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1. Compare and contrast price and nonprice competition. Give examples of firms that compete on a price basis and on a
nonprice basis.
2. What are the implications of a downward-sloping demand curve?
3. Explain what is meant by price elasticity of demand.
4. Why is the marginal revenue of a product important to the marketer?
5. If fixed costs = $6,000, selling price = $10, and variable costs per unit = $5, what is the breakeven point in units and in
dollar sales volume?
6. Identify and describe the major factors that affect pricing decisions.
7. What are reference prices and how do customers use them? What is the difference between internal and external
reference prices?
8. What are the differences among value-conscious, price-conscious, and prestige-sensitive customers?
9. How would pricing decisions differ for a business in an oligopolistic market structure as opposed to a monopolistic
market structure?
10. Identify and describe the major types of discounts used for business markets. Then explain the reasons for using each
type.
11. What are the terms of F.O.B. pricing?
12. How can transfer pricing be calculated? Give three alternatives.
13. Price is
a.
money paid in a transaction.
b.
not important to buyers.
c.
of limited interest to sellers.
d.
the most inflexible marketing mix decision variable.
e.
the value that is exchanged for products in a marketing transaction.
14. The oldest form of exchange⎯trading of products⎯is known as
a.
credit.
b.
buying.
c.
purchasing.
d.
barter.
e.
pricing.
15. What do all of the following have in common: tuition, fee, premium, retainer, dues?
a.
They are all usually paid in cash.
b.
They are forms of exchange similar to, but not identical with, money.
c.
They are forms of exchange similar to, but not identical with, barter.
d.
They are different terms for the concept of price.
e.
They have nothing in common.
16. Logan is reading the online report of the tuition and fees he owes for this semester of college. Since he has signed up
for online banking, he pays the amount immediately. The amount Logan just paid is considered to be
a.
his expenses.
b.
his charges.
c.
his bill.
d.
the price.
e.
the exchange valuations.
17. Price is considered to be the variable in the marketing mix that is
a.
Least flexible.
b.
Most flexible.
c.
Most difficult.
d.
First to be decided.
e.
Last to be decided.
18. What equation shows organizations the relationship between price and profit?
a.
Total Variable Costs + Total Fixed Costs = Sales − Profit
b.
Price = Profit per Item × Number of Units Sold
c.
(Price × Quantity Sold) − Total Costs = Profits
d.
(Price − Profits) × Total Costs = Sales
e.
Total Costs = (Price × Quantity Sold) − Profits
19. Price is a key element in the marketing mix because it relates directly to
a.
the size of the sales force.
b.
the speed of an exchange.
c.
quality controls.
d.
the generation of total revenue.
e.
brand image.
20. In conducting an assessment of her accounting firm, Paige discovers the following annual results: average charge per
customer = $250; rent = $12,000; total billings = $150,000; employee compensation and benefits = $60,000; and other
costs = $110,000. Given these results, Paige's profits would equal
a.
a loss of $20,000.
b.
a loss of $32,000.
c.
$28,000.
d.
$40,000.
e.
$222,000.
21. Suppose Tommy Hilfiger is introducing a new line of men's ties. The designer believes that the target market for these
ties comprises men who are very status-conscious. In keeping with this assessment, department stores selling the ties
should
a.
charge a price based on their cost.
b.
charge prices consistent with their existing ties.
c.
discount the ties.
d.
negotiate the price with individual tie shoppers.
e.
use price symbolically.
22. When marketers emphasize price as an issue and match or beat the prices of other companies, they are using
a.
price competition.
b.
nonprice competition.
c.
comparative pricing strategies.
d.
demand-based pricing.
e.
supply-based pricing.
23. Safe Auto advertises its automobile insurance as "minimum coverage for minimum budgets." Safe Auto is engaging in
a.
non-price competition.
b.
demand-based pricing.
c.
competitive pricing.
d.
price differentiation.
e.
price competition.
24. Advertisements for Suave shampoos emphasize that other shampoos may cost more but don't work any better than
Suave. In this example, Suave is competing on the basis of
a.
product attributes.
b.
product performance.
c.
product price.
d.
available selection.
e.
product packaging.
