Name:
Class:
Date:
chapter 12
Page 1
Indicate whether the statement is true or false.
1. Changes in buyers’ attitudes, other components of the marketing mix, and uncontrollable environmental factors can
influence demand.
a. True
b. False
2. Pricing decisions can be based on determining whether the demand for a product is price elastic or price inelastic.
a. True
b. False
3. Knowing the number of units necessary to break even is important in setting the price.
a. True
b. False
4. Marginal revenue is the change in total revenue that occurs when a firm sells an additional unit of product.
a. True
b. False
5. The six stages of setting prices should always be followed if prices are to be set correctly.
a. True
b. False
6. The point at which marginal revenue equals marginal cost is the breakeven point.
a. True
b. False
7. Pricing whereby the buyer absorbs all or part of the freight costs is freight absorption pricing.
a. True
b. False
8. Pricing objectives should be considered overall goals to aid the organization in its long-range plans.
a. True
b. False
9. Comparison of various prices and various breakeven points will tell the marketer exactly what price to charge.
a. True
b. False
10. Grocery stores use negotiated pricing strategies.
a. True
b. False
Name:
Class:
Date:
chapter 12
Page 2
11. Noncumulative discounts are one-time reductions in prices based on the number of units purchased, the dollar value of
the order, or the product mix purchased.
a. True
b. False
12. Customary pricing is based on tradition.
a. True
b. False
13. A psychological price is designed to encourage purchases on the basis of rational response rather than on the basis of
emotional reactions.
a. True
b. False
14. A major reason why retailers use markup pricing is that it is convenient.
a. True
b. False
15. The idea behind prestige demand is that many prestige products seem to sell better at a high price than at a low price.
a. True
b. False
16. With prestige products, a firm will always be able to sell more at a higher price.
a. True
b. False
17. The more experience the customer has with a product, the more he or she relies on external reference prices.
a. True
b. False
18. The objective of profit maximization is rarely operational because its achievement is difficult to measure.
a. True
b. False
19. The legality of uniform geographic pricing has been challenged, and so its use has been abandoned.
a. True
b. False
20. Elastic demand is usually a result of the lack of substitute products.
a. True
b. False
21. Captive pricing, premium pricing, and price lining are all strategies aimed at maximizing the profits of an entire
product line rather than an individual product.
Name:
Class:
Date:
chapter 12
Page 3
a. True
b. False
22. Ideally, pricing decisions have little relation to a firm’s marketing objectives.
a. True
b. False
23. Price elasticity of demand measures the sensitivity of demand to changes in price.
a. True
b. False
24. Rent is usually a fixed cost.
a. True
b. False
25. Some stores employ comparison shoppers to learn what prices their competitors are charging.
a. True
b. False
26. A marketer uses only one pricing objective to avoid organizational confusion.
a. True
b. False
27. If demand is elastic, a change in price causes a parallel change in total revenue.
a. True
b. False
28. The effectiveness of demand-based pricing often depends on a marketer’s ability to determine all the costs associated
with the product.
a. True
b. False
29. The use of market share as a pricing objective oversimplifies the value of price in contributing to profits.
a. True
b. False
30. The way that pricing is used in the marketing mix will influence the determination of the final price.
a. True
b. False
31. Knowing the target market’s evaluation of price allows the marketer to know how much emphasis to place on price
and how to price a product relative to competition.
a. True
b. False
Name:
Class:
Date:
chapter 12
Page 4
32. Seasonal discounts provide price incentives to customers during peak selling seasons.
a. True
b. False
33. Costs are a major issue when establishing price.
a. True
b. False
34. A pricing strategy is a course of action designed to achieve pricing and marketing objectives.
a. True
b. False
35. Two types of new-product pricing are price skimming and product-line pricing.
a. True
b. False
36. The objective of maintaining or increasing market share depends on growth in industry sales.
a. True
b. False
37. The price of a hotel room is more important to a business traveler than to a tourist.
a. True
b. False
38. Channel member expectations play no part in a firm’s pricing decisions.
a. True
b. False
39. Factors affecting pricing decisions can include demand, distribution, and the way in which the product is promoted.
a. True
b. False
40. Demand depends only on the price of the product.
a. True
b. False
41. The firm should produce the quantity at which marginal revenue and marginal cost are equal.
a. True
b. False
42. The role played by attitudes toward price in the overall evaluation of the marketing mix is a minor concern in
identifying the target market.
