49) A customer orientation toward pricing implicitly invokes the concept of
A) knowing the dimensions of the target market.
B) positioning.
C) the income effect.
D) value.
E) profit.
50) A firm uses customer orientation when it sets its pricing strategy based on how it can add
value to its products or services. A “no haggle” pricing policy is a type of ________ pricing
strategy.
A) maximizing profits
B) sales orientation
C) target return
D) status quo
E) customer-oriented
51) Julia’s is an upscale women’s clothing store. Prices are based on customers’ beliefs about the
value of the clothing. The store focuses on a limited target market and provides excellent
customer service. Julia’s is using a ________ pricing strategy.
A) customer-oriented
B) target profit
C) target return
D) status quo
E) maximizing profits
52) A strategy of setting prices based on how customers develop their perceptions of value can
often be the most effective pricing strategy, especially if the strategy
A) leads the marketer to being the low-cost seller.
B) is supported by consistent advertising and distribution strategies.
C) challenges consumers to discard their perceptions of value.
D) is consistent with a competitive target return strategy.
E) is measured against the competition.
53) Traditional demand curve economic theory is used by marketers to understand ________ in
the five Cs of pricing.
A) competitors
B) channel members
C) cost
D) consumers
E) company objectives
54) Customers must see value in a product or service before they are willing to exchange time or
money to obtain it, but not all customers see the same value in a product. To analyze how many
units will be sold at any given price point, marketers draw on
A) a demand curve.
B) the law of averages.
C) multiple regression analyses.
D) target return strategies.
E) a sales orientation.
55) A demand curve shows the relationship between ________ during a specific period of time.
A) income and demand
B) price and costs
C) price and elasticity
D) profit and price
E) price and demand
56) A demand curve is built on the assumption that
A) income is derived from demand.
B) price remains the same, and fixed costs change.
C) everything but price and demand remains the same.
D) fixed costs change with quantity demanded.
E) the firm does not advertise.
57) According to a typical demand curve, the higher the price,
A) the greater the income effect.
B) the lower the quantity consumers will buy.
C) the lower the output of producers.
D) the greater the production costs.
E) the lower the cross-price elasticity.
58) There is an old saying “If you have to ask the price of a yacht, you cannot afford it.” Products
like yachts are most likely to be associated with
A) cross-shopping.
B) competitive parity pricing.
C) target return value.
D) prestige pricing.
E) break-even point pricing.
59) The price elasticity of demand for a teeth–whitening kit is −1. The market for this product is
considered
A) inelastic.
B) elastic.
C) dynamic.
D) saturated.
E) a prestige market.
60) The price elasticity of demand for a specific brand of deodorant is 1. The market for this
product is considered
A) inelastic.
B) elastic.
C) saturated.
D) dynamic.
E) a prestige market.
61) When it comes to measuring consumers’ price sensitivity, products are viewed as either
A) elastic or inelastic.
B) fixed or variable.
C) complementary or substitutable.
D) necessary or optional.
E) dynamic or rigid.
62) For which of the following is demand likely to be least sensitive to price increases?
A) spring break vacations
B) a specific brand of cereal
C) prescription drugs
D) theater tickets
E) restaurant meals
63) For which of the following is demand likely to be most sensitive to price increases?
A) prescription drugs
B) college tuition for last-semester seniors
C) electricity
D) hospital care
E) a specific brand of soft drink
64) A study found that, among addicted smokers, a 10 percent increase in the price of cigarettes
resulted in a 2 percent decrease in quantity demanded. For these consumers, cigarettes have a(n)
________ price elasticity demand.
A) elastic
B) inelastic
C) cross-price
D) income effect
E) substitution effect
65) What situation is occurring if a 1 percent decrease in price results in more than a 1 percent
increase in quantity demand?
A) Demand is cross-price elastic.
B) Demand is price inelastic.
C) Demand is price elastic.
D) Demand maintains the status quo.
E) Demand results in the income effect.
66) Assume the demand for electricity, a necessity with few substitutes, is −0.2. If the electric
company raised its rates by 10 percent, we would expect a
A) 10 percent decrease in quantity demanded.
B) 2 percent increase in quantity demanded.
C) 10 percent increase in quantity demanded.
D) 2 percent decrease in quantity demanded.
E) 5 percent decrease in quantity demanded.
67) If a 1 percent decrease in price results in less than a 1 percent increase in the quantity
demanded, demand is
A) cross-price elastic.
B) price inelastic.
C) price elastic.
D) status quo elastic.
E) derived demand inelastic.
68) Barry customizes Harley-Davidson motorcycles. No two cycles are alike. He notices that
very few customers even ask the price of his motorcycles before they decide to purchase them.
Demand for his motorcycles is probably
A) price sensitive.
B) price elastic.
C) price inelastic.
D) income elastic.
E) cross-price elastic.
69) The observation that consumers are generally more sensitive to price increases than to price
decreases suggests that
A) most consumers cannot remember what price they paid the last time they bought a particular
product.
B) it is easier to lose customers with a price increase than to gain customers with a price
decrease.
C) most consumers would rather skip buying a product than pay a higher price.
D) most consumers are emotionally attached to their favorite products and are unlikely to
change, even if the price changes.
E) firms gain more customers with price decreases than they lose with price increases.
70) The Coffee Express company is located in a business district with few customers on the
weekend. To attract customers on Saturday and Sundays, it reduces its prices on these two days.
This is an example of
A) dynamic pricing.
B) the substitution effect.
C) the income effect.
D) the target return effect.
E) cross-price elasticity.
