74) Yield management pricing refers to
A) controlling the production of products based upon seasonal demand.
B) deliberately selling a product below its customary price, not to increase sales, but to attract
customers’ attention in hopes that they will buy other products as well.
C) charging the same prices during different times of the day or days of the week to reflect
variations in supply for the service.
D) offering significant price discounts to wholesalers that agree to purchase products in advance
for a period of a year or more at a time.
E) charging different prices to maximize revenue for a set amount of capacity at any given time.
75) Charging different prices to maximize revenue for a set amount of capacity at any given time
is referred to as
A) demand backward pricing.
B) target pricing.
C) skimming pricing.
D) yield management pricing.
E) penetration pricing.
76) A ________ approach often results in changing prices based on time, day, week, or season.
A) skimming pricing
B) bundle pricing
C) yield management pricing
D) target return on investment pricing
E) standard markup pricing
77) Yield management pricing is a typical tactic for services trying to manage
A) perceived risk.
B) capacity.
C) cognitive dissonance.
D) inelasticity of demand.
E) new product strategy development.
78) While ________ often changes price based upon color or style, ________ often changes
prices based on time, day, week, or season.
A) prestige pricing; skimming pricing
B) yield management pricing; bundle pricing
C) price lining; yield management pricing
D) target pricing; target return on investment pricing
E) bundle pricing; standard markup pricing
79) Airlines, hotels, and car rental firms all engage in ________ by varying prices based on time,
day, week, or season to match supply and demand.
A) skimming pricing
B) yield management pricing
C) bundle pricing
D) target pricing
E) prestige pricing
80) One problem in the interstate trucking industry is the number of trucks that return empty
after making a delivery. There is a website where independent interstate truckers can look for
loads to carry on their return trips, known as backhauls. Because the trucks would normally
return empty, truckers who use this website to generate business they would not have had
otherwise receive a reduced shipping rate. This reduced rate for a backhaul is an example of
A) penetration pricing.
B) target pricing.
C) cost-plus pricing.
D) odd-even pricing.
E) yield management pricing.
81) Which of the following is a cost-oriented pricing method?
A) loss-leader pricing
B) standard markup pricing
C) at-, above-, or below-market pricing
D) price lining
E) penetration pricing
82) With a cost-oriented pricing strategy, a price setter stresses the ________ side of the pricing
problem, and the price is set by looking at
A) demand; revenue.
B) production and marketing; profit.
C) demand; target sales.
D) cost; production and marketing expenses.
E) cost; consumer tastes.
83) Which of the following statements regarding cost-oriented approaches is most accurate?
A) These methods focus on the demand side of the pricing problem.
B) These methods account for production, marketing, and overhead expenses.
C) Target return on investment is an example of a cost-oriented method.
D) Experience curve pricing is simple to use because costs predictably decrease by 25 percent
with each doubling of production.
E) Cost-oriented approaches are a subcategory of competition-oriented methods.
84) Standard markup pricing is considered to be a ________ approach to pricing.
A) demand-oriented
B) profit-oriented
C) cost-oriented
D) competition-oriented
E) service-oriented
85) Standard markup pricing refers to
A) adjusting the price of a product so it is “in line” with that of its largest competitor.
B) setting the price of a line of products at a number of different price points.
C) setting prices to achieve a profit that is a specified percentage of the sales volume.
D) increasing the price slightly to protect against undue profit losses from unforeseen
environmental forces.
E) adding a fixed percentage to the cost of all items in a specific product class.
86) Adding a fixed percentage to the cost of all items in a specific product class is referred to as
A) target profit pricing.
B) standard markup pricing.
C) target return-on-investment pricing.
D) customary pricing.
E) everyday low pricing.
87) All of the following statements about standard markup pricing are true except which?
A) High-volume products usually have smaller markups than do low-volume products.
B) The percentage markup depends on the type of retail store and the product involved.
C) Markups must cover all expenses of the store, pay for overhead costs, and contribute
something to profits.
