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Indicate whether the statement is true or false.
1. To prove predatory pricing, it must be proved that the destructive company explicitly tried to ruin a competitor and that
the predatory price was below the predator’s average variable cost.
a. True
b. False
2. The Internet, Extranets (private electronic networks), and wireless setups are enabling buyers to quickly and easily
compare products and prices, putting them in a better bargaining position.
a. True
b. False
3. When a seller establishes a series of prices for a type of merchandise, a purchase agreement is violated.
a. True
b. False
4. The big advantage of price skimming is that it typically discourages or blocks competition from entering a market.
a. True
b. False
5. As the product enters the maturity stage, prices generally begin to stabilize.
a. True
b. False
6. An effective distribution network can overcome minor flaws in the marketing mix.
a. True
b. False
7. Predatory pricing is illegal under the Robinson-Patman Act of 1936.
a. True
b. False
8. www.ebay.com is the most popular extranet in the United States.
a. True
b. False
9. Shopping bots allow sellers to collect detailed data about customers’ buying habits, preferences, and even spending
limits.
a. True
b. False
10. Unlike break-even pricing, markup pricing uses complicated concepts of cost.
a. True
b. False
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11. A rebate is a discount to wholesalers and retailers for performing channel functions.
a. True
b. False
12. Product life cycles can only be measured in years.
a. True
b. False
13. Prices always steadily decline for a product in the decline stage of the product life cycle.
a. True
b. False
14. Basing-point pricing is a price tactic that offers all goods and services at the same price or perhaps two or three prices.
a. True
b. False
15. Gwenta Corp., a soft drink manufacturing company, pays a certain quarterly amount to its distributors who display the
soft drink’s latest ad on their distribution trucks. This quarterly payment is referred to as a noncumulative quantity
discount.
a. True
b. False
16. According to garment makers, the demands of big volume customers, such as department stores, are nearly wiping out
profits for all suppliers except the very largest.
a. True
b. False
17. Dynamic pricing has better equipped brick-and-mortar stores to compete with their online alternatives.
a. True
b. False
18. Unlike a firm that launches a new item resembling several others already on the market, a firm that introduces a totally
new product with no close substitutes will have no pricing freedom.
a. True
b. False
19. Break-even analysis is the method of determining the cost of buying the product from the producer, plus amounts for
profit and for expenses not otherwise accounted for.
a. True
b. False
20. When a seller establishes a series of prices for a type of merchandise, it creates an odd-even pricing.
a. True
b. False
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21. During the maturity stage of a product life cycle, distribution channels become a significant cost factor.
a. True
b. False
22. Extranets enable buyers to quickly and easily compare products and prices, putting them in a better bargaining
position.
a. True
b. False
23. For businesses, consumer penalties are part of doing business in a highly competitive marketplace.
a. True
b. False
24. Because of its recent high growth in the national market, Mable Inc., an online cosmetics retailer, has divided its U.S.
market into segments and is charging a flat freight rate to all customers in a given segment. In this scenario, Mable Inc.
plans to adopt freight absorption pricing.
a. True
b. False
25. In the absence of other information, people typically assume that prices are higher because the products contain better
materials, because they are made more carefully, or, in the case of professional services, because the provider has more
expertise.
a. True
b. False
26. A firm can charge different prices to different customers if the prices represent manufacturing or quantity discount
savings.
a. True
b. False
27. A trade discount is a payment to a dealer for promoting the manufacturer’s products.
a. True
b. False
28. Psychological pricing is marketing two or more products in a single package for a special price.
a. True
b. False
29. As products enter the growth stage of the product life cycle, prices generally begin to stabilize.
a. True
b. False
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30. Zone pricing is a modification of uniform delivered pricing, and it divides the United States (or the total market) into
segments (or zones) and charges a flat freight rate to all customers in a given zone.
a. True
b. False
31. Price promotion alone always creates a low price image.
a. True
b. False
Indicate the answer choice that best completes the statement or answers the question.
