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263. Both the Federal Trade Commission Act and the Wheeler-Lea Act prohibit
a. freezing prices.
b. independent pricing policies.
c. deceptive pricing.
d. price fixing.
e. price differentials.
264. Markum Industries determines that for its air compressors the following results are achieved at a price of $250: total
costs = $250,000; variable costs per unit = $100; fixed costs = $175,000. Given these figures, Markum would break even
at ____ units.
a. 1,167
b. 1,000
c. 1,750
d. 2,500
e. 700
265. Information about competitors’ prices ________________________.
a. cannot be uncovered during marketing research
b. is not a consideration in the price setting process
c. is essential in an industry dominated by non-price competition
d. is often a closely guarded secret
e. is readily available to all industry participants
266. Which of the following statements is true about breakeven analysis?
a. The breakeven point can only be stated in terms of sales revenue.
b. At the breakeven point, the firm’s fixed costs are greater than its variable costs.
c. At the breakeven point, the firm’s fixed costs are less than its variable costs.
d. At the breakeven point, the firm’s sales price per unit equals its variable cost per unit.
e. At the breakeven point, the firm’s sales revenue equals the sum of its fixed and variable costs.
267. Bundle pricing may be perceived to be of value by customers because
a. they always pay a lower price per item than they would have if they bought each item separately.
b. they prefer buying a combination of bundled products in a single transaction, which saves time, effort, and
perhaps money.
c. the companies selling the products can sell them at a lower price because their costs of packaging are lower.
d. they are purchasing complementary products, which is convenient for them.
e. they can purchase items that are consumed frequently in larger quantities.
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.
268. Refer to Scenario 12.2. If BASF were to employ pricing that includes the price at the factory plus freight charges
from a chosen point nearest the buyer, this would be an example of ____ pricing.
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a. factory plus
b. dispersion
c. base-point
d. freight absorption
e. uniform geographic
269. Maria recently put her house on the market at an asking price of $260,000. She realizes, however, that in order to sell
the house, she may have to use
a. secondary-market pricing.
b. reference pricing.
c. negotiated pricing.
d. price lining.
e. professional pricing.
270. During July and August, Lakewood Links Golf Course, located in South Carolina, offers weekday rates of $13 for a
round of golf with a cart. During the rest of the year, the weekday rates are between $25 and $35. This is an example of
the use of
a. differential pricing.
b. incentives.
c. competition-based pricing.
d. demand-based pricing.
e. random discounting.
271. The Palasi Candy Company is a small business located in the northeastern United States. The owner of Palasi Candy
is calculating the projected costs for the coming year. There is rent for the building, salaries for the retail employees, raw
materials of sugar, chocolate, and other ingredients, wrappers for packaging of individual pieces of candy, boxes, and
radio advertising. Palasi’s ______ are most likely to be the raw materials of sugar, chocolate, and other ingredients, as well
as the wrappers.
a. sunk costs.
b. variable costs.
c. direct costs.
d. fixed costs.
e. marginal costs.
272. Which of the following products is most likely to have an inverted C-shaped demand curve?
a. Visit to the Dentist
b. Eternity perfume
c. Starbucks coffee
d. Pillsbury cake mix
e. Ford Escape
273. A price-skimming strategy assumes that
a. the initial demand is highly elastic.
b. the product is efficient.
c. it will be difficult to recoup development costs.
d. all consumers have homogeneous tastes.
e. the initial demand is highly inelastic.
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274. What a price means or what it communicates to customers is called
a. reference.
b. response.
c. interpretation.
d. internalization.
e. signaling.
275. A Macy’s manager designs the casual clothing department such that one of Macy’s private label pairs of jeans, priced
at $24.99, is positioned next to a national brand of jeans, such as Levis, priced at $39.99. What is the manager attempting
to accomplish?
a. Everyday low prices strategy
b. Odd-number pricing strategy
c. Bundle pricing strategy
d. Special-event pricing strategy
e. Reference pricing strategy
276. When a customer is considering the purchase of a product in a less-familiar product category, that individual is likely
to rely more heavily on
a. internal reference prices.
b. symbol prices.
c. high value products.
d. discounted reference prices.
e. external reference prices.
277. Lucy buys a new dress at T.J. Maxx that has a price tag with “Compare at $150.00. Our Price $89.99.” This is an
example of the use of
a. internal referencing.
b. cumulative discounts.
c. seasonal discounts.
d. base-point pricing.
e. an external reference price.
