87. Generally, customers are most likely to rely on the price-quality association when
a.
they cannot judge the quality of the product for themselves.
b.
the product is a well-known brand.
c.
customers can judge the product’s quality for themselves.
d.
the product is purchased through the use of the Internet.
e.
products are being purchased from well-established retailers that are familiar to customers.
88. To gain market share, when Hyundai first entered the U.S. car market it did so with a comparatively
low pricing strategy. One of the negative side effects of making this pricing decision is
a.
a negative impact on consumers’ perceptions of quality.
b.
difficulty raising the prices later.
c.
a high return on investment level affecting tax balances owed.
d.
poor survival chances.
e.
higher developmental costs.
89. A price developed in the consumer’s mind through experience with the product is called a(n)
a.
external reference price.
b.
value-price guideline.
c.
frame of reference.
d.
internalized price.
e.
internal reference price.
90. When a customer is considering the purchase of a product in a less-familiar product category, that
individual is likely to rely more heavily on
a.
internal reference prices.
b.
symbol prices.
c.
high value products.
d.
discounted reference prices.
e.
external reference prices.
91. Lucy buys a new dress at T.J. Maxx that has a price tag with “Compare at $150.00. Our Price $89.99.”
This is an example of the use of
a.
internal referencing.
b.
cumulative discounts.
c.
seasonal discounts.
d.
base-point pricing.
e.
an external reference price.
92. The perception of price depends on a
a.
product’s actual price and consumers’ expectations regarding price.
b.
consumer’s analysis of competitive prices.
c.
consumer’s reference price.
d.
consumer’s expectation of price.
e.
product’s actual price in comparison with the manufacturer’s suggested price.
93. Vanessa is shopping for a new pair of athletic shoes. Since she is concerned about both the price and
the quality aspects of a product, Vanessa is most likely a ___ consumer.
a.
Price-conscious
b.
Prestige-sensitive
c.
Value-conscious
d.
Price-conscious and prestige-sensitive
e.
Quality-conscious
94. Buyers who focus on purchasing products that signify prominence and status are
a.
value-conscious consumers.
b.
price-conscious consumers.
c.
socially elite buyers.
d.
prestige-sensitive buyers.
e.
brand aware consumers.
95. Nicole is out shopping with her friends for the day. While evaluating a decision to purchase a
handbag, she says, “People notice when you buy the most expensive brand of a product.” Nicole is
most likely a _____ consumer.
a.
price-conscious
b.
quality-conscious
c.
value-conscious
d.
socially conscious
e.
prestige-sensitive
96. ACE Electronics introduces a new voice-activated personal computer that no longer requires a
keyboard. ACE charges the high price of $11,000 per unit, thus generating large profits because it has
a 20 percent market share. ACE’s major problem in the future will most likely be
a.
survival.
b.
cash flow.
c.
competition.
d.
return on investment.
e.
profit.
97. Monopolies usually keep their prices at a level that generate a reasonable, but not excessive, return
primarily because
a.
they want to avoid new competitors entering their market.
b.
they want to avoid government regulations on their pricing.
c.
they try to satisfy the demands of value-conscious consumers.
d.
firms can increase market share more rapidly this way.
e.
customers will discontinue use of these products if prices rise.
98. Marketers have no flexibility in setting prices under conditions of
a.
a monopoly.
b.
an oligopoly.
c.
perfect competition.
d.
monopolistic competition.
e.
no competition.
99. The ____ prohibits price fixing among firms in an industry.
a.
Sherman Antitrust Act
b.
Federal Trade Commission Act
c.
Wheeler-Lea Act
d.
Robinson-Patman Act
e.
Clayton Act
100. Which of the following acts does not directly affect pricing decisions?
a.
Sherman Antitrust Act
b.
Federal Trade Commission Act
c.
Wheeler-Lea Act
d.
Clayton Act
e.
Simpson-Marshall Act
101. Both the Federal Trade Commission Act and the Wheeler-Lea Act prohibit
a.
freezing prices.
b.
independent pricing policies.
c.
deceptive pricing.
d.
price fixing.
e.
price differentials.
