71) When hotels drop their rates on the weekends, then this form of price discrimination is
known as ________.
A) channel pricing
B) image pricing
C) product-form pricing
D) time pricing
E) location pricing
72) The airline and hospitality industries use ________, by which they offer discounted but
limited early purchases, higher-priced late purchases, and the lowest rates on unsold inventory
just before it expires.
A) special-customer pricing
B) yield pricing
C) cash rebates
D) location pricing
E) customer-segment pricing
73) ________ refers to selling below cost with the intention of destroying competition.
A) Bid rigging
B) Loss-leader pricing
C) Predatory pricing
D) Price discrimination
E) Price penetration
74) For price discrimination to work ________.
A) the market must be segmentable and the segments must show similar intensities of demand
B) members in the lower-price segment must be able to resell the product to the higher-price
segment
C) competitors must be able to undersell the firm in the higher-price segment
D) the practice must not breed customer resentment and ill will
E) the extra revenue derived from price discrimination must not exceed the cost of segmenting
and policing the market
75) A low price buys market share but not market loyalty. The same customers will shift to any
lower-priced product that may come along. This is called the ________.
A) low-price trap
B) relative-market-share trap
C) shallow-pockets trap
D) target-market-share trap
E) fragile-market-share trap
76) When higher-priced competitors match the lower prices but have longer staying power
because of deeper cash reserves, it leads to a(n) ________.
A) low-quality trap
B) fragile-market-share trap
C) price war trap
D) escalator trap
E) shallow-pockets trap
77) A company does not set a final price until the product is finished or delivered. This is known
as ________.
A) delayed quotation pricing
B) an escalator clause
C) special-event pricing
D) time pricing
E) the shallow-pockets trap
78) When a company requires the customers to pay today’s price and all or part of any inflation
increase that takes place before delivery, it is known as ________.
A) special-customer pricing
B) an escalator clause
C) delayed quotation pricing
D) unbundling
E) time pricing
79) When a company maintains its price but removes or prices separately one or more elements
that were part of the former offer, such as free delivery or installation, it is known as ________.
A) escalating
B) differentiation
C) unbundling
D) reverse discounting
E) delayed quotation pricing
80) In markets that are characterized by products that are highly homogeneous, how should a
firm react to a competitor’s reduction in price?
A) shrink the amount of the product available
B) substitute expensive materials or ingredients
C) reduce product features
D) reduce product services
E) augment the product
81) Price is one of the two elements of the marketing mix that produces revenue.
82) Traditionally, price was never a major determinant of buyer choice.
83) Today, consumers are price takers and accept prices at face value or as given.
84) Purchase decisions are based on how consumers perceive prices and what they consider the
current actual price to be–not the marketer’s stated price.
85) Customers usually have a lower price threshold below which prices signal inferior or
unacceptable
quality, as well as an upper price threshold above which prices are prohibitive and the product
appears not worth the money.
86) Although consumers may have fairly good knowledge of the range of prices involved, very
few can accurately recall specific prices of products.
87) When examining products, consumers compare an observed price to an internal reference
price they remember or an external frame of reference.
88) Many consumers use price as an indicator of quality and value.
89) Companies strive to maximize their current profits if they are plagued with overcapacity,
intense competition, or changing consumer wants.
90) In reality, it is very easy for firms to estimate their demand and cost functions.
91) If firms wish to maximize their market share, they should opt for market-skimming pricing.
92) A firm is said to be following a market-skimming pricing strategy, if it introduces a product
into the market at a high price and slowly drops the price over time.
93) In the case of prestige goods, the demand curve sometimes slopes upward.
94) Companies prefer customers who are less price sensitive.
95) Price elasticity depends upon the magnitude and direction of the contemplated price change.
96) A small change in price of a product within the price indifference band causes a substantial
change in the demand of that product.
97) Total costs consist of the sum of the fixed and variable costs for any given level of
production.
98) In target-return pricing, the firm adds a standard markup to the product’s cost.
99) The key to effectively using perceived-value pricing is to deliver value that is on par with
your competitors.
100) Value pricing requires a company to reengineer its operations to become a low-cost
producer.
101) In high-low pricing, retailers charge low prices on an everyday basis with occasional price
increases.
102) The U.S. government often uses Dutch auctions to procure supplies.
103) In a compensation deal, the seller sells a plant, equipment, or technology to another country
and agrees
to accept as partial payment products manufactured with the supplied equipment.
104) Offset is a form of countertrade where sellers receive full payment in cash and agree to
spend a substantial amount of the money in the country where they are trading within a stated
time period.
105) A quantity discount is a price reduction given to those who pay their bills promptly.
106) Trade-in allowances reward dealers for participating in advertising and sales support
programs.
107) Psychological discounting involves setting an artificially high price and then offering the
product at substantial savings.
108) Loss leader pricing dilutes a company’s brand image.
109) In first-degree price discrimination, the seller charges less to buyers of larger volumes.
110) When firms charge different prices to different customer groups for the same product or
service, it is a case of second-degree price discrimination.
111) The airline industries implement yield pricing by offering discounted but limited early
purchases,
higher-priced late purchases, and the lowest rates on unsold inventory just before it expires.
112) Price discrimination in all forms is illegal in the United States.
113) Predatory pricing, which refers to the concept of selling below cost with the intention of
destroying competition, is lawful under certain conditions.
