Question 1

All of these are demand-oriented approaches to selecting an approximate price level except which?

Accepted Answer

A)  odd-even 
B)  yield management 
C)  customary 
D)  bundle 
E)  prestige 
A)  odd-even 
B)  yield management 
C)  customary 
D)  bundle 
E)  prestige

Question 2

When establishing product-line pricing, the price differentials between items in the line should make sense to customers and reflect differences in terms of the

Accepted Answer

A)  perceived value of the products offered. 
B)  actual costs of the features offered. 
C)  perceived risk. 
D)  quantity discounts and price allowances offered. 
E)  market segments targeted. 
A)  perceived value of the products offered. 
B)  actual costs of the features offered. 
C)  perceived risk. 
D)  quantity discounts and price allowances offered. 
E)  market segments targeted.

Question 3

With the introduction of e-books, distributors could still set their own retail prices, but with a restriction. Distributors could set prices below a publisher's retail list price so long as they

Accepted Answer

A)  matched the commission received from a publisher. 
B)  exceeded the commission received from a publisher. 
C)  did not exceed the commission received from a publisher. 
D)  did not increase prices to the readers. 
E)  prevented discounts to competitors. 
A)  matched the commission received from a publisher. 
B)  exceeded the commission received from a publisher. 
C)  did not exceed the commission received from a publisher. 
D)  did not increase prices to the readers. 
E)  prevented discounts to competitors.

Question 4

Yield management pricing is a typical tactic for services trying to manage

Accepted Answer

A)  perceived risk. 
B)  capacity. 
C)  cognitive dissonance. 
D)  inelasticity of demand. 
E)  new product strategy development. 
A)  perceived risk. 
B)  capacity. 
C)  cognitive dissonance. 
D)  inelasticity of demand. 
E)  new product strategy development.

Question 5

What is critical when using target profit pricing?

Accepted Answer

A)  demand that is insensitive to price over the range being considered 
B)  a higher-than-average price compared to competitors 
C)  a low potential for currency exchange rates to change 
D)  a lower-than-average price compared to competitors 
E)  a new or innovative product 
A)  demand that is insensitive to price over the range being considered 
B)  a higher-than-average price compared to competitors 
C)  a low potential for currency exchange rates to change 
D)  a lower-than-average price compared to competitors 
E)  a new or innovative product

Question 6

The three major types of special adjustments to list or quoted price are

Accepted Answer

A)  demand-oriented, cost-oriented, and profit-oriented adjustments. 
B)  one price, flexible price, and discounts. 
C)  discounts, allowances, and marginal adjustments. 
D)  discounts, allowances, and geographical adjustments. 
E)  discounts, incremental costs and revenues, and geographical adjustments. 
A)  demand-oriented, cost-oriented, and profit-oriented adjustments. 
B)  one price, flexible price, and discounts. 
C)  discounts, allowances, and marginal adjustments. 
D)  discounts, allowances, and geographical adjustments. 
E)  discounts, incremental costs and revenues, and geographical adjustments.

Question 7

What are the five most common deceptive pricing practices? Give an example of each one.

Accepted Answer

The five most common deceptive pricing p

Question 8

Target profit pricing refers to

Accepted Answer

A)  adjusting the price of a product so it is "in line" with that of its largest competitor. 
B)  setting an annual target of a specific dollar volume of profit. 
C)  setting the price of a line of products at a number of different price points. 
D)  adding a fixed percentage to the cost of all items in a specific product class. 
E)  setting prices to achieve a profit that is a specified percentage of production costs. 
A)  adjusting the price of a product so it is "in line" with that of its largest competitor. 
B)  setting an annual target of a specific dollar volume of profit. 
C)  setting the price of a line of products at a number of different price points. 
D)  adding a fixed percentage to the cost of all items in a specific product class. 
E)  setting prices to achieve a profit that is a specified percentage of production costs.

