Chapter 11 Pricing Strategies 1) A company sets not a single price, but rather a ________ that covers different items

in its line that change over time as products move through their life cycles. A) pricing by-product B) pricing structure C) pricing loop D) pricing cycle ) pricing bundle Ans!er" B Diff" 1 #age $ef" %11 &'ill" Concept (b)ective" 11-1 *) Companies facing the challenge of setting prices for the first time can choose bet!een t!o broad strategies" mar'et-penetration pricing and ________. A) mar'et-level pricing B) mar'et-competitive pricing C) mar'et-s'imming pricing D) mar'et-price lining ) mar'et-price filling Ans!er" C Diff" * #age $ef" %1* &'ill" Concept (b)ective" 11-1 %) (f the follo!ing, !hich statement !ould +(, support a mar'et-s'imming policy for a ne! productA) ,he product.s /uality and image support its higher price. B) nough buyers !ant the products at that price. C) Competitors are not able to undercut the high price. D) Competitors can enter the mar'et easily. ) C and D Ans!er" D Diff" % #age $ef" %1* &'ill" Concept (b)ective" 11-1

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5) A firm is using ________ !hen it charges a high, premium price for a ne! product !ith the intention of reducing the price in the future. A) price s'imming B) trial pricing C) value pricing D) mar'et-penetration pricing ) prestige pricing Ans!er" A Diff" * #age $ef" %1* &'ill" Concept (b)ective" 11-1 6) ________ pricing is the approach of setting a lo! initial price in order to attract a large number of buyers /uic'ly and !in a large mar'et share. A) 7ar'et-s'imming B) 7ar'et-penetration C) Belo!-mar'et D) 8alue-based ) 9eader Ans!er" B Diff" 1 #age $ef" %1% &'ill" Concept (b)ective" 11-1 :) Accent &oft!are faces the conditions belo!, all of !hich support Accent.s use of a mar'etpenetration pricing strategy ;C #, that ________. A) the mar'et is highly price sensitive B) production and distribution costs !ill fall as sales volume increases C) the product.s /uality and image support a high price D) a lo! price !ould help 'eep out the competition ) A and C Ans!er" C Diff" % #age $ef" %1% &'ill" Concept (b)ective" 11-1

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0) <hich of the follo!ing is a reason that a mar'eter !ould choose a penetration pricing strategyA) to ensure the company has the ability to increase prices once demand decreases B) to focus on the rapid achievement of profit ob)ectives C) to appeal to different consumer segments !ith different levels of price sensitivity D) to create mar'ets for highly technical products ) to discourage competition from entering the mar'et Ans!er" Diff" % #age $ef" %1% &'ill" Concept (b)ective" 11-1 =) Companies usually develop ________ rather than single products. A) product families B) product lines C) product groupings D) product brands ) product images Ans!er" B Diff" 1 #age $ef" %1% &'ill" Concept (b)ective" 11-* >) A mar'eter must be familiar !ith the five ma)or product mi? pricing situations. <hich of the follo!ing is +(, one of themA) product line pricing B) optional-product pricing C) captive-product pricing D) unbundled product pricing ) by-product pricing Ans!er" D Diff" % #age $ef" %1% &'ill" Concept (b)ective" 11-* 11) A challenge for management in product line pricing is to decide on the price steps bet!een the ________. A) various products in a line B) product mi?es C) product groupings D) product lines ) various target mar'ets Ans!er" A Diff" * #age $ef" %1% &'ill" Concept (b)ective" 11-*

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11) <hen using price steps, the seller must establish perceived ________ that support the price differences. A) nonprice competitions B) /uality differences C) /uantity levels D) images ) strategies Ans!er" B Diff" * #age $ef" %15 AAC&B" Communication &'ill" Concept (b)ective" 11-* 1*) 7any producers !ho use captive-product pricing set the price of the main product ________ and set ________ on the supplies necessary to use the product. A) lo!@ lo! mar'ups B) high@ lo! mar'ups C) lo!@ high mar'ups D) high@ high mar'ups ) moderately@ moderate mar'ups Ans!er" C Diff" * #age $ef" %15 &'ill" Concept (b)ective" 11-* 1%) <hen amusement par's and movie theaters charge admission plus fees for food and other attractions, they are follo!ing aAn) ________ pricing strategy. A) by-product B) optional-product C) captive-product D) s'imming ) penetration Ans!er" C Diff" * #age $ef" %16 &'ill" Concept (b)ective" 11-*

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15) 4i#oint ,elephone Company uses t!o-part pricing for its long-distance call charges. Because this is a service, the price is bro'en into a fi?ed rate plus a ________. A) fi?ed rate usage B) variable usage rate C) standard usage rate D) mar'et usage rate ) none of the above Ans!er" B Diff" 1 #age $ef" %16 &'ill" Concept (b)ective" 11-* 16) Companies involved in deciding !hich items to include in the base price and !hich to offer as options are engaged in ________ pricing. A) product bundle B) optional-product C) captive-product D) by-product ) s'imming Ans!er" B Diff" 1 #age $ef" %15 &'ill" Concept (b)ective" 11-* 1:) Beeping in mind that a seller must sell by-products at a price that covers more than the cost of storing and delivering them, !hich of the follo!ing !ill by-product pricing permit a seller to doA) increase the main product.s price B) ma'e e?tra profit C) reduce the main product.s price D) none of the above ) B and C Ans!er" Diff" % #age $ef" %16 &'ill" Concept (b)ective" 11-*

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10) <ith product bundle pricing, sellers can combine several products and offer the bundle ________. A) as a !or'ing unit B) at a reduced price C) as a complete self-service pac'age D) as a re!ard to loyal customers ) as segmented pricing Ans!er" B Diff" 1 #age $ef" %16 &'ill" Concept (b)ective" 11-* 1=) <hat is a ma)or advantage of product bundle pricingA) 3t can promote the sales of products consumers might not other!ise buy. B) 3t offers consumers more value for the money. C) 3t combines the benefits of the other pricing strategies. D) 3t provides a more complete product e?perience for consumers. ) All of the above. Ans!er" A Diff" * #age $ef" %16 &'ill" Concept (b)ective" 11-* 1>) <hich of the follo!ing is +(, a price ad)ustment strategyA) segmented pricing B) promotional pricing C) free samples D) geographical pricing ) seasonal pricing Ans!er" C Diff" * #age $ef" %16 &'ill" Concept (b)ective" 11-% *1) &ervice 3ndustries, 3nc., plans to offer a price-ad)ustment strategy in the near future. ,hey could consider each of the follo!ing ;C #, ________. A) discount and allo!ance pricing B) segmented pricing C) physiological pricing D) promotional pricing ) location pricing Ans!er" C Diff" * #age $ef" %16 &'ill" Concept (b)ective" 11-%

