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Indicate whether the statement is true or false.
1. As products enter the growth stage of the product life cycle, prices generally begin to stabilize.
a. True
b. False
2. Dynamic pricing is most useful when the capacity of a product or service cannot be fixed well in advance.
a. True
b. False
3. Pricesalwayssteadilydeclineforaproductinthedeclinestageoftheproductlifecycle.
a. True
b. False
4. Unlike a firm that launches a new item resembling several others already on the market, a firm that introduces a totally
new product with no close substitutes will have no pricing freedom.
a. True
b. False
5. For businesses, consumer penalties are part of doing business in a highly competitive marketplace.
a. True
b. False
6. The greater the number of different uses for a product, the more inelastic demand tends to be.
a. True
b. False
7. Psychological pricing is marketing two or more products in a single package for a special price.
a. True
b. False
8. Predatory pricing is illegal under the Sherman Act and the Federal Trade Commission Act.
a. True
b. False
9. Price matching is one of the ways to counter a competitor’s prices.
a. True
b. False
10. Manufacturers find that their large customers such as department stores often make specific pricing demands that the
suppliers must agree to.
a. True
b. False
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11. Price is often used as a promotional tool to increase consumer interest.
a. True
b. False
12. A rebate is a discount to wholesalers and retailers for performing channel functions.
a. True
b. False
13. Profit maximization means striving for profits that are satisfactory to the stockholders and management—in other
words, a level of profits consistent with the level of risk an organization faces.
a. True
b. False
14. Status quo pricing is a pricing objective that maintains existing prices or meets the competition’s prices.
a. True
b. False
15. During the maturity stage of product life cycle, distribution channels become a significant cost factor.
a. True
b. False
16. While break-even pricing is relatively simple, markup pricing uses more complicated concepts of cost.
a. True
b. False
17. Adequate distribution for a new product can often be attained by offering a small profit margin to distributors.
a. True
b. False
18. According to garment makers, the demands of large customers are nearly wiping out profits for all but the very large
suppliers.
a. True
b. False
19. A lack of price matching contributes to a low price image.
a. True
b. False
20. An effective distribution network can sometimes overcome other minor flaws in the marketing mix.
a. True
b. False
21. Extranets enable buyers to quickly and easily compare products and prices, putting them in a better bargaining
position.
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a. True
b. False
22. When retailers stock exclusive versions of products that have similar specifications to ones carried in other stores but
have different model or serial numbers, it facilitates price matching.
a. True
b. False
23. To the consumer, price is the cost of something.
a. True
b. False
Indicate the answer choice that best completes the statement or answers the question.
24. 99-Center Inc. is a retail store where all its merchandise is priced at 99 cents. This retailer uses a _____.
a. single-price tactic
b. flexible pricing tactic
c. price lining tactic
d. price bundling tactic
25. _____ is a pricing policy whereby a firm charges a relatively low price for a product when it is first rolled out as a way
to reach the mass market.
a. Penetration pricing
b. Price skimming
c. Price discrimination
d. Status quo pricing
26. Pedro owns the only silver jewelry shop in a small rural neighborhood. He sells his products at double their cost.
Pedro’s practice is known as _____.
a. keystoning
b. status quo pricing
c. predatory pricing
d. economy of scale
27. Heeldom is the only footwear shop in the coastal town of Freccarosia. However, it sells footwear at consistent prices
that gives it a reasonable margin over its costs and overheads. In this scenario, Heeldom most likely bases its pricing
policy on the pricing objective of _____.
a. sales maximization
b. satisfactory profits
c. retained earnings
d. status quo pricing
28. When there are many substitutes available for a particular product, consumers:
a. judge the quality of the substitute product based on supply of each substitute.
b. perceive individual products to have poor durability.
c. can easily switch from one product to another.
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d. are sensitive to changes in supply of substitute products belonging to new brands.
