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Chapter 10 Practice Test (ANSWER KEY) Multiple Choice 1) refers to the amount of money charged for a product or service

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Chapter 10 Practice Test (ANSWER KEY)

Multiple Choice

1) refers to the amount of money charged for a product or service.

1. 1. Value
   2. Cost
   3. Price
   4. Wage
   5. Salary
2. ________ is the only element in the marketing mix that produces revenue.
   1. Price
   2. Product
   3. Place
   4. Fixed costs
   5. Variable costs
3. Which of the following is  with regard to price?
   1. Historically, price has had the least perceptible impact on buyer choice.
   2. Price is the least flexible element in the marketing mix.
   3. Unlike product features and channel commitments, prices cannot be changed quickly.
   4. Price is the sum of all the values that customers give up to gain the benefits of having a product.
   5. Prices only have an indirect impact on a firm's bottom line.
4. What sets the ceiling for product prices?
   1. product manufacturing costs
   2. sellers' perceptions of the product's value
   3. customer perceptions of the product's value
   4. variable costs
   5. break-even volume
5. What sets the floor for product prices?
   1. consumer perceptions of the product's value
   2. product costs
   3. competitors' strategies
   4. advertising budgets
   5. market competition
6. Effective ________ pricing involves understanding how much value consumers place on the benefits they receive from the product and setting a price that captures that value.
   1. competition-oriented
   2. cost-based
   3. time-based
   4. customer-oriented
   5. marketer-oriented
7.  ________ pricing uses buyers' perceptions of value as the key to pricing.
   1. Customer value-based
   2. Cost-based
   3. Time-based
   4. Markup
   5. Target return
8. Which of the following is  of value-based pricing?
   1. The targeted value and price drive decisions about what costs can be incurred and the resulting product design.
   2. Value-based pricing is mostly product driven.
   3. Value-based pricing involves setting prices based on the costs of producing, distributing, and selling the product plus a fair rate of return for its effort and risk.
   4. The marketer usually designs a product and marketing program and then sets the price.
   5. A company using value-based pricing designs what it considers to be a good product, adds up the costs of making the product, and sets a price that covers costs plus a target profit.
9. Which of the following processes does value-based pricing reverse?
   1. high-low pricing
   2. everyday low pricing
   3. cost-based pricing
   4. good-value pricing
   5. value-added pricing
10. A pharmaceutical company in Utah recently released a new and expensive anti-ulcer drug in the market. The company justifies the high price of the drug by claiming that it is highly effective for treating all kinds of ulcers. The company also claims that the new drug will help bring down the need for invasive surgeries, an additional benefit for patients. Which of the following pricing strategies is the pharmaceutical company most likely using in this instance?
    1. target pricing
    2. markup pricing
    3. cost-based pricing
    4. value-based pricing
    5. break-even pricing
11. The perceived value of different product offers can be reasonably assessed by ________.
    1. conducting a SWOT analysis
    2. preparing demand curves
    3. conducting surveys and experiments
    4. collecting data about competitors' offers
    5. setting a benchmark for product quality
12. Underpriced products ________.
    1. produce less revenue than they would if they were priced at the level of perceived value
    2. sell poorly in the global marketplace
    3. produce more revenue than they would if they were priced at the level of perceived value
    4. mostly offer higher value than those with a high markup price
    5. are characterized by rapidly declining demand
13. Which of the following involves introducing less-expensive versions of established, brand name products?
    1. markup pricing
    2. good-value pricing
    3. time-based pricing
    4. cost-based pricing
    5. target profit pricing
14.  ________ pricing refers to offering just the right combination of quality and gratifying service at a fair price.
    1. Markup
    2. Good-value
    3. Cost-plus
    4. Target profit
    5. Break-even
15. When McDonald's and other fast food restaurants offer "value menu" items at surprisingly low prices, they are most likely using ________ pricing.
    1. break-even
    2. target profit
    3. good-value
    4. cost-plus
    5. target return
16. Azure Air, an airline company, offers attractive prices to customers with tighter budgets. A no-frills airline, it charges for all other additional services, such as baggage handling and in-flight refreshments. Which of the following best describes Azure Air's pricing method?