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*1) A /uantity discount is a price reduction to buyers !ho purchase ________. A) fre/uently B) large volumes C) close outs D) inferior merchandise ) superior merchandise Ans!er" B Diff" * #age $ef" %1: &'ill" Concept (b)ective" 11-% **) ,rade or functional discounts are offered by manufacturers to !hich of the follo!ingA) channel members !ho perform tas's that the manufacturer !ould other!ise have to perform B) consumers !ho earn a price reduction for buying in bul' C) intermediaries such as financing institutions as a cost of doing business !ith them D) manufacturers that agree to e?clusive distribution contracts ) the government mar'et and other organiCations that re/uire bid proposals Ans!er" A Diff" % #age $ef" %1: &'ill" Concept (b)ective" 11-% *%) <hich of the follo!ing is an e?ample of a cash discountA) *D11, net %1 B) E6.11 !ith a t!o-pac' C) a free case !hen you buy 1* D) !hen you pay cash and ta'e the product !ith you ) none of the above Ans!er" A Diff" % #age $ef" %1: &'ill" Concept (b)ective" 11-% *5) <hen Feneral 7otors provides payments or price reductions to its ne! car dealers as re!ards for participating in advertising and sales support programs, it is granting aAn) ________. A) trade discount B) functional discount C) allo!ance D) promotional allo!ance ) trade credit Ans!er" D Diff" 1 #age $ef" %1: &'ill" Concept (b)ective" 11-%

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*6) Guantity discounts provide an incentive to the customer to buy ________. A) more products or services from a variety of sellers B) less from another competitor C) more from one given seller, rather than from many different sources D) more than he or she needs ) bundled merchandise Ans!er" C Diff" * #age $ef" %1: &'ill" Concept (b)ective" 11-% *:) By definition, this type of pricing is used !hen a firm sells a product or service at t!o or more prices, even though the difference in price is not based on differences in cost. A) segmented pricing B) variable pricing C) fle?ible pricing D) cost-plus pricing ) reference pricing Ans!er" A Diff" * #age $ef" %1: &'ill" Concept (b)ective" 11-* *0) <hen a firm varies its price by the season, month, day, or even hour, it is using ________ pricing. A) revenue management B) penetration C) variable D) time ) value-added Ans!er" D Diff" 1 #age $ef" %1: &'ill" Concept (b)ective" 11-% *=) Airlines, hotels, and restaurants call segmented pricing ________. A) time pricing B) yield management C) location pricing D) segmented ) service pricing Ans!er" B Diff" * #age $ef" %10 &'ill" Concept (b)ective" 11-%

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*>) <hich of the follo!ing conditions should e?ist for segmented pricing to be an effective strategyA) ,he mar'et must be able to be segmented. B) ,he segments must sho! different degrees of demand. C) Competitors can.t undersell in the segment being charged the higher price. D) All of the above. ) +one of the above. Ans!er" D Diff" * #age $ef" %10 &'ill" Concept (b)ective" 11-% %1) Consumers usually perceive higher-priced products as ________. A) not !ithin reach of most people B) having a higher /uality C) having high profit margins D) popular brands ) being in the introductory stage of the product life cycle Ans!er" B Diff" * #age $ef" %10 &'ill" Concept (b)ective" 11-% %1) Consumer use price less to )udge the /uality of a product !hen they ________. A) lac' information B) lac' s'ills to use the product C) have e?perience !ith the product D) are shopping for a specialty item ) cannot physically e?amine the product Ans!er" C Diff" * #age $ef" %10 &'ill" Concept (b)ective" 11-% %*) 7ichael and Hohn both o!n leather )ac'ets and are currently shopping for t!o ne! ones. ,hey both have prices in mind and refer to them !hen shopping. ,hese prices are termed ________. A) psychological prices B) reference prices C) comparison prices D) price points ) s'immed prices Ans!er" B Diff" * #age $ef" %1> &'ill" Concept (b)ective" 11-%

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%%) <hich of the follo!ing refers to the prices that a buyer carries in his or her mind and refers to !hen loo'ing at a given productA) target prices B) reference prices C) promotional prices D) geographical prices ) dynamic prices Ans!er" B Diff" 1 #age $ef" %1> &'ill" Concept (b)ective" 11-% %5) <hen consumers cannot )udge /uality because they lac' the information or s'ill, price becomes ________. A) less important B) insignificant C) an important /uality signal D) the only driver of the purchase ) none of the above Ans!er" C Diff" * #age $ef" %10 &'ill" Concept (b)ective" 11-% %6) All of the follo!ing are typical !ays a reference price might be formed in a buyer.s mind ;C #, ________. A) noting current prices B) remembering past prices C) assessing the buying situation D) comparing it to a ne! product ) influences from sellers Ans!er" D Diff" * #age $ef" %1> &'ill" Concept (b)ective" 11-% %:) <hat type of pricing is being used !hen a company temporarily prices it product belo! the list price or even belo! cost to create buying e?citement and urgencyA) segmented pricing B) psychological pricing C) referent pricing D) promotional pricing ) dynamic pricing Ans!er" D Diff" 1 #age $ef" %*1 &'ill" Concept (b)ective" 11-%
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%0) #romotional pricing can have all of the follo!ing adverse effects ;C #, ________. A) creating deal-prone customers B) eroding the brand.s value in the eyes of customers C) giving pricing secrets a!ay to competitors D) becoming addicting to both the customer and business ) instigating industry price !ars Ans!er" C Diff" * #age $ef" %*1 &'ill" Concept (b)ective" 11-% %=) ,he most li'ely effect of the fre/uent use of promotional pricing is an industry ________. A) e?pansion B) price !ar C) erosion D) cooperation ) imbalance Ans!er" B Diff" * #age $ef" %*1 &'ill" Concept (b)ective" 11-% %>) <hen customers buy products from manufacturers. dealers !ithin a specified time period, the manufacturer sends the customer a chec' called a ________. A) cash rebate B) discount C) dealer reduction D) promotional pricing re!ard ) discount allo!ance Ans!er" A Diff" * #age $ef" %*1 &'ill" Concept (b)ective" 11-% 51) Durango China Company charges all customers !ithin a given geographical area a single total price. ,he more distant the area, the higher the price. ,his is ________. A) freight-absorption pricing B) Cone pricing C) uniform-delivered pricing D) I(B-origin pricing ) bul' rate pricing Ans!er" B Diff" * #age $ef" %*1 &'ill" Concept (b)ective" 11-%

