41) ________ costing includes only those costs that vary directly with the volume of an item
produced.
A) Absorption
B) Break-even
C) Indirect
D) Direct
Topic: Pricing Techniques for Manufacturers
AACSB: Analytic Skills
42) ________ tells what portion of the total revenues remains after covering variable costs to
contribute toward meeting fixed expenses and earning a profit.
A) The full-absorption statement
B) The break-even selling price
C) The contribution percentage
D) Cost-plus pricing
Topic: Pricing Techniques for Manufacturers
AACSB: Analytic Skills
43) Even in the short run, a small business must set the price of a product at least equal to the
________ costs (per unit), or it must shut down.
A) fixed
B) variable
C) total
D) invariable
Topic: Pricing Techniques for Manufacturers
AACSB: Analytic Skills
44) Most service firms base their prices on:
A) fairly stable pricing policies.
B) the cost of the service plus an estimate of the value they add in delivering the service.
C) market surveys on their respective industries.
D) an hourly basis for services rendered.
Topic: Pricing Techniques for Service Firms
AACSB: Analytic Skills
11
45) To establish a reasonable, profitable price for service, the small business owner needs to
know:
A) fixed and variable costs, the break-even point, and his/her contribution percentage.
B) competitors’ prices, and costs of direct and indirect labor.
C) the cost of materials, direct labor, and overhead for each unit of service.
D) full-absorption costs, direct and indirect labor, and the break-even point.
Topic: Pricing Techniques for Service Firms
AACSB: Analytic Skills
46) A customer who purchases a television from Ace Appliance Store and pays for it in 36
monthly payments is using:
A) trade credit.
B) charge account credit.
C) installment credit.
D) debit card credit.
Topic: Installment Credit
AACSB: Analytic Skills
47) A firm sells small-ticket items to their regular customers on customer charge accounts and
then bills the customers each month. This type of credit arrangement is called:
A) trade credit.
B) charge account credit.
C) installment credit.
D) debit card credit.
Topic: Trade Credit
AACSB: Analytic Skills
48) A variation of geographic pricing in which the small company sells its merchandise to
customers on the condition that they pay all the shipping is called:
A) uniform delivered pricing.
B) F.O.B. factory.
C) zone pricing.
D) discounts.
Topic: Pricing Techniques for Established Products and Services
AACSB: Analytic Skills
12
49) F.O.B. factory is a variation of ________ pricing.
A) opportunistic
B) bundling
C) geographic
D) skimming
Topic: Pricing Techniques for Established Products and Services
AACSB: Reflective Thinking
50) When developing a marketing approach to pricing, business owners must:
A) establish prices that are compatible with their customers’ expectations and what they are
willing to pay.
B) compete solely on price.
C) establish prices that are compatible with their customers’ expectations and add a certain
percentage to it.
D) establish prices that are compatible with their customers’ expectations and subtract a certain
percentage to it.
Topic: Three Powerful Pricing Forces: Image, Competition, and Value
AACSB: Analytic Skills
51) Price wars usually begin when:
A) the economy is in turmoil.
B) when there are more than 4 competitors.
C) when one competitor believes that they can achieve a higher volume through lower price.
D) small businesses enter the market dominated by bigger giants.
Topic: Three Powerful Pricing Forces: Image, Competition, and Value
AACSB: Analytic Skills
52) Customers that sell small-ticket items frequently offer their customers:
A) discounts.
B) installment credit option.
C) “store value” cards.
D) trade credit.
Topic: Trade Credit
AACSB: Analytic Skills
13
53) The price that business owners set depends on the desired image they want to create for their
products or services. These images are:
A) discount.
B) value.
C) upscale.
D) All of the above
Topic: Introduction
AACSB: Analytic Skills
54) Brenda is starting her business by offering exclusive hand-bags. The desired image that she
should set for her handbags is “exclusive.” She should set the price at:
A) discount.
B) bargain.
