112) The retail price of mobile phones (unsubsidized) has decreased from $4,000 in 1983 when
Motorola commercialized the device, to less than $99 today as the volume increased from zero to
millions of units sold. This is due in large part to which type of pricing approach?
A) skimming pricing
B) prestige pricing
C) experience curve pricing
D) odd-even pricing
E) customary pricing
113) The retail price of fax machines has decreased from over $10,000 in the early 1970s to less
than $100 today. This is due in large part to
A) skimming pricing.
B) prestige pricing.
C) odd-even pricing.
D) experience curve pricing.
E) customary pricing.
114) The retail price of DVD players has decreased from $900 in the mid-1990s to about $50
today. This is due in large part to
A) skimming pricing.
B) prestige pricing.
C) odd-even pricing.
D) customary pricing.
E) experience curve pricing.
115) Which of the following is a profit-oriented approach to pricing?
A) skimming pricing
B) target pricing
C) loss-leader pricing
D) target return-on-investment pricing
E) standard markup pricing
116) All of the following are profit-oriented approaches to select an approximate price level
except which?
A) target ROI pricing
B) target profit pricing
C) target return-on-sales pricing
D) target return-on-investment pricing
E) cost-plus-percentage-of-cost pricing
117) With profit-oriented approaches to pricing, a price setter may choose to balance both
________ and ________ to set price.
A) revenue; profit
B) tangible goods; services
C) costs; revenue
D) demand; supply
E) costs; demand
118) Target profit pricing refers to
A) adjusting the price of a product so it is “in line” with that of its largest competitor.
B) setting an annual target of a specific dollar volume of profit.
C) setting the price of a line of products at a number of different price points.
D) adding a fixed percentage to the cost of all items in a specific product class.
E) setting prices to achieve a profit that is a specified percentage of production costs.
119) Setting an annual target of a specific dollar volume of profit is referred to as
A) target profit pricing.
B) target return-on-investment pricing.
C) loss-leader pricing.
D) at-, above-, or below-market pricing.
E) yield management pricing.
120) A critical assumption when using target profit pricing is that
A) a higher average price will not cause the demand for a product to fall.
B) a higher average price will cause new competitors to join the industry.
C) a higher average price will be offset by reductions in manufacturing costs.
D) profit is tied to the current value of the dollar in relation to foreign currencies.
E) any price increase will be followed quickly by similar moves from all of your competitors.
121) What is critical when using target profit pricing?
A) demand that is insensitive to price over the range being considered
B) a higher-than-average price compared to competitors
C) a low potential for currency exchange rates to change
D) a lower-than-average price compared to competitors
E) a new or innovative product
122) A custom tailor wishes to use target profit pricing to establish a price for a custom-designed
business suit. Assume variable cost is $200 per suit, fixed cost is $44,000, and the target profit is
$50,000 based on a volume of 50 suits. What price should be charged for a typical custom suit?
A) $520
B) $1,040
C) $1,880
D) $2,080
E) $10,000
123) Lady Marion Seafood, Inc., sells five-pound packages of Alaskan salmon. Assume that its
unit variable cost per package is $30 and its fixed cost is $250,000. It wants a target profit of
$38,000 based on a volume of 16,000 packages. What should the firm charge for a five-pound
package of salmon?
A) $25.00
B) $33.94
C) $40.00
D) $48.00
E) $61.25
124) Target return-on-sales 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) 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) setting a price based on a specific annual dollar target profit volume.
125) Setting a price to achieve a profit that is a specified percentage of the sales volume is
referred to as
A) target return-on-investment pricing.
B) target return-on-sales pricing.
C) loss-leader pricing.
D) target pricing.
E) standard markup pricing.
126) What pricing method is used because it establishes a benchmark to show how much of a
firm’s effort is needed to achieve a certain profit?
A) experience curve pricing
B) target return-on-sales pricing
C) standard markup pricing
D) target profit pricing
E) loss-leader pricing
127) The owner of a store that sells custom kitchen cabinets wishes to use a target return-on-
sales pricing approach to establish a price for a typical section of cabinets. Assume that variable
costs total $200 per unit, fixed cost is $44,000, and the storeowner desires a target profit of 20
percent return on sales at an annual volume of 400 cabinets. What price should be charged for a
typical cabinet section?
A) $263.50
B) $311.00
C) $387.50
D) $445.50
E) $775.00
128) Target return-on-investment pricing refers to
A) setting a price to achieve an annual target ROA.
B) adding a fixed percentage to the cost of all items in a specific product class.
C) setting prices to achieve a profit that is a specified percentage of the sales volume.
D) setting a price to achieve an annual target ROI.
E) setting a price based on an annual specific dollar target volume of profit.
129) Setting a price to achieve an annual target return-on-investment (ROI) is referred to as
A) target return-on-investment pricing.
B) target return-on-profit pricing.
C) target return-on-sales pricing.
D) target profit pricing.
E) customary pricing.
130) Which of the following companies would be most likely to use target return-on-investment
pricing?
A) a farmer
B) a supermarket chain
C) a book publisher
D) a veterinarian
E) an automobile manufacturer
131) Target return-on-investment (ROI) is frequently used by
A) contractors.
B) public utilities.
C) business-to-business markets.
D) supermarkets.
E) small privately owned firms.
