Quiz 07 Question 1 of 10

Total Grade: 7 (of possible 10 points) Score: 1 (of possible 1 point)

Gina's Jewelry is an upscale store offering high quality jewelry. Gina charges prices that are considerably higher than those of her competitors. Despite this difference in price, Gina's sales revenues are consistently the highest in the market. This is an example of: A.Customary Pricing

B. Cost-Based Pricing

C. Penetration Pricing

D.Competition-Based Pricing

E. Prestige Pricing

Answer Key: E Feedback Lecture page 107 A) Customary pricing: a method of pricing based on tradition, a standardized channel of distribution, or other competitive factors. This type of pricing is used in vending machines or other products where there is a common standard price. B) There is not mention of cost or markup in this question, so there is no evidence Gina is using cost-based pricing C) Gina is charging prices considerably higher than her competition so she is not using penetration pricing. Penetration prices starts with a low price and gradually brings it up. D) Competition-based pricing one of the five basic pricing approaches. This answer is too general. E) Prestige pricing involves setting a high price so that status-conscious consumers will be attracted to the product and buy it. Gina charges are prices than her competitors but she has the highest sales revenues in the market. Therefore, jewelry consumers must be drawn to the prestige of her products. Question 2 of 10 Score: 0 (of possible 1 point) Hammacher Schlemmer is planning to launch a dashboard breathalyzer for personal automobiles next year. The required plant and equipment investment is $12,000,000, and management expects to produce and sell 200,000 devices. Fixed cost will be $400,000, and the unit variable cost per breathalyzer will be $180. Management has set a target of 15% return on investment. What price should H.S. charge? A.$11

B. $242

C. $251

D.$62

E. $191

Answer Key: E Feedback Lecture page 105 A. $11 $191 B. $242 $191 C. $251 $191 D. 462 $191 E. Price = [ TFC + TVC + (Investment x ROI) ] / (# Units) = [ $400,000 + ($180 x 200,000) + ($12,000,000 x .15) ] / (200,000) = ( $400,000 + $36,000,000 + $1,800,000 ) / (200,000) = $38,200,000 / 200,000 = $191 Question 3 of 10 Score: 1 (of possible 1 point) Emily recently decided that she wanted to purchase a new Dell Laptop for the upcoming semester. After speaking to many people about computers over the past few years, she had a good idea about what kind of processor and how much memory she wanted. She believed that the laptop would cost around $900.00. After building her computer online at www.Dell.com, she was surprised to learn that her computer normally would cost $1500.00. However, if she agrees to buy it today, Dell will sell it to her for $1200.00. What is occurring in the passage? I. external reference price II. sticker shock III. internal reference price IV. participative bargaining A.external reference price

B. II and III only

C. I only

D.II, III, and IV only

E. I, II, and III only

F. II and IV only

Answer Key: E Feedback Lecture page 109 A. Sticker shock is the feeling of surprise experienced by consumers when they find unexpectedly high prices on products they consider buying. Internal reference price is one where consumers evaluate a price by comparing it with a relative standard of what they expect a product to cost. B. With external reference price, sellers price items by comparing the prices to those found outside of this shopping situation. External reference prices are usually set up with the format compare to $ . C. Sticker shock is the feeling of surprise experienced by consumers when they find unexpectedly high prices on products they consider buying. Internal reference price is one where consumers evaluate a price by comparing it with a relative standard of what they expect a product to cost. Participative bargaining is not an actual marketing term. Participative pricing is where consumers partake in determining the final price. D. With external reference price, sellers price items by comparing the prices to those found outside of this shopping situation. External reference prices are usually set up with the format compare to $ . Sticker shock is the feeling of surprise experienced by consumers when they find unexpectedly high prices on products they consider buying. Internal reference price is one where consumers evaluate a price by comparing it with a relative standard of what they expect a product to cost. In this quiz question, Emily first creates an internal reference price of what she expects her laptop to cost her. When she sees what her built product s supposed to sell for, she experiences sticker shock. Finally, the deal of a lower price if the laptop is bought today is an example of an external price reference, comparing it to the higher price. E. Sticker shock is the feeling of surprise experienced by consumers when they find unexpectedly high prices on products they consider buying. Participative bargaining is not an actual marketing term. Participative pricing is where consumers partake in determining the final price. Question 4 of 10 Score: 0 (of possible 1 point) Richard Anderson, an entrepreneur residing in Arizona, noticed that many of his friends and neighbors complained of the intense heat during the summer months. In order to make the heat more bearable, Anderson developed and marketed a simple cooling system that sprayed a fine mist of water into the air. The system attached easily to patio roofs, backyard fences, and even golf carts. Since introducing the product on the market, Anderson has discovered that relatively large changes in the price of the system lead to relatively small changes in demand for his product. The demand for Anderson's product is: A.price insensitive.