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51) Jnder !hich type of geographic pricing strategy does each customer pay the e?act freight for the product from the factory to its destinationA) Cone pricing B) basing-point pricing C) uniform-delivered pricing D) I(B-origin pricing ) dynamic pricing Ans!er" D Diff" * #age $ef" %*1 &'ill" Concept (b)ective" 11-% 5*) Jsing this pricing strategy, the seller ta'es responsibility for part or all of the actual freight charges in order to get the desired business. A) I(B-origin B) freight-absorption C) basing-point D) loss leader ) Cone pricing Ans!er" B Diff" 1 #age $ef" %*1 &'ill" Concept (b)ective" 11-% 5%) <hich of the follo!ing is the opposite of I(B-origin pricingA) basing-point pricing B) freight-absorption pricing C) uniform-delivered pricing D) freight-absorption pricing ) Cone pricing Ans!er" C Diff" % #age $ef" %*1 &'ill" Concept (b)ective" 11-% 55) Ireight-absorption pricing is used for ________ and ________. A) mar'et penetration@ higher profit margins B) holding on to increasingly competitive mar'ets@ higher profit margins C) mar'et penetration@ holding on to increasingly competitive mar'ets D) generating temporary higher profits@ discouraging competitors ) services@ installations Ans!er" C Diff" % #age $ef" %*1 &'ill" Concept (b)ective" 11-%

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56) <hen a company charges the same rate to ship a product any!here in the Jnited &tates, it is using !hich form of geographic pricingA) I.(.B. delivered B) I.(.B. factory C) I.(.B. origin D) uniform delivered ) basing-point Ans!er" D Diff" 1 #age $ef" %*1 &'ill" Concept (b)ective" 11-% 5:) ,he 3nternet offers ________, !here the price can easily be ad)usted to meet changes in demand. A) captive pricing B) dynamic pricing C) basing-point pricing D) price bundling ) cost-plus pricing Ans!er" B Diff" * #age $ef" %** AAC&B" Jse of 3, &'ill" Concept (b)ective" 11-% 50) &ome companies are reversing the fi?ed pricing trend and using ________. A) captive pricing B) segmented pricing C) promotional pricing D) dynamic pricing ) geographical pricing Ans!er" D Diff" * #age $ef" %** &'ill" Concept (b)ective" 11-% 5=) <hen pricing internationally, most companies ad)ust their prices to reflect ________. A) local mar'et conditions B) cost considerations C) local la!s and regulations D) e?change-rate fluctuations ) all of the above Ans!er" Diff" * #age $ef" %*% AAC&B" 7ulticultural and Diversity &'ill" Concept (b)ective" 11-%
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5>) 7ost companies that conduct international business ________ to ________. A) ad)ust their prices@ ta'e local mar'et conditions into consideration B) use promotional pricing@ create e?citement in ne! mar'ets C) use geographical pricing@ reduce delivery costs D) set a uniform price@ maintain a consistent product image ) initiate price cuts@ compensate for import tariffs and ta?es Ans!er" A Diff" * #age $ef" %*% AAC&B" 7ulticultural and Diversity &'ill" Concept (b)ective" 11-% 61) #rice escalation in international mar'ets may result from differences in mar'et conditions or ________. A) cultural preferences B) selling strategies C) regional tastes D) customer perceptions ) language barriers Ans!er" B Diff" * #age $ef" %*% AAC&B" 7ulticultural and Diversity &'ill" Concept (b)ective" 11-5 61) <hich of the follo!ing is 9 A&, li'ely to cause price escalation in foreign mar'etsA) the additional costs of product modifications B) the additional costs of shipping and insurance C) the additional costs of import tariffs and ta?es D) the additional costs of improving a country.s infrastructure ) e?change rate fluctuations Ans!er" D Diff" * #age $ef" %*% AAC&B" 7ulticultural and Diversity &'ill" Concept (b)ective" 11-%

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6*) #rice escalation in international mar'ets may result from four of these five mar'eting conditions. <hich one !ill have the 9 A&, effectA) the additional cost of physical distribution B) e?change-rate fluctuations C) mar'et stability D) higher costs of selling ) language barriers Ans!er" Diff" * #age $ef" %*% AAC&B" 7ulticultural and Diversity &'ill" Concept (b)ective" 11-% 6%) ,here are many reasons !hy a firm might consider cutting its price. All of the follo!ing are among them ;C #, ________. A) e?cess capacity B) falling demand in the face of strong price competition C) a drive to dominate the mar'et through lo!er costs D) monopolistic competition ) a drive to gain mar'et share and cut costs through volume Ans!er" D Diff" * #age $ef" %*5 &'ill" Concept (b)ective" 11-5 65) <hich of the follo!ing is a reason for a company to raise its pricesA) to address the issue of overdemand for a product B) to !in a larger share of the mar'et C) to use e?cess capacity D) to boost sales volume ) to balance out decreasing costs Ans!er" A Diff" 1 #age $ef" %*5 &'ill" Concept (b)ective" 11-5 66) <hich of the follo!ing is a ma)or factor that influence price increasesA) cost inflation B) surplus of ra! materials C) government intervention D) foreign competition ) B and C Ans!er" A Diff" * #age $ef" %*5 &'ill" Concept (b)ective" 11-5

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6:) Competitors are most li'ely to react to a price change !hen ________. A) the number of firms involved is small B) the purchase is uniform C) the buyers are not !ell informed D) A and B ) all of the above Ans!er" D Diff" * #age $ef" %*6 &'ill" Concept (b)ective" 11-5 60) A competitor is li'ely to interpret your firm.s decision to cut prices in many !ays, including all of the follo!ing ;C #, as ________. A) an attempt to ta'e more mar'et share B) an effort it to use e?cess capacity C) a personal decision due to management.s personality D) an attempt to cut prices industry-!ide ) A and D Ans!er" C Diff" * #age $ef" %*: &'ill" Concept (b)ective" 11-5 6=) <hen a competitor cuts its price, a company is most li'ely to decide to ________ if it believes it !ill not lose much mar'et share or !ould lose too much profit by cutting its o!n price. A) reduce its production costs B) reduce its mar'eting costs C) maintain its current prices and profit margin D) increase its mar'eting budget to raise the perceived value of the product ) increase its production costs to improve the /uality of the product Ans!er" C Diff" * #age $ef" %*: &'ill" Concept (b)ective" 11-5

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6>) <hen faced !ith a competitor !ho has cut its product.s price, !hich of the follo!ing is typically the most efficient !ay for a company to maintain its o!n price but raise the perceived value of its offerA) improving the /uality of the product B) introducing a higher-priced premium brand C) altering the company.s mar'eting communications D) bundling the offer !ith add-ons ) distributing the product through less costly channels Ans!er" C Diff" % #age $ef" %*: &'ill" Concept (b)ective" 11-5 :1) <hich of the follo!ing is +(, on an effective action that a company can ta'e to combat a competitor.s price cut on a productA) reduce price B) raise perceived value C) improve /uality and increase price D) bundle products together ) launch a lo!-price Kfighting brandK Ans!er" D Diff" * #age $ef" %*: &'ill" Concept (b)ective" 11-5 :1) <hen a firm improves the /uality and increases the price of a product in reaction to a competitor ma'ing a price reduction, the firm in essence is ________. A) moving its brand into a less competitive position B) adversely positioning its product C) moving its brand into a higher price-value position D) creating a Kfighting brandK ) changing its target mar'et Ans!er" C Diff" % #age $ef" %*0 &'ill" Concept (b)ective" 11-5