278. If an organization sets prices to recover research and development expenses and establish a premium quality image
for its product, it would be using a ____ pricing objective.
a. survival
b. return on investment
c. market share
d. product quality
e. cash flow
279. Which of the following is not a discount provided to business customers?
a. Trade
b. Cumulative
c. Cash
d. Seasonal
e. Differentiated
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280. When Mia and Shane are planning their honeymoon, their travel agent tells them that if they buy a special package,
their trip to Paris will include meals, tickets to the theater, and a rental car in addition to airfare and a hotel. This is an
example of the use of
a. multiple-unit pricing.
b. bundle pricing.
c. prestige pricing.
d. price lining.
e. price packaging.
281. Jared is developing a business plan for a new type of bicycle helmet. He is interested in finding the point at which the
costs of producing the helmet will equal the revenue earned from selling the product. Jared is interested in finding the
a. elasticity of demand.
b. breakeven point.
c. variable costs.
d. price elasticity.
e. the sum of fixed costs.
282. You are the head of pricing strategy for your firm and you are very excited about a new point-of-sale system that has
just been installed in all your firm’s retail outlets. The system is a state-of-the-art, real-time information system that
captures the details of every sale made in your retail outlets. Now, you will have up–to-the-minute data on sales volume
trends and performances for your entire product line. You plan to use this data to set prices based on these volume trends.
Which of the following basis for pricing are you intending to use?
a. Markup pricing
b. Competition-based pricing
c. Demand-based pricing
d. Cost-based pricing
e. Cost-plus pricing
283. To maintain market share and revenue in an increasingly price-sensitive market, companies have focused on quality,
used labor-saving technologies, and used efficient manufacturing processes. These tactics have provided gains in
productivity that have translated into ____ for the consumer.
a. higher costs for the company and higher prices
b. higher costs for the company and lower prices
c. lower costs for the company and lower prices
d. lower costs for the company and higher prices
e. no change in the costs for either the company or
284. Chris is planning three sales during the third quarter of the year at Toys R’ Us. The first is at the beginning of the
school year, the second is the week before Halloween, and the third is Black Friday. These sales would be considered to
be
a. psychological pricing.
b. calendar discounting.
c. sales promotion pricing.
d. special-event pricing.
e. captive pricing.
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285. Mars Petcare is one of the world’s largest pet food manufacturers. If the strategic goal for Mars Petcare in the
coming year was to ___________ in North America, it should use temporary price reductions.
a. increase the number of competitors.
b. gain market share.
c. decrease volume sold.
d. increase revenue per item.
e. decrease the number of competitors.
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.
286. Refer to Scenario 12.1. To break even, Concession Supply should sell ____ cases of hot dogs per day at Wrigley
Field.
a. 13
b. 120
c. 40
d. 200
e. 60
287. The management at Allied Electronics is having difficulty in raising the introductory price on system components to
cover the increased costs of producing the sensing devices for home security systems. Apparently, Allied used a(n) ____
strategy in pricing these components.
a. odd-number
b. skimming
c. lining
d. penetration
e. psychological
288. Gambrell Designs thinks its new product, the Automatic Dog Walker, will have a short product life cycle; therefore,
its marketing department sets its primary pricing objective as
a. market share.
b. cash flow.
c. profit.
d. product quality.
e. status quo.
289. The newest version of a product like Bose headphones is likely to use _____, while the new version of Red Bull is
likely to use _____ .
a. penetration pricing; price skimming.
b. price skimming; psychological pricing.
c. psychological pricing; penetration pricing
d. price skimming; penetration pricing
e. price skimming; promotional pricing.
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290. You are reading the quarterly financial report of one of your competitors. You expected to see their total sales
revenue decline because they had a large price increase during the quarter. You were certain that the price increase would
lead to an equivalently large decrease in their total sales revenue. To your surprise, their total sales revenue actually
increased in the quarter.
Based on this information, which of the following explanations could explain why the competitor’s total sales revenue
increased?
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 total sales revenue increases when prices are raised.
e. The demand for the company’s products is elastic, so fixed costs increase when prices are raised.
291. Markup is measured either as a percentage of ____ or a percentage of ____.
a. selling price; cost
b. cost; profit
c. revenue; contribution margin
d. resources used; cost
e. demand; competition
292. If the terms of a business exchange are 2/10 net 30, this means that the transaction
a. involves a cumulative discount if paid in 30 days.
b. involves a noncumulative discount.
c. offers a discount if the buyer lives within a ten-mile radius.
d. price does not include the cost of freight.
e. involves a cash discount if paid within ten days.
