Chapter 10 Test Bank
1. The amount of something (money, time, or effort) that a buyer exchanges with a seller to obtain a product is referred to in
marketing terms as a
A. value.
B. renumeration.
2. One of the most important strategic decisions a firm faces is _______ because it reflects the value the product delivers to
consumers as well as the value it captures for the firm.
A. promotion
B. production management
3. Joey set up a lawn-mowing business in his neighborhood. He currently has 7 customers that want their lawns mowed each
week, for which he charges $25.00 each. Joey spends $10.00 a week in gas and another $17.00 in yard waste bags and
stickers. What is Joey‘s weekly revenue?
A. $88.00
B. $105.00
10-2
Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 10-01 Explain the importance of pricing strategy to every organization.
Topic: The Importance of Pricing
4. Joey set up a lawn-mowing business in his neighborhood. He currently has 7 customers that want their lawns mowed each
week for which he charges them $25.00 each. Joey spends $10.00 a week in gas and another $17.00 in yard waste bags and
stickers. What is Joey’s weekly profit?
5. The first step in the price-setting process is to
A. compare alternatives.
B. analyze the competitive price environment.
6. When Apple released its first iPhone in 2007, it charged customers $599. Shortly thereafter, it reduced the price to $399 for
the exact same device. Apple’s decision to set a relatively high price for a period of time after the product launched and then
decrease the price to a level that would be more sustainable over time reflects which pricing strategy?
A. volume maximization
B. target pricing
10-3
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 10-02 Outline the objectives, steps, and decisions involved in setting price.
Topic: Setting Prices
7. Compare the following statements and select the one that is accurate regarding a profit maximization strategy.
A. A profit maximization strategy sets prices low to encourage a greater volume of purchases and lower the level of involvement
for the consumer.
B. Profit maximization should not be used as a permanent pricing objective, but is effective in allowing a firm to endure a difficult
time.
8. Volume maximization is also referred to as
9. What is marginal revenue?
A. the total change in revenue that results from a large change in product price
10-4
Difficulty: 1 Easy
Learning Objective: 10-02 Outline the objectives, steps, and decisions involved in setting price.
Topic: Setting Prices
10. The degree to which the price of a product affects consumers’ purchasing behavior is referred to as
11. Consumers will be more price sensitive when
A. some or all of the purchase price is paid by others.
B. the cost of not getting the expected benefits of a purchase is high.
12. One of the most important concepts in marketing is the price elasticity of demand, which is the
A. percentage a product is marked up in response to consumer demand.
B. point at which the costs of producing a product equal the revenue made from selling the product.
13. A measure of price sensitivity that gives the percentage change in quantity demanded in response to a percentage change
in price is known as
A. marginal revenue.
B. break-even analysis.
14. In November, the appliance store priced its front-loading washing machines at $899.00 and sold 50 units. In December they
reduced the price to $799.00 and sold 53 units. Which of the following statements is accurate regarding this situation?
15. For the first quarter of the year, the price of the company’s most popular e-reader was $129.00. The company sold 750,000
units at this price. For the second quarter, the company decided to reduce the price of the e-reader to $109.00. At this price
point, the company sold 1.5 million units indicating that demand for the product is
A. unstable.
B. stable.
16. In the price-setting process, the next step after demand has been evaluated is to
A. define the pricing objectives.
B. choose a price.
17. According to your text, which of the following is not a fixed cost?
A. insurance
B. salaries
18. Variable costs are defined as costs that
19. Which of the following is a variable cost?
A. salaries
B. advertising cost
20. Which of the following accurately describes break-even analysis?
A. the process of calculating the percentage change in quantity demanded in response to a percentage change in price
B. the process of calculating the point at which fixed costs and variable costs are equal
21. Greg is the owner of a full-service car wash. For the month of December he paid $2,000 in rent, $700 in utilities, $2,950 in
salaries, and $50 on advertising. A full service car wash costs $10.50. Unit variable costs per car wash are $2.50. How many
full-service car washes does Greg need to sell to break-even each month?
10-8
22. Which of the following statements regarding break-even analysis is true?
A. Break-even analysis reflects how demand may be affected at different price levels.
B. Break-even analysis does not measure price sensitivity.
C. Break-even analysis does not measure the cost of sales.
D. Break-even analysis is an accurate measure of variable costs.
E. Break-even analysis is an accurate measure of fixed costs.
Break-even analysis only analyzes the costs of the sales. It does not reflect how demand may be affected at different price
levels. In other words, it doesn’t measure price sensitivity.
23. What can be said regarding the role of industry structure on setting price?
24. According to your text, pricing resembles a game of
A. cards.
B. blackjack.
25. Since consumers have the tendency to compare prices on almost everything they buy, marketers setting prices should
attempt to capitalize on this tendency by determining the price consumers will consider fair and reasonable for a product. This is
known as the
26. Justine went to the specialty grocery store by her office after work. When looking at the offerings at the meat counter, she
was surprised to see ground beef selling for $4.49/lb. At her normal grocery store, she can get the same quality beef for
$3.29/lb., a price Justine feels is reasonable. $3.29/lb. for ground beef is Justine’s
27. Which of the following provides the best source of information for marketers regarding how high they can price a product
before customers stop considering the product a good value?