32. Which of the following refers to a pricing objective that maintains existing prices or meets the competition’s prices?
a. Sales maximization
b. Status quo pricing
c. Satisfactory pricing
d. Pricing based on perceived satisfaction
33. Which of the following represents approaches to create a price strategy?
a. Price skimming and penetration pricing, but not status quo pricing
b. Penetration pricing and status quo pricing, but not price skimming
c. Status quo pricing and price skimming, but not penetration pricing
d. Price skimming, penetration pricing, and status quo pricing
34. Which of the following statements is true of geographic pricing for freight?
a. Freight absorption pricing is a tactic that requires a buyer to absorb the freight costs from the shipping point.
b. Uniform delivered pricing divides the United States into segments or zones and charges a flat freight rate to all
customers in a given zone.
c. Postage stamp pricing is adopted when the marketing manager wants total costs to be equal for all purchasers of
identical products.
d. With basing-point pricing, a seller designates a location as a basing point so that all buyers are not charged the
freight cost from that point.
35. Consumers determine value of the product on the basis of
a. perceived satisfaction.
b. the opportunity cost to buy the product.
c. discounts availed.
d. what other people buy.
36. To increase the popularity of its new range of smartphones, GizmoPro Inc. offered several free accessories to
customers who bought their smartphones. However, the offer turned out to be unsustainable and the company had to offer
discounts on the accessories instead. GizmoPro’s decision is aimed at _____.
a. market share pricing
b. profit maximization
c. demand orientation
d. sales maximization
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37. __________ is the practice of offering a product line with several items at specific price points.
a. Bait pricing
b. Price bundling
c. Odd-even pricing
d. Price lining
38. Consumers are more likely to perceive the value of a product to be less than its price tag says if the product’s
a. price is set too high in their minds.
b. manufacturer gains very little profit from the product.
c. demand is inelastic.
d. demand and supply attain the state of price equilibrium.
39. As output is increased or decreased, the ______ costs remains unchanged.
a. marginal
b. dependent
c. fixed
d. opportunity
40. Which statement is true of the relationship of price to quality?
a. When a purchase decision involves uncertainty, consumers tend to attribute higher quality to low-priced products.
b. Consumers perception that a higher price indicates higher quality seems to vary from one product to another.
c. In the absence of other information, people typically assume that if prices are higher, that rarely indicates higher
quality.
d. Price promotions of higher priced, higher quality brands tend to attract more business than do similar promotions
of lower priced and lower quality brands.
41. Which of the following is a limitation of break-even analysis?
a. It does not give an estimate of how much profit can be earned once the break-even point is obtained.
b. It does not give weight to the cost of labor that is incurred during production.
c. Sometimes it cannot predict the effect of changes in sales price.
d. Sometimes it is hard to know whether a cost is fixed or variable.
42. When there are many substitutes available in the market for a particular product, consumers
a. have a hard time switching from one product to another, making demand more elastic.
b. have a hard time switching from one product to another, making demand more inelastic.
c. can easily switch from one product to another, making demand more elastic.
d. can easily switch from one product to another, making demand more inelastic.
43. Generally speaking, which of the following marks a product’s entry into the growth stage of its life cycle?
a. Prices generally begin to destabilize.
b. Prices generally begin to stabilize.
c. Prices decrease rapidly as competition increases.
d. Prices decrease moderately as competition decreases.
44. Diffusion Research Company specializes in conducting market research for various firms. When it receives a new
research proposal, its management first estimates the cost of conducting the research and delivering the final research
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report. The management then attempts to reduce the costs through efficient operations. In this scenario, Diffusion
Research Company has a _____ pricing objective.
a. cash maximization
b. status quo
c. sales-oriented
d. profit-oriented
45. Which of the following statements best defines dynamic pricing?
a. It is the practice of marking up prices by 100 percent, or doubling the cost.
b. It is a basic, long-term pricing framework that establishes the initial price for a product.
c. It is the ability to change prices very quickly.
d. It is the practice of charging a very low price for a product with the intent of driving competitors out of business.
46. Which of the following is true of establishing pricing goals?
a. Pricing objectives are either profit oriented or sales oriented if they are to serve company objectives.
b. Reaching the desired market share must not entail sacrificing short-term profits because every dollar counts.
c. A profit maximization objective may require a bigger initial investment than the firm can commit to or wants to
commit to.
d. Pricing objectives rarely have trade-offs and thus managers must set them ambitiously to capture the market.