Name:
Class:
Date:
chapter 12
Page 5
a. True
b. False
43. In some cases, prices are assigned to goods on the basis of nothing more than custom.
a. True
b. False
44. Periodic discounting is often predictable so consumers wait to make purchases until they can benefit from the price
reductions.
a. True
b. False
45. Transfer pricing involves the sale of a product to another unit within the same organization.
a. True
b. False
46. Penetration pricing and price skimming of the market are two types of new-product pricing.
a. True
b. False
47. A customer looking for the lowest price on a mattress without concern for the quality of the mattress or the status
gained by buying and using a certain brand is a price-conscious customer.
a. True
b. False
48. It is usually easy to obtain an accurate price list for a competitor’s products.
a. True
b. False
49. A marketer is usually in a better position to establish prices when it knows the prices charged for competing brands.
a. True
b. False
50. Marketing mix variables are highly interrelated.
a. True
b. False
51. For most products, the quantity demanded goes up as the price goes down.
a. True
b. False
52. Producers commonly provide discounts off list prices to intermediaries.
a. True
b. False
Name:
Class:
Date:
chapter 12
Page 6
53. Customers always interpret a higher price to mean higher quality.
a. True
b. False
54. Random discounting means discounting various products on a systematic basis.
a. True
b. False
55. Cost-based pricing results in a high price when demand is high and a low price when demand is low.
a. True
b. False
56. Grocery stores that position their less expensive, private brands next to more expensive, well-known manufacturer
brands on the shelf are using the concept of reference pricing.
a. True
b. False
57. Setting prices for business customers is very similar to setting prices for consumers.
a. True
b. False
58. A firm that considers costs and revenue secondary to competitors’ prices when setting its own prices is using a
competition-based pricing strategy.
a. True
b. False
59. Profit margins for marketing channel members must be considered when determining the price of a product.
a. True
b. False
60. The local florist advertises a discount on arrangements during the month of April because the anniversary of the store’s
opening is in April. This is an example of special-event pricing.
a. True
b. False
61. F.O.B. factory denotes the price of the products at the factory. If the price is quoted as F.O.B. shipping, then shipping
costs are paid by the seller.
a. True
b. False
62. Product demand usually becomes more elastic over time because more substitutes are found.
a. True
b. False
Name:
Class:
Date:
chapter 12
Page 7
63. Fixed costs vary with the number of units produced or sold.
a. True
b. False
64. One pitfall of cost-plus pricing for the buyer is that the seller may increase costs to establish a larger profit base.
a. True
b. False
65. The government frequently uses competition-based pricing in granting defense contracts.
a. True
b. False
66. Cost-plus pricing is popular in periods of rapid inflation.
a. True
b. False
67. Electricity is an example of a product that is price elastic.
a. True
b. False
68. Demand-based pricing strategies are easy to use.
a. True
b. False
69. A firm can survive in the long run only if its products are sold below cost.
a. True
b. False
70. Organizational goals have little to do with pricing decisions.
a. True
b. False
71. A company wanting to maximize profits from its new product would use product-line pricing.
a. True
b. False
72. Markup pricing is not used often by marketers because establishing a percentage markup greatly increases the
complexity of the decision-making process.
a. True
b. False
Name:
Class:
Date:
chapter 12
Page 8
73. A price-leader approach is a pricing approach most often used in supermarkets to attract consumers by giving them
special low prices on a few items.
a. True
b. False
74. Pricing decisions should be based on the marketer’s previous marketing strategies for other successful products and on
intuition.
a. True
b. False
75. Differential pricing is effective mainly when focusing on only one market segment.
a. True
b. False
76. Knowing the target market’s evaluation of price allows the marketer to know how much emphasis to place on price
and how to price a product relative to competition.
a. True
b. False
77. The importance of price depends on the type of product, the type of target market, and the purchase situation.
a. True
b. False
78. Penetration pricing is one new-product pricing approach that provides the most flexible introductory price.
a. True
b. False
79. Demand is best determined by a top management committee.
a. True
b. False
80. Markup can be stated as a percentage of the cost or as a percentage of the selling price.
a. True
b. False
81. Price skimming is designed to yield maximum unit sales volume.
a. True
b. False
82. Differential pricing means different buyers pay different prices for the same quality and quantity of product.
a. True
b. False
83. The use of price skimming discourages competitors from entering a market.
Name:
Class:
Date:
chapter 12
Page 9
a. True
b. False
84. In setting price, it is wise to analyze competitors’ prices.
a. True
b. False
85. Cost-based pricing strategies result in a percentage being added to the cost of the product.
a. True
b. False
86. A customer’s interpretation and response to a price depends on what the customer receives from a purchase compared
to what he or she gives up to make a purchase.
