Price is best described as:
that which is given up in exchange to acquire a good or service
Wal-Mart, Randi saw a bag of daffodil flower bulbs and a box of plant fertilizer. The items, which were sold together, retailed at $28.50, but were marked down to $19.99. The $19.99 is the:
All of the following statements about price are true EXCEPT:
Price means the same thing to the consumer and the seller.
Which of the following statements about price is true?
Price is not necessarily based on the satisfaction consumers receive from a product.
equals price of goods times quantity sold
_____ pay for every activity of the company.
Money that is left over after paying for company activities is called:
At Wal-Mart, Randi saw a bag of daffodil flower bulbs and a box of plant fertilizer. The items, which were sold together, retailed at $28.50, but were marked down to $19.99. The retailer sold one at the $28.50 price and five at the $19.99. The retailer’s revenue is:
Why are marketing managers finding it more difficult to set prices in today’s environment?
The high rate of new-product introductions has led to careful reevaluation by consumers.
For convenience, pricing objectives can be divided into three categories. They are:
profit oriented, sales oriented, and status quo
An organization is using _____ when it sets its prices so that total revenue is as large as possible relative to total costs.
When Apple Inc. originally introduced its iPhone it was priced at what many believed to be about as high as the market would allow. Within weeks Apple lowered the price of the iPhone. It appears that Apple Inc. entered the market with a _____ approach to pricing the iPhone
When Insight Research Associates quotes a marketing research project management will first estimate the cost to conduct the research and produce and deliver the final client report. The next step in determining the price is to add 30% to that cost estimate. This becomes the price estimate given to the potential research client. This suggests that Insight Research Associates uses a(n) _____ pricing objective.
Thompson Pool is known for quality pool installations, excellent customer service, and reasonable prices. If you want to have a Thompson pool you will have to wait about six months due to demand for their product. While Thompson could probably price their product higher, given the demand, they don’t. Instead, they set price so that they earn a reasonable level of profits. This company seems to base its pricing policy on:
earning satisfactory profits
____ is equal to net profit after taxes divided by total assets.
Return on investment
ierre’s Ice Cream Company produces ultra-rich ice cream, which it sells in the Cleveland, Ohio area. Last year, it managed to exceed its target ROI for the current fiscal year. The following results were found on its financial statements: Gross Revenues: $250,000 Total Assets: $500,000 Gross Profits: $100,000 Total Liabilities: $200,000 Net Profits after Tax: $ 50,000 Owner’s Equity: $300,000
Sherrie is seven years old and wants to open a lemonade stand in her neighborhood. She is having a tough time deciding whether to base her pricing objectives on market share, dollar sales, or unit sales. Regardless of which she chooses, her pricing objective can be categorized as:
At a price of $1,192,057, the Bugatti Veyron may be the most expensive street legal car currently on the market today. Obviously, Bugatti is NOT using a _____ pricing objective in setting the price for this car
market share or sales maximization
A company using market share pricing has a _____ pricing objective.
____ is a company’s product sales as a percentage of total sales for that industry.
At the end of the summer, Howard Nursery reduced the price on all of its plants, fertilizer, and potting soil by 50 percent in order to liquidate this inventory. What type of pricing strategy is being used in this example?
Dixie Furniture Company has recently moved to a new, larger location. At this new location, it has been unable to attract sufficient customers. Its owner does not have the cash to pay the current loan installment due on the building and inventory so he decided to reduce all merchandise prices by at least 50 percent for a weekend sale to earn enough to make his loan payment. His pricing objective can be classified as:
As a short-term pricing objective, _____ can be effectively used on a temporary basis to sell off excessive inventory.
If a company’s pricing objective is to meet the competition or to maintain existing prices, it is using _____ pricing.
When Delta Airlines raises or lowers its prices on its Atlanta to Chicago route other airlines tend to make the same changes in their pricing. This is an example of _____ pricing.