47. The assertion, “price is that which is given up to get a good or service” indicates which of the following effects of
price?
a. The sacrifice effect of price
b. The information effect of price
c. The perceived satisfaction effect of price
d. The quality effect of price
48. At a price of $2,000 per unit, the demand for Rancho 60 mountain bikes from Cloyd’s Inc. is 300 units, which is the
number of bikes they manufacture every year. If the marketing managers at Cloyd’s Inc. decide to sell each bike at a price
lower than $2,000 per unit, _____.
a. a shortage of bikes will be created
b. the number of bikes produced will increase drastically
c. an inelastic demand for the bikes will be created
d. the demand for and the supply of the bikes will attain equilibrium
49. Firms that indulge in price fixing
a. decide how much to charge for a product.
b. undercut the price quoted by a seller to a buyer.
c. charge different prices to different customers.
d. do not sell to two or more different buyers.
50. The ability to change prices very quickly, often in real time is known as ___________.
a. dynamic pricing
b. status quo pricing
c. satisfactory pricing
d. pricing based on perceived satisfaction
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51. Which term refers to a pricing policy whereby a firm charges a high introductory price, often coupled with heavy
promotion?
a. Price skimming
b. Penetration pricing
c. Status quo pricing
d. Sales maximization
52. Which of the following is a price tactic that uses odd-numbered prices to connote bargains and even-numbered prices
to imply quality?
a. One-part pricing
b. Price lining
c. Psychological pricing
d. Price skimming
53. Which of the following statements is true of value-based pricing?
a. It is a modification of uniform delivered pricing.
b. It is sometimes called postage stamp pricing.
c. It has grown out of the quality movement.
d. It presents drawbacks if costs are continually rising.
54. _______________ is a price tactic in which the seller pays the actual freight charges and bills every purchaser an
identical, flat freight charge.
a. Value-based pricing
b. FOB origin pricing
c. Uniform delivered pricing
d. Zone pricing
55. ___________ is a price tactic that tries to get consumers into a store through false or misleading price advertising and
then uses high-pressure selling to persuade consumers to buy more expensive merchandise.
a. Bait pricing
b. Price bundling
c. Odd-even pricing
d. Leader pricing
56. Profit-oriented pricing objectives include _____.
a. target return on investment
b. target market share
c. meeting competitors’ prices
d. status quo pricing
57. Which of the following best defines markup pricing?
a. The cost of buying the product from the producer, plus amounts for profit and for expenses not otherwise
accounted for
b. The practice of marking up prices by 100 percent, or doubling the cost
c. A method of determining what sales volume must be reached before total revenue equals total costs
d. The ability to change prices very quickly, often in real time
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58. Univ Airlines and Mirago Airlines are competitors. They mutually agree to charge customers a certain price for
airfreight. This leads to the several lawsuits being filed against them by other airlines. In this case, Univ Airlines and
Mirago Airlines can be charged under the _____ Act.
a. Clayton
b. Sarbanes-Oxley
c. Sherman
d. Robinson-Patman
59. Which of the following helps determine what sales volume must be reached before total revenue equals total costs?
a. SWOT analysis
b. Breakeven analysis
c. Status quo pricing
d. Dynamic pricing
60. At a local supermarket, Linda saw a box of plant fertilizer that retails at $25 but was marked down to $20.99. Given
this information, $20.99 is the _____.
a. dividend
b. price
c. margin
d. profit
61. The practice of charging a very low price for a product with the intent of driving competitors out of business or out of
a market is called ______________.
a. status quo pricing
b. predatory pricing
c. price skimming
d. penetration pricing
62. Which of the following represents the final step in setting the right price of a product?
a. Choose a price strategy to help determine a base price.
b. Fine-tune the base price with pricing tactics.
c. Establish pricing goals.
d. Estimate demand, costs, and profits.
63. Which of the following is a characteristic of niche-oriented type of shopping bot?
a. It searches a wide range of product categories.
b. The sites it accesses operate using a Yellow Pages type of model.
c. Consumers can find the list of all retailers.
d. It searches for prices for only one type of product.
64. During off-season, the Rues Hotel offers a 25 percent discount on its rooms to attract guests. The Rues Hotel is
demonstrating the ______.
a. power of yield management systems
b. advantage of markup pricing
c. relationship between price and quality
d. use of price as a promotional tool
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65. Which of the following statements is true of price lines?
a. Buyers cannot be offered a wide variety of merchandise at each established price.
b. Price lines enable a seller to reach several market segments.
c. Firms have to carry a larger total inventory than it could without price lines.
d. Price lines are advantageous when costs rise continually.