29. _____ is sometimes called a “market-plus” approach to pricing because it denotes a high price relative to the prices of
competing products.
a. Price skimming
b. Penetration pricing
c. Status quo pricing
d. Bait-and-switch pricing
30. At Fournotts, a retail corporation, Riya saw a box of collector’s edition comic books. Each book was priced at $28.50,
but a customer who bought five of the books was required to pay only $19.99 for each book. Riya bought one book and
her friend bought five books. In this case, Fournotts’ revenue from this purchase is _____.
a. $158.51
b. $19.99
c. $28.50
d. $128.45
31. Consumers are more likely to perceive the value of a product to be less than its cost if:
a. in consumers’ minds, the product’s price is set too high.
b. the product’s manufacturer gains very little profit from the product.
c. the product has an inelastic demand.
d. the product’s demand and supply attain the state of price equilibrium.
32. When Lofonift Inc. introduced its flagship product, an MP3 player, it captured the MP3 player market by offering its
product at the lowest price in the market. This gradually forced many of its competitors out of business. Once its
competitors were out of business, Lofonift Inc. raised its prices. In this scenario, Lofonift Inc. most likely indulged in
_____.
a. predatory pricing
b. price discrimination
c. status quo pricing
d. price fixing
33. Which of the following is true of price-quality relationships?
a. Consumers perceive lowerpriced goods to be more long lasting than higherpriced goods.
b. Consumers believe that higher priced goods are manufactured with better quality of ingredients.
c. Consumers lack information about the quality of lowerpriced goods due to poor advertising.
d. Consumer demands for higherpriced goods remain unchanged even if their quality declines.
34. Unlike niche-oriented shopping bots, broad-based shopping bots:
a. give pricing power to the retailers.
b. search for prices for only one type of product.
c. operate using a Yellow Pages type of model.
d. include examples like SeatGeek(event tickets) andKayak(travel-related services).
35. Unlike a firm that strives for market share, a firm with the objective of maximizing sales:
a. possesses adequate funds and faces an optimistic future.
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b. ignores profits, competition, and the marketing environment as long as sales are rising.
c. benefits from maximization of cash if it is adopted as a long-run objective.
d. seeks to maintain existing prices or to meet the competition’s prices.
36. _____ is a method of determining what sales volume must be reached before total revenue equals total costs.
a. Break-even analysis
b. Markup pricing
c. Opportunity analysis
d. Fixed-cost pricing
37. Which of the following is true of products in the introductory stage of their life cycle?
a. Their prices will rise dramatically as they move into the specialty goods category.
b. They experience price increases that are cost initiated.
c. Their prices are usually set high.
d. They experience an elastic demand in the core of the market.
38. Inelastic demand is a situation in which:
a. an increase or a decrease in price does not significantly affect the demand for a product.
b. prices are adjusted over time to maximize a company’s revenues.
c. demand is created for new products by aggressive brand awareness campaigns.
d. consumers’ demand is sensitive to price changes.
39. Unlike even-numbered prices, odd-numbered prices:
a. make consumers feel they are paying a higher price for a product.
b. are used for “prestige” items.
c. have elastic demand.
d. connote a bargain.
40. Severallest, a supermarket, ran into losses in the last financial year and its management wanted to ensure that it did not
happen again this year. Therefore, the firm laid off several employees and introduced a customer loyalty program in
which loyalty cardholders could earn points on each purchase. In this scenario, Severallest aimed at achieving _____.
a. market share pricing
b. profit maximization
c. demand orientation
d. sales maximization
41. Which of the following statements is true about shopping bots?
a. The broad-based type of shopping bot searches for prices for only one type of product such as consumer electronics
(CNET) or travel-related services (Kayak).
b. They create opportunities for prestige pricing.
c. They search the Web for the best price for a product.
d. The niche-oriented shopping bot searches a wide range of product categories such as Google Shopping or Nextag.
