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Course Number: FINANCE 3360, Spring 2012

College/University: University of Texas

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14 Student: ___________________________________________________________________________ 1. Vizio's long-term goal for the next 20 to 30 years is to A. have at least one of its HDTVs products in every single home in the United States. B. have its HDTVs exported from the U.S. to China. C. be the next Sony. D. be the next Apple. E. create the first completely wireless HDTV entertainments system. 2. According to...

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___________________________________________________________________________ 1. Vizio's 14 Student: long-term goal for the next 20 to 30 years is to A. have at least one of its HDTVs products in every single home in the United States. B. have its HDTVs exported from the U.S. to China. C. be the next Sony. D. be the next Apple. E. create the first completely wireless HDTV entertainments system. 2. According to Vizio, "The whole goal is to ensure that we have the right product, at the right time and the right price and _________." A. forever rid the world of plugs and wires B. create customer value that is unmatched in the industry C. deliver it to the right people D. at the right place E. drive a seamless end-to-end value chain 3. In order to deliver a product that the average consumer could afford, Vizio A has the design specifications and marketing done in the United States and having contract . manufacturers in Taiwan, build the product. B. uses mass customization in Taiwan and then ships the HDTVs to the United States. C. purchased a small company in China to distribute its products under the Vizio name. D. purchased a small company in Japan to distribute its products under the Vizio name. E. relies solely on recycled materials to build high quality, no frills products. 4. The key to setting a final price for a product is finding an approximate price level to use as a reasonable starting point. Four common approaches to select an approximate price level are: (1) demand-oriented; (2) ___________; (3) profit-oriented; and (4) competition-oriented approaches. A. cost-oriented B. cause-oriented C. revenue-oriented D. stakeholder-oriented E. distribution-oriented 5. The key to setting a final price for a product is finding an approximate price level to use as a reasonable starting point. Four common approaches to select an approximate price level are: (1) demand-oriented; (2) cost-oriented; (3) ___________; and (4) competition-oriented approaches. A. stakeholder-oriented B. revenue-oriented C. profit-oriented D. distribution-oriented E. cause-oriented 6. The key to setting a final price for a product is finding an approximate price level to use as a reasonable starting point. Four common approaches to select an approximate price level are: (1) demand-oriented; (2) cost-oriented; (3) profit-oriented; and (4) __________ approaches. A. revenue-oriented B. distribution-oriented C. stakeholder-oriented D. competition-oriented E. cause-oriented Figure 14-1 7. Figure 14-1 above represents the six steps in setting price. Which letter represents the step where a firm would consider a demand-, cost-, profit-, or competition-oriented approach? A. "B" B. "C" C. "D" D. "E" E. "F" 8. Figure 14-1 above represents the six steps in setting price. Which letter represents the step where a firm would consider a one price or flexible price strategy, company and competitive effects, and incremental costs and revenues? A. "B" B. "C" C. "D" D. "E" E. "F" 9. Figure 14-1 above represents the six steps in setting price. Which letter represents the step where a firm would consider discounts, allowances, and geographical adjustments? A. "B" B. "C" C. "D" D. "E" E. "F" 10. Which of the following statements is most accurate? A. When selecting a strategy for setting an initial price, it doesn't matter which one you use as long as you stick with it. B Sometimes pricing strategies overlap and it would be wise for a novice marketer to consider several . strategies in choosing an approximate price level. C. Demand-oriented pricing approaches rely heavily on competitors' prices. D. Skimming pricing is a competition-oriented pricing strategy. E. Penetration pricing is the best pricing strategy for companies trying to meet the goals of a profitoriented pricing approach. 11. Demand-oriented approaches weigh factors that underlie expected __________ more heavily than factors such as cost, profit, and competition when selecting a price level. A. total revenue B. stakeholder concerns C. prevailing prices D. product substitutes E. customer tastes 12. Skimming pricing is considered to be a __________ approach to pricing. A. demand-oriented B. cost-oriented C. profit-oriented D. competition-oriented E. service-oriented 13. Skimming pricing is a strategy that introduces a new or innovative product by A. following a price elastic strategy. B. creating multiple price points. C. setting a high initial price. D. setting a low initial price. E. setting the price at the average of competitors' prices. 14. Setting the highest initial price that customers really desiring the product are willing to pay when introducing a new or innovative product is referred to as a A. skimming strategy. B. penetration strategy. C. price-lining strategy. D. experience-curve pricing strategy. E. prestige pricing strategy. 15. Skimming pricing refers to A.setting the lowest initial price possible when introducing a new or innovative product in order to "skim" sales from competitors. B setting the highest initial price that customers really desiring the product are willing to pay when . introducing a new or innovative product. C. setting the lowest initial price possible, skimming right above the point of profitability in order to secure a larger market share. D purposely setting the highest price possible to repel the mass market and attract upper class buyers even . though the actual value of the item is extremely small. E selling off the lowest producing products from a company's product line and turning them over to . resellers to skim off any remaining profit potential. 16. A skimming pricing policy is likely to be most effective when A. consumers perceive your product to be similar to other products on the market. B. a lower price will significantly lower fixed costs. C. competitors will be attracted to the market due to the potential for high sales revenues. D. consumers tend to be price sensitive. E. the high initial price will not attract competitors. 17. A skimming pricing policy is likely to be most effective when 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 high price as signifying high quality. D. consumers tend to be price sensitive. E. it will be easier to set measurable sales unit goals. 18. A skimming pricing policy is likely to be most effective when A. consumers perceive your product to be similar to other products on the market. B. a lower price will significantly lower fixed costs. C. consumers tend to be price sensitive. D. it will be easier to set measurable sales unit goals. E. the high initial prices do not attract competitors. 19. A skimming pricing policy is likely to be most effective when A. consumers tend to be price sensitive. B. it will be easier to set measurable sales unit goals. C. a lower price will significantly lower fixed costs. D. consumers perceive your product to be similar to other products on the market. E. lowering the price has only a minor effect on increasing sales volume and reducing unit costs. 20. A skimming pricing policy is likely to be most effective when A. customers are willing to buy immediately at the high initial price. B. consumers tend to be price sensitive. C. it will be easier to set measurable sales unit goals. D. a lower price will significantly lower fixed costs. E. consumers perceive your product to be similar to other products on the market. 21. Hallmark was the official supplier of flowers at the last Winter Olympics. Hallmark presented each Olympic winner with a special bouquet of roses designed to resemble the Olympic torch. Consumers were able to buy a smaller version of this same bouquet at the Hallmark Web site for $74.95. The Olympic bouquet that consumers could buy contains two dozen yellow roses, yet you can buy two dozen yellow roses for less than $35 at most supermarkets. If Hallmark is treating the Olympic bouquet as an innovative product, then it is using which demand-oriented pricing approach? A. bundle pricing B. yield management pricing C. skimming pricing D. target return-on-sales pricing E. penetration pricing 22. The Apple iPhone was recently introduced at an initial price of $600. People waited in line overnight so they could be one of the first to own these unique phones. Which pricing strategy did Apple use to help recoup its research and development costs for the mobile phone? A. penetration pricing B. experience curve pricing C. customary pricing D. skimming pricing E. target pricing 23. When microwave ovens were in the introduction stage of its product life cycle, some consumers were willing to pay exorbitant prices for these innovative ovens. Taking advantage of this strong consumer desire, marketers set the price for microwave ovens at the highest initial price customers with a very strong desire for the product were willing to pay. Marketers of microwave ovens used a __________ pricing strategy. A. skimming B. penetration C. prestige D. price lining E. bundle 24. Penetration pricing is considered to be a __________ approach to pricing. A. demand-oriented B. cost-oriented C. profit-oriented D. competition-oriented E. service-oriented 25. Penetration pricing refers to A. charging different prices to different buyers for goods of like grade and quality. B. setting the highest initial price that customers really desiring the product are willing to pay. C. setting a low initial price on a new product to appeal immediately to the mass market. D setting a market price for product or product class based on a subjective feel for the competitors' prices . or market price as the benchmark. E. setting prices a few dollars or cents under an even number. 26. The pricing strategy that is almost the exact opposite of skimming pricing is A. target pricing. B. penetration pricing. C. price lining. D. odd-even pricing. E. prestige pricing. 27. Wrigley recently introduced a new flavor of Orbit brand sugar free chewing gummint mojito. The introductory price was low so that it would quickly create loyal customers for the flavor. In this example, Wrigley used A. skimming pricing. B. penetration pricing. C. price lining. D. odd-even pricing. E. loss-leader pricing. 28. Penetration pricing is intended to appeal to which market? A. highly selective, quality-seeking consumers B. price-insensitive markets C. the mass market D. specialty product markets E. the same markets as those targeted with a skimming pricing strategy 29. Which of the following statements about penetration pricing is most accurate? A. Penetration pricing is a profit-oriented approach to pricing. B. Penetration pricing is a cost-oriented pricing method. C. Penetration pricing encourages competitors to enter a market. D. Penetration pricing is more effective in a marketplace with price-sensitive consumers. E. Penetration pricing usually precedes a skimming pricing. 30. A penetration pricing policy is likely to be most effective when A. unit production and marketing costs fall dramatically as production volumes increase. B. customers are willing to buy immediately at the high initial price. C. lowering the price has only a minor effect on increasing sales volume and reducing unit costs. D. the high initial prices do not attract competitors. E. customers interpret high price as signifying high quality. 31. A penetration pricing policy is likely to be most effective when A. lowering the price has only a minor effect on increasing sales volume and reducing unit costs. B. when the high initial prices do not attract competitors. C. many segments of the market are price sensitive. D. customers interpret high price as signifying high quality. E. customers are willing to buy immediately at the high initial price. 32. A penetration pricing policy is likely to be most effective when A. lowering the price has only a minor effect on increasing sales volume and reducing unit costs. B. the high initial prices do not attract competitors. C. a low initial price discourages competitors from entering the market. D. customers interpret high price as signifying high quality. E. customers are willing to buy immediately at the high initial price. 33. In some cases, penetration pricing may follow skimming pricing. The skimming pricing would help __________ and the penetration pricing would help __________. A. increase market share; attract price-insensitive customers B. attract price sensitive customers; increase market share C. recoup initial research and development costs; increase market share D. recoup initial research and development costs; maintain market share E. increase market share; attract price insensitive customers 34. When Hallmark cards introduced a line of $0.99 cards (about half the price of the previously least expensive cards it sold), the greeting card company was trying to appeal to a mass market that was price sensitive. Hallmark was using a __________ pricing strategy. A. prestige B. skimming C. penetration D. target ROI E. experience-curve 35. The manufacturer of a new kind of fat-free ice cream that has the consistency and taste of regular ice cream is thinking of using a penetration pricing strategy for its new product. Which of the following conditions would argue against using a penetration pricing strategy for the tasty fat-free ice cream? A. The ice cream market is highly conservative. B. The ice cream market exhibits inelastic demand over a fairly broad range of prices. C. Economies of scale in production would be substantial. D. Retailers are not willing to carry new brands of ice cream in the already overcrowded category. E. Once the initial price is set, it is nearly impossible to lower price without alienating early buyers. 36. Prestige pricing is considered to be a __________ approach to pricing. A. demand-oriented B. cost-oriented C. profit-oriented D. competition-oriented E. service-oriented 37. Setting a high price so that quality- or status-conscious consumers will be attracted to the product and buy it is referred to as A. skimming pricing. B. status pricing. C. price lining. D. value pricing. E. prestige pricing. 38. A manufacturer using _________ is setting a high price so that quality- or status-conscious consumers will be attracted to the product and buy it. A. skimming pricing B. penetration pricing C. price lining D. odd-even pricing E. prestige pricing 39. Talbot's sells women's clothes. A T-shirt with the Talbot's label costs $25. If you want to buy just ant Tshirt, you can buy one for $5 at a Family Dollar Store, but it won't have the Talbot's label or quality. What kind of demand-oriented approach to pricing does Talbot's use? A. experience curve pricing B. skimming pricing C. demand-backward pricing D. prestige pricing E. flexible pricing 40. You can buy a General Electric dishwasher for $399 or you can buy a similar under-the-counter Bosch brand dishwasher for $989. Since Bosch uses its pricing strategy to project a high-quality product image, it is most likely using __________ pricing. A. bundle B. standard markup C. prestige D. penetration E. cost plus fixed-fee Figure 14-2 41. Figure 14-2A above shows a demand curve that slopes downward and to the right, then turns back to the left. Which pricing approach does Figure 14-2A depict? A. prestige pricing B. skimming pricing C. penetration pricing D. price lining E. reflexive pricing 42. Figure 14-2A above is a graph that shows which pricing strategy? A. skimming B. penetration C. cost-plus D. price lining E. prestige 43. The movement from point A to point B in Figure 14-2A above shows A. skimming demand. B. penetration demand. C. that buyers see the product as a bargain and buy more. D. that buyers become dubious about the quality and prestige and buy less. E. a downturn in the economy. 