132) Figure 14-5 above shows the results of a spreadsheet simulation to select a price to achieve
a target return on investment (ROI). What is the ROI for Scenario A?
A) 2%
B) 5%
C) 10%
D) 14%
E) 17%
133) Figure 14-5 above shows the results of a spreadsheet simulation to select a price to achieve
a target return on investment (ROI). What is the ROI for Scenario B?
A) 2%
B) 5%
C) 10%
D) 14%
E) 17%
134) Figure 14-5 above shows the results of a spreadsheet simulation to select a price to achieve
a target return on investment (ROI). What is the ROI for Scenario C?
A) 2%
B) 5%
C) 10%
D) 14%
E) 17%
135) Which of the following is a competition-oriented approach to pricing?
A) skimming pricing
B) target pricing
C) customary pricing
D) target return-on-sales pricing
E) standard markup pricing
136) All of the following are competition-oriented approaches to selecting an approximate price
level except
A) loss-leader pricing.
B) customary pricing.
C) above-market pricing.
D) odd-even pricing.
E) at-market pricing.
137) Rather than emphasize demand, cost, or profit factors, a price setter can stress what
________ doing.
A) the service sector is
B) the market or competitors
C) the global economy is
D) suppliers are
E) the financial markets are
138) Customary pricing refers to
A) a pricing method where the price the seller quotes includes all transportation costs.
B) setting the same price for similar customers who buy the same product and quantities under
the same conditions.
C) deliberately selling a product below its list price to attract attention to it.
D) setting a price that is dictated by tradition, a standardized channel of distribution, or other
competitive factors.
E) pricing based on what the market will bear.
139) Setting a price that is dictated by tradition, a standardized channel of distribution, or other
competitive factors is referred to as
A) cost-plus pricing.
B) customary pricing.
C) standard markup pricing.
D) loss-leader pricing.
E) target profit pricing.
140) Southern gardeners normally pay $5 for a two-cubic-foot bag of pine bark mulch that they
buy at their local gardening-supply and home-improvement stores to keep the weeds down in
their gardens. If the price being charged by a retailer is not within a narrow range that gardeners
feel is appropriate, they will use substitutions—newspaper, grass clippings, or some other kind of
covering. When pricing pine bark mulch, a garden-supply or home-improvement retailer should
use
A) customary pricing.
B) at-market pricing.
C) loss-leader pricing.
D) penetration pricing.
E) bundle pricing.
141) Consumers buy water and soda from vending machines. Usually the price of each of these
products is about $1.50. If a marketer charges a significantly higher price for such products
dispensed by vending machines, such as $2.50 per item, sales are likely to decline. Thus,
marketers tend to be very consistent in the prices they charge for vending machine products. This
is an example of marketers employing a ________ strategy.
A) below-market pricing
B) skimming pricing
C) penetration pricing
D) loss-leader pricing
E) customary pricing
142) Setting a market price for a product or product class based on a subjective feel for the
competitors’ price or market price as the benchmark is referred to as
A) customary pricing.
B) above-, at-, or below-market pricing.
C) standard markup pricing.
D) competitive margin pricing.
E) experience curve pricing.
143) For most products, it is difficult to identify a specific market price for a product or product
class. Still, marketing managers often have a subjective feel for the competitors’ price or market
price. Using this benchmark, they then may deliberately choose a strategy of
A) above-, at-, or below-market pricing.
B) loss-leader pricing.
C) penetration pricing.
D) standard markup pricing.
E) experience curve pricing.
144) According to the text, clothing manufacturer Christian Dior and retailer Neiman Marcus use
________ pricing.
A) above-market
B) at-market
C) below-market
D) prestige pricing
E) everyday low pricing
145) Swedish company Asko, which prides itself on manufacturing and marketing some of the
best-built and most prestigious appliances in the world, would most likely use which
competition-oriented pricing approach?
A) customary pricing
B) above-market pricing
C) loss-leader pricing
D) target profit pricing
E) penetration pricing
146) According to the text, Revlon cosmetics uses ________ pricing.
A) above-market
B) at-market
C) below-market
D) prestige pricing
E) everyday low pricing
147) Manufacturers of private brands use which method of competition-oriented pricing?
A) penetration pricing
B) below-market pricing
C) loss-leader pricing
D) prestige pricing
E) skimming pricing
148) An ad campaign by Suave shampoo asked television viewers to identify the heads of hair of
women who used Suave shampoo and conditioner and those that used the much more expensive
salon hair-care products. The idea of the ad was that no one could tell which woman used the
much cheaper Suave brand. By making price its selling point, Suave is most likely using
A) customary pricing.
B) loss-leader pricing.
C) prestige pricing.
D) skimming pricing.
E) below-market pricing.
149) Companies use a ________ to assess whether its products and brands are above, at, or
below the market.
A) customary price
B) prestige price
C) price premium
D) price lining
E) benchmark
150) Companies use a price premium to assess whether their products and brands are priced
above, at, or below the market. This price premium equals
A) unit volume market share for a brand divided by dollar sales market share for a brand, minus
one.
B) dollar sales market share for a brand divided by unit volume market share for a brand, plus
one.
C) dollar sales market share for a brand divided by unit volume market share for a brand, minus
one.
D) dollar sales market share for a brand, divided by unit volume market share for a brand, plus
one.
E) dollar sales market share for a brand, divided by unit volume market share for a brand, minus
the number of competitors against which a brand is being measured.