66. Unlike a firm that strives for market share, a firm with the objective of maximizing sales
a. possesses adequate funds and faces an optimistic future.
b. ignores profits, competition, and the marketing environment as long as sales are rising.
c. benefits from maximization of cash if it is adopted as a long-run objective.
d. seeks to maintain existing prices or to meet the competition’s prices.
67. Which of the following is the final stage in the product life cycle?
a. Maturity stage
b. Decline stage
c. Growth stage
d. Introductory stage
68. Adequate distribution for a new product can often be attained by
a. offering a larger-than-usual profit margin to distributors.
b. having different model or serial numbers for products.
c. allowing customers to get involved in showrooming.
d. increasing the prices of the products.
69. Return on investment (ROI) for a firm is
a. the margin of profit earned by the firm inclusive of the taxes payable by the firm.
b. the firm’s total assets multiplied by net profits after taxes.
c. a measure of the firm’s effectiveness in generating profits with the available assets.
d. lower than the previous year if the firm has performed better in the market.
70. _____ is a price tactic that charges freight costs from a given point, regardless of the city from which the goods are
shipped.
a. FOB origin pricing
b. Zone pricing
c. Uniform delivered pricing
d. Basing-point pricing
71. The managers at Click-to-Door, an e-commerce website, closely monitor its rival online retailers to analyze how
consumers respond to changes in the prices of certain products. They use the results of this analysis to constantly change
the prices on their website to maximize sales and profits. In this case, which of the following pricing strategies does Click-
to-Door follow?
a. Comparative pricing
b. Dynamic pricing
c. Capacitive pricing
d. Dependent pricing
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72. A cash refund given for the purchase of a product during a specific period is called
a. cash discount.
b. quantity discount.
c. functional discount.
d. rebate.
73. The geographic pricing method that is a modification of uniform delivered pricing, divides the United States (or the
total market) into segments, and charges a flat freight rate to all customers in that segment, is called ___________.
a. FOB origin pricing
b. zone pricing
c. uniform delivered pricing
d. basing-point pricing
74. A situation in which consumer response is sensitive to changes in price exhibits ______ demand.
a. elastic
b. inelastic
c. stagnant
d. fluctuating
75. What pricing policy entails charging a relatively low price for a product when it is first rolled out as a way to reach the
mass market?
a. Penetration pricing
b. Price skimming
c. Price discrimination
d. Status quo pricing
76. A price tactic that requires the buyer to absorb the freight costs from the shipping point is called ______________.
a. value-based pricing
b. FOB origin pricing
c. uniform delivered pricing
d. zone pricing
77. Which action would a firm take if following a status quo pricing policy?
a. Charge a price identical to or very close to the competition’s price.
b. Discourage or block competition from entering a market.
c. Enable management to recover its product development costs quickly.
d. Expand production with the use of technological innovations and tools.
78. Fresnas Designs Inc. is a company known for its quality interior decorations, customized service, and affordable
prices. Given the high demand for its service, Fresnas’ management could price its products higher, but it prefers to price
its products such that it will earn a reasonable revenue. Fresnas bases its pricing policy on _____.
a. sales maximization
b. earning satisfactory profits
c. creating retained earnings
d. status quo pricing
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79. Name the method of determining what sales volume must be reached before total revenue equals total costs.
a. Break-even analysis
b. Markup pricing
c. Opportunity analysis
d. Fixed-cost pricing
80. Which of the following is true of Internet auctions?
a. Business-to–business auctions are likely to fade away in the future.
b. The seller in a reverse auction sells his products or services to the highest bidder.
c. The eBay site is the most popular auction site, with more than 100 million buyers and sellers.
d. Consumers do not trust Internet auctions and how they work.
