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Indicate whether the statement is true or false.
1. Pricing decisions are influenced by a variety of legal constraints imposed by federal, state, and local
governments.
a. True
b. False
2. Brands that are seeking to be associated with prestige and exclusivity often set higher prices.
a. True
b. False
3. Since many firms begin penetration pricing with the intention of increasing prices in the future, success
depends on generating numerous trial purchases.
a. True
b. False
4. A low price is a sure sell because the demand for many goods is highly elastic.
a. True
b. False
5. Unfair-trade laws were intended to protect small specialty shops, such as dairy stores, from loss-leader
pricing tactics.
a. True
b. False
6. When a chain store sells certain products below cost to attract customers, it is practicing a loss-leader price
tactic.
a. True
b. False
7. Defense based on cost differentials against charges of price discrimination under the Robinson–Patman Act
works only if the price differences exceed the cost differences resulting from selling to various classes of
buyers.
a. True
b. False
8. Tiffany, Rolex, Gucci, and Prada represent exclusivity, meaning their prices are mostly inelastic.
a. True
b. False
9. Marketers who have adopted a product-line pricing strategy have one major advantage in that they have no
difficulty making price changes on individual items.
a. True
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10. A price of $ 9.97 is less likely to appeal to customers than $ 9.95 or $ 9.99.
a. True
b. False
11. The ticket reselling market is both highly fragmented and susceptible to fraud and distorted pricing.
a. True
b. False
12. Skimming pricing strategies are also known as “market-plus pricing.”
a. True
b. False
13. If consumers can easily find close substitutes for a good or service, the product’s demand tends to be
inelastic.
a. True
b. False
14. When the elasticity of demand is greater than 1.0, then that demand is said to be inelastic.
a. True
b. False
15. In the absence of other cues, price is an important indicator of a product’s quality to prospective purchasers.
a. True
b. False
16. Firms using a competitive pricing strategy try to reduce the emphasis on price competition by matching
other firms’ prices and concentrating their own marketing efforts on the product, distribution, and promotion
elements of the marketing mix.
a. True
b. False
17. Skimming is an effective strategy to use when products are distinctive or have little competition.
a. True
b. False
18. Companies can avoid penalties under the Robinson–Patman Act as long as they can demonstrate that their
price discounts and promotional allowances restrict competition.
a. True
b. False
19. Penetration pricing is often used in a market in which a new product is likely to face strong competition
when introduced.
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a. True
b. False
20. Product line pricing is the practice of marketing merchandise at variable prices negotiated between buyer
and seller.
a. True
b. False
21. Most companies set prices using competitive pricing as their primary pricing strategy.
a. True
b. False
22. While price offers a dramatic means of achieving competitive advantage, it is the most difficult marketing
variable for competitors to match.
a. True
b. False
23. The price elasticity of demand (or elasticity of demand) is the percentage change in the quantity of a good or
service demanded divided by the percentage change in its price.
a. True
b. False
24. Setting prices is a one-time decision for most products in most companies.
a. True
b. False
25. High-demand sporting or concert events have encountered an expensive, often illegal, form of pricing where
tickets are resold at a much higher price than what it was originally bought for. This practice is called ticket
scalping.
a. True
b. False
26. Citibank offers an opportunity for credit card customers to transfer balances from competitive cards and pay
low financing for a six-month period. After the introductory period is over, the rate will increase to the normal
interest rate. Citibank’s strategy is to penetrate the market and obtain increased market share.
a. True
b. False
27. Price is an important indicator of quality for many consumers.
a. True
b. False
28. A leader merchandise is a product offered by retailers to customers at less than cost to attract them to stores.
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a. True
b. False
29. Paul and Amanda have six season tickets to the St. Louis Cardinals, a major league baseball team. During
the season, they often offer their unused tickets to the highest bidder, especially when the Cardinals play the
Chicago Cubs. This practice, known as “scalping,” is illegal in all U.S. cities.
a. True
b. False
30. Most states supplement federal legislation with their own unfair-trade laws, which require sellers to maintain
minimum prices for comparable merchandise.
a. True
b. False
31. A private-label product priced below the lower limit can be regarded as too cheap by potential customers.
a. True
b. False
32. A skimming pricing strategy is commonly used as a market entry price for distinctive goods and services
with high initial competition.
a. True
b. False
33. A skimming pricing strategy is ineffective in marketing higher-end goods.
a. True
b. False
34. Lysol sanitizing wipes entered the market at a low sales price and was supported by heavy couponing. As
the initial trial period passed, the pricing slowly rose and the couponing became more infrequent. This activity
is an example of penetration pricing.
a. True
b. False
35. The price of products only includes the costs incurred by the manufacturer for procuring the raw material
and for processing the products.
a. True
b. False
Indicate the answer choice that best completes the statement or answers the question.