C) value.
D) upscale.
Topic: Introduction
AACSB: Reflective Thinking
55) In most cases, a ________ pricing strategy is used to introduce relatively low priced goods
into the market where no elite segment and little opportunity for differentiation exist.
A) skimming
B) penetration
C) geographic
D) opportunistic
Topic: Penetration Pricing
AACSB: Analytic Skills
56) Uniform delivered pricing is a variation of:
A) opportunistic pricing.
B) leader pricing.
C) geographic pricing.
D) multiple pricing.
Topic: Geographic Pricing
AACSB: Analytic Skills
14
57) Which price strategy is mostly used for moving stale, outdated, damaged merchandise?
A) Markdown pricing
B) Multiple pricing
C) Bundling
D) Skimming
Topic: Discounts
AACSB: Analytic Skills
58) XYZ manufactures computer hardware. The marketing executives, in order to increase the
market share, forced a business to accept a suggested retail price and not to sell the items below
the stated price.
A) This practice violates the Sherman Antitrust Act.
B) There is no violation. According to a recent Supreme Court decision, this is fine.
C) This practice violates the Fair Price Protection Act.
D) As long as the manufacturer offers rebates, they can do whatever they want.
Topic: Suggested Retail Prices
AACSB: Reflective Thinking
59) For some customers, a higher price equals:
A) higher quality.
B) greater perceived value.
C) uniqueness.
D) All of the above
Topic: Price Conveys Image
AACSB: Analytic Skills
60) Price ________ usually begin(s) when one competitor believes that they can achieve a higher
volume through lower price, or they believe that they can exert enough pressure on other
competitors’ profits to drive them out of business.
A) discounts
B) markdowns
C) wars
D) penetration
Topic: Competition and Prices
AACSB: Analytic Skills
15
61) The problem with using ________ is that it clouds the true relationships among price,
volume, and costs by including fixed expenses in unit cost.
A) full-absorption costing
B) variable costing
C) contribution margin costing
D) break-even costing
Topic: Direct Costing and Pricing
AACSB: Analytic Skills
62) Which of the following is correct?
A) Sales – variable costs – fixed costs = contribution margin
B) Total revenue – variable costs = contribution margin
C) Total revenue – fixed costs = contribution margin
D) Total revenue – profit = contribution margin
Topic: Direct Costing and Pricing
AACSB: Analytic Skills
63) Which of the following is a fair definition of price?
A) In purely economic terms, price is the monetary value of a good or service.
B) Price is a measure of what a customer is required to give up to obtain a good or service.
C) None of the above
D) Both A and B
Topic: Pricing: The Creative Blend of Art and Science
AACSB: Analytic Skills
64) The price floor is established:
A) by the firm’s total cost.
B) by the consumers.
C) by the government.
D) None of the above
Topic: Pricing: The Creative Blend of Art and Science
AACSB: Analytic Skills
16
65) Businesses faced with rapidly rising raw materials costs should consider the following
strategies:
A) Communicate with customers and focus on improving efficiency everywhere in the company.
B) Emphasize the value your company provides to customers.
C) Anticipate rising materials costs and try to lock in prices early.
D) All of the above
Topic: Pricing: The Creative Blend of Art and Science
AACSB: Analytic Skills
66) Most often, small business owners ________ their goods and services, believing that
________ prices are the only way they can achieve a competitive advantage.
A) over price; high
B) under price; low
C) over price; low
D) under price; high
Topic: Price Conveys Image
AACSB: Analytic Skills
67) Two factors are vital to studying the effects of competition on a small firm’s pricing policies:
A) the location of the competitors and the nature of the competing goods.
B) the pricing.
C) the location of the competitors and their marketing efforts.
D) Both A and B
Topic: Competition and Prices
AACSB: Analytic Skills
68) Three objectives of new product pricing are:
A) get the product accepted, maintain market share as competition grows, and earn a profit.
