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a. price
b. quality
c. availability
d. value
e. image
157. When marginal cost is equal to marginal revenue, the firm should
a. produce more to increase profits.
b. produce less to decrease total costs.
c. stop producing additional units to maximize profits.
d. provide discounts to encourage purchases.
e. intensify distribution to increase sales.
158. The holiday shopping season is a busy one for retailers and shoppers alike as retailers strive to offer a selection of
products that shoppers will want to purchase as gifts for friends and family members. Some consumers might shop all
throughout the year to gather the various gifts for friends and family members while the majority of shoppers will
purchase items in a narrow window the three to four weeks before Christmas. Retailers face stiff competition for the
consumer’s gift purchasing business and may realize 40% to 50% of their annual sales during the holiday shopping
frenzy. In order to attract more customers to their retail store, chains such as Target and Walmart advertise significant
price reductions on desired items such as laptop computers, television sets, and gaming systems. More and more shoppers
are anticipating these heavy discounts for the few days after Thanksgiving and especially on Black Friday and Cyber
Monday and concentrate their holiday shopping on these days to maximize the discounts they could get when purchasing
gifts. The holiday sales known as Black Friday and Cyber Monday are an example of the ______ strategy.
a. periodic discounting
b. captive pricing
c. random discounting
d. price lining
159. If PepsiCo sets its twelve-pack price to match the price charged by Coca-Cola, Pepsi is using which of the following
pricing methods?
a. Demand-based
b. Cost-based
c. Reference pricing
d. Competition-based
e. Price leader
160. Pricing the basic product in a product line low while pricing related items at a higher level is called
a. premium pricing.
b. random discounting.
c. captive pricing.
d. price skimming.
e. price lining.
161. The fact that a gas station in Texas pays less for fuel than a gas station in Maine from a producer in Louisiana
suggests that refineries are using which of the following pricing methods?
a. Price differentiation
b. Base-point pricing
c. Freight absorption pricing
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d. Transfer pricing
e. Zone pricing
162. Ryan orders 16 dozen fishing lures from Strike Right for $375. When he gets the invoice, he is furious that $25 in
freight charges has been tacked onto his bill because he thought the price included freight costs. Ryan should have been
certain that the order terms were
a. F.O.B. origin.
b. F.O.B. factory.
c. C.O.D.
d. 2/10, n/30.
e. F.O.B. destination.
163. Abby is marketing consultant who specializes in small businesses. Her current client is very interested in estimating
the costs for the coming year, in order to find the breakeven point. Abby knows this is an important financial statistic
because below the breakeven point, the firm is operating
a. with fixed costs only.
b. with minimal variable costs.
c. with no revenue.
d. with minimal profit.
e. at a loss.
164. Justin, a sales representative for Serta Mattress manufacturers, phones Kirk of Southside Furniture to inform him that
if he will increase his recent order of 15 mattress sets to 20, he will receive a 14 percent price reduction. This offer is due
to a recent overstock condition at the factory and will not be available in the future. The discount offered here is
a. cash.
b. noncumulative.
c. seasonal.
d. trade.
e. cumulative.
Scenario 12.2
Use the following to answer the questions.
The BASF Chemical Company in Germany has developed a new rubberized coating. The product has an application for
cell phones and other hand-held electronic devices that gives them protection from falls and scratches. BASF plans to
market the product directly to businesses that manufacture the casings for these types of products. BASF currently uses a
system of salespeople headquartered in Germany, while its primary business customers are in China.
165. Refer to Scenario 12.2. BASF has decided to offer discounts to its businesses customers in the form of the following:
For each order of $100,000 or more during the next 90 days, the buyer will receive a rebate of 5 percent. This type of
pricing would be an example of ____ discounts.
a. allowance
b. cash
c. seasonal
d. noncumulative
e. cumulative
166. All of the following are psychological techniques except
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a. customary pricing.
b. bundle pricing.
c. reference pricing.
d. odd-number pricing.
e. price skimming.