    1. target profit pricing
    2. good-value pricing
    3. cost-based pricing
    4. break-even pricing
    5. penetration pricing
17. Retailers such as Costco and Walmart charge a constant, daily low price with few or no temporary price discounts. This is an example of ________ pricing.
    1. competition-based
    2. everyday low
    3. cost-plus
    4. break-even
    5. penetration
18. Bon Vivant offers an assortment of exclusive French wines at incredibly low prices. These prices are neither limited-time offers nor special discounts, but represent the daily prices of products sold by Bon Vivant. This reflects Bon Vivant's ________ pricing strategy.
    1. everyday low
    2. markup
    3. penetration
    4. break-even
    5. cost-based
19.  ________ pricing involves charging higher prices on an everyday basis but running frequent promotions to lower prices temporarily on selected items.
    1. High-low
    2. Everyday low
    3. Cost-plus
    4. Break-even
    5. Penetration
20. Department stores such as Kohl's and Macy's practice high-low pricing by ________.
    1. charging a constant, everyday low price
    2. providing few or no temporary price discounts
    3. increasing prices temporarily on select products
    4. having frequent sale days for store credit-card holders
    5. underpricing most consumer items
21. Companies that adopt value-added pricing ________.
    1. consider value-added features as a fitting substitute for aggressive cost cutting
    2. set incredibly low prices to meet competition
    3. attach value-added features and services to differentiate their offers and support their higher prices
    4. overprice their products without any apparent justification
    5. underprice their products and lower quality to boost demand in the short-run
22. Which of the following is  with regard to value-added pricing?
    1. Companies that practice value-added pricing typically match the competition by cutting prices.
    2. Companies practicing value-added pricing differentiate their offers by attaching value-added features to offerings that, in turn, justify higher prices.
    3. The intrinsic value of products sold by companies practicing value-added pricing is far less than their actual selling price.
    4. Companies practicing value-added pricing primarily rely on cost differentiation.
    5. Value-added pricing is the most suitable pricing strategy in pure monopolies.
23. In an effort to differentiate its offerings from its competitors, Pegasus Computers decided to add an extra USB port in all its laptops besides providing a free pair of Delphi power bass headphones with every Pegasus laptop. Although the additional features increased the price of the laptops by $500, Pegasus was confident that the strategy would help boost demand for its laptops substantially. This is an example of ________.
    1. good-value pricing
    2. markup pricing
    3. break-even pricing
    4. value-added pricing
    5. cost-based pricing
24.  ________ involves setting prices based on the costs for producing, distributing, and selling the product plus a fair rate of return for effort and risk.
    1. Value-based pricing
    2. Competition-based pricing
    3. Cost-based pricing
    4. Penetration pricing
    5. Break-even pricing
25. Companies with lower costs ________.
    1. specialize in selling products with value-added features
    2. usually market products with inferior quality, thereby justifying the low selling price
    3. can set lower prices that result in smaller margins but greater sales and profits
    4. tend to overprice products owing to their monopolistic advantage
    5. usually set higher prices that result in higher margins
26. A company must pay each month's bills for rent, heat, interest, and executive salaries regardless of the company's level of output. This exemplifies its ________ costs.
    1. overhead
    2. variable
    3. target
    4. total
    5. unit
27. Overhead costs ________ as the number of units produced increases.
    1. decrease
    2. increase steadily
    3. fluctuate
    4. remain the same
    5. increase rapidly
28. Which of the following is most likely a fixed cost?
    1. sales representative commissions
    2. product distribution costs
    3. manufacturing input costs
    4. temporary worker salaries
    5. facility rental payments
29. Fixed costs ________.
    1. are costs that do not vary with production or sales level
    2. vary directly with the level of production
    3. decrease with accumulated production experience
    4. are the sum of the overhead and variable costs for any given level of production
    5. represent the annual costs of inputs incurred by a company
30. Costs that change with the level of production are referred to as ________.
    1. fixed costs
    2. variable costs
    3. target costs
    4. total costs
    5. overhead costs
31. In 2011, the fixed costs of a company were $500,000, and its variable costs equaled $150,000. In 2010, the company made an annual profit of $200,000. It has been predicted that, despite a steady growth, the company's variable costs will likely equal $300,000 by 2013. The total costs of the company in 2011 were ________.
