Marketing Chapter 10 Individuals or groups that buy new or used products for a lower price in a foreign country

106. Individuals or groups that buy new or used products for a lower price in a foreign country, import them legally back into the

domestic market, and sell them for less than the normal market price are participating in the _______ market.

107. The international pricing strategy of any U.S. firm must take into account the taxes on imports and exports that foreign

countries might place on its goods, otherwise known as _______.

108. _______ is a strategy in which a company sells its exports to another country at a lower price than it sells the same product

in its domestic market.

109. _______ is one of the most watched and regulated marketing activities because it directly impacts the financial viability of

both organizations and individuals.

110. The practice of charging different customers different prices for the same product is called price _______.

111. If two or more companies agree to maintain a certain price on a product, they are engaging in a deceptive and illegal

practice called price _______.

112. The practice of first setting prices low with the intention of pushing competitors out of the market or keeping new

competitors from entering the market, and then raising prices to normal levels is referred to as _______ pricing.

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Blooms: Remember

Difficulty: 1 Easy

Learning Objective: 10-06 Explain the major legal and ethical issues associated with pricing.

Topic: Ethical Issues in Pricing

113. A firm that knowingly quotes a higher original price on a product to make the discount it offers on the product seem more

substantial is engaged in _______ pricing.

114. To combat price discrimination that injures competition, the _____ _____ _____ was made into law in 1936 with the goal of

requiring sellers to charge everyone the same price.

115. The Wheeler-Lea Act of 1938 is also called the _______ Act.

116. Pricing is one of the most important strategic decisions a firm faces because it reflects the value the product delivers to

consumers as well as the value it captures for the firm.

117. A profit maximization strategy is used during the growth and maturity stages of the product life cycle.

118. Volume maximization is the same thing as survival pricing.

119. The change in total revenue that results from selling one additional product unit is referred to as price sensitivity.

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Topic: Setting Prices

120. Customers are more price sensitive the higher the product’s price is relative to the customers’ price expectation.

121. Price elasticity of demand is a measure of price sensitivity.

122. An auto dealership reduced the price of its new SUVs by $3,000 in hopes of generating more sales. However, the lower

price only resulted in a few more sales of the vehicle. This represents an elastic demand situation.

123. Prices are generally more inelastic in the early stages of the product life cycle and increasingly elastic in the later stages of

the product life cycle.

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Topic: Price Elasticity of Demand

124. Rent on an office building would be considered a fixed cost, while sales commissions would be considered a variable cost.

125. Once a firm has established its break-even point for a product, it has a starting point for estimating how much revenue it

must generate to earn a profit.

126. Break-even analysis is an accurate measure of price sensitivity.

127. While shopping, Chloe sees a pair of jeans on sale for $29.99. She is excited because she has purchased this particular

brand of jeans several times in the past for $40.00. In this instance, $40.00 is Chloe’s reference price.

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Blooms: Apply

Difficulty: 3 Hard

Learning Objective: 10-02 Outline the objectives, steps, and decisions involved in setting price.

Topic: Setting Prices

128. Underpricing is a pricing strategy whereby companies charge an amount just below cost in order to generate sales in the

introductory stage of a product’s life cycle.

129. Unbundling provides value for customers who are focused on a specific price point rather than the complete product

offering.

130. An escalator clause ensures that the customer does not incur financial hardship as a result of increases to the cost of a

product.

131. Cost-plus pricing is not a very effective strategy for maximizing profits.

132. An odd pricing tactic prices items in odd dollar amounts, such as $4.95, instead of in even amounts, like $4.88.

133. Loss-leader pricing involves selling a product at a price that causes the firm a financial loss.

134. Dynamic pricing is a pricing strategy that involves pricing a product higher than competitors to signal that it is of higher

quality.

135. The gray market form of buying and selling often occurs when the price of an item is significantly higher in one country than

another.

136. Tariffs may raise the price that foreign customers must pay for goods produced in the United States, negatively impacting a

U.S. firm’s ability to be price competitive in those markets.

137. A local diner offers a lunch special during the week for $5.99. On Wednesdays, senior citizens can get the same lunch

special for $4.99. This is a form of predatory pricing.

138. Because predatory pricing could be considered an attempt to create a monopoly, it is illegal under U.S. law.

139. The 1936 law that requires sellers to charge everyone the same price for a product is the Robinson-Patman Act.

140. The Robinson-Patman Act is also called the Advertising Act.

141. According to the textbook, what are the three pricing objectives that a business could have?

142. You own a gas station and are thinking about raising prices because your cost of the gasoline has increased. You are

worried that if you raise the price, the quantity of gasoline purchased by your customers will decrease, thereby lowering your

total revenues. Analyze this situation.

143. You are starting a business and as part of your business plan you need to develop a break-even analysis. Your fixed costs

(overhead) associated with your store are $1,000,000 annually, and your selling price per item is $2,500. If you have a labor cost

of $500 per unit, marketing costs of $250 per unit, and other variable costs of $500 per unit, what is your break-even point of

sales?

144. What are the various pricing tactics that a business can use?

145. Why is price discrimination acceptable in pricing?

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146. You just saw an advertisement in the newspaper for a very inexpensive big screen television on sale at a local department

store. The ad implies the TV has all the features that a customer would want in that type of TV. You get to the department store

and the television that is on display that matches the price does not look like the TV in the ad, nor does it have the functions that

you would expect in a big screen TV. The salesperson tells you that you should look at the model staged next to the model on

sale, which has all the features you are looking for, but is $200 more. What do you think the pricing strategy is that this company

used in this instance?

Chapter 10 Test Bank Summary

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