44. The movement from point B to point C in Figure 14-2A above shows A. an increased demand for the product at a lower price. B. derived demand. C. that buyers see the product as a bargain and buy more. D. that buyers become dubious about the quality and prestige and buy less. E. a downturn in the economy. 45. Figure 14-2B above illustrates which type of pricing approach? A. skimming B. penetration C. cost-plus D. price lining E. prestige 46. Price-lining is considered to be a __________ approach to pricing. A. cost-oriented B. demand-oriented C. profit-oriented D. competition-oriented E. service-oriented 47. Setting the price of a line of products at a number of different specific price points is referred to as _________. A. odd-even pricing B. bundle pricing C. cost-plus pricing D. price lining E. prestige pricing 48. Price lining refers to A. charging different prices to different buyers for goods of like grade and quality. B. setting a low initial price on a new product to appeal immediately to the mass market. C setting a market price for product or product class based on a subjective feel for the competitors' price . or market price as the benchmark. D. setting the price of a line of products at a number of different specific price points. E. adjusting the price of a product so it is "in line" with the price of its largest competitor. 49. When using a price lining strategy, a marketer will A. set price slightly higher than necessary to protect against losses from environmental factors. B. adjust the price of a product so it is "in line" with the price of its largest competitor. C. set the price of a line of products at a number of different specific pricing points. D. setting a low initial price on a new product to appeal immediately to the mass market. E setting a market price for product or product class based on a subjective feel for the competitors' price . or market price as the benchmark. 50. The assumption that demand is elastic at a number of price points but is inelastic between these price points leads to which pricing approach? A. product line pricing B. skimming pricing C. penetration pricing D. price lining E. odd-even pricing 51. Which of the following statements regarding price lining is most accurate? A. In order for price lining to be effective, there should be at least ten specified price points. B. Price lining method assumes that demand is inelastic at each price point but elastic between price points. C. Price lining assumes that demand is elastic at each price point but inelastic between price points. D. Price lining is the preferred pricing strategy for governmental contracts. E. Price lining is the same as above-, at-, or below-market pricing. 52. In some cases, manufacturers design products for different price points and retailers apply __________ to achieve the three or four different price points offered to consumers. A. approximately the same markup percentages B. progressively higher markup percentages C. different markup percentages depending how long the item remains on their shelves D. above-, at-, or below-market pricing E. elasticity of demand pricing calculations 53. A retailer purchased a gross of silk shells each costing exactly $17 apiece. Although the only difference between the shells was color, when they were put on the floor, the pastel primary colors were marked $25, the pastel colors were marked $28 dollars, and the black and white shells were marked $30. These prices were set most likely because A. retailers using a price lining strategy will occasionally mark up items based on color, style, and expected consumer demand. B. fewer people buy black and white shells, so the retailer has to charge a higher price to break even. C. the retailer is using prestige pricing; black and white are more elegant. Dthe primary colors are priced using a penetration strategy, the pastels are priced using a skimming . strategy, and the black and white shells are priced using prestige pricing. E. price lining is essentially the same as above-, at-, or below market pricing. 54. In response to Duracell's introduction of the Duracell Ultra battery, Energizer introduced an Advanced Formula battery. But unlike Duracell, Energizer priced its batteries at a low initial price to attract the mass market. Energizer used A. penetration pricing. B. prestige pricing. C. skimming pricing. D. price lining. E. cost-plus fixed-fee pricing. 55. In response to Duracell's introduction of the Duracell Ultra battery, Energizer introduced an Advanced Formula battery. But unlike Duracell, Energizer priced its batteries at a low initial price to attract the mass market. Was Energizer's pricing strategy to take market share from Duracell a success? A. No, because consumers equate quality of batteries with higher prices. B. No, because consumers are price-insensitive when it comes to batteries. C. Yes, because the positive association with the "Energizer Bunny" kept on going and going. D. Yes, because consumers typically respond positively to cost-plus pricing. E. Yes, because the demand for batteries has unitary elasticity. 56. Odd-even pricing is considered to be a __________ approach to pricing. A. cost-oriented B. profit-oriented C. demand-oriented D. competition-oriented E. service-oriented 57. Odd-even pricing refers to A. setting prices one way for product lines and another way for individual brands. B. setting prices of luxury items at even price points and setting the price of necessities at odd price points. C. setting prices a few dollars or cents under an even number. D. adding a fixed percentage to the cost of all items in a specific product class. E. offering retailers "baker's dozens," thirteen items for the price of twelve to encourage larger purchase orders. 58. Setting prices a few dollars or cents under an even number is referred to as _________. A. odd-even pricing B. prestige pricing C. price lining D. above-, at-, or below-market pricing E. every day fair pricing 59. Odd-even pricing is based on A. retailers' perceptions of price. B. customers' perceptions of price. C. wholesalers' markups. D. manufacturers' perceptions of price. E. government regulators' perceptions of price. 60. The prices for all furniture sold at American Furniture Warehouse end in $9, such as $599.99, $899.99, etc. American Furniture Warehouse uses A. odd-even pricing. B. dynamic pricing. C. price lining. D. bundle pricing. E. product line pricing. 61. Which of the following statements regarding odd-even pricing is most accurate? A. Odd-even pricing is designed to give the consumer a better set of pricing alternatives. B. Odd-even pricing can be used in conjunction with a skimming strategy, but should not be used with a penetration strategy. C. Odd-even pricing does not work if the product is healthcare-related. D. Overuse of odd-ending prices tends to mute its effect on demand. E. Odd-ending prices are best used with large ticket items; it loses its effectiveness with moderate- to lowticket items. 62. The pricing approach that: (1) estimates the price that ultimate consumers would be willing to pay for a product; (2) works backward through markups taken by retailers and wholesalers to determine what price to charge wholesalers; and then (3) deliberately adjusts the composition and features of the product to achieve the target price to consumers is referred to as _________. A. cost-benefit pricing B. cost-plus percentage-of-cost pricing C. target pricing D. cost-plus fixed-fee pricing E. product feature pricing 63. The Swedish manufacturer of Asko dishwashers concluded that consumers would be willing to pay approximately $989 for a dishwasher that was quieter than any other machine on the market. Based on this price, Asko determined the margins that would have to be given to wholesalers and retailers to arrive at the $989 retail price. Asko used A. prestige pricing. B. price lining. C. cost-plus pricing. D. target pricing. E. customary pricing. 64. Which of the following pricing techniques is most sensitive to customers' responses to price? A. cost-plus percentage-of-cost pricing B. experience curve pricing C. cost-plus fixed-fee pricing D. target pricing E. standard markup pricing 65. Which of the following is a demand-oriented approach to pricing? A. customary pricing B. target profit pricing C. standard markup pricing D. bundle pricing E. service-oriented pricing 66. Bundle pricing is considered to be a __________ pricing practice. A. demand-oriented B. cost-oriented C. profit-oriented D. competition-oriented E. product line-oriented 67. Marketing two or more products in a single package price is referred to as A. package pricing. B. loss-leader pricing. C. bundle pricing. D. tie-in pricing. E. multi-product pricing. 68. Bundle pricing refers to A. an extra amount of "free goods" awarded sellers in the channel of distribution for promoting a product. B. marketing two or more products in a single package price. C 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. D. offering significant price discounts to wholesalers who agree to purchase products well in advance of their reorder period. E. the practice of charging two or more prices depending upon the outlet carrying the product. 69. If you were to buy one peach tree and one apple tree from the Stark Bros. fruit trees and landscaping catalog in two separate orders, you will pay a total of $108.99. However, if you order the peach and apple tree together in the same order, you pay only $89.99. When purchasing the two trees together, what pricing strategy does Stark Bros. employ? A. product line pricing B. bundle pricing C. prestige pricing D. price lining E. discount pricing 70. When Dell sells various laptops, it also pre-installs Microsoft Office and other software customers order at a discount before a laptop is shipped. This is an example of A. price lining. B. product line pricing. C. customary pricing. D. prestige pricing. E. bundle pricing. 71. Which one of the following statements regarding bundle pricing is most accurate? A. Bundle pricing is intended to benefit the consumer, not the seller. B.Bundle pricing is really "bundle packaging" since the price charged is for two or more products that are shrink-wrapped together. C. Bundle pricing is often associated with a skimming strategy. D. Bundle pricing often provides a lower total cost to buyers and lower marketing costs to sellers. E Bundle pricing is based on the idea that consumers value the individual items more than they value the . group contained in the package. 72. A box of dishwasher detergent shrink-wrapped with a bottle of Jet Dry for 10 cents more than the regular price of the dishwasher detergent is an example of __________ pricing. A. penetration B. prestige C. bundle D. odd-even E. standard mark-up 73. Yield management is considered to be a __________ approach to pricing. A. demand-oriented B. cost-oriented C. profit-oriented D. competition-oriented E. service-oriented 74. Yield management pricing refers to A. controlling the production of products based upon seasonal demand. 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. charging different prices during different times of the day or days of the week to reflect variations in demand for the service. D offering significant price discounts to wholesalers who agree to purchase products in advance for a . period of a year or more at a time. E. charging different prices to maximize revenue for a set amount of capacity at any given time. 75. While __________ often changes price based upon color or style, __________ often changes prices based on time, day, week, or season. A. prestige; skimming B. yield management pricing; bundle pricing C. price-lining; yield management pricing D. target pricing; target return on investment pricing E. promotional allowances; standard markup pricing 76. Yield management pricing is most consistent with services trying to deal with A. capacity management. B. perceived risk. C. cognitive dissonance. D. inelasticity of demand. E. new product strategy development. 77. One problem in the interstate trucking industry is the number of trucks that return after making a delivery with an empty truck. There is a Web site where independent interstate truckers can look for loads that they can carry with them on their return trip. Because the trucks would be returning empty, truckers, who use this Web site to get business that they would not have had without it, receive a reduced shipping rate. This reduced rate is an example of A. yield management pricing. B. penetration pricing. C. target pricing. D. cost-plus pricing. E. odd-even pricing. 78. Which of the following is a cost-oriented approach to pricing? A. experience curve pricing B. skimming pricing C. prestige pricing D. loss-leader pricing E. bundle pricing 79. With cost-oriented approaches, a price setter stresses the cost side of the pricing problem, not the __________ side. A. shareholder equity B. income C. service D. supply E. demand 80. With a __________ pricing strategy, a price setter stresses the __________ side of the pricing problem. A. demand-oriented; cost B. supply-oriented; target ROI C. competition-oriented; marketing channel D. cost-oriented; cost E. profit-oriented; revenue 81. Which of the following is a cost-oriented approach to pricing? A. cost-plus pricing B. skimming pricing C. prestige pricing D. loss-leader pricing E. bundle pricing 82. Which of the following statements regarding cost-oriented approaches is most accurate? A. These methods focus on the demand side of the pricing problem. B. These methods focus on production and marketing expenses. C. Target return on investment is an example of a cost-oriented method. D. Experience curve pricing is simple to use because costs predictably decrease by 25 percent with each doubling of production. E. Cost-oriented approaches are subcategories of competition-oriented methods. 83. Which of the following is a cost-oriented pricing method? A. standard markup pricing B. loss leader pricing C. at-, above-, or below-market pricing D. price lining E. penetration pricing 84. Standard markup pricing is considered to be a __________ approach to pricing. A. demand-oriented B. cost-oriented C. profit-oriented D. competition-oriented E. service-oriented 85. Standard markup pricing refers to A. adjusting the price of a product so it is "in line" with that of its largest competitor. B. setting the price of a line of products at a number of different price points. C. adding a fixed percentage to the cost of all items in a specific product class. D. setting prices to achieve a profit that is a specified percentage of the sales volume. E. increasing the price slightly to protect against undue profit losses from unforeseen environmental forces. 86. Adding a fixed percentage to the cost of all items in a specific product class is referred to as A. target profit pricing. B. target return-on-investment pricing. C. standard markup pricing. D. customary pricing. E. everyday low pricing. 87. 