167. Which of the following pricing objectives sets prices to recover cash as quickly as possible?
a. Market share
b. Profit
c. Cash flow
d. Return on investment
e. Product quality
168. French Quarter Inns drops the price of a suite from $225 to $195 per night and experiences a reduction in the
quantity of rooms demanded of an average of five per night. This is an indication that suites at this hotel are apparently an
example of a(n) ____ product.
a. reverse-demand
b. inferior
c. standard
d. secondary-demand
e. prestige
169. Which of the following is most likely to have an inelastic demand curve?
a. Automobile
b. Vacation
c. Nonelective surgery
d. Recreational vehicle
e. Computer
Scenario 12.4
Use the following to answer the questions.
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.
170. Refer to Scenario 12.4. Glenwood’s closest competitor, The Hearthstone Pet Hospital, currently charges $60 for each
basic office visit. If Glenwood were to price its basic office visit at $45, it would most likely be employing which of the
following?
a. customary pricing.
b. penetration pricing.
c. prestige pricing.
d. price skimming.
e. cost-based pricing.
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171. Which of the following pricing strategies often results in a retailer losing money on the product?
a. Price leader
b. Psychological discounting
c. Penetration pricing
d. Special-event pricing
e. Ethical pricing
172. Nicole is out shopping with her friends for the day. While evaluating a decision to purchase a handbag, she says,
“People notice when you buy the most expensive brand of a product.” Nicole is most likely a _____ consumer.
a. price-conscious
b. quality-conscious
c. value-conscious
d. socially conscious
e. prestige-sensitive
173. Reference pricing is
a. listing the manufacturer’s suggested retail price on the price tag along with the store’s lower price.
b. mentioning the price that other retailers charge for the same product on the display for the product.
c. using a consumer’s internal perceptions of what the appropriate price should be to help price a firm’s products.
d. pricing a product at a moderate level and positioning it next to a more expensive model or brand.
e. using prices in advertising so that customers will have a point of reference when they come to the retail facility.
174. Duds and Suds is a bar with a country and western atmosphere. In addition to the bar, Duds and Suds has a gift shop
that sells western clothing with its logo. Norman is the owner of the business and has recently enacted temporary price
reductions through clearance sales, discounts, and nightly drink specials. What is Norman most likely trying to do?
a. raise cash quickly.
b. decrease costs.
c. increase profitability.
d. run off the competition.
e. create a value image.
175. Services that are performed by lawyers, dentists, or doctors are typically priced using ____; sometimes these prices
are not based on the amount of time that is spent in each situation, but are based on a flat fee regardless of the difficulty
involved.
a. traditional pricing
b. professional pricing
c. everyday low prices
d. price lining
e. customary pricing
Scenario 12.2
Use the following to answer the questions.
The BASF Chemical Company in Germany has developed a new rubberized coating. The product has an application for
cell phones and other hand-held electronic devices that gives them protection from falls and scratches. BASF plans to
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market the product directly to businesses that manufacture the casings for these types of products. BASF currently uses a
system of salespeople headquartered in Germany, while its primary business customers are in China.
176. Refer to Scenario 12.2. BASF is considering the problem of actual distance in delivering its product from the plant in
Germany to some of its customers in China. Which pricing strategy would help overcome this problem?
a. Geographic
b. Transfer
c. Commercial
d. Transit
e. Factory
177. The manager at Target puts a sign up next to a Samsung audio system that reads, “Only $299.99! $60 less than at
Best Buy.” This is an example of what type of pricing strategy?
a. Random discounting
b. Periodic discounting
c. Comparison discounting
d. Penetration pricing
e. Everyday low prices
178. If a company provides price differentials that harm competition by giving one or more buyers a competitive
advantage, it is committing
a. price discrimination.
b. price-consciousness.
c. functional discounting.
d. price competition.
e. price fixing.
179. Which of the following is true about the evaluation of competitors’ prices?
a. This is done in stage three of the price setting process.
b. This is done in stage four of the price setting process.
c. This is done in stage five of the price setting process.
d. This is done in stage six of the price setting process.
e. This is done in stage two of the price setting process.