114) Companies sometimes initiate price cuts in an attempt to dominate the market through
lower costs.
115) Cost inflation provokes price increases.
116) In a price-war trap, higher-priced competitors match the firm’s lower prices but have longer
staying power because of deeper cash reserves.
117) Escalator clauses are found in contracts for major industrial projects, such as aircraft
construction and bridge building.
118) Generally, consumers prefer small price increases on a regular basis to sudden, sharp
increases.
119) Shrinking the amount of product instead of raising the price is a good way to counteract
consumer
resistances to price increases.
120) A company must consider the product’s stage in the life cycle and its importance in the
company’s portfolio before responding to a competitor’s price cut.
121) How does the Internet help sellers discriminate between buyers and vice-versa?
122) What are the different possible consumer reference prices?
123) Briefly describe the different types of pricing objectives.
124) What are the different price-setting methods? Briefly describe each of them.
125) What are the different forms of countertrade?
126) What are the different types of price discounts and allowances?
127) What are the different types of promotional pricing?
128) What is third-degree price discrimination?
129) How can companies initiate price cuts and what are the traps that companies can fall into
because of this?
130) Explain the concept of overdemand.
131) When Abe goes shopping, he comes across a T-shirt that is priced at $35. Although he
wants to buy it, judging from the material used, he feels that the T-shirt should only cost $20.
What reference price is Abe using here?
132) NV Inc. has launched a touch sensitive handset in the Indian market and priced the same at
INR 9500. Although many people are checking it out and showing interest about purchasing it,
majority of them are holding themselves back because they feel that it is not worth INR 9500.
They compare the handsets’ feature with that of its other competitors offering the same features
and come to a conclusion that it is worth INR 8500 and nothing more than that. What kind of a
reference price are the consumers using?
133) When Cathy went shopping, she paid a lot to buy a jacket that had a well-known designer’s
tag attached to it. After a few days, she came across a jacket which was undistinguishable from
the one she had bought but was priced 5 times lesser than the earlier one. She didn’t give this a
second thought because she was convinced that the designer label she had bought was worth it.
What can be deduced from this?
134) Agatha’s Inc. is about to introduce a new product in the market, but is not sure as to how it
should price the product. The company is facing intense competition from 5 other companies. In
the past, it has also failed to keep up with the changing consumer wants. In such a situation, what
should be its main objective?
135) Bella’s Inc. has estimated the demand and costs associated with alternative prices. It has
finally chosen to price its new offering in such a way that it will maximize the rate of return on
investment. What can be deduced about the company’s objective?
136) When Carl’s company introduced its new product in the market, it introduced it at the
lowest possible price assuming that the demand for the product is going to be highly responsive
to the price it is being introduced at. It also believes that a higher sales volume will lead to lower
unit costs and higher long-run profit. What can be said about the company’s objective?
137) When Sony introduced the world’s first high-definition television to the Japanese market in
1990, it was priced at $43,000. This helped Sony to scoop the maximum amount of revenue from
the various segments of the market. The price dropped steadily through the years—a 28-inch
Sony HDTV cost just over $6,000 in 1993, but a 40-inch Sony HDTV cost only $600 in 2010.
What pricing strategy did Sony use here?
138) Daryl convinced his prospective client that Car A was the best for him. But, the client
insisted that the car cost him a good $10,000 more than Car B, the one which he was thinking of
buying. Daryl told him that the amount he would have to spend on the fuel, insurance, repairs,
and maintenance for Car B would be 5 times more than what he would have to spend on Car A.
Finally convinced, the client consented to buy Car A. What technique did Daryl use to convince
his customer?
139) A company that pays its bills each month for its rent, heat, interest, and salaries regardless
of its output is said to be incurring what type of costs?
140) Ellie’s manager has asked her to come up with ways to reduce costs of their new product by
utilizing a process called “target costing.” What should Ellie do?
141) What should a company do if its competitor’s product contains some features that are not
available in its product?
142) A toaster manufacturer who has invested $1 million in the business wants to set a price to
earn a 20 percent return on investment, specifically $200,000. What pricing method should it
choose?
143) In oligopolistic industries, all firms normally charge the same price. What kind of a pricing
method are they said to be following?
144) On sites such as eBay and Amazon.com, the seller puts up an item and bidders raise the
offer price until the top price is reached. What kind of auctions are these?
145) A British aircraft manufacturer sold planes to Brazil for 70 percent cash and the rest in
coffee. This is an example of what kind of a countertrade?
146) Fred’s company has recently sold its resin-producing plant to a local concern in India. As
part of the sales price, his company agrees to accept as partial payment the production of the
resin at an agreed upon price for six years. This is an example of what type of countertrade?
147) Pepsi Co. sold its cola syrup to Russia and agreed to buy Russian vodka at a certain rate for
sale in the United States for the next 5 years. What kind of a countertrade did both the parties
indulge in?
148) When Gina’s company printed the ad for their Perfume in the newspapers, the caption read,
“WAS $100, NOW $75”. What kind of a promotional pricing did her company use?
149) Movie matinees are priced lower than the evening shows; television advertising costs less
when run after midnight. These are examples of what type of price discrimination?
150) When the airline industries offer discounted but limited early purchases, higher-priced late
purchases, and the lowest rates on unsold inventory just before it expires, what kind of a pricing
technique are they said to be using?