Question 1

How can transfer pricing be calculated? Give three alternatives.

Accepted Answer

The answer of How can transfer pricing be calculated? Give...

Question 2

Premium-priced products are usually marketed through

Accepted Answer

A)  complex marketing channels. 
B)  intensive or selective distribution. 
C)  exclusive or intensive distribution. 
D)  exclusive distribution only. 
E)  selective or exclusive distribution.

Question 3

What does the demand curve for a prestige product look like?

Accepted Answer

A)  It is a straight line where the quantity sold continues to increase as the price of each product increases. 
B)  It is a curve where the highest and the lowest prices yield the greatest quantity sold and mid-range prices produce the fewest sales. 
C)  It forms a curve where the greatest quantity sold comes at a medium price, and the quantities fall as the price increases or decreases. 
D)  It forms a straight vertical line because of the prestige of the product, and quantity sold will remain stable regardless of the price. 
E)  It slopes from left to right at a very mild slope; that is, as quantity increases, price decreases slowly.

Question 4

French Quarter Inns drops the price of a suite from $225 to $195 per night and experiences a reduction in the quantity of rooms demanded of an average of five per night. This is an indication that suites at this hotel are apparently an example of a(n) ____ product.

Accepted Answer

A)  reverse-demand 
B)  inferior 
C)  standard 
D)  secondary-demand 
E)  prestige

Question 5

Suppose Tommy Hilfiger is introducing a new line of men's ties. The designer believes that the target market for these ties comprises men who are very status-conscious. In keeping with this assessment, department stores selling the ties should

Accepted Answer

A)  charge a price based on their cost. 
B)  charge prices consistent with their existing ties. 
C)  discount the ties. 
D)  negotiate the price with individual tie shoppers. 
E)  use price symbolically.

Question 6

Demand depends only on the price of the product.

Accepted Answer

A) True 
 B)False

Question 7

The Sherman Antitrust Act prohibits price fixing. Price fixing is

Accepted Answer

A)  an attempt to establish high prices by becoming the market leader. 
B)  the use of false or misleading statements or practices to persuade buyers that a product is a better deal than it really is. 
C)  the practice of employing price differentials that tend to injure competition by giving one or more buyers a competitive advantage. 
D)  an agreement among competing firms to raise, lower, or maintain prices for mutual benefit. 
E)  the intent to set a product's price so low that rival firms cannot compete and therefore withdraw from the marketplace.

Question 8

Which of the following is not a method used to determine transfer prices?

Accepted Answer

A)  Discounted standard cost 
B)  Actual full cost 
C)  Standard full cost 
D)  Cost plus investment 
E)  Market-based cost

Question 9

Scenario 19.1 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.
Refer to Scenario 19.1. To break even, Concession Supply should sell ____ cases of hot dogs per day at Wrigley Field.

Accepted Answer

A)  13 
B)  120 
C)  40 
D)  200 
E)  60

Question 10

What do all of the following have in common: tuition, fee, premium, retainer, dues?

Accepted Answer

A)  They are all usually paid in cash. 
B)  They are forms of exchange similar to, but not identical with, money. 
C)  They are forms of exchange similar to, but not identical with, barter. 
D)  They are different terms for the concept of price. 
E)  They have nothing in common.

Question 11

If Wilson Sporting Goods faces a standard demand curve that exists for most products, as it raises the price of its tennis rackets, the

Accepted Answer

A)  quantity demanded goes down. 
B)  demand remains constant. 
C)  quantity demanded increases. 
D)  demand increases. 
E)  breakeven increases.

Question 12

Suppose a competitor says that Walmart's everyday low prices are really a type of predatory pricing. Walmart contends that its efficient operations and strong relationships with suppliers, as well as a number of other factors, allow it to keep prices lower than competitors all of the time. A judge determines that Walmart is not guilty of predatory pricing. If Walmart's competitor wanted to prove it was guilty of predatory pricing, what would it have to do?

Accepted Answer

A)  Show that Walmart was undercutting competitors to sell off excess inventory 
B)  Demonstrate that Walmart did not really have the lowest prices of all retailers 
C)  Prove that the prices were set low in order to drive out competitors 
D)  Maintain that Walmart's pricing strategy placed other firms at a disadvantage 
E)  Prove that Walmart was using price differentials to charge customers different prices

Question 13

The owner of Big Bike Motorcycles is opening a new retail location. Which of the following is most likely to be a fixed cost for Big Bike Motorcycles?

Accepted Answer

A)  Retail personnel salaries 
B)  Advertising on Facebook 
C)  Building rent 
D)  Electricity 
E)  Transportation of sold bikes

Question 14

If fixed costs = $6,000, selling price = $10, and variable costs per unit = $5, what is the breakeven point in units and in dollar sales volume?

Accepted Answer

The answer of If fixed costs = $6,000, selling price...

Question 15

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.

Accepted Answer

A) True 
 B)False

Question 16

LaTonya Horton works for the Spurs organization and is responsible for managing ticket sales. She knows that ticket price and season ticket packages are related to consumers' interest in purchasing tickets and she tries to price individual tickets and packages at the level where ticket sales and profitability are maximized for the Spurs home games. LaTonya typically tests the _______ of demand by creating special events or special sales where she adjusts the price of tickets so she can determine the best price that maximizes profitability for the organization.

Accepted Answer

A)  price elasticity 
B)  quantity 
C)  feasibility 
D)  sensitivity 
E)  fluctuation

Question 17

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% market share. ACE's major problem in the future will most likely be

Accepted Answer

A)  survival. 
B)  cash flow. 
C)  competition. 
D)  return on investment. 
E)  profit.

Question 18

Shania Dolls have become a major competitor of doll companies like Mattel. When the company produces 1,500 dolls, it incurs $6,000 in costs. When it produces 1,501 dolls, the costs go up to $6,004. This $4 difference is an example of

Accepted Answer

A)  marginal cost. 
B)  fixed cost. 
C)  average variable cost. 
D)  total cost. 
E)  average total cost.

Question 19

The ____ prohibits price fixing among firms in an industry.

Accepted Answer

A)  Sherman Antitrust Act 
B)  Federal Trade Commission Act 
C)  Wheeler-Lea Act 
D)  Robinson-Patman Act 
E)  Clayton Act

Question 20

Trading products is the oldest form of exchange, and is commonly known as

Accepted Answer

A)  credit. 
B)  buying. 
C)  purchasing. 
D)  barter. 
E)  pricing.

Exam 19: Pricing Concepts