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Exam 16: Pricing Concepts and Strategies

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Question 111

True/False

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When the elasticity of demand or supply is greater than 1.0, then that demand or supply is said to be elastic.

A) True
B) False

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Question 112

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A firm that manufactures TVs sells them at prices of $750, $1,000, and $1,250. The manufacturer will return $75, $100, or $125 by mail to those who purchase its brand of TV. What is this reduction in price an example of?

A) promotion allowance
B) trade-in
C) rebate
D) quantity discount

E) B) and C)
F) A) and C)

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Question 113

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What does the exchange value of a product define?

Marketers determine prices based on their ability to strike a balance between desired profits and the customer's perception of a product's value.

Cumulative quantity discounts are price reductions based on the volume of product purchased during a stated period of time.

Customary prices are prices set on the basis of detailed calculations of product costs and contribution to profit margin.

The market price of a product is always the same as its list price.

What do many government and organizational procurement departments do instead of paying set prices for their purchases?

The danger of a low-price strategy is that competitors can easily counter this approach.

The basis on which most price structures are built is the list price-the rate normally quoted to potential buyers.

Cost-plus pricing is the practice of adding a markup to the base cost of a product to cover unassigned costs and provide a profit.

Discuss the four major types of pricing policies, as well as flexible alternatives.

Everyday low-pricing is used exclusively by retailers in an effort to attract consumers.

Match each item to the statement or sentence listed below. a.competitive bidding b.penetration pricing strategy c.list price d.trade discount e.price flexibility f.promotional pricing g.loss leader h.cannibalization i.bundle pricing j.odd pricing k.transfer price l.profit centre m.skimming pricing strategy n.competitive pricing strategy o.pricing policy p.market price q.noncumulative quantity discount r.step out s.bot t.cash discount -A product offered to consumers at less than cost to attract them to stores in the hope that they will buy other merchandise at regular prices is called a(n) _____.

In breakeven analysis, once all fixed costs have been covered, additional sales will generate per-unit profits equal to the difference between the selling price and the variable cost of each unit.

Which statement does NOT accurately describe breakeven analysis?

Controlling demand for a new product through the pricing strategy could save a company from having dissatisfied customers by matching supply to the demand.

A company has demonstrated that their price discounts and promotional allowances do not restrict competition. The company is most likely defending itself against which pricing-related practice?

A fitness club that advertises a special rate for customers who sign up during the first two weeks of January is using a promotional pricing strategy.

What type of pricing is the exact opposite of FOB origin pricing?