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1. Randy and Debbie are in charge of training new marketing department employees at Company ABC. In a
training session, Debbie comments that price serves as a mechanism to obtain value back from customers.
Debbie is correct in her assessment.
a. True
b. False
2. Executives at Company XYZ are considering some changes to the firm’s best selling product. Modifications
to the product are easier than changing other marketing mix variables.
a. True
b. False
3. Pricing is as important as any of the other Ps in terms of sending a signal to customers, competitors, and
collaborators regarding the positioning and image of the brand.
a. True
b. False
4. Profits decrease as fixed or variable costs decrease.
a. True
b. False
5. When ABC Gifts reduced its prices, the number of subscriptions it sold increased. This is an example of
elasticity.
a. True
b. False
6. Demand goes up as a function of a customer’s desire.
a. True
b. False
7. The highest possible price is set by figuring out just how much a customer is willing to pay and pricing near
that mark.
a. True
b. False
8. Pricing tends to stay the same over the course of a product’s life cycle.
a. True
b. False
9. Pricing always has an element of trial and error.
a. True
b. False
10. Company ABC’s management team needs to determine how many units must be sold before the company
covers its costs. The company should conduct a break-even analysis.
a. True
b. False
11. Break-even is represented by: BE = [(Price – Variable costs) × Demand] – (Fixed costs).
a. True
b. False
12. Break-even is represented by: BE = Fixed costs/(Price – Variable costs).
a. True
b. False
13. A breakeven can be computed in terms of number of units sold or monetary values.
a. True
b. False
14. Goods are tricky because they are disproportionately high in variable costs.
a. True
b. False
15. The trick for marketers is to discover that upper bound and price just below it.
a. True
b. False
16. Scanner data are only useful for firms that want to do experiments.
a. True
b. False
17. Scanner data are the only research tool used today to assess customers’ willingness to pay.
a. True
b. False
18. Some marketers define a good brand by whether or not the customer is price insensitive and determined to
buy the brand, regardless of cost.
a. True
b. False
19. In conjoint analysis, customers are directly asked about price.
a. True
b. False
20. If Profit = Revenue – Expense and Revenue = Price × Quantity sold, then to maximize profits we need to
find a price where any further increase in price would lead to a large falloff in demand.
a. True
b. False
21. For some products and services, higher prices can make a purchase seem more appealing to customers.
a. True
b. False
22. Study after study has demonstrated that there is a correlation between price and quality for most product
categories.
a. True
b. False
23. The processing of alternative currencies by consumers, such as loyalty program points, is a recent
phenomenon gaining the attention of marketers.
a. True
b. False
24. When we evaluate a product’s price to determine whether we think the price being charged is “fair,” we
compare the price to some reference, either an externally available price or an internally (mentally) stored price.
a. True
b. False
25. Higher prices set lower expectations.
a. True
b. False
26. Jessie is just as likely to use a $15 coupon for a $29 item as she is to use a $15 coupon on a $199 product.
a. True
b. False
27. Companies are allowed to charge different prices to different people for the same goods or services.
a. True
b. False
28. In most markets, there is almost always a price-sensitive segment and another that seeks quality.
a. True
b. False
29. A quantity discount is a type of segmentation pricing.
a. True
b. False
30. Depending on whether customers experience a price or time shift, it may be unimportant for a company to
manage perceptions of price fairness.
a. True
b. False
31. Some prices are set using a two-part tariff, meaning that a customer pays some amount for one part of the
service and another part of the service is free of charge.
a. True
b. False
32. Pricing for market penetration and skimming are contrasting strategies.
a. True
b. False
33. "This brand has lost all of its popularity," Giovanna informed the management team. "We've added every
possible feature, but the technology is just too old to make this a viable product. We should reduce the price to
empty out our inventory. Let's vote to invest more money to continue to sell the brand or reduce the price to sell
all of the units remaining in inventory." The management team should vote to reduce the price.
a. True
b. False
34. Price promotions have predictable negative side effects.
a. True
b. False
35. Temporary price cuts and coupons are reliable in generating a modest short-term uptick in sales.
a. True
b. False
36. Price drops attract loyal customers.
a. True
b. False
37. Coupons are especially effective at encouraging new (current) customers to try current (new) products and
brand extensions.
a. True
b. False
38. Marketers frequently use game theory to try to estimate the likely results of various actions, most frequently
price cuts and competitive response.
a. True
b. False
39. Both parties acting selfishly on their own accord always yields better results than mutual cooperation.
a. True
b. False
40. With dynamic pricing, the buyer sets the price at an auction.
a. True
b. False
41. Lee is the product manager for a software program sold by Company ABC. In evaluating the product, Lee
determines that something just isn’t right with how the software program is marketed to potential customers,
and he feels a change is necessary. Which of the following marketing mix variables is easiest for Lee to change?
a. promotion
b. price
c. place
d. product
42. The medium price of a product is determined by
a. the customer's willingness to pay.
b. competitors' price ± fudge factor.
c. cost + markup.
d. the product's popularity.
43. From a marketing perspective, pricing should be about the
a. profit.
b. company.
c. customer.
d. competition.
44. __________ is greater when the item is a luxury good rather than a necessity, when many substitutes are
available, or when the purchase is a relatively big one.
a. Price sensitivity
b. Product sensitivity
c. Place sensitivity
d. Promotion sensitivity
45. Which of the following is true about competitive pricing?
a. It is set by covering costs and then adding some margin.
b. It is set by covering costs only.
c. It is set by figuring out just how much a customer is willing to pay and pricing near that mark.
d. It is at a medium level, somewhere in between extremes, using competitors’ prices as a starting point,
and adjusting from there.
46. Which of the following formulas defines profit?
a. (Price × Demand) – (Fixed costs) – (Variable costs × Demand)
b. Price – Demand – (Fixed costs × Variable costs)
c. Price + (Demand – Fixed costs) × Variable costs
d. Price × (Demand – Fixed costs) + Variable costs
47. What term refers to the “wiggle room” in the supply and demand curve?
a. price insensitivity
b. elasticity
c. variance
d. error
48. If a change in price barely affects demand, it means the demand is
a. supplied.
b. inelastic.
c. unstable.
d. relative.
49. If demand bounces around when prices change, it is
a. elastic.
b. stable.
c. absolute.
d. unreliable.
50. When we draw a graph of price and demand, elasticity is defined by which of the following?
a. the y-intercept of the line
b. the x-intercept of the line
c. the number of points we plot to create the line
d. the slope of the line
51. If E = 1, demand is said to be
a. elastic.
b. inelastic.
c. unitary.
d. invalid.
52. What does it mean for demand to be unitary?
a. Prices go up or down, but revenues remain about the same.
b. Prices remain the same, but revenues go up and down.
c. Prices and revenue change unpredictably.
d. There is never a change in price or revenue.