180. The Panama Jack Company utilizes a special strategy to sell its ECO-shirt line. Its basic promotional tool is the
discount. These discounts offered to middlemen for performing certain channel activities are referred to as ____
discounts.
a. trade
b. cumulative
c. noncumulative
d. push
e. intermediary
181. Which factor is least likely to affect pricing decisions?
a. Competitive prices
b. Legal and regulatory issues
c. Organizational and marketing objectives
d. Customers’ interpretation and response
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e. Shifting stock values
182. Suppose that the frozen foods division of Swanson purchases food trays and boxes from the packaging division. The
form of pricing used to charge the frozen foods division is called
a. zone pricing.
b. base-point pricing.
c. business-unit pricing.
d. transfer pricing.
e. price discrimination.
183. Amtrak is considering two pricing strategies for its service. One is to price its train tickets so that it is less expensive
to travel on weekends than during the week when there is heavy business travel, which illustrates ____ pricing. The
second is to price its train tickets so that the further away the travel date, the greater the discount, which is best described
as ___
a. demand-based; secondary market pricing.
b. demand-based; differential pricing.
c. demand-based; periodic discounting.
d. cost-plus; secondary markup.
e. cost-plus; periodic discounting.
184. Buyers who focus on purchasing products that signify prominence and status are
a. value-conscious consumers.
b. price-conscious consumers.
c. socially elite buyers.
d. prestige-sensitive buyers.
e. brand aware consumers.
185. Roberts Electronics calculates that if it produces 15 radar detectors, its costs are $1,500, and if it produces 16 radar
detectors, its costs are $1,590. In this instance, $90 is the firm’s ____ cost.
a. average
b. fixed
c. variable
d. marginal
e. average variable
186. When Gabriella visits a Chevrolet showroom to purchase a new car, she sees a Cruze priced around $19,000 and
right next to it is a Corvette priced close to $65,000. What type of psychological pricing strategy is the dealership using?
a. bundle pricing.
b. multiple-unit pricing.
c. captive pricing.
d. customary pricing.
e. reference pricing.
187. For most products, a(n) ____ relationship exists between the price of a particular product and the quantity demanded.
a. inelastic
b. inverse
c. positive
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d. unknown
e. elastic
188. Vanessa is shopping for a new pair of athletic shoes. Since she is concerned about both the price and the quality
aspects of a product, Vanessa is most likely a ___ consumer.
a. Price-conscious
b. Prestige-sensitive
c. Value-conscious
d. Price-conscious and prestige-sensitive
e. Quality-conscious
189. When a seller’s costs are usually determined during or after a product is made and then a specified percentage or
dollar amount is added to the cost to establish a price, an organization is using ____ pricing.
a. markup
b. demand-based
c. differential
d. cost-plus
e. expensed-based
190. The owner of Big Bike Motorcycles is opening a new retail location. Which of the following is most likely to be a
fixed cost for Big Bike Motorcycles?
a. Retail personnel salaries
b. Advertising on Facebook
c. Building Rent
d. Electricity
e. Transportation of sold bikes
191. When a satellite dish company uses bundling to combine phone, dish, and broadband Internet access prices, it is
attempting to influence a consumer’s perception of price to make a product’s price more attractive and reduce “sticker
shock.” This is an example of using a ____ pricing strategy.
a. competition-based
b. cost-based
c. promotional
d. competitive
e. psychological
192. If Roberts Electronics finds that the average total cost of its radar detectors and the marginal cost of its radar
detectors are both $85, then
a. its marginal costs are falling.
b. average total cost is at its maximum.
c. average total costs are rising.
d. demand is elastic.
e. average total cost is at its lowest level.
193. In the long run, the J. F. Smucker Company must view ____ as the absolute lowest price for its Jif brand peanut
butter.
a. a 10 percent return on investment
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b. product development costs
c. total costs
d. advertising expenditures
e. Nestlé’s prices
194. Odd-number pricing is
a. a cost-based strategy.
b. competition-based.
c. a rarely used technique.
d. a psychological pricing strategy.
e. a form of unethical pricing.
195. Which of the following basis for pricing is most commonly used by retailers?
a. Negotiated pricing
b. Markup pricing
c. Demand-based pricing
d. Cost-plus pricing
e. Differential pricing
Scenario 12.4
Use the following to answer the questions.
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.
