81
156) Companies use a price premium to assess whether their products and brands are priced above,
at, or below the market. This price premium equals
A) unit volume market share for a brand, divided by dollar sales market share for a brand, minus
one.
B) dollar sales market share for a brand, divided by unit volume market share for a brand, plus one.
C) dollar sales market share for a brand, divided by unit volume market share for a brand, minus
one.
D) unit volume market share for a brand, divided by dollar sales market share for a brand, plus one
E) dollar sales market share for a brand, divided by unit volume market share for a brand, minus
the number of competitors against which a brand is being measured.
157) A Price Premium Marketing Dashboard shows the dollar sales market share for Red Bull to
be 38 percent and the unit volume market share to be 33 percent among selected energy drinks.
What is the price premium for Red Bull in 2010?
A) −12.5 percent
B) −7.5 percent
C) −5.3 percent
D) 5 percent
E) 15.2 percent
158) Loss-leader pricing refers to
A) a pricing method where the price the seller charges is below the actual cost to make the product.
B) setting a low initial price and gradually but consistently increasing that price so as not to
antagonize the consumer.
C) deliberately selling a product below its customary price, not to increase sales, but to attract
customers’ attention in hopes that they will buy other products as well.
D) a method of pricing based on a product’s tradition, standardized channel of distribution, or other
competitive factors.
E) pricing a product between 8 and 10 percent lower than nationally branded competitive products.
159) Using ________, many retailers deliberately sell products below their normal prices (and
sometimes below cost) to attract attention and additional store traffic.
A) customary pricing
B) below-market pricing
C) prestige pricing
D) penetration pricing
E) loss-leader pricing
160) When Kroger, a national supermarket chain, uses a special promotion to price a six-pack of
soda at $2.09 (which is below its customary price level of $4.29), it is attempting to
A) drive its competition out of business.
B) attract customers in hopes they will buy other products as well.
C) fill its parking lot so its store will look successful.
D) work with the local bottler to move products that are close to their expiration dates.
E) help stimulate the local economy and generate good will with its customers.
161) Basic to setting a product’s price is the extent of ________. This information is used in
estimating the revenues the firm expects to receive.
A) management’s commitment to the product relative to other products in the line
B) the product line into which it will be introduced
C) customer demand for it
D) the firm’s promotional budget
E) distribution requirements
162) Marketing executives must translate estimates of customer demand into estimates of
A) personnel.
B) advertising expenditures that will be required.
C) ancillary product support.
D) revenues the firm expects to receive.
E) supply on a demand curve.
163) A demand curve is a graph that relates
A) the quantity sold and price, which shows the maximum number of units that will be sold at a
given price.
B) revenues and costs, which shows the minimum number of units that must be sold to break even.
C) the quantity sold and revenues, which shows the minimum number of units that must be sold in
order to make a profit.
D) total production costs to various price points in order to determine how many units must be sold
in order to realize a predetermined profit.
E) primary demand to selective demand, which shows the growth of the market compared to
change in market share.
164) The maximum quantity of products consumers will buy at given price is shown by
A) a demand curve.
B) a price constraint.
C) a break-even point.
D) a supply curve.
E) a marginal revenue curve.
165) The horizontal axis of a demand curve graph represents
A) market growth rate.
B) relative market share.
C) price per unit.
D) potential profit in dollars.
E) quantity demanded.
166) The vertical axis of a demand curve graph represents
A) market growth rate.
B) relative market share.
C) price per unit.
D) potential profit in dollars.
E) quantity demanded.
167) A demand curve graph typically appears as
A) a parabola with the apex representing the highest price that can be charged without losing
customers.
B) a diagonal line going from upper left to lower right demonstrating that as price goes down,
demand goes up.
C) an inverted parabola with the lowest point representing the lowest price that can be charged and
still meet the company’s profit objectives.
D) a diagonal line going from lower left to upper right demonstrating that as prices go up, demand
goes up proportionately.
E) two intersecting lines that identify the point at which supply and demand are exactly the same.
168) Factors that determine consumers’ willingness and ability to pay for products and services are
referred to as
A) supply factors.
B) demand factors.
C) affordability factors.
D) elasticity factors.
E) macro environmental factors.
169) Demand factors refer to
A) the number of consumers who can afford to purchase a product or service.
B) the price that should be charged for a given product.
C) consumers’ willingness and ability to pay for products and services.