B. price inelastic.

C. price sensitive. D.unitary elastic.

E. price elastic.

Answer Key: B Feedback Text page 343-344 The price elasticity of demand is defined as the percentage change in quantity demanded divided by the percentage change in price. If the price elasticity of demand is less than one then price is inelastic, which means the quantity demanded is not sensitive to changes in the price. Since Anderson noticed that relatively large changes in the price lead to relatively small changes in the quantity demanded we can infer that the demand is price inelastic. Price is elastic when the elasticity is greater than one, implying that the quantity demanded is sensitive to changes in the price. Price is unitary elastic where the elasticity is equal to one. Question 5 of 10 Score: 1 (of possible 1 point) Factors that limit the latitude of prices a firm may set are called: A.pricing restraints.

B. pricing objectives.

C. the pricing environment.

D.pricing constraints.

E. pricing elasticity.

Answer Key: D Feedback Text page 336 A) This is not a real marketing term. B) Pricing objectives are expectations that specify the role of price in an organizations marketing and strategic plans. C) This answer is not specific enough to be correct. D) This is the definition of pricing constraints. E) Price elasticity of demand refers to the percentage change in quantity demanded relative to a percentage change in price. Question 6 of 10 Score: 1 (of possible 1 point) Odd-even pricing is: setting prices of luxury items at even price points and setting the price of necessities at odd price A. points.

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

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

D.

a method of pricing where price often falls following the reduction of costs associated with the firm's production experience.

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

Answer Key: E Feedback Text page 358: Odd-even pricing by definition involves setting prices a few dollars or cents under an even number. It assumes that if the price of a product is $499.99 versus $500, demand is likely to be higher if the price is $499.99, because consumers perceive the price as something over 400 rather than about 500. Question 7 of 10 Score: 0 (of possible 1 point) The prices for all furniture sold at American Furniture Warehouse end in $9. American Furniture Warehouse uses: A.experience curve pricing.

B. price lining.

C. odd-even pricing.

D.dynamic pricing.

E. bundle pricing.

Answer Key: C Feedback Text page 358 A. Experience curve pricing is a method 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 firms experience at producing and selling them doubles. In this quiz question, the furniture prices are unrelated to the experience of AFW.

B. Price lining is where a firm that is selling not just a single product but a line of products may price them at a number of different specific pricing points. In this quiz question, the situation described does not focus on the product lines. C. Odd-even pricing involves setting prices a few dollars or cents under an even number. The presumption is that consumers will relate the price of the item to the lower number, rather than the number it is actually closest to. In this quiz question, American Furniture Warehouse prices its products with numbers ending in 9, wanting customers to relate the price to a low number, rather than simply round up. D. Dynamic pricing is another term for flexible price policy. It involves setting different prices for products and services depending on individual buyers and purchase situations, and types include yield management pricing. Dynamic pricing gives sellers considerable discretion in setting the final price in light of demand, cost, and competitive factors. In this quiz question, prices do not change. E. Bundle pricing is a frequently used demand-oriented pricing practice that means the marketing of two or more products in a single package price. In this quiz question, AFW is not described as selling multiple products in package prices. Question 8 of 10 Score: 1 (of possible 1 point) Which of the following items is the least likely to be purchased using participative pricing? A.A used bicycle from a police auction

B. A car from a Toyota dealership

C. A wristwatch from a street vendor

D.A sweater from Burdine's

E. A textbook from eBay

Answer Key: D Feedback Lecture page 101 Administered pricing, which means prices are fixed, is the norm within the United States. Participative pricing entails bargaining over the price of goods or services. Participative pricing is the exception to administered pricing in the United States. Purchasing a sweater from Burdines would be an example of administered pricing while the other answer choices are examples of participative pricing. Question 9 of 10 Score: 1 (of possible 1 point) To encourage buyers to stock inventory earlier than their normal customer demand would require, manufacturers often use: A.functional discounts.