196. Refer to Scenario 12.4. Glenwood is considering a markup pricing basis, with the cost for office visit plus vaccines at
$45. If Glenwood were to add a markup of 33.3 percent of the costs, its price would be ____.
a. $79
b. $65
c. $55
d. $78
e. $60
197. A retailer offers 20 percent off prices at different times during the year. There doesn’t seem to be any pattern or
system as to when the discounts occur. The retailer is using:
a. random discounting.
b. odd-number pricing.
c. periodic discounting.
d. price skimming.
e. psychological pricing.
Scenario 12.3
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Use the following to answer the questions.
Suppose that Ray-Ban is considering a new line of sunglasses that would be sold in major department stores. The new line
would be positioned as a more distinctive brand than the typical glasses sold through department stores, and would be
priced higher than other brands in the store, but a lower price line than the current Ray-Ban lines that are sold through
more selective stores. In determining the price for this sunglass line, Ray-Ban wants to gather information about all brands
sold in department stores and about customers’ perceptions of those brands.
198. Refer to Scenario 12.3. Ray-Ban’s plan of gathering information about the other brands sold in department stores,
including their prices, would most likely be used in a ____ basis for pricing.
a. Cost
b. Competition
c. Demand
d. Customer
e. Market
199. When an organization sets a number of prices for selected groups of merchandise, this is commonly referred to as
a. prestige pricing.
b. price lining.
c. customary pricing.
d. odd-number pricing.
e. ethical pricing.
200. Reductions for transportation and other costs related to the physical distance between buyer and seller are known as
a. base-point pricing.
b. freight absorption pricing.
c. price zoning.
d. location pricing.
e. geographic pricing.
201. What type of discount is given to a business purchaser for performing activities such as transporting, storing, and
selling?
a. Quantity
b. Cash
c. Geographic
d. Service
e. Trade
202. When Cadillac buys headlights from Delco (both of which are divisions of General Motors), ____ pricing occurs.
a. base-point
b. zone
c. transfer
d. uniform geographic
e. matrix
203. All for Fun is a retail store that offers a variety of board games, magic cards, and other collectible items and caters to
teens and adults who enjoy strategy-based games. The store has over 20,000 magic cards and utilizes a sophisticated
computer system to identify the value of each card. All for Fun determines the rarity of a given card and adjusts prices
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according to how much money customers are likely to pay for a particular card. Cards that are in limited production or
considered “rare” are more expensive than cards that are widely available. Thus, the price for a single magic card might
vary between $25 and $50 or more per card depending upon the market. What type of pricing is All for Fun utilizing?
a. Demand-based pricing
b. Markup pricing
c. Cost-plus pricing
d. Competition-based pricing
204. A measure of sensitivity of demand in relation to changes in price is
a. a demand curve.
b. a prestige graph.
c. marginal analysis.
d. price elasticity of demand.
e. quantity elasticity.
Scenario 12.1
Use the following to answer the questions.
Concession Supply sells hotdogs, buns, and nacho ingredients to several major league ballparks across the country.
Currently, Concession Supply has the following pricing information for one case of hotdogs sold at Wrigley Field: Total
fixed costs = $1,200, Selling price = $16, and Variable costs = $6.
205. Refer to Scenario 12.1. What is the breakeven point in dollar sales volume?
a. $1,200
b. $1,440
c. $3,000
d. $1,920
e. $1,600
206. The ____ prohibits price fixing among firms in an industry.
a. Sherman Antitrust Act
b. Federal Trade Commission Act
c. Wheeler-Lea Act
d. Robinson-Patman Act
e. Clayton Act
207. For most firms in the United States, demand curves are
a. upward sloping.
b. completely horizontal.
c. completely vertical.
d. c-shaped.
e. downward sloping.
208. To determine the breakeven point in units, divide the fixed costs by
a. total costs.
b. variable costs time price.
c. price minus variable costs.
d. price per unit.
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e. total revenue minus fixed costs.
209. A market share objective
a. is not recommended when sales for the total industry are declining.
b. is not especially useful when sales for the total industry are increasing.
c. is not especially useful when sales for the total industry are flat.
d. is useful primarily in an industry where total sales are increasing.
e. can be used effectively whether total industry sales are rising or falling.
210. Monopolies usually keep their prices at a level that generate a reasonable, but not excessive, return primarily because
a. they want to avoid new competitors entering their market.
b. they want to avoid government regulations on their pricing.
c. they try to satisfy the demands of value-conscious consumers.
d. firms can increase market share more rapidly this way.
e. customers will discontinue use of these products if prices rise.