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? A. target return-on-sales pricing B. flexible pricing C. cost-plus pricing D. standard markup pricing E. customary pricing 88. Assume it costs Lady Marion Seafood, Inc. $30 to catch, process, freeze, package, and ship, 5-pound packages of Alaskan salmon. It uses a 60 percent markup on its salmon products and charges customers $48 for a postage-paid vacuum-sealed package. What type of pricing does Lady Marion Seafood use? A. target return-on-sales pricing B. cost-plus pricing C. standard markup pricing D. target profit pricing E. customary pricing 89. Supermarkets managers use standard markup pricing because it is particularly suited to situations when A. there is a large number of product lines, all with basically the same product attributes. B. there is a large number of products and estimating the demand for each would be difficult and time consuming. C. there is a specific profit goal that needs to be achieved. D. there is a policy of selling every item in a product line at the same price regardless of the product class. E. the products are perishable or seasonal. 90. Summing the total unit cost of providing a product or service and adding a specific amount to the cost to arrive at the price is referred to as _________. A. standard markup pricing B. experience curve pricing C. cost-plus pricing D. product-line pricing E. target return-on-investment pricing 91. Cost-plus pricing refers to A. setting the price of a line of products at a number of different price points. B. adding a fixed percentage to the cost of all items in a specific product class. C. summing the total unit cost of providing a product or service and adding a specific amount to the cost to arrive at the price. D. setting prices to achieve a profit that is a specified percentage of the sales volume. E. increasing the price slightly to protect against undue profit losses from unforeseen environmental factors. 92. The two forms of cost-plus pricing are A. cost-plus fixed-fee pricing and cost-plus variable-fee pricing. B. cost-plus ROI pricing and cost-minus markdown pricing. C. target return on sales pricing and target return on investment pricing. D. cost-plus percentage-of-cost pricing and cost-plus fixed-fee pricing. E. dynamic pricing and flexible pricing. 93. Rather than billing clients by the hour, some lawyers and their clients agree on a fixed fee based on expected costs plus an agreed upon level of profit for the law firm. Which pricing approach are they using? A. target pricing B. cost-plus pricing C. customary pricing D. experience curve pricing E. bundle pricing 94. The most commonly used pricing method for business products is _________. A. target return on investment B. customary C. standard markup D. target profit E. cost-plus pricing 95. While the most commonly used pricing method for business products is cost-plus pricing, this method is becoming more and more popular among __________ in the service sector. A. e-businesses B. business-to-consumer firms C. business-to-government sellers D. nonprofit organizations E. business-to-business marketers 96. Setting the price of a product or service by adding a fixed percentage of the construction costs is referred t o as A. cost-plus fixed-fee pricing. B. cost-plus percentage-of-cost pricing. C. demand backward pricing. D. experience curve pricing. E. target return on investment pricing. 97. Cost-plus percentage-of-cost pricing refers to A. summing the total unit cost of providing a product or service and adding a specific amount to the cost to arrive at the price. B. setting the price of a product or service by adding a fixed percentage of the production or construction costs. C. adding a fixed percentage to the cost of all items in a specific product class. D. setting a price that is dictated by tradition, a standardized channel of distribution, or other competitive factors. E. charging different prices to different buyers for goods of like grade and quality. 98. Which of the following type of business is most likely to use cost-plus percentage-of-cost pricing? A. real estate agency B. architect C. insurance company D. power company E. space shuttle contractor 99. A pricing method where a supplier is reimbursed for all costs, regardless of what they may be, and also receives an agreed upon dollar amount of profit that is independent of the final cost of the project is referred to as A. target return on investment pricing. B. cost-plus percentage-of-cost pricing. C. target return on sales pricing. D. experience curve pricing. E. cost-plus fixed-fee pricing. 100.The Brazilian government wants to build a global positioning satellite (GPS) system. The satellite manufacturer will receive a mutually agreed upon profit. The pricing approach the satellite manufacturer uses is called A. standard markup pricing. B. experience curve pricing. C. cost-plus percentage-of-cost pricing. D. cost-plus fixed-fee pricing. E. bundle pricing. 101.Experience curve pricing is considered to be a __________ approach to pricing. A. demand-oriented B. cost-oriented C. profit-oriented D. competition-oriented E. service-oriented 102.Experience curve pricing refers to Athe method of pricing where the price of a product often rises following the expansion of costs . associated with the firm's producing and selling an increased volume of the product. Ba method of pricing based on the learning effect, which holds that the unit cost of many products and . services declines by 10 percent to 30 percent each time a firm's experience at producing and selling them doubles. C. the point at which profits double then double again as more consumers buy the product. D. a predictive pricing plan based upon the knowledge the prices will fluctuate in a predictable pattern within a given industry. E. a pricing strategy that uses price estimates based upon the consensus of the salesforce and the firm's top management team. 103.Which cost-oriented pricing method holds that a product's unit costs predictably decline by 10 to 30 percent each time its production volume doubles? A. experience curve pricing B. cost-plus percentage-of-cost pricing C. cost-plus fixed-fee pricing D. standard markup pricing E. derived demand pricing 104.The retail price of cell phones (unsubsidized) has decreased from $4,000 in 1983 when Motorola commercialized the device to less than $99 today. This is due in large part to which type of pricing approach? A. skimming pricing B. prestige pricing C. odd-even pricing D. experience curve pricing E. customary pricing 105.The retail price of fax machines has decreased from over $1,000 in the early 1970s to less than $100 today. This is due in large part to A. skimming pricing. B. prestige pricing. C. odd-even pricing. D. experience curve pricing. E. customary pricing. 106.The retail price of DVD players has decreased from $900 in the mid-1990s to less than $100 today. This is due in large part to A. skimming pricing. B. prestige pricing. C. odd-even pricing. D. experience curve pricing. E. customary pricing. 107.Which of the following is a profit-oriented pricing method? A. target return on sales pricing B. loss leader pricing C. above-, at-, or below-market pricing D. price lining E. penetration pricing 108.Target profit pricing refers to A. adjusting the price of a product so it is "in line" with that of its largest competitor. B. setting the price of a line of products at a number of different price points. C. adding a fixed percentage to the cost of all items in a specific product class. D. setting prices to achieve a profit that is a specified percentage of production costs. E. setting an annual target of a specific dollar volume of profit. 109.Setting an annual target of a specific dollar volume of profit is referred to as _________. 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 110.A critical assumption when using target profit pricing is that 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. 111.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 a target profit of $50,000 based on a volume of 50 suits. What price should be charged for a typical custom suit? A. $520 B. $1,040 C. $1,880 D. $2,080 E. $10,000 112.Lady Marion Seafood, Inc. sells 5-pound packages of Alaska salmon. Assume its unit variable cost per package is $30 and its fixed cost is $250,000. It wants a target profit of $38,000 on a volume of 16,000 packages. What should it charge for a five-pound package of salmon? A. $25.00 B. $33.94 C. $40.00 D. $48.00 E. $61.25 113.The manager of a small gasoline station observes that while gasoline sales have been steady, the service side of the business has fallen off, and mechanics are often idle. He decides to offer a promotiona $20 off coupon for an oil change that is to be mailed to 800 households within a 2-mile radius from the gas station. The cost of printing and mailing is $1,000. The normal cost of an oil change is $40. Materials and labor per oil change cost is $15. If two hundred customers use the coupon, what will be the total profit of the promotion based on the profit equation? A. ($4,000) B. ($1,000) C. $0 D. $1,000 E. $4,000 114.Target return-on-sales pricing refers to A. adjusting the price of a product so it is "in line" with that of its largest competitor. B. setting the price of a line of products at a number of different price points. C. adding a fixed percentage to the cost of all items in a specific product class. D. setting prices to achieve a profit that is a specified percentage of the sales revenue. E. setting a price based on a specific annual dollar target profit volume. 115.Setting a price to achieve a profit that is a specified percentage of the sales volume is referred to as _________. A. target return-on-investment pricing B. target return-on-sales pricing C. loss-leader pricing D. penetration pricing E. standard markup pricing 116.A custom kitchen cabinet storeowner wishes to use target return-on-sales pricing approach to establish a price for a typical section of cabinets. Assume that variable costs total $200 per unit, fixed cost is $44,000, and the storeowner desires a target profit of 20 percent return on sales at an annual volume of 400 cabinets. What price should be charged for a typical cabinet section? A. $263.50 B. $311.00 C. $387.50 D. $445.50 E. $775.00 117.Target return-on-investment pricing refers to 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. 118.Setting a price to achieve an annual target return-on-investment (ROI) is referred to as A. target return-on-investment pricing. B. target return-on-profit pricing. C. target return-on-sales pricing. D. target profit pricing. E. customary pricing. 119.Which of the following companies would be most likely to use target return-on-investment pricing? A. a farmer B. a florist shop C. a book publisher D. a veterinarian E. an automobile manufacturer 120.Target return-on-investment (ROI) is frequently used by A. contractors. B. public utilities. C. business-to-business markets. D. supermarkets. E. small privately owned firms. 121.Rather than emphasize demand, cost, or profit factors, a price setter can stress what __________ is (are) doing. A. the service sector B. the global economy C. suppliers D. "the market" or competitors E. the financial markets 122.Customary pricing refers to 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. 123.Setting a price that is dictated by tradition, a standardized channel of distribution, or other competitive factors is referred to a(n) _________. A. cost-plus pricing B. customary pricing C. standard markup pricing D. experience curve pricing E. target profit pricing 124.Southern gardeners normally pay $5 for 2 cubit foot bag of pine bark mulch that they buy at their local gardening supply and home improvement stores to keep the weeds down in their gardens. If the price being charged by a retailer is not within a narrow range that gardeners feel is appropriate, they will use substitutionsnewspaper, grass clippings or some other kind of ground covering. When pricing pine bark mulch, a garden supply or home improvement retailer should use A. customary pricing. B. at-market pricing. C. loss-leader pricing. D. penetration pricing. E. bundle pricing. 125.Setting a market price for a product or product class based on a subjective feel for the competitors' price or market price as the benchmark is referred to as A. customary pricing. B. above-, at-, or below-market pricing. C. standard markup pricing. D. competitive margin pricing. E. experience curve pricing. 126.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 A. above-, at-, or below-market pricing. B. loss-leader pricing. C. penetration pricing. D. standard markup pricing. E. experience curve pricing. 127.Swedish company Asko, which prides itself on manufacturing and marketing some of the best-built and most expensive appliances in the world, probably would use which competition-oriented pricing approach? A. customary pricing B. above-market pricing C. prestige pricing D. at-market pricing E. below-market pricing 128.An ad campaign by Suave shampoo asked television viewers to identify the heads of hair of women who used Suave shampoo and conditioner and those that used the much more expensive salon hair-care products. The idea of the ad was that no one could tell which woman used the much cheaper Suave brand. By making price its selling point, Suave is most likely using _________. A. above-market pricing B. below-market pricing C. loss-leader pricing D. prestige pricing E. skimming pricing 129.Manufacturers of generic brands use which method of competition-oriented pricing? A. penetration pricing B. below-market pricing C. loss-leader pricing D. prestige pricing E. skimming pricing 130.Loss-leader pricing refers to A. a pricing method where the price the seller charges is below the actual cost to make the product. B. setting a low initial price and gradually but consistently increasing that price so as not to antagonize the consumer. C 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. D. a method of pricing based on a product's tradition, standardized channel of distribution, or other competitive factors. E. pricing a product between 8 and 10 percent lower than nationally branded competitive products. 131.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 A. bundle pricing. B. magnet pricing. C. loss-leader pricing. D. predatory pricing. E. below-market pricing. 132.Using _________, many retailers deliberately sell products below their normal prices (and sometimes below cost) to attract attention and induce additional store traffic. A. customary pricing B. below-market pricing C. loss-leader pricing D. prestige pricing E. penetration pricing 133.When Kroger's, a national supermarket chain, uses a special promotion to price a six-pack of soda at $2.09 (which is below its customary price level), it is attempting to A. drive its competition out of business. B. attract customers in hopes they will buy other products as well. C. fill its parking lot so its store will look successful. D. work with the local bottler to move products that are close to their expiration dates. E. help stimulate the local economy and generate good will with its customers. 