B) get the product accepted, avoid price wars, and earn a profit.
C) maintain market share as competition grows, earn profits, and increase sales.
D) None of the above
Topic: Pricing Strategies and Tactics
AACSB: Analytic Skills
17
69) Judith started her business in 1995. During the years, she sold different products she
purchased from distributors and manufacturers. One day, she came up with a new product. She
patented the product and got started to sell the product. What should be the objectives of her
pricing strategies?
A) Get the product accepted
B) Maintain market share as competition grows
C) Earn a profit
D) All of the above
Topic: Pricing Strategies and Tactics
AACSB: Reflective Thinking
70) A ________ pricing strategy often is used when a company introduces a new product into a
market with little or no competition.
A) price war
B) competitive
C) skimming
D) price floor
Topic: Pricing Strategies and Tactics
AACSB: Analytic Skills
71) As sales volume increases with the broad acceptance of the new products, the firm can lower
its price. This is a characteristic of:
A) price wars.
B) competitive pricing.
C) skimming.
D) penetration.
Topic: Pricing Strategies and Tactics
AACSB: Analytic Skills
72) Small businesses whose pricing decisions are greatly affected by the costs of shipping
merchandise to customers across a wide range of geographic regions frequently employ one of
the ________ techniques.
A) opportunistic pricing
B) geographic pricing
C) leader pricing
D) price lining
Topic: Pricing Techniques for Established Products and Services
AACSB: Analytic Skills
18
73) ________ is grouping together several products or services, or both, into a package that
offers customers extra value at a special price.
A) Leader pricing
B) Price lining
C) Discount pricing
D) Bundling
Topic: Pricing Techniques for Established Products and Services
AACSB: Analytic Skills
74) ________ pricing is when the base product is not functional without the appropriate
accessory.
A) Captive-product
B) Optional-product
C) By-product
D) None of the above
Topic: Pricing Techniques for Established Products and Services
AACSB: Analytic Skills
75) Price is the monetary value of a good or service in the marketplace.
Topic: Pricing: The Creative Blend of Art and Science
AACSB: Analytic Skills
76) Price is a measure of what the customer must exchange to obtain goods and services and is
an indicator of value to the customer.
Topic: Pricing: The Creative Blend of Art and Science
AACSB: Analytic Skills
77) For most products, there is an ideal price.
Topic: Pricing: The Creative Blend of Art and Science
AACSB: Analytic Skills
78) The price floor of a product or service is set by the company’s cost structure.
Topic: Pricing: The Creative Blend of Art and Science
AACSB: Analytic Skills
19
79) All firms within an industry have the same price floor.
Topic: Pricing: The Creative Blend of Art and Science
AACSB: Analytic Skills
80) Proper pricing is a balancing act, walking between a high enough price to cover profit
margins and convey the right image and low enough to attract customers.
Topic: Pricing: The Creative Blend of Art and Science
AACSB: Analytic Skills
81) If a company wants quick acceptance and extensive distribution, when introducing a new
product into a highly competitive market with a large number of similar products, penetration
pricing is the best strategy.
Topic: Pricing Strategies and Tactics, Skimming
AACSB: Reflective Thinking
82) Penetration pricing is a short-term pricing strategy and achieves tremendous profit.
Topic: Pricing Strategies and Tactics, Skimming
AACSB: Analytic Skills
83) A penetration pricing strategy is designed to recover a company’s developmental and
promotional cost of a new product very quickly.
Topic: Pricing Strategies and Tactics, Skimming
AACSB: Analytic Skills
84) A skimming pricing strategy sets a relatively high price for a product to appeal to the
segment of the market which is not sensitive to price.
Topic: Pricing Strategies and Tactics, Skimming
AACSB: Analytic Skills
85) The skimming pricing strategy is used when there is a lot of competition in the market.
Topic: Pricing Strategies and Tactics, Skimming
AACSB: Analytic Skills
20