102. If a company provides price differentials that harm competition by giving one or more buyers a
competitive advantage, it is committing
a.
price discrimination.
b.
price-consciousness.
c.
functional discounting.
d.
price competition.
e.
price fixing.
103. Which of the following prohibits price discrimination that lessens competition among wholesalers and
retailers?
a.
Sherman Antitrust Act
b.
Robinson-Patman Act
c.
Lanham Trademark Act
d.
Federal Trade Commission Act
e.
Wheeler-Lea Act
104. Provisions of the Robinson-Patman Act, as well as those of the ____, limit the use of price
differentials.
a.
Simpson-Marshall Act
b.
Federal Trade Commission Act
c.
Wheeler-Lea Act
d.
Clayton Act
e.
Sherman Antitrust Act
105. Which of the following is not a discount provided to business customers?
a.
Trade
b.
Cumulative
c.
Cash
d.
Seasonal
e.
Differentiated
106. What type of discount is given to a business purchaser for performing activities such as transporting,
storing, and selling?
a.
Quantity
b.
Cash
c.
Geographic
d.
Service
e.
Trade
107. The Panama Jack Company utilizes a special strategy to sell its ECO-shirt line. Its basic promotional
tool is the discount. These discounts offered to middlemen for performing certain channel activities are
referred to as ____ discounts.
a.
trade
b.
cumulative
c.
noncumulative
d.
push
e.
intermediary
108. Laura Spangler, of North Central Novelties, reduces the price of games sold to Robertson’s
Entertainment by 10 percent to allow for expenses associated with Robertson’s promoting the games to
consumers. This is an example of a ____ discount.
a.
quantity
b.
cash
c.
seasonal
d.
trade
e.
complementary
109. If Ralph Lauren offers to reduce the price of its women’s blazers when retailers buy more than 100
pieces, the designer is offering a ____ discount.
a.
quantity
b.
cash
c.
seasonal
d.
trade
e.
complementary
110. A deduction from list price for purchasing large quantities aggregated over a stated period of time is a
a.
noncumulative quantity discount.
b.
additive cash discount.
c.
cumulative quantity discount.
d.
cumulative discount allowance.
e.
additive quantity reduction.
111. Justin, a sales representative for Serta Mattress manufacturers, phones Kirk of Southside Furniture to
inform him that if he will increase his recent order of 15 mattress sets to 20, he will receive a 14
percent price reduction. This offer is due to a recent overstock condition at the factory and will not be
available in the future. The discount offered here is
a.
cash.
b.
noncumulative.
c.
seasonal.
d.
trade.
e.
cumulative.
112. Tim O’Brien gets the invoice for a load of gravel he purchased last week. The price of the gravel was
$55, and the terms are 2/10, n/45. If Tim pays the invoice in five weeks, he will owe
a.
a penalty.
b.
$53.90.
c.
$56.10.
d.
$58.30.
e.
$55.00.
113. If the terms of a business exchange are 2/10 net 30, this means that the transaction
a.
involves a cumulative discount if paid in 30 days.
b.
involves a noncumulative discount.
c.
offers a discount if the buyer lives within a ten-mile radius.
d.
price does not include the cost of freight.
e.
involves a cash discount if paid within ten days.
114. A concession in price in business markets to achieve a desired goal is called a(n)
a.
allowance.
b.
objective-oriented discount.
c.
cash discount.
d.
trade discount.
e.
cumulative discount.
115. Reductions for transportation and other costs related to the physical distance between buyer and seller
are known as
a.
base-point pricing.
b.
freight absorption pricing.
c.
price zoning.
d.
location pricing.
e.
geographic pricing.
116. If a retailer orders a quantity of merchandise to be delivered to his store in Phoenix and is quoted a
price that does not include shipping charges, the retailer is paying a(n) ____ price.
a.
F.O.B. destination
b.
F.O.B. factory
c.
transfer
d.
postage-stamp
e.
base-point
117. Ryan orders 16 dozen fishing lures from Strike Right for $375. When he gets the invoice, he is furious
that $25 in freight charges has been tacked onto his bill because he thought the price included freight
costs. Ryan should have been certain that the order terms were
a.
F.O.B. origin.
b.