71) French luxury goods manufacturer and retailer Hermès is known for making expensive
leather goods. But paying $300,168 for a handbag at auction, which is over the standard retail
price of $280,000, is extraordinary, and not for the casual shopper. The handbag is considered a
A) product in demand.
B) inelastic product.
C) elastic product.
D) custom product.
E) prestige product.
72) Natalie operates on a pretty tight budget. She is a price-conscious shopper and usually buys
store or generic brands to save money. Recently, however, Natalie was given a pretty substantial
raise. As such, she has altered her shopping patterns and now regularly buys more expensive,
name-brand goods. This is an example of
A) the substitution effect.
B) the price inelasticity coefficient.
C) the income effect.
D) the target return effect.
E) cross-price elasticity.
73) Sales of national brands of orange juice tend to increase when the economy is doing well,
while sales of generic orange juice increase when the economy is not doing well. This is an
example of how ________ impacts demand for products.
A) dynamic pricing
B) the price inelasticity coefficient
C) the income effect
D) the target return effect
E) cross-price elasticity
74) Rodi owns Hallman’s auto repair service. He has observed over the years that customers keep
their high-mileage cars longer when the economy is doing poorly, creating demand for his
maintenance and repair service. Rodi has observed the impact of ________ on demand for his
service.
A) break-even points
B) the price inelasticity ratio
C) the income effect
D) the target return effect
E) cross-price elasticity
75) There are many options available to consumers when it comes to breakfast cereals. So, if
Kellogg’s significantly increases the price of Rice Krispies, consumers are more apt to buy
alternate cereals instead. This illustrates which concept?
A) the income effect
B) the substitution effect
C) the break-even point
D) the target return effect
E) cross-price elasticity
76) The more substitutes that exist in a market,
A) the lower the price elasticity for each product.
B) the greater the income elasticity for each product.
C) the easier it will be to utilize a target profit pricing strategy.
D) the more sensitive consumers will be to changes in the price of a particular product.
E) the more likely the market will be characterized as an oligopoly.
77) Brad always buys and uses Nike brand golf balls. If he finds a Titleist or Callaway ball in the
rough, he gives it away. Brand-loyal golfers like Brad allow Nike to charge a higher price and
not lose many sales. By building a strong brand, Nike has effectively
A) increased the income effect for its products.
B) increased the cross-price elasticity for its products.
C) focused on the competitive parity point for its products.
D) shifted the golf ball market from a monopoly to pure competition.
E) reduced the price elasticity of demand for its products.
78) Marketers spend millions of dollars annually trying to create or reinforce brand loyalty.
Brand loyalty changes the demand curve for the firm’s products by
A) reducing the price elasticity of demand.
B) making demand more oligopolistic and less monopolistic.
C) increasing the income effect.
D) reducing fixed costs and increasing the gray marketing effect.
E) shifting the market from a monopoly to pure competition.
79) Cross-price elasticity is the
A) percentage change in quantity of a product demanded divided by the percentage change in its
price.
B) percentage change in quantity demanded of Product A compared to the percentage change in
price of Product B.
C) change in price of Product A divided by change in quantity demanded for Product B.
D) change in quantity of a product demanded divided by the change in its price.
E) change in quantity of a product demanded divided by the change in its elasticity.
80) ________ products are products whose demands are positively related and as such, they rise
or fall together.
A) Substitute
B) Premium
C) Elastic
D) Inelastic
E) Complementary
81) Which of the following is the most logical example of complementary products?
A) hot dogs and hamburgers
B) VCRs and DVD players
C) hot dogs and hot dog buns
D) Honda cars and Toyota cars
E) a university and a corporation
82) Bill is a yacht broker in the southeastern United States. For years he has had difficulty selling
large yachts locally because there were few places to dock these boats. Yachts and spaces to
dock them are an example of
A) substitute products.
B) purely competitive products.
C) status quo pricing products.
D) complementary products.
E) competitive parity products.
83) If the price for a product increases, the demand for the complementary product will
A) decrease.
B) increase.
C) stay the same.
D) become more elastic.
E) become more inelastic.
84) Frank’s Heating and Air Conditioning Company specializes in electric heat pumps. Frank
keeps track of the price of natural gas, knowing that
A) natural gas creates more environmental greenhouse effects than coal.
B) an increase in the price of natural gas will increase demand for his electrical heating systems.
C) gas heating systems and electrical heating systems are complementary goods.
D) when the price of natural gas goes up, the quantity demanded also rises.
E) the demand for natural gas is price elastic.
85) Managers of Wendy’s fast-food restaurants keep track of prices at competitors such as
McDonald’s, Burger King, and Arby’s, knowing that a decrease in the prices at these other fast–
food restaurants will
A) increase the income effect for Wendy’s products.
B) increase demand for Wendy’s products.
C) decrease the income effect for Wendy’s products.
D) increase the complementary effect for Wendy’s products.
E) decrease demand for Wendy’s products.
86) One problem in relying on price elasticity and demand curves when setting prices is
A) the way a product or service is marketed can have a profound impact on price elasticity.
B) the underlying ideas of the demand curve and elasticity are less relevant in the modern
economy.
C) only economists can properly analyze demand curves and set prices using this tool.
D) competitors can construct the same demand curves, so there is no advantage in using them.
E) marketing split from economics over the ideas of demand and elasticity.
87) In general, prices should not be based on costs because
A) consumers are cost-conscious.
B) producers rarely know what their costs are.
C) consumers make their purchase decisions based on perceived value.
D) producers need to avoid creating a cost competitive parity debate.
E) customers are always right.
88) Consider a bakery like Entenmann’s: The majority of the ________ costs are the cost of the
ingredients, primarily flour.
A) fixed
B) incidental
C) prestige
D) inelastic
E) variable