211. Ethan is an operations unit manager for Morningstar Foods. So far in developing his monthly budget, he has
identified the following costs: Overhead at $120,000; Packaging at $70,000; Advertising at $60,000; Salaries at $400,000;
Food production at $90,000, and Distribution at $22,000. The fixed costs in this situation would be
a. overhead, packaging, advertising, salaries, food production, and distribution
b. overhead, packaging, advertising, salaries, and distribution
c. overhead, advertising, distribution, and salaries
d. overhead, advertising, and salaries
e. overhead
212. A price developed in the consumer’s mind through experience with the product is called a(n)
a. external reference price.
b. value-price guideline.
c. frame of reference.
d. internalized price.
e. internal reference price.
213. Marketers must take steps to make sure that the pricing objectives they set are consistent with the organization’s ____
objectives and ____ objectives.
a. advertising; marketing
b. overall; marketing
c. marketing; promotional
d. overall; promotional
e. overall; revenue
214. The types of prices that appear most often in ads are ___; while the types of prices that occur least often in ads are
____ prices.
a. reference; comparison
b. discount; cost-plus
c. bargain; premium
d. comparison; cost-plus
e. sale; reference
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215. If Pacific Power and Light increased its rates by 10 percent and experienced a 2 percent reduction in the demand for
power, the demand would be
a. elastic.
b. minimal.
c. minor elasticity.
d. variable.
e. inelastic.
216. When marketers at Consolidated Mustard Company tried to determine demand for their product, they found that at
50 cents, consumers wanted 2,000 jars; at $1.00, they wanted 6,000 jars; and at $1.50, they wanted 4,000 jars. What can
Consolidated conclude?
a. Consolidated did poor market demand research.
b. Consolidated has an elastic product.
c. Consolidated has an inelastic product.
d. Consolidated mustard is a prestige good.
e. Consolidated mustard has a normal demand curve.
217. Which of the following statements about markup pricing is correct?
a. The use of similar markups reduces price competition.
b. Markup pricing is inconvenient to use.
c. Markup pricing results in a high price when demand is high and a low price when demand is low.
d. Markup pricing is a demand-based pricing method.
e. Using markups makes pricing a time-consuming, difficult process.
218. When determining markup as a percentage of cost, divide the markup amount by
a. price.
b. cost.
c. quantity.
d. revenue.
e. 100.
219. The federal government often uses ____ pricing when it grants defense contracts.
a. markup
b. differential
c. breakeven
d. cost-plus
e. competition-based
220. Nabisco is considering two pricing objectives. The first is to sell one out of every three crackers consumed in the
world, an objective based on _______; the second is to meet, but not beat, competitor’s prices of cookie products, which
is a _____ objective.
a. cash flow; market share
b. market share; cash flow
c. survival; status quo
d. market share; survival
e. market share; status quo.
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221. Which of the following acts does not directly affect pricing decisions?
a. Sherman Antitrust Act
b. Federal Trade Commission Act
c. Wheeler-Lea Act
d. Clayton Act
e. Simpson-Marshall Act
222. Which of the following is not a method used to determine transfer prices?
a. Discounted standard cost
b. Actual full cost
c. Standard full cost
d. Cost plus investment
e. Market-based cost
223. If a product is priced based on how many or how few people want it at a particular time and place, ____ pricing is
being used.
a. markup
b. demand-based
c. competitive
d. peak
e. differential
Scenario 12.3
Use the following to answer the questions.
Suppose that Ray-Ban is considering a new line of sunglasses that would be sold in major department stores. The new line
would be positioned as a more distinctive brand than the typical glasses sold through department stores, and would be
priced higher than other brands in the store, but a lower price line than the current Ray-Ban lines that are sold through
more selective stores. In determining the price for this sunglass line, Ray-Ban wants to gather information about all brands
sold in department stores and about customers’ perceptions of those brands.
