37. 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. can be used primarily in an industry where total sales are increasing.
e. can be used effectively whether total industry sales are rising or falling.
38. Under Armor is establishing a ____ pricing objective to maintain or increase its product’s sales in relation to total
industry sales.
a. return on investment
b. survival
c. product quality
d. market share
e. status quo
Chapter 12 – Pricing Concepts and Management
39. Gambrel 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.
40. Maintaining a certain market share, meeting competitors’ prices, maintaining a favorable image, and achieving price
stability are all associated with a ____ pricing objective.
a. product quality
b. market share
c. survival
d. profit
e. status quo
Chapter 12 – Pricing Concepts and Management
41. Which pricing objective de-emphasizes price and can lead to a climate of non-price competition in an industry?
a. Status quo
b. Return on investment
c. Market share
d. Survival
e. Cash flow
42. What type of pricing objective would an organization use if it were in a favorable position and desired nothing
more?
a. Return on investment
b. Cash flow
c. Profit
d. Status quo
e. Survival
Chapter 12 – Pricing Concepts and Management
43. 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
44. The pricing of Clinique makeup, considerably higher than brands such as Cover Girl, Revlon, and Maybelline, is
most likely used to communicate ____.
a. market share
b. product quality
c. status quo
d. profitability
e. cash flow
Chapter 12 – Pricing Concepts and Management
45. SinceVictoria’sSecrethasdecidedtousenonpricecompetition,itdistinguishesitsbrandthroughallofthe
following except ____.
a. distinctive product features.
b. exceptional service.
c. rebates.
d. variety and selection.
e. product quality and style.
46. The PIMS studies indicates that both market share and ____ are good indicators of profitability.
a. low pricing
b. product quality
c. limited competition
d. sales growth
e. ROI pricing
Chapter 12 – Pricing Concepts and Management
47. 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. break-even increases.
48. For most products, a(n) ____ relationship exists between the price of a particular product and the quantity
demanded.
a. inelastic
b. inverse
c. positive
d. unknown
e. elastic
Chapter 12 – Pricing Concepts and Management
49. 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.
50. 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 product.
e. Consolidated mustard has a normal demand curve.
Chapter 12 – Pricing Concepts and Management
51. French Quarter Inns reduces the price of a suite from $225 to $195 per night and experiences a reduction in the
quantity of rooms demanded by an average of five per night. This is an indication that suites at this hotel are an
example of a(n) ____ product.
a. reverse-demand
b. inferior
c. standard
d. secondary-demand
e. prestige
52. What does the demand curve for a prestige product look like?
a. It is a straight line where the quantity sold continues to increase as the price of each product increases.
b. It is a curve where the highest and the lowest prices yield the greatest quantity sold and mid-range prices
produce the fewest sales.
c. It forms a curve where the greatest quantity sold comes at a medium price and the quantities fall as the price
increases or decreases.
d. It forms a straight vertical line because of the prestige of the product, and quantity sold will remain stable
regardless of the price.
e. It slopes from left to right at a very mild slope, and as quantity increases, price decreases slowly.
Chapter 12 – Pricing Concepts and Management
53. If Seagram’s marketers found that the firm’s Crown Royal bourbon was a prestige product and raised its price,
which of the following would most likely happen?
a. The quantity demanded would immediately fall.
b. The quantity demanded would always increase.
c. Above some price level, the quantity demanded would begin to decrease.
d. The demand curve for the product would always shift to the right.
e. The demand curve for the product would always shift to the left.
54. If Carnival Cruise Lines increased the price of its seven-day cruise package by 10 percent and, as a result,
experienced a 20 percent decline in customer bookings, Carnival’s demand would be:
a. steady.
b. inelastic.
c. elastic.
d. prestige.
e. marginal.
Chapter 12 – Pricing Concepts and Management
55. A measure of the 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.
56. If a product has an inelastic demand and the manufacturer raises its price:
a. total revenue will increase.
b. quantity demanded will decrease.
c. the demand schedule will shift.
d. the demand will become more inelastic.
e. total revenue will decrease.