B. seasonal discounts.

C. trade discounts.

D.cumulative discounts.

E. noncumulative discounts.

Answer Key: B Feedback Text page 370 A) Functional discounts are given to wholesalers and retailers by manufacturers, for marketing functions they will perform in the future. B) Seasonal discounts are used to encourage buyers to stock inventory earlier than their normal demand would require. The key in this question is the emphasis on the type of discount that encourages earlier purchase, prior to customer demand. C) A trade discount is another name for a functional discount. They are reductions off the list or base price offered on the basis of where they are in the channel and the marketing activities they are expected to perform in the future. D) Cumulative discounts are a type of quantity discount, where a reduction in unit cost is given for a larger order. They apply to the accumulation of purchases of a product over a given time period, typically a year. E) Noncumulative quantity discounts are based on the size of an individual purchase order. They encourage large individual purchase orders, not a series of orders. Question 10 of 10 Score: 1 (of possible 1 point) Bell Manufacturing Co. is trying to decide what price to charge the distributor of its telephones. If the retail price of a Bell telephone is $40, the retail markup is 60% and the distributor's markup is 35%, what price should Bell Manufacturing Co. charge to its distributor? A.$16.40

B. $10.40

C. $8.40

D.$18.52

E. $29.63

Answer Key: B

Feedback Lecture page 108 A. $16.40 $10.40 B. Man. Price = Retail Price x [ (100 - %Retail Markup) / 100 ] x [ (100 - %Distributors Markup) / 100 ] = $40 x [ (100 60) / 100 ] x [ (100 35) / 100 ] =$40 x .40 x .65 = $10.40 C. $8.40 $10.40 D. $18.52 $10.40 E. $29.63 $10.40 Bell Manufacturing Co. is trying to decide what price to charge the distributor of its telephones. If the retail price of a Bell telephone is $40, the retail markup is 60% and the distributor's markup is 35%, what price should Bell Manufacturing Co. charge to its distributor? A.$16.40

B. $10.40

C. $8.40

D.$18.52

E. $29.63

Answer Key: B Feedback Lecture page 108 A. $16.40 $10.40 B. Man. Price = Retail Price x [ (100 - %Retail Markup) / 100 ] x [ (100 - %Distributors Markup) / 100 ] = $40 x [ (100 60) / 100 ] x [ (100 35) / 100 ] =$40 x .40 x .65 = $10.40 C. $8.40 $10.40 D. $18.52 $10.40 E. $29.63 $10.40 Question 2 of 10 Score: 1 (of possible 1 point) Which of the following is true concerning market skimming? A.It is often used to achieve early market dominance in terms of market share.

B. It is used at the decline stage of the product life cycle.

C. It is used at the maturity stage of the product life cycle.

D.It is used when demand is price inelastic.

E. It is often used to encourage price-sensitive customers to buy a new product.

Answer Key: D Feedback Lecture page 107 A) Market penetration is used by firms trying to achieve early market share dominance in terms of market share, not market skimming. B) Market skimming is used in the introduction stage of a product life cycle. It is a pricing strategy used when introducing a new product. C) Market skimming is used in the introduction stage of a product life cycle. D) Market skimming is used in situations where demand is price inelastic. Firms are able to begin at a relatively high price, since consumers are not very price sensitive, and gradually bring the price down, skimming profits off the market. E) That would be market penetration. Market penetration is used in highly price elastic markets to entice consumers who are price-sensitive to buy a product. Question 3 of 10 Score: 1 (of possible 1 point) Anvil wants to know how much to charge Gator fans for their National Champions t-shirts in order to make a profit of $10,000. Anvil has the capacity to produce 20,000 t-shirts, their total fixed costs are $400,000, and their variable costs are $8 per t-shirt. How much should Anvil charge? A.$20.50