a. True
b. False
87. Marketers that evaluate competitors’ prices do so to set their own prices slightly below those of competitors.
a. True
b. False
88. An early-bird special offered by a restaurant during off-peak hours is an example of the secondary-market pricing
strategy.
a. True
b. False
89. Competition-based pricing is important if competing products are almost homogeneous or if price is the key variable
in the marketing strategy.
a. True
b. False
Indicate the answer choice that best completes the statement or answers the question.
90. If Norelco introduced a new electric razor that sonically removes hair and priced it first at $175 and then at $150
before reducing the price to $100, the firm’s initial pricing strategy is known as
a. penetration pricing.
b. psychological pricing.
c. price lining.
d. price skimming.
e. odd-number pricing.
91. Which of the following would be used in setting the price of a new product if considerable competition is expected?
a. Psychological pricing
b. Penetration pricing
c. Odd-number pricing
d. Price skimming
Name:
Class:
Date:
chapter 12
Page 10
e. Prestige pricing
92. Which of the following is not a major factor for firms making price decisions?
a. Costs
b. Competition
c. Previous sales
d. Channel member expectations
e. Legal and regulatory issues
93. If the product price is $100, average variable cost $40 per unit, and the total fixed costs are $120,000, what is the
breakeven point?
a. 500 units
b. 2,000 units
c. 1,200 units
d. 300 units
e. 3,000 units
94. Theater goers in the Midwest were pleasantly surprised when they arrived at the cinema to see the latest release and
learned that a price reduction had just gone into effect. The Wehrenberg Theater chain, which is the oldest theater
company and operates in 15 Midwest locations, decided to drop matinee prices from $7.75 to $4.50 per person and reduce
evening prices from $9.75 to $7.50 per person. The price decrease is a result of decreased traffic at the theater and a trend
for consumers to use Netflix or Hulu to watch movies. The Starplex Cinemas operating in the same communities as
Wehrenberg followed suit and reduced their prices to attract consumers as well. The two movie theater chains are utilizing
the ______ pricing basis.
a. Demand-based
b. Markup
c. Cost-plus
d. Competition-based
95. A product is a price leader when
a. it is sold at the highest price.
b. its price maximizes profits.
c. an increase or decrease in price leads to increased revenue or lower costs.
d. it is sold at less than cost in the hope that sales of other products will increase.
e. its price leads the industry in sales.
96. If local Shell gasoline stations look at BP stations’ prices as the primary method of determining its own prices, Shell is
using ________
a. price fixing; which considers competition to be less important than costs.
b. price fixing; which considers costs to be less important than competitor’s prices.
c. market share pricing; which considers competition to be the ultimate pricing goal.
d. competition-based pricing, which considers profit to be the ultimate pricing goal.
e. competition-based pricing, which considers costs to be less important than competitor’s prices.
97. To gain market share, when Hyundai first entered the U.S. car market it did so with a comparatively low pricing
strategy. One of the negative side effects of making this pricing decision is
a. a negative impact on consumers’ perceptions of quality.
Name:
Class:
Date:
chapter 12
Page 11
b. difficulty raising the prices later.
c. a high return on investment level affecting tax balances owed.
d. poor survival chances.
e. higher developmental costs.
98. If a product has an inelastic demand and the manufacturer raises its price,
a. total revenue will increase.
b. quantity demanded will decrease.
c. the demand schedule will shift.
d. the demand will become more inelastic.
e. total revenue will decrease.
99. At what point does a firm maximize profit?
a. The point at which marginal cost equals marginal revenue
b. The point at which the firm sells its product at the highest price
c. The breakeven point plus the adjusted marginal cost
d. The point at which marginal profits equal marginal revenue
e. The point at which marginal cost equals marginal profits
100. Some grocery stores collect data on competitive prices
a. by calling their competitors.
b. on a quarterly basis.
c. through stores’ purchase data.
d. from their resellers.
e. by using full-time comparison shoppers.