134.Companies use a "price premium" to assess whether its products and brands are priced above, at, or below the market. More specifically, a price premium is the percentage by which the actual price charged for a specific brand exceeds or falls short of a benchmark established for a similar product or basket of products. This price premium equals: A. dollar sales market share for a brand divided by unit volume market share for a brand, minus 1. B. unit volume market share for a brand divided by dollar sales market share for a brand, minus 1. C. dollar sales market share for a brand divided by unit volume market share for a brand, plus 1. D. dollar sales market share for a brand, divided by unit volume market share for a brand, plus 1. E dollar sales market share for a brand, divided by unit volume market share for a brand, minus the . number of competitors against which a brand is being measured. Figure 14-3 135.Position "A" in Figure 14-3 above represents the price premium of which of the following? A. Crunch n Munch B. Cracker Jack C. Fiddle Faddle D. Private Brands E. Seasonal, specialty, and regional brands 136.Position "B" in Figure 14-3 above represents the price premium of which of the following? A. Crunch n Munch B. Cracker Jack C. Fiddle Faddle D. Private Brands E. Seasonal, specialty, and regional brands 137.Position "C" in Figure 14-3 above represents the price premium of which of the following? A. Crunch n Munch B. Cracker Jack C. Fiddle Faddle D. Private Brands E. Seasonal, specialty, and regional brands 138.Position "D" in Figure 14-3 above represents the price premium of which of the following? A. Crunch n Munch B. Cracker Jack C. Fiddle Faddle D. Private Brands E. Seasonal, specialty, and regional brands 139.Position "E" in Figure 14-3 above represents the price premium of which of the following? A. Crunch n Munch B. Cracker Jack C. Fiddle Faddle D. Private Brands E. Seasonal, specialty, and regional brands 140.As the brand manager for Cracker Jack, what information does Figure 14-3 above give you? A. You have a price premium relative to Crunch n Munch. B. Crunch n Munch has a price premium relative to Cracker Jack. C. Fiddle Faddle is priced higher than Crunch n Munch. D. Private Brands sell more product than Cracker Jack. E. Seasonal, specialty, and regional brands have the lowest market share. 141.Setting one price for all buyers of a product or service is referred to as _________. A. customary pricing B. one-price policy C. flexible-price policy D. standard markup pricing E. uniform pricing 142.A one-price policy refers to A. setting different prices for products and services depending on individual buyers and purchase situations. B. setting the price of a line of products at a number of different specific pricing points. C 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. D. adding a fixed percentage to the cost of all items in a specific product class. E. setting one price for all buyers of a product or service. 143.Another name for a one-price policy is A. customary pricing. B. fixed pricing. C. flexible-pricing. D. standard markup pricing. E. uniform pricing. 144.When you buy a used car from a CarMax dealership, you are offered the car at a "no haggle" price. You can buy it or not, but there is no negotiating the published price because of the seller's A. customary pricing strategy. B. uniform pricing policy. C. flexible-price policy. D. dynamic pricing strategy. E. one-price policy. 145.Tendollars.com offers thousands of gifts, all priced at $10. This is an example of two pricing methods working in tandem. Most likely, the firm uses a __________ and a _________. A. customary pricing approach; skimming pricing approach B. odd-even pricing approach; loss-leader pricing approach C. below-market pricing approach; one-price policy D. penetration pricing approach; loss-leader pricing approach E. everyday low pricing approach; flexible-price policy 146.Setting different prices for products and services depending on individual buyers and purchase situations is referred to as A. price lining. B. customary pricing. C. a flexible-price policy. D. price fixing. E. discretionary pricing. 147.A flexible-price policy refers to A. setting the price of a line of products at a number of different specific pricing points. B 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. C. setting different prices for products and services depending on individual buyers and purchase situations. D 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. E. Adding a fixed percentage to the cost of all items in a specific product class. 148.Another name for flexible price policy is _________. A. target pricing B. fluid pricing C. dynamic pricing D. price lining E. market-based pricing 149.Which of the following statements about a flexible-price policy is most accurate? A. A flexible-price policy is especially suited to low cost items where profit margins are slim. B. A flexible-price policy should be avoided with large ticket items such as cars or real estate. C. When using a flexible-price policy, the seller may risk violating the Robinson-Patman Act. D. Flexible pricing is not a form of yield management pricing. E.Flexible pricing is rarely used for online purchases because of the high cost to develop information technology and data warehouses. 150.A flexible-price policy gives marketers __________ in setting the final price in light of demand, cost, and competitive factors. A. no leeway B. total freedom C. little discretion D. considerable discretion E. limited competitive authority 151.The way that person navigates through an online marketer's Web site is called A. surf-shopping behavior B. a cross-channel shopper C. the clickstream D. 1-click shopping E. the shopper pathway 152.Yield management pricing is a form of A. target pricing. B. loss-leader pricing. C. dynamic pricing. D. customary pricing. E. price lining. 153.Which of the following statements regarding new car purchases in the United States is most accurate? A. While men of all races pay basically the same price, women, regardless of race, pay considerably less. B. Seventy-nine percent of all men purchasing cars cite haggling over price as the most exciting aspects of the purchase. C. African-Americans, women, and Hispanics pay higher prices than the average price paid for a new car. D. A one-price policy is now the standard in the automobile industry due to violations of the RobinsonPatman Act. E. Female automobile salespeople rarely, if ever, offer flexible pricing to women customers. 154.The 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 is referred to as A. line item pricing. B. product-line pricing. C. price lining. D. customary pricing. E. discretionary pricing. 155.Product-line pricing refers to A. setting the price of a line of products at a number of different specific pricing points. B 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. C 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. D. adding a fixed percentage to the cost of all items in a specific product class. E. the marketing of two or more products in a single package. 156.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. 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 157.Product-line pricing involves determining: (1) the lowest-priced product and price; (2) the highest-priced product and price; and (3) _________. 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 158.When establishing product line pricing, the highest priced item is typically positioned as A. the oldest product item in the line. B. the largest selling product item in the line. C. the premium item in the line in terms of quality and features. D. the loss leader item for the rest of the product line. E. the most price insensitive product item in the line. 159.When establishing product line pricing, the lowest-priced item is typically positioned as A. the youngest product item in the line. B. the smallest selling product item in the line. C. the lost-cost item in the line in terms of quality and features. D. the profit leader for the rest of the product line. E. the traffic builder designed to capture the attention of first-time buyers. 160.When establishing product line pricing, the price differentials between items in the line should make sense to customers and reflect differences in terms of the A. perceived value of the products offered. B. actual costs in terms of the features offered. C. perceived risk. D. quantity discounts and price allowances offered. E. market segments targeted. 161.Different brands within a company's product line generally have different profit margins; for example, items with higher price lines have higher profit margins. Nike Variety tennis shoes have variable costs of $6 and sell for $24, whereas Nike Wimbledon tennis shoes have variable costs of $38 and sell for $48, but when fixed overhead is added, the shoe is unprofitable by $2 per pair. Which statement is most accurate regarding Nike's pricing approach with these two product lines: A. Demand for each shoe line is unrelated to price. B. Nike is using a cost-plus percentage-of-cost pricing strategy. C. Nike is using a product-line pricing strategy. D. Demand for each shoe line is unrelated to product quality. E. Consumers do not use price as an indication of quality. 162.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 the video game console loss and deliver a handsome profit for the entire Nintendo product line. This example illustrates Nintendo's use of A. bundle pricing. B. product-line pricing. C. price lining. D. customary pricing. E. loss-leader pricing. 163.The Hummer was an attention-getting SUV that sold for $80,000 in a limited number of dealerships. Then, General Motors developed a smaller version for $50,000 that could be sold in many more outlets. To cover costs and reach the market faster, the Hummer H2 shared some parts with other GM cars. To which customer effects did Hummer marketing managers need to pay particular attention? AThe original Hummer was prestige priced. Therefore, the price of Hummer 2 should make sense to . customers and reflect differences in the perceived value of each product. B. Elements such as gas mileage, color, and interior fabrics will be important for H2 customers. C. The most important elements of the H2 is its versatility as a family vehicle. D. Comfort and fuel efficiency will be more important than price for H2 customers. E. The original Hummer was penetration priced so that the H2 continues this pricing strategy to maximize expected profit. 164.Toro decided to augment its traditional hardware retail distribution channel by also selling through mass merchandisers such as Walmart and Target and set prices its products substantially below those for its traditional hardware outlets. Many unhappy hardware stores subsequently abandoned Toro products in favor of other manufacturers. This is an example of a firm failing to consider __________ effects when setting its final list or quoted price. A. company B. social responsibility C. regulatory D. competitive E. customer 165.The successive price cutting by competitors to increase or maintain their unit sales or market share is referred to as A. everyday even lower pricing. B. price war. C. pricing combat. D. competitive cost war. E. price reduction. 166.Price war refers to A. competition between sellers and resellers to maintain or attain the largest market share of potential customers. B.conflicts between manufacturers and distributors regarding acceptable percentages they each may charge relative to one another. C.the competitive advantage of consumers who bring coupons or offers from one seller to another in order to negotiate a better price. D. the successive price cutting by competitors to increase or maintain their unit sales or market share. E. the practice of replacing promotional allowances with lower manufacturer list prices. 167.Which of the following statements regarding price cutting is most accurate? A. Marketers should only consider price cutting if primary demand for a product class will remain stable. B Marketers should only consider price cutting if the price cut can be made across all item in a product . line and all product lines in a product mix. C. Marketers should only consider price cutting if the price cut is confined to customers within specific target market segments. D. Marketers should only consider price cutting if the firm has a technological advantage over its competitors. E. Marketers should never consider price cutting unless a product is in the introductory stage of its product life cycle. 168.Marginal analysis refers to A. a continuing, concise trade-off of incremental costs against incremental revenues. B. the change in total cost that results from producing and marketing one additional unit of a product. C.a technique that analyzes the relationship between total revenue and total cost to determine profitability at various levels of output. D. a continuing concise trade-off of incremental ROI and incremental ROA. E. a technique that analyzes the relationship between revenues, profit, and market share relative to changes in market growth rates. 169.Marginal analysis might take the form of such questions as, "Should we extend our hours to include Sundays?" or "What if we put more apples in the pie?" The basic principle is that A. as long as a marketing action breaks even, the action is worth taking. B. expected incremental revenues from pricing and other marketing actions must more than offset incremental costs. C. don't rock the boat if your program is making a profit; leave well enough alone. D. if you are not willing to take risks, even if the numbers tell you otherwise, your business will ultimately fail. E. marketing and finance are two different animals: "If it feels right in your gutgo for it." 170.It is relatively easy to measure the incremental cost of a new advertising campaign; what is not as easy is A. measuring the extra fixed cost involved. B. measuring the extra variable cost involved. C. measuring the incremental revenue generated by the new advertising campaign. D determining whether customers who stop buying the product are reacting negatively to the . advertisement or to some other aspect of the product itself. E. determining what percentage of the ad-generated revenue should be reinvested into additional advertisements of the same form. 171.The manager of a small gasoline station observes that while gasoline sales have been steady, the service side of the business has fallen off, and mechanics are often idle. He decides to offer a promotiona $20 off coupon for an oil change that is to be mailed to 800 households within a 2-mile radius from the gas station. The cost of printing and mailing is $1,000. The normal cost of an oil change is $40. Materials and labor per oil change cost is $15. How many additional maintenance service jobs must result for the promotion to break even? A. 25 jobs B. 40 jobs C. 50 jobs D. 67 jobs E. 200 jobs 172.The three major types of special adjustments to list or quoted price are A. discounts, allowances, and geographical adjustments. B. demand-oriented, cost-oriented, and profit-oriented adjustments. C. one price, flexible price, and discounts. D. discounts, allowances, and marginal adjustments. E. discounts, incremental costs and revenues, and geographical adjustments. 173.Discounts refer to reductions from the __________ that a seller gives a buyer as a reward for some activity of the buyer that is favorable to the seller. A. final price B. list price C. manufacturer's suggested retail price D. manufacturer's cost E. retailer's cost 174.The four major types of price discounts are A. quantity, trade-in, promotional, and cash. B. quantity, seasonal, trade (functional), and cash. C. quantity, seasonal, promotional, and FOB. D. cash, trade-in, seasonal, and promotional. E. trade-in, promotional, geographic, and functional. 175.Reductions in unit costs for a larger order are referred to as A. promotional allowances. B. quantity discounts. C. economic order discounts. D. penetration pricing. E. case allowances. 