28. According to your text, one of the most common mistakes in modern pricing is
29. Charging someone less than they are willing to pay is a practice referred to as
A. minimal pricing.
B. price skimming.
30. Which of the following statements regarding pricing is true?
A. Marketers should keep prices low during the introductory stage of the product life cycle.
B. Choosing a price is a one-time decision that is made for each individual product.
31. What are two of the most common and effective strategies marketers can use for raising prices?
A. markup pricing and escalator clauses
B. reference pricing and unbundling
32. The price strategy of unbundling involves
A. pricing products a few cents below the next dollar amount.
B. placing two or more products together in a package and selling them at a single price.
33. Scotts Fertilizer has a 4-step program for lawn care. Each step features a different product. Scotts sells the fertilizer as a set
containing one bag of each of the 4-step products. If Scotts decided to sell each product individually rather than as a set, it
would be an example of which pricing strategy?
34. A section in a contract that ensures that providers of goods and services do not encounter unreasonable financial hardship
as a result of uncontrollable increases in the costs of or decreases in the availability of something required to deliver products to
customers is referred to as a(n)
35. One of the most commonly used pricing tactics, markup pricing, is also referred to as
A. dynamic pricing.
B. profit margin pricing.
36. As a pricing tactic, markup pricing is
A. the most effective pricing tactic overall.
B. good at capturing the value consumers place on products.
37. The amount a product sells for above the total cost of the product itself is called
A. the price elasticity of demand.
B. marginal cost.
38. A pricing tactic in which a firm prices products a few cents below the next dollar amount is called
A. perceived pricing.
B. even pricing.
39. Bowman’s shoe store just received a shipment of dress boots. The manufacturer’s suggested retail price for the boots is
$150.00, but Bowman’s decides to price the boots at $149.95. What pricing tactic is Bowman’s most likely using?
A. dynamic pricing
B. yield pricing
40. Prestige pricing involves
A. constantly updating prices to reflect changes in supply or demand.
B. pricing generic label goods at the same price as designer goods.
41. If luxury brands such as Versace clothing, Lexus automobiles, and Dom Perignon champagne wanted to promote an image
of superior quality and exclusivity to customers, they would most likely use which pricing tactic?
A. odd pricing
B. cost-plus pricing
42. Sunny Pines campground, located in the Midwest, promotes the months of September and October as its value camping
months. During this time, it offers reduced rates on camper rentals and campgrounds. It does this, in part, because the weather
is not as favorable for camping at this time. The pricing tactic Sunny Pines is using to encourage camping during these months
is most likely
A. price bundling.
B. prestige pricing.
43. If a resort wanted to promote visitors to come during its off-peak times, it would most likely choose which pricing tactic?
A. prestige pricing
B. price skimming
44. When Sony launched its new PS4 gaming system, the product was sold as a package that included the game console,
game controllers, wireless headset, and one video game. This is an example of
A. survival pricing.
45. A strategy in which two or more products are packaged together and sold at a single price is called price
A. pushing.
B. grouping.
46. All of the following are advantages of using a price bundling strategy except
A. it can lead to higher profits for the firm.
B. it leads to reduced selling costs.
47. Your text notes that technology has helped to shift the balance of power from companies to customers. Which of the
following exemplifies this statement?
A. The Internet allows companies to advertise on more than one platform.
B. Companies can use social networking sites to help them better target their audiences.
48. Recent research indicates that approximately _______ of consumers search for and purchase a low-priced product using an
in-store shopping app or online search engine.
A. 5%
B. 20%
49. What technological advancement created for mobile devices has unleashed a new era of pricing transparency for
consumers?
A. SIM cards
B. mobile banking
50. A pricing strategy that involves constantly updating prices to reflect changes in supply, demand, or market conditions is
called
51. Fenton, a marketer for a major retailer, uses the Internet to aggressively review the prices of products sold by his
competitors. Accordingly, he constantly updates his prices based on his findings and what changes he sees in consumer
demand. What type of pricing strategy is Fenton most likely using?
A. flexible pricing
B. demand pricing
52. For an airline, the price of economy-class seats on any given flight may fluctuate over time. For example, the airline may try
to fill economy-class seats by lowering the price as the day of the flight draws closer, or try to fill business-class seats first by
raising prices on economy tickets. This is an example of
53. Yield management is a strategy for maximizing a firm’s
55. The illegal buying and selling of products outside of sanctioned channels is referred to as the
A. gray market.
B. blue market.
56. The sale of branded products through legal but unauthorized distribution channels is referred to as the
57. A couple living in the United States travels to China and buys huge amounts of designer purses for a much lower price than
could be purchased at home. They import the purses back into the States where they sell them for less than the normal market
price. The purses are considered to be
58. Which of the following statements regarding the gray market is true?
A. The gray market involves the illegal buying and selling of goods.
B. The interconnected nature of world economies has made it easier for firms to track gray market exchanges.
59. Taxes on imports and exports between countries are called
60. Which of the following has allowed for easier import/export transactions between the United States, Mexico, and Canada?
A. the implementation of embargoes
B. the black market