42. _____ is the selling to two or more different buyers, within a reasonably short time, of commodities (not services) of
like grade and quality at different prices where the result would be to substantially lessen competition.
a. Price discrimination
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b. Price fixing
c. Bait pricing
d. Penetration pricing
43. Kylerd, a mobile phone brand, has been facing a lot of competition from rival phone companies and is losing money.
Therefore, it plans to maximize sales by flooding the market with its products, including excess inventory. In this
scenario, which pricing objective does Kylerd plan to use?
a. A status quo pricing objective
b. A profit-oriented pricing objective
c. A bait-and-switch pricing objective
d. A sales-oriented pricing objective
44. Stone Restaurant, a newly opened restaurant, was unable to attract a lot of customers. Since the owner of the
restaurant had to pay the loan amount that he had taken to start the restaurant, he decided to implement a strategy that
would help him attract more customers. He offered about 20 percent discount on all the dishes on the menu on weekends.
This strategy, he thought, would help him earn enough to be able to make the loan payment. In this case, the owner’s
pricing objective can be classified as:
a. market share maximization.
b. profit maximization.
c. asset maximization.
d. sales maximization.
45. _____ is the quantity of a product that will be offered to the market by a supplier at various prices for a specified
period.
a. Demand
b. Supply
c. Market share
d. Product share
46. Galloren Inc., a firm that sells greeting cards, plans to counter high competition during Christmas by selling its
products at a 15 percent discount. It believes that this strategy will help the business to effectively get rid of excess
inventory during this period of high demand. According to this scenario, Galloren Inc.’s pricing objective is _____.
a. market share maximization
b. profit maximization
c. asset maximization
d. sales maximization
47. For convenience, pricing objectives can be divided into three categories, which are:
a. refundable, competitive, and attainable.
b. perceived, actual, and situational.
c. differentiated, niche, and undifferentiated.
d. profit oriented, sales oriented, and status quo.
48. _____ is a price tactic in which different customers pay different prices for essentially the same merchandise bought in
equal quantities.
a. One-part pricing
b. Price lining
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c. Flexible pricing
d. Price skimming
49. Dynamic pricing is used to:
a. implement bait pricing to get more loyal customers.
b. perform price discrimination among customers.
c. adjust prices over time to maximize a company’s revenues.
d. attain price equilibrium.
50. Return on investment (ROI) for a firm:
a. is the margin of profit earned by the firm inclusive of the taxes payable by the firm.
b. is its total assets multiplied by the net profits after taxes.
c. measures management’s overall effectiveness in generating profits with the available assets.
d. will be lower than the previous year if the firm performs better in the market.
51. Univ Airlines and Mirago Airlines are two competing airlines. They make an agreement to charge customers a certain
price for airfreight. This leads to the filing of several lawsuits against them by other airlines. In this case, Univ Airlines
and Mirago Airlines can be charged under _____.
a. the Clayton Act
b. the Sarbanes-Oxley Act
c. the Sherman Act
d. the Robinson-Patman Act
52. Adequate distribution for a new product can often be attained by:
a. offering a larger-than-usual profit margin to distributors.
b. having different model or serial numbers for products.
c. allowing customers to involve in showrooming.
d. increasing the prices of the products.
53. A _____ is a price reduction offered to a consumer, an industrial user, or a marketing intermediary in return for
prompt payment of a bill.
a. cash discount
b. quantity discount
c. functional discount
d. seasonal discount
54. Golacande is a popular candy shop. It sells 350 candies each day and each candy costs $1.50. In this scenario, the
daily revenue of Golacande is _____.
a. $235
b. $510
c. $350
d. $525
55. Wadenst Inc. and Renetin Corp. are the only two network service providers in the island country of Geremya. Since
the companies have an equal market share, they agreed to have similar tariffs and pricing policies. This scenario
exemplifies the practice of _____.
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a. price fixing
b. price skimming
c. status quo pricing
d. penetration pricing
56. Which of the following is a limitation of break-even analysis?
a. It does not give an estimate of how much profit can be earned once the break-even point is obtained.
b. It does not give weightage to the cost of labor that is incurred during production.
c. It is applicable only when the demand for a product is elastic.
d. It is hard to determine which costs are fixed and which costs are variable.
