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MULTIPLE-CHOICE QUESTIONS (Application Based): Trader Joe's offers an assortment of exclusive gourmet products at impossibly low prices.

1. Trader Joe's offers an assortment of exclusive gourmet products at impossibly low prices. These prices are not limited-time offers or special discounts. Instead, they reflect Trader Joe's ________ strategy.
A) everyday low pricing
B) cost-plus pricing
C) dynamic pricing
D) value-based pricing
E) cost-based pricing

2. Xbox 360 decides to add a free subscription to XBOX magazine with every game bought in an effort to differentiate its offering from PS3 games. This is an example of ________.
A) good-value pricing
B) add-on pricing
C) product-support pricing
D) value-added pricing
E) cost-based pricing

3. In Vin del Mar, Chile, there are a dozen stores specializing in selling the same quality of seafood products on one street. An individual store dare not charge more than the going price without the risk of losing business to the other stores that are selling the fish at a common price. This is an example of what type of market?
A) pure competition
B) monopolistic competition
C) oligopolistic competition
D) pure monopoly
E) socialist

4. Companies are fortunate to have demand that is more ________ because they may be able to set higher prices.
A) elastic
B) external
C) internal
D) inelastic
E) fixed

5. Ascot Tires has decided to decrease its prices. The company can expect that ________ for their product will increase.
A) cost-plus pricing
B) value-based pricing
C) demand
D) the experience curve
E) competition

6. The long-run average cost curve (LRAC) helps the producer understand which of the following?
A) It shows how large a business should be, to be most efficient.
B) It deals mainly with competitors' prices.
C) It deals mainly with external factors.
D) all of the above
E) none of the above

7. Valeo Fashions has just introduced a new line of fashion dresses for teens. They will initially enter the market at high prices in a ________ pricing strategy.
A) market-penetration
B) market-skimming
C) competitive market
D) psychological
E) demographic

8. When Circuit Town Electronics sets its televisions at three price levels of $699, $899, and $1,099, it is using ________.
A) product line pricing
B) market-skimming pricing
C) market-penetration pricing
D) break-even pricing
E) target profit pricing

9. Mach 3 razor blades must be used in the Mach 3 razor. Which type of pricing is most likely used?
A) product line pricing
B) optional-product pricing
C) captive-product pricing
D) by-product pricing
E) product bundle pricing

10. The JC Whitney Company of Chicago offers replacement parts for older Volkswagen Beetles. Parts are often shipped from other locations throughout the United States. However, the company charges for shipping as if every part was shipped from their Chicago headquarters. The company practices ________.
A) FOB-origin pricing
B) uniform-delivered pricing
C) zone pricing
D) basing-point pricing
E) none of the above

11. A manufacturer offers 3/10, net 30, terms to a wholesaler for a recent purchase. The wholesaler may deduct ________ percent if the bill is paid within ________ days.
A) 10; 30
B) 10; 3
C) 3; 30
D) 3; 10
E) 7; 10

12. When Whallans Gift Card Shop offers a price reduction to customers who buy Christmas cards the week after Christmas, Whallans is giving a(n) ________ discount.
A) functional
B) seasonal
C) annual
D) allowance
E) credit

13. In designing its marketing channel, Chairs for Every Occasion has moved from a make-and-sell view of its business, which focused on productive inputs and factory capacity as a starting point for marketing planning, to a sense-and respond view, which begins instead with the needs of target customers. With this new view, Chairs for Every be Occasion is developing its ________.
A) supply chain
B) wholesaler chain
C) demand chain
D) logistics
E) vertical marketing system

14. Which of the following is NOT a key function that intermediaries play in completing transactions?
A) promotion
B) information
C) matching
D) financing
E) negotiation

15. When two Taco Bell restaurants have a disagreement over who should be able to sell in quantity at a discount to the local high school band, they are in a ________ conflict.
A) vertical
B) problematic
C) no-win
D) horizontal
E) functional

16. Which of the following is an example of a manufacturer-sponsored retailer franchise system?
A) fast-food restaurants such as McDonald's and Burger King
B) Starbucks operating within Target stores
C) Ford and its network of independent franchised dealers
D) licensed bottlers that bottle and sell Coca-Cola to retailers
E) motels such as Holiday Inn and Ramada Inn