    1. $350,000
    2. $450,000
    3. $650,000
    4. $800,000
    5. $950,000
32. The total production costs at Kellner Machine Works are $87,000 out of which $45,000 represent fixed costs. Which of the following is representative of the variable costs incurred by the company?
    1. $35,000
    2. $42,000
    3. $45,000
    4. $87,000
    5. $132,000
33. The fixed cost in manufacturing a single LED monitor is $40 and the variable cost is $12. If the company expects to manufacture 5,000 monitors, the total costs would be ________.
    1. $60,000
    2. $200,000
    3. $260,000
    4. $420,000
    5. $500,000
34. As production moves up, the average cost per unit decreases because ________.
    1. variable costs decrease
    2. of increasing diseconomies of scale
    3. fixed costs are spread over more units
    4. overhead costs decrease
    5. revenue increases
35. A cell phone manufacturing firm produced 1,000 cell phones a day but believed that it could reasonably step up production to 2,000 cell phones a day. Consequently, it built a larger plant and installed efficient machinery and work arrangements to realize the projected output. Which of the following can most likely be inferred from this information?
    1. The unit cost of producing 2,000 cell phones per day would be twice that of the unit cost of producing 1,000 units per day.
    2. A production plant with the capacity of producing 5,000 cell phones a day would be most efficient.
    3. The unit cost of producing 2,000 cell phones per day would be lower than the unit cost of producing 1,000 units per day.
    4. A 2,000-capacity production plant would be less efficient because of increasing diseconomies of scale.
    5. The fixed costs of the firm are more likely to increase with the increase in output.
36. The long-run average cost (LRAC) curve indicates the ________.
    1. per unit cost of output in the long run
    2. projected total production costs of competitors
    3. variable costs incurred by a firm over time
    4. fixed costs incurred by a firm over the long term
    5. number of units the market will buy in a given time period, at different prices that might be charged
37. The learning curve is representative of the ________.
    1. per unit cost of output in the long run
    2. drop in the average per-unit production cost that comes with accumulated production experience
    3. number of units the market will buy in a given time period, at different prices that might be charged
    4. total market demand resulting from different prices
    5. per unit cost of output in the short run
38. As production workers become better organized and more familiar with equipment, the average cost per unit tends to decrease with the ________.
    1. increase in the diseconomies of scale
    2. accumulated production experience
    3. decrease in the economies of scale
    4. increase in derived demand
    5. increase in primary demand
39. With accumulated production experience and a higher volume of production, companies not only become more efficient but also ________.
    1. gain economies of scale
    2. incur higher overhead costs
    3. create derived demand in the market
    4. spend more per unit of produced output
    5. tend to routinely spend less on inputs
40. The experience curve reveals that ________.
    1. repetition in production has no visible impact on production costs
    2. repetition in production enhances efficiency
    3. the average cost of production remains the same with accumulated production experience
    4. repetition in production adds to the costs and thereby increases the prices of outputs
    5. the average cost of production increases with accumulated production experience
41. A downward-sloping experience curve is indicative of ________.
    1. the negative customer perception about a company's products
    2. the falling demand for a company's products
    3. the falling unit production cost of a company
    4. the low quality of a company's products
    5. slow and inadequate organizational learning
42. Which of the following is most likely a risk associated with experience-curve pricing?
    1. High-volume production facilities are unable to meet demand.
    2. New technology often leads to productivity problems.
    3. Demand for the product fluctuates unpredictably.
    4. Consumers tend to prefer new brands over established ones.
    5. Aggressive pricing often gives a product a cheap image.
43. Experience-curve pricing assumes that ________.
    1. competitors are weak and not willing to match price cuts
    2. competitors are strong and invincible
    3. aggressive pricing adversely affects product image
    4. volume-based production slows down organizational learning
    5. lower-cost technologies are almost always inferior
44. The simplest pricing method is ________ pricing.
    1. value-based
    2. fixed cost
    3. cost-plus
    4. target return
    5. competition-based
45. Cost-plus pricing ________.
    1. is a complex pricing method
    2. involves pricing that accurately reflects production costs
    3. involves adding a standard markup for profit
    4. aims at breaking even on the costs of making and marketing a product
    5. is a value-based pricing method
46. Lawyers, accountants, and other professionals typically price by adding a standard markup for profit. This exemplifies ________.