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:*) A company !ould most li'ely consider launching a lo!-price Kfighting brandK in response to a competitor reducing prices if ________. A) the mar'et segment being lost is price sensitive B) the mar'et segment being lost is not price sensitive C) the mar'et segment being lost responds to arguments of higher /uality D) the mar'et segment being lost no longer demands the product ) the mar'et segment being lost has shifted culturally Ans!er" A Diff" * #age $ef" %*0 &'ill" Concept (b)ective" 11-5 :%) #rice-fi?ing, predatory pricing, retail price maintenance, and deceptive pricing are e?amples of ________. A) common pricing policies B) ma)or public policy issues in pricing C) common pricing strategies D) pricing policies used mostly in the !holesale sector ) pricing used mostly in the retail sector Ans!er" B Diff" 1 #age $ef" %*0 AAC&B" thical $easoning &'ill" Concept (b)ective" 11-5 :5) ,he &herman, Clayton, and $obinson-#atman Acts are all federal la!s that !ere enacted to curb the formation of ________. A) monopolies B) oligopolies C) competitive mar'ets D) international mar'ets ) limited partnerships Ans!er" A Diff" * #age $ef" %*0 AAC&B" thical $easoning &'ill" Concept (b)ective" 11-5

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:6) <hen sellers set prices after tal'ing to competitors and engaging in collusion, they are involved in ________. A) predatory pricing B) discriminatory pricing C) price-fi?ing D) s'imming pricing ) penetration pricing Ans!er" C Diff" * #age $ef" %*= AAC&B" thical $easoning &'ill" Concept (b)ective" 11-5 ::) Iederal legislation on price-fi?ing re/uires that sellers set their prices ________. A) based on their fi?ed and variable costs B) !ithout communication from competitors C) to achieve a specific profit margin D) !ithout the intention of cutting into competitors. profits ) consistently throughout a region Ans!er" B Diff" * #age $ef" %*= AAC&B" thical $easoning &'ill" Concept (b)ective" 11-5 :0) 3f a large retailer sold numerous items belo! cost !ith the intention of punishing small competitors and gaining higher long-run profits by putting them out of business, the retailer !ould be guilty of ________. A) price collusion B) price-fi?ing C) predatory pricing D) discriminatory pricing ) penetration pricing Ans!er" C Diff" * #age $ef" %*=-%*> AAC&B" thical $easoning &'ill" Concept (b)ective" 11-5

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:=) <hich of the follo!ing !ould most li'ely be considered predatory pricingA) pricing belo! cost to get rid of a surplus B) pricing belo! cost to drive out competitors C) pricing belo! cost in order to entice customers to your store D) offering a suggested retail price on the manufacturer.s pac'age ) both B and C if the intent is to someho! harm competition Ans!er" Diff" % #age $ef" %*= AAC&B" thical $easoning &'ill" Concept (b)ective" 11-5 :>) ,he $obinson-#atman Act see's to prevent unfair ________ by ensuring that sellers offer the same price terms to customers at a given price level. A) mar'eting B) price discrimination C) competition D) price collusion ) treatment of small retailers Ans!er" B Diff" * #age $ef" %%1 AAC&B" thical $easoning &'ill" Concept (b)ective" 11-5 01) #rice discrimination is legal under !hich of the follo!ing conditionsA) !hen a manufacturer and reseller have agreed upon a specified retail price for a product B) !hen a manufacturer sells to retailers in different mar'ets C) !hen a seller can prove its costs are different !hen selling to different retailers D) !hen a seller advertises prices that are not actually available to consumers ) !hen a seller has not communicated !ith competitors before announcing prices Ans!er" C Diff" % #age $ef" %%1 AAC&B" thical $easoning &'ill" Concept (b)ective" 11-5

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01) #rice discrimination may be used to match competition as long as the strategy is temporary, localiCed, and ________. A) defensive B) offensive C) published D) private ) used in all channels Ans!er" A Diff" % #age $ef" %%1 AAC&B" thical $easoning &'ill" Concept (b)ective" 11-5 0*) 7ar'.s 7ar'ers, a manufacturer of color mar'ers, has re/uired its dealers to charge a specified retail price for its mar'ers. 7ar'.s is most li'ely guilty of ________. A) price-fi?ing B) retail price maintenance C) price discrimination D) price collusion ) unfair price s'imming Ans!er" B Diff" * #age $ef" %%1 AAC&B" thical $easoning &'ill" Concept (b)ective" 11-5 0%) ________ results !hen a company uses pricing methods that ma'e it difficult for consumers to understand )ust !hat price they are really paying. A) &canner fraud B) &'imming pricing C) #rice confusion D) #redatory pricing ) #rice collusion Ans!er" C Diff" * #age $ef" %%1 AAC&B" thical $easoning &'ill" Concept (b)ective" 11-5

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05) Iailure to enter the current price into a retailer.s system may result in charges of ________. A) predatory pricing B) scanner fraud C) retail maintenance pricing D) discriminatory pricing ) price-fi?ing Ans!er" B Diff" * #age $ef" %%1 AAC&B" Jse of 3, &'ill" Concept (b)ective" 11-5 06) Comparison pricing claims are legal if they are truthful. 4o!ever, sellers should not advertise a price reduction unless ________. A) it is a saving from the usual retail price B) a KfactoryK price, if listed, is !hat it is claimed to be C) a K!holesaleK price, if listed, is !hat it is claimed to be D) Kcomparable value itemsK are not actually imperfect goods ) all of the above Ans!er" Diff" 1 #age $ef" %%1 AAC&B" thical $easoning &'ill" Concept (b)ective" 11-5 0:) 8aleo Iashions has )ust introduced a ne! line of fashion dresses for teens. ,hey !ill initially enter the mar'et at high prices in a ________ pricing strategy. A) mar'et-penetration B) mar'et-s'imming C) competitive mar'et D) psychological ) demographic Ans!er" B Diff" * #age $ef" %1* AAC&B" $eflective ,hin'ing &'ill" Application (b)ective" 11-1

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00) 7ar'et-s'imming pricing !ould li'ely be most effective in selling ________. A) any convenience item B) an electronic device for !hich research and development must be recouped C) shampoo and bath soap D) anything easily copied by competitors ) most items at D9# retailers such as <al-7art Ans!er" B Diff" % #age $ef" %1* AAC&B" Analytic &'ills &'ill" Application (b)ective" 11-1 0=) Among the follo!ing, a mar'et-penetration strategy !ill li'ely be most effective !ith ________. A) pharmaceuticals B) an electronic device for !hich $LD must be recouped C) convenience items for !hich there is much competition D) any specialty item ) none of the above Ans!er" C Diff" % #age $ef" %1% AAC&B" Analytic &'ills &'ill" Application (b)ective" 11-1 0>) <hen #epsi came out !ith #epsi Blue and priced it at half price to attract buyers they !ere using, #epsi !as using ________. A) mar'et-s'imming pricing B) mar'et-penetration pricing C) ne!-product pricing D) discount pricing ) value-added pricing Ans!er" B Diff" * #age $ef" %1% AAC&B" $eflective ,hin'ing &'ill" Application (b)ective" 11-1