224. Refer to Scenario 12.3. If Ray-Ban selected the prices for its new sunglasses to be $59.99 or $79.99, this would be an
example of using ____ pricing in order to increase sales of the new line.
a. product-line
b. odd-number
c. professional
d. promotional
e. penetration
225. Target has worked closely with suppliers such as Calphalon to offer customers a high-quality, branded product that is
only available in Target stores. Due to these partnerships, Target has established a high level of perceived _______ among
their customers since they provide a large range of brand-name merchandise at reasonable or below-competition prices.
a. value
b. demand
c. supply
d. competitive differentiation
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226. A concession in price in business markets to achieve a desired goal is called a(n)
a. allowance.
b. objective-oriented discount.
c. cash discount.
d. trade discount.
e. cumulative discount.
227. The amount of profit a channel member expects depends on
a. the amount of discounts for large orders provided by the producers.
b. the number of channel support activities provided by the producers.
c. what the intermediary could earn if it were handling a competing product instead.
d. the type of distribution channels involved.
e. the amount of effort required to carry the product.
228. Most pricing objectives based on ____ are achieved by trial and error because not all cost and revenue data are
available when prices are set.
a. market share
b. cash flow
c. return on investment
d. survival
e. profit
229. ____________ is setting the price lower than competing brands in order to enter a market and quickly gain a
significant share of the market.
a. Price skimming
b. Premium pricing
c. Penetration pricing
d. Reference pricing
e. Captive pricing
230. A company trying to position itself as value oriented should not
a. set prices that are reasonable relative to product quality.
b. use premium pricing for its products.
c. set prices similar to those of its competitors.
d. use any advertising for its products.
e. consider costs when determining the price of products.
231. All of the following are pricing strategies used by companies wishing to encourage purchases based on consumers’
emotional responses except
a. reference pricing.
b. bundle pricing.
c. odd-number pricing.
d. multiple-unit pricing.
e. penetration pricing.
232. If General Motors determines that it wants to sell 200,000 Chevrolet Acadias and sets the price at $29,500 because it
knows that at that price it will reach that goal, the firm would be using a ____ pricing method.
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a. cost-plus
b. competition-based
c. psychological
d. comparison
e. demand-based
233. A retailer of Real Dry deodorant prices it at $2.00; it costs the retailer $1.40. What is the approximate markup as a
percentage of selling price?
a. 3 percent
b. 14.3 percent
c. 30 percent
d. 70 percent
e. 20 percent
234. Marketers have no flexibility in setting prices under conditions of
a. a monopoly.
b. an oligopoly.
c. perfect competition.
d. monopolistic competition.
e. no competition.
235. Dividing the percentage change in quantity demanded by the percentage change in price gives the
a. prestige demand curve.
b. breakeven point.
c. marginal cost curve.
d. price sensitivity curve.
e. price elasticity of demand.
236. If Wrigley set its pricing objective as attaining 38 percent of the chewing gum market, what else would be needed to
make this a true pricing objective?
a. Statement of demand elasticities
b. Identification of cost structure
c. Breakeven analysis
d. Identification of a time period for accomplishment
e. Establishment of a subsequent pricing policy
237. For custom-made equipment or commercial construction projects, which pricing method is most likely used?
a. Prestige
b. Premium
c. Differential
d. Return-on-investment
e. Cost-plus
238. Tiffany would like to start a small, in-home baking business. She often makes baked goods for friends and family,
but usually mixes the ingredients by hand. Tiffany is expecting to be baking larger batches than she normally does and
thinks a stand mixer would be a good investment. She looks online at KitchenAid stand mixers and sees that the Pro 600
Stand Mixer features a six quart stainless steel bowl, several stainless steel attachments, and a 575-watt motor. The Pro
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600 mixer is priced at $449. KitchenAid sells a variety of other stand mixers, but most have nylon coated attachments and
lower-wattage motors. Those are priced between $259 and $329. Tiffany really wants the Pro stand mixer given that it has
the most desirable and versatile features. KitchenAid is utilizing which type of pricing strategy?
a. Premium pricing
b. Customary pricing
c. Reference pricing
d. Price lining
239. Which of the following statements about price elasticity is false?
a. Steak is an example of a product that has an elastic demand for most people, because when price goes up quantity
demanded goes down proportionally more.
b. Elasticity of demand is the relative responsiveness of a change in quantity demanded to changes in price.
c. If marketers can determine price elasticity, then setting prices at optimum levels is much easier.
d. When price is raised on a product that has an inelastic demand, then total revenue will decrease.
e. A product like electricity has an inelastic demand.