176.Quantity discounts refer to A. price reductions in unit costs for placing a larger order. B. price reductions for placing long-term pre-scheduled orders. C. price reductions to encourage retailers to stock inventory earlier than their normal demand would require. D. reductions in unit costs for purchasing items that are nearing their expiration dates. E. reductions in unit costs taking for merchandise that will soon be replaced by new and improved versions of the original product. 177.Your local instant photocopying service charges 10 cents a copy for copies up to a quantity of 25, 9 cents a copy for 26 to 99 copies, and 8 cents a copy for 100 copies or more. What kind of adjustment to list or quoted prices is the photocopying service using? A. experience curve pricing B. quantity discounts C. loss-leader pricing D. promotional discounts E. everyday low pricing 178.Mike Morgan, a sales representative for a major distributor of Kodak film, wanted to encourage repeat purchases by his customers. In order to accomplish this objective, Morgan offered the following discounts to his customers: a 10 percent discount for buying 10-49 cases of film within the calendar year; the discount increases to 12 percent if 50-99 cases of film are purchased within the same calendar year; and the discount increases to 15 percent if 100 or more cases of film are purchased within the same calendar year. What type of discount was Morgan offering his customers? A. a seasonal discount B. a cumulative quantity discount C. a noncumulative quantity discount D. a trade discount E. a case allowance discount 179.A discount that is based on the size of an individual purchase order rather than a series of repeat orders is referred to as a(n) A. cumulative quantity discount. B. bundle pricing. C. economic order discount. D. noncumulative quantity discount. E. promotional allowance. 180.Non-cumulative quantity discounts refer to A. discounts that are based on a series of orders rather than on the size of an individual order. B. discounts that are based on the size of an individual purchase order rather than a series of orders. C. one-time discounts per customer or household. D. one-time discounts that must be used within a certain time frame or they become null and void. E. discounts used to place new products on supermarket shelves. 181.181. Which of the following statements regarding quantity discounts is most accurate? A Noncumulative quantity discounts encourage repeat buying by a single customer to a far greater degree . than do cumulative quantity discounts. B. Quantity discounts are primarily used to undercut competitors' prices. C Noncumulative quantity discounts encourage smaller long-term repeat purchases rather than less . frequent larger short-term purchases. D. Noncumulative quantity discounts encourage large individual purchase orders, not a series of orders. E. Quantity discounts can basically be used only once with each reseller or the price will increase. 182.Discounts that apply to the accumulation of purchases of a product over a given time period, such as a year, are referred to as A. promotional allowances. B. cumulative quantity discounts. C. cash discounts. D. functional discounts. E. noncumulative quantity discounts. 183.Cumulative quantity discounts refer to A. reductions in unit costs for a larger order. B cash payments or extra amounts of "free goods" awarded sellers in the channel of distribution for . undertaking certain advertising or selling activities to promote a product. C. discounts offered to sellers for first time purchases of a new product as incentives for providing shelf space. D. a series of discounts for every additional rebuy in which the discount becomes incrementally higher. E. discounts that apply to the accumulation of purchases of a product over a given time period, typically a year. 184.Which of the following statements regarding quantity discounts is most accurate? A Cumulative quantity discounts encourage repeat buying by a single customer to a far greater degree . than do noncumulative quantity discounts. B Noncumulative quantity discounts encourage repeat buying by a single customer to a far greater degree . than do cumulative quantity discounts. C. Quantity discounts are primarily used to undercut competitors' prices. D Noncumulative quantity discounts encourage smaller long term repeat purchases rather than less . frequent large quantity purchases. E. Quantity discounts can basically be used only once with each reseller or the price will become too customary. 185.Manufacturers use seasonal discounts to A. get rid of expired merchandise. B. prevent retailers from purchasing competitors' products. C. extend the peak seasonal selling season. D.establish an immediate feeling of goodwill between the buyer and seller that hopefully will continue when prices return to normal. E. encourage the buyer to stock inventory earlier than normal demand would require. 186.To encourage buyers to stock inventory earlier than their normal demand would require, manufacturers often use A. noncumulative discounts. B. cumulative discounts. C. seasonal discounts. D. trade discounts. E. functional discounts. 187.To reward wholesalers and retailers for the risk they accept in assuming increased inventory carrying costs, manufacturers offer A. noncumulative discounts. B. cumulative discounts. C. seasonal discounts. D. trade discounts. E. functional discounts. 188.To reward wholesalers and retailers for having supplies in stock at the time they are wanted by customers, manufacturers offer A. noncumulative discounts. B. cumulative discounts. C. seasonal discounts. D. trade discounts. E. functional discounts. 189.To reward wholesalers and retailers for marketing functions they will perform in the future, a manufacturer often gives __________ or, as often called, __________ discounts. A. quantity; seasonal B. trade; functional C. manufacturer's; quantity D. cash; seasonal E. quantity; cash 190.Functional discounts are offered to resellers in the marketing channel on the basis of where they are in the channel and A. the size of the order. B. the frequency of the order. C. when orders are placed during the year. D. the length of the relationship with the manufacturer. E. the marketing activities they are expected to perform in the future. 191.Trade discounts are offered to resellers in the marketing channel on the basis of where they are in the channel and A. the size of the order. B. the frequency of the order. C. when orders are placed during the year. D. the length of the relationship with the manufacturer. E. the marketing activities they are expected to perform in the future. 192.Trade discounts are offered to resellers in the marketing channel on the basis of the marketing activities they are expected to perform in the future and A. the size of the order. B. the frequency of the order. C. when orders are placed during the year. D. the length of the relationship with the manufacturer. E. where they are in the channel. 193.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 sequence always refers to the A. discount to the ultimate consumer. B. manufacturer's percentage cost. C. retail end of the channel. D. channel intermediary closest to the manufacturer. E. original unit cost. 194.If the terms of the trade discount are listed as "20/10/5," the number 20 represents A. 20 percent of the suggested retail price is available to the retailer to cover costs and provide a profit. B. 20 percent of the suggested retail price is available to the wholesaler to cover costs and provide a profit. C. 20 percent of the suggested retail price is available to the jobber to cover costs and provide a profit. D. 20 percent of the suggested retail price is available to the ultimate consumer. E. 20 percent of the suggested retail price is the profit available to the manufacturer. 195.If the terms of the trade discount are listed 20/10/5, the number 5 represents A. 5 percent of the suggested retail price is available to the retailer to cover costs and provide a profit. B. 5 percent of the suggested retail price is available to the wholesaler to cover costs and provide a profit. C. 5 percent of the suggested retail price is available to the jobber to cover costs and provide a profit. D. 5 percent of the suggested retail price is available to the ultimate consumer. E. 5 percent of the suggested retail price is the profit available to the manufacturer. 196.A manufacturer does marketing research and estimates that consumers will accept a manufacturer's suggested retail price of $50 for a jacket. The manufacturer expects to offer trade discount terms of 40/10/ 5 to retailers, wholesalers, and agents in the marketing channel. What price will the manufacturer receive for the jacket? A. $47.50 B. $45.00 C. $30.00 D. $27.50 E. $25.65 197.A manufacturer estimates that consumers will accept a price of $275 for a snowboard. If the manufacturer expects to offer trade discounts of 35/15/5 to retailers, wholesalers, and agents, respectively, what price will the manufacturer receive for the snowboard? A. $275.00 B. $178.75 C. $151.94 D. $144.34 E. $100.00 198.A manufacturer offers a suggested list price for a cashmere sweater of $250. The trade discount is 40/20/ 10. What amount does the manufacturer expect to receive for the sweater? A. $175.00 B. $225.00 C. $108.00 D. $125.00 E. $100.00 199.Within the channel of distribution for certain types of imported furniture, the typical trade terms are 40/ 15/10. If a dining room table has a list price of $1,000, how much would the manufacturer sell the table to a jobber for? A. $1,000 B. $600 C. $510 D. $459 E. $400 200.A glass blowing studio makes fine pieces of art glass. It has decided on a retail list price of $2,000 for one of its vases. They sell only using wholesalers and retailers who receive 50/10 terms. How much will the studio receive from selling this vase? A. $2,000 B. $1,000 C. $900 D. $800 E. $100 Figure 14-4 201.Which of the following terms does Figure 14-4 above reflect? A. 30/7/3.15 B. 30/10/5 C. 5/10/30 D. 10/30/5 E. 30/5/10 202.In Figure 14-4 above what does $7.00 represent? A. the wholesaler's trade discount B. the retailer's trade discount C. the jobber's trade discount D. the manufacturer's trade discount E. the manufacturer's markup 203.According to Figure 14-4 above, how much is the retailer trade discount? A. $30.00 B. $7.00 C. $3.15 D. $63.00 E. $70.00 204.According to Figure 14-4 above, how much is the jobber trade discount? A. $30.00 B. $7.00 C. $3.15 D. $63.00 E. $70.00 205.To encourage retailers to pay their bills quickly, manufacturers offer them A. quantity discounts. B. flexible pricing policies. C. promotional allowances. D. cash discounts. E. manufacturer's inducements. 206.The purpose of a cash discount is to A. reward retailers for making large quantity purchases. B. encourage purchasing items during periods of low demand. C. prevent competitors from obtaining shelf space. D. counteract the introduction of a new product by a competitor. E. encourage retailers to pay their bills promptly. 207.If the cash discount terms for a $500 purchase are 4/10 net 30, the number $500 refers to A. the original price owed on the merchandise. B. the total amount owed if paid within 10 days. C. the total discount in dollars if the bill is paid on time. D. the manufacturer's suggested retail price. E. the total penalty in dollars if the bill is paid after 10 days. 208.If the cash discount terms for a $500 purchase are 4/10 net 30, the number 4 refers to A. the percentage markup on the product. B. the percentage discount if the bill is paid within 10 days. C. the percentage increase in price if the bill is not paid within 10 days. D. the discount in dollars per unit awarded if the order is paid on time. E. the penalty in dollars in dollars if the bill is not paid within 10 days. 209.If the cash discount terms for a $500 purchase are 4/10 net 30, the number 10 refers to A. the percentage discounted if the bill is paid within 30 days. B. the percentage increase in price if the bill is not paid within 10 days. C. the number of days for which the discount is valid. D. the discount in dollars per unit awarded if the order is paid on time. E. the penalty in dollars in dollars if the bill is not paid within 10 days. 210.If a firm receives an invoice for $45,000 with the cash discount terms of 2/10 net 30, what is maximum effective annual interest rate the firm should borrow to take advantage of the cash discount if it didn't have the funds on hand? A. 6 percent B. 12 percent C. 18 percent D. 24 percent E. 36 percent 211.Larry's Lawn Care allows customers to use a credit card for purchases. Larry pays 3 percent of the sale to the credit card company. To promote more business, Larry decides to offer a lower price to customers paying cashthat price being 3 percent less than the standard list price. Larry is giving his customers a(n): A. functional discount. B. trade-in allowance. C. promotional allowance. D. discount-for-cash. E. everyday low price. 212.When Sherman bought gas, he noticed the convenience store offered him a 3 percent reduction in price if he paid cash rather than used his credit card. The convenience store was offering him a A. trade discount. B. cash discount. C. promotional allowance. D. rebate. E. functional discount. 213.Allowances, like discounts, refer to A. rewards given to retailers to encourage early payment. B. payment extensions given to cash-strapped consumers during the current recession. C. list price deductions based on surges in consumer demand. D. list price deductions based on sudden drops in consumer demand. E. reductions from list or quoted prices to buyers for performing some activity. 214.Like discounts, reductions from list or quoted prices to buyers for performing some activity are referred t o as A. subsidies. B. remittances. C. noncumulative deductions. D. list price deductions. E. allowances. 215.A price reduction given when a used product is part of the payment on a new product is referred to as a _________. A. cash discount B. subsidy discount C. seasonal discount D. trade-in allowance E. promotional allowance 216.A trade-in allowance refers to a A. noncash exchange of one product for another of equal or greater value. B. cash back payment when a more expensive item is replaced with a less expensive item. C. price reduction given when a used product is part of the payment on a new product. D. the return of money based on proof of purchase. E. cash payment to a retailer for extra in-store support or special featuring of the brand. 217.Which of the following statements regarding a trade-in allowance is most accurate? A. A trade-in allowance is a noncash exchange of one product for another of equal or greater 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 item. 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. 218.A new car dealer can reduce the list price of a new Ford pickup truck by offering you a __________ of $1,000 for your 1988 Camaro. A. cash discount B. functional discount C. seasonal discount D. trade-in allowance E. promotional allowance 219.Cash payments or an extra amount of "free goods" awarded sellers in the channel for undertaking certain advertising or selling activities to promote the product is referred to as a A. quantity discount. B. flexible pricing policy. C. promotional allowance. D. purchase inducement. E. subsidy. 220.A promotional allowance refers to A. a one-time discount that must be used within a certain time frame or they expire. Bthe cash payments or an extra amount of "free goods" awarded sellers in the channel of distribution for . undertaking certain advertising or selling activities to promote the product. C. the return of money based on proof of purchase. D. short-term price reductions when consumer demand takes a significant and unexpected dip. E. incentives such as trips, cruises, jewelry, etc. presented to brand loyal customers. 