores that are selling the fish at a common price. This is an example of what type of market?
A) pure competition
B) monopolistic competition
C) oligopolistic competition
D) pure monopoly
E) socialist
answer
A
question
90) Companies are fortunate to have demand that is more ________ because they may be able to set higher prices.
A) elastic
B) external
C) internal
D) inelastic
E) fixed
answer
D
question
91) If demand falls by 1 percent when price is increased by 2 percent, then ________.
A) elasticity is -1/2
B) demand is inelastic
C) demand is elastic
D) buyers are not price sensitive
E) A and B
answer
E
question
92) Jimmy's Hardware, an independent local retailer, is losing business to Walmart. This is most likely because he cannot match Walmart's pricing strategy of ________.
A) EDLP
B) EFGF
C) fixed prices
D) value-added pricing
E) skimming pricing
answer
A
question
93) Consumers who have less time and patience for watching for supermarket specials and clipping coupons would most likely prefer ________.
A) variable pricing
B) high-low pricing
C) EDLP
D) break-even pricing
E) value-added pricing
answer
C
question
94) ________ pricing works only if that price actually brings in the expected level of sales.
A) Elasticity
B) Markup
C) Variable
D) Inelasticity
E) Target return
answer
E
question
95) If Canon Camera Company follows a high-price, high-margin strategy, what will competitors such as Nikon, Minolta, and Pentax most likely do?
A) They will go out of business.
B) They will want to compete against Canon.
C) They will advertise less.
D) They will bundle their products.
E) none of the above
answer
B
question
96) If Canon Camera Company follows a low-price, low-margin strategy for a product, what will competitors most likely do?
A) They will decide to decide to target underserved niches.
B) They will want to compete in the same markets against Canon.
C) They will advertise less.
D) They will advertise more.
E) none of the above
answer
A
question
97) Consumers usually perceive higher-priced products as ________.
A) out of reach for most people
B) having high quality
C) having target-cost prices
D) having cost-based prices
E) being in the introductory stage of the product life cycle
answer
B
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