118) Marketing a product internationally rarely requires a product to be priced differently
depending on the country.
119) Why do businesses use cash discounts when they are in essence losing some money on the
sale?
120) Differentiate between dynamic and fixed pricing.
121) Explain the factors involved in setting international pricing.
122) List four types of discounts.
123) List four types of segmented pricing.
124) Explain the psychology behind a price of $9.99 instead of $10.00.
125) Casual Comfort sells its catalog items using FOB-origin pricing. Who pays the freight
charges?
126) The “bottom of the pyramid” refers to ________.
A) the world’s poorest consumers
B) the middle classes of Brazil, Russia, India, and China
C) a market with little or no purchasing power
D) people with easy access to luxury goods
E) the middle class of high-income countries
127) Which of the following factors would most likely lead to a company initiating a price cut?
A) over-demand
B) weakened economy
C) poor competition
D) cost inflation
E) weak price competition
128) Which of the following is used in an attempt to dominate the market through a pricing
strategy?
A) price increase
B) match competitors’ pricing
C) price cuts
D) quantity discounts
E) custom prices
129) Which of the following would most likely lead to a company initiating a price increase?
A) weakened economy
B) possession of outdated merchandise
C) excess capacity
D) over-demand
E) possession of defective merchandise
130) Reasons for a price increase include all of the following EXCEPT ________.
A) a desire to improve profits
B) cost inflation
C) when the alternative is rationing of the product
D) decreasing gross margins
E) increasing supply of product
131) Ways to avoid accusations of price gouging include ________.
A) bundling products together
B) matching competitors’ pricing
C) communications to customers explaining why prices are being increased
D) passing along increased costs
E) increase quality of the product
132) Which of the following is true of price changes?
A) Over-demand leads to companies initiating price cuts.
B) Changes in price do not affect a brand’s image.
C) Customer reaction to price changes is not as important as competitor reaction.
D) A drop in price can adversely affect how consumers view the brand.
E) Excess capacity is a factor that causes increases in price.
133) Competitors are most likely to react to a price change when ________.
A) a large number of competitors are involved
B) the product is uniform
C) the buyers are not well informed about product features
D) buyers are not well informed about price differences
E) the products are not uniform
134) Questions a company should consider if a competitor initiates a price change include all of
the following EXCEPT ________.
A) “Are other competitors going to respond?”
B) “What will happen to the company’s market share if it does not respond?”
C) “Is the price change temporary or permanent?”
D) “Why did the competitor change the price?”
E) “How can we improve our product?”
135) When a competitor cuts its price, a company should ________ if it believes it will not lose
much market share or would lose too much profit by cutting its own prices.
A) reduce its production costs
B) reduce its marketing costs
C) maintain its current prices and profit margin
D) increase its marketing budget to raise the perceived value of the product
E) increase its production costs to improve the quality of the product
136) When faced with a competitor who has cut its product’s price, which of the following is
the most cost-effective way for a company to maintain its own price but raise the perceived
value of its offer?
A) by improving the quality of the product
B) by introducing a higher-priced premium brand
C) by altering the company’s marketing communications
D) by bundling the offer with add-ons
E) by distributing the product through less costly channels
137) In response to price cuts from competitors, a cereal company with several more expensive
and higher quality cereals introduced a lower-priced option to its product line. This is an
example of which of the following responses to a competitor’s price cut?
A) raising the perceived value of a product
B) improving product quality
C) accepting a reduced market share
D) launching a “fighter brand”
E) using high-low pricing
138) Excess capacity leads to companies initiating an increase in price.
139) Companies need to respond to a competitor’s price change if its own market share and
profits will decrease because of the change.
140) Launching a fighter brand is an effective way to deal with a situation in which the market
segment being lost is price sensitive and will not respond to arguments of higher quality.
141) Discuss the conditions under which a company might consider using price cuts or price
increases.
142) When are competitors most likely to react to price changes? How can a firm anticipate the
likely reactions of its competitors?
143) How might a consumer view a price cut?
144) Which of the following is true of public policies and pricing?
A) The government imposes no limits on intrastate pricing issues.
B) The Robinson-Patman Act governs interstate commerce.
C) Companies have free rein when it comes to setting prices.
D) The Sherman Act governs intrastate commerce.
E) The Clayton Act encourages the formation of monopolies.
145) Which of the following is NOT true of public policies and pricing?
A) Companies are free to charge whatever prices they wish.
B) Federal, state, and local laws govern the rules of fair play in pricing.
C) Deceptive pricing is not permitted.
D) Companies must consider broader societal pricing concerns.
E) Regulations exist to control predatory pricing.