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=1) Hohnson Boats !ants to introduce a ne! model of boat into mature mar'ets in highly developed countries !ith the goal of /uic'ly gaining mass-mar'et share. As a consultant, you should recommend a ________ pricing strategy. A) mar'et-s'imming B) mar'et-penetration C) Cone D) loss-leader ) captive-product Ans!er" B Diff" * #age $ef" %1% AAC&B" $eflective ,hin'ing &'ill" Application (b)ective" 11-1 =1) <hen Circuit ,o!n lectronics sets its televisions at three price levels of E:>>, E=>>, and E1,1>>, it is using ________. A) product line pricing B) mar'et-s'imming pricing C) mar'et-penetration pricing D) brea'-even pricing ) target profit pricing Ans!er" A Diff" 1 #age $ef" %15 AAC&B" $eflective ,hin'ing &'ill" Application (b)ective" 11-* =*) <hen #olaroid set the general price range of its cameras lo! and the mar'up on its film high, it !as practicing ________. A) mar'et-penetration pricing B) mar'et-s'imming pricing C) product line pricing D) captive-product pricing ) price bundling Ans!er" D Diff" * #age $ef" %15 AAC&B" $eflective ,hin'ing &'ill" Application (b)ective" 11-*

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=%) <hen product managers at &ch!inn ma'e decisions about !hich types of bicycle seats, handle bars, and saddlebags to offer customers on their bi'es, they are engaged in ________. A) product line pricing B) optional-product pricing C) captive-product pricing D) by-product pricing ) value-based pricing Ans!er" B Diff" 1 #age $ef" %15 AAC&B" $eflective ,hin'ing &'ill" Application (b)ective" 11-* =5) 7ach % raCor blades must be used in the 7ach % raCor. <hich type of pricing is most li'ely usedA) product line pricing B) optional-product pricing C) captive-product pricing D) by-product pricing ) product bundle pricing Ans!er" C Diff" * #age $ef" %15 AAC&B" $eflective ,hin'ing &'ill" Application (b)ective" 11-* =6) ,he fact that a hot dog cost five times more at Disneyland than at &am.s Club is an e?ample of ________. A) allo!ance pricing B) captive-product pricing C) penetration pricing D) segmented pricing ) promotional pricing Ans!er" B Diff" * #age $ef" %15 AAC&B" $eflective ,hin'ing &'ill" Application (b)ective" 11-*

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=:) A manufacturer offers %D11, net %1, terms to a !holesaler for a recent purchase. ,he !holesaler may deduct ________ percent if the bill is paid !ithin ________ days. A) 11@ %1 B) 11@ % C) %@ %1 D) %@ 11 ) 0@ 11 Ans!er" D Diff" % #age $ef" %1: AAC&B" Analytic &'ills &'ill" Application (b)ective" 11-% =0) <hen <hallans Fift Card &hop offers a price reduction to customers !ho buy Christmas cards the !ee' after Christmas, <hallans is giving aAn) ________ discount. A) functional B) seasonal C) annual D) allo!ance ) credit Ans!er" B Diff" 1 #age $ef" %1: AAC&B" $eflective ,hin'ing &'ill" Application (b)ective" 11-% ==) ,he +e! Age Fallery has three admission prices for students, adults, and seniors. All three groups are entitled to the same services. ,his form of pricing is called ________. A) time pricing B) location pricing C) customer-segmented pricing D) revenue management pricing ) generational pricing Ans!er" C Diff" * #age $ef" %1: AAC&B" $eflective ,hin'ing &'ill" Application (b)ective" 11-%

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=>) Bro!n Baby ,anning &alon offers !ee'ly tanning sessions for E16 and season passes !ith unlimited tanning for E161. Bro!n Baby ,anning &alon is offering ________ pricing. A) by-product B) captive-product C) product bundling D) discount ) psychographic Ans!er" D Diff" * #age $ef" %1: AAC&B" Analytic &'ills &'ill" Application (b)ective" 11-% >1) 9ancaster $ecycling has a history of problems !ith customers !ho do not pay their bills on time. 9ancaster $ecycling !ants to improve its cash situation, reduce bad debts, and reduce credit-collection costs. ,he company might consider !hich of the follo!ing forms of pricingA) by-product B) inflation-ad)usted C) cash discounts D) captive-product ) penetration Ans!er" C Diff" % #age $ef" %1: AAC&B" $eflective ,hin'ing &'ill" Application (b)ective" 11-% >1) &ecret &nea'er !ill give anyone E11 for their old snea'ers, regardless of condition, !hen purchasing a ne! pair of snea'ers. ,he end result is essentially reducing the price of the ne! snea'ers by E11. <hat is this type of price ad)ustment calledA) functional discount B) captive-product C) seasonal discount D) trade-in allo!ance ) by-product Ans!er" D Diff" 1 #age $ef" %1: AAC&B" $eflective ,hin'ing &'ill" Application (b)ective" 11-%

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>*) Bose prices its most e?pensive noise reduction earphones at E%>>.>6, !hich is a full E111.11 more than its ne?t most e?pensive earphones. 3t costs Bose only a fe! dollars more to ma'e the most e?pensive earphones. Bose is using ________ pricing. A) customer-segment B) product-form C) s'imming D) penetration ) captive-product Ans!er" B Diff" % #age $ef" %1: AAC&B" $eflective ,hin'ing &'ill" Application (b)ective" 11-% >%) ,he Chicago Bears organiCation charges different prices for seats in different areas of the &oldier Iield, even though the costs are the same. ,his form of pricing is called ________. A) location pricing B) s'imming pricing C) product form pricing D) fle?ible pricing ) penetration pricing Ans!er" A Diff" * #age $ef" %1: AAC&B" $eflective ,hin'ing &'ill" Application (b)ective" 11-% >5) 7anor Cinemas has announced that seniors over :1 years of age can enter the theater for free prior to 5"11 p.m. !hen accompanied by a paying customer. ,his is an e?ample of ________. A) promotional pricing B) discounts and allo!ances C) by-product pricing D) product bundle pricing ) none of the above Ans!er" A Diff" * #age $ef" %*1 AAC&B" $eflective ,hin'ing &'ill" Application (b)ective" 11-%