Which of the following statements describes an advantage of status quo pricing?
Status quo pricing requires little planning.
Although many factors can influence price, the primary determinants are:
the demand for the good and the cost to the seller
The quantity of a product that will be sold at various prices for a specified period is called:
The price of the good or service is a key decision for a marketer because it most significantly and directly affects the product’s
Most demand curves slope:
downward and to the right
The manager of a souvenir shop in Florida graphed the demand per week for fresh orange juice. The graph indicates a demand schedule that slopes downward and to the right. This graph indicates that the quantity of juice demanded increases as:
Khimaira Farms sells handcrafted cookie cutters. When graphed, the demand schedule for Khimaira Farms brand cookie cutters forms a straight line. If at $3 per cutter, 500 cookie cutters are demanded, and at $4 per cutter, 450 cookie cutters are ordered, how many will be ordered at a price of $6 per cutter?
Personal Touch produces and markets beaded purses. When graphed, the demand schedule for its purses is a straight line. If one purse costs $20, 5,000 beaded purses are sold. At $25, 4,500 purses are sold. How many beaded purses will be sold if the price per purse is increased to $30?
The _____ is the quantity of a product that will be sold in the market at various prices for a specified time period, and _____ is the quantity of a product that will be offered to the market by suppliers at various prices for a specified period.
____ is the quantity of a product that will be offered to the market at various prices for a specified period.
When the price of a product is set at a level where demand and supply are the same, _____ has been achieved.
At a price of $654,400 the SSC Ultimate Aero has been ranked as the third most expensive car in the world. The company is only planning to build twenty-five of the current model. If that matches the demand for the Ultimate Aero, then a state of _____has been achieved.
Bottles of Pure Hawaiian Air contain air that smells like the floral bouquet that greets tourists as theyget off the plane in Hawaii. When a tourist shop began selling Pure Hawaiian Air, it charged $5 per bottle and could not keep up with the demand. It has since raised the price to $7. Now the shop is still selling all the bottles of Pure Hawaiian Air it carries, but the owner is not forced to reorder on a daily basis. The $7 price is probably a(n):
Consumers’ responsiveness or sensitivity to changes in prices is known as:
elasticity of demand
When consumers are sensitive to price changes, _____ occurs.
While the sales of the Apple iPhone have been great from the beginning, when Apple released its iPhone 3G cut the price of the iPhone for $399 to $199 sales exploded with one million iPhones sold the first weekend. Demand for the iPhone appears to be _____.
What happens when demand is elastic?
As price goes up, revenue goes down.
Procter & Gamble dropped the price of Pringles Potato Chips in the Southeast due to price competition and consumer demand. As a result of the price reduction, Procter & Gamble increased unit sales and earnings by 10 percent due to:
demand being elastic
____ occurs when an increase in sales exactly offsets a decrease in price so that total revenue remains exactly the same.
When price decreases and total revenue falls, demand is
When the NES Group lowered the price of its professional-grade meat slicers from $2,300 to $1,600, demand doubled from 4 units sold per month to 8 units per month. However, total revenue dropped. This is an example of
When Nesco brand food hydrators sold for $59.99, Nesco sold 90 dehydrators. When the company dropped the price of its dehydrators to $44.95, it sold 145 dehydrators. Demand for the food dehydrators appears to be:
ritics claim bank ATMs take advantage of the _____ of customers who suffer a poverty of time and have a strong need for convenience.
inelastic demand schedule
All of the following factors directly affect the elasticity of demand EXCEPT
inputs needed to manufacture the product
Which of the following would imply demand would be elastic?
many substitute products
The greater the number of different uses for a product, the more _____ demand tends to be.
If a product has high pricing power this would indicate a situation of:
Yield management systems are used to:
profitably fill unused capacity
____ use complex mathematical software to profitably fill unused capacity
Yield management systems
Allstate has more than 1,500 price levels that are determined by a complex algorithms that analyzes 16 credit report variables, including late payments and card balances. Allstate is using a _____ to set prices.
yield management system
Which of the following statements about yield management systems (YMS) is true?