146) The Sherman, Clayton, and Robinson-Patman Acts are all federal laws that were enacted
to curb the formation of ________.
A) monopolies
B) global partnerships
C) competitive markets
D) internal markets
E) intrastate partnerships
147) When sellers set prices after talking to competitors and engaging in collusion, they are
involved in ________.
A) interstate commerce
B) comparative pricing
C) price fixing
D) skimming pricing
E) price bundling
148) A number of top fashion-modeling agencies would most likely be charged with ________
for jointly determining what commissions they charge for models.
A) prestige pricing
B) competitive pricing
C) price bundling
D) dynamic pricing
E) price fixing
149) Federal legislation on price fixing requires that sellers set their prices ________.
A) based on their fixed and variable costs
B) without communication from competitors
C) to achieve a specific profit margin
D) without the intention of cutting into competitors’ profits
E) consistently throughout a region
150) If a large retailer sold numerous items below cost with the intention of punishing small
competitors and gaining higher long-run profits by putting those competitors out of business,
the retailer would be guilty of ________.
A) price collusion
B) price fixing
C) predatory pricing
D) competitive pricing
E) penetration pricing
151) Savings for You, a discount retail chain, is highly competitive. When entering a new
market, Savings for You often cuts prices so deeply that it sells below costs, effectively pushing
smaller companies with less purchasing power out of the market. Savings for You is most
likely guilty of ________.
A) market skimming
B) price fixing
C) deceptive pricing
D) price collusion
E) predatory pricing
152) Which of the following would be considered predatory pricing?
A) a company that prices its products below cost to get rid of a surplus
B) a company that prices below cost to drive out competitors
C) a company that offers a volume discount
D) a company that offers the suggested retail price on the manufacturer’s package
E) a company that offers real-time pricing online
153) The ________ seeks to prevent unfair price discrimination by ensuring that sellers offer
the same price terms to customers at a given price level.
A) FTC’s “Guides against Deceptive Pricing”
B) Robinson-Patman Act
C) Sherman Act
D) Clayton Act
E) Automobile Information Disclosure Act
154) Price discrimination is legal when a ________.
A) manufacturer and reseller have agreed upon a specified retail price for a product
B) manufacturer sells to retailers in different markets
C) seller can prove its costs are different when selling to different retailers
D) seller advertises prices that are not actually available to consumers
E) seller has not communicated with competitors before announcing prices
155) Price discrimination may be used to match competition as long as the strategy is
temporary, localized, and ________.
A) defensive
B) offensive
C) publicized
D) private
E) uniform across channels
156) Mark’s Markers, a manufacturer of white board markers, has required its dealers to charge
a specified retail price for its markers. Mark’s is most likely guilty of ________.
A) captive pricing
B) retail price maintenance
C) price discrimination
D) competitive pricing
E) unfair price skimming
157) ________ occurs when a seller states price savings that are not actually available to
consumers.
A) Comparative pricing
B) Scanner fraud
C) Deceptive pricing
D) Market skimming
E) Price collusion
158) While comparison pricing claims are legal if they are truthful, the FTC warns sellers not to
advertise a) factory or wholesale prices unless such prices are what they claim to be, b)
comparable value prices on imperfect goods, or c) ________.
A) a sale unless the products are available in sufficient quantity to meet expected demand
B) in a way which confuses potential buyers of the product
C) a description of a product unless all versions of the product are offered with the same pricing
terms
D) a price reduction unless it is a savings from the usual retail price
E) if only a limited quantity are available at the reduced price
159) Failure to enter the current price into a retailer’s system may result in charges of
________.
A) predatory pricing
B) scanner fraud
C) retail maintenance pricing
D) discriminatory pricing
E) price fixing
160) Reasons sellers go beyond what is required by pricing regulations include all of the
following EXCEPT that ________.
A) it is good business to treat customers fairly
B) customers that fully understand prices and pricing terms are happy customers
C) word-of-mouth from dissatisfied customers spreads rapidly
D) building strong and lasting relationships is key to business success
E) it improves profitability to earn additional revenue due to customer confusion
161) Price discrimination is permissible if the seller manufactures different qualities of the
same product for different retailers and can prove that the price difference is proportional.
162) The widespread use of scanner-based computer checkouts has eradicated complaints of
retailers overcharging their customers.
163) While regulations exist to prohibit deceptive pricing practices, in reality, most reputable
sellers do the minimum required to meet the regulations.
164) In what way does the government regulate pricing?
165) Compare the practices of price fixing and predatory pricing. Explain why each is
prohibited by law.
166) Why is predatory pricing considered illegal?
167) Why is identifying predatory pricing difficult?
168) What is deceptive pricing?