221.The practice of replacing promotional allowances with lower manufacturer list prices is referred to as A. everyday low pricing. B. everyday fair pricing. C. trade-in allowances. D. markdown pricing. E. everyday value pricing. 222.Everyday low pricing refers to A. the pricing strategy of "extreme value" stores to maintain high price-quality images for the products they sell. B. the pricing strategy of starting a product at standard list price and then lowering the price by a certain percentage until it is sold. C. short-term price reductions when consumer demand takes a significant and unexpected dip. D. the practice of replacing promotional allowances with lower manufacturer list prices. E. a form of predatory pricing used solely for the purpose of undercutting competitors' prices. 223.The acronym "EDLP" stands for _________. A. everyday lo-hi pricing B. extended discounts for loss-leader products C. expired discounts in lieu of lower pricing D. everyday low pricing E. either free delivery or lower prices 224.Which of the following statements about everyday low pricing (EDLP) is most accurate? A. EDLP encourages manufacturer allowances. B. Supermarkets have hailed EDLP as value pricing at its most effective. C. Some argue that EDLP without price specials is boring for many grocery shoppers. D. EDLP allows supermarkets to use deeply discounted price specials. E. EDLP can increase average retail prices by as much as 10 percent. 225.Which of the following statements about everyday low pricing (EDLP) is most accurate? A. For supermarkets, EDLP means "everyday low profits!" B. Supermarkets have hailed EDLP as value pricing at its most effective. C. EDLP allows supermarkets to use deeply discounted price specials. D. EDLP can increase average retail prices by as much as 10 percent. E. If retailers pass on their allowances to customers, they cannot make a profit. 226.After offering a promotional allowance, the price of a product returns to its regular price level. When this happens, the retail store's gross margin on that product __________ on those items that were bought with the allowance but not sold during the price special promotion. A. decreases substantially B. increases substantially C. remains the same D. fluctuates wildly E. vanishes 227.Instead of everyday low prices (EDLP), supermarkets prefer a __________ approach, which is based on frequent specials where prices are temporarily lowered for a brief period of time and then raised again. A. odd-even pricing B. a one-price policy C. hi-lo pricing D. bundle-pricing E. rigid-pricing 228.228. Geographic adjustments are made by manufacturers or wholesalers to cover A. production costs. B. administrative costs. C. promotional costs. D. variable costs. E. transportation costs. 229.Manufacturers or even wholesalers make geographical adjustments to list or quoted prices to reflect A. warehouse inventory carrying and loading costs. B. the cost of transportation of the products from seller to buyer. C. changes in price due to tariffs the Federal Trade Commission imposes on the transport of goods to and from the U.S. D. changes in price due to fuel excise taxes on inefficient diesel trucks. E. the need some firms have of recouping the costs of developing different versions of their products for different global markets. 230.The two general methods for quoting prices related to transportation costs are FOB origin pricing and _________. A. uniform delivered pricing B. mode of transportation pricing C. regional pricing D. flexible pricing E. FOB destination pricing 231.The two general methods for quoting prices related to transportation costs are uniformed delivered pricing and _________. A. regional pricing B. flexible pricing C. mode of transportation pricing D. FOB origin pricing E. FOB destination pricing 232.Which of the following statements about geographical adjustments to price is most accurate? A. In FOB origin pricing, the seller selects the mode of transportation. B. In FOB with freight-allowed pricing, the buyer subtracts the transportation costs from the list price. C. Multiple-zone pricing is sometimes referred to as "spider web" pricing. D Basing point pricing seems to have been used in industries where freight expenses are only a minor . part of the total cost to the buyer. EGeographical adjustments can be subject to government regulation if the firm cannot supply objective . data (lists of mountains, rivers, weather conditions, etc.) explaining why those adjustments need to be made. 233.Which of the following statements about geographical adjustments to price is most accurate? A. In FOB origin pricing, the seller selects the mode of transportation. B. In FOB with freight-allowed pricing, the seller must pay for all transportation costs. C. Multiple-zone pricing is sometimes referred to as "spider web" pricing. D Basing point pricing seems to have been used in industries where freight expenses are a significant part . of the total cost to the buyer. EGeographical adjustments can be subject to government regulation if the firm cannot supply objective . data (lists of mountains, rivers, weather conditions, etc.) explaining why those adjustments need to be made. 234.The acronym "FOB" stands for _________. A. freight on board B. free on board C. freight of buyer D. forward onto buyer E. freight owner bonus 235.The word "Free" in relation to the acronym "FOB" signals the point or location where the seller is A. free of responsibility for customer invoicing. B. free of product liability. C. free to choose method of transportation. D. free to choose the point of loading. E. free to choose the method of payment. 236.FOB origin pricing refers to A. a method of "free on board" pricing where the price the seller sets includes all transportation costs. B a method of pricing where taxes and tariffs are adjusted based upon the city, state, or country of origin . of a product and not its destination. C a method of pricing where taxes and tariffs are adjusted based upon the city, state, or country . destination of a product and not its place of origin. Dthe "free on board" (FOB) price the seller quotes that includes only the cost of loading the product onto . or into a vehicle and specifies the name of the location where the loading is to occur (seller's factory or warehouse). E. the seller's naming the location of this loading as the seller's factory or warehouse. 237.A method of pricing where the price the seller quotes includes only the cost of loading the product onto the vehicle and specifies the name of the location where the loading is to occur is referred to as A. FOB destination pricing. B. FOB origin pricing. C. geographical allowance. D. uniform delivered pricing. E. mode of transportation pricing. 238.Central Ice Machine Company 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 true? A. Central Ice Machine will pay all shipping costs. B. Central Ice Machine splits the shipping costs with its customers no matter 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. 239.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 Athe 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. BNeiman Marcus selects the mode of transportation, pays freight charges, and is responsible for any . damage while the shoes are in transit because title passed to the firm at the point of loading. C. Neiman Marcus and the factory split the freight costs. Dthe factory pays the freight cost to a designated port (airport or seaport) in the U.S. while Neiman . Marcus pays the freight from that port to its final destination within the U.S. E. the factory passes the title when the goods are loaded but will pay all shipping costs. 240.With uniform delivered pricing, the price the seller quotes A. includes all transportation costs. B. excludes all transportation costs. C. includes a fixed allowance whereby the buyer pays any additional costs. D. includes a fixed percentage of transportation costs for which it will be responsible. E.will guarantee that a retailer will be charged the same transportation fee for all of their outlets regardless of where they are located. 241.The price the seller quotes that includes all transportation costs is referred to as _________. A. mode of transportation B. geographical allowance C. uniform delivered pricing D. FOB origin pricing E. FOB destination pricing 242.Many cruise lines pay the customer's airfare to the point of cruise departure. What type of price adjustment are the cruise lines using? A. skimming pricing B. promotional pricing C. loss-leader pricing D. uniform delivered pricing E. prestige pricing 243.A company placing an order from the Lab Safety Supply catalog is instructed to add $25.00 to the total cost of the order to pay for shipping. Which method of shipping does this catalog supplier use? A. single-zone pricing B. multiple-zone pricing C. FOB origin pricing D. FOB destination pricing E. basing-point pricing 244.A pricing method where all buyers pay the same delivered price for the products, regardless of their distance from the seller is referred to as _________. A. single-zone pricing B. multiple-zone pricing C. freight absorption pricing D. FOB origin pricing E. basing-point pricing Figure 14-5 245.According to Figure 14-5 above, if the plant in Denver charges $20 to ship its products to all of the identified cities, it is most likely using which type of pricing? A. FOB origin pricing B. basing-point pricing C. single-zone pricing D. multiple-zone pricing E. freight absorption pricing 246.When a firm divides its selling territory into geographic areas, it is referred to as A. single-zone pricing. B. multiple-zone pricing. C. geographic pricing. D. FOB origin pricing. E. basing-point pricing. 247.Multiple-zone pricing refers to A. establishing a distribution center in each major geographical region or zone in which a firm's product is sold. B. establishing retail outlets in the same vicinity as all the firm's manufacturing plants. C. a firm's decision to charge the same price regardless of geographic regions or zones where it operates. D. a firm's division of its selling territory into geographic areas or zones. E a firm's decision to divide its business between multiple carriers to provide flexibility should . transportation prices rise with one and fall with another. 248.After extensive analysis, a mail order company has decided to embark on a policy of multiple-zone pricing. In which step of the price-setting process would the mail order firm have made this decision? A. Make special adjustments to the list or quoted price. B. Select an approximate price level. C. Estimate demand and revenue. D. Identify price constraints and objectives. E. Set list or quoted price. Figure 14-6 249.According to Figure 14-6 above, if the plant in Denver ships its products to all the identified cities at different prices based on distance as indicated by the color-coded regions, it is most likely using which type of pricing? A. FOB origin pricing B. basing-point pricing C. single-zone pricing D. multiple-zone pricing E. FOB destination pricing 250.According to Figure 14-6 above, if products are shipped from Denver, which of the following statements would be most accurate? A Products shipped from Denver would charge customers in Miami and New York a lower price than . customers who live in Dallas or Seattle. B. Customers in Minneapolis and Nashville would be charged $60. C. Customers in Dallas and Phoenix pay the same price. D. Customers in Nashville pay less shipping than customers in Minneapolis. E. All customers receiving products from Denver will pay the same shipping fees. 251.A company in Virginia that manufactures and sells peanut brittle to retailers, charges higher shipping costs for orders sent to customers living west of the Mississippi River. This Virginia company is using A. single-zone pricing. B. multiple-zone pricing. C. FOB origin pricing. D. freight absorption pricing. E. basing-point pricing. 252.Another name for freight-absorption pricing is A. FOB factory. B. FOB absorption pricing. C. FOB with freight-allowed pricing. D. basing-point pricing. E. FOB origin pricing. 253.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 A. FOB factory. B. basing-point pricing. C. FOB origin pricing. D. single zone pricing. E. freight-allowed pricing. 254.Selecting one or more geographical locations from which the list price for products plus freight expenses are charged to the buyer is referred to as _________. A. FOB origin pricing B. single-zone pricing C. basing-point pricing D. multiple-zone pricing E. freight absorption pricing 255.Basing-point pricing refers to A. selecting a single geographical location from which the list price for products plus freight expenses are charged to the seller. B.selecting one or more geographical locations from which the list price for products plus freight expenses are charged to the seller. C. having all buyers pay the same delivered price for the products, regardless of their distance from the seller. Da firm dividing a selling territory into geographic areas or zones and charging the same delivered price . to all buyers within the same zone, but charging different prices in for different zones depending on distance from the factory or warehouse. E selecting one or more geographical locations (basing points) from which the list price for products plus . freight expenses are charged to the buyer. 256.For which of the following products is its manufacturer most likely to use basing-point pricing? A. pet food B. furniture C. crystal glass bowls D. cut flowers E. coal 257.Five pricing practices are closely scrutinized because of potential unethical or illegal actions. They include: (1) price fixing; (2) price discrimination; (3) deceptive pricing; (4) geographical pricing; and (5) _________. A. predatory pricing B. price discounting C. lateral price fixing D. regional rollbacks E. delayed payment penalties 258.Five pricing practices are closely scrutinized because of potential unethical or illegal actions. They include: (1) price fixing; (2) price discrimination; (3) predatory pricing; (4) geographical pricing; and (5) _________. A. price discounting B. deceptive pricing C. lateral price fixing D. regional rollbacks E. delayed payment penalties 259.Five pricing practices are closely scrutinized because of potential unethical or illegal actions. They include: (1) price fixing; (2) predatory pricing; (3) deceptive pricing; (4) geographical pricing; and (5) _________. A. price discounting B. lateral price fixing C. regional rollbacks D. delayed payment penalties E. price discrimination 260.Five pricing practices are closely scrutinized because of potential unethical or illegal actions. They include: (1) predatory pricing; (2) price discrimination; (3) deceptive pricing; (4) geographical pricing; and (5) _________. A. price discounting B. lateral price fixing C. regional rollbacks D. delayed payment penalties E. price fixing 261.Which of the following statements about the legal and regulatory aspect of pricing is most accurate? A. The Robinson-Patman Act deals with predatory pricing. B. The Consumer Goods Pricing Act is the only federal legislation that deals directly with pricing issues. C. The Sherman Act deals only with vertical price fixing. D. The Federal Trade Commission Act deals with predatory pricing, deceptive pricing, and geographical pricing issues. E. The Consumer Goods Pricing Act and the Robinson-Patman Act deal with price discrimination. 262.A conspiracy among firms to set prices for a product is referred to as A. price discrimination. B. price fixing. C. predatory pricing. D. tying arrangements. E. exclusive dealing. 