57. _____ is a price tactic that tries to get consumers into a store through false or misleading price advertising and then
uses high-pressure selling to persuade consumers to buy more expensive merchandise.
a. Leader pricing
b. Price lining
c. Bait pricing
d. Price bundling
58. Brettend Corp., a car manufacturer, launched its premium hatchback in the country of Leslania before any of its
competitors did. Although the car was priced unreasonably high, it was a success because it was perceived as a luxury
hatchback. In this scenario, Brettend Corp. adopted the strategy of _____.
a. penetration pricing
b. price skimming
c. status quo pricing
d. bait-and-switch pricing
59. _____ does not change as output is increased or decreased.
a. Marginal cost
b. Dependentcost
c. Fixed cost
d. Opportunity cost
60. _____ is a price tactic that charges freight costs from a given point, regardless of the city from which the goods are
shipped.
a. Free on board origin pricing
b. Zone pricing
c. Uniform delivered pricing
d. Basing-point pricing
61. To increase the popularity of its new range of smartphones, GizmoPro Inc., a mobile phone manufacturer, offered
several other products for free to customers who bought the smartphones. However, the management of GizmoPro Inc.
soon found this to be an unsustainable practice. The company then decided to offer discounts on the products instead of
giving them for free. These actions of the management of GizmoPro Inc. are aimed at:
a. market share pricing.
b. profit maximization.
c. demandorientation.
d. sales maximization.
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62. At a price of $2,000 per unit, the demand for Ranger 60 mountain bikes from Cloyd’s Inc. is 300 units, which is same
as the number of bikes manufactured every year. If the marketing managers at Cloyd’s Inc. decide to sell each bike at a
price lower than $2,000 per unit, _____.
a. a shortage of bikes will be created
b. the number of bikes being made will increase drastically
c. an inelastic demand for the bikes will be created
d. the demand and supply for the bike will attain equilibrium
63. Identify a true statement about yield management systems.
a. They determine the availability of product substitutes in industries that are experiencing rapid change.
b. They use a software that employs techniques such as discounting early purchases and limiting early sales at these
discounted prices.
c. They predict necessary service levels required to achieve revenue goals.
d. They determine whether it is financially more feasible to buy a new product or repair a broken one.
64. Which of the following statements is true of price lines?
a. Buyers cannot be offered a wide variety of merchandise at each established price.
b. Price lines enable a seller to reach several market segments.
c. Firms have to carry a larger total inventory than it could without price lines.
d. Price lines are advantageous when costs rise continually.
65. Edithy Choc is a milk chocolate brand that is retailed at $10 per slab. Fred is a shopkeeper whose business isn’t doing
too well because of the competition from a nearby supermarket. So, he marks down each chocolate slab in his shop to $8
to draw in more customers. According to this scenario, $8 is the _____.
a. dividend
b. price
c. margin
d. profit
66. During off-season, the Rues Hotel offers a 25 percent reduction on its rooms to attract guests. Given this information,
which of the following is illustrated in this scenario?
a. The power of yield management systems
b. The advantage of markup pricing
c. The relationship between price and quality
d. The use of price as a promotional tool
67. A price skimming strategy is most often used for a new product when:
a. competition in the market is abundant.
b. customers are unwilling to spend a large amount of money on the product.
c. its supply is greater than its demand.
d. the product is perceived by the target market as having unique advantages.
