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160. Fixed costs vary with the number of units produced or sold.
a.
True
b.
False
161. Rent is usually a fixed cost.
a.
True
b.
False
162. Marginal revenue is the change in total revenue that occurs when a firm sells an additional unit of product.
a.
True
b.
False
163. The firm should produce the quantity at which marginal revenue and marginal cost are equal.
a.
True
b.
False
164. The point at which marginal revenue equals marginal cost is the breakeven point.
a.
True
b.
False
165. Knowing the number of units necessary to break even is important in setting the price.
a.
True
b.
False
166. Comparison of various prices and various breakeven points will tell the marketer exactly what price to charge.
a.
True
b.
False
167. Pricing decisions should be based on the marketer's previous marketing strategies for other successful products and
on intuition.
a.
True
b.
False
168. Organizational goals have little to do with pricing decisions.
a.
True
b.
False
169. Ideally, pricing decisions have little relation to a firm's marketing objectives.
a.
True
b.
False
170. Costs are a major issue when establishing price.
a.
True
b.
False
171. A firm can survive in the long run only if its products are sold below cost.
a.
True
b.
False
172. Factors affecting pricing decisions can include demand, distribution, and the way in which the product is promoted.
a.
True
b.
False
173. Marketing mix variables are highly interrelated.
a.
True
b.
False
174. Profit margins for marketing channel members must be considered when determining the price of a product.
a.
True
b.
False
175. Channel member expectations play no part in a firm's pricing decisions.
a.
True
b.
False
176. Customers always interpret a higher price to mean higher quality.
a.
True
b.
False
177. A customer's interpretation and response to a price depends on what the customer receives from a purchase compared
to what he or she gives up to make a purchase.
a.
True
b.
False
178. The more experience the customer has with a product, the more he or she relies on external reference prices.
a.
True
b.
False
179. A customer looking for the lowest price on a mattress without concern for the quality of the mattress or the status
gained by buying and using a certain brand is a price-conscious customer.
a.
True
b.
False
180. Knowing the target market's evaluation of price allows the marketer to know how much emphasis to place on price
and how to price a product relative to competition.
a.
True
b.
False
181. In setting price, it is wise to analyze competitors' prices.
a.
True
b.
False
182. Setting prices for business customers is very similar to setting prices for consumers.
a.
True
b.
False
183. Producers commonly provide discounts off list prices to intermediaries.
a.
True
b.
False
184. Noncumulative discounts are one-time reductions in prices based on the number of units purchased, the dollar value
of the order, or the product mix purchased.
a.
True
b.
False
185. Seasonal discounts provide price incentives to customers during peak selling seasons.
a.
True
b.
False
186. F.O.B. factory denotes the price of the products at the factory. If the price is quoted as F.O.B. shipping, then shipping
costs are paid by the seller.
a.
True
b.
False
187. The legality of uniform geographic pricing has been challenged, and so its use has been abandoned.
a.
True
b.
False
188. Pricing whereby the buyer absorbs all or part of the freight costs is freight absorption pricing.
a.
True
b.
False
189. Transfer pricing involves the sale of a product to another unit within the same organization.
a.
True
b.
False
190. You are a senior sales and marketing analyst for a major retailing firm in Wyoming. The marketing manager just
stopped by your office with a very frustrated look on her face. She tells you that she is confused why every time the
company raises the sales price of its products, total revenue for the company declines.
Based on this information, which of the following explanations do you give her for why this situation occurs?
a.
The demand for the company’s products is inelastic, so total revenue declines when prices are raised.
b.
The demand for the company’s products is elastic, so total revenue declines when prices are raised.
c.
The demand for the company’s products is elastic, so unit sales increase when prices are raised.
d.
The demand for the company’s products is inelastic, so unit sales increase when prices are raised.
e.
The demand for the company’s products is elastic, so fixed costs increase when prices are raised.
191. You are reading the quarterly financial report of one of your competitors. You expected to see their total sales
revenue decline because they had a large price increase during the quarter. You were certain that the price increase would
lead to an equivalently large decrease in their total sales revenue. To your surprise, their total sales revenue actually
increased in the quarter.
Based on this information, which of the following explanations could explain why the competitor’s total sales revenue
increased?
a.