YMS are mathematically complex systems to make use of underutilized capacity and reduce the cost of perishability
Behavioral targeting technology is being used by Internet retailers to offer different prices and promotional offers to different customers based upon their Internet and browsing habits. One potential downside to this practice is:
Chad has calculated the sales volume at which his lemonade stand’s costs equal revenue. Over dinner he announced to his family that he only needed to sell 50 glasses of lemonade at $5 per glass to cover all his costs (lumber and nails for the stand, lemons, sugar, etc.). Which important factor has Chad excluded from his analysis?
The two types of costs a marketer needs to consider when setting prices are:
variable and fixed
A cost that changes with the level of output is called a(n) _____ cost
Which of the following is most likely to be a variable cost for an Internet retailer that sells spices, herbs, and seasonings to consumers?
postage for shipping spices and herbs
For a nail salon, the costs associated with the purchase of nail polish and other products like nail polish remover, sterilized equipment, laundry service for the towels, and the beverages given to customers, are all examples of _____ costs.
____ costs do not change as output is increased or decreased.
Central Bark is a dog resort where pets are pampered. Which of the following is the BEST example of one of its fixed costs?
payment on the building used by Central Bark
Mitch owns a pet boarding kennel. The monthly payment on the land he purchased for his kennel, the mortgage on his small office building, and his business license are all examples of _____ costs.
__ cost is the change in total costs associated with a one-unit change in output.
Monthly output at Leisure-Time, Inc. changed from 12 to 13 prefabricated gazebos, and the total costs changed from $9,000 to $10,500. What is the marginal cost for this company?
When a seller determines the selling price by adding to cost an amount for profit and expenses not previously accounted for, the seller is using _____ pricing.
The most popular method used by wholesalers and retailers in establishing a sales price is _____ pricing
Cowboy Malone’s Electric City pays a wholesaler $700 for a television and sells it to a customer for $1,500. The markup on the television is:
The difference between the retailer’s cost and the selling price is the _____.
The owner of specialty kitchen retail store wants to determine what price she should put on a set of mixing bowls. They cost her $7. She desires a markup of 30 percent based on selling price. Which of the following is closest to the price she should charge her customers?
An educational toy store can buy a world globe for $30. If the store owner sells the globe for $45, what is the markup based on cost?
An educational toy store can buy a world globe for $30. If the store owner sells the globe for $45, what is the markup based on the selling price?
____ is the practice of marking up prices by 100 percent (or doubling the cost to set the selling price)
the practice of marking up prices by 100 percent
The Nest is a retail store owned and operated by an interior designer. The markup on all items in the store is 100 percent over cost (or double the cost). In this case we would say that the designer uses:
Profit maximization occurs when:
marginal revenue equals marginal cost
____ is the extra revenue associated with selling an additional unit of output.
As long as the revenue of the last unit produced and sold is greater than the cost of the last unit produced and sold, a firm should:
The point at which marginal cost and marginal revenue are equal always results in:
maximization of profits
_____ determine what sales volume must be reached for a product before the company’s total costs equal total revenue and no profits are earned.
The typical break-even model assumes a given fixed cost and a
constant average variable cost
Fixed cost contribution equals:
price minus the average variable cost
Your Memory Lane creates custom art prints that use graphs and icons in a street scene to commemorate special occasions. Suppose Your Memory Lane has priced its product at $350 per print. Further, it has determined that the company’s fixed cost is $12,500, with an average variable costs per print of $250. What is his fixed cost contribution per print?
Your Memory Lane produce custom-made art prints that include graphics and icons to celebrate life’s special moments. For example, on his wedding anniversary David had an art print produced that celebrated highlights of his ten years with his wife, Kathy. Suppose Your Memory Lane sells the custom artwork for $500. It estimates its average variable costs to be $200 per unit produced. It figures its fixed costs to be $900,000 per year. How many prints does it have to sell to break even?
