Chapter 14
Test Bank
1. Price is the cash expenditure plus taxes that consumers have to pay for a good or service.
2. The key to successful pricing is to match the product with the consumer’s perception of value.
3. Price is the only part of the marketing mix that does not generate costs.
4. Pricing strategies should be aligned with a firm’s overall goals and objectives.
5. When a firm has a particular profit goal as its overriding concern, it will use target return pricing to meet the profit objective.
6. Rarely is the lowest-price product offering the dominant brand in a given market.
7. American Airlines just reduced its fares for summer flights by $100. Delta Airlines changes its pricing structure and reduces its flights by $100 as
well. Delta is employing status quo pricing.
8. A demand curve shows the relationship between income and demand.
9. The demand curve for prestige products generally slopes downward due to higher prices.
10. Because consumers are generally more sensitive to price increases than to price decreases, it is easier to lose current customers with a price increase
11. When the price of milk goes up, demand does not fall significantly, because people still need to buy milk. However, if the price of T-bone steaks
rises beyond a certain point, people will buy fewer of them because they can turn to the many substitutes for this cut of meat. This refers to price
elasticity of demand.
12. Dynamic pricing is also referred to as individualized pricing.
13. Brands that have developed loyal customers have a higher price elasticity of demand.
14. In U.S. markets, there are many substitute products for Fruit Loops cereal, suggesting the price elasticity of demand for Fruit Loops is high.
15. Costs related to supply and costs related to demand are the two primary cost categories.
16. At the break-even point, profits are maximized.
17. Diana owns a boutique specializing in ball gowns. Sales are stable and Diana feels it is time she had a 20 percent increase in her salary. If Diana
takes this increase in compensation, it will decrease the break-even quantity of gowns she needs to sell on a monthly basis.
18. Pure competition occurs when there are many firms competing for customers in a given market but their products are differentiated.
19. An example of an objective set by a sales-oriented company is to institute a company-wide policy that all products must provide for at least an 18
percent profit margin to reach a particular profit goal for the firm.
20. If a firm is engaged in monopolistic competition, it should seek a way to differentiate itself.
Multiple Choice Questions
21. When CarMax promises a “no–haggle” pricing structure, it exhibits _________ because it provides additional value to potential used car buyers by
making the process simple and easy.
22. Earl was known for driving 30 miles just to save a dollar on the price of his favorite beverage. Earl perceived price as _______ for a good or service,
while most consumers recognize price as the _______ made to acquire a good or service.
23. All of the following are included in the full price of a product or service except
24. Consumers generally believe that __________ is one of the most important factors in their purchase decisions.
25. Unlike product, promotion, or place, price is the only part of the marketing mix
26. In developing marketing strategies, why is price often the most challenging of the four Ps to manage?
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27. Historically, prices were
28. Margaret has been invited to a fancy dinner party and wants to bring a good bottle of wine as a gift for the host. Since she does not know much about
wine, she will likely use the price of the wines as
29. All of the following are included in the five Cs of pricing except
30. Tess is the marketing manager for a fast-food restaurant chain. She uses a target return pricing strategy because her firm’s primary objective is to
31. Gary is the marketing manager for an automobile dealership. His boss tells him the firm’s primary goal is to increase its local market share from 15
to 30 percent. His firm is using a ________ orientation.
32. When Delta increases its average fares, American Airlines and United often follow with similar increases. This is an example of
33. Bernard’s firm has set corporate direction to become one of the leaders in each of its significant market segments. It was Bernard’s job to examine the
firm’s pricing strategy to determine how to maximize market share, even at the expense of profits in the short run. What kind of company objective
would guide Bernard’s effort?
34. Naomi tells her sales representatives the goal is to generate at least a 20 percent return on investment for all of the industrial building supplies they
sell. Naomi is using a _______ pricing strategy.
35. A _______ strategy involves accurately measuring all the factors needed to predict sales and profits at various price levels, so that the price level that
produces the highest return can be chosen.
36. Health clubs often use a low introductory offer price to get people to join their club. These low prices represent a _______ pricing strategy.
37. Many years ago Honda’s Accord and Ford’s Taurus were the two top-selling cars in the United States. As the year was coming to an end, Ford cut the
price of the Taurus, hoping to outsell the Accord and allow Ford to claim that “Taurus is the best-selling car in America.” Ford was using a _______
pricing strategy.