Question 9

Charging different prices to maximize revenue for a set amount of capacity at any given time is referred to as

Accepted Answer

A)  demand-backward pricing. 
B)  target pricing. 
C)  skimming pricing. 
D)  yield management pricing. 
E)  penetration pricing. 
A)  demand-backward pricing. 
B)  target pricing. 
C)  skimming pricing. 
D)  yield management pricing. 
E)  penetration pricing.

Question 10

If a firm estimates that its costs will fall by 10 percent each time volume doubles for its product, then the cost of the l,000th unit produced and sold will be about 90 percent of the cost of the 500th unit, and the 2,000th unit will be 90 percent of the l,000th unit. Therefore, if the cost of the 500th unit is $100, the cost of the 4,000th unit would be

Accepted Answer

A)  $0. 
B)  $72.90. 
C)  $81.00. 
D)  $90.00. 
E)  $100.00. 
A)  $0. 
B)  $72.90. 
C)  $81.00. 
D)  $90.00. 
E)  $100.00.

Question 11

List four of the eight demand-oriented approaches to selecting an approximate price level and define what they are.

Accepted Answer

Demand-oriented approaches are (1) skimm

Question 12

Penetration pricing refers to

Accepted Answer

A)  charging different prices to different buyers for goods of like grade and quality. 
B)  setting the highest initial price that customers really desiring the product are willing to pay. 
C)  setting a low initial price on a new product to appeal immediately to the mass market. 
D)  setting a market price for a product or product class based on a subjective feel for the competitors' prices or market price. 
E)  setting prices a few dollars or cents under an even number. 
A)  charging different prices to different buyers for goods of like grade and quality. 
B)  setting the highest initial price that customers really desiring the product are willing to pay. 
C)  setting a low initial price on a new product to appeal immediately to the mass market. 
D)  setting a market price for a product or product class based on a subjective feel for the competitors' prices or market price. 
E)  setting prices a few dollars or cents under an even number.

Question 13

Setting a price to achieve an annual target return-on-investment (ROI) is referred to as

Accepted Answer

A)  target return-on-investment pricing. 
B)  target return-on-profit pricing. 
C)  target return-on-sales pricing. 
D)  target profit pricing. 
E)  customary pricing. 
A)  target return-on-investment pricing. 
B)  target return-on-profit pricing. 
C)  target return-on-sales pricing. 
D)  target profit pricing. 
E)  customary pricing.

Question 14

Which of these statements regarding cost-oriented approaches is most accurate?

Accepted Answer

A)  These methods focus on the demand side of the pricing problem. 
B)  These methods account for production, marketing, and overhead expenses. 
C)  Target return on investment is an example of a cost-oriented method. 
D)  Experience-curve pricing is difficult to use because costs are not predictably related to rates of production. 
E)  Cost-oriented approaches are a subcategory of competition-oriented methods. 
A)  These methods focus on the demand side of the pricing problem. 
B)  These methods account for production, marketing, and overhead expenses. 
C)  Target return on investment is an example of a cost-oriented method. 
D)  Experience-curve pricing is difficult to use because costs are not predictably related to rates of production. 
E)  Cost-oriented approaches are a subcategory of competition-oriented methods.

Question 15

In response to Duracell's introduction of the Duracell Ultra battery, Energizer introduced an Advanced Formula battery. But unlike Duracell, Energizer priced its batteries at a low initial price, believing that consumers were too price-sensitive to pay more in this category. In this case, Energizer used

Accepted Answer

A)  penetration pricing. 
B)  prestige pricing. 
C)  skimming pricing. 
D)  price lining. 
E)  cost-plus fixed-fee pricing. 
A)  penetration pricing. 
B)  prestige pricing. 
C)  skimming pricing. 
D)  price lining. 
E)  cost-plus fixed-fee pricing.

Question 16

Which of these is the step in setting a final price for a product that occurs immediately after determining cost, volume, and profit relationships?

