77. A certain location of O’Charley’s Restaurant has annual fixed costs of $200,000. If an average tab at the restaurant
is $60 and the variable costs per tab is $20, how many groups of customers must O’Charley’s serve per year in
order to break even?
a. 2,000
b. 5,000
c. 10,000
d. 3,333
e. 2,500
78. The Highland Racquet Club found that with annual fixed costs of $60,000, its break-even point is 2,000 members
when the membership charge is $60 per person per year. What is the variable cost per person for Highland?
a. $45
b. $50
c. $30
d. $25
e. $40
Chapter 12 – Pricing Concepts and Management
79. Abby is a 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 break-even point. Abby knows this is an important
financial statistic because below the break-even point, the firm operates:
a. with fixed costs only.
b. with minimal variable costs.
c. with no revenue.
d. with minimal profit.
e. at a loss.
80. What assumption does break-even 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 that demand is elastic for the product.
Chapter 12 – Pricing Concepts and Management
81. Marketers at organizations engaged in price competition:
a. are more concerned about knowing competitors’ prices than 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. do not employ comparative shoppers to help them gather information regarding the prices of competing
brands.
e. experience high levels of price instability.
82. Marketers improve their ability to establish prices appropriately when:
a. there is non-price competition.
b. they know the 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.
Chapter 12 – Pricing Concepts and Management
83. The three primary bases for developing prices are:
a. profit, demand, and competition.
b. supply, demand, and marketing objectives.
c. demand, competition, and cost.
d. markup, cost, and cost-plus.
e. negotiation, periodicity, and randomness.
84. Marketers generally view ____ as the minimum price a product can be sold for.
a. revenue
b. demand
c. profits
d. costs
e. moderate losses
Chapter 12 – Pricing Concepts and Management
85. 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. expense-based
86. 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
Chapter 12 – Pricing Concepts and Management
87. Steinway produces concert grand pianos, often using the custom materials and designs desired by a specific
customer. The average price of these pianos runs about $50,000 depending on the exact piano. What type of pricing
does Steinway most likely use for these pianos?
a. Markup
b. Competition-based
c. Cost-plus
d. Demand-based
e. Secondary-market
88. 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.
Chapter 12 – Pricing Concepts and Management
89. 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
90. When determining markup as a percentage of cost, divide the markup amount by:
a. price.
b. cost.
c. quantity.
d. revenue.
e. 100.
Chapter 12 – Pricing Concepts and Management
91. A retailer of Real Dry deodorant prices it at $2.00, while it costs the retailer $1.40. What is the approximate
markup as a percentage of selling price?
a.
3 percent
a. 3 percent
b. 14.3 percent
c. 30 percent
d. 70 percent
e. 20 percent
92. Kohl’spays$16.50forasixouncebottleofcologneandsellsitfor$25.95.Itsmarkupasapercentageofcostis
approximately ____ percent for this product.
a. 64
b. 36
c. 18
d. 57
e. 45
Chapter 12 – Pricing Concepts and Management
93. 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
94. 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 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
Chapter 12 – Pricing Concepts and Management
95. 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.
96. If General Motors determines that it wants to sell 200,000 Chevrolet Acadias and sets the price at $29,500. The
firm knows that at that price it will achieve its goal. Therefore, the firm would be using a ____ pricing method.
a. cost-plus
b. competition-based
c. psychological
d. comparison
e. demand-based
Chapter 12 – Pricing Concepts and Management
97. Competition-based pricing is:
a. used when costs and revenues are secondary to competitors’ prices.
b. not a useful method to increase market share.
c. not useful if the competing products are homogeneous.
d. usedtopriceabovecompetitors’prices.
e. used when competing products are heterogeneous.
98. When products in an industry are relatively homogeneous and price is a key purchase consideration:
a. competition-based pricing becomes more important.
b. demand-based pricing dominates pricing decisions.
c. firms tend to use secondary-market pricing.
d. cost-based methods like markup pricing are dominant.
e. customary pricing is used.