    1. target pricing
    2. cost-plus pricing
    3. value-based pricing
    4. break-even pricing
    5. penetration pricing
47. Herbie Inc., a firm manufacturing sandwich makers, has fixed costs of $250,000, variable costs of $20 per unit of output, and expected unit sales of 50,000 units. What is the unit cost of a sandwich maker manufactured by Herbie?
    1. $15
    2. $25
    3. $30
    4. $50
    5. $75
48. Samsung Mobile plans to launch a new phone with a unit cost of $270 and wants to earn a 10 percent markup on its sales. Samsung's markup price is ________.
    1. $275
    2. $280
    3. $295
    4. $300
    5. $335
49. Why is markup pricing most likely impractical?
    1. Calculating costs is complicated due to fluctuations.
    2. By tying the price to cost, sellers oversimplify pricing.
    3. When all firms in the industry use this pricing method, prices tend to be similar.
    4. The method ignores demand and competitor prices.
    5. With a standard markup, consumers know when they are being overcharged.
50. Why is markup pricing most likely popular?
    1. Sellers are more certain about demand than about costs.
    2. Markup pricing tends to maximize market competition.
    3. Markup pricing affords buyers greater bargaining power.
    4. Sellers do not need to make frequent adjustments as demand changes.
    5. Markup pricing is designed to set prices to break even on the costs of making and marketing a product.
51. Which of the following is a cost-based approach to pricing?
    1. value-based pricing
    2. high-low pricing
    3. target return pricing
    4. good value pricing
    5. EDLP
52. Target return pricing is a variation of which of the following cost-oriented pricing approaches?
    1. cost-plus pricing
    2. break-even pricing
    3. markup pricing
    4. value-based pricing
    5. fixed cost pricing
53. Target return pricing uses the concept of a(n) ________, which shows the total cost and total revenue expected at different sales volume levels.
    1. BCG matrix
    2. break-even chart
    3. SWOT analysis
    4. demand curve
    5. experience curve
54. John assured his venture capitalists an earning of 25-percent return on equity when he began his IT startup. In order to achieve this result, he will most likely use which of the following pricing approaches?
    1. value-based pricing
    2. markup pricing
    3. EDLP
    4. customer-based pricing
    5. target return pricing
55. The break-even volume is the point at which ________.
    1. the total revenue and total cost curves intersect
    2. demand equals supply
    3. the production of one more unit will not lead to increase in demand
    4. the company can pay off all its long-term debt
    5. a firm exceeds the sales forecast
56. Which of the following statements about break-even analysis is ?
    1. It is used to determine how much production experience a company must have in order to achieve desired efficiencies.
    2. It is a technique used to calculate fixed costs.
    3. It determines the amount of retained earnings a company will have during a given accounting period.
    4. It is a technique marketers use to determine the relationship between supply and demand.
    5. It is calculated by using variable costs, the unit price, and fixed costs.
57. A company faces fixed costs of $100,000 and variable costs of $8 per unit. It plans to directly sell its product in the market for $12. How many units must it produce and sell to break even?
    1. 20,000
    2. 25,000
    3. 30,000
    4. 35,000
    5. 40,000
58. As a manufacturer increases the price, ________.
    1. efficiency drops
    2. the break-even volume drops
    3. competition is minimized
    4. the total costs increase
    5. the profit margin shrinks
59. Mansfield Pharmaceuticals markets Zipro, an antibiotic. The firm has fixed costs of $1,000,000 and variable costs of $2 per bottle of 50 tablets priced at $10 per bottle. What is the break-even volume?
    1. 25,000
    2. 55,000
    3. 100,000
    4. 115,000
    5. 125,000
60. A manufacturer has fixed costs of $100,000, a variable cost of $10 per unit of output, and break-even volume of 50,000 units. What should the manufacturer's unit cost be in order to break even?
    1. $10
    2. $12
    3. $14
    4. $16
    5. $20
61. Which of the following involves setting prices based on a rival firm's strategies, costs, prices, and market offerings?