263.Price fixing refers to 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. 264.Price fixing is illegal per se under the Sherman Act. "Per se" means A. "according to" B. "in lieu of" C. "in regard to" D. "in and of itself" E. "without exception" 265.Two or more competitors explicitly or implicitly setting prices is referred to as _________. A. competitive collusion B. vertical price fixing C. horizontal price fixing D. lateral price fixing E. price cooperation 266.Mark Johnson, the manager of a discount consumer electronics store, was approached by the manufacturer's representative on behalf of a marketer of a popular and profitable line of DVD storage racks. The manufacturer's representative implied that if Johnson doesn't raise the retail prices for the storage racks to those paid by the marketer's non-discount customers, Johnson's supply of racks may be severely curtailed. The manufacturer's representative is guilty of attempting A. horizontal price-fixing. B. resale price maintenance. C. price discrimination. D. predatory pricing. E. bait and switch pricing. 267.Controlling agreements between independent buyers and sellers whereby sellers are required to not sell products below a minimum retail price are referred to as A. horizontal price fixing. B. vertical price fixing. C. competitive price fixing. D. lateral price fixing. E. explicit price fixing. 268.Vertical price fixing refers to A. two or more competitors explicitly or implicitly setting prices. B. the practice of charging different prices to different buyers for goods of like grade and quality. C controlling agreements between independent buyers and sellers whereby sellers are required not to sell . products below a minimum retail price horizontal price fixing. D. a conspiracy among firms to set prices for a product or service. E. a seller's requirement that the purchaser of one product also buy another product in the line. 269.Price discrimination refers to 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 or service. E. a seller's requirement that the purchaser of one product also buy another product in the line. 270.The practice of charging different prices to different buyers for goods of like grade and quality is referred t o as A. horizontal price-fixing. B. resale price maintenance. C. price discrimination. D. predatory pricing. E. bait-and-switch pricing. 271.In one of its least favorite actions, Amazon.com was caught fiddling with its price tags. Avid videodisc buyers, buying in quantity for resale, found that the online retailer was offering different customers different prices for the same DVD, and complained vociferously. Amazon was caught red-handed. It was, company officials admitted, trying to see how much it could charge for an item before buyers balked. No matter what the reasoning behind it, Amazon.com was using A. horizontal price-fixing. B. resale price maintenance. C. price discrimination. D. predatory pricing. E. bait-and-switch pricing. 272.A unique feature of the Robinson-Patman Act is that it allows for price differentials to different customers under several conditions. Which of the following practices would be permitted? A sing price differentials when price differences charged to different customers do not exceed the U . 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. 273.A unique feature of the Robinson-Patman Act is that it allows for price differentials to different customers under several conditions. Which of the following practices would be permitted? A. Using price differentials when price differences are given on the basis of other family businesses. B. Using price differentials when charging different prices to different buyers for goods of like grade or quality. C. Using price differentials when charging different prices on the basis of religious affiliation. DUsing price differentials when charging the original price for refurbished goods that have been damaged . or used and returned but repaired according to company specifications. E When price differences result from changing market conditions, avoiding obsolescence of seasonal . merchandise, including perishables, or closing out sales. 274.A unique feature of the Robinson-Patman Act is that it allows for price differentials to different customers under several conditions. Which of the following practices would be permitted? A. Using price differentials when price differences are given on the basis of other family businesses. B. Using price differentials when charging different prices to different buyers for goods of like grade or quality. C When price differences are quoted to selected buyers in good faith to meet competitors' prices and are . not intended to injure competition. D. Using price differentials when charging different prices on the basis of religious affiliation. E When price differences result from changing market conditions, avoiding obsolescence of seasonal . merchandise, including perishables, or closing out sales. 275.The Robinson-Patman Act covers promotional allowances as well as discounts. To legally offer promotional allowances to buyers, the seller must do so on a(n) __________ to all buyers businesses distributing the seller's products. A. proportionally equal basis B. limited basis C. disproportionally equal basis D. geographical basis E. across the board 276.Five common forms of pricing include: bait and switch, bargains conditional on other purchases, comparable value comparisons, comparisons with suggested prices, and former price comparisons. What do all these practices have in common? They are all A. most effective in the growth stage of the product life cycle. B. popular techniques preferred by online businesses. C. illegal and often difficult to prosecute. D. most effective in business-to-business marketing. E. effective pricing practices that professional marketers use. 277.A hardware store advertises a 3/8" Black and Decker Power Drill for $29.95. You enter the store intending to purchase the drill. The salesperson informs you that they are all sold out. She tells you that the "sale" drills were factory seconds and that if you are going to be doing any kind of serious woodworking, you should buy the Model 3309, which sells for $49.99. This scenario has elements of which type of deceptive pricing? A. comparable value comparisons B. former price comparisons C. comparisons with suggested prices D. conditional bargains E. bait and switch 278.To promote their business, some psychics advertise free tarot-card readings and other insights into their customers' futures on television. Unfortunately, this "free reading" has cost some unsuspecting callers as much as $700 in phone charges. This sort of deceptive pricing practice would be primarily monitored by the A. Consumer Protection Agency. B. U.S. Department of Justice. C. Federal Trade Commission. D. Federal Communications Commission. E. Consumer Product Safety Commission. 279.Which of the following statements about geographical pricing is most accurate? A. Geographical pricing is generally legal and not normally a concern the U.S. legal system. B. Geographical pricing has come under more government scrutiny than any other pricing policy. C. FOB origin pricing is legal. D. FOB freight-allowed pricing practices are illegal. E. Basing-point pricing is the only form of geographical pricing that is not under some type of legal restriction. 280.The practice of changing a very low price for a product with the intent of driving competitors out of business is referred to as A. price fixing. B. price discrimination. C. predatory pricing. D. deceptive pricing. E. geographical pricing. 281.Predatory pricing refers to A. a conspiracy among firms to set prices for a product. B. using price differentials when charging different prices on the basis of race, religion, or ethnic affiliation. C. the practice of changing a very low price for a product with the intent of driving competitors out of business. Dusing price differentials when charging the original price for refurbished goods that have been damaged . or used and returned but repaired according to company specifications. E controlling agreements between independent buyers and sellers whereby sellers are required to not sell . products below a minimum retail price. 282.Predatory pricing is 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 or service. E. a seller's requirement that the purchaser of one product must also buy another product in the line. 283.In the early 1980s, typical round-trip coach air fares from the East Coast to London were over $500. Then Freddie Laker introduced the People's Express, a competing service into Newark at $350. Major airlines matched his priceand 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. A. price fixing B. price discrimination C. predatory pricing D. deceptive pricing E. pricing constraints 284.Bob Biltmore owns dozens of very successful print shops throughout the Midwest. Biltmore's shops specialize in low cost black and white copies and feature user-friendly machines consumers can easily operate. In recent months, Biltmore has noticed many more competitors in the areas where his stores are located. In an attempt to eliminate the competition, Biltmore has decided to charge a very low price for his black and white copies, a price so low his competitors will be forced out of business. After the competition has been driven out, Biltmore plans to raise the price of his copies. Biltmore is planning to engage in the illegal and unethical practice of A. price fixing. B. price inflation. C. predatory pricing. D. competitive pricing. E. a price war. 285.The practice of offering a bargain that is conditional on the purchase of other products may exist when a buyer is offered the "1-Cent Sales," the "Buy 1, Get 1 Free," or the "Get 2 for the Price of 1" deal. Such pricing is legal only if A. the seller is using bundle pricing. B. there is a reasonable amount of inventory to satisfy the needs of the retailers normal traffic flow. C. the first items are sold at the regular price, not a price inflated for the offer. D. the product is not outdated. E. the quantity available to the customer is not limited. 286.Advertising such as "Retail Value $100, Our Price $85" is deceptive if A. a verified and substantial number of stores in the market area did not price the item at $100.00. B. even one store in that retail chain did not price the item at $100. C. a competitor is selling the same item for $75.00 on sale and their normal price is only $85. D. there is not enough product on hand at that price to satisfy the needs of the store's regular customer traffic. E. the markup on the original price is more than 200 percent. 287.A claim that a price is below a manufacturer's suggested or list price may be deceptive if A. few or no sales occur at that price in a retailer's market area. B. the items for sale had been purchased from another retailer. C. the items for sale were part of a manufacturer's promotional allowance. D. the items were part of a bulk order. E. the items were purchased from the manufacturer at a higher price and the sale was part of a loss-leader promotion. 288.When a seller represents a price as reduced, the item must have been offered in good faith at a higher price for a substantial previous period. Former price comparisons are deceptive if A the high price tags were from a previous owner or retailer and were purchased that way from the . reseller, even though that price didn't originate at the store. B. a high price was set for the purpose of establishing a reference for a price reduction. C. the items for sale were part of a manufacturer's promotional allowance. D. the items for sale were available at the higher price for less than 30 days. E. the items were purchased from the manufacturer at a higher price and the sale was part of a loss-leader promotion. 289.As explained in "Going Online" box, the Federal Trade Commission (FTC) is especially concerned about the A. overuse of FOB origin pricing. B. misuse of quantity discounting. C. elimination of seasonal discounts. D. children under 18 making online purchases. E. misuse of the word "free" in promotions. 290.When 3M launched its premium Greptile Grip golf glove consisting of the highest quality Cabretta leather, it suggested a retail price range of $16.95 to $19.95. Golf glove marketer Bionic had introduced its Classic at $24.95 and its Pro at $39.95, while FootJoy launched its Pure Touch Limited at $28.00 and its SciFlex at $18.00. Other competitors focused on price/value at three price points: $6.00-$9.99, $10.00$16.99, and $17.00 and up. These statements suggest that 3M has been pursuing a(n) __________ method of selecting an approximate price level. A. competition-based B. profit-oriented C. cost-oriented D. demand-oriented E. experience-oriented 291.If 3M decided the retail price for the Greptile Grip golf glove would be $16.95 and then worked backward through markups taken by retailers and wholesalers to determine what price it can charge wholesalers for the product, the firm would most likely be practicing a __________ strategy. A. price lining B. penetration pricing C. predatory pricing D. cost plus percentage-of-cost pricing E. target pricing 292.List and describe the four approaches used when selecting an approximate price level (Step 4) in the price setting process. 293.What are the four common approaches used by managers to help them find an approximate price level? 294.What are three special adjustments to list or quoted price? 295.When is skimming pricing an effective strategy? 296.What are the conditions favoring the use of penetration pricing? 297.Explain why odd-even pricing may be successful. 298.Give an example of yield management pricing and explain why it is used. 299.What is standard markup pricing and when would it be used? 300.What is experience curve pricing and how does it relate to marketing strategies? 301.What is loss-leader pricing and why do retailers use it? 302.What is the difference between a one-price policy and a flexible-price policy? 303.What are discounts? List the four kinds that are especially important in marketing pricing strategy. 304.What is the difference between noncumulative and cumulative quantity discounts? 305.What are the two general methods for quoting prices related to transportation costs? Explain how each is used. 306.Define the four kinds of uniform delivered pricing methods and give an example of the use of each. 307.The Consumer Goods Pricing Act, the Sherman Act, the Federal Trade Commission Act, and the Robinson-Patman Act all address different aspects of deceptive pricing. Select one example for each act and explain which aspects of the practice would be considered illegal. 308.What are the five most common deceptive pricing practices? Give an example of each one. 309.Explain predatory pricing. 