38. Julia wants her firm’s gourmet snacks to be the leading brand in the U.S. market. When adopting a pricing strategy designed to gain market share,
she should remember that
39. Sharon knew that her established customers liked her product much better than her competitor’s. She was planning to expand into new markets, and
she was considering pricing. She was leaning toward charging a higher price than competitors to help demonstrate that hers was a high-quality product.
Sharon was considering
40. When Ursula decides how to price new products in her gift store, she measures the value of her product offerings against those of the other stores in
her area. Ursula uses a _______ pricing strategy.
41. Ryan gave the manager of his convenience store a set of binoculars so she could see the gasoline prices charged by the other convenience store at
that intersection. Ryan told the manager to always match the gasoline prices of the other store. Ryan is using a _______ pricing strategy.
42. When firms set prices similar to those of competitors, they are following a strategy of
43. In many high-end resort markets, Westin hotels compete directly with Crown Plaza hotels. When it comes to pricing, Westin tends to charge its
guests similar rates to what the Crown Plaza hotels charge. Westin is using a _______ pricing strategy.
44. A customer orientation toward pricing implicitly invokes the concept of
45. A “no haggle” pricing policy is a type of _____ pricing strategy.
46. Julia’s is an upscale women’s clothing store. Prices are based on customers’ beliefs about the value of the clothing. The store focuses on a limited
target market and provides excellent customer service. Julia’s is using a _______ pricing strategy.
47. A strategy of setting prices based on how customers develop their perceptions of value can often be the most effective pricing strategy, especially if
the strategy
48. Traditional demand curve economic theory is used by marketers to understand _______ in the five Cs of pricing.
49. Customers must see value in a product or service before they are willing to exchange time or money to obtain it, but not all customers see the same
value in a product. To analyze how many units will be sold at any given price point, marketers draw on
50. A demand curve shows the relationship between _______ during a specific period of time.
51. A demand curve is built on the assumption that
52. According to a typical demand curve, the higher the price,
53. There is an old saying “If you have to ask the price of a yacht, you cannot afford it.” Products like yachts are most likely to be associated with
54. The price elasticity of demand for a teeth-whitening kit is −1. The market for this product is considered
55. The price elasticity of demand for a specific brand of deodorant is 1. The market for this product is considered
56. When it comes to measuring consumers’ price sensitivity, products are viewed as either
57. For which of the following is demand likely to be least sensitive to price increases?
58. For which of the following is demand likely to be most sensitive to price increases?
59. A study found that, among addicted smokers, a 10 percent increase in the price of cigarettes resulted in a 2 percent decrease in quantity demanded.
For these consumers, cigarettes have a(n) _______ price elasticity demand.
60. What situation is occurring if a 1 percent decrease in price results in more than a 1 percent increase in quantity demand?
61. Assume the demand for electricity, a necessity with few substitutes, is −0.2. If the electric company raised its rates by 10 percent, we would expect
62. If a 1 percent decrease in price results in less than a 1 percent increase in the quantity demanded, demand is
63. Barry customizes Harley-Davidson motorcycles. No two cycles are alike. He notices that very few customers even ask the price of his motorcycles
before they decide to purchase them. Demand for his motorcycles is probably
64. The observation that consumers are generally more sensitive to price increases than to price decreases suggests that
65. The Coffee Express company is located in a business district with few customers on the weekend. To attract customers on Saturday and Sundays, it
reduces its prices on these two days. This is an example of
66. French luxury goods manufacturer and retailer Hermès is known for making expensive leather goods. But paying $300,168 for a handbag at auction,
which is over the standard retail price of $280,000, is extraordinary, and not for the casual shopper. The handbag is considered a
67. Natalie operates on a pretty tight budget. She is a price-conscious shopper and usually buys store or generic brands to save money. Recently,
however, Natalie was given a pretty substantial raise. As such, she has altered her shopping patterns and now regularly buys more expensive,
name-brand goods. This is an example of
68. Sales of national brands of orange juice tend to increase when the economy is doing well, while sales of generic orange juice increase when the
economy is not doing well. This is an example of how _______ impacts demand for products.