    1. target return pricing
    2. good-value pricing
    3. competitor value-added pricing
    4. market-based pricing
    5. competition-based pricing
62. Companies can legitimately charge a higher price if ________.
    1. consumers perceive that the company's product offers greater value
    2. the demand for products manufactured by a firm is highly elastic
    3. the cost of advertising is minimal
    4. derived demand remains constant
    5. consumers de-emphasize quality
63. Refer to the scenario below to answer the following question(s). 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. Considering that most young households have limited financial resources, Alden attempts to engage in target costing. "In doing this," says Milt Alden, the co-founder of Alden Electronics, "we have better control over keeping price right in line with customers." Alden manufactures a three-speed blender, its top seller, along with a five-speed blender. The hand mixers are manufactured in two variants—a small handheld mixer with two rotating beaters and another that comes with an optional stand and an attached mixing bowl. Alden's temperature-controlled skillets are manufactured in a single 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. 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 benefits from the ________.
    1. cost-plus pricing
    2. value-added pricing
    3. experience curve
    4. inelastic demand in the market
    5. derived demand in the market
64. Which of the following is an external factor that affects pricing decisions in a company?
    1. the company's overall marketing strategy
    2. the nature of the market
    3. the organizational objectives of the company
    4. elements of the company's marketing mix
    5. the annual advertising budget of rival firms
65. Which of the following is an internal factor that affects pricing decisions in a company?
    1. the nature of the market
    2. the degree of inflation in the economy
    3. the overall marketing strategy of the company
    4. the forces of demand and supply in the market
    5. consumers' perception of value
66. Companies using target costing ________.
    1. first design a new product and then determine its cost
    2. tailor their products to be in line with the marketing mix
    3. routinely neglect customer value considerations
    4. avoid determining an ideal selling price until analyzing test market results
    5. start with an ideal selling price and then target costs that will ensure that the price is met
67. Elmo Inc., a global conglomerate, designed the ElBrush, an electric toothbrush. Sensing market demand for the electric toothbrush, Elmo started with an ideal selling price of $3 based on customer value considerations and then targeted costs to ensure that the price was met. This exemplifies ________.
    1. competition-based pricing
    2. cost-plus pricing
    3. target costing
    4. everyday low pricing
    5. high-low pricing
68. PoolPak produces climate-control systems for large swimming pools. The company's customers are more concerned about service support for maintaining their systems than the initial price of the product. PoolPak specializes in and differentiates itself through both cutting-edge technologies used to build its high-value climate control systems as well as seamless quality service. PoolPak's prices are very high, but demand for its climate-control systems seems to be forever on the rise. This exemplifies ________.
    1. target costing
    2. a pure monopoly
    3. cost-plus pricing
    4. a nonprice position
    5. break-even pricing
69. DivetheBlue, a company marketing deep-sea diving equipment, charges very high prices for its products. Despite the availability of many low-priced products in the market, customers seem to prefer DivetheBlue, which has earned a reputation for selling high-quality products. This exemplifies ________.
    1. a pure monopoly
    2. an oligopoly
    3. a nonprice position
    4. break-even pricing
    5. target costing
70. A decision to position the product on high-performance quality will mean that the ________.
    1. seller must charge a higher price to cover higher costs
    2. seller must charge a lower price to attract more customers
    3. producer must step down production
    4. marketer must boost derived demand in the market
    5. break-even volume will be fairly low
71. Price setting is usually determined by ________ in small companies.
    1. the top managers
    2. the marketing department
    3. the sales department
    4. divisional managers
    5. product managers
72. Price setting is usually determined by ________ in large companies.
    1. top managers
    2. external stakeholders
    3. product managers
    4. non-executive employees
    5. the sales department
73. In industrial markets, ________ typically has the final say in setting the pricing objectives and policies of a company.
    1. the sales manager
    2. top management
    3. the production manager
    4. the HR department
    5. the sales staff
74. In industries in which pricing is a key factor, ________ often set the best prices or help others in setting them.
    1. sales departments
    2. salespeople
    3. production managers
    4. line managers
    5. pricing departments
75. Under ________, the market consists of many buyers and sellers trading in a uniform commodity.
    1. pure competition
    2. monopolistic competition
    3. oligopolistic competition
    4. a pure monopoly
    5. the dominant firm model
76. Which of the following exemplifies a pure competitive market?
    1. a market where many buyers and sellers trade over a range of prices rather than a single market price
    2. a market where a single firm controls the larger fraction of the market share
    3. a market where a few powerful firms control the larger fraction of the market share
    4. a market characterized by only a few large sellers
    5. a market where many buyers and sellers trade in a uniform commodity
77. Which of the following is  of a pure competitive market?
    1. A single seller has a major effect on the current and future market price.
    2. Companies spend significantly on marketing research and product development.
    3. The advertising budget of companies is usually huge.
    4. Sellers try to develop differentiated offers for different customer segments.
    5. Sellers spend little time on marketing strategy.
78. In Viña del Mar, Chile, a large number of shops specialize in selling the same quality of seafood products along the beach frequented by tourists. No individual shop dares charge more than the going price without fearing loss of business to other shops. This exemplifies ________.
