Question 1

What assumption does breakeven analysis make that limits its overall usefulness?

Accepted Answer

A)   It focuses on how to achieve a price objective.
B)   It assumes a company wants to gain a certain market share.
C)   It relies on demand for a product being inelastic.
D)   It focuses only on competitive factors and not costs.
E)   It assumes demand is elastic for the product.F) C) and E)
G) A) and B)

Question 2

For custom-made equipment or commercial construction projects, which pricing method is most likely used?

Accepted Answer

A)   Prestige
B)   Premium
C)   Differential
D)   Return-on-investment
E)   Cost-plusF) A) and C)
G) A) and B)

Question 3

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 costF) B) and D)
G) A) and D)

Question 4

The importance of price depends on the type of product, the type of target market, and the purchase situation.

Accepted Answer

A) True 
 B)False

Question 5

Understanding the consumers' expectations of _____________, helps a marketer correctly assess the target market's evaluation of price.

Accepted Answer

A)   value and quality
B)   reverse distribution
C)   low prices
D)   price rebates
E)   technical assistanceF) C) and E)
G) A) and C)

Question 6

When marketers at Consolidated Mustard Company tried to determine demand for their product, they found that at 50 cents, consumers wanted 2,000 jars; at $1.00, they wanted 6,000 jars; and at $1.50, they wanted 4,000 jars. What can Consolidated conclude?

Accepted Answer

A)   Consolidated did poor market demand research.
B)   Consolidated has an elastic product.
C)   Consolidated has an inelastic product.
D)   Consolidated mustard is a prestige good.
E)   Consolidated mustard has a normal demand curve.F) C) and E)
G) C) and D)

Question 7

A product that has more features than those of its competition, or that is perceived to be of higher quality, warrants using which type of pricing strategy?

Accepted Answer

A)   Custom pricing
B)   Special-event pricing
C)   Premium pricing
D)   Price lining
E)   Reference pricingF) A) and E)
G) B) and C)

Question 8

If a company increased its price from $100 to $120 and the quantity demanded fell by 40 percent, the price elasticity of demand for this product is

Accepted Answer

A)   2.
B)   1/2.
C)   − 1/2.
D)   − 2.
E)   4.F) B) and E)
G) A) and B) D

Question 9

Two types of new-product pricing are price skimming and product-line pricing.

Accepted Answer

A) True 
 B)False

Question 10

A concession in price in business markets to achieve a desired goal is called a(n)

Accepted Answer

A)   allowance.
B)   objective-oriented discount.
C)   cash discount.
D)   trade discount.
E)   cumulative discount.F) B) and C)
G) A) and E)

Question 11

Captive pricing, premium pricing, and price lining are all strategies aimed at maximizing the profits of an entire product line rather than an individual product.

Accepted Answer

A) True 
 B)False

Question 12

Which of the following statements is true about customers' interpretation and response to price?

Accepted Answer

A)   An internal reference price is a comparison price provided by others such as friends and relatives.
B)   An external reference price is a price developed in the buyer's mind through experience with the product.
C)   Prestige-sensitive customers are concerned about both the price and quality aspects of a product.
D)   At times, customers interpret a higher price as higher product quality.
E)   Customers do not consider the resources required to maintain a product after purchase.F) A) and B)
G) B) and E)

Question 13

Pricing decisions can be based on determining whether the demand for a product is price elastic or price inelastic.

Accepted Answer

A) True 
 B)False

Question 14

If local Shell gasoline stations look at BP stations' prices as the primary method of determining its own prices, Shell is using ________

Accepted Answer

A)   price fixing; which considers competition to be less important than costs.
B)   price fixing; which considers costs to be less important than competitor's prices.
C)   market share pricing; which considers competition to be the ultimate pricing goal.
D)   competition-based pricing, which considers profit to be the ultimate pricing goal.
E)   competition-based pricing, which considers costs to be less important than competitor's prices.F) C) and E)
G) B) and E) E

Question 15

Pricing decisions should be based on the marketer's previous marketing strategies for other successful products and on intuition.

Accepted Answer

A) True 
 B)False

Question 16

The use of price skimming discourages competitors from entering a market.

Accepted Answer

A) True 
 B)False

Question 17

A graph of the quantity of products marketers expect to sell at various prices if other factors remain constant is a

Accepted Answer

A)   price graph.
B)   supply curve.
C)   price/quantity graph.
D)   marginal revenue curve.
E)   demand curve.F) C) and D)
G) A) and B)

Question 18

You are a senior sales and marketing analyst for a major retailing firm in Wyoming. The marketing manager just stopped by your office with a very frustrated look on her face. She tells you that she is confused why every time the company raises the sales price of its products, total revenue for the company declines.
Based on this information, which of the following explanations do you give her for why this situation occurs?

Accepted Answer

A)   The demand for the company's products is inelastic, so total revenue declines when prices are raised.
B)   The demand for the company's products is elastic, so total revenue declines when prices are raised.
C)   The demand for the company's products is elastic, so unit sales increase when prices are raised.
D)   The demand for the company's products is inelastic, so unit sales increase when prices are raised.
E)   The demand for the company's products is elastic, so fixed costs increase when prices are raised.F) A) and B)
G) None of the above

Question 19

When marginal cost is equal to marginal revenue, the firm should

Accepted Answer

A)   produce more to increase profits.
B)   produce less to decrease total costs.
C)   stop producing additional units to maximize profits.
D)   provide discounts to encourage purchases.
E)   intensify distribution to increase sales.F) A) and B)
G) B) and E)

Question 20

How can transfer pricing be calculated? Give three alternatives.