D) the number of consumers who want to purchase a product.
E) the number of consumers who can purchase a product.
170) All of the following are demand factors except which?
A) the price of similar products
B) consumer tastes
C) consumer income
D) the availability of similar products
E) the number of products in the line
171) When estimating demand, price is not the only factor to be considered. Three other elements
emphasized by economists are consumer tastes, price and availability of similar products, and
A) consumer income.
B) consumer psychographics.
C) size of the target market.
D) current political agendas.
E) green substitutes.
172) While consumer tastes and price and availability of similar products determine what
consumers want to buy, consumer income determines
A) where they buy.
B) the degree of brand loyalty.
C) the degree of repeat purchase.
D) what they can buy.
E) their likelihood of spreading positive word-of-mouth.
173) Which of the following statements about the factors that influence demand is true?
A) As the availability of close substitutes increases, the demand for a product increases.
B) As real consumer income increases, the demand for a product increases.
C) As the price of close substitutes increases, the demand for a product declines.
D) Changing consumer tastes have little impact on the demand for a product.
E) As real consumer income decreases, the demand for a product increases.
174) There are a lot of skateboards on the market, but when it was launched the BMW Streetcarver
was the only one with stabilizers and wheel design based on BMW’s automobiles. This technology
gave the BMW Streetcarver better control at high speeds and around sharp turns than any other
brand. The skateboard was priced at $495, which left many consumers (especially young males)
who might have wanted to buy the Streetcarver unable to afford it. This inability to pay for the
high-priced BMW-made skateboard shows the effect of ________ on sales.
A) demand factors
B) macroeconomic environmental factors
C) barter factors
D) supply factors
E) exchange parameters
175) Mrs. Renfro’s, Inc., sells 25 different relishes in 45 different states. Its Chipotle Corn Salsa is
so popular that the company struggles to keep its resellers stocked. At $4.50 a jar, its price seems
just right to consumers who savor its hot and spicy taste. The popularity of spicy food is an
example of a ________ on which Mrs. Renfro’s has capitalized.
A) barter factor
B) demand factor
C) supply factor
D) consumer index
E) macroeconomic environmental factor
Figure 11-3a
176) Figure 11-3a above shows that when the price for Red Baron frozen cheese pizzas moves
from $8 to $6 per unit along the demand curve D1, the quantity demanded
A) increases from 2 to 3 million units per year.
B) decreases from 3 to 2 million units per year.
C) stays the same.
D) increases from 6 to 8 million units per year.
E) decreases from 8 to 6 million units per year.
177) Figure 11-3a shows shows that when the quantity demanded for Red Baron frozen cheese
pizzas moves from 2 to 3 million units along the demand curve D1, the profit
A) increases from $6 to $8 per unit.
B) decreases from $8 to $6 per unit.
C) stays the same per unit.
D) increases from $2 to $3 per unit.
E) impacts cannot be determined. Figure 11-3a does not indicate what happens to profit when the
quantity demanded changes.
178) Which of the following illustrates movement along the demand curve?
A) Prices remain the same, but there is a significant increase in demand.
B) Prices remain the same, but there is a significant decrease in demand.
C) As the price is raised, the quantity demanded increases, assuming all demand factors stay the
same.
D) As the price is lowered, the quantity demanded increases, assuming all demand factors stay the
same.
E) Movement along the curve indicates that some significant event has taken place outside the
organization that has affected demand.
Figure 11-3b
179) Figure 11-3b above shows that when the quantity demanded for Red Baron frozen cheese
pizzas moves from 2 to 3 million units from the demand curve D1 to the demand curve D2, the
profit
A) impacts cannot be determined. Figure 11-3b does not indicate what happens to profit when the
quantity demanded changes.
B) increases from $2 to $3 per unit.
C) stays the same per unit.
D) increases from $6 to $8 per unit.
E) decreases from $8 to $6 per unit.
180) In Figure 11-3b above, the demand curve shifts from D1 to D2. This most likely represents
A) an increase in demand that did not require a change in price but was the result of a change in one
or more demand factors.
B) an increase in demand that required a decrease in price.
C) no change in price and a decrease in demand that results from internal business practice
changes.
D) no change in demand or price but a greater profit due to economies of scale.
E) a decrease in price from $8 to $6 per unit.
181) Which of the following statements most likely would account for the shift in the demand
curve from D1 to D2 shown in Figure 11-3b above?
