77) 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 dessert?
A) The ice cream market is highly conservative.
B) Economies of scale in production would be substantial.
C) Retailers are not willing to carry new brands of ice cream in the already overcrowded category.
D) Once the initial price is set, it is nearly impossible to lower the price without alienating early
buyers.
E) The ice cream market exhibits inelastic demand over a fairly broad range of prices.
78) Prestige pricing is a ________ approach to pricing.
A) demand-oriented
B) cost-oriented
C) profit-oriented
D) competition-oriented
E) service-oriented
79) Prestige pricing refers to
A) charging different prices to different buyers for goods of like grade and quality.
B) setting a low initial price on a new product to appeal immediately to the mass market odd-even
pricing.
C) setting a market price for a product or product class based on a subjective feel for the
competitors’ price or market price.
D) setting a high price so that quality- or status-conscious consumers will be attracted to the
product and buy it.
E) setting a price that is dictated by tradition, a standardized channel of distribution, or other
competitive factors.
80) Setting a high price so that quality- or status-conscious consumers will be attracted to the
product and buy it is referred to as
A) skimming pricing.
B) status pricing.
C) price lining.
D) value pricing.
E) prestige pricing.
Figure 11-3
81) Figure 14-3 above shows a demand curve depicting which pricing approach?
A) prestige pricing
B) skimming pricing
C) penetration pricing
D) price lining
E) reflexive pricing
82) The movement from point A to point B in Figure 11-3 above shows
A) skimming demand.
B) penetration demand.
C) that buyers see the product as a bargain and buy more.
D) that buyers become dubious about the quality and prestige and buy less.
E) a downturn in the economy.
83) The movement from point B to point C in Figure 11-3 above shows
A) skimming demand.
B) penetration demand.
C) that buyers see the product as a bargain and buy more.
D) that buyers become dubious about the quality and prestige and buy less.
E) a downturn in the economy.
84) You can buy a General Electric dishwasher for $399 or you can buy a similar Bosch brand
dishwasher for $989. Since Bosch uses its pricing strategy to project a high-quality product image,
it is most likely using ________ pricing.
A) yield management
B) standard markup
C) prestige
D) penetration
E) cost-plus-fixed-fee
85) A Patek Philippe Sky Moon Tourbillion men’s wristwatch is among the most expensive in the
world, costing more than $1.5 million. This is an example of a ________ strategy.
A) penetration pricing
B) target pricing
C) bundle pricing
D) loss-leader pricing
E) prestige pricing
86) When the Swiss watchmaker TAG Heuer quadrupled the average price of its watches, its sales
volume jumped sevenfold. The likely cause of this volume increase is
A) because the watch market is highly conservative.
B) because economies of scale in production would be substantial.
C) because retailers are not willing to carry new brands of watches in this category.
D) because once the initial price is set, it is nearly impossible to lower the price without alienating
early buyers.
E) because the watch category frequently uses prestige pricing, wherein lower prices may result in
lower sales.
87) Odd-even pricing is considered to be a ________ approach to pricing.
A) cost-oriented
B) profit-oriented
C) demand-oriented
D) competition-oriented
E) service-oriented
88) Odd-even pricing refers to
A) setting prices one way for product lines and another way for individual brands.
B) setting prices of luxury items at even price points and setting the price of necessities at odd price
points.
C) setting prices a few dollars or cents under an odd number.
D) adding a fixed percentage to the cost of all items in a specific product class.
E) setting prices a few dollars or cents under an even number.
89) Setting prices a few dollars or cents under an even number is referred to as
A) odd-even pricing.
B) prestige pricing.
C) price lining.
D) above-, at-, or below-market pricing.
E) every day fair pricing.
90) Which of the following statements regarding odd-even pricing is most accurate?
A) Odd-even pricing is designed to give the consumer a better set of pricing alternatives.
B) Odd-even pricing can be used in conjunction with a skimming pricing strategy, but should not
be used with a penetration pricing strategy.