D) A price is achieved by summing the total unit cost of providing a product or service and
adding a specific amount to the cost.
E) Supermarket managers have such a large number of products that estimating the demand for
each product as a means of setting price is impossible.
88) Creative Quilts Studio sells hundreds of colors and types of fabric and thread. To price its
inventory, the owners add 50 percent to the cost of each bolt of fabric and every spool of thread.
What is this pricing approach called?
A) target return-on-sales pricing
B) flexible pricing
C) cost-plus pricing
D) standard markup pricing
E) customary pricing
89) It costs Lady Marion Seafood, Inc., $30 to catch, process, freeze, package, and ship five-
pound packages of Alaskan salmon. The firm adds 60 percent to the cost of its salmon products
and charges customers a total of $48 for a postage-paid vacuum-sealed package. What type of
pricing does Lady Marion Seafood use?
A) target return-on-sales pricing
B) bundle pricing
C) standard markup pricing
D) target profit pricing
E) customary pricing
90) Supermarket managers use standard markup pricing because it is particularly suited to
situations when
A) there is a large number of products and estimating the demand for each would be difficult and
time consuming.
B) there is a large number of product lines, all with basically the same product attributes.
C) there is a specific profit goal that needs to be achieved.
D) there is a policy of selling every item in a product line at the same price regardless of the
product class.
E) the products are perishable or seasonal.
91) Which of the following is a cost-oriented approach to pricing?
A) cost-plus pricing
B) skimming pricing
C) prestige pricing
D) loss-leader pricing
E) bundle pricing
92) Summing the total unit cost of providing a product or service and adding a specific amount
to the cost to arrive at a price is referred to as
A) standard markup pricing.
B) experience curve pricing.
C) cost-plus pricing.
D) product-line pricing.
E) target return-on-investment pricing.
93) Cost-plus pricing refers to
A) summing the total unit cost of providing a product or service and adding a specific amount to
the cost to arrive at the price.
B) setting the price of a line of products at a number of different price points.
C) adding a fixed percentage to the cost of all items in a specific product class.
D) setting prices to achieve a profit that is a specified percentage of the sales volume.
E) increasing the price slightly to protect against undue profit losses from unforeseen
environmental forces.
94) The two forms of cost-plus pricing are
A) cost-plus-fixed-fee pricing and cost-plus-variable-fee pricing.
B) cost-plus-ROI pricing and cost-minus-ROI pricing.
C) target return on sales pricing and target return on investment pricing.
D) cost-plus-percentage-of-cost pricing and cost-plus-fixed-fee pricing.
E) dynamic pricing and flexible pricing.
95) Setting the price of a product or service by adding a fixed percentage to the total unit cost is
referred to as
A) cost-plus-fixed-percentage fee pricing.
B) target pricing.
C) cost-plus-percentage-of-cost pricing.
D) experience curve percentage pricing.
E) target return on investment pricing.
96) Cost-plus-percentage-of-cost pricing refers to
A) summing the total unit cost of providing a product or service and adding a specific amount to
the cost to arrive at the price.
B) adding a fixed percentage to the cost of all items in a specific product class.
C) setting a price that is dictated by tradition, a standardized channel of distribution, or other
competitive factors.
D) setting the price of a product or service by adding a fixed percentage to the total unit cost.
E) charging different prices to different buyers for goods of like grade and quality.
97) Which of the following type of business is most likely to use cost-plus-percentage-of-cost
pricing?
A) real estate agency
B) insurance company
C) power company
D) space shuttle contractor
E) architect
98) A pricing method where a supplier is reimbursed for all costs, regardless of what they may
be, and also receives an agreed-on dollar amount of profit that is independent of the final cost of
the project, is referred to as
A) target return on investment pricing.
B) cost-plus-percentage-of-cost pricing.
C) target return on sales pricing.
D) experience curve pricing.
E) cost-plus-fixed-fee pricing.
