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15 Cards in this Set
- Front
- Back
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Which of the following pricing methods involves setting prices based on the costs of producing, distributing, and selling a product plus a fair rate of return for effort and risk? a) Value-added pricing b) Good-value pricing c) Customer value-based pricing d) Cost-based pricing e) Break-even pricing |
d) Cost-based pricing |
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Harold sells ice cream from an ice cream truck. It costs Harold $0.75 for each ice cream bar; Harold sells the ice cream bars for $1.50. Which of the following is Harold using to determine his prices for ice cream bars? a) Break-even pricing b) Competition-based pricing c) Value-added pricing d) Variable-cost pricing e) Cost-plus pricing |
e) Cost-plus pricing |
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What is the purpose of a demand curve? a) to anticipate the potential demand for a product b) to demonstrate how product demand determines price c) to show how sensitive a market is to pricing changes d) to determine the amount of competition in a given market e) to illustrate the amount of money a product must sell for to break even
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b) to demonstrate how product demand determines price |
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On a Budget Stores realizes that it holds a special place in the market. Consumers rely on their low prices and react extremely negatively at any changes in price—if prices fall too low, the customers do not purchase items because they feel that the items are of low quality; if prices are raised too high, customers do not purchase items because they feel the price is not worth the value they are getting for the product. Consequently, On a Budget Stores keeps its prices in a small range: usually between $1 and $5. Which of the following does On a Budget Stores use to determine its prices? a) Target costing b) Product demand c) Price elasticity d) Market penetration e) Product bundling |
c) Price elasticity |
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Which of the following is LEAST likely to be a consideration when setting the price for a product? a) Cost of production b) Age of the product c) Frequency of advertising d) Competitors' prices e) Target market |
c) Frequency of advertising |
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Which of the following is LEAST likely to be used to increase product sales in a particular market? a) offering discounts for a product b) bundling products that are used together frequently c) using customer perceptions to price a product d) selling a product at promotional prices e) introducing a fighter brand |
e) introducing a fighter brand |
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Market-skimming pricing and market-penetration pricing are strategies used with which type of products? a) Established products b) Expensive products c) Popular products d) New products e) Rare products |
d) New products |
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Video Game Palace has developed a brand new video game system that is the latest thing in video games. As no one else has this type of technology, the company has decided to set the prices for the new system significantly higher than its competitors, gradually lowering the price as the system’s novelty wears off. Which of the following is Video Game Palace using to determine its prices? a) Market-penetration pricing b) Market-skimming pricing c) Psychological pricing d) Promotional pricing e) Dynamic pricing |
b) Market-skimming pricing |
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Doors Inc. is a technology company that focuses on creating operating systems, which are the software packages that run everything on a computer. The company is releasing the newest version of its operating system and is deciding on the appropriate pricing strategy. The CEO favors an aggressive market-penetration pricing strategy in order to gain market share, even if it means pricing the operating system at a level at which the company would lose money on every sale. The CFO favors market-skimming pricing. a) Existing operating systems satisfy most customer requirements. b) Two other competitors are expected to release new versions of their operating systems in the coming weeks. c) Large organizations are eager to adopt the new version because of improved enterprise functions. d) The majority of sales are expected to occur through original equipment manufacturers, which are companies that manufacture computers and sell them bundled with the operating system. e) New sales are expected to be low, with most sales being less-profitable upgrades from the previous version of the operating system. |
c) Large organizations are eager to adopt the new version because of improved enterprise functions. |
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Doors Inc. is a technology company that focuses on creating operating systems, which are the software packages that run everything on a computer. The company is releasing the newest version of its operating system and is deciding on the appropriate pricing strategy. The CEO favors an aggressive market-penetration pricing strategy in order to gain market share, even if it means pricing the operating system at a level at which the company would lose money on every sale. The CFO favors market-skimming pricing. a) Research reveals that the market is not price sensitive. b) There are significant economies of scale in production. c) Prices could be raised once the introductory period is over. d) The demand for operating systems is inelastic. e) Most customers are extremely unsatisfied with most technology companies.
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b) There are significant economies of scale in production. |
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Product mix strategies differ from other product pricing strategies in which of the following ways? a) Prices in a product mix are not subject to the normal demand curve. b) Prices in a product mix are not based upon the cost of production. c) Prices in a product mix are usually lower than on an individual product. d) Prices in a product mix are set to maximize profit on several products, not one. e) Prices in a product mix are based on competitors’ prices. |
d) Prices in a product mix are set to maximize profit on several products, not one. |
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Tooth Brite Tooth Care, Inc. sells several products related to dental care: toothbrushes, toothpaste, dental floss, tooth whitener, and mouthwash. Which of the following product mix pricing strategies would be the most helpful to Tooth Brite Tooth Care? a) Product bundle pricing b) Optional product pricing c) Cost-plus pricing d) By-product pricing e) Segmented pricing |
a) Product bundle pricing |
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Which of the following price increases is most likely to lead to a negative customer reaction? a) A company raises prices to remain competitive in a market. b) A company raises prices to offset increases to production costs. c) A company sets high prices for a product that is newly introduced. d) A company sets high prices in order to take advantage of customer need. e) A company raises prices to increase the value of a product in the customer’s mind. |
d) A company sets high prices in order to take advantage of customer need. |
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Which of the following involves temporarily lowering pricing to fuel sales on a short term basis? a) Psychological pricing b) Sale pricing c) Promotional pricing d) Break-even pricing e) Competitor-based pricing |
c) Promotional pricing |
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Legal Eagle Law Firm knows that people are not likely to trust a lawyer who works for low fees—the customer will trust the lawyer’s ability to win cases. Consequently, the firm charges very high prices in the hopes that customers will choose the firm for their legal needs. Which of the following pricing strategies is being used by Legal Eagle Law Firm? a) Segmented pricing b) Market-penetration pricing c) Good-value pricing d) Psychological pricing e) Optional product pricing |
d) Psychological pricing |