Chapter 12 – Pricing Concepts and Management
99. IflocalShellgasolinestationslookatBPstations’pricesastheprimarymethodofdeterminingitsownprices,Shell
is most likely using:
a. price fixing; which considers competition to be less important than costs.
b. pricefixing;whichconsiderscoststobelessimportantthancompetitor’sprices.
c. market share pricing; which considers competition to be the ultimate pricing goal.
d. competition-based pricing, which considers profit to be the ultimate pricing goal.
e. competitionbasedpricing,whichconsiderscoststobelessimportantthancompetitor’sprices.
100. If PepsiCo sets its twelve-pack price to match the price charged by Coca-Cola, Pepsi is using ____ pricing
methods?
a. demand-based
b. cost-based
c. reference
d. competition-based
e. psychological
Chapter 12 – Pricing Concepts and Management
101. 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
102. Executives in Japan decided to price Lexus luxury cars in the United States at $55,000 while pricing them at
$66,000 in their own country. This is an example of:
a. secondary-market pricing.
b. price skimming.
c. bait pricing.
d. prestige pricing.
e. random discounting.
Chapter 12 – Pricing Concepts and Management
103. 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. bundle pricing.
b. cumulative discounts.
c. seasonal discounts.
d. base-point pricing.
e. reference pricing.
104. To gain market share, when Hyundai first entered the U.S. car market it did so with a comparatively low pricing
strategy. One of the negative side effects of making this pricing decision is:
a. absence of product trial by the target market.
b. difficulty raising the prices later.
c. a high return on investment level affecting tax balances owed.
d. poor survival chances.
e. higher developmental costs.
Chapter 12 – Pricing Concepts and Management
105. If a company provides price differentials that harm competition by giving one or more buyers a competitive
advantage, it is committing:
a. periodic discounting.
b. price-consciousness.
c. functional discounting.
d. price competition.
e. price fixing.
106. 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
Chapter 12 – Pricing Concepts and Management
107. AmanageratKohl’sdiscoversthatMacy’shasreducedthepriceofitschildren’sLevi’sfrom$31.99to$24.99,
according to an advertisement in the Sunday newspaper. She immediately phones her store and instructs the
salesperson on duty to put a sign up next to their children’s Levi’s that reads, “SALE: $24.99.” This is an example
of:
a. secondary-market pricing.
b. bait-pricing.
c. reference pricing.
d. random discounting.
e. comparison discounting.
108. If a business decides to reduce its prices once in a while on an unsystematic basis, it is using:
a. price reduction planning.
b. random discounting.
c. bait pricing.
d. periodic discounting.
e. penetration pricing.
Chapter 12 – Pricing Concepts and Management
109. If Norelco introduced a new electric razor that sonically removes hair and priced it first at $175 and then at $150
before reducing the price to $100, the firm’s initial pricing strategy is known as:
a. penetration pricing.
b. psychological pricing.
c. price lining.
d. price skimming.
e. odd-even pricing.
110. Sony management decided to use skimming as a pricing strategy for its newest line of high-definition television
(HDTV) sets. It should be aware that this strategy does not:
a. generate capital to cover research and development costs.
b. discourage competitors from entering the market.
c. provide flexibility in the introductory base price.
d. protect the firm from covering costs if prices are set too low.
e. reduce the stress that may be placed on the firm’s production capabilities.
Chapter 12 – Pricing Concepts and Management
111. A price-skimming strategy assumes that:
a. the firm cannot recover the high costs of R&D.
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.
112. A penetration pricing strategy is particularly appropriate when demand is:
a. increasing.
b. highly elastic.
c. highly inelastic.
d. decreasing.
e. inefficient.
Chapter 12 – Pricing Concepts and Management
113. 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.
114. 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-even
b. skimming
c. lining
d. penetration
e. psychological
Chapter 12 – Pricing Concepts and Management
115. Pricing the basic product in a product line low, while pricing related items at a higher level is called:
a. premium pricing.
b. bait pricing.
c. captive pricing.
d. price skimming.
e. price lining.
116. A product that has more features than those of its competition, or that is perceived to be of higher quality, warrants
using:
a. custom pricing.
b. special-event pricing.
c. premium pricing
d. price lining.
e. bait pricing.
Chapter 12 – Pricing Concepts and Management