25. Isabella is a product manager for The Container Store, a retailer of plastic bins and other storage containers. Sales
have been declining in the past nine months and her management team is pressuring her to compete based on price
discounts. However, Isabella is aware of the dangers associated with engaging in price competition. She knows that
competitors can also change prices quickly and aggressively, which can result in a(n) ____ that will be harmful to both
companies.
a.
reduction in cost
b.
price war
c.
competitive game
d.
industry collapse
e.
advertising battle
26. Sellers that emphasize distinctive product features to encourage brand preferences among customers are practicing
a.
product competition.
b.
nonprice competition.
c.
brand differentiation.
d.
price competition.
e.
competitor differentiation.
27. One advantage of nonprice competition is that
a.
a firm can react quickly to competitive efforts.
b.
market share becomes less important.
c.
a firm can build customer loyalty.
d.
marketing efforts are completely eliminated.
e.
pricing is no longer a factor.
28. Which of the following statements about nonprice competition is false?
a.
Companies that use nonprice competition do not need to keep track of their competitor's prices.
b.
A company must be able to distinguish its brand through some unique feature in order to successfully engage
in nonprice competition.
c.
A firm using nonprice competition can build loyalty to both its company and its products.
d.
When using nonprice competition, a company should promote the distinguishing characteristics of its brand.
e.
Buyers must view the distinguishing characteristics of a product offered through nonprice competition as
being important.
29. A product under nonprice competition would most likely not succeed in the market if
a.
a new advertising campaign is established for it.
b.
it is easy to duplicate.
c.
it is packaged differently from similar products.
d.
it is priced near the competitors' price.
e.
its quality has been upgraded.
30. For most firms in the United States, demand curves are
a.
upward sloping.
b.
completely horizontal.
c.
completely vertical.
d.
c-shaped.
e.
downward sloping.
31. If Wilson Sporting Goods faces a standard demand curve that exists for most products, as it raises the price of its
tennis rackets, the
a.
quantity demanded goes down.
b.
demand remains constant.
c.
quantity demanded increases.
d.
demand increases.
e.
breakeven increases.
32. For most products, a(n) ____ relationship exists between the price of a particular product and the quantity demanded.
a.
inelastic
b.
inverse
c.
positive
d.
unknown
e.
elastic
33. A graph of the quantity of products marketers expect to sell at various prices if other factors remain constant is a
a.
price graph.
b.
supply curve.
c.
price/quantity graph.
d.
marginal revenue curve.
e.
demand curve.
34. When marketers at Consolidated Mustard Company tried to determine demand for their product, they found that at 50
cents, consumers wanted 2,000 jars; at $1.00, they wanted 6,000 jars; and at $1.50, they wanted 4,000 jars. What can
Consolidated conclude?
a.
Consolidated did poor market demand research.
b.
Consolidated has an elastic product.
c.
Consolidated has an inelastic product.
d.
Consolidated mustard is a prestige good.
e.
Consolidated mustard has a normal demand curve.
35. French Quarter Inns drops the price of a suite from $225 to $195 per night and experiences a reduction in the quantity
of rooms demanded of an average of five per night. This is an indication that suites at this hotel are apparently an example
of a(n) ____ product.
a.
reverse-demand
b.
inferior
c.
standard
d.
secondary-demand
e.
prestige
36. What does the demand curve for a prestige product look like?
a.
It is a straight line where the quantity sold continues to increase as the price of each product increases.
b.
It is a curve where the highest and the lowest prices yield the greatest quantity sold and mid-range prices
produce the fewest sales.
c.
It forms a curve where the greatest quantity sold comes at a medium price and the quantities fall as the price
increases or decreases.
d.
It forms a straight vertical line because of the prestige of the product, and quantity sold will remain stable
regardless of the price.
e.
It slopes from left to right at a very mild slope; that is, as quantity increases, price decreases slowly.
37. If Seagram's marketers found that the firm's Crown Royal bourbon was a prestige product and raised its price, which
of the following would most likely happen?
a.
The quantity demanded would immediately fall.
b.
The quantity demanded would always increase.
c.
Above some price level, the quantity demanded would begin to decrease.
d.
The demand curve for the product would always shift to the right.
e.
The demand curve for the product would always shift to the left.
38. Which of the following products is most likely to have an inverted C-shaped demand curve?
a.
Visit to the Dentist
b.
Eternity perfume
c.
Starbucks coffee
d.
Pillsbury cake mix
e.
Ford Escape
39. A measure of sensitivity of demand in relation to changes in price is
a.
a demand curve.
b.
a prestige graph.
c.
marginal analysis.
d.
price elasticity of demand.
e.
quantity elasticity.
40. If Carnival Cruise Lines increased the price of its seven-day cruise package by 10 percent and, as a result, experienced
a 20 percent decline in customer bookings, Carnival's demand would be
a.
steady.
b.
inelastic.
c.
elastic.
d.
prestige.
e.
marginal.