99) When buying highly technical, few-of-a-kind products such as hydroelectric power plants,
governments have found that general contractors are reluctant to specify a formal, fixed price for
the procurement. Therefore, these contractors use ________ to compensate them for any cost
overruns.
A) at-market pricing
B) experience curve pricing
C) cost-plus-fixed-fee pricing
D) standard markup pricing
E) yield management pricing
100) What pricing strategy did the National Aeronautics and Space Administration (NASA) use
to pay Lockheed Martin for the Orion lunar spacecraft?
A) cost-plus-percentage-of-cost pricing
B) experience curve pricing
C) standard markup pricing
D) yield management pricing
E) cost-plus-fixed-fee pricing
101) The Brazilian government wants to build a global positioning satellite (GPS) system. The
satellite manufacturer will receive a mutually agreed-on profit over and above all costs
associated with the project. The pricing approach the satellite manufacturer uses is called
A) standard markup pricing.
B) experience curve pricing.
C) cost-plus-percentage-of-cost pricing.
D) cost-plus-fixed-fee pricing.
E) bundle pricing.
102) The most commonly used pricing method for business products is
A) target return on investment.
B) customary.
C) standard markup.
D) target profit.
E) cost-plus pricing.
103) Architectural firms that specialize in designing and constructing one-of-a-kind custom
buildings such as the Rock and Roll Hall of Fame often use which pricing strategy?
A) cost-plus pricing
B) experience curve pricing
C) standard markup pricing
D) yield management pricing
E) price lining
104) Rather than billing clients by the hour, some lawyers and their clients agree on a fixed fee
based on expected costs plus an agreed-on level of profit for the law firm. Which pricing
approach are they using?
A) target pricing
B) cost-plus pricing
C) customary pricing
D) experience curve pricing
E) bundle pricing
105) Which of the following is a cost-oriented approach to pricing?
A) skimming pricing
B) prestige pricing
C) loss-leader pricing
D) experience curve pricing
E) bundle pricing
106) Experience curve pricing is considered to be a ________ approach to pricing.
A) demand-oriented
B) cost-oriented
C) profit-oriented
D) competition-oriented
E) service-oriented
107) Experience curve pricing refers to
A) the method of pricing where the price of a product often rises following the expansion of
costs associated with the firm’s producing and selling an increased volume of the product.
B) the point at which profits double, then double again, as more consumers buy the product.
C) a predictive pricing plan based upon the knowledge that the prices will fluctuate in a
predictable pattern within a given industry based on the diffusion of innovation.
D) a method of pricing based on the learning effect, which holds that the unit cost of many
products and services declines by 10 to 30 percent each time a firm’s experience at producing and
selling them doubles.
E) a pricing strategy that uses price estimates based upon the consensus of the salesforce and the
firm’s top management team.
108) Which cost-oriented pricing method is based on the recognition that a product’s unit costs
predictably decline by 10 to 30 percent each time its production volume doubles?
A) experience curve pricing
B) cost-plus-percentage-of-cost pricing
C) capacity management pricing
D) standard markup pricing
E) derived demand pricing
109) Japanese, Korean, and U.S. firms in the electronics industry often adopt which cost-oriented
pricing approach, one that complements the demand-oriented pricing strategy of skimming
followed by penetration pricing?
A) cost-plus-percentage-of-cost pricing
B) cost-plus-fixed-fee pricing
C) standard markup pricing
D) derived demand pricing
E) experience curve pricing
110) According to the textbook, which industry typically adopts an experience curve pricing
approach?
A) advertising
B) space exploration
C) ready-to-eat cereal
D) electronics
E) mining
111) If a firm estimates that its costs will fall by 10 percent each time volume doubles for its
product, then the cost of the l,000th unit produced and sold will be about 90 percent of the cost
of the 500th unit, and the 2,000th unit will be 90 percent of the l,000th unit. Therefore, if the cost
of the 500th unit is $100, the cost of the 4,000th unit would be
A) $0.
B) $72.90.
C) $81.00.
D) $90.00.
E) $100.00.