240. Pricing strategies and methods
a. help direct and structure the selection of a final price.
b. are the last decisions made for a new product.
c. are the same for all of a company’s products.
d. are the most important decisions made for a product.
e. require limited planning on the part of management.
241. A problem associated with ____ is that consumers can predict when prices will be lowered and delay purchases until
that time.
a. random discounting
b. penetration pricing
c. reference pricing
d. everyday low pricing
e. periodic discounting
242. Breyer’s produces a variety of ice cream flavors and lines of varying qualities. The higher quality ice cream varieties
are priced higher than the basic ones. Breyer’s is using ____ to price its ice cream.
a. captive pricing
b. price baiting
c. premium pricing
d. reference pricing
e. differential pricing
243. Marketers improve their ability to establish prices appropriately when
a. there is nonprice competition.
b. they know prices charged for competing brands.
c. their products are of better quality than the competition’s.
d. the main objective is image building.
e. using psychological pricing.
244. If a firm currently produces 2,500 products per month and decides to produce 2,501, it will incur
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a. more fixed costs.
b. higher average fixed costs.
c. fewer variable costs.
d. a marginal cost.
e. higher average variable costs.
245. If Nabisco wants to quickly gain a large market share with its new line of reduced-fat snack crackers, it should use
a. penetration pricing.
b. random discounting.
c. captive pricing.
d. price skimming.
e. everyday low prices.
Scenario 12.3
Use the following to answer the questions.
Suppose that Ray-Ban is considering a new line of sunglasses that would be sold in major department stores. The new line
would be positioned as a more distinctive brand than the typical glasses sold through department stores, and would be
priced higher than other brands in the store, but a lower price line than the current Ray-Ban lines that are sold through
more selective stores. In determining the price for this sunglass line, Ray-Ban wants to gather information about all brands
sold in department stores and about customers’ perceptions of those brands.
246. Refer to Scenario 12.3. Given Ray-Ban’s plan for positioning the new sunglass line, they should use a ____ strategy
when introducing their new product.
a. promotional
b. penetration
c. price-skimming
d. reference
e. secondary-market
247. ACE Electronics introduces a new voice-activated personal computer that no longer requires a keyboard. ACE
charges the high price of $11,000 per unit, thus generating large profits because it has a 20 percent market share. ACE’s
major problem in the future will most likely be
a. survival.
b. cash flow.
c. competition.
d. return on investment.
e. profit.
248. You are a brand manager for a large chain of grocery stores. You have been working overtime for the last two weeks
to prepare for your pricing objectives meeting with the head of sales and marketing. You walk into the meeting with a
high degree of confidence in the strategy that you have for setting the pricing objectives for your brand category for the
upcoming year. You are speechless when the marketing head tells you that no changes in the pricing objectives will be
made for your brand category. He says he believes it is most prudent to leave the existing pricing objectives as they are for
the upcoming year.
Which of the following statements is the best explanation for the marketing head’s decision to leave the existing pricing
objectives in place with no change?
a. A status quo pricing objective can reduce a firm’s risks by helping stabilize demand for its products.
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b. The company intends to focus on product quality instead of pricing to win market share.
c. The company expects its market share to increase if it leaves its pricing objectives the same.
d. Profit maximization is not an objective in the upcoming year.
e. The company is not concerned about cash flow.
249. You and a partner have are planning to open a dollar discount store in your hometown. You plan to sell the majority
of the items in the store for one dollar unit price. You have seen this concept work well in other cities and you believe the
demographics of your hometown are a good fit for this retail concept.
Which of the following types of customers are you expecting to frequent your store?
a. Price-conscious customers
b. Wholesalers
c. Other retailers
d. Prestige-sensitive customers
e. Value-conscious customers
Scenario 12.4
Use the following to answer the questions.
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.
250. Refer to Scenario 12.4. Glenwood has decided that it is going to offer a special package offer if the prevention plan is
purchased within the first 30 days of each year’s time for vaccinations. This type of pricing strategy would be an example
of
a. customary pricing.
b. secondary-market pricing.
c. introductory pricing.
d. periodic discounting.
e. random discounting.