14 Key 1. (p. 345) C 2. (p. 345) E 3. (p. 345) A 4. (p. 346) A 5. (p. 346) C 6. (p. 346) D 7. (p. 346) C 8. (p. 346) D 9. (p. 346) E 10. (p. 346-347) B 11. (p. 346) E 12. (p. 347) A 13. (p. 346) C 14. (p. 346) A 15. (p. 346) B 16. (p. 346) E 17. (p. 346) C 18. (p. 346) E 19. (p. 346) E 20. (p. 346) A 21. (p. 346) C 22. (p. 346) D 23. (p. 346) A 24. (p. 347) A 25. (p. 347) C 26. (p. 347) B 27. (p. 347) B 28. (p. 347) C 29. (p. 347) D 30. (p. 347) A 31. (p. 347) C 32. (p. 347) C 33. (p. 347) C 34. (p. 347) C 35. (p. 347) B 36. (p. 347) A 37. (p. 347) E 38. (p. 347) E 39. (p. 347) D 40. (p. 347) C 41. (p. 347-348) A 42. (p. 347-348) E 43. (p. 347-348) C 44. (p. 347-348) D 45. (p. 348) D 46. (p. 348) B 47. (p. 348) D 48. (p. 348) D 49. (p. 348) C 50. (p. 348) D 51. (p. 348) C 52. (p. 348) A 53. (p. 348) A 54. (p. 348) A 55. (p. 348) A 56. (p. 349) C 57. (p. 349) C 58. (p. 349) A 59. (p. 349) B 60. (p. 349) A 61. (p. 349) D 62. (p. 349) C 63. (p. 349) D 64. (p. 349) D 65. (p. 349) D 66. (p. 347, 349) A 67. (p. 349) C 68. (p. 349) B 69. (p. 349) B 70. (p. 349) E 71. (p. 349) D 72. (p. 349) C 73. (p. 349) A 74. (p. 349) E 75. (p. 349) C 76. (p. 349) A 77. (p. 349) A 78. (p. 347, 350) A 79. (p. 349) E 80. (p. 349) D 81. (p. 347, 350) A 82. (p. 350) B 83. (p. 347, 349) A 84. (p. 349-350) B 85. (p. 349-350) C 86. (p. 349-350) C 87. (p. 349-350) D 88. (p. 349-350) C 89. (p. 349-350) B 90. (p. 350) C 91. (p. 350) C 92. (p. 350) D 93. (p. 350) B 94. (p. 350) E 95. (p. 350) E 96. (p. 350) B 97. (p. 350) B 98. (p. 350) B 99. (p. 350) E 100. (p. 350) D 101. (p. 347, 350-351) B 102. (p. 350-351) B 103. (p. 350-351) A 104. (p. 350-351) D 105. (p. 350-351) D 106. (p. 350-351) D 107. (p. 347, 352) A 108. (p. 351) E 109. (p. 351) A 110. (p. 351-352) A 111. (p. 351-352) D 112. (p. 351-352) D 113. (p. 351-352) C 114. (p. 352) D 115. (p. 352) B 116. (p. 352) C 117. (p. 352) D 118. (p. 352) A 119. (p. 352) E 120. (p. 352) B 121. (p. 347, 353) D 122. (p. 353-354) D 123. (p. 353-354) B 124. (p. 353-354) A 125. (p. 354) B 126. (p. 354) A 127. (p. 354) B 128. (p. 354) B 129. (p. 354) B 130. (p. 354) C 131. (p. 354) C 132. (p. 354) C 133. (p. 354) B 134. (p. 355) A 135. (p. 355) D 136. (p. 355) C 137. (p. 355) E 138. (p. 355) A 139. (p. 355) B 140. (p. 355) A 141. (p. 355) B 142. (p. 355) E 143. (p. 355) B 144. (p. 355) E 145. (p. 355-356) C 146. (p. 356) C 147. (p. 356) C 148. (p. 356) C 149. (p. 356) C 150. (p. 356) D 151. (p. 356) C 152. (p. 356) C 153. (p. 357) C 154. (p. 356) B 155. (p. 356) B 156. (p. 357) C 157. (p. 356) E 158. (p. 357) C 159. (p. 357) E 160. (p. 357) A 161. (p. 356-357) C 162. (p. 356-357) B 163. (p. 357) A 164. (p. 357) E 165. (p. 357) B 166. (p. 357) D 167. (p. 358) C 168. (p. 358) A 169. (p. 358) B 170. (p. 359) C 171. (p. 358-359) E 172. (p. 359) A 173. (p. 360) B 174. (p. 360) B 175. (p. 360) B 176. (p. 360) A 177. (p. 360) B 178. (p. 360) B 179. (p. 360) D 180. (p. 360) B 181. (p. 360) D 182. (p. 360) B 183. (p. 360) E 184. (p. 360) A 185. (p. 360) E 186. (p. 360) C 187. (p. 360) C 188. (p. 360) C 189. (p. 361) B 190. (p. 361) E 191. (p. 361) E 192. (p. 361) E 193. (p. 361) C 194. (p. 361) A 195. (p. 361) E 196. (p. 361) E 197. (p. 361) D 198. (p. 361) C 199. (p. 361) D 200. (p. 361) C 201. (p. 361) B 202. (p. 361) A 203. (p. 361) A 204. (p. 361) C 205. (p. 361) D 206. (p. 361) E 207. (p. 361) A 208. (p. 361) B 209. (p. 361) C 210. (p. 361) E 211. (p. 361) D 212. (p. 361) B 213. (p. 361-362) E 214. (p. 361) E 215. (p. 362) D 216. (p. 362) C 217. (p. 362) B 218. (p. 362) D 219. (p. 362) C 220. (p. 362) B 221. (p. 362) A 222. (p. 362) D 223. (p. 362) D 224. (p. 363) C 225. (p. 363) A 226. (p. 363) B 227. (p. 363) C 228. (p. 362) E 229. (p. 362) B 230. (p. 362) A 231. (p. 362) D 232. (p. 362-363) B 233. (p. 362-363) D 234. (p. 362) B 235. (p. 362) D 236. (p. 362) D 237. (p. 362) B 238. (p. 362) D 239. (p. 362) B 240. (p. 362) A 241. (p. 362) C 242. (p. 362) D 243. (p. 362) A 244. (p. 362) A 245. (p. 362) C 246. (p. 362) B 247. (p. 362) D 248. (p. 347, 359) A 249. (p. 362) D 250. (p. 362) C 251. (p. 362) B 252. (p. 363) C 253. (p. 363) E 254. (p. 363) C 255. (p. 363) E 256. (p. 363) E 257. (p. 363) A 258. (p. 363) B 259. (p. 363) E 260. (p. 363) E 261. (p. 364) D 262. (p. 363) B 263. (p. 363) D 264. (p. 363) D 265. (p. 364) C 266. (p. 364) B 267. (p. 364) B 268. (p. 364) C 269. (p. 364) C 270. (p. 364) C 271. (p. 364) C 272. (p. 364) A 273. (p. 364) E 274. (p. 364) C 275. (p. 364-365) A 276. (p. 365) C 277. (p. 365) E 278. (p. 365) C 279. (p. 365) C 280. (p. 365) C 281. (p. 365) C 282. (p. 365) B 283. (p. 365) C 284. (p. 365) C 285. (p. 365) C 286. (p. 365) A 287. (p. 365) A 288. (p. 365) B 289. (p. 366) E 290. (p. 368-369) A 291. (p. 368-369) E 292. (p. 346) Demand-oriented approaches weigh factors underlying expected customer tastes and preferences. With cost-oriented approaches, a price setter stresses the cost side, not the demand side, of the pricing problem. With profit-oriented approaches, a price setter may choose to balance both revenues and costs to set price. With a competition-oriented approach, a price setter can stress what competitors or "the market" is doing. See Figure 14-1 in the textbook. 293. (p. 346) Four common approaches to helping find this approximate price level are: (1) demand-oriented; (2) cost-oriented; (3) profit-oriented; and (4) competition-oriented. See Figure 14-1 in the textbook. 294. (p. 346) Three special adjustments to list or quoted price include discounts, allowances, and geographical adjustments. Each can substantially change the final price. See Figure 14-1 in the textbook. 295. (p. 346) Skimming pricing is an effective strategy when: (1) enough prospective customers are willing to buy the product immediately at the high initial price to make those sales profitable; (2) the high initial price will not attract competitors; (3) lowering price has only a minor effect on increasing the sales volume and reducing unit costs; and (4) customers interpret the high price as signifying high quality. 296. (p. 347) The conditions favoring penetration pricing are the reverse of those supporting skimming pricing and are: (1) many segments of the market are price sensitive; (2) a low initial price discourages competitors from entering the market; and (3) unit production and marketing costs fall dramatically as production volumes increase. 297. (p. 349) Odd-even pricing presumes that customers when looking at an item marked $299.99 will see the price as something over $200 rather than about $300. 298. (p. 349) Yield management pricing is charging different prices to maximize revenue for a set amount of capacity at any given time. Airlines, hotels, cruise ships, and car rental companies frequently use it to match demand and supply. 299. (p. 349-350) Standard markup pricing entails adding a fixed percentage to the cost of all items in a specific product class. It is used in supermarkets and other retail stores that have such a large number of products that estimating the demand for each product as a means of setting price is impossible. 300. (p. 350-351) Experience curve pricing is based on the learning effect, which holds that the unit cost of many products and services declines by 10 percent to 30 percent each time a firm's experience at producing and selling them doubles. This reduction is regular or predictable enough that the average cost per unit can be mathematically estimated. 301. (p. 354) For a special promotion, many retail stores deliberately sell a product below its customary price to attract attention to it. The purpose of this loss-leader pricing strategy is not to increase sales of the specific advertised product but to attract customers in hopes they will buy other products as well, particularly discretionary items carrying large markups. 302. (p. 355-356) A one-price policy sets one price for all buyers of a product or service. In contrast, a flexible-price policy sets different prices for products and services depending on individual buyers and purchase situations. A flexible-price policy gives sellers considerable discretion in setting the final price in light of demand, cost, and competitive factors. 303. (p. 360) Discounts are reductions from list price that a seller gives a buyer as a reward for some activity of the buyer that is favorable to the seller. Four kinds of discounts are especially important in marketing strategy. They are: (1) quantity discounts; (2) seasonal discounts; (3) trade (functional) discounts; and (4) cash discounts. 304. (p. 360) Noncumulative quantity discounts are based on the size of an individual purchase order. They encourage large individual purchase orders, not a series of orders. Cumulative quantity discounts apply to the accumulation of purchases of a product over a given time period, typically a year. They encourage repeat buying (loyalty) by a single customer. 305. (p. 362) The two general methods for quoting prices related to transportation costs are FOB origin pricing and uniform delivered pricing, which are geographical adjustments made to the list price. FOB means "free on board" some vehicle at some location, which means the seller pays the cost of loading the product onto the vehicle that is used (such as a barge, railroad car, or truck). FOB origin pricing usually involves the seller naming the location of the loading as the seller's factory or warehouse. When a uniform delivered pricing method is used, the price the seller quotes includes all transportation costs. The four kinds of delivered pricing methods are: single-zone pricing, multiple-zone pricing, FOB with freight allowed pricing, and-basing-point pricing. Basing-point pricing involves selecting one or more geographical locations (basing point) from which the list price for products plus freight expenses are charged to the buyer. Basing-point pricing methods have been used in the steel, cement, and lumber industries where freight expenses are a significant part of the total cost to the buyer and products are largely undifferentiated. With FOB with freight-allowed pricing, the price is quoted by the seller as "FOB plantfreight allowed." The buyer is allowed to deduct freight expenses from the list price of the goods, so the seller agrees to pay, or "absorb," the transportation costs. This often happens in shipments from the manufacturer (plant) to the wholesaler or retailer's warehouse. In multiple-zone pricing, a firm divides its selling territory into geographic areas or zones. The delivered price to all buyers within any one zone is the same, but prices across zones vary depending on the transportation cost to the zone and the level of competition and demand within the zone. The U.S. Postal Service uses multiple-zone pricing for mailing certain packages. In single-zone pricing, all buyers pay the same delivered price for the products, regardless of their distance from the seller. A retail store offering free delivery in a metropolitan area is an example. 306. (p. 362-363) The four kinds of delivered pricing methods are: (1) single-zone pricing; (2) multiple-zone pricing; (3) FOB with freight-allowed pricing; and (4) basing-point pricing. 307. (p. 363-365; text Figure 14-8) The Consumer Goods Pricing Act considers vertical price fixing. The Sherman Act considers horizontal price fixing and predatory pricing illegal. The Federal Trade Commission Act considers predatory pricing, deceptive pricing, and geographical pricing illegal. And the Robinson-Patman Act considers geographical pricing and price discrimination illegal. See Figure 14-8 in the textbook. 308. (p. 365) The five most common deceptive pricing practices are: (1) Bait and Switch. Example: Advertising a very low price on a microwave oven to attract customers to the store but persuading them to buy a more expensive model by (a) ridiculing the advertised model, or (b) not having the advertised model in stock. (2) Bargains Conditional on other Purchases. Example: A "Buy 1, Get 1 Free" offer is made on paint. However, the price of the first can of paint is inflated to include the price of the "free" can of paint. (3) Comparable Value Comparisons. Example: When a merchant claims "Retail Value $100, Our Price $85," even though the area market price is less than $100. (4) Comparisons with Suggested Prices. Example: A claim that a price is below a manufacturer's suggested price even though few (if any) sales are made at the suggested price. (5) Former Price Comparisons. Example: A seller offers a "reduced" price when the previous price was offered only for a short period or was deliberately set high to establish a reference point. See Figure 14-9 in the textbook. 309. (p. 365-366) Predatory pricing is the practice of charging a very low price for a product with the intent of driving competitors out of business. Once competitors have been driven out, the firm raises its prices. This practice is illegal under the Sherman Act and the Federal Trade Commission Act. Proving the presence of this practice has been difficult and expensive because it must be shown that the predator explicitly attempted to destroy a competitor and the predatory price was below the defendant's average cost. 14 Summary Category AACSB: Analytic AACSB: Ethics AACSB: Technology Kerin - Chapter 14 Learning Objective: 14-01 Describe how to establish the "approximate price level" using demand-oriented; cost-oriented; profitoriented; and competition-oriented approaches. Learning Objective: 1402 Recognize the major factors considered in deriving a final list or quoted price from the approximate price level. Learning Objective: 1403 Identify the adjustments made to the approximate price level on the basis of discounts; allowances; and geography. Learning Objective: 14-04 Name the principal laws and regulations affecting specific pricing practices. Level of Learning: Application Level of Learning: Comprehension Level of Learning: Knowledge Topic: Above-, At-, or Below-Market Pricing Topic: Above-Market Pricing Topic: Allowances Topic: Bargains Conditional on Other Purchases Topic: Basing-Point Pricing Topic: Below-Market Pricing Topic: Bundle Pricing Topic: Cash Discounts Topic: Chapter Opening Example: Vizio Topic: Clickstream Topic: Comparisons with Suggested Price Topic: Comperable Value Comparisons Topic: Competition-Oriented Approaches Topic: Cost-Oriented Approaches Topic: Cost-Plus Fixed Fee Pricing Topic: Cost-Plus Percentage-Of-Cost Pricing Topic: Cost-Plus Pricing Topic: Cumulative Quantity Discounts Topic: Customary Pricing Topic: Customer Effects Topic: Customer Effects on Pricing Decision Topic: Deceptive Pricing Topic: Deceptive Pricing Practices Topic: Demand-Oriented Approaches Topic: Discounts Topic: Everyday Low Pricing Topic: Experience Curve Pricing Topic: Flexible-Price Policy Topic: Fob Origin Pricing Topic: Fob with Freight-Allowed Pricing Topic: Former Price Comparisons Topic: Geographical Adjustments Topic: Geographical Pricing Topic: Going Online Topic: Legal and Regulatory Aspects of Pricing Topic: Loss-Leader Pricing Topic: Making Responsible Decisions Topic: Marginal Analysis Topic: Marketing Matters Topic: Multiple-Zone Pricing # of Questions 299 9 1 315 152 32 89 36 74 149 86 2 1 2 1 3 2 8 8 3 1 1 1 1 6 2 3 6 3 3 1 1 3 1 1 1 3 7 6 6 2 1 7 1 1 6 5 1 4 6 6 Topic: Noncumulative Quantity Discounts Topic: Odd-Even Pricing Topic: One-Price and Flexible-Price Policies Topic: One-Price Policy Topic: Penetration Pricing Topic: Predatory Pricing Topic: Prestige Pricing Topic: Price Discrimination Topic: Price Fixing Topic: Price Lining Topic: Price War Topic: Product-Line Pricing Topic: Profit-Oriented Approaches Topic: Promotional Allowance Topic: Quantity Discounts Topic: Resale Price Maintenance Topic: Robinson-Patman Act Topic: Seasonal Discount Topic: Select an Approximate Price Level Topic: Single-Zone Pricing Topic: Skimming Pricing Topic: Special Adjustments to List or Quoted Price Topic: Standard Markup Pricing Topic: Target Pricing Topic: Target Profit Pricing Topic: Target Return-On-Investment Pricing Topic: Target Return-On-Sales Pricing Topic: The Price-Setting Process Topic: Trade (Functional) Discount Topic: Trade Discount Topic: Trade-In Allowance Topic: Types of Discounts Topic: Types of Special Adjustments Topic: Uniform Delivered Pricing Topic: Using Marketing Dashboards Topic: Vertical Price Fixing Topic: Video Case: 3m Topic: Yield Management Pricing 3 7 1 5 13 6 9 3 4 9 3 9 1 2 5 1 4 4 2 3 13 1 7 3 6 4 3 7 2 14 4 2 1 4 7 2 2 6
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