Chap013 - Chapter 13 Pricing Concepts for Establishing...

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Chapter 13 Pricing Concepts for Establishing Value True / False Questions 1. Price is the cash expenditure plus taxes that consumers have to pay for a good or service. True False 2. The key to successful pricing is to match the product with the consumer's perception of value. True False 3. Price is the only part of the marketing mix that does not generate costs. True False 4. If Brandon buys hats for his store for $5 each and sells them for $15 each, he is using a keystoning pricing strategy. True False 5. Rarely is the lowest-price product offering the dominant brand in a given market. True False 6. A demand curve shows the relationship between income and demand. True False 7. Because consumers are generally more sensitive to price increases than to price decreases, it is easier to lose current customers with a price increase than it is to gain new customers with a price decrease. True False 8. Brands that have developed loyal customers have a higher price elasticity of demand. True False 9. In U.S. markets, there are many substitute products for Fruit Loops cereal, suggesting the price elasticity of demand for Fruit Loops is elastic. True False 10. In general, prices should not be based on costs because consumers make their purchase decisions based on perceived value, not the cost of production.
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True False 11. At the break-even point, profits are maximized. True False 12. In addition to the product-specific and firm-specific factors that affect pricing, there are two broader factors - the Internet and sociocultural factors. True False 13. A gray market employs irregular but not necessarily illegal methods of distributing products. True False 14. Economic trends that affect pricing decisions include increases in disposable income and status consciousness, a trend for customers to shop cheap, global economic conditions, and local economic conditions. True False 15. The Internet has decreased consumers' price sensitivity. True False 16. Diana owns a boutique specializing in ball gowns. Sales are stable and Diana feels it is time she had a 20% increase in her salary. If Diana takes this increase in compensation, it will decrease the breakeven quantity of gowns she needs to sell on a monthly basis. True False 17. If a firm is engaged in monopolistic competition, it should seek a way to differentiate itself. True False 18. When Sony released their PlayStation 3 game machines, they charged a high price, attracting the most avid game players. This was a market penetration pricing strategy. True False 19. Cheryl wants to quickly establish a dominant market share for her new line of ergonomic pens. To do this, she will likely use a market penetration pricing strategy. True False 20. Proving that a company has engaged in the deceptive bait and switch practice is easy.
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