36. Many people in rural areas of West Virginia use heating oil to heat their homes during the winter months.
Shield Heating Oil sells and delivers this kind of heating oil to customers across a 200-mile range, which
includes some mountainous terrain. Which of the following statements is true about Shield’s pricing tactics?
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a. It is legal for Shield to levy a special long-distance tax on its customers who live the farthest from the
company’s main storage facility.
b. It is legal for Shield to charge slightly more to its customers who live in remote areas where it is difficult
to deliver the heating oil.
c. It is legal for Shield to charge slightly more to its customers who can afford to pay more.
d. It is legal for Shield to charge slightly more to its customers who buy a higher volume of heating oil.
37. Your co-worker, the operations manager of Blue Ocean Seafood Restaurants, has pointed out a slight
decline in diners ordering and eating the chain’s famous cheesy butter biscuits. The head of product
development has a theory that people want lighter options today, and she has recommended test marketing a
lower-fat version of the biscuits at select locations in eight major cities across the United States. As the
marketing director, how do you respond?
a. You agree that test marketing is an excellent idea, and you’ve decided to issue a memo to all managers to
instruct the wait staff to strongly promote the new product so that it gets a great response.
b. You reject the idea of test marketing because you feel that there will be too many variations in the
results to make a wise decision.
c. You agree that test marketing could be helpful, but you point out that it may also reveal your ideas to
your competitors.
d. You agree that test marketing is an excellent idea because it will quickly and inexpensively provide you
with the direction your company needs.
38. You are a buyer for Kroger grocery stores, and you’re negotiating a deal with the sales representative for
Folger’s coffee. Obviously, you’d like to get the best deal possible. Under the Robinson–Patman Act, which of
the following discounts would be considered legal?
a. If your company sells more than half a billion in goods each year, you can get a 3% discount if you order
a minimum of 2,000 cases of coffee every three months.
b. Like all other retailers, you can get a 5% discount if you order a minimum of 5,000 cases of coffee every
three months.
c. If your company sells less than $50 million in goods each year, you can get a 5% discount if you order a
minimum of 2,000 cases of coffee every three months.
d. A discount of any kind would not be considered legal.
39. The _____ of demand is the percentage change in the quantity of a good or service demanded divided by the
percentage change in its price.
a. volume elasticity
b. competition sensitivity
c. price elasticity
d. volume sensitivity
40. “Buy three shock absorbers and get the fourth free,” as advertised by an auto repair shop, is an example of
_____ pricing.
a. unit
b. variable
c. promotional
d. product-line
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41. Market ___, which refers to the condition when suppliers make just enough of a product and price it in a
way that consumers buy it all, rarely happens and is usually temporary.
a. balance
b. equality
c. equilibrium
d. sensitivity
42. Under which of the following conditions is a product most likely to have an elastic demand?
a. Consumers can easily find close substitutes for the product.
b. The marginal cost of producing the product is equal to its marginal revenue.
c. A large portion of a person’s budget is spent on the product.
d. The fixed costs associated with producing the product are higher than the variable costs associated with
it.
43. Which of the following statements is true about the forecasting technique known as “trend analysis”?
a. It cannot be used to forecast sales of new products.
b. It requires very expensive computing equipment and data researchers.
c. One advantage of this technique is that it assumes that conditions in the future will remain as they have
been in the past.
d. It is a qualitative technique.