17. Which of the following is an example of a multichannel distribution system?
A) Wal-Mart locating to several countries
B) J. C. Penney's catalog and retail store sales
C) Avon's door-to-door distribution
D) Starbuck's location inside of book stores
E) a hotel providing guest privileges at a health spa across the street

18. Which product will most likely be exclusively distributed?
A) BMW cars
B) Levi's blue jeans
C) Bazooka bubble gum
D) Prairie Farms yogurt
E) Coca-Cola

19. When Home Depot allows key suppliers to use its stores as a testing ground for new merchandising programs, it is implementing a ________.
A) shared services
B) partnership management
C) shared projects
D) third-party project
E) cross-functional, cross-company team

20. Quaker Oats has been selling oatmeal for many years and is a trusted leader in the oatmeal market. What will be the most likely objective of advertisements for a new flavor of oatmeal being introduced by Quaker Oats?
A) build a company image
B) encourage customers to switch brands
C) correct false impressions
D) maintain customer relationships
E) change customer perceptions

21. Suave ran ads featuring a woman with beautiful hair questioning "Suave or Matrix? Can You Tell?" This is an example of ________.
A) informative advertising
B) reminder advertising
C) comparative advertising
D) persuasive advertising
E) buzz marketing

22. Apex detergent is relatively undifferentiated from two other detergent brands: Acme and Brighton detergent; therefore, Apex may require ________.
A) a different target market
B) a new package
C) heavy advertising to set it apart from others
D) a higher price
E) none of the above

23. In its advertisements, Timex promotes its affordable and sturdy watches. Fossil emphasizes style and fashion in its advertisements, while Rolex stresses luxury and status. These are all examples of ________ appeals.
A) creative
B) meaningful
C) believable
D) entertainment
E) distinctive

24. When AFLAC uses a duck to represent its product, which type of execution style is being employed?
A) mood or image
B) fantasy
C) personality symbol
D) technical expertise
E) musical

25. You receive a report that 68% of your target market has been exposed to your ad campaign during a given period of time. The information in the report relates to ________.
A) reach
B) frequency
C) impact
D) engagement
E) qualitative value

26. When a pharmaceutical ad includes a world-renowned heart surgeon describing the benefits of the medication, which type of execution style is being used?
A) mood or image
B) fantasy
C) personality symbol
D) musical
E) technical expertise

Refer to the scenarios below to answer the following questions.

Scenario 1
Alden Manufacturing produces small kitchen appliances, blenders, hand mixers, and electric skillets under the brand name First Generation. Alden attempts to target newlyweds and first-time home buyers with this brand.
In considering that most young households have limited financial resources, Alden has attempted to engage in target costing. "In doing this," Milt Alden stated, "we have better control over keeping price right in line with customers."
Alden manufactures a three-speed blender, its top seller, and a five-speed blender. The hand mixers are manufactured in two styles: a small hand-held mixer with two rotating beaters and a similar style that comes with an optional stand and attached mixing bowl. Alden's temperature-controlled skillets are manufactured in one style with three color options.
"Our product offerings are narrower," Milt Alden added, "but our line workers know each product like the back of their hands. This allows us to produce superior products while holding our prices low."

27. Milt Alden says that his line workers "know each product like the back of their hands," and that this knowledge helps the company keep its prices low. This indicates that Alden Manufacturing most likely uses which of the following strategies?
A) cost-plus pricing
B) value-based pricing
C) the experience curve
D) cost-based pricing
E) target profit pricing

28. Milt Alden uses a target costing strategy. Which of the following is he most likely to do in executing this strategy?
A) base his price on competitors' prices
B) use everyday low pricing
C) use a break-even chart to determine pricing
D) start with customer-value considerations
E) start by determining the costs of a new product

29. If Alden raises the price on the handheld mixer by 2 percent and quantity demanded falls by 10 percent what is the price elasticity of demand?
A) —5
B) —8
C) —12
D) 5
E) 12

Scenario 2
Quills, Inc., is a manufacturer of ballpoint pens, pencils, and stationery. The firm's primary distribution strategy is to sell in large volumes to office supply stores and large discount chains. Charles Powell, CEO of Quills, had hoped to manufacture and sell in large enough quantities that prices could be held low. However, in the first several months, the firm experimented with the price portion of its marketing mix in an effort to cater to a number of markets.