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>6) ,he HC <hitney Company of Chicago offers replacement parts for older 8ol's!agen Beetles. #arts are often shipped from other locations throughout the Jnited &tates. 4o!ever, the company charges for shipping as if every part !as shipped from their Chicago head/uarters. ,he company practices ________. A) I(B-origin pricing B) uniform-delivered pricing C) Cone pricing D) basing-point pricing ) none of the above Ans!er" D Diff" * #age $ef" %*1 AAC&B" $eflective ,hin'ing &'ill" Application (b)ective" 11-% >:) 3f +orth!est A!nings charges the same price for delivery of their product to any customer that is located !ithin the Freat 9a'es states, the company is using ________. A) psychological pricing B) promotional pricing C) reference pricing D) Cone pricing ) uniform-delivered pricing Ans!er" D Diff" % #age $ef" %*1 AAC&B" $eflective ,hin'ing &'ill" Application (b)ective" 11-% >0) Big 7i'e.s 4ealth Iood &tore sells nutritional energy-producing foods. ,he price of the products sold varies according to individual customer accounts and situations. Ior e?ample, long-time customers receive discounts. ,his strategy is an e?ample of ________. A) price elasticity B) cost-plus pricing C) dynamic pricing D) value pricing ) penetration pricing Ans!er" C Diff" % #age $ef" %** AAC&B" $eflective ,hin'ing &'ill" Application (b)ective" 11-%

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>=) &avings for Mou, a discount retail chain, is highly competitive. <hen entering a ne! mar'et, &avings for Mou often cuts prices so deeply that it sells belo! costs, effectively pushing smaller companies !ith less purchasing po!er out of the mar'et. &avings for Mou is most at ris' of being accused of ________. A) mar'et s'imming B) price-fi?ing C) deceptive pricing D) price confusion ) predatory pricing Ans!er" Diff" * #age $ef" %*= AAC&B" $eflective ,hin'ing &'ill" Application (b)ective" 11-% Refer to the scenario below to answer the following questions. Guills, 3nc., is a manufacturer of ballpoint pens, pencils, and stationery. ,he firm.s primary distribution strategy is to sell in large volumes to office supply stores and large discount chains. Charles #o!ell, C ( of Guills, had hoped to manufacture and sell in large enough /uantities that prices could be held lo!. 4o!ever, in the first several months, the firm e?perimented !ith the price portion of its mar'eting mi? in an effort to cater to a number of mar'ets. >>) <hy might have Charles #o!ell have avoided using mar'et-s'imming pricing at GuillsA) A high price !as li'ely to produce more mar'et gro!th. B) 3t !as difficult for competitors to enter the mar'et. C) ,he costs of producing a larger volume of the firm.s products !ere too high. D) ,he /uality and image of the products !ould not have li'ely supported the high initial price. ) ,he mar'et for the products !as not highly price sensitive. Ans!er" D Diff" * #age $ef" %1* AAC&B" $eflective ,hin'ing &'ill" Application (b)ective" 11-1 111) By offering a set of pens pac'aged !ith stationery and matching envelopes, Guills is using ________. A) optional product pricing B) product bundle pricing C) by-product pricing D) dynamic pricing ) price-fi?ing Ans!er" B Diff" * #age $ef" %16 AAC&B" $eflective ,hin'ing &'ill" Application (b)ective" 11-*
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111) #ricing strategies tend to change and evolve as the average product passes through its life cycle. Ans!er" ,$J Diff" 1 #age $ef" %1* &'ill" Concept (b)ective" 11-1 11*) <hen 7urphy.s Candies sets a lo! initial price in order to get its Kfoot in the doorK and /uic'ly attract a large number of buyers, the company is practicing mar'et-s'imming pricing. Ans!er" IA9& Diff" * #age $ef" %1* AAC&B" $eflective ,hin'ing &'ill" Concept (b)ective" 11-1 11%) 7ar'et-s'imming is a more popular strategy for pricing ne! products, !hile mar'etpenetration is a more popular strategy for pricing products that are more advanced in the product life cycle. Ans!er" IA9& Diff" % #age $ef" %1*-%1% &'ill" Concept (b)ective" 11-1 115) #ricing is often difficult because various products have related demand and costs, and they face different degrees of competition. Ans!er" ,$J Diff" 1 #age $ef" %1% &'ill" Concept (b)ective" 11-* 116) <ater 9ight Iishing Boats is li'e most companies. ,hey commercialiCe their ne! product ideas one at a time rather than developing a product line. Ans!er" IA9& Diff" * #age $ef" %1% &'ill" Concept (b)ective" 11-* 11:) Hust 4ats prices its various types of caps at ten different price levels, ranging from E*.11 to E5.>6. ,his is an illustration of price steps. Ans!er" ,$J Diff" 1 #age $ef" %15 AAC&B" $eflective ,hin'ing &'ill" Application (b)ective" 11-*

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110) <hen Hohnny (n the &pot, a house mover, sells bo?es and pads that must be used in moving a household.s furniture, the company is practicing by-product pricing. Ans!er" IA9& Diff" * #age $ef" %16 AAC&B" $eflective ,hin'ing &'ill" Application (b)ective" 11-* 11=) &ome industries commonly use t!o-part pricing, brea'ing the price do!n into a fi?ed fee and a fi?ed usage rate. Ans!er" IA9& Diff" % #age $ef" %16 &'ill" Concept (b)ective" 11-* 11>) <hen a manufacturer see's a mar'et for by-products and accepts a price that covers more than the cost of storing and delivering those by-products, the manufacturer is able to reduce the main product.s price to ma'e it more competitive. Ans!er" ,$J Diff" * #age $ef" %16 AAC&B" Analytic &'ills &'ill" Application (b)ective" 11-* 111) <hen using product bundle pricing, sellers combine several of their products and offer the bundle at an increased price for increased profit. Ans!er" IA9& Diff" 1 #age $ef" %16 &'ill" Concept (b)ective" 11-* 111) 7ost companies ad)ust their basic prices to account for various customer differences and changing situations. Ans!er" ,$J Diff" * #age $ef" %16 &'ill" Concept (b)ective" 11-% 11*) A seasonal discount is a price reduction to buyers !ho buy merchandise or services !hile they are in season. Ans!er" IA9& Diff" * #age $ef" %1: &'ill" Concept (b)ective" 11-%

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11%) 7anufacturers may offer functional discounts !ithin trade channels for channel members !ho store inventory. Ans!er" ,$J Diff" % #age $ef" %1: &'ill" Concept (b)ective" 11-% 115) ,he basic difference bet!een customer-segment pricing and product-form pricing is that the latter offers alternative versions of the product that are priced differently but not according to differences in their costs. Ans!er" ,$J Diff" % #age $ef" %1: AAC&B" Analytic &'ills &'ill" Application (b)ective" 11-% 116) &egmented pricing is 'no!n by other names@ t!o of the most common are revenue management and yield management. Ans!er" ,$J Diff" * #age $ef" %10 &'ill" Concept (b)ective" 11-% 11:) <hen consumers cannot )udge the /uality of a product because they lac' information or s'ill, they are li'ely to perceive a higher-priced product as having higher /uality. Ans!er" ,$J Diff" * #age $ef" %10 &'ill" Concept (b)ective" 11-% 110) ,he fre/uent use of promotional pricing can lead to industry price !ars. Ans!er" ,$J Diff" * #age $ef" %*1 &'ill" Concept (b)ective" 11-% 11=) Jsed too fre/uently, promotional pricing can have the negative effect of decreasing the brand.s value in the eyes of customers. Ans!er" ,$J Diff" * #age $ef" %*1 &'ill" Concept (b)ective" 11-%

