chp 15 test bank - CHAPTER 15PRICING PRACTICES MULTIPLE...

Info iconThis preview shows pages 1–4. Sign up to view the full content.

View Full Document Right Arrow Icon
CHAPTER 15—PRICING PRACTICES MULTIPLE CHOICE 1. The competitive market pricing rule-of-thumb for profit maximization is to set: a. MR = MC b. MR = MC/[1 + (1/ ε P )] c. P = MC/[1 + (1/ ε P )] d. MC = MR/[1 + (1/ ε P )] ANS: A 2. A 50% markup on cost is equivalent to a markup on price of: a. 25% b. 33% c. 50% d. 100% ANS: B 3. A 50% markup on price is equivalent to a markup on cost of: a. 25% b. 33% c. 50% d. 100% ANS: D 4. When ε P = -2, the optimal markup on cost is: a. 100% b. 67% c. 50% d. 33% ANS: A 5. When ε P = -1, the optimal markup on price is: a. 100% b. 67% c. 50% d. 33% ANS: A 6. During peak periods: a. incremental costs are relevant for pricing purposes. b. fully allocated costs are relevant for pricing purposes. c. facilities are underutilized. d. expansion is not required to further increase production. ANS: B 7. A by-product:
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
a. has MR = 0. b. results from an increase in the production of some other output. c. has MC = MC Q . d. is identified in terms of its excess production. ANS: B 8. When transferred products can be sold in perfectly competitive external markets, the optimal transfer price is the: a. external market price. b. marginal revenue of the transferred-to (buying) division. c. marginal revenue in the output market. d. marginal cost of the transferring (selling) division. ANS: A 9. Consumers' surplus represents: a. total revenues. b. total revenues less total costs. c. the excess of revenues above and beyond the cost of output to producers. d. the value of output to consumers above and beyond the amount paid to producers. ANS: D 10. If a firm charges a price of $6 for a product with a cost of $4, the markup on cost equals: a. 67% b. 33% c. 150% d. 50% ANS: D 11. If a firm charges a price of $5 for a product with a cost of $2, the markup on price equals: a. 60% b. 150% c. 250% d. 40% ANS: A 12. Profit margin equals: a. marginal cost minus marginal revenue. b. average cost minus average revenue. c. average cost minus average variable cost. d. price minus cost. ANS: D 13. The optimal markup on price will fall following an increase in: a. cost. b. revenue. c. the price elasticity of demand. d. price. ANS: C
Background image of page 2
14. When engaging in short-run incremental analysis, managers should ignore: a. fixed costs. b. implicit costs. c. explicit costs. d. effects on the costs of already existing products. ANS: A 15. Consumers' surplus is: a. the costs consumers would have to pay to produce a product minus the amount paid to sellers. b. the consumer's budget minus total expenditures. c. the value of a good to consumers minus the amount paid sellers. d. quantity supplied minus quantity demanded. ANS: C 16. With price discrimination, higher prices are charged when: a. the price elasticity of demand is high. b.
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 4
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 26

chp 15 test bank - CHAPTER 15PRICING PRACTICES MULTIPLE...

This preview shows document pages 1 - 4. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online