The demand for the company’s products is inelastic, so total revenue declines when prices are raised.
b.
The demand for the company’s products is elastic, so total revenue declines when prices are raised.
c.
The demand for the company’s products is elastic, so unit sales increase when prices are raised.
d.
The demand for the company’s products is inelastic, so total sales revenue increases when prices are raised.
e.
The demand for the company’s products is elastic, so fixed costs increase when prices are raised.
192. You and a partner have are planning to open a dollar discount store in your hometown. You plan to sell the majority
of the items in the store for one dollar unit price. You have seen this concept work well in other cities and you believe the
demographics of your hometown are a good fit for this retail concept.
Which of the following types of customers are you expecting to frequent your store?
a.
Price-conscious customers
b.
Wholesalers
c.
Other retailers
d.
Prestige-sensitive customers
e.
Value-conscious customers
193. You are the general manager of the machining products division of a diversified manufacturing company in Des
Moines, Iowa. You primarily produce machining products for sale to wholesalers around the world. However, you
periodically get requests from other divisions in your company to purchase your products. You treat these purchase
requests the same as a purchase request from a non-affiliated entity. You sell your machining products to other internal
divisions at a price that is equivalent to a market-based cost.
This is example of which of the following types of business pricing?
a.
Freight absorption pricing
b.
Uniform geographic pricing
c.
Transfer pricing
d.
Zone pricing
e.
Base-point pricing
194. Which of the following is true about price?
a.
Price has no psychological impact on customers.
b.
Price always takes the form of money paid.
c.
Price relates directly to variable costs.
d.
Marketers do not use price symbolically.
e.
It is the only marketing mix variable that can be changed quickly to respond to shifts in demand.
195. Which of the following is true about price competition?
a.
A major advantage of price competition is flexibility.
b.
Price competition allows the marketer to build brand loyalty.
c.
Price wars do not result from price competition.
d.
In price competition, marketers distinguish their brands with unique product features.
e.
In price competition, marketers distinguish their brands with promotion and packaging.
196. Which of the following is true about non-price competition?
a.
A major advantage of non-price competition is flexibility.
b.
Non-price competition does not allow the marketer to build brand loyalty.
c.
Price wars may result from non-price competition.
d.
In non-price competition, marketers distinguish their brands with unique product features.
e.
In non-price competition, marketers do not use promotion.
197. Which of the following statements is true about marginal analysis?
a.
Fixed costs vary with changes in the number of units sold.
b.
Total cost is the sum of average fixed costs and average variable costs times the quantity produced.
c.
Average variable cost equals variable cost times number of units sold.
d.
Average fixed cost increases as the number of units produced increases.
e.
Marginal cost equals fixed costs minus variable costs.
198. Which of the following statements is true about breakeven analysis?
a.
The breakeven point can only be stated in terms of sales revenue.
b.
At the breakeven point, the firm’s fixed costs are greater than its variable costs.
c.
At the breakeven point, the firm’s fixed costs are less than its variable costs.
d.
At the breakeven point, the firm’s sales price per unit equals its variable cost per unit.
e.
At the breakeven point, the firm’s sales revenue equals the sum of its fixed and variable costs.
199. ____________ are reductions off the list price given by a producer to an intermediary for performing certain
functions.
a.
Trade discounts
b.
Quantity discounts
c.
Cumulative discounts
d.
Non-cumulative discounts
e.
Cash discounts
200. Which of the following statements is true about the factors that affect pricing decisions?
a.
In the long-term, a firm may sell products below cost to match competition.
b.
Marketers should set prices that are consistent with the organization’s goals and mission.
c.
Pricing decisions should not influence activities associated with the other marketing mix variables.
d.
Price is not linked to elements of the distribution variable of the marketing mix.
e.
Costs should not be an issue when establishing price.
201. Which of the following statements is true about customers’ interpretation and response to price?
a.
An internal reference price is a comparison price provided by others such as friends and relatives.
b.
An external reference price is a price developed in the buyer’s mind through experience with the product.
c.
Prestige-sensitive customers are concerned about both the price and quality aspects of a product.
d.
At times, customers interpret a higher price as higher product quality.
e.
Customers do not consider the resources required to maintain a product after purchase.