101. If a retailer orders a quantity of merchandise to be delivered to his store in Phoenix and is quoted a price that does not
include shipping charges, the retailer is paying a(n) ____ price.
a. F.O.B. destination
b. F.O.B. factory
c. transfer
d. postage-stamp
e. base-point
102. Wet Seal, a retailer of swimwear, employs a commonly used cost-based pricing method called
a. value pricing.
b. cost-plus pricing.
c. cost discounting.
d. differential pricing.
e. markup pricing.
103. Understanding the consumers’ expectations of _____________, helps a marketer correctly assess the target market’s
evaluation of price.
a. value and quality
b. reverse distribution
c. low prices
d. price rebates
Name:
Class:
Date:
chapter 12
Page 12
e. technical assistance
104. If Ralph Lauren offers to reduce the price of its women’s blazers when retailers buy more than 100 pieces, the
designer is offering a ____ discount.
a. quantity
b. cash
c. seasonal
d. trade
e. complementary
105. Since Victoria’s Secret has decided to use nonprice competition, it distinguishes its brand through all but which of
the following?
a. distinctive product features.
b. exceptional service.
c. rebates.
d. variety and selection.
e. product quality and style.
106. If Carnival Cruise Lines increased the price of its seven-day cruise package by 10 percent and, as a result,
experienced a 20 percent decline in customer bookings, Carnival’s demand would be
a. steady.
b. inelastic.
c. elastic.
d. prestige.
e. marginal.
107. When products in an industry are relatively homogeneous and price is a key purchase consideration,
a. competition-based pricing becomes more important.
b. demand-based pricing dominates pricing decisions.
c. firms tend to use secondary–market pricing.
d. cost-based methods like markup pricing are dominant.
e. customary pricing is often used.
108. At the breakeven point,
a. the money a company brings in from selling products equals the amount spent producing the products.
b. the total fixed costs are exactly equal to the total variable costs.
c. profits are exactly equal to the difference between revenue and total variable costs.
d. the marginal revenue of a product is exactly equal to the marginal cost of producing one more unit.
e. the marginal cost curve and the average cost curve will be identical for a particular product.
109. If REVO sets the price for its sunglasses at $240, it is most likely using _____pricing to convey ______.
a. product-line; prestige.
b. product-line; quality.
c. psychological; quality.
d. psychological; prestige.
e. price skimming; quality.
Name:
Class:
Date:
chapter 12
Page 13
110. Which of the following statements is true about the determination of a specific price for a product?
a. Price elasticity is not relevant when determining a specific price.
b. It occurs in the fifth stage of the price setting process.
c. Only fixed costs should be considered when setting the specific price.
d. When no government controls exist, pricing is a flexible way to adjust the marketing mix.
e. Demand is not a consideration when establishing a specific price.
111. Kohl’s pays $16.50 for a six-ounce bottle of cologne and sells it for $25.95. Its markup as a percentage of cost is
approximately ____ percent for this product.
a. 64
b. 36
c. 18
d. 57
e. 45
112. Steinway produces concert grand pianos, often using the custom materials and designs desired by a specific
customer. The average price of these pianos runs about $50,000 depending on the exact piano. What type of pricing does
Steinway most likely use for these pianos?
a. Markup
b. Competition-based
c. Cost-plus
d. Demand-based
e. Secondary-market
113. Generally, customers are most likely to rely on the price-quality association when
a. they cannot judge the quality of the product for themselves.
b. the product is a well-known brand.
c. customers can judge the product’s quality for themselves.
d. the product is purchased through the use of the Internet.
e. products are being purchased from well-established retailers that are familiar to customers.
114. Showing a product’s price along with its previous price, the price of a competing brand, or the price at another retail
outlet is called
a. competition-based pricing.
b. reference pricing.
c. comparison discounting.
d. captive pricing.
e. psychological pricing.
115. The Highland Racquet Club found that with annual fixed costs of $60,000, its breakeven point is 2,000 members
when the membership charge is $60 per person per year. What is the variable cost per person for Highland?
a. $45
b. $50
c. $30
d. $25
e. $40
Name:
Class:
Date:
chapter 12
Page 14
116. Which of the following products is most likely to involve personal selling?
a. Blenders at a department store
b. Riding lawn mowers
c. Kindle Fire
d. Picture frames at a hobby supply store
e. Footballs at a sporting goods store
117. Tim O’Brien gets the invoice for a load of gravel he purchased last week. The price of the gravel was $55, and the
terms are 2/10, n/45. If Tim pays the invoice in five weeks, he will owe
a. a penalty.
b. $53.90.
c. $56.10.
d. $58.30.
e. $55.00.