F.O.B. factory.
c.
C.O.D.
d.
2/10, n/30.
e.
F.O.B. destination.
118. The fact that a gas station in Texas pays less for fuel than a gas station in Maine from a producer in
Louisiana suggests that refineries are using which of the following pricing methods?
a.
Price differentiation
b.
Base-point pricing
c.
Freight absorption pricing
d.
Transfer pricing
e.
Zone pricing
119. Suppose that the frozen foods division of Swanson purchases food trays and boxes from the packaging
division. The form of pricing used to charge the frozen foods division is called
a.
zone pricing.
b.
base-point pricing.
c.
business-unit pricing.
d.
transfer pricing.
e.
price discrimination.
120. When Cadillac buys headlights from Delco (both of which are divisions of General Motors), ____
pricing occurs.
a.
base-point
b.
zone
c.
transfer
d.
uniform geographic
e.
matrix
121. Which of the following is not a method used to determine transfer prices?
a.
Discounted standard cost
b.
Actual full cost
c.
Standard full cost
d.
Cost plus investment
e.
Market-based cost
122. Suppose that the watchband department of Timex sells completed watchbands to the finished watch
department. The finished watch department is charged the price it would have to pay an outside
watchband manufacturer less a discount to reflect low sales and transportation costs. This method of
pricing is called ____ pricing.
a.
zone
b.
actual full cost
c.
standard full cost
d.
cost plus investment
e.
market-based cost
Scenario 20.1
Use the following to answer the questions.
Concession Supply sells hotdogs, buns, and nacho ingredients to several major league ballparks across
the country. Currently, Concession Supply has the following pricing information for one case of
hotdogs sold at Wrigley Field: Total fixed costs = $1,200, Selling price = $16, and Variable costs = $6.
123. Refer to Scenario 20.1. To break even, Concession Supply should sell ____ cases of hot dogs per day
at Wrigley Field.
a.
13
b.
120
c.
40
d.
200
e.
60
124. Refer to Scenario 20.1. What is the breakeven point in dollar sales volume?
a.
$1,200
b.
$1,440
c.
$3,000
d.
$1,920
e.
$1,600
125. Refer to Scenario 20.1. If Concession Supply increased its price by 10 percent and experienced only a
2 percent decrease in the demand for hotdogs, the demand would be
a.
inelastic.
b.
common.
c.
prestige.
d.
elastic.
e.
marginal.
126. Refer to Scenario 20.1. If Concession Supply wanted to make a profit of $800 on each case, it would
need to sell ____ cases.
a.
150
b.
300
c.
100
d.
75
e.
200
Scenario 20.2
Use the following to answer the questions.
The BASF Chemical Company in Germany has developed a new rubberized coating. The product has
an application for cell phones and other hand-held electronic devices that gives them protection from
falls and scratches. BASF plans to market the product directly to businesses that manufacture the
casings for these types of products. BASF currently uses a system of salespeople headquartered in
Germany, while its primary business customers are in China.
127. Refer to Scenario 20.2. BASF has decided to offer discounts to its businesses customers in the form of
the following: For each order of $100,000 or more during the next 90 days, the buyer will receive a
rebate of 5 percent. This type of pricing would be an example of ____ discounts.
a.
allowance
b.
cash
c.
seasonal
d.
noncumulative
e.
cumulative
128. Refer to Scenario 20.2. BASF is considering the problem of actual distance in delivering its product
from the plant in Germany to some of its customers in China. Which pricing strategy would help
overcome this problem?
a.
Geographic
b.
Transfer
c.
Commercial
d.
Transit
e.
Factory
129. Refer to Scenario 20.2. If BASF were to employ pricing that includes the price at the factory plus
freight charges from a chosen point nearest the buyer, this would be an example of ____ pricing.
a.
factory plus
b.
dispersion
c.
base-point
d.
freight absorption
e.
uniform geographic
130. Refer to Scenario 20.2. If BASF were to price its product in barrels from the factory, before it is
loaded on the carrier, this would be an example of ____ pricing.
a.
buy-back allowance
b.
geographic
c.
F.O.B destination
d.