44. You’re the marketing director of a company that manufactures women’s shoes. Six months ago your
company introduced a new style of walking shoes, and now you’d like to get a better sense of how popular they
are so you can forecast sales for the next six months. What kind of data will you include when you use the sales
force composite technique to help develop a forecast?
a. Salespeople’s estimates aggregated at the district level
b. Salespeople’s estimates aggregated at the district level and then at the regional level
c. Salespeople’s estimates aggregated at the district level, then at the regional level, and then at the national
level
d. Salespeople’s estimates aggregated at the district level, then at the regional level, then at the national
level, and then at the executive level
45. A penetration pricing strategy is called _____ pricing when it implements the premise that a lower-than–
market price will attract buyers and move a brand from an unknown newcomer to brand-recognition or brand-
preference stage.
a. market-plus
b. market-minus
c. EDLP
d. FOB
46. You’re involved in an intense debate with your co-worker at the pharmaceutical manufacturing firm where
you both work. As the head of sales, he maintains that his salespeople are the best source of sales forecasting
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data. As the head of marketing, you feel that trend analysis is the best choice for forecasting sales. What is the
best solution to this dilemma?
a. He’s right. When you have a sales force with specialized knowledge of the marketplace, that’s all you
need.
b. You’re right. When you have sales data going back several years on a product, that’s all you need.
c. Neither of these techniques is appropriate for this situation. You should be using the Delphi technique.
d. Since both techniques have limitations, you should use both approaches and compare.
47. A smartphone manufacturer introduced a new device into the marketplace with pricing set according to the
skimming approach. The CEO of the company reviews financial reports from the device and notes that the
pricing approach used is not cost-effective for the company. How should the CEO adjust the pricing strategy for
this device?
a. Drop the price
b. Increase the price
c. Offer an everyday low price option
d. Remarket the device under a private label
e. Match the price to the competitions’ price
48. As the marketing director for a hospital, you’ve decided to develop a quick survey about your hospital’s
services for outgoing patients. The CEO would like you to include the following question on the survey: Do you
intend to use our hospital again in the next three years? How do you react to his suggestion?
a. You refuse to include it because data about buyer intentions should only be collected using electronic
survey methods.
b. You agree to include it because it’s an excellent way to predict long-term demand for your services.
c. You refuse to include it since most people don’t know whether they’ll need your services in the coming
years so their answers would not present a realistic forecast.
d. You agree to include it, even though you feel the question would be distressing or offensive to most
patients.
49. Car washes are a dime a dozen, or are they? You and your competitors are all charging $20 for a basic car
wash, but as you think about long-range planning, you’d like to attract more business to your Rainbow’s End
Car Wash. What should you do?
a. Offer a 20% off coupon for the next three months
b. Lower your prices, even though it will mean a significant loss in profits
c. Enhance your customer service by offering free drinks in a clean, inviting waiting room
d. Raise your prices to suggest an image of high-end luxury
50. State laws requiring sellers to maintain minimum prices for comparable merchandise are called _____ laws.
a. tax-exemption
b. unfair-trade
c. price-discrimination
d. loss-leader
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51. As a Procter & Gamble sales representative, you sell Pampers diapers, among many other brands, to grocery
store chains of all sizes. One of the smaller chains located in three states, which earns close to $200 million
annually, would like a discount. Under the Robinson–Patman Act, what kind of discount could you offer this
customer?
a. No discount; the price of Pampers must remain exactly the same for all customers.
b. You can offer up to a 10% discount to smaller retailers, but not larger retailers.
c. You can offer up to a 10% discount to larger retailers, but not smaller retailers.
d. You can offer a discount to this and any other retailer based strictly on the volume of their orders.
52. Executives at Pfizer are trying to forecast sales of the company’s popular cholesterol-lowering drug, Lipitor.
Trend analysis has given them a fairly good sense of projected sales, but they’d like to get some additional
feedback from the marketplace. A good technique to use for this purpose would be ____.
a. a jury of executive opinion
b. sales force composite
c. the Delphi technique
d. a survey of buyer intentions
53. You’re the marketing director for a software development start-up. Your company is only a week away from
launching the most forward-thinking new software it has ever developed, and everyone is excited about the
product’s sales potential. Suddenly, the CEO says you’ve got to use the Delphi technique to make one more
sales forecast before the launch. What do you say to change her mind?
a. You remind her that the Delphi technique is time-consuming and can’t be completed in one week.
b. You describe how easily competitors could learn company secrets during this process.
c. You explain that the product is so revolutionary that there couldn’t possibly be anyone out there who
could provide valuable feedback.
d. You inform her that the Delphi technique is an antiquated approach that no one uses anymore.