81. Betty‘s Bakery sells cupcakes to coffee shops and restaurants. The company strives to increase its market share in
terms of the revenue generated. This illustrates the _____ pricing objective.
a. status quo
b. profit-oriented
c. bait
d. sales-oriented
82. Which of the following refers to net profit after taxes divided by total assets?
a. Return on investment (ROI)
b. Revenue
c. Profit
d. Price
83. Which of the following pricing strategies is subject to government regulation?
a. Penetration pricing
b. Status quo pricing
c. Price skimming
d. Price fixing
84. Which of the following statements is true of simple break-even analysis?
a. It does not consider the selling price of a product.
b. It does not give weightage to the cost of labor.
c. It is applicable only when the demand for a product is elastic.
d. It ignores the demand for a product.
85. In which of the following cases is the elasticity of demand expected to be high?
a. Substitutes are available.
b. A product price is significantly low relative to purchasing power.
c. Products are not durable.
d. The product has only one use.
86. Inelastic demand is a situation in which
a. an increase or a decrease in price does not significantly affect the demand for a product.
b. prices are adjusted over time to maximize a company’s revenues.
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c. demand is created for new products by aggressive brand awareness campaigns.
d. a pricing objective maintains existing prices or meets the competition’s prices.
87. A basic, long-term pricing framework that establishes the initial price for a product and the intended direction for price
movements over the product life cycle is called ___________.
a. strategic management
b. a price strategy
c. a promotional strategy
d. advertising strategy
88. For convenience, pricing objectives can be divided into three categories: profit oriented, sales oriented, and ______.
a. marketing oriented
b. status quo
c. inventory oriented
d. tax oriented
89. The 99-Center is a retail store where all the merchandise is priced at 99 cents. This retailer uses a _____.
a. single-price tactic
b. flexible pricing tactic
c. price lining tactic
d. price bundling tactic
90. Which of the following is the first step in the four-step process of setting the right price of a product?
a. Estimate demand, costs, and profits.
b. Establish pricing goals.
c. Choose a price strategy to help determine a base price.
d. Fine-tune the base price with pricing tactics.
91. Riya saw a box of collector’s edition comic books at Fournotts, a retail corporation. Each comic was priced at $28.50.
A friend of hers who bought five books was required to pay only $19.99 per book. Riya bought just one book and
received no discount. Fournotts’ revenue from Riya’s and her friend’s combined purchases was _____.
a. $158.51
b. $19.99
c. $28.50
d. $128.45
92. Which of the following refers to the practice of marking up prices by 100 percent, or doubling the cost?
a. Keystoning
b. Markup pricing
c. Breakeven pricing
d. Price matching
93. A _____ is a price reduction offered to a consumer, an industrial user, or a marketing intermediary in return for
prompt payment of a bill.
a. cash discount
b. quantity discount
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c. functional discount
d. seasonal discount
94. Which statement best describes the value of shopping bots to consumers?
a. The broad-based bots search for prices for one type of product.
b. Shopping bots create opportunities for prestige pricing.
c. They theoretically give pricing power to a consumer.
d. Niche-oriented bots search a wide range of product categories.
95. _____ is a price tactic in which different customers pay different prices for essentially the same merchandise bought in
equal quantities.
a. One-part pricing
b. Price lining
c. Flexible pricing
d. Price skimming
96. A price skimming strategy is most often used for a new product when
a. competition in the market is abundant.
b. customers are unwilling to spend a large amount of money on the product.
c. the supply of the product is greater than its demand.
d. the product is perceived by the target market as having unique advantages.
97. Zen Electronics has taken a penetration pricing approach to launch its new line of mobiles. Therefore, Zen is most
likely to ______.
a. initially charge a relatively low price per product
b. introduce the line at a relatively high price per product
c. wait until the current competition weakens
d. join the competition at its peak
98. Costs that change with the level of output are called _____ costs.
a. fixed
b. variable
c. independent
d. indirect
99. Which of the following defines demand?
a. The quantity of a product offered to the market by a supplier at various prices for a specified period
b. The quantity of a product sold in the market at various prices for a specified period
c. A company’s product sales as a percentage of total sales for that industry
d. A part of profit percentage that is given up in exchange for acquiring a good or service
100. When a purchase decision involves uncertainty, which of the following statements best describes the price–quality
relationship?
a. Consumers perceive lower-priced goods to be more long-lasting than higher-priced goods.
b. Consumers believe that higher-priced goods are manufactured with materials or ingredients of better quality.
c. Consumers lack information about the quality of lower-priced goods due to poor advertising.