F.O.B. factory
e.
base-point
TRUE/FALSE
131. Price is the value that is exchanged for products in a marketing transaction.
132. Barter is the oldest form of exchange.
133. Price should be defined in terms of money only.
134. Because buyers have unlimited purchasing power, they do not have to allocate it to the most desired
products.
135. The value of an idea cannot be assessed by price.
136. The purpose of the pricing concept is to quantify and express the value of items in a market exchange.
137. Marketers have more difficulty adjusting their prices than they do any other marketing mix variable.
138. Price is the most easily adjusted ingredient in the marketing mix.
139. The major disadvantage of using price competition is that it takes a long time to implement the
changes in price.
140. Price is a crucial marketing mix component.
141. Total costs are influenced by quantities sold.
142. Profits for a firm are computed as follows: Profits = TR − FC.
143. Price is a major component of the profit equation.
144. A seller can change prices quickly in a price-competition situation.
145. A firm that competes on a price basis is unable to change prices frequently.
146. Price competition is a very flexible marketing strategy.
147. Nonprice competition emphasizes distinctive product features, service, and product quality.
148. Nonprice competition does not permit unique product features, higher product quality, and customer
service.
149. Nonprice competition allows a company to increase its brand’s unit sales through means other than
changing the brand’s price.
150. Nonprice competition can be used to establish brand loyalty.
151. Brand uniqueness is not important in nonprice competition.
152. Sellers using nonprice competition are not concerned with prices charged by competitors.
153. Demand is best determined by a top management committee.
154. For most products, the quantity demanded goes up as the price goes down.
155. Demand depends only on the price of the product.
156. With prestige products, a firm will always be able to sell more at a higher price.
157. The idea behind prestige demand is that many prestige products seem to sell better at a high price than
at a low price.
158. Changes in buyers’ attitudes, other components of the marketing mix, and uncontrollable
environmental factors can influence demand.
159. Price elasticity of demand measures the sensitivity of demand to changes in price.
160. Electricity is an example of a product that is price elastic.
161. Pricing decisions can be based on determining whether the demand for a product is price elastic or
price inelastic.
162. If demand is elastic, a change in price causes a parallel change in total revenue.
163. Elastic demand is usually a result of the lack of substitute products.
164. Product demand usually becomes more elastic over time because more substitutes are found.
165. Fixed costs vary with the number of units produced or sold.
166. Rent is usually a fixed cost.
167. Marginal revenue is the change in total revenue that occurs when a firm sells an additional unit of
product.
168. The firm should produce the quantity at which marginal revenue and marginal cost are equal.
169. The point at which marginal revenue equals marginal cost is the breakeven point.
170. Knowing the number of units necessary to break even is important in setting the price.
171. Comparison of various prices and various breakeven points will tell the marketer exactly what price to
charge.
172. Pricing decisions should be based on the marketer’s previous marketing strategies for other successful
products and on intuition.
173. Organizational goals have little to do with pricing decisions.
174. Ideally, pricing decisions have little relation to a firm’s marketing objectives.
175. Marketers should set prices consistent with marketing goals, not with the corporate mission.
176. Costs are a major issue when establishing price.
177. A firm can survive in the long run only if its products are sold below cost.
178. Factors affecting pricing decisions can include demand, distribution, and the way in which the product
is promoted.
179. Marketing mix variables are highly interrelated.
180. Profit margins for marketing channel members must be considered when determining the price of a
product.
181. Channel member expectations play no part in a firm’s pricing decisions.
182. Customers always interpret a higher price to mean higher quality.
183. 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.
184. The more experience the customer has with a product, the more he or she relies on external reference
prices.
185. 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.
186. 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.
187. In setting price, it is wise to analyze competitors’ prices.
188. Setting prices for business customers is very similar to setting prices for consumers.
189. Producers commonly provide discounts off list prices to intermediaries.
190. 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.
191. Seasonal discounts provide price incentives to customers during peak selling seasons.
192. 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.
193. The legality of uniform geographic pricing has been challenged, and so its use has been abandoned.
194. Pricing whereby the buyer absorbs all or part of the freight costs is freight absorption pricing.
195. Transfer pricing involves the sale of a product to another unit within the same organization.