A) The firm increased its prices and consumers perceived the value of the product to be greater.
B) There were fewer product substitutes available in the marketplace.
C) Competitors in the market raised their prices.
D) A recession occurred that raised consumers’ incomes.
E) The firm’s price remained the same but changes occurred in consumer tastes.
182) A shift of the demand curve from D1 to D2 in Figure 11-3b above indicates
A) fewer units are demanded at the given price.
B) more units are demanded at the given price.
C) the price has decreased.
D) the price has increased.
E) there is not enough information given to indicate what happened.
183) Which of the following best illustrates a shift in the demand curve?
A) When prices remain the same, there is a significant change in supply.
B) As the price is raised, the quantity demanded increases, assuming all else stays the same.
C) When prices remain the same, there is an increase or decrease in demand.
D) As the price is lowered, the quantity demanded decreases, assuming all else stays the same.
E) An internal matter has forced a price change of some type, but it does not impact demand.
184) The percentage change in quantity demanded relative to the percentage change in price is
referred to as
A) price elasticity of demand.
B) demand derivative of price.
C) average demand.
D) marginal revenue.
E) derived demand.
185) Price elasticity of demand (E) is expressed as (Δ means change)
A) E = Percentage change in price (%Δ in P) ÷ Percentage change in quantity demanded (%Δ in
Q).
B) E = Price (P) ÷ Quantity demanded (Q).
C) E = Percentage change in quantity demanded (%Δ in Q) ÷ Percentage change in price (%Δ in
P).
D) E = Quantity demanded (Q) ÷ Price (P).
E) E = Quantity demanded (Q) × Price (P).
186) For the sake of simplicity and by convention, price elasticity figures are shown as
A) positive numbers (0.64, 1.25, etc.).
B) negative numbers (−0.64, −1.25, etc.).
C) Greek letters (∑, ∏, etc.).
D) Roman numerals (I, V, X, etc.).
E) English consonants (P, Q, R, etc.).
187) Elastic demand exists when
A) a small percentage decrease in price produces a smaller percentage increase in quantity
demanded.
B) a small percentage decrease in price produces a larger percentage increase in quantity
demanded.
C) an increase in price causes a larger increase in quantity demanded.
D) the quantity demanded remains the same regardless of level of price.
E) no change in price produces a small percentage change in quantity demanded.
188) Several companies produce latex gloves that are used in a variety of different industries. If
one of the glove manufacturers decreases its price by just a few percentage points, it will result in a
significant increase in quantity demanded. The demand for latex gloves is
A) synergistic.
B) inelastic.
C) unitary.
D) elastic.
E) static.
189) Inelastic demand exists when
A) a small percentage decrease in price produces a smaller percentage increase in quantity
demanded.
B) a small percentage increase in price produces a larger percentage increase in quantity
demanded.
C) an increase in price is impossible due to government restrictions.
D) the quantity demanded remains the same regardless of any changes in marketing strategies.
E) a small percentage decrease in price produces a smaller percentage increase in quantity
supplied.
190) If a firm finds the demand for one of its products is inelastic, it can increase its total revenues
by
A) lowering its price.
B) increasing fixed costs only.
C) increasing variable costs only.
D) increasing both fixed and variable costs.
E) raising its price.
191) Recently, much of the western United States experienced a drought condition and water
usage was restricted in Denver. Yet, even though most people used less water, the price of water
did not drop. When the drought was declared over, the water company raised water prices.
However, the residents of Denver did not use less water. Here, water is
A) price-elastic.
B) price-sensitive.
C) price-inelastic.
D) price-insensitive.
E) unitary-elastic.
192) The manufacturer of a new kind of fat-free ice cream that has the consistency and taste of
regular ice cream is thinking of using a penetration pricing strategy for its new product. Which of
the following conditions would argue against using a penetration pricing strategy for the tasty,
fat-free ice cream?
A) The ice cream market is highly elastic.
B) A large portion of the market has inelastic demand for ice cream over a broad range of prices.
C) Economies of scale in production would be substantial.
D) Retailers are not willing to pay for new brands of premium ice cream in the already
overcrowded category.
E) Once the initial price is set, it is nearly impossible to lower prices without alienating buyers.
193) The total money received from the sale of a product is referred to as
A) profit.
B) total revenue.
C) average revenue.
D) marginal revenue.
E) derived demand.