Question 1

A skimming pricing policy is likely to be most effective when

Accepted Answer

A) consumers perceive your product to be similar to other products on the market. 
B) a lower price will significantly lower fixed costs. 
C) customers interpret the high price as signifying high quality. 
D) consumers tend to be price-sensitive. 
E) it is easier to set measurable sales unit goals. 
A) consumers perceive your product to be similar to other products on the market. 
B) a lower price will significantly lower fixed costs. 
C) customers interpret the high price as signifying high quality. 
D) consumers tend to be price-sensitive. 
E) it is easier to set measurable sales unit goals.

Question 2

What are the conditions favoring the use of penetration pricing?

Accepted Answer

The conditions favoring penetration pric

Question 3

When establishing product-line pricing, the highest priced item is typically positioned as

Accepted Answer

A) the oldest product item in the line. 
B) the premium item in the line in terms of quality and features. 
C) the largest selling product item in the line. 
D) the loss-leader item for the rest of the product line. 
E) the most price-insensitive product item in the line. 
A) the oldest product item in the line. 
B) the premium item in the line in terms of quality and features. 
C) the largest selling product item in the line. 
D) the loss-leader item for the rest of the product line. 
E) the most price-insensitive product item in the line.

Question 4

Frito-Lay recognizes that its tortilla chip products are partial substitutes for one another. Its bean and cheese dips and salsa sauces complement its tortilla chips. Frito-Lay uses this knowledge to set prices for each item in order to ensure that the entire line is profitable. This pricing strategy is known as

Accepted Answer

A) bundle pricing. 
B) price lining. 
C) customary pricing. 
D) product-line pricing. 
E) loss-leader pricing. 
A) bundle pricing. 
B) price lining. 
C) customary pricing. 
D) product-line pricing. 
E) loss-leader pricing.

Question 5

What is the difference between noncumulative and cumulative quantity discounts?

Accepted Answer

Noncumulative quantity discounts are bas

Question 6

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 the demand for a product to rise. 
C) a higher average price will always cause the demand for a product to fall. 
D) this form of pricing is extremely risky because profit is tied to the current value of the dollar. 
E) being first is essential if you increase your average price since all of your competitors will do the same. 
A) a higher average price will not cause the demand for a product to fall. 
B) a higher average price will cause the demand for a product to rise. 
C) a higher average price will always cause the demand for a product to fall. 
D) this form of pricing is extremely risky because profit is tied to the current value of the dollar. 
E) being first is essential if you increase your average price since all of your competitors will do the same.

Question 7

The two general methods for quoting prices related to transportation costs are uniformed delivered pricing and

Accepted Answer

A) regional pricing. 
B) flexible pricing. 
C) mode of transportation pricing. 
D) FOB origin pricing. 
E) FOB destination pricing. 
A) regional pricing. 
B) flexible pricing. 
C) mode of transportation pricing. 
D) FOB origin pricing. 
E) FOB destination pricing.

Question 8

Setting an annual target of a specific dollar volume of profit is referred to as

Accepted Answer

A) target profit pricing. 
B) target return-on-investment pricing. 
C) loss-leader pricing. 
D) at-, above-, or below-market pricing. 
E) yield management pricing. 
A) target profit pricing. 
B) target return-on-investment pricing. 
C) loss-leader pricing. 
D) at-, above-, or below-market pricing. 
E) yield management pricing.

Question 9

What is experience curve pricing and how does it relate to marketing strategies?

Accepted Answer

Experience curve pricing is based on the

Question 10

One problem in the interstate trucking industry is the number of trucks that return empty after making a delivery. There is a website where independent interstate truckers can look for loads to carry on their return trips, known as backhauls. Because the trucks would normally return empty, truckers who use this website to generate business they would not have had otherwise receive a reduced shipping rate. This reduced rate for a backhaul is an example of

Accepted Answer

A) penetration pricing. 
B) target pricing. 
C) cost-plus pricing. 
D) odd-even pricing. 
E) yield management pricing. 
A) penetration pricing. 
B) target pricing. 
C) cost-plus pricing. 
D) odd-even pricing. 
E) yield management pricing.

Question 11

The Robinson-Patman Act allows for price differentials to different customers under several conditions. Which of the following practices would be permitted?

Accepted Answer

A) using price differentials when price differences charged to different customers do not exceed the differences in the cost of manufacture, sale, or delivery resulting from different methods or quantities in which such goods are sold or delivered to buyers 
B) using price differentials when price differences are given on the basis of other family businesses 
C) using price differentials when charging different prices to different buyers for goods of like grade or quality 
D) using price differentials when charging different prices on the basis of religious affiliation 
E) using price differentials when charging the original price for refurbished goods that have been damaged or used and returned but repaired according to company specifications 
A) using price differentials when price differences charged to different customers do not exceed the differences in the cost of manufacture, sale, or delivery resulting from different methods or quantities in which such goods are sold or delivered to buyers 
B) using price differentials when price differences are given on the basis of other family businesses 
C) using price differentials when charging different prices to different buyers for goods of like grade or quality 
D) using price differentials when charging different prices on the basis of religious affiliation 
E) using price differentials when charging the original price for refurbished goods that have been damaged or used and returned but repaired according to company specifications

Question 12

For most products, it is difficult to identify a specific market price for a product or product class. Still, marketing managers often have a subjective feel for the competitors' price or market price. Using this benchmark, they then may deliberately choose a strategy of

Accepted Answer

A) above-, at-, or below-market pricing. 
B) loss-leader pricing. 
C) penetration pricing. 
D) standard markup pricing. 
E) experience curve pricing. 
A) above-, at-, or below-market pricing. 
B) loss-leader pricing. 
C) penetration pricing. 
D) standard markup pricing. 
E) experience curve pricing.