30. Why might have Charles Powell have avoided using market-skimming pricing at Quills?
A) A high price was likely to produce more market growth.
B) It was difficult for competitors to enter the market.
C) The costs of producing a larger volume of the firm's products were too high.
D) The quality and image of the products would not have likely supported the high initial price.
E) The market for the products was not highly price sensitive.

31. By offering a set of pens packaged with stationery and matching envelopes, Quills is using ________.
A) optional product pricing
B) product bundle pricing
C) by-product pricing
D) dynamic pricing
E) price-fixing

Scenario 3
Miller Meat Company contracts with several Midwestern farmers to raise beef and pork for its meat processing center. To guarantee freshness, Miller Meat Company relies on a vast distribution network. For delivery to local grocers in Indiana, Miller Meat uses its own fleet of refrigerated trucks; delivery to these Indiana grocers constitutes 65 percent of Miller Meat's business. For deliveries in Illinois, Wisconsin, and points directly west of the Mississippi River, Miller Meat Company contracts with a refrigerated fleet that specializes in expediting smaller shipments. For faster delivery during peak times, Miller Meat Company often uses its own trucks to deliver to the expedited fleet's consolidation point from its distribution warehouse in Indiana. During the holiday season, however, several specialty distributors contract with Miller Meat Company to package specialty meats in gift boxes, then ship them directly to the recipients. For these specialty shipments within Indiana, Illinois, and Wisconsin, Miller uses its normal delivery mode. For all other specialty shipments, Miller ships from its distribution warehouse via air, then contracts with expedited carriers in various cities to deliver to the recipients.

32. Which of the following is one of Miller Meat Company's upstream partners?
A) local grocers in Indiana who sell the company's products
B) Midwestern farmers who raise beef and pork for the meat processing center
C) the refrigerated fleet that expedites small shipments
D) air carriers that take Miller's specialty shipments
E) recipients of Miller's gift boxes

33. In using air transportation and then expedited truck carriers to deliver specialty items to customers outside of a designated delivery range, Miller Meats is using ________.
A) all of its supply chain
B) all of its value delivery network
C) indirect marketing channels
D) intermodal transportation
E) a vertical marketing system

Scenario 4
Most of the clientele at Second Avenue have learned about the store through word-of-mouth communication. This small retailer of quality second-hand children's clothing thrives on the sale of a vast inventory of children's clothing placed there on consignment. "Because small children grow so quickly," Second Avenue's owner commented, "they often outgrow many of their clothes before they've hardly been worn!" Second Avenue provides a way for people to sell their children's clothing, earn a few dollars, and buy the next larger size. "We're extremely picky about the condition of the clothing we stock," the owner stated, "but we sell most items at a 60 percent discount."

34. Second Avenue wants to create a postcard to be sent to local families with young children. The postcard will include information about the store's typical inventory, store hours, and directions. Which of the following format elements can make the biggest difference in the success or failure of the direct mailing?
A) copy
B) headline
C) illustration
D) font
E) color

35. The owner of Second Avenue wants to establish a community clothing drive to collect clothes for a local children's shelter. The owner will set up collection barrels outside Second Avenue. Which of the following public relations tools is the owner using?
A) press relations
B) product publicity
C) lobbying
D) development
E) public affairs


36. Compare oligopolistic competition with a pure monopoly.

37. What must a company using value-based pricing find out about its customers?

38. Explain the significance of a downward-sloping experience curve.

39. When would price cuts and price increases be necessary?

40. Compare the practices of price-fixing and predatory pricing, explaining why each is prohibited by law.

41. Give two examples of products for which captive-product pricing may be used.

42. Why are more and more companies turning to third-party logistics providers (3PLs)?

43. How can a firm benefit from participating in a horizontal marketing system?

44. Explain how seasonality impacts media timing.

45. Explain why an ad would need to be modified from one country to the next.

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