118. Sony management decided to use skimming as a pricing strategy for its newest line of high-definition television
(HDTV) sets. It should be aware that this strategy does not
a. generate capital to cover research and development costs.
b. discourage competitors from entering the market.
c. provide flexibility in the introductory base price.
d. protect the firm from covering costs if prices are set too low.
e. reduce the stress that may be placed on the firm’s production capabilities.
119. If a business decides to reduce its prices once in a while on an unsystematic basis, it is using
a. price reduction planning.
b. random discounting.
c. reference pricing.
d. periodic discounting.
e. penetration pricing.
120. Which of the following is a requirement for setting pricing objectives?
a. The objectives should be short-term oriented.
b. There should be only one pricing objective.
c. An evaluation of competitors’ prices should be made.
d. The cost structure should be identified.
e. The objectives should be explicitly stated.
121. Running a big sale in order to generate enough cash flow to pay creditors is typical in a situation in which a firm’s
primary pricing objective is
a. status quo.
b. profit.
c. survival.
d. market share.
e. recovery.
Name:
Class:
Date:
chapter 12
Page 15
122. A certain location of O’Charley’s Restaurant has annual fixed costs of $200,000. If an average tab at the restaurant is
$60 and the variable costs per tab is $20, how many groups of customers must O’Charley’s serve per year in order to break
even?
a. 2,000
b. 5,000
c. 10,000
d. 3,333
e. 2,500
123. What type of pricing objective would an organization use if it were in a favorable position and desired nothing more?
a. Return on investment
b. Cash flow
c. Profit
d. Status quo
e. Survival
124. When Sharp first introduced its line of graphing calculators, it set the price quite high; it has lowered the price as
competitors have entered the market. The pricing strategy initially used by Sharp is called
a. customary pricing.
b. odd-number pricing.
c. penetration pricing.
d. price skimming.
e. prestige pricing.
125. The Office Place is an office supplies company who has just adjusted its price levels so that it can increase its sales
volume to match its expenses. The Office Place is most likely employing a(n) ____ objective.
a. market share
b. cash flow
c. return on investment
d. survival
e. profit
126. Maintaining a certain market share, meeting competitors’ prices, maintaining a favorable image, and achieving price
stability are all associated with a ____ pricing objective.
a. product quality
b. market share
c. survival
d. profit
e. status quo
127. If Kroger Food Stores advertises 2-liter bottles of Pepsi for 89 cents to generate store traffic that will purchase other
items at regular prices, the grocer is using
a. reference pricing.
b. a price leader.
c. special-event pricing.
d. comparison discounting.
e. professional pricing.
Name:
Class:
Date:
chapter 12
Page 16
128. A manager at Kohl’s discovers that Macy’s has reduced the price of its children’s Levi’s from $31.99 to $24.99,
according to an advertisement in the Sunday newspaper. She immediately phones her store and instructs the salesperson
on duty to put a sign up next to their children’s Levi’s that reads, “SALE: $24.99.” This is an example of what pricing
strategy?
a. Secondary-market pricing
b. Captive pricing
c. Reference pricing
d. Random discounting
e. Comparison discounting
129. Aldi’s and Dollar General stores have been expanding their footprint across the United States opening new locations
and competing against traditional discount and grocery store chains, such as Walmart, Target, Kmart, Kroger, Jewel Osco,
and Schnucks. Both Aldi’s and Dollar General hope to capture a large proportion of the dollars consumers spend on
grocery and general merchandise items and have responded to consumer desires for value and convenience of a smaller
store. What type of pricing objective are these stores utilizing?
a. survival
b. profit
c. market share
d. return on investment
130. A marketer is most likely to set prices according to a cash-flow objective when a
a. trial-and-error approach to the market is acceptable.
b. certain market share must be maintained.
c. quick return on investment is desired.
d. higher price is acceptable to the firm.
e. product is expected to have a long life cycle.
