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# Chapter.. - Chapter 3 Price and Pricing Strategies MULTIPLE...

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Chapter 3: Price and Pricing Strategies MULTIPLE CHOICE 1. New entrepreneurs often set the price of their products or services by adding up all the costs involved in bringing the product or service to market and then adding a specific amount for profit. What is this approach known as? a. Profit-based pricing b. Demand-supply pricing c. Cost-plus pricing d. Pioneering pricing ANS: C New entrepreneurs often set the price of their products or services by adding up all the costs involved in bringing the product or service to market and then adding a specific amount for profit (say, 15 percent). This approach is referred to as “cost-plus pricing.” REF: 3-1 2. Which of these is not an implication of the supply-demand-price equation, considering a free marketplace with willing buyers and willing sellers? a. If supply is static and demand falls, prices will fall b. If demand is static and supply decreases, prices will rise c. If supply is static and demand increases, prices will fall d. If demand is static and supply increases, prices will fall ANS: C The supply-demand-price equation assumes a free marketplace with willing buyers and willing sellers. Under these conditions, the formula has four implications regarding price: 1. If supply is held static and demand increases, prices will rise, 2. If supply is static and demand falls, prices will fall, 3. If demand is static and supply increases, prices will fall, and 4. If demand is static and supply decreases, prices will rise. REF: 3-2 3. ____ is an attempt to affect demand through alteration of prices. a. Revenue strategy b. Marketing strategy c. Price strategy d. Positioning strategy ANS: C Price strategy is an attempt to affect demand through alteration of prices. REF: 3-2 4. What are the types of demand identified by economists in free markets? a. National, international b. Elastic, inelastic c. Open, restrictive d. Fixed, adaptive ANS: B

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Economists recognize two basic types of demand in free markets: 1. Elastic 2. Inelastic REF: 3-2 5. Identify the market in which the overall demand in the market will expand if prices are lowered. a. Elastic market b. Restrictive market c. Open market d. Inelastic market ANS: A An elastic market is one in which the overall demand in the market will expand if prices are lowered. REF: 3-2 6. Identify the term that recognizes a market in which demand will not respond to price changes. a. Open market b. Restrictive market c. Elastic market d. Inelastic market ANS: D An inelastic market is one in which demand will not respond to price changes. REF: 3-2 7. It is noticed that as competition escalates among carriers and as ticket prices drop, people tend to fly more frequently. Which market does this example illustrate? a.
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Chapter.. - Chapter 3 Price and Pricing Strategies MULTIPLE...

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