Question 1

A manufacturer of a portable digital HD camera is thinking of using a skimming pricing strategy for its new product. Which of the following conditions would argue against using a skimming pricing strategy for the camera?

Accepted Answer

A)  There will be a large potential market, even if the product is sold at a high price. 
B)  Technological problems still exist for competitors; their products are not equivalent. 
C)  Increasing the volume sold reduces production costs substantially. 
D)  Consumers perceive a strong price-quality relationship for this product. 
E)  Many consumers in the target market are innovators.

Question 2

Airlines, hotels, and car rental firms all engage in ________ by varying prices based on time, day, week, or season to match supply and demand.

Accepted Answer

A)  skimming pricing 
B)  yield management pricing 
C)  bundle pricing 
D)  target pricing 
E)  prestige pricing

Question 3

Yield management 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 4

Product-line pricing involves determining the lowest-priced product and price, the highest-priced product and price, and

Accepted Answer

A)  the single most popular item in the line. 
B)  the least vulnerable product in the line. 
C)  the most frequently sold product in the line. 
D)  the most price-insensitive product in the line. 
E)  the price differentials for all other products in the line.

Question 5

The retail price of DVD players has decreased from $900 in the mid-1990s to about $50 today. This is due in large part to

Accepted Answer

A)  skimming pricing. 
B)  prestige pricing. 
C)  odd-even pricing. 
D)  customary pricing. 
E)  experience-curve pricing.

Question 6

Discounts that are designed to encourage repeat buying by a single customer over a given time period, such as a year, are referred to as

Accepted Answer

A)  promotional allowances. 
B)  cumulative quantity discounts. 
C)  cash discounts. 
D)  functional discounts. 
E)  noncumulative quantity discounts.

Question 7

Odd-even 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

Question 8

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

Accepted Answer

The answer of What is loss-leader pricing and why do...

Question 9

Creative Quilts Studio sells hundreds of colors and types of fabric and thread. To price its inventory, the owners add 50 percent to the cost of each bolt of fabric and every spool of thread. What is this pricing approach called?

Accepted Answer

A)  target return-on-sales pricing 
B)  flexible pricing 
C)  cost-plus pricing 
D)  standard markup pricing 
E)  customary pricing

Question 10

Talbots sells women's clothes. A long-sleeved scoop neck T-shirt with the Talbots label costs $45. By comparison, you can buy a T-shirt for $5 at a Family Dollar Store, but it won't have the prestigious Talbots label or quality. What kind of demand-oriented approach to pricing does Talbots use?

Accepted Answer

A)  experience-curve pricing 
B)  skimming pricing 
C)  demand-backward pricing 
D)  prestige pricing 
E)  flexible pricing

Question 11

Penetration 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 12

Figure 14-2
-Figure 14-2 above represents the four approaches to selecting an appropriate price level. Box A represents which approach?

Accepted Answer

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

Question 13

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.

Question 14

Which of these statements regarding a trade-in allowance is most accurate?

Accepted Answer

A)  A trade-in allowance is a noncash exchange of one product for another of equal or lesser value. 
B)  A trade-in allowance is an effective way to lower the price a buyer has to pay without formally reducing the list price. 
C)  A trade-in allowance is a cash-back payment when a more expensive item is replaced with a less expensive one. 
D)  A trade-in allowance is the return of money based on proof of purchase. 
E)  A trade-in allowance is a cash payment to a retailer for extra in-store support or special featuring of the brand.

Question 15

Target return-on-investment pricing refers to

Accepted Answer

A)  setting a price to achieve an annual target ROA. 
B)  adding a fixed percentage to the cost of all items in a specific product class. 
C)  setting prices to achieve a profit that is a specified percentage of the sales volume. 
D)  setting a price to achieve an annual target ROI. 
E)  setting a price based on an annual specific dollar target volume of profit.

Question 16

Bundle pricing is considered to be a ________ pricing practice.

Accepted Answer

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

Question 17

The two general methods for quoting prices related to transportation costs are FOB origin pricing and

Accepted Answer

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

Question 18

Many cruise lines pay the customer's airfare to the point of cruise departure. What type of price adjustment are the cruise lines using?

Accepted Answer

A)  skimming pricing 
B)  promotional pricing 
C)  loss-leader pricing 
D)  prestige pricing 
E)  uniform delivered pricing

Question 19

If demand for a class of products is elastic at a number of price points but is inelastic between these price points, which pricing approach should be chosen?

Accepted Answer

A)  product-line pricing 
B)  skimming pricing 
C)  penetration pricing 
D)  price lining 
E)  odd-even pricing

Question 20

Setting the price of a line of products at a number of different specific price points is referred to as

Accepted Answer

A)  odd-even pricing. 
B)  bundle pricing. 
C)  cost-plus pricing. 
D)  price lining. 
E)  prestige pricing.

Exam 14: Arriving at the Final Price