54. Dish Network has recently advertised a bundled package of 50 channels plus Internet for $59.99 per month
but in the fine print, the advertisement notes that this offer is applicable for new subscribers only. What type of
pricing policy is Dish Network using with this promotion?
a. Promotional pricing
b. Odd pricing
c. Penetration pricing
d. Flexible pricing
55. As the chief sales and marketing officer for Kia Motors, it’s up to you to set pricing tactics in what is an
established competitive pricing environment. Right now, you’re looking at your firm’s line-up of four different
gas-powered sedans, each of which is distinctly different from the others, although they all tend to look fairly
similar. Which tactic is the best approach for pricing Kia sedans?
a. Suggest they are premium products by pricing them slightly higher than competitors
b. Use odd pricing to make consumers think they’re getting a better bargain with Kia
c. Set a very low price point for all Optimas, the low-end model, to lure consumers away from other brands
d. Differentiate them by categorizing them into price tiers ranging from $22,500 to $49,900
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56. Devon is a wholesaler for water purification systems. Valerie was one of his first customers, and she’s
continued to purchase a fair number of systems from him over the years. Recently, Valerie asked Devon if he
could cut her a break on her next order, especially since she’s been such a steady, loyal customer for so long.
How should Devon respond?
a. Devon should reward Valerie’s loyalty by offering her a special discount.
b. Devon should negotiate a deal with Valerie where he offers her a specific discount as long as she
continues to order a consistent number of units over a set period of time.
c. Devon could offer her a discount based on a certain number of units ordered, as long as he offers the
same discount to all of his customers.
d. Devon should obey the law and not offer her any kind of discount.
57. In the absence of other cues:
a. many buyers interpret low prices as signals of high-quality products.
b. price offers no clue of a product’s quality to prospective purchasers.
c. price is an important indicator of product quality to consumers.
d. the relationship between price and quality holds true only in declining economies.
58. _____ pricing is a pricing policy in which products are offered to consumers at less than cost to attract them
to stores in the hope that they will buy other merchandise at regular prices.
a. Skimming
b. Loss leader
c. Odd
d. Variable
59. Which of the following is the best example of supply?
a. All of the fan belts available for sale at AutoZone this year
b. All of a lawyer’s billable hours at $400 per hour
c. All of the women’s shoes available for sale for $100 a pair this year
d. All of the people willing to buy women’s shoes for $100 a pair this year
60. A couple of years ago, Google – the information services giant – made one of its first forays into
manufacturing and selling a physical product: the Google Pixel smartphone. It is highly unlikely that Google
used ___ to forecast sales of this new product.
a. the Delphi technique
b. test marketing
c. trend analysis
d. a survey of buyer intentions
61. Which of the following statements is true about the forecasting technique known as the “jury of executive
opinion”?
a. Employees at nearly all levels of the organization contribute their opinions, which is what makes this
technique highly accurate.
b. It is time-consuming and expensive to implement.
c. It is a quantitative technique.
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d. Contributors may lack the background knowledge and experience to make meaningful predictions.
62. Your company manufactures umbrellas, among other accessories. Six months ago, you projected sales of
5,000 units of your $16 umbrellas over the course of a year, so you produced 5,000 umbrellas. But so far you’ve
sold less than half. What does this mean, and what is the best way to address the situation?
a. Supply of this product at this price is too great and competition too intense, so you should discontinue
making umbrellas.
b. Demand of this product at this price is less than anticipated, so you should produce fewer umbrellas in
the future.
c. Demand of this product at a higher price must be greater, so you should start marketing your umbrellas
as a premium product sold at a higher price point.
d. Demand of this product at this price is less than anticipated, so you should drop the price.
63. The manufacturer of safety wallets is determining the retail price to charge for each unit sold. Which
approach should the manufacturer use that supports the psychological pricing strategy?
a. Set the price at $24.97
b. Set the price at $25.00 for the first item and $5 for the second
c. Set the price according to the number of unrelated products sold
d. Set the price according to the number of variations of the wallet style
e. Set the first unit sold at full price and the second purchased at half price
64. Which of the following statements is true about the forecasting technique known as the “sales force
composite”?
a. Because salespeople are concerned about how estimates will influence perceived performance, they
typically inflate their estimates.
b. It is a time-consuming method because it involves so many members at all levels of an organization.
c. It is based on the belief that the organization’s members who are closest to the marketplace will have the
best insights into expected short-term sales.
d. It is only valuable when applied to a very small geographic region.
