117) Production of the DeLorean car, made famous in the film Back to the Future, never got
above 25,000 units during its lifetime. Automobile industry analysts estimate that production of
this car needed to reach around 300,000 units to achieve the ________, which refers to a
decrease in unit cost as product volume increases.
A) slotting allowance benefit
B) price fixing return
C) improvement value effect
D) experience curve effect
E) cumulative bundling benefit
118) With a ________ pricing strategy, marketers set a low initial price for the introduction of a
new product or service.
A) market penetration
B) bundling
C) price fixing
D) reference
E) skimming
119) If all three grocery stores in town decide to charge the same price for a gallon of milk, what
type of pricing tactic is being used?
A) horizontal price fixing
B) vertical price fixing
C) horizontal price discrimination
D) vertical price discrimination
E) loss-leader pricing
120) When members of the marketing channel collude to control the prices passed on to
consumers, they are engaging in
A) loss-leader price fixing.
B) bait-and-switch price fixing.
C) horizontal price fixing.
D) vertical price fixing.
E) predatory pricing.
121) When a firm colludes with other firms to control prices, it is engaging in
A) competitive favoritism.
B) industry tightening.
C) monopolistic competition.
D) price fixing.
E) regressive pricing.
122) What makes a high/low pricing strategy appealing to sellers?
A) It attracts two distinct market segments.
B) It allows the seller to market itself as an “everyday low price leader.”
C) It doesn’t require the seller to continually offer sales or deep discounts.
D) It allows sellers to capture the most profit from a new product or service.
E) It reduces the need for slotting and advertising allowances.
123) A reference price is
A) the total price including tax.
B) the price against which buyers compare the actual selling price.
C) the manufacturer‘s cost.
D) a cumulative quantity discount price.
E) the external horizontal fixed price.
124) Price advertisements should never
A) include “puffery.”
B) deceive customers to the point of doing harm.
C) include the MSRP.
D) use advertising allowances to increase sales promotion.
E) use price skimming after using price penetration.
125) Developing a good pricing strategy is essential to the financial well-being of a firm. Even
though a firm has an excellent strategy, what are continuing threats to the strategy?
126) Suppose that a friend asks you to drive him to the airport this weekend so he can catch a
flight. He pays you for the gas used driving to the airport, and for the cost of parking the car at
the airport while you help him in with his bags. He then declares that you are now “even,” since
he has fully compensated you for any costs you incurred in helping him get to his flight. From
your perspective, what aspects of the “price” of taking your friend to the airport has he omitted?
127) Most public colleges charge less than half the price of similar private colleges. How can
each type of college be delivering value?
128) What five components should be taken into consideration when a company is developing its
pricing objectives?
129) What methods might a firm use when pricing based on a profit orientation and how do they
differ?
130) Joe’s Deli is trying to compete with the local Subway store. When Subway offers lower
prices on certain sandwiches during its “customer appreciation month,” Joe’s Deli reduces the
price of its similar subs in order to compete. What pricing orientation is being utilized by Joe’s
Deli?
131) If upscale manufacturers of prestige products like BMW autos, Tiffany glass, or Rolex
watches offered lower-priced products, what might happen to the demand for their products?
Why?
132) How is the price elasticity for Crest toothpaste likely to be different from the price elasticity
for all toothpastes (a product category)? Why are they likely to be different?
133) When the major league baseball season opens in April, teams that are located in the
Midwest and Northeast are still experiencing colder and frequent rainy weather. This often
results in fewer fans attending these April games. What can these ball clubs do to maximize their
revenue during this time period?
63
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134) How is consumer behavior affected by the “income effect”?
135) Explain the difference between fixed and variable costs and provide examples of each.
136) Small-business consultants are constantly admonishing would-be entrepreneurs, “Beware of
the overhead.” Using an overhead (fixed costs) of $100,000 and then an overhead of $200,000,
with a contribution per unit of $50, determine the break-even points.
137) Why might it be considered more fun and challenging for a marketer to be part of a market
characterized by monopolistic competition than be part of one characterized by pure
competition?
138) Fenton has always used standard markups to determine the prices for his clothing products.
You are advising him to change his pricing strategy. What advice would you give Fenton?
139) Brandon is conducting an experiment, charging different prices for the same products at
different stores and measuring sales. With this information, he will construct a demand curve.
How can Brandon use this information?
140) Karen initially charged $80 for an hour-long massage and averaged 20 clients per week.
When she raised her price to $100, the number of massages decreased to 15 per week. What is
the price elasticity of demand for her service?
141) Raymond estimates the fixed costs associated with opening a new bank branch are
$500,000. He estimates the branch will attract 1,000 new customers who will cost $50/year to
service each of their accounts. He also expects to generate $100,000 in fees annually from these
accounts. What will be the total cost of opening the new branch and remaining open for one
year?
142) Differentiate between the four levels of competition and offer examples of each type.
143) Why are price wars more common in oligopolies than in pure competition markets?
144) Explain how the demand curve works, and how it benefits a firm.
145) Why do manufacturers set manufacturer’s suggested retail prices (MSRP)? How do they
enforce this practice? Is it legal?
146) At Ben’s college, the local Dunkin’ Donuts gives a 10 percent discount to students. Is this
price discrimination? Why or why not?
147) Ryan is the only retailer in his market selling a new, ergonomically designed pen. What are
the objectives of using a penetration pricing strategy? Why would Ryan consider using a market
penetration pricing strategy?
148) Why do marketers of new and innovative products often start out with a price skimming
strategy rather than a penetration strategy?
149) What does an everyday low pricing strategy convey to consumers?
150) Explain the concept of the high/low strategy. Why is this an attractive strategy to
marketers?