Chapter 12 – Pricing Concepts and Management
57. 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.
b. Elasticity of demand is the relative responsiveness of a change in quantity demanded to change 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. Electricity is an example of a product that has elastic demand.
58. If Pacific Power and Light increased its rates by 10 percent and the demand for power remained the same, the
demand would be:
a. elastic.
b. minimal.
c. minor elasticity.
d. variable.
e. inelastic.
Chapter 12 – Pricing Concepts and Management
59. Dividing the percentage change in quantity demanded by the percentage change in price gives the:
a. prestige demand curve.
b. break-even point.
c. marginal cost curve.
d. price sensitivity curve.
e. price elasticity of demand.
60. Marginal analysis involves examining:
a. what happens to a firm’s costs and revenues when production is changed by one unit.
b. the sensitivity of consumer demand for a product or product category.
c. the quantity of products expected to be sold at different prices.
d. the difference between marginal revenue and total revenue.
e. the difference between marginal cost and total cost.
Chapter 12 – Pricing Concepts and Management
61. Ethan is an operations unit manager for Morningstar Foods. When 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. packaging and distribution
e. food production
62. The owner of Big Bike Motorcycles is opening a retail outlet at a new location. Which of the following is most
likely to be a fixed cost for Big Bike Motorcycles?
a. Retail personnel salaries
b. Advertising on social networks
c. Building rent
d. Electricity
e. Transportation of sold bikes
Chapter 12 – Pricing Concepts and Management
63. The Palasi Candy Company is a small business located in the 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,andradioadvertising.Palasi’s____aremost 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.
64. If a firm currently produces 2,500 products per month and decides to produce 2,501, it will incur:
a. more fixed costs.
b. higher average fixed costs.
c. fewer variable costs.
d. a marginal cost.
e. higher average variable costs.
Chapter 12 – Pricing Concepts and Management
65. 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
66. 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 its:
a. 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 point.
Chapter 12 – Pricing Concepts and Management
67. Michelin notices that when the number of tires it sells increases from 1,000,000 to 1,000,001, total revenue rises
$35. The $35 represents the firm’s:
a. average revenue.
b. marginal revenue.
c. price elasticity.
d. average variable revenue.
e. average total cost.
68. At what point does a firm maximize profit?
a. The point at which marginal cost equals marginal revenue
b. The point at which the firm sells its product at the highest price
c. The break-even point plus the adjusted marginal cost
d. The point at which marginal profits equal marginal revenue
e. The point at which marginal cost equals marginal profits
Chapter 12 – Pricing Concepts and Management
69. 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.
d. provide discounts to encourage purchases.
e. intensify distribution to increase sales.
70. 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.
Chapter 12 – Pricing Concepts and Management
71. At the break-even point:
a. the money a company brings in from selling products equals the amount spent producing the products.
b. the total fixed costs are exactly equal to the total variable costs.
c. profits are exactly equal to the difference between revenue and total variable costs.
d. the marginal revenue of a product is exactly equal to the marginal cost of producing one more unit.
e. the marginal cost curve and the average cost curve will be identical for a particular product.
72. 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. break-even point.
c. variable costs.
d. price elasticity.
e. the sum of fixed costs.
Chapter 12 – Pricing Concepts and Management
73. Managers at Caterpillar have determined the costs associated with producing hay balers are equal to the price that
they charge for the hay balers. This indicates that Caterpillar is producing at the ____ point.
a. break-even
b. marginal cost
c. profit margin
d. competitive price
e. profit maximizing
74. To determine the break-even point in units, divide the fixed costs by:
a. total costs.
b. variable costs multiplied by price.
c. price minus variable costs.
d. price per unit.
e. total revenue minus fixed costs.
Chapter 12 – Pricing Concepts and Management
75. If the product price is $100, average variable cost $40 per unit, and the total fixed costs are $120,000, what is the
break-even point?
a. 500 units
b. 2,000 units
c. 1,200 units
d. 300 units
e. 3,000 units
76. Markum Industries determines that, for its air compressors, the following results are achieved at a price of $250:
total costs = $250; 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
Chapter 12 – Pricing Concepts and Management