65. Bath & Body Works brand shower gels retail for about $12.50 a bottle, while Suave Naturals shower gels
retail for about $3.00 a bottle. A recent survey conducted by Suave revealed that many people enjoy the Suave
gel fragrances just as much as the Bath & Body Works fragrances. Why might some people still be willing to
pay a higher price for the Bath & Body Works products?
a. It is widely known that products sold in exclusive boutiques, such as Bath & Body Works, are better
than products sold in grocery stores, such as Suave.
b. The lower price of Suave products indicates that they are made from lower-quality materials.
c. The higher price of Bath & Body Works products guarantee they work better.
d. The higher price of Bath & Body Works products will make some people perceive them as better
quality.
66. Which of the following statements is true about the forecasting technique known as the “survey of buyer
intentions”?
a. It is the preferred technique for making long-term forecasts.
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b. It is time-consuming because data can only be collected through personal interviews conducted face-to–
face or over the phone.
c. It should only be used by organizations with huge quantities of customers so that results are based on a
significant amount of data.
d. Results may be somewhat misleading in that buyer intentions do not necessarily translate into actual
purchases.
67. A buyer at CVS Pharmacy has a fairly good sense of which seasonal products she wants to stock for the
coming summer, but she’d like to quickly get a confirmation of her plans. She would most likely use ___ to get
an immediate, inexpensive reading on these seasonal products.
a. a jury of executive opinion
b. test marketing
c. the Delphi Technique
d. a survey of buyer intentions
68. In order to recover research and development costs rapidly and earn high initial profits, SenseTV is setting a
high price for its plasma TVs. The pricing strategy SenseTV is using is called _____ pricing strategy.
a. market-minus
b. skimming
c. penetration
d. competitive
69. You’re a senior product manager for an educational product publisher, and your team has come up with an
intriguing new twist on a digital economics textbook. To get a better sense of how well this product might sell,
you’ve invited several other senior product managers from other fields, such as business, statistics, and
marketing, to provide feedback on your idea. Jonah thinks it’s an amazing idea he should copy. Yvonne is sure
it will be far too expensive. Marianna says it wouldn’t appeal to her customers. What have you learned from this
experience?
a. The jury of executive opinion approach could never work because no group could ever completely
agree.
b. The opinions you’ve received have to be combined and averaged to get a clear answer.
c. You should only seek opinions from members of your own team who understand the product.
d. You should ask the company’s sales representatives for feedback because the jury of executive opinion
technique should always be used in conjunction with the sales force composite technique.
70. Which of the following pricing strategies tries to reduce the emphasis on price as a competitive weapon?
a. Penetration pricing
b. Everyday low pricing
c. Skimming pricing
d. Competitive pricing
71. An example of odd pricing would be:
a. a buy-two-get-one-free promotion.
b. selling a radar detector for $129.99 instead of $130.
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c. subtracting trade-ins from the list price.
d. rebates that lower total price.
72. A 5 percent increase in the price of corn flour that results in a 15 percent increase in the quantity supplied
yields a price elasticity of supply for corn flour of:
a. 2.0.
b. 2.5.
c. 3.0.
d. 3.5.
73. City Drug is a locally owned, independent pharmacy located in a town where there is also a Wal-Mart
pharmacy and a CVS pharmacy. It could potentially be difficult for this small business to compete against these
giant chains, but the independent pharmacy is protected against loss-leader pricing by __________.
a. the Fair Packaging and Labeling Act
b. the Robinson–Patman Act
c. unfair trade laws
d. the Price Discrimination Act
74. The amounts of a product that will be offered for sale at different prices during a specified period is referred
to as:
a. supply.
b. demand.
c. inventory.
d. stock.
75. Which of the following is a disadvantage associated with product-line pricing?
a. It does not provide flexibility for making price changes on individual items.
b. It results in consumers having difficulty in making purchase decisions.
c. It is ineffective in differentiating between products.
d. It does not allow shoppers to choose desired price ranges.