C) Odd-even pricing does not work if the product is health care–related.
D) Overuse of odd-even prices tends to mute its effect on demand.
E) Odd-even prices are best used with large ticket items; it loses its effectiveness with moderate- to
low-ticket items.
91) The prices for all furniture sold at American Furniture Warehouse end in $9.99, such as
$589.99, $869.99, etc. American Furniture Warehouse uses
A) odd-even pricing.
B) dynamic pricing.
C) price lining.
D) bundle pricing.
E) product-line pricing.
92) Bundle pricing is considered to be a ________ pricing practice.
A) demand-oriented
B) cost-oriented
C) profit-oriented
D) competition-oriented
E) product line-oriented
93) Which of the following is a demand-oriented approach to pricing?
A) customary pricing
B) target profit pricing
C) standard markup pricing
D) bundle pricing
E) service-oriented pricing
94) Marketing two or more products in a single package price is referred to as
A) package pricing.
B) loss-leader pricing.
C) bundle pricing.
D) tie-in pricing.
E) multiproduct pricing.
95) Bundle pricing refers to
A) an extra amount of “free goods” awarded to sellers in the channel of distribution for promoting
a product.
B) marketing two or more products in a single package price.
C) using BOGOs—requiring customers to “buy one to get one free” as a strategy to increase sales
and profits.
D) setting the price of a line of products at two specific pricing points.
E) the practice of charging two or more prices depending upon the outlet carrying the product.
96) Which one of the following statements regarding bundle pricing is most accurate?
A) Bundle pricing is intended to benefit the consumer, not the seller.
B) Bundle pricing is really “bundle packaging” since the price charged is for two or more of the
same products that are shrink-wrapped together.
C) Bundle pricing is often associated with a skimming strategy.
D) Bundle pricing often provides a lower total cost to buyers and lower marketing costs to sellers.
E) Bundle pricing is based on the idea that consumers value the individual items more than they
value the group contained in the package.
97) If you were to buy one peach tree and one apple tree from the Stark Bros. fruit trees and
landscaping catalog in two separate orders, you would pay a total of $109.99. However, if you
order the peach and apple tree together in the same order, you pay only $89.99 each. When selling
the two trees together for a reduced price, what pricing strategy does Stark Bros. employ?
A) product-line pricing
B) prestige pricing
C) price lining
D) discount pricing
E) bundle pricing
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98) When Dell sells various laptops, it also preinstalls Microsoft Office and other software that
customers order at a discount before the laptop is shipped. This is an example of
A) price lining.
B) product-line pricing.
C) bundle pricing.
D) customary pricing.
E) prestige pricing.
99) A box of Cascade dishwasher detergent shrink-wrapped with a bottle of Jet Dry is sold for
$1.50 less than the regular price of the products sold separately. This is an example of ________
pricing.
A) penetration
B) prestige
C) bundle
D) odd-even
E) standard markup
100) Delta Air Lines offers vacation packages that include airfare, car rental, and lodging. Delta is
using a(n) ________ pricing strategy.
A) penetration
B) prestige
C) bundle
D) odd-even
E) standard markup
101) Which of the following is a cost-oriented pricing method?
A) loss-leader pricing
B) standard markup pricing
C) at-, above-, or below-market pricing
D) price lining
E) penetration pricing
102) Which of the following is a cost-oriented approach to pricing?
A) standard markup pricing
B) skimming pricing
C) prestige pricing
D) loss-leader pricing
E) bundle pricing
103) With a cost-oriented pricing strategy, a price setter stresses the ________ side of the pricing
problem and the price is set by looking at ________.
A) demand; revenue
B) production; profit
C) demand; target sales
D) cost; production and marketing expenses
E) cost; consumer tastes
104) Which of the following statements regarding cost-oriented approaches is most accurate?
A) These methods focus on the demand side of the pricing problem.
B) These methods account for production, marketing, and overhead expenses.