68. The managers at Click-to-Door, a giant e-commerce Web site, closely monitor its rival online retailers to analyze the
prices at which they offer certain goods and how the consumers respond to the changes in prices. They use the results of
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this analysis to constantly change the priceson their Web site to maximize sales as well as profits. In this case, which of
the following models of pricing does Click-to–Door follow?
a. Comparative pricing
b. Dynamic pricing
c. Capacitive pricing
d. Dependent pricing
69. Fresnas Designs Inc. is a company known for its quality interior decorations, customized service, and affordable
prices. Given the high demand in the market for its service, the management of Fresnas Designs Inc. could price its
products higher, but it prefers to price its products such that it will earn a reasonable revenue. In this case, the
management of Fresnas Designs Inc. bases its pricing policy on:
a. sales maximization.
b. earning satisfactory profits.
c. creating retained earnings.
d. status quo pricing.
70. Nyla, a florist, bought 16 bouquets from a garden supply store for $4 each and sold all of them to her customers for $5
each by the end of the day. In this scenario, Nyla’s profit for the day was _____.
a. $15
b. $4
c. $16
d. $5
71. Firms that indulge in price fixing:
a. decide how much to charge for a product.
b. undercut the price quoted by a seller to a buyer.
c. charge different prices to different customers.
d. do not sell to two or more different buyers.
72. Which of the following statements is true of unfair trade practice acts?
a. They prohibit any firm from selling to two or more different buyers.
b. Unfair trade practice lawsprevent oligopoly leaders from joining together and fixing prices at the highest rates that
a market will allow.
c. They establish penalties for companies that engage in predatory pricing.
d. State enforcement of unfair trade practice laws has been lax partly because low prices benefit local consumers.
73. Demand for a product will be inelastic if:
a. its price is so low that it is an inconsequential part of an individual’s budget.
b. the product has a number of different uses.
c. many substitute products are available in the market.
d. the product can be repaired and replaced or prolonged in its use.
74. The marketing manager of Rues Golf Club finds that the club can increase its market share and become the industry
leader if it slashes membership prices by 50 percent during the first quarter of the year. However, the club cannot achieve
its target return on investment if its slashes its membership prices during a quarter. This conflict illustrates:
a. a need to eliminate low-profit products.
b. a lack of competition in the marketplace.
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c. how pricing operates in an ideal marketplace.
d. the need for trade-offs in pricing objectives.
75. In _____,the seller pays all or part of the actual freight charges and does not pass them on to the buyer.
a. free on board origin pricing
b. freight absorption pricing
c. uniform delivered pricing
d. basing-point pricing
76. The net profit before taxes, net profit after taxes, and total assets of Sandovane Corp., a steel manufacturing company,
in the current financial year are $62,000, $60,000, and $200,000 respectively. Given this information, the return on
investment (ROI) for Sandovane Corp. this year is _____.
a. 0.3 percent
b. 0.4 percent
c. 0.5 percent
d. 0.6 percent
77. Nerissa owns a shop that sells a wide range of souvenirs. Her suppliers also service most of her competitors.
Therefore, she prices her products in the same range as that of her competitors. Which pricing objective does Nerissa
follow?
a. Status quo pricing
b. Survival pricing
c. Sales-oriented pricing
d. Profit-oriented pricing
78. Raviant Airways slashed its international ticket prices so low that none of its competitors could match it. As a result,
the firm gained a huge market share and some of the smaller competitors went out of business. After a year, Raviant
Airways moved back to its original prices. However, the firm continued to enjoy a large share of the market. According to
this scenario, Raviant Airways used the strategy of _____.
a. anchor pricing
b. predatory pricing
c. price fixing
d. status quo pricing
79. Which of the following is an impact of the Internet on consumers’ shopping behavior?
a. The Internet auction business is likely to disappear in the future.
b. Consumer reviews on the Internet about various products tend to be equal in quality.
c. Business-to-business auctions are likely to be the dominant form of Internet auction in the future.
d. Extranets are programs that search the Internet for the best price for a particular product.
80. To consumers, value is based upon:
a. the absolute monetary value of price.
b. their perceived satisfaction.
c. their ability to get discount on a product.
d. the steadiness of price over a period of time.
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81. Shopping bots theoretically give pricing power to:
a. consumers.
b. wholesalers.
c. retailers.
d. agents.