41. Which of the following is most likely to have an inelastic demand curve?
a.
Automobile
b.
Vacation
c.
Nonelective surgery
d.
Recreational vehicle
e.
Computer
42. If a product has an inelastic demand and the manufacturer raises its price,
a.
total revenue will increase.
b.
quantity demanded will decrease.
c.
the demand schedule will shift.
d.
the demand will become more inelastic.
e.
total revenue will decrease.
43. Which of the following statements about price elasticity is false?
a.
Steak is an example of a product that has an elastic demand for most people, because when price goes up
quantity demanded goes down proportionally more.
b.
Elasticity of demand is the relative responsiveness of a change in quantity demanded to changes in price.
c.
If marketers can determine price elasticity, then setting prices at optimum levels is much easier.
d.
When price is raised on a product that has an inelastic demand, then total revenue will decrease.
e.
A product like electricity has an inelastic demand.
44. If Pacific Power and Light increased its rates by 10 percent and experienced a 2 percent reduction in the demand for
power, the demand would be
a.
elastic.
b.
minimal.
c.
minor elasticity.
d.
variable.
e.
inelastic.
45. If a company increased its price from $100 to $120 and the quantity demanded fell by 40 percent, the price elasticity
of demand for this product is
a.
2.
b.
1/2.
c.
−1/2.
d.
−2.
e.
4.
46. Dividing the percentage change in quantity demanded by the percentage change in price gives the
a.
prestige demand curve.
b.
breakeven point.
c.
marginal cost curve.
d.
price sensitivity curve.
e.
price elasticity of demand.
47. Marginal analysis involves examining
a.
what happens to a firm's costs and revenues when production is changed by one unit.
b.
what happens to a firm’s revenues when one more product is sold.
c.
what happens to a firm’s costs when one more unit is produced.
d.
the difference between marginal revenue and total revenue.
e.
the difference between marginal cost and total cost.
48. Ethan is an operations unit manager for Morningstar Foods. So far in developing his monthly budget, he has identified
the following costs: Overhead at $120,000; Packaging at $70,000; Advertising at $60,000; Salaries at $400,000; Food
production at $90,000, and Distribution at $22,000. The fixed costs in this situation would be
a.
overhead, packaging, advertising, salaries, food production, and distribution
b.
overhead, packaging, advertising, salaries, and distribution
c.
overhead, advertising, distribution, and salaries
d.
overhead, advertising, and salaries
e.
overhead
49. The owner of Big Bike Motorcycles is opening a new retail location. Which of the following is most likely to be a
fixed cost for Big Bike Motorcycles?
a.
Retail personnel salaries
b.
Advertising on Facebook
c.
Building Rent
d.
Electricity
e.
Transportation of sold bikes
50. The Palasi Candy Company is a small business located in the northeastern United States. The owner of Palasi Candy
is calculating the projected costs for the coming year. There is rent for the building, salaries for the retail employees, raw
materials of sugar, chocolate, and other ingredients, wrappers for packaging of individual pieces of candy, boxes, and
radio advertising. Palasi’s ______ are most likely to be the raw materials of sugar, chocolate, and other ingredients, as well
as the wrappers.
a.
sunk costs.
b.
variable costs.
c.
direct costs.
d.
fixed costs.
e.
marginal costs.
51. If a firm currently produces 2,500 products per month and decides to produce 2,501, it will incur
a.
more fixed costs.
b.
higher average fixed costs.
c.
fewer variable costs.
d.
a marginal cost.
e.
higher average variable costs.
52. Roberts Electronics calculates that if it produces 15 radar detectors, its costs are $1,500, and if it produces 16 radar
detectors, its costs are $1,590. In this instance, $90 is the firm's ____ cost.
a.
average
b.
fixed
c.
variable
d.
marginal
e.
average variable
53. If Roberts Electronics finds that the average total cost of its radar detectors and the marginal cost of its radar detectors
are both $85, then
a.
its marginal costs are falling.
b.
average total cost is at its maximum.
c.
average total costs are rising.
d.
demand is elastic.
e.
average total cost is at its lowest level.
54. Michelin notices that when the number of tires it sells increases from 1,000,000 to 1,000,001, total revenue rises $35.
The $35 represents the firm's
a.
average revenue.
b.
marginal revenue.
c.
price elasticity.
d.
average variable revenue.
e.
average total cost.