76. Demand for the hiking sandals marketed by the SoftShoe Company is highly elastic. As a pricing strategy consultant,
you have been hired to help the firm reduce this elasticity. Choose the recommendation you would be least likely to make.
a. Introduce a unique sandal that is custom-made for hikers with significant foot problems, such as deformed toes or
large bunions.
b. Promise to undercut the price of any comparable brand.
c. Market the sandal as a necessity for hikers.
d. Market the sandal as a prestigious luxury for hikers.
e. Increase the sandal’s price.
77. Harry’s, your family-owned business, has been serving breakfast, lunch, and dinner in your city for so long
that it’s practically an institution! Your lunch menu items range in price from $8.99 to $13.99. Recently, your
head chef suggested adding a delicious new seafood option to the lunch menu, but the costly ingredients
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involved will force you to charge $17.99 for it, which is comparable to what you charge for dinner menu items.
You’re concerned that this will upset your long-time customers. What should you do?
a. Set the price at $13.99, but cut costs on all other menu items to make up for any revenue shortfalls
b. Set the price at $17.99, but raise the prices of all other menu items by $2 or more so it doesn’t stand out
c. Set the price at $17.99, and trust that your customers will see the value of the new menu item
d. Set the price at $14.99 for the first month, then gradually raise it to $17.99 over the next three months
78. As the chief marketing officer at Chevrolet, you’d like to determine how much the engineering team’s
redesigned dashboards are going to influence your sales forecasts. You’ve decided to use the Delphi technique,
but you’re not sure who to include in your research. Of the following groups who might provide useful insights,
which group are you least likely to turn to for feedback?
a. Academic researchers in automotive engineering
b. Audio/hearing specialists
c. Experts in efficient environmental design
d. Vision and visual processing scientists
79. Brandon recently completed law school, passed the bar exam and began working for a prestigious law firm
in Dallas, TX. The firm has a strict dress code and Brandon is required to wear business suits, dress shirts, ties,
and dress shoes. He is investing in a new wardrobe and visited Men’s Discount Warehouse to purchase new
clothes. He shared his situation with Tim, his sales representative, and Tim told him that if he bought 2 suits, he
would receive 2 dress shirts, 3 ties, and 2 pairs of socks for free. Which of the following statements is TRUE
regarding this example?
a. Promotions such as this are legal when differences in price reflect cost differentials
b. The Robinson–Patman Act prohibits this activity as it would be considered price discrimination
c. Retailers are restricted from using bundled pricing
d. This practice would likely drive competitors out of business
80. Which of the following statements is true about the forecasting technique known as the “test market”?
a. Tests must be conducted in dozens of markets across the country, making the technique both time–
consuming and expensive.
b. It provides realistic information on actual purchases rather than on customers’ intention to buy.
c. It involves giving out free samples and surveying consumers after they’ve tried or used the product.
d. It is a qualitative technique.
81. Which of the following terms represents the measure of responsiveness of purchasers and suppliers to a
change in price?
a. Selectivity
b. Captivity
c. Elasticity
d. Sensitivity
82. Lenovo is developing a new tablet computer that they believe will revolutionize mobile computing. Since
the company believes there is little direct competition for this new product, they plan to set a high price in
comparison to other computer models. Lenovo is using a _____ pricing strategy.
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a. skimming
b. market-minus
c. penetration
d. competitive
83. When a men’s clothing store sells suits at four price levels ($295, $455, $525, and $650), the store’s retail
policy is _____ pricing.
a. unit
b. promotional
c. product-line
d. psychological
84. The amounts of a product that consumers will purchase at different prices during a specified period is
referred to as:
a. volume.
b. demand.
c. inventory.
d. supply.
85. As the marketing director for a highly respected menswear manufacturer, you’ve been asked to offer your
insights on pricing and positioning the company’s first line of men’s cologne. Your company’s cologne will be
sold in department stores, and for a number of reasons, you’ve suggested pricing it slightly higher than
comparable competitors. What is the disadvantage to this strategy?
a. It is understood that there will be less demand for higher-priced products.
b. It is understood that you will earn a lower gross profit margin with higher-priced products.
c. You will need to engage in a costly advertising campaign to promote these higher-priced products.
d. Given that colognes and fragrances are a category of product that is subject to competitive pricing, you
will be forced to lower your prices eventually.