    1. pure competition        
    2. monopolistic competition
    3. oligopolistic competition
    4. pure monopoly
    5. the dominant firm model
79. Under ________, the market consists of many buyers and sellers who trade over a range of prices rather than a single market price.
    1. pure competition
    2. monopolistic competition
    3. oligopolistic competition
    4. a pure monopoly
    5. the dominant firm model
80. Which of the following is  with regard to pure competition?
    1. Under pure competition, no single buyer or seller has much effect on the going market price.
    2. In a purely competitive market, marketing research is of utmost importance.
    3. In a purely competitive market, product development is the focus of most firms.
    4. Under pure competition, the market consists of many buyers and sellers who trade over a range of prices rather than a single market price.
    5. Under pure competition, the market consists of only a few large sellers.
81. The movie industry in a country is controlled by six large studios that receive 90 percent of the annual revenues from movies. This is an example of a(n) ________.
    1. pure competition
    2. monopolistic competition
    3. oligopolistic competition
    4. pure monopoly
    5. government monopoly
82. In which situation is the market dominated by one seller?
    1. pure monopoly
    2. monopolistic competition
    3. oligopolistic competition
    4. pure competition
    5. free market
83. Refer to the scenario below to answer the following question(s). 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. Considering that most young households have limited financial resources, Alden attempts to engage in target costing. "In doing this," says Milt Alden, the co-founder of Alden Electronics, "we have better control over keeping price right in line with customers." Alden manufactures a three-speed blender, its top seller, along with a five-speed blender. The hand mixers are manufactured in two variants—a small handheld mixer with two rotating beaters and another that comes with an optional stand and an attached mixing bowl. Alden's temperature-controlled skillets are manufactured in a single 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.
    1. Milt Alden uses which of the following strategies for pricing his products?
       1. basing company price on competitors' prices
       2. using everyday low pricing
       3. initiating an aggressive promotional campaign
       4. starting with customer-value considerations
       5. focusing on overall fixed costs of manufacturing
    2. If Milt Alden focuses on overall costs of manufacturing plus profit in setting product prices, which strategy would he employ?
       1. break-even pricing
       2. competition-based pricing
       3. value-added pricing
       4. cost-plus pricing
       5. good-value pricing
84. Under oligopolistic competition ________.
    1. the market consists of a single dominant seller
    2. the market consists of numerous small sellers
    3. the market consists of many buyers and sellers who trade over a range of prices rather than a single market price
    4. sellers are typically unresponsive to competitors' pricing strategies and marketing moves
    5. the market consists of only a few large sellers
85. Which of the following shows the number of units the market will buy in a given time period, at different prices that might be charged?
    1. demand curve
    2. supply curve
    3. learning curve
    4. break-even pricing
    5. target costing
86. Which of the following is  about the demand curve?
    1. A demand curve indicates the drop in the average per-unit production cost that comes with accumulated production experience.
    2. A demand curve indicates the cost per unit of output in the long run.
    3. A demand curve indicates the cost per unit of output in the short run.
    4. In a monopoly, the demand curve does not indicate the total market demand resulting from different prices.
    5. A demand curve shows the number of units the market will buy in a given time period at different prices that might be charged.
87. Bruno Servers has decided to decrease its prices on its popular higher-range servers. The company can reasonably expect ________ to increase.
    1. fixed costs
    2. variable costs
    3. demand
    4. additional value
    5. overhead costs
88. _______ refers to a measure of the sensitivity of demand to changes in price.