293. If Colgate-Palmolive wants to maximize profit on its toothpaste, it should operate at the point where
a. total costs and total revenues are equal.
b. marginal revenue is at its highest level.
c. marginal revenue exceeds marginal cost.
d. marginal revenue equals marginal cost.
e. demand is most elastic.
294. Price leaders, comparison discounting, and special-event pricing are applications of
a. psychological pricing.
b. professional pricing.
c. product-line pricing.
d. bait-and-switch.
e. promotional pricing.
295. When establishing prices, a marketer’s first step is to
a. determine demand.
b. develop pricing objectives.
c. select a pricing policy.
d. evaluate competitors’ prices.
e. determine a pricing method.
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296. You are the general manager of the machining products division of a diversified manufacturing company in Des
Moines, Iowa. You primarily produce machining products for sale to wholesalers around the world. However, you
periodically get requests from other divisions in your company to purchase your products. You treat these purchase
requests the same as a purchase request from a non-affiliated entity. You sell your machining products to other internal
divisions at a price that is equivalent to a market-based cost.
This is example of which of the following types of business pricing?
a. Freight absorption pricing
b. Uniform geographic pricing
c. Transfer pricing
d. Zone pricing
e. Base-point pricing
297. Marketers at organizations engaged in nonprice competition
a. are more concerned about knowing competitors’ prices than are marketers in organizations that are engaged in
price competition.
b. are not concerned about the prices of competing brands.
c. need competitive price information to make sure that their products are priced at approximately the same level as
the prices of competing brands.
d. rely on customers to help them gather information regarding the prices of competing brands.
e. experience high levels of price instability.
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.
298. Refer to Scenario 12.3. Ray-Ban has decided to promote the new sunglass line as an “affordable luxury” and plans
significant promotional expenditures. With these objectives, which of the following should Ray-Ban use to price its
product line?
a. competition-based pricing
b. cost-plus pricing
c. markup pricing
d. demand-based pricing
e. differential pricing
299. If Wilson Sporting Goods faces a standard demand curve that exists for most products, as it raises the price of its
tennis rackets, the
a. quantity demanded goes down.
b. demand remains constant.
c. quantity demanded increases.
d. demand increases.
e. breakeven increases.
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300. Which type of pricing objective can reduce a firm’s risk by helping to stabilize demand for its products?
a. Status quo
b. Market share
c. Survival
d. Cash flow
e. Return on investment
301. McDonald’s restaurants have experienced declining sales recently due to consumers increased interest in healthy
eating and their preference for fast-casual restaurants such as Chipotle and Noodles. In order to attract more customers to
McDonald’s, the chain expanded the number of items they are offering on the $1 menu and many of these items are priced
below cost. McDonald’s is most likely utilizing a _____ pricing objective.
a. survival
b. profit
c. market share
d. return on investment
302. For most consumers, there is an assumed relationship between
a. price and quality.
b. value and cost.
c. internal and external reference prices.
d. value and price consciousness.
e. prestige prices and value.
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.
303. Refer to Scenario 12.2. If BASF were to price its product in barrels from the factory, before it is loaded on the
carrier, this would be an example of ____ pricing.
a. buy-back allowance
b. geographic
c. F.O.B destination
d. F.O.B. factory
e. base-point
304. Which of the following statements is true about customers’ interpretation and response to price?
a. An internal reference price is a comparison price provided by others such as friends and relatives.
b. An external reference price is a price developed in the buyer’s mind through experience with the product.
c. Prestige-sensitive customers are concerned about both the price and quality aspects of a product.
d. At times, customers interpret a higher price as higher product quality.
e. Customers do not consider the resources required to maintain a product after purchase.
305. The degree to which the price of a product enhances a customer’s satisfaction with the purchase experience and with
the product after the purchase is part of their
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a. response.
b. reference.
c. interpretation.
d. price satisfaction.
e. price-consciousness.
306. Which of the following is true about the target market’s evaluation of price?
a. The importance of price depends on the unemployment rate.
b. The importance of price depends on the type of product.
c. The importance of price does not depend on the target market.
d. The target market’s perception of value combines a product’s price and size attributes.
e. The target market’s perception of value combines a product’s price and availability attributes.
307. What assumption does breakeven analysis make that limits its overall usefulness?
a. It focuses on how to achieve a price objective.
b. It assumes a company wants to gain a certain market share.
c. It relies on demand for a product being inelastic.
d. It focuses only on competitive factors and not costs.
e. It assumes demand is elastic for the product.