86. You begin every work day by stopping by the local premium coffee shop for a latte. They recognize you
when you come in and just hand you your regular order. Recently, a number of events happened at the same
time: you got a promotion with a higher salary; your regular coffee shop increased its prices; and a competitor
moved into the same shopping center, offering lower prices.
Required:
During your vacation, you have the luxury of time to reflect on your workday pattern of coffee consumption.
Looked at from a marketing perspective, which action could you choose to show that your demand is more
elastic?
a. Spending some of your higher income after the promotion
b. Demonstrating that you are a loyal customer of your current coffee shop
c. Asking for a good-customer discount from your regular place
d. Discovering that you enjoy the taste of the competitor’s coffee
e. Returning to the comfort of your established routine
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87. In the grocery business, you’re pretty much stuck in a competitive pricing environment. You can’t afford to
attract more customers by lowering all of your prices, but what could you do differently with your product and
pricing tactics to entice people through your stores’ doors?
a. Lowering the prices on all of your best-selling items
b. Holding a 20% off sale on five to eight seasonal items each week
c. Establishing different tiers of prices for different quality levels of meat
d. Featuring more gourmet items at premium prices
88. A retailer wants to increase the number of customers shopping in her store. Which of the following has the
greatest potential for success?
a. Promotional pricing
b. Price flexibility
c. Prestige pricing
d. Unit pricing
89. Well, this is frustrating! Six months ago, you decided to attract more customers to your gas station/mini-
mart by offering all snacks, candy, and beverages for 50% off. When you checked your finances three months
ago, you could see a noticeable uptick in business. Having achieved your goal, you then discontinued the snack
specials, and you’ve just discovered that business has dropped off so much that you’re earning even less than
when you started! What do you think went wrong?
a. Your psychological pricing tactic was inappropriate for this situation.
b. Your promotional campaign went on too long, and your new customers got angry when you ended the
promotion.
c. You offered too many products at too much of a discount, so over time your losses have begun to
outweigh your gains.
d. You didn’t factor in that summer is coming and everyone wants to slim down for the season.
90. When General Motors introduced the Saturn, it priced the SL sports sedan at $2,000 less than the Toyota
Corolla DLX and $1,500 less than comparable Nissan and Honda automobiles. This is an example of the _____
pricing strategy.
a. skimming
b. penetration
c. competitive
d. leader
91. At Streamline Technology, you’re responsible for marketing the company’s ergonomically designed office
equipment, such as chairs and desks. Since Streamline has relatively few customers, you’ve asked one of the
marketers on your team to write up a plan for a survey of buyer intentions regarding your company’s ergonomic
keyboard. When you review his plan, you agree with everything he’s proposed except:
a. calling customers by phone to establish current needs and demand for the keyboard.
b. conducting intercept interviews with consumers as they’re exiting office supply stores.
c. creating an online survey about the keyboard, and inviting customers to take the survey.
d. requiring the sales representatives to ask three key questions about the keyboard during each sales call.
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92. Many people were surprised when famed discount retailer Wal-Mart started acquiring smaller online
retailers such as Bonobos and ModCloth, which are known for selling higher-end fashion at moderate and
higher prices. Why would Wal-Mart executives make acquisitions like these?
a. By offering more higher-priced, high-quality products, Wal-Mart executives hope to enhance
consumers’ overall perception of the Wal-Mart brand.
b. Wal-Mart executives want to be perceived as a major player in all segments of the market, from low to
high, which they intend to accomplish by eliminating the competition through acquisitions.
c. By offering stylish, high-fashion products, Wal-Mart executives hope to reposition the brand as a
premier clothing retailer.
d. Through these acquisitions, Wal-Mart gains access to new groups of consumers who can then be
introduced to the Wal-Mart brand.