B. $24.50

C. $12.50

D.$28.50

E. $10.50

Answer Key: D

Feedback Lecture page 105 A. $20.50 $28.50 B. $24.50 $28.50 C. $12.50 $28.50 D. Price = (TFC + TVC + ) / (Total #Units) = [$400,000 + ($8 x 20,000) + $10,000] / [20,000] = ($400,000 + $160,000 + $10,000) / (20,000) = $570,000 / 20,000 = $28.50 E. $10.50 $28.50 Question 4 of 10 Score: 0 (of possible 1 point) Go to any Kroger supermarket and walk to the cereal aisle. You will notice that four brands--Kellogg's, Quaker, General Mills, and Post--seem to occupy most of the shelf space. Collectively, they control over 90% of the market. These cereals are all priced about the same. There is limited product differentiation as the result of licensing agreements that have created a line of Disney cereals and through the use of different health claims. Given this information, you should know the cereal industry is an example of: A.a pure monopoly

B. a pure competition.

C. monopolistic competition.

D.monopolistic oligopoly.

E. an oligopoly.

Answer Key: E Feedback Text page 338 A) The cereal industry is no a pure monopoly because there is more than one brand of cereal. In a pure monopoly there is only one firm in the industry. B) The cereal industry is not pure competition because there is a good deal of product differentiation. In pure competition all of the products sold in an industry are exactly the same. C) The cereal industry is not monopolistic competition because there are only a few sellers and the products are priced about the same. In monopolistic competition there are many sellers who compete over a range of prices. D) This is a made up term. E) The cereal industry is an oligopoly because there are only a few sellers and they are sensitive to each others prices. In an oligopoly situation competitors try to avoid price competition because it can lead to costly price wars.

Question 5 of 10 Score: 0 (of possible 1 point) The ratio of perceived benefits to price is called: A.prestige pricing.

B. value analysis.

C. value.

D.the price-quality relationship.

E. value-added pricing.

Answer Key: C Feedback Text page 332 A. Prestige pricing involves setting a high price so that quality- or status-conscious consumers will be attracted to the product and buy it. B. Value analysis is a systematic appraisal, within organizational buying, of the design quality, and performance of a product to reduce purchasing costs. C. Value is, by definition, the ratio of perceived benefits to price. D. The price-quality relationship refers to the concept that price and quality co-vary; sometimes price influences consumers perception of overall quality, and sometimes perception of quality influences price. E. Value-added pricing involves setting a price according to the additional value created through production, marketing, etc for a product. Question 6 of 10 Score: 0 (of possible 1 point) A new store named "Gator Clothing Inc." recently opened and is threatening to take a lot of business from "Gators R Us". The CEO of "Gators R Us", which is the market leader and has been established for many years, decides that it will eliminate any chance of "Gator Clothing Inc." taking any of its market share by deliberately setting the prices of its products below cost so that "Gator Clothing Inc." will not be able to make a profit, and will eventually go out of business. This type of pricing strategy is known as: A.Profit Maximization

B. Competition Based Pricing

C. Termination Pricing

D.Profit Satisficing

E. Predatory Pricing

Answer Key: E Feedback Text page 376 A) Profit maximization involves setting the price of the product so as to maximize profit. B) When a firm sets its price, price competition based pricing requires that the firm take into account the actions of other firms in response. C) Created term D) Profit satisficing involves choosing a price that yields a satisfactory profit-level. It is usually employed when a firm is unable to precisely determine the profit maximizing price. E) Predatory pricing is the practice of charging a very low price for a product with the intent of driving competitors out of business. By setting its price below cost it can be shown that Gators R Us has the intent of driving Gator Clothing out of business, and is thus engaged in predatory pricing. Question 7 of 10 Score: 0 (of possible 1 point) A radio advertisement features a female buyer who is very enthusiastic about the pricing policies of the Saturn automobile dealers. In the testimonial-type advertisement, the car buyer laments about the difficulty she experienced with other car dealers in haggling over a final price for an auto. In comparison, the buyer touts the ease with which she arrived at a final price for her new Saturn automobile--she simply entered the show room, asked for the price of the car she preferred, and the sales person quoted her the selling price. No matter which Saturn dealer she visited, the buyer (or any other buyer for that matter) would be quoted the same price for the same automobile. The advertisement represents Saturn's _____ policy. A.standard-price