Question 13

What is loss-leader pricing and why do retailers use it?

Accepted Answer

For a special promotion, many retail sto

Question 14

What is the difference between an EDLP retailer and a high-low retailer? Why does Carmex charge them a different price?

Accepted Answer

Everyday low price (EDLP) retailers, suc

Question 15

Which of the following companies would be most likely to use target return-on-investment pricing?

Accepted Answer

A) a farmer 
B) a supermarket chain 
C) a book publisher 
D) a veterinarian 
E) an automobile manufacturer 
A) a farmer 
B) a supermarket chain 
C) a book publisher 
D) a veterinarian 
E) an automobile manufacturer

Question 16

Customary pricing refers to

Accepted Answer

A) a pricing method where the price the seller quotes includes all transportation costs. 
B) setting the same price for similar customers who buy the same product and quantities under the same conditions. 
C) deliberately selling a product below its list price to attract attention to it. 
D) setting a price that is dictated by tradition, a standardized channel of distribution, or other competitive factors. 
E) pricing based on what the market will bear. 
A) a pricing method where the price the seller quotes includes all transportation costs. 
B) setting the same price for similar customers who buy the same product and quantities under the same conditions. 
C) deliberately selling a product below its list price to attract attention to it. 
D) setting a price that is dictated by tradition, a standardized channel of distribution, or other competitive factors. 
E) pricing based on what the market will bear.

Question 17

Product-line pricing involves determining (1) the lowest-priced product and price; (2) __________; and (3) the price differentials for all other products in the line.

Accepted Answer

A) the single most popular item in the line 
B) the least vulnerable product in the line 
C) the highest-priced product and price 
D) the most frequently sold product in the line 
E) the most price insensitive product in the line 
A) the single most popular item in the line 
B) the least vulnerable product in the line 
C) the highest-priced product and price 
D) the most frequently sold product in the line 
E) the most price insensitive product in the line

Question 18

Target pricing is considered to be a __________ approach to pricing.

Accepted Answer

A) cost-oriented 
B) profit-oriented 
C) demand-oriented 
D) competition-oriented 
E) service-oriented 
A) cost-oriented 
B) profit-oriented 
C) demand-oriented 
D) competition-oriented 
E) service-oriented

Question 19

Noncumulative quantity discounts refers to

Accepted Answer

A) discounts that are based on a series of orders rather than on the size of an individual order. 
B) onetime discounts per customer or household. 
C) onetime discounts that must be used within a certain time frame or they will become null and void. 
D) discounts used to place new products on supermarket shelves. 
E) discounts that are based on the size of an individual purchase order rather than a series of orders. 
A) discounts that are based on a series of orders rather than on the size of an individual order. 
B) onetime discounts per customer or household. 
C) onetime discounts that must be used within a certain time frame or they will become null and void. 
D) discounts used to place new products on supermarket shelves. 
E) discounts that are based on the size of an individual purchase order rather than a series of orders.

Question 20

Suppose a manufacturer quotes price in the following form: List price-$100 less 30/10/5. When calculating this trade discount, the first number "30" in the percentage sequence always refers to the

Accepted Answer

A) discount to the ultimate consumer. 
B) manufacturer's cost. 
C) retail end of the channel. 
D) channel intermediary closest to the manufacturer. 
E) original unit cost. 
A) discount to the ultimate consumer. 
B) manufacturer's cost. 
C) retail end of the channel. 
D) channel intermediary closest to the manufacturer. 
E) original unit cost.

Exam 14: Arriving at the Final Price

A skimming pricing policy is likely to be most effective when

What are the conditions favoring the use of penetration pricing?

When establishing product-line pricing, the highest priced item is typically positioned as

What is the difference between noncumulative and cumulative quantity discounts?

A critical assumption when using target profit pricing is that

The two general methods for quoting prices related to transportation costs are uniformed delivered pricing and

Setting an annual target of a specific dollar volume of profit is referred to as

What is experience curve pricing and how does it relate to marketing strategies?

The Robinson-Patman Act allows for price differentials to different customers under several conditions. Which of the following practices would be permitted?

For most products, it is difficult to identify a specific market price for a product or product class. Still, marketing managers often have a subjective feel for the competitors' price or market price. Using this benchmark, they then may deliberately choose a strategy of

What is loss-leader pricing and why do retailers use it?

What is the difference between an EDLP retailer and a high-low retailer? Why does Carmex charge them a different price?

Which of the following companies would be most likely to use target return-on-investment pricing?

Customary pricing refers to

Product-line pricing involves determining (1) the lowest-priced product and price; (2) __________; and (3) the price differentials for all other products in the line.

Target pricing is considered to be a __________ approach to pricing.

Noncumulative quantity discounts refers to

Suppose a manufacturer quotes price in the following form: List price-$100 less 30/10/5. When calculating this trade discount, the first number "30" in the percentage sequence always refers to the

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