93. You’re the marketing director of Southern Pride Candle Company, and you’ve been studying sales data for
the last five years. Despite several newcomers entering the market, sales have been increasing steadily during
this period. Specifically, sales increased by 8.9%, 9.1%, 8.7%, and 9.3% over each previous year’s sales,
respectively. What does your trend analysis tell you about sales for the coming year?
a. It’s reasonable to assume that your sales will increase approximately 9% over the previous year’s sales.
b. It’s safe to predict an increase in sales of at least 9.3% or higher over the previous year.
c. It would not be smart to project sales based on this data because it doesn’t factor in changes in the
marketplace.
d. The pattern indicates that your company will see an increase of slightly less than 9.3%, probably
something like 9.1%.
94. Which of the following is an example of a quantitative forecasting technique?
a. A book distributor asks its top 100 customers to indicate how many copies of various bestsellers they
plan to order in the next three months
b. Oculus VR invites 50 of its key gaming advisors to test out a new virtual reality headset
c. Best Buy asks store managers to predict future sales of flat-screen TVs over the next six months
d. Starbuck’s promotes a new breakfast burrito at Midwestern stores for the next two months
95. You’re the chief sales and marketing officer for Kia Motors. You’ve decided to price the standard, gas-
powered Optima at $22,500. The company is also offering a plug-in hybrid model, which costs an extra $3,500
to manufacture, including the cost of R&D. What price do you assign to the plug-in hybrid, and why?
a. The Optima is your brand’s low-end model, so you’re pricing the Optima plug-in hybrid at $26,000 to fit
with consumers’ expectations.
b. New technology, like that found in the plug-in hybrid, is perceived as more valuable, so you price the
vehicle at $28,500.
c. Consumers will not perceive a difference in the value of the two models, despite differences in
manufacturing, so you price the plug-in hybrid equal to the standard model at $22,500.
d. Eco-friendly products are perceived as more valuable and prestigious, so you’re pricing the plug-in
hybrid at $35,200.
96. Wal-Mart, K-Mart, and Target are all large discount store chains, and they carry many of the same types of
products. Yet Target is perceived as being better quality and more prestigious. Why?
a. Target sells slightly higher-priced brands and products.
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b. Target has better branding, advertising, and logo design.
c. With far more locations than the other two chains, Target is simply better known.
d. Target offers a wider selection of products, including groceries in most stores.
97. A 5 percent increase in the price of milk that results in a 2 percent decrease in the quantity of milk demanded
yields a price elasticity of demand for milk of:
a. 0.5.
b. 0.4.
c. 1.0.
d. 1.4.
98. Which of the following is an example of a qualitative forecasting technique?
a. A pharmaceutical company asks its sales force to predict the sales of a particular drug over the next six
months
b. McDonald’s offers a new pulled pork sandwich in Cincinnati for the next three months
c. A notebook manufacturer predicts the sales of notebooks this school season based on sales from the last
five years
d. A handbag retailer compares response rates to two variations of the same Instagram ad
99. In the small but growing town where you live, Burke’s Fine Furnishings, where you work as the marketing
manager, has been the only local choice for consumers for about 20 years. But recently, a new furniture store
opened, and they are out to steal your business with incredible deals and “no-interest-for-a-year” credit offers.
What’s the best way to respond to their penetration pricing strategy?
a. Maintain your prices and hope they’ll raise theirs before you go out of business
b. Lower your prices and offer a similar credit deal, at least temporarily
c. Start offering other products, such as appliances, so you’re not competing head-to-head
d. Trash talk the competitor and try to spread malicious rumors about them
100. Jamal needed a new cell phone but didn’t have a lot of money. He went to TechBargains.com and typed
“cheap cell phones” into the search bar. As he was scrolling through his options, he noticed very few brands
under $50 and far more brands selling for $100 or more. Which of the following statements best describes what
Jamal has observed?
a. Generally speaking, the higher the price point, the greater the demand.
b. Generally speaking, the higher the price point, the more supply is available.
c. In general, as price goes down, demand goes up.
d. In general, as price goes down, supply goes up.
101. You own an apartment complex, and you want to increase the monthly rent on all units by $50 a month.
When you ask the building’s on-site manager, Janette, whether she thinks it’s okay to raise the rent, she says that
demand for rental housing is elastic. What is she saying you should do?
a. People are sensitive to price changes on big-ticket items such as housing, so you should be prepared for
a drop in demand if you raise the rent.
b. People are more tolerant of price changes on big-ticket items such as housing, so it’s okay to raise the
rent. You won’t see a change in demand.