C) Skimming is an example of a cost-oriented method.
D) These methods are simple to use because costs predictably decrease with each doubling of
production.
E) Cost-oriented approaches are a subcategory of competition-oriented methods.
105) Standard markup pricing is considered to be a ________ approach to pricing.
A) demand-oriented
B) profit-oriented
C) cost-oriented
D) competition-oriented
E) service-oriented
106) Standard markup pricing refers to
A) adjusting the price of a product so it is “in line” with that of its largest competitor.
B) setting the price of a line of products at a number of different price points.
C) setting prices to achieve a profit that is a specified percentage of the sales volume.
D) increasing the price slightly to protect against undue profit losses from unforeseen
environmental forces.
E) adding a fixed percentage to the cost of all items in a specific product class.
107) Adding a fixed percentage to the cost of all items in a specific product class is referred to as
A) target profit pricing.
B) standard markup pricing.
C) target return-on-investment pricing.
D) customary pricing.
E) everyday low pricing.
108) All of the following statements about standard markup pricing are true except which?
A) High-volume products usually have smaller markups than do low-volume products.
B) The percentage markup depends on the type of retail store and the product involved.
C) Markups must cover all expenses of the store, pay for overhead costs, and contribute something
to profits.
D) The method involves summing the total unit cost of providing a product or service and adding a
specific amount.
E) Supermarket managers use this method since they have such a large number of products that
estimating the demand for each product as a means of setting price is impossible.
109) Creative Quilts Studio sells hundreds of colors and types of fabric and thread. To price its
inventory, the owners add 50 percent to the cost of each bolt of fabric and every spool of thread.
What is this pricing approach called?
A) target return-on-sales pricing
B) flexible pricing
C) cost-plus pricing
D) standard markup pricing
E) customary pricing
110) It costs Lady Marion Seafood, Inc., $30 to catch, process, freeze, package, and ship
five-pound packages of Alaskan salmon. The firm adds 60 percent to the cost of its salmon
products and charges customers a total of $48 for a postage-paid, vacuum-sealed package. What
type of pricing does Lady Marion Seafood use?
A) target return-on-sales pricing
B) bundle pricing
C) standard markup pricing
D) target profit pricing
E) customary pricing
111) Supermarket managers use standard markup pricing because it is particularly suited to
situations when
A) there is a large number of products and estimating the demand for each would be difficult and
time consuming.
B) there is a large number of product lines, all with basically the same product attributes.
C) there is a specific profit goal that needs to be achieved.
D) there is a policy of selling every item in a product line at the same price regardless of the
product class.
E) the products are perishable or seasonal.
112) Summing the total unit cost of providing a product or service and adding a specific amount to
the cost to arrive at a price is referred to as
A) standard markup pricing.
B) experience curve pricing.
C) cost-plus pricing.
D) product-line pricing.
E) target return-on-investment pricing.
113) Cost-plus pricing refers to
A) summing the total unit cost of providing a product or service and adding a specific amount to
the cost to arrive at the price.
B) setting the price of a line of products at a number of different price points.
C) adding a fixed percentage to the cost of all items in a specific product class.
D) setting prices to achieve a profit that is a specified percentage of the sales volume.
E) increasing the price slightly to protect against undue profit losses from unforeseen
environmental forces.
114) The two forms of cost-plus pricing are
A) cost-plus-fixed-fee pricing and cost-plus-variable-fee pricing.
B) cost-plus-ROI pricing and cost-minus-ROI pricing.
C) target return on sales pricing and target return on investment pricing.
D) cost-plus-percentage-of-cost pricing and cost-plus-fixed-fee pricing.
E) dynamic pricing and flexible pricing.
115) Setting the price of a product or service by adding a fixed percentage to the total unit cost is
referred to as
A) cost-plus-fixed-percentage fee pricing.
B) target pricing.
C) cost-plus-percentage-of-cost pricing.
D) experience curve percentage pricing.
E) target return on investment pricing.