98) Milt Alden uses which of the following strategies for pricing his products?
A) basing company price on competitors’ prices
B) using everyday low pricing
C) initiating an aggressive promotional campaign
D) starting with customer-value considerations
E) focusing on overall fixed costs of manufacturing
99) If Alden raises the price of the handheld mixer by 2 percent and then the quantity demanded
falls by 10 percent, what is the price elasticity of demand?
A) -5
B) -8
C) -12
D) 5
E) 12
100) Prices have a direct impact on a firm’s bottom line.
101) Customer perceptions of the product’s value set the floor for prices.
102) Product costs set the ceiling for prices.
103) In customer value-based pricing, price is considered along with all other marketing mix
variables before the marketing program is set.
104) Value-based pricing uses the sellers’ perception of value as the key to pricing.
105) Using value-based pricing, a marketer would not design a product and marketing program
before setting the price.
106) Cost-based pricing is often product driven.
107) Department stores that practice everyday low pricing (EDLP) typically provide frequent
sale days, early-bird savings, and bonus earnings for store credit-card holders.
108) Overhead costs are costs that do not vary with production or sales level.
109) Cost-based pricing involves setting prices based on consumer perception of value.
110) Average cost tends to increase with accumulated production experience.
111) A downward-sloping experience curve is indicative of a company’s rapidly increasing
production costs.
112) The simplest pricing method is cost-plus pricing, which involves adding a standard markup
to the cost of the product.
113) Markup pricing is popular because when all firms in the industry use this pricing method,
prices tend to be similar, so price competition is minimized.
114) Markup pricing is used when a firm tries to determine the price at which it will break even
or make the target return it is seeking.
115) A break-even chart shows the total cost and total revenue expected at various sales volume
levels.
116) Internal factors affecting pricing include the company’s overall marketing strategy,
objectives, and marketing mix.
117) Price decisions must be coordinated with product design, distribution, and promotion
decisions to form a consistent and effective integrated marketing mix program.
118) In a pure monopoly, the market consists of many buyers and sellers who trade over a range
of prices rather than a single market price.
119) A demand curve shows the number of units the market will buy in a given time period at
different prices that might be charged.
120) If a company faces competition, its demand at different prices will depend on whether
competitors’ prices stay constant or change with the company’s own prices.
121) If demand changes greatly with price, the demand is inelastic.
122) The more elastic the demand, the more it pays for the seller to raise the price.
123) Buyers are more price sensitive when the product they are buying is unique or when it is
high in quality, prestige, or exclusiveness.
124) If demand is elastic rather than inelastic, sellers will consider lowering their prices.
125) Define price. Discuss its importance.
126) Distinguish between value-based pricing and cost-based pricing.
127) Explain break-even pricing.
128) What are the different internal factors that affect a firm’s pricing decisions?
129) Compare and contrast pure competition and oligopolistic competition.
130) Briefly discuss monopolistic competition.
131) What is a demand curve? Explain its importance in the context of pricing decisions.
132) Explain price elasticity. What determines the elasticity of demand?
133) Briefly describe how economic conditions impact a firm’s pricing strategies.
134) “Beyond the market and the economy, the company must consider several other factors in
its external environment when setting prices.” Explain this statement.
135) List some important characteristics of price.
136) Why is price considered one of the most flexible elements of the marketing mix?
137) Explain the concept of price floor.
138) Explain the concept of price ceiling.
139) Briefly describe the process of value-based pricing.
140) What is good-value pricing?
141) What is high-low pricing?
142) Define total costs.
143) Explain the significance of a downward-sloping experience curve.
144) A marketer’s fixed costs are $400,000. The variable cost is $16 per unit, and the price of the
product is $24 per unit. If the company wants to make a profit, how many units must it sell and at
what price?
145) A marketer’s fixed costs are $400,000, the variable cost is $16 per unit, and the price of the
product is $24 per unit. What is the company’s break-even point in dollar sales?
146) What is competition-based pricing?
147) Who typically sets prices in large and small companies?
148) What is a pure monopoly?
149) If demand falls by 15 percent when a seller raises its price by 3 percent, what will be the
price elasticity of demand? Is the demand elastic or inelastic?