Question 1

Product-line pricing refers to

Accepted Answer

A)  setting the price of a line of products at a number of different specific pricing points. 
B)  deliberately selling a product below its customary price, not to increase sales, but to attract customers' attention in hopes that they will buy other products as well. 
C)  adding a fixed percentage to the cost of all items in a specific product class. 
D)  setting of prices for all items in a product line to cover the total cost and produce a profit for the complete line, not necessarily for each item. 
E)  the marketing of two or more products in a single package.

Question 2

Skimming pricing is considered to be a ________ approach to pricing.

Accepted Answer

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

Question 3

Price fixing is

Accepted Answer

A)  an arrangement a manufacturer makes with a reseller to handle only its products and not those of a competitor. 
B)  the practice of charging a very low price for a product with the intent of driving competitors out of business. 
C)  the practice of charging different prices to different buyers for goods of like grade and quality. 
D)  a conspiracy among firms to set prices for a product. 
E)  a seller's requirement that the purchaser of one product also buy another product in the line.

Question 4

Resale price maintenance was declared illegal in 1975 under the

Accepted Answer

A)  Sherman Act. 
B)  Consumer Goods Pricing Act. 
C)  Robinson-Patman Act. 
D)  Federal Trade Commission Act. 
E)  Clayton Act.

Question 5

Deliberately selling a product below its customary price, not to increase sales, but to attract customers' attention in hopes that they will buy other products as well, is referred to as

Accepted Answer

A)  loss-leader pricing. 
B)  bundle pricing. 
C)  magnet pricing. 
D)  predatory pricing. 
E)  below-market pricing.

Question 6

Central Ice Machine Co. is located in Omaha, Nebraska, and sells Frick, Sullair, York, and Fes Fuller ammonia refrigeration parts. The company ships these parts using FOB origin pricing. Which of the following statements about the shipment of a Frick reciprocating compressor is most accurate?

Accepted Answer

A)  Central Ice Machine will pay all shipping costs. 
B)  Central Ice Machine splits the shipping costs with its customers regardless of where the compressor is shipped. 
C)  It will cost Central Ice Machine more to ship to Charlotte, North Carolina, than to Topeka, Kansas. 
D)  A buyer in Albany, New York, will pay significantly more shipping charges than a buyer in Lincoln, Nebraska. 
E)  All buyers will pay the same shipping costs, regardless of the destination.

Question 7

There are several factors that predict when a skimming pricing policy is likely to be most effective, including situations in which

Accepted Answer

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

Question 8

The acronym FOB stands for

Accepted Answer

A)  freight on board. 
B)  free on board. 
C)  freight of buyer. 
D)  forward onto buyer. 
E)  freight owner bonus.

Question 9

The key to setting a final price for a product is finding an approximate price level to use as a reasonable starting point. Which of the following is one of four common approaches to selecting an approximate price level?

Accepted Answer

A)  competition-oriented 
B)  cause-oriented 
C)  revenue-oriented 
D)  stakeholder-oriented 
E)  distribution-oriented

Question 10

A custom tailor wishes to use target profit pricing to establish a price for a custom-designed business suit. Assume variable cost is $200 per suit, fixed cost is $44,000, and the target profit is $50,000 based on a volume of 50 suits. What price should be charged for a typical custom suit?

Accepted Answer

A)  $520 
B)  $1,040 
C)  $1,880 
D)  $2,080 
E)  $10,000

Question 11

In the 1980s, typical round-trip coach airfares from the East Coast to London were more than $500. Then Freddie Laker introduced the People's Express, a competing service into Newark at $350. Major airlines matched his price-and continued to do so until they drove People's Express out of business. Then prices shot back up to over $500. A lawsuit filed under the Sherman Act resulted in the judgment that the major airlines had explicitly tried to destroy a competitor. The experience of People's Express is an example of ________ on the part of the major airlines.

Accepted Answer

A)  price fixing 
B)  price discrimination 
C)  deceptive pricing 
D)  predatory pricing 
E)  pricing constraints

Question 12

What are the two general methods for quoting prices related to transportation costs? Explain how each is used.

Accepted Answer

The answer of What are the two general methods for...

Question 13

All of these are profit-oriented approaches to select an approximate price level except which?

Accepted Answer

A)  target ROI pricing 
B)  target profit pricing 
C)  target return-on-sales pricing 
D)  target return-on-investment pricing 
E)  cost-plus-percentage-of-cost pricing

Question 14

Target return-on-investment (ROI) is frequently used by

Accepted Answer

A)  contractors. 
B)  public utilities. 
C)  business-to-business markets. 
D)  supermarkets. 
E)  small privately owned firms.

Question 15

A box of Cascade dishwasher detergent shrink-wrapped with a bottle of Jet Dry is sold for $1.50 less than the regular price of the products sold separately. This is an example of ________ pricing.

Accepted Answer

A)  penetration 
B)  prestige 
C)  bundle 
D)  odd-even 
E)  standard markup

Question 16

A pricing strategy where the buyer is allowed to deduct freight expenses from the list price of the goods so the seller pays the transportation costs is referred to as

Accepted Answer

A)  FOB factory pricing. 
B)  FOB absorption pricing. 
C)  FOB origin pricing. 
D)  basing-point pricing. 
E)  FOB with freight-allowed pricing.

Question 17

The price for Nintendo's Wii video game console was likely insufficient to cover its fixed and variable costs. However, the price of its video games was set high enough to cover its video game console's loss and deliver a handsome profit for all Nintendo products. This example illustrates Nintendo's use of

Accepted Answer

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

Question 18

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.

Question 19

Companies use a ________ to assess whether its products and brands are above, at, or below the market.

Accepted Answer

A)  customary price 
B)  prestige price 
C)  price premium 
D)  price lining 
E)  benchmark

Question 20

The fashion buyer for Neiman Marcus is in Italy to view the new collections and to order for the coming season. In Milan, she negotiates a good price for a quantity of shoes in a range of sizes and styles, FOB factory. This means that

Accepted Answer

A)  the factory selects the mode of transportation, pays the freight charges, and is responsible for any damage because the seller retains title to the goods until they are delivered to Neiman Marcus. 
B)  Neiman Marcus selects the mode of transportation, pays freight charges, and is responsible for any damage while the shoes are in transit because title passes to the firm at the point of loading. 
C)  Neiman Marcus and the factory will split the freight costs. 
D)  the factory pays the freight cost to a designated port (airport or seaport) in the United States while Neiman Marcus pays the freight from that port to its final destination within the United States. 
E)  the factory passes the title when the goods are loaded but will pay all shipping costs.

Exam 14: Arriving at the Final Price