131. Suppose managers at Caterpillar have determined the costs associated with producing hay balers are equal to the
price that they charge for the hay balers. This indicates that Caterpillar is producing at the ____ point.
a. breakeven
b. marginal revenue less than marginal cost
c. profit margin
d. competitive price
e. profit maximizing
132. The pricing strategy that assumes that demand is relatively inelastic over certain price ranges is called
a. price lining.
b. odd-number pricing.
c. price skimming.
d. prestige pricing.
e. customary pricing.
133. What does the demand curve for a prestige product look like?
a. It is a straight line where the quantity sold continues to increase as the price of each product increases.
b. It is a curve where the highest and the lowest prices yield the greatest quantity sold and mid-range prices produce
the fewest sales.
Name:
Class:
Date:
chapter 12
Page 17
c. It forms a curve where the greatest quantity sold comes at a medium price and the quantities fall as the price
increases or decreases.
d. It forms a straight vertical line because of the prestige of the product, and quantity sold will remain stable
regardless of the price.
e. It slopes from left to right at a very mild slope; that is, as quantity increases, price decreases slowly.
134. Which of the following statements is true about marginal analysis?
a. Fixed costs vary with changes in the number of units sold.
b. Total cost is the sum of average fixed costs and average variable costs times the quantity produced.
c. Average variable cost equals variable cost times number of units sold.
d. Average fixed cost increases as the number of units produced increases.
e. Marginal cost equals fixed costs minus variable costs.
135. The three primary bases for developing prices are
a. profit, demand, and competition.
b. supply, demand, and marketing objectives.
c. demand, competition, and cost.
d. markup, cost, and cost-plus.
e. negotiation, periodicity, and randomness.
136. Michelin notices that when the number of tires it sells increases from 1,000,000 to 1,000,001, total revenue rises $35.
The $35 represents the firm’s
a. average revenue.
b. marginal revenue.
c. price elasticity.
d. average variable revenue.
e. average total cost.
137. Provisions of the Robinson-Patman Act, as well as those of the ____, limit the use of price differentials.
a. Simpson-Marshall Act
b. Federal Trade Commission Act
c. Wheeler-Lea Act
d. Clayton Act
e. Sherman Antitrust Act
138. Competitors’ prices, along with the marketing variables they emphasize, are determining factors in
a. the instability of prices in a particular industry.
b. using markup pricing for consumer goods.
c. how much marketing research a firm needs to collect.
d. using differential pricing to demonstrate quality differences.
e. how important price will be to customers.
139. Westin Hotels, Inc. has an objective of achieving a 25 percent return from its overall sales. This is an example of a
____ pricing objective.
a. market share
b. cash flow
c. return on investment
Name:
Class:
Date:
chapter 12
Page 18
d. profit
e. status quo
140. Kendra has been doing research for a smartphone manufacturing company. She has just been reviewing the results of
several focus groups and has found that for customers, value is a function of the product’s
a. quality attributes.
b. price and brand name.
c. price and durability.
d. quality and functional attributes.
e. quality relative to the quality of competing brands.
141. Competition-based pricing is
a. used when costs and revenues are secondary to competitors’ prices.
b. not useful as a method of increasing market share.
c. not useful if the competing products are homogeneous.
d. not able to increase sales.
e. used when competing products are heterogeneous.
142. The decision of Sears to use odd prices such as $59.99 for a Craftsman drill is an application of ____, where prices
are often used to _____.
a. odd-number pricing; increase sales because customers register the dollar amount, not the cents
b. customary pricing; show customers products are priced based on tradition
c. price skimming; give a product an upscale or exclusive image
d. reference pricing; make it easier for consumers to compare
e. everyday low prices; facilitate comparison to competitors’ prices
143. If Seagram’s marketers found that the firm’s Crown Royal bourbon was a prestige product and raised its price, which
of the following would most likely happen?
a. The quantity demanded would immediately fall.
b. The quantity demanded would always increase.
c. Above some price level, the quantity demanded would begin to decrease.
d. The demand curve for the product would always shift to the right.
e. The demand curve for the product would always shift to the left.
144. Marginal analysis involves examining
a. what happens to a firm’s costs and revenues when production is changed by one unit.
b. what happens to a firm’s revenues when one more product is sold.
c. what happens to a firm’s costs when one more unit is produced.
d. the difference between marginal revenue and total revenue.
e. the difference between marginal cost and total cost.