Furr Friends sells kits for making personalized grave markers for pets. The company sells each kit for $25. The average variable cost for each kit is $10, and the total annual fixed costs for plant operation are $45,000. What is the break-even point in units?
Regency, Inc. makes disposable cap and gown sets for graduations. Each cap and gown set sells for $15. The average variable cost for manufacturing 10 cap and gown sets is $100. Total fixed costs for the year equal $65,000. Calculate the break-even point in units.
Ceylon Express sells bottled pasteurized tea to retailers. It has the following revenues and costs:
Sales price per bottle: $0.50 Average variable costs per bottle: $0.30 Total fixed costs (annual): $50,000 Tax rate: 20 percent What is the annual break-even point in units for the company?
Chulo Ibsen makes and sells hand-forged wrought iron firescreens for $125 each. He has determined that his fixed costs are $8,000, and his average variable costs per firescreen are $45. What is his break-even point in dollars?
Which of the following statements describes a limitation associated with break-even analysis?
It is sometimes difficult to ascertain whether a cost is fixed or variable.
Which of the following statements about pricing strategies throughout the product life cycle is FALSE?
With inelastic demand, price will be set low in the introduction stage.
When Apple Inc. developed and introduced the iPhone it was unique as it essentially combined a cellular phone with an iPod, an Internet browser, and email capabilities. As such, in the short run it seemed that demand for the product would be inelastic, with no real existing competition. The recommend pricing strategy in such a situation would be:
high initial price, falling slightly when entering the growth stage
In the mature and highly competitive furniture industry, you would expect furniture manufacturers to engage in:
a price war
Kroger supermarkets will place well-known brands on the shelves at high prices while offering their own Kroger brand at lower prices. This practice is an example of:
selling against the brand
Manufacturers can do all of the following to regain some control over the price their products are sold for at the retail level EXCEPT:
require resellers to maintain prices in line with competitors’ prices
provide a means for comparison shopping
Which of the following statements about the Internet is true?
Business-to-business auctions on the Internet are likely to be more important than consumer auctions in the future
During the hot summer months or the week before a new class starts if there is still space available, the Nick Price golf school in Orlando, Florida offers a 25 percent reduction to get golfers during the off-season or those making a last-minute decision. This is an example of pricing strategy used as a(n):
Many consumers, especially when faced with an uncertain purchase decision, think that a high price:
is a signal of quality
David likes New Balance running shoes. However, when he stopped by the Foot Locker to buy a new pair of running shoes he notice that Nike had a new pair of running shoes that cost $350. To David the higher price of the Nike shoe indicated that it would be a better pair of running shoes. This is an example of _____.
When the Apple iPhone 3G was introduced the Apple iTunes web site also began selling small program “apps” written by third parties that could be run on the iPhone. One interesting app was the “I Am Rich” application. For a price of $1,000 you could buy this app that did nothing but display a red gem on the iPhone’s screen. The description of the app stated that this red icon would remind you (and others you show it to) “that you were rich enough to afford this.” Six of the applications were sold before Apple Inc. removed the app from iTunes. At the $1,000 price the author of the app was using _____ pricing as part of his marketing approach.
Marketing managers who attempt to raise the quality image of their product by selling it at high prices are following a(n) _____ strategy.
maintained markup pricing
uses high prices to promote a high-quality product
Laurie knows little about cooking and does not want to spend the time to learn how to make a quiche. However, she has been asked to bring a quiche to an office retirement party. Not wanting to make a poor choice, she is likely to:
buy the most expensive pre-made quiche (perhaps paying too much), guessing that the price is related to quality
The dimensions of quality that are important to consumers include:
a. versatility b. serviceability c. performance d. ease of use e.all of the choices
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