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11>) ,he I(B-origin pricing strategy means that the goods sold are placed free on board a carrier. At that point the title and responsibility pass to the customer, !ho pays the freight from the factory to the destination. Ans!er" ,$J Diff" % #age $ef" %*1 &'ill" Concept (b)ective" 11-% 1*1) None pricing involves the customer paying for the shipping if they live outside the Cone !here the company is located. Ans!er" IA9& Diff" * #age $ef" %*1 &'ill" Concept (b)ective" 11-% 1*1) Ii?ed price policiesone price for all buyersis a relatively modern idea that arose at the end of the nineteenth century. Ans!er" ,$J Diff" * #age $ef" %** &'ill" Concept (b)ective" 11-% 1**) A company considering a price change should be more concerned about consumers. reactions than competitors. reactions. Ans!er" IA9& Diff" % #age $ef" %*6 &'ill" Concept (b)ective" 11-5 1*%) Mour company may respond to a competitor.s price reduction by launching a lo!-price fighting brand. ,his is li'ely necessary if the particular mar'et segment being lost is price sensitive and !ill not respond to arguments of higher /uality. Ans!er" ,$J Diff" % #age $ef" %*0 &'ill" Concept (b)ective" 11-5 1*5) &tate and federal governments accept some reasons for price-fi?ing !hen it does not limit competition. Ans!er" IA9& Diff" * #age $ef" %*= AAC&B" thical $easoning &'ill" Concept (b)ective" 11-5

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1*6) <hen $edman.s 8ariety raised their store prices 51 percent and then ran a *1 percent off sale, $edman.s !as guilty of deceptive pricing. Ans!er" ,$J Diff" * #age $ef" %%1 AAC&B" thical $easoning &'ill" Application (b)ective" 11-5 1*:) Companies bringing out a ne! product can choose bet!een t!o broad strategies" mar'ets'imming pricing and mar'et-penetration pricing. Distinguish bet!een the t!o. Ans!er" 7ar'et s'imming is used to s'im revenues layer by layer from the mar'et by entering the mar'et !ith high initial prices. ,he product.s /uality and image must support its higher price, and enough buyers must !ant the product at that price. ,he costs of producing a smaller volume cannot be so high that they cancel the advantage of charging more. Competitors should not be able to enter the mar'et easily and undercut the high price. 7ar'et penetration is used to penetrate the mar'et /uic'ly and deeply to attract a large number of buyers /uic'ly and !in a large mar'et share by setting a lo! price initially !hen it enters the mar'et. ,he mar'et must be highly price sensitive so that a lo! price produces more mar'et gro!th. #roduction and distribution costs must fall as sales volume increases. Also, the lo! price must help 'eep out competition and be maintained over time. Diff" * #age $ef" %1*-%1% AAC&B" Analytic &'ills &'ill" Application (b)ective" 11-1 1*0) &ensenig #ropeller manufactures replica anti/ue !ooden airplane propellers. 3n the process of producing these products they generate a great deal of scrap hard!ood. <hich pricing mi? strategy should they use, and ho! does it functionAns!er" Jsing by-product pricing, &ensenig !ill see' a mar'et for the hard!ood or by-products and should accept any price that covers more than the cost of storing and delivering the byproducts. ,his practice allo!s the &ensenig to reduce the main product.s price to ma'e it more competitive. &ensenig might even find that the by-products themselves are profitable. Diff" 1 #age $ef" %16 AAC&B" Analytic &'ills &'ill" Application (b)ective" 11-*

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1*=) ?plain product line pricing. Ans!er" <ith this option, management must decide on the price steps to set bet!een the various products in a line. ,he price steps should ta'e into account cost differences bet!een the products in a line, customer evaluations of their different features, and competitors. prices. ,he seller.s tas' is to establish perceived /uality differences that support the price differences bet!een various price points. Diff" 1 #age $ef" %1% AAC&B" Analytic &'ills &'ill" Application (b)ective" 11-* 1*>) <hy do businesses use cash discounts !hen they are in essence losing some money on the saleAns!er" &uch discounts are customary in many industries in order to re!ard a customer !ho pays their bill promptly. ,he practice encourages customers to pay early, giving the firm /uic'er and more reliable access to cash. A cash discount can also help to build customer loyalty to the firm. Diff" * #age $ef" %1: AAC&B" Analytic &'ills &'ill" Application (b)ective" 11-% 1%1) Describe the differences bet!een dynamic and fi?ed pricing. Ans!er" ,hroughout most of history, prices !ere set by negotiation bet!een buyers and sellers.,he fi?ed price policysetting one price for all buyersis a relatively modern idea that arose !ith the development of large-scale retailing at the end of the nineteenth century. ,oday most prices are set this !ay. 4o!ever, some companies are no! reversing the fi?ed pricing trend. ,hey are using dynamic pricing, ad)usting prices continually to meet the characteristics and needs of individual customers and situations. Dynamic pricing ma'es sense in many conte?ts, it ad)usts prices according to mar'et forces, and it often !or's to the benefit of the customer Diff" 1 #age $ef" %** AAC&B" Analytic &'ills &'ill" Application (b)ective" 11-%

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1%1) ?plain the factors involved in setting international pricing. Ans!er" 3n some cases, a company can set a uniform !orld!ide price. 4o!ever, most companies ad)ust their prices to reflect local mar'et conditions and cost considerations. A firm must consider economic conditions, competitive situations, la!s and regulations, and development of the !holesale and retail system. Consumer perceptions and preferences also may vary from country to country, calling for different prices. ,he company may have different mar'eting ob)ectives in various !orld mar'ets. Costs play an important role in setting international prices. 7anagement must prepare for price escalation that may result from the differences in selling strategies or mar'et conditions. ,he additional costs of product modifications, shipping and insurance, import tariffs and ta?es, e?change-rate fluctuations, and physical distributions must all be factored into the Kprice.K Diff" * #age $ef" %*% AAC&B" 7ulticultural and Diversity &'ill" Application (b)ective" 11-% 1%*) <hen !ould price cuts and price increases be necessaryAns!er" #rice cuts may be necessary !hen there is e?cess capacity. Another time to cut prices is !hen mar'et share is falling in the face of strong price competition. A company may also cut prices in a drive to dominate the mar'et through lo!er costs. A ma)or factor in price increases is cost inflation. $ising costs s/ueeCe profit margins and lead companies to pass cost increases along to customers. Another factor leading to price increases is over-demand. <hen a company cannot supply all its customers. needs, it can raise its prices, ration products to customers, or both. Diff" % #age $ef" %*5 AAC&B" Analytic &'ills &'ill" Application (b)ective" 11-5 1%%) <hen are competitors most li'ely to react to price changes- 4o! can a firm anticipate the li'ely reactions of its competitorsAns!er" Competitors are most li'ely to react !hen the number of firms involved is small, !hen the product is uniform, and !hen the buyers are !ell informed. 3f the firm faces one large competitor, and if the competitor tends to react in a set !ay to price changes, that reaction can be easily anticipated. But if the competitor treats each price change as a fresh challenge and reacts according to its self-interest, the company !ill have to figure out )ust !hat ma'es up the competitor.s self-interest at the time. Diff" * #age $ef" %*6-%*: AAC&B" Analytic &'ills &'ill" Application (b)ective" 11-5