B. sticker-price

C. dynamic-price

D.one-price

E. flexible-price

Answer Key: D

Feedback Text page 366 A.) We made up this term. It sounds familiar to standard markup pricing which is defined as adding a fixed percentage to the cost of all items in a specific product class. B.) We made up this term. You wont find this term in the book of lectures. C.) Dynamic pricing is the practice of changing prices for products and services in real time in response to supply and demand. The prices of Saturn automobiles are fixed, so dynamic pricing does not describe the Saturns pricing policy. D.) Correct answer. One price policy, a.k.a. fixed pricing, is defined as setting once price for all buyers of a product or service. E.) Flexible price policy is setting different prices for products and services depending on the individual buyers and purchase situations. Saturns business policy is the opposite of a flexible price policy. Question 8 of 10 Score: 0 (of possible 1 point) Fixed cost refers to: A.the consideration exchanged for the ownership or use of a good or service.

B. total expenses incurred in producing or selling one additional unit of product.

C. the total expense incurred by a firm in producing and marketing a product or service.

D.expenses that are stable and do not change with the quantity of the product that is produced and sold.

E. the sum of the expenses that vary directly with the quantity of the product produced and sold.

Answer Key: D Feedback Text page 345 A. Price is the money or other consideration exchanged for the ownership or use of a good or service. B. Marginal cost is the change in total cost that results from producing and marketing one additional unit of a product. C. Total cost is the total expense incurred by a firm in producing and marketing a product, and is the sum of fixed cost and variable cost. D. Fixed cost, by definition, is the sum of the expenses of the firm that are stable and do not change with the quantity of a product that is produced and sold. E. Variable cost is the sum of expenses that vary directly with the quantity of the product produced and sold. Question 9 of 10 Score: 0 (of possible 1 point) Which of the following is NOT a problem associated with the Cost-Based and Profit-Based pricing strategies?

A.

These strategies do not take into consideration increases in production efficiency that would create economies of scale.

B. These strategies do not take into consideration competitors' prices.

C. These strategies do not take into consideration the cost of goods in relation to profits.

D.These strategies do not take into consideration demand factors.

E. These strategies do not take into consideration factors external to the firm.

Answer Key: C Feedback Lecture page 106 A) The failure to account for economies of scale is a problem associated with these pricing strategies. The variable cost may be reduced as more and more units are produced, so the unit cost of production usually drops as the firms output increases. B) Cost-Based and Profit-Based pricing strategies do not include competitive factors such as competitors prices. C) This is not a problem. These strategies do take into consideration the cost of goods in relation to profits. D) Both these strategies ignore demand factors. They have an internal focus so there is no reflection of the external market factors like demand. E) This is a problem with these strategies. They only consider internal goals and costs. External, marketrelated variables are not considered in these pricing approaches. Question 10 of 10 Score: 0 (of possible 1 point) Ralph Lauren is happy with its current profit level and decided to set its prices to try to achieve the same level of profit next year, even though it may be possible to earn even more. This is an example of which pricing objective? A.predatory pricing

B. profit maximization

C. market share maintenance D.profit satisficing

E. parity maintenance

Answer Key: D Feedback Lecture page 102 A) Predatory pricing is the practice of charging a very low price for a product with the intent of driving competitors out of business. B) Profit maximization involves setting the price of the product so as to maximize profit. C) A firm may wish to set the price that maintains its current market share. D) Profit satisficing involves choosing a price that yields a satisfactory profit-level. It is usually employed when a firm is unable to precisely determine the profit maximizing price. In this example Ralph Lauren is satisfied with its current profit even though it is not its profit maximizing level. Therefore, Ralph Lauren is using a profit satisficing objective. E) Created term.