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16 Cards in this Set
- Front
- Back
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What was the purpose of the Robinson-Patman act? |
The Robinson-Patman Act amended the Clayton act to prohibit price descrimination in sales to other producers, wholesalers, or retailers that are not based on a cost differential |
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What laws require sellers to maintain minimum retail price levels for comparable merchandise? |
At the state level unfair-trade laws require sellers to maintain minimum prices for comparable merchandise |
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What laws allow manufacturers to set minimum retail prices for their products? |
Fair-trade laws permit manufacturers to set minimum retail for their products and require dealers to sign contracts agreeing to abide by such prices |
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What are target -return objectives? |
Target-return objectives are short -run or long-run goals usually stated as percentages of sales or investment |
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What is value pricing? |
Value pricing emphasizes the benefits a product provides in comparison to the price and quality levels of competing offerings |
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How do prestige objectives affect a seller’s pricing strategy? |
Prestige pricing establishes a relatively high price to develop and maintain an image of quality that appeals to status- conscious customers. The seller uses price to create an overall image of the firm |
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What are two basic ways in which marketers determine prices? |
Marketers determine prices by applying the theoretical concepts of supply and demand and by completing cost-oriented analysis |
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What are the four types of market structures? |
The four types of market structures are pure competition, monopolistic competition, oligopoly, and monopoly |
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Identify two types of costs that make up a product’s total cost |
A products total cost is composed of total variable costs and total fixed costs. |
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What are the determinants of elasticity |
The degree of consumer responsiveness to price changes - elasticity- is affected by such factors as 1) availability of substitute or complementary goods 2) the classification of good or service as luxury or necessity 3) the portion of a consumers budget spent on item 4) the time perspective |
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What is the usual relationship between elasticity and revenue |
A price cut increases revenue only for a product with elastic demand, a price increase increases revenu only for a product with inelastic demand |
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List the 3 reasons that it is difficult to put price theory into practice. |
A basic assumption of price theory is all firm’s attempt to maximize profits. This does not always happen in practice. A second reason is demand curves can be extremely difficult to estimate. Finally, there is poor communication between economists and practitioners, making it difficult to apply price theory in the real world |
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What is full cost pricing |
Full cost pricing uses all relevant variable costs in setting a products price |
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What is incremental-cost pricinf |
Incremental-price coating attempts to use only costs directly attributable to a specific output in setting prices to cover one the arbitrary allocation of fixed expenses |
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What is the formula for finding the basic breakeven point, in units and in dollars |
Breakeven point in units=total fixed cost/ per unit contribution to fixed costs. Break even point in dollars=total fixed costs/(1-variable cost per unit price) |
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What adjustments to the basic breakeven calculations must be made to include target return |
Break even point( including specific dollar target return)=(total fixed cost +profit objective )/(per unit contribution) |