251. The pricing of Clinique makeup considerably higher than brands such as Cover Girl, Revlon, and Maybelline is used
to communicate ____, which is the company’s primary pricing objective.
a. market share
b. product quality
c. status quo
d. profitability
e. cash flow
252. Marketers generally view ____ as the minimum price a product can be sold for.
a. fixed costs
b. variable costs
c. profits
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d. costs
e. moderate losses
253. You are a senior sales and marketing analyst for a major retailing firm in Wyoming. The marketing manager just
stopped by your office with a very frustrated look on her face. She tells you that she is confused why every time the
company raises the sales price of its products, total revenue for the company declines.
Based on this information, which of the following explanations do you give her for why this situation occurs?
a. The demand for the company’s products is inelastic, so total revenue declines when prices are raised.
b. The demand for the company’s products is elastic, so total revenue declines when prices are raised.
c. The demand for the company’s products is elastic, so unit sales increase when prices are raised.
d. The demand for the company’s products is inelastic, so unit sales increase when prices are raised.
e. The demand for the company’s products is elastic, so fixed costs increase when prices are raised.
Scenario 12.1
Use the following to answer the questions.
Concession Supply sells hotdogs, buns, and nacho ingredients to several major league ballparks across the country.
Currently, Concession Supply has the following pricing information for one case of hotdogs sold at Wrigley Field: Total
fixed costs = $1,200, Selling price = $16, and Variable costs = $6.
254. Refer to Scenario 12.1. If Concession Supply increased its price by 10 percent and experienced only a 2 percent
decrease in the demand for hotdogs, the demand would be
a. inelastic.
b. common.
c. prestige.
d. elastic.
e. marginal.
255. The fact that senior citizens are charged a lower price at movie theaters than younger adults is an example of ____
pricing.
a. price-line
b. promotional
c. professional
d. differential
e. psychological
256. If Samsung uses _____ pricing for its newest version of laptops, it is probably most interested in obtaining market
share; and it is assuming
a. premium pricing; that no other competitors are likely to enter the market soon.
b. price skimming; that no other competitors are likely to enter the market soon.
c. premium pricing; it needs to recoup R & D costs as soon as possible.
d. penetration pricing; that no other competitors are likely to enter the market soon.
e. penetration pricing; that other competitors could enter the market easily.
257. What type of pricing strategy is used in a situation where the seller has an ethical responsibility not to overcharge the
client and the fees do not relate directly to the time and/or effort spent in specific cases?
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a. Price lining
b. Prestige pricing
c. Professional pricing
d. Customary pricing
e. Price skimming
258. Products such as light bulbs, canned soft drinks, and ice cream sandwiches are usually priced using ______ usually
resulting in a ____
a. multiple-unit pricing; lower per unit price.
b. reference pricing; lower per unit price.
c. multiple-unit pricing; more convenient package.
d. bundle pricing; lower per unit price.
e. bundle pricing; more convenient package.
259. If a company increased its price from $100 to $120 and the quantity demanded fell by 40 percent, the price elasticity
of demand for this product is
a. 2.
b. 1/2.
c. −1/2.
d. −2.
e. 4.
260. Brian is shopping for a new coat at Stein Mart and finds a North Face down jacket that he really likes. He knows that
the North Face brand is considered to be high quality and that it’s usually very expensive. He’s pleasantly surprised to see
the price—the “suggested retail price” is $199 and Stein Mart’s price is $99. Brian decides to purchase the coat even
though it’s a little more expensive than he originally thought he’d spend on the jacket. What type of pricing strategy is
Stein Mart using to price the North Face jacket and other merchandise?
a. Comparison discounting
b. Price leaders
c. odd-number pricing
d. Special-event pricing
261. ____________ are reductions off the list price given by a producer to an intermediary for performing certain
functions.
a. Trade discounts
b. Quantity discounts
c. Cumulative discounts
d. Non-cumulative discounts
e. Cash discounts
262. _____________ is pricing a product at a moderate level and positioning it next to a more expensive model or brand.
a. Reference pricing
b. Odd-number pricing
c. Customary pricing
d. Prestige pricing
e. Professional pricing