82. Diffusion Research Company specializes in conducting market research for various firms. When it receives proposal
for a new research, its management first estimates the cost of conducting the research and delivering the final research
report. The management, then, attempts to reduce the costs through efficient operations. It also tries to maximize revenue
by satisfying its customers’ requirements.In this case, Diffusion Research Company uses a _____ pricing objective.
a. profit-oriented
b. cash maximization
c. status quo
d. sales-oriented
83. Which of the following statements is true about yield management systems (YMS)?
a. They are used to eliminate the problem of simultaneous production and consumption from services.
b. They are used only in service industries.
c. They are complex pricing systems used to establish price equilibrium.
d. They are used to make profitable use of the unused capacity of perishable goods.
84. Which of the following happens if demand is elastic?
a. As price goes up, consumer demand changes.
b. The competition between organizations reduces.
c. There is no substitute for a product in such case.
d. Purchasing power of the consumer decreases.
85. At a local supermarket, Linda saw a box of plant fertilizer that was retailed at $25 but was marked down to $20.99.
Given this information, $20.99 is the:
a. dividend.
b. price.
c. margin.
d. profit.
86. Herman, who runs a toy shop, buys stuffed toys at a cost of $4 per piece. He wants to earn a 30 percent return on each
toy. Herman should fix the retail price per piece at _____.
a. $4.90
b. $5.71
c. $4.85
d. $6.10
87. Britney,a teenager, startsher own business of selling cupcakes to coffee shops and restaurants. She strives to
increaseeither the market share in terms of the revenue generated or the number of cupcakes sold. This is an example of
_____.
a. status quo pricing
b. profit-oriented pricing objective
c. bait pricing
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d. sales-oriented pricing objective
88. Profit-oriented pricing objectives include:
a. target return on investment.
b. target market share.
c. meeting competitors’ prices.
d. status quo pricing.
89. A cost that changes with the level of output is called a(n) _____.
a. liquid cost
b. variable cost
c. independent cost
d. indirect cost
90. Ava Lawnmowers Inc. is a company that manufactures and sells lawn mowers. Since it faces stiff competition in the
market, it sells its products at different prices depending on the number of lawn movers purchased by the consumers.In
this scenario, the company indulges in _____.
a. penetration pricing
b. price skimming
c. price discrimination
d. predatory pricing
91. Identify a true statement about status quo pricing.
a. Itleads to optimal pricing of a product.
b. Itrequires serious planning and is difficult to implement.
c. It gives great importance to the demand and costs of a product.
d. Itcan lead to a pricing disaster.
92. Brandont Inc., a machinery manufacturing company, noticed that it was receiving fewer orders than usual. In order to
maximize profits with its existing few orders, it attempted to reduce costs by operating more efficiently. In this scenario,
which pricing objective did Brandont Inc. employ?
a. A profit-oriented pricing objective
b. A cash maximization pricing objective
c. A status quo pricing objective
d. A sales-oriented pricing objective
93. Which of the following is true of simple break-even analysis?
a. It ignores the selling price of a product.
b. It does not give weightage to the cost of labor that is incurred during production.
c. It is applicable only when the demand for a product is elastic.
d. It ignores the demand for a product.
94. A _____ is a price reduction offered to buyers buying in multiple units or above a specified dollar amount.
a. trade discount
b. cash discount
c. seasonal discount
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d. quantity discount
95. Illustrate with examples how price plays a role in promotion strategies for products.
96. Compare price skimming and penetration pricing.
97. Explain the relationship between price and quality of a product that affects a purchase decision.
98. Discuss in detail the advantages and disadvantages of break-even pricing.
99. Discuss the role of price in the evaluation of product alternatives.
100. Discuss how shopping bots help consumers with their purchase decisions.
101. Discuss the factors that affect elasticity of demand.
102. Define consumer penalty and give reasons for imposing consumer penalties.
103. Briefly explain how distribution strategy acts as a determinant of price.
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Answer Key
1. True
2. False
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