Accepted Answer

Transfer pricing occurs when one unit in an organization sells a product to another unit. The price is determined by one of the following methods: 
 • Actual full cost: calculated by dividing all fixed and variable expenses for a period into the number of units produced. 
 • Standard full cost: calculated based on what it would cost to produce the goods at full plant capacity. 
 • Cost plus investment: calculated as full cost plus, the cost of a portion of the selling unit's assets used for internal needs. 
 • Market-based cost: calculated at the market price less a small discount to reflect the lack of sales effort and other expenses. 
 The choice of transfer pricing method depends on the company's management strategy and the nature of the units' interaction. An organization must also ensure that transfer pricing is fair to all units involved in the transactions.

Exam 12: Pricing Concepts and Management

What assumption does breakeven analysis make that limits its overall usefulness?

Correct Answer
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For custom-made equipment or commercial construction projects, which pricing method is most likely used?

Correct Answer
verified

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

Correct Answer
verified

The importance of price depends on the type of product, the type of target market, and the purchase situation.

Correct Answer
verified

Understanding the consumers' expectations of _____________, helps a marketer correctly assess the target market's evaluation of price.

Correct Answer
verified

When marketers at Consolidated Mustard Company tried to determine demand for their product, they found that at 50 cents, consumers wanted 2,000 jars; at $1.00, they wanted 6,000 jars; and at $1.50, they wanted 4,000 jars. What can Consolidated conclude?

Correct Answer
verified

A product that has more features than those of its competition, or that is perceived to be of higher quality, warrants using which type of pricing strategy?

Correct Answer
verified

If a company increased its price from $100 to $120 and the quantity demanded fell by 40 percent, the price elasticity of demand for this product is

Correct Answer
verified
D

Two types of new-product pricing are price skimming and product-line pricing.

Correct Answer
verified

A concession in price in business markets to achieve a desired goal is called a(n)

Correct Answer
verified

Captive pricing, premium pricing, and price lining are all strategies aimed at maximizing the profits of an entire product line rather than an individual product.

Correct Answer
verified

Which of the following statements is true about customers' interpretation and response to price?

Correct Answer
verified

Pricing decisions can be based on determining whether the demand for a product is price elastic or price inelastic.

Correct Answer
verified

If local Shell gasoline stations look at BP stations' prices as the primary method of determining its own prices, Shell is using ________

Correct Answer
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E

Pricing decisions should be based on the marketer's previous marketing strategies for other successful products and on intuition.

Correct Answer
verified

The use of price skimming discourages competitors from entering a market.

Correct Answer
verified

A graph of the quantity of products marketers expect to sell at various prices if other factors remain constant is a

Correct Answer
verified

Correct Answer
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When marginal cost is equal to marginal revenue, the firm should

Correct Answer
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How can transfer pricing be calculated? Give three alternatives.

Exam 12: Pricing Concepts and Management

What assumption does breakeven analysis make that limits its overall usefulness?

Correct AnswerverifiedShow Answer

For custom-made equipment or commercial construction projects, which pricing method is most likely used?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The importance of price depends on the type of product, the type of target market, and the purchase situation.

Correct AnswerverifiedShow Answer

Understanding the consumers' expectations of _____________, helps a marketer correctly assess the target market's evaluation of price.

Correct AnswerverifiedShow Answer

When marketers at Consolidated Mustard Company tried to determine demand for their product, they found that at 50 cents, consumers wanted 2,000 jars; at $1.00, they wanted 6,000 jars; and at $1.50, they wanted 4,000 jars. What can Consolidated conclude?

Correct AnswerverifiedShow Answer

A product that has more features than those of its competition, or that is perceived to be of higher quality, warrants using which type of pricing strategy?

Correct AnswerverifiedShow Answer

If a company increased its price from $100 to $120 and the quantity demanded fell by 40 percent, the price elasticity of demand for this product is

Correct AnswerverifiedD

Two types of new-product pricing are price skimming and product-line pricing.

Correct AnswerverifiedShow Answer

A concession in price in business markets to achieve a desired goal is called a(n)

Correct AnswerverifiedShow Answer

Captive pricing, premium pricing, and price lining are all strategies aimed at maximizing the profits of an entire product line rather than an individual product.

Correct AnswerverifiedShow Answer

Which of the following statements is true about customers' interpretation and response to price?

Correct AnswerverifiedShow Answer

Pricing decisions can be based on determining whether the demand for a product is price elastic or price inelastic.

Correct AnswerverifiedShow Answer

If local Shell gasoline stations look at BP stations' prices as the primary method of determining its own prices, Shell is using ________

Correct AnswerverifiedE

Pricing decisions should be based on the marketer's previous marketing strategies for other successful products and on intuition.

Correct AnswerverifiedShow Answer

The use of price skimming discourages competitors from entering a market.

Correct AnswerverifiedShow Answer

A graph of the quantity of products marketers expect to sell at various prices if other factors remain constant is a

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

When marginal cost is equal to marginal revenue, the firm should

Correct AnswerverifiedShow Answer

How can transfer pricing be calculated? Give three alternatives.

Correct Answer
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D

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E

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