Accepted Answer

A)  set list or quoted price 
B)  select an approximate price level 
C)  scan competitors for prices of similar products or services 
D)  estimate demand and revenue 
E)  identify pricing objectives and constraints 
A)  set list or quoted price 
B)  select an approximate price level 
C)  scan competitors for prices of similar products or services 
D)  estimate demand and revenue 
E)  identify pricing objectives and constraints

Question 17

A critical assumption when using target profit pricing is that

Accepted Answer

A)  a higher average price will not cause the demand for a product to fall. 
B)  a higher average price will cause new competitors to join the industry. 
C)  a higher average price will be offset by reductions in manufacturing costs. 
D)  profit is tied to the current value of the dollar in relation to foreign currencies. 
E)  any price increase will be followed quickly by similar moves from all of your competitors. 
A)  a higher average price will not cause the demand for a product to fall. 
B)  a higher average price will cause new competitors to join the industry. 
C)  a higher average price will be offset by reductions in manufacturing costs. 
D)  profit is tied to the current value of the dollar in relation to foreign currencies. 
E)  any price increase will be followed quickly by similar moves from all of your competitors.

Question 18

Several factors indicate that a penetration pricing policy would be effective when introducing a new product, including situations in which

Accepted Answer

A)  lowering the price has only a minor effect on increasing the sales volume and reducing the unit cost. 
B)  the high initial price will not attract competitors. 
C)  customers interpret the high price as signifying high quality. 
D)  enough prospective customers are willing to buy immediately at the high initial price to make these sales profitable. 
E)  many segments of the market are price-sensitive. 
A)  lowering the price has only a minor effect on increasing the sales volume and reducing the unit cost. 
B)  the high initial price will not attract competitors. 
C)  customers interpret the high price as signifying high quality. 
D)  enough prospective customers are willing to buy immediately at the high initial price to make these sales profitable. 
E)  many segments of the market are price-sensitive.

Question 19

Rather than billing clients by the hour, some lawyers and their clients agree on a fixed fee based on expected costs plus an agreed-on level of profit for the law firm. Which pricing approach are they using?

Accepted Answer

A)  target pricing 
B)  cost-plus pricing 
C)  customary pricing 
D)  experience-curve pricing 
E)  bundle pricing 
A)  target pricing 
B)  cost-plus pricing 
C)  customary pricing 
D)  experience-curve pricing 
E)  bundle pricing

Question 20

All of these are competition-oriented approaches to selecting an approximate price level except which?

Accepted Answer

A)  loss-leader pricing 
B)  customary pricing 
C)  above-market pricing 
D)  odd-even pricing 
E)  at-market pricing 
A)  loss-leader pricing 
B)  customary pricing 
C)  above-market pricing 
D)  odd-even pricing 
E)  at-market pricing

Exam 14: Arriving at the Final Price

All of these are demand-oriented approaches to selecting an approximate price level except which?

When establishing product-line pricing, the price differentials between items in the line should make sense to customers and reflect differences in terms of the

With the introduction of e-books, distributors could still set their own retail prices, but with a restriction. Distributors could set prices below a publisher's retail list price so long as they

Yield management pricing is a typical tactic for services trying to manage

What is critical when using target profit pricing?

The three major types of special adjustments to list or quoted price are

What are the five most common deceptive pricing practices? Give an example of each one.

Target profit pricing refers to

Charging different prices to maximize revenue for a set amount of capacity at any given time is referred to as

List four of the eight demand-oriented approaches to selecting an approximate price level and define what they are.

Penetration pricing refers to

Setting a price to achieve an annual target return-on-investment (ROI) is referred to as

Which of these statements regarding cost-oriented approaches is most accurate?

Which of these is the step in setting a final price for a product that occurs immediately after determining cost, volume, and profit relationships?

A critical assumption when using target profit pricing is that

Several factors indicate that a penetration pricing policy would be effective when introducing a new product, including situations in which

Rather than billing clients by the hour, some lawyers and their clients agree on a fixed fee based on expected costs plus an agreed-on level of profit for the law firm. Which pricing approach are they using?

All of these are competition-oriented approaches to selecting an approximate price level except which?

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