308. You are head of sales and marketing for your firm and you are meeting with the CEO to establish pricing objectives
for the upcoming product year.
Which of the following factors are you going to consider as you establish your firm’s pricing objectives?
a. Consumer advocacy groups’ concerns
b. Sales reps compensation packages
c. Competitor complaints
d. The firm’s survival
e. Dissident shareholders’ complaints
309. Department stores such as Kohl’s and Macy’s are interested in learning how much their competitors are charging for
similar merchandise. Which of the following practices might these retailers utilize to identify competitors’ prices?
a. Employing comparative shoppers who systematically collect data on prices at competing stores
b. Stealing price lists from a display at a trade show
c. Hiring sales representatives from competitor’s companies and asking them to share price information
d. Pretending to be a buyer and soliciting pricing information from their competitor
310. The “White Sale” that many department stores have every year a few weeks after Christmas is an example of
a. secondary pricing.
b. off-peak pricing.
c. periodic discounting.
d. random discounting.
e. captive pricing.
311. You are the marketing manager for a multi-state auto dealership in the Southeast United States. It is that time of year
when your fleet of autos goes through a major model year change. You are putting the final touches on your pricing
strategy to facilitate this change in your inventory of autos.
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Which of the following pricing strategies will you use to facilitate this model year change?
a. Negotiated pricing
b. Secondary-market pricing
c. Differential pricing
d. Random discounting
e. Periodic discounting
312. A product that has more features than those of its competition, or that is perceived to be of higher quality, warrants
using which type of pricing strategy?
a. Custom pricing
b. Special-event pricing
c. Premium pricing
d. Price lining
e. Reference pricing
313. Suppose that the watchband department of Timex sells completed watchbands to the finished watch department. The
finished watch department is charged the price it would have to pay an outside watchband manufacturer less a discount to
reflect low sales and transportation costs. This method of pricing is called ____ pricing.
a. zone
b. actual full cost
c. standard full cost
d. cost plus investment
e. market-based cost
314. Premium-priced products are usually marketed through
a. complex marketing channels.
b. intensive or selective distribution.
c. exclusive or intensive distribution.
d. exclusive distribution only.
e. selective or exclusive distribution.
315. To attract customers into a store, Safeway advertises its milk at less than cost, hoping that customers will purchase
other groceries as well. This pricing strategy is called
a. price lining.
b. special-event pricing.
c. differential pricing.
d. comparison discounting.
e. price leader pricing.
316. A graph of the quantity of products marketers expect to sell at various prices if other factors remain constant is a
a. price graph.
b. supply curve.
c. price/quantity graph.
d. marginal revenue curve.
e. demand curve.
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317. How are pricing objectives similar to a corporation’s overall goals? How are they different?
318. Compare and contrast price skimming and penetration pricing.
319. What are the differences among value-conscious, price-conscious, and prestige-sensitive customers?
320. Describe, compare, and contrast the three major bases for setting prices.
321. Identify and describe six types of psychological pricing.
322. How might a marketer find information about a competitor’s prices? Why is this information important?
323. What are reference prices and how do customers use them? What is the difference between internal and external
reference prices?
324. What are some issues to consider when determining a specific price?
325. Explain what is meant by price elasticity of demand.
326. Under what conditions would a marketer most likely use a price leader strategy?
327. Explain differential pricing and then describe the four major types.
328. What is bundle pricing? Give three examples, each one from a different industry.
329. Identify and describe the major types of discounts used for business markets. Then explain the reasons for using each
type.
330. What are the terms of F.O.B. pricing?
331. What are the implications of a downward-sloping demand curve?
332. Why is the marginal revenue of a product important to the marketer?
333. If fixed costs = $6,000, selling price = $10, and variable costs per unit = $5, what is the breakeven point in units and
in dollar sales volume?
334. How would pricing decisions differ for a business in an oligopolistic market structure as opposed to a monopolistic
market structure?
335. How can transfer pricing be calculated? Give three alternatives.
336. Identify and describe the three types of product-line pricing.
337. Identify and describe the major factors that affect pricing decisions.
338. How can a marketer use product quality as a pricing objective to influence purchasing decisions?
339. Explain the difference between cost-plus and markup pricing.
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340. Describe the six steps of the process that marketers can use to establish prices.
341. What are some of the objectives a firm might hope to achieve when setting prices?
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Answer Key
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