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1%5) <hat regulates pricing activities !hen the federal government does notAns!er" &tates often regulate these activities. ,he most important pieces of federal legislation affecting prices are the &herman, Clayton, and $obinson-#atman Acts, initially adopted to curb the formation of monopolies and to regulate business practices that might unfairly restrain trade. Because these statutes can be applied only to interstate commerce, many states have adopted similar provisions for companies that operate locally. ?amples include pricing !ithin channel levels and pricing across channel levels. Diff" * #age $ef" %*0 AAC&B" thical $easoning &'ill" Application (b)ective" 11-5 1%6) Compare the practices of price-fi?ing and predatory pricing, e?plaining !hy each is prohibited by la!. Ans!er" 7any federal, state, and local la!s govern the rules of fair play in pricing. ,!o ma)or areas of concern are price-fi?ing and predatory pricing. Companies that engage in price-fi?ing collude to set a common price for their comparable products@ price-fi?ing undermines the core element of price competition in our free-mar'et economy. (n the other hand, predatory pricing ta'es price competition too far. #redatory pricing occurs !hen a company sells a product belo! cost !ith the intention of punishing a competitor or by putting a competitor out of business. Diff" % #age $ef" %*=-%*> AAC&B" thical $easoning &'ill" Application (b)ective" 11-5 1%:) Ior !hat types of products might mar'eters use mar'et-s'imming pricingAns!er" &uch pricing !or's !hen the product.s /uality and image support the higher price@ for e?ample, companies selling high-tech electronics may use mar'et-s'imming pricing. Diff" * #age $ef" %1* AAC&B" Analytic &'ills &'ill" Application (b)ective" 11-1 1%0) Ior !hat types of products might mar'eters use mar'et-penetration pricingAns!er" 7ar'eters use such pricing !hen attempting to attract a large number of buyers /uic'ly and !in a large mar'et share@ such pricing may be common !hen competition for products is high. Diff" * #age $ef" %1% AAC&B" Analytic &'ills &'ill" Application (b)ective" 11-1

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1%=) <hy is product line pricing usedAns!er" &uch pricing is used to establish price rangesor price steps!ithin product lines. Diff" 1 #age $ef" %1% AAC&B" Analytic &'ills &'ill" Application (b)ective" 11-* 1%>) Five t!o e?amples of products for !hich mar'eters may use optional-product pricing. Ans!er" &uch products may include refrigerators !ith icema'ers and cars !ith options such as stereos, F#&, and cruise control. Diff" 1 #age $ef" %15 AAC&B" $eflective ,hin'ing &'ill" Application (b)ective" 11-* 151) Five t!o e?amples of products for !hich captive-product pricing may be used. Ans!er" Captive-product pricing is used !hen pricing theater tic'ets and selling refreshments at a higher rate@ it is also used !hen pricing game consoles along !ith video games. Diff" % #age $ef" %15 AAC&B" $eflective ,hin'ing &'ill" Application (b)ective" 11-* 151) Five t!o e?amples of by-product pricing. Ans!er" ?amples could include selling scrap metal after producing metal stampings or selling donut holes after producing donuts. Diff" * #age $ef" %16 AAC&B" $eflective ,hin'ing &'ill" Application (b)ective" 11-* 15*) 4o! do consumers benefit from product bundle pricingAns!er" &everal products are sold together at a reduced rate@ vacation pac'ages that include air and hotel or value meals in the fast-food industry are e?amples. Diff" * #age $ef" %16 AAC&B" Analytic &'ills &'ill" Application (b)ective" 11-* 15%) Five an e?ample of a cash discount. Ans!er" <ith a *D11, net %1 arrangement, for e?ample, the customer can deduct * percent if the bill is paid !ithin 11 days. Diff" % #age $ef" %1: AAC&B" Analytic &'ills &'ill" Application (b)ective" 11-%

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155) 9ist four types of segmented pricing. Ans!er" Customer-segment pricing, product-form pricing, location pricing, and time pricing are all e?amples. Diff" % #age $ef" %1: AAC&B" Analytic &'ills &'ill" Application (b)ective" 11-% 156) ?plain the psychology behind a price of E>.>> instead of E11.11. Ans!er" Consumers typically see the E>.>> product in the E> range instead of the E11 range@ the price appears to psychologically be cheaper. Diff" * #age $ef" %*1 AAC&B" Analytic &'ills &'ill" Application (b)ective" 11-% 15:) 9.9. Bean sells its catalog items I(B-origin pricing. <ho pays the freight chargesAns!er" ,he customer pays for the freight. Diff" * #age $ef" %*1 AAC&B" $eflective ,hin'ing &'ill" Application (b)ective" 11-% 150) ?plain t!o different !ays a consumer might vie! a price cut. Ans!er" A consumer might believe that he or she is getting a good deal on a /uality product, or a consumer might believe that the /uality of the product has been reduced. Diff" * #age $ef" %*6 AAC&B" Analytic &'ills &'ill" Application (b)ective" 11-5 15=) <hy is predatory pricing considered illegalAns!er" #redatory pricing !or's against the principles of a free-enterprise system@ predatory pricing allo!s the mar'eters to sell belo! cost !ith the intention of punishing competitors. Diff" * #age $ef" %*> AAC&B" thical $easoning &'ill" Application (b)ective" 11-5 15>) 4o! can a manufacturer avoid using retail price maintenance but still e?ert some influence over the price retailers charge for its productAns!er" ,he manufacturer can propose a suggested retail price. Diff" 1 #age $ef" %%1 AAC&B" thical $easoning &'ill" Application (b)ective" 11-5

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161) 4o! does deceptive pricing harm consumersAns!er" Deceptive pricing occurs !hen a seller states prices or price savings that mislead consumers or are actually not available to consumers. Diff" * #age $ef" %%1 AAC&B" thical $easoning &'ill" Application (b)ective" 11-5

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