145. Laura Spangler, of North Central Novelties, reduces the price of games sold to Robertson’s Entertainment by 10
percent to allow for expenses associated with Robertson’s promoting the games to consumers. This is an example of a
____ discount.
a. quantity
b. cash
c. seasonal
Name:
Class:
Date:
chapter 12
Page 19
d. trade
e. complementary
146. Lexmark sells some of its color printers for about $100, but the refill cartridges cost over $30 each. Lexmark’s
pricing strategy would be best labeled as
a. odd-number pricing.
b. captive pricing.
c. customary pricing.
d. price lining.
e. complementary pricing.
147. Tiffany and John recently purchased a 25-year-old home and are currently immersed in a kitchen remodel, which
includes replacing countertops, cabinets, and kitchen appliances. They are shopping for appliances and visited several
retailers to compare prices and determine which brands best met their requirements. One retailer is offering the GE brand
refrigerator, cook top, built-in oven, dishwasher, and warming drawer for $3,999, while another retailer has a set of LG
appliances that includes a larger refrigerator, range/oven combination, dishwasher, and wine cooler for $3,450. Tiffany
and John are meeting with their kitchen designer to finalize their plans for the kitchen and think that either one of these
packages will fit their requirements. The appliance retailers are utilizing a ______ pricing strategy.
a. bundle
b. reference
c. skimming
d. premium
148. Which pricing objective de-emphasizes price and can lead to a climate of nonprice competition in an industry?
a. Status quo
b. Return on investment
c. Market share
d. Survival
e. Cash flow
149. Under Armour is establishing a ______ pricing objective to maintain or increase its product’s sales in relation to total
industry sales.
a. Return on investment
b. Survival
c. Product quality
d. Market share
e. Status quo
150. Which of the following statements is true about the factors that affect pricing decisions?
a. In the long-term, a firm may sell products below cost to match competition.
b. Marketers should set prices that are consistent with the organization’s goals and mission.
c. Pricing decisions should not influence activities associated with the other marketing mix variables.
d. Price is not linked to elements of the distribution variable of the marketing mix.
e. Costs should not be an issue when establishing price.
Scenario 12.4
Use the following to answer the questions.
Name:
Class:
Date:
chapter 12
Page 20
Glenwood Pet Hospital is considering implementing a new pricing strategy for its veterinarian services. After reviewing
the previous three years’ revenue, Glenwood finds that most of its customers bring their pets in for the required annual
vaccinations and then only if the animal is ill. Glenwood’s objective is to generate more income per customer on an annual
basis. The hospital has previously priced its services by charging a flat fee for the office visit, a fee for each vaccine, and a
fee for each type of examination beyond the basic office visit. Most customers pay the flat office fee and a fee for a rabies
vaccine. Glenwood is now considering a new plan where the pet owner would pay one fee that would cover an office visit,
the required rabies vaccine, and additional vaccines that prevent heartworm, kennel-cough, and fleas. Glenwood hopes to
encourage the pet owners to view their pet’s health as part of a prevention program, rather than a one-time annual visit.
151. Refer to Scenario 12.4. Glenwood’s new pricing strategy is an example of ____ pricing.
a. percentage
b. cost-based
c. customary
d. bundle
e. demand-based
152. Executives in Japan decided to price Lexus luxury cars in the United States at $55,000 while pricing them at $66,000
in their own country. This is an example of
a. secondary-market pricing.
b. price skimming.
c. periodic discounting.
d. captive pricing.
e. random discounting.
153. Maintaining or increasing market share
a. can be achieved even if industry sales are flat or decreasing.
b. is an infrequently used pricing objective in most industries.
c. depends upon the overall growth of the total industry.
d. is a profit-related objective based on price.
e. is directly tied to leading an industry in product quality.
154. A deduction from list price for purchasing large quantities aggregated over a stated period of time is a
a. noncumulative quantity discount.
b. additive cash discount.
c. cumulative quantity discount.
d. cumulative discount allowance.
e. additive quantity reduction.
155. Which of the following prohibits price discrimination that lessens competition among wholesalers and retailers?
a. Sherman Antitrust Act
b. Robinson-Patman Act
c. Lanham Trademark Act
d. Federal Trade Commission Act
e. Wheeler-Lea Act
156. When consumers are making do with less expensive products and shopping more selectively, manufacturers and
retailers must focus on the ____ of their products.