    1. Price elasticity
    2. A demand curve
    3. Price-value equation
    4. Marginal utility
    5. Income elasticity of demand
89. If demand hardly changes with a small change in price, the demand is ________.
    1. variable
    2. inelastic
    3. highly elastic
    4. derived
    5. negative
90. If demand changes greatly with a small change in price, the demand is ________.
    1. variable
    2. inelastic
    3. derived
    4. elastic
    5. negative
91. Dips in the economy and the instant price comparisons made possible by the Internet have contributed to ________.
    1. decreased consumer price sensitivity
    2. increased consumer price sensitivity
    3. a less direct relationship between supply and demand
    4. low brand equity for luxury goods
    5. decreased brand loyalty
92. In the aftermath of the Great Recession of 2008 to 2009, consumers ________.
    1. have become more value conscious
    2. have become less value conscious
    3. exhibit great interest in prestige pricing
    4. show no interest in price cutting
    5. rarely endorse value-for-money deals
93. When companies set prices, the government and social concerns are ________ factors affecting pricing decisions.
    1. external
    2. internal
    3. economic
    4. cultural
    5. organizational

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1.  Prices have a direct impact on a firm's bottom line.
2.  Customer perceptions of the product's value set the floor for prices.
3.  Product costs set the ceiling for prices.
4.  In customer value-based pricing, price is considered along with all other marketing mix variables before the marketing program is set.
5.  Value-based pricing uses the sellers' perception of value as the key to pricing.
6.  Using value-based pricing, a marketer would not design a product and marketing program before setting the price.
7.  Cost-based pricing is often product driven.
8.  Department stores that practice everyday low pricing typically provide frequent sale days, early-bird savings, and bonus earnings for store credit-card holders.
9.  Overhead costs are costs that do not vary with production or sales level.
10.  Cost-based pricing involves setting prices based on consumer perception of value.
11.  Average cost tends to increase with accumulated production experience.
12.  A downward-sloping experience curve is indicative of a company's rapidly increasing production costs.
13.  The simplest pricing method is cost-plus pricing, which involves adding a standard markup to the cost of the product.
14.  Markup pricing is popular because when all firms in the industry use this pricing method, prices tend to be similar, so price competition is minimized.
15.  Markup pricing is used when a firm tries to determine the price at which it will break even or make the target return it is seeking.
16.  A break-even chart shows the total cost and total revenue expected at various sales volume levels.
17.  Internal factors affecting pricing include the company's overall marketing strategy, objectives, and marketing mix.
18.   Price decisions must be coordinated with product design, distribution, and promotion decisions to form a consistent and effective integrated marketing mix program.
19.  In a pure monopoly, the market consists of many buyers and sellers who trade over a range of prices rather than a single market price.
20.   A demand curve shows the number of units the market will buy in a given time period at different prices that could be charged.
21.   If a company faces competition, its demand at different prices will depend on whether competitors' prices stay constant or change with the company's own prices.
22.  If demand changes greatly with price, the demand is inelastic.
23.  The more elastic the demand, the more it pays for the seller to raise the price.
24.   If demand is elastic rather than inelastic, sellers will consider lowering their prices.

Short Answer

1. List some important characteristics of price.
2. Why is price considered one of the most flexible elements of the marketing mix?
3. Define price. Discuss its importance.
4. Explain the concept of the price floor.
5. Explain the concept of the price ceiling.
6. Briefly describe the process of value-based pricing.
7. What is good-value pricing?
8. What is high-low pricing?
9. Define total costs.
10. Explain the significance of a downward-sloping experience curve.
11. A marketer's fixed costs are $400,000. The variable cost is $16 per unit, and the price of the product is $24 per unit. If the company wants to make a profit, how many units must it sell and at what price?
12. A marketer's fixed costs are $400,000, the variable cost is $16 per unit, and the price of the product is $24 per unit. What is the company's break-even point in dollar sales?
13. What is competition-based pricing?
14. Distinguish between value-based pricing and cost-based pricing.
15. Explain break-even pricing.
16. Who typically sets prices in large and small companies?
17. What is a pure monopoly?
18. What are the different internal factors that affect a firm's pricing decisions?
19. Compare and contrast pure competition and oligopolistic competition.
20. Briefly discuss monopolistic competition.
21. What is a demand curve? Explain its importance in the context of pricing decisions.
22. Explain price elasticity. What determines the elasticity of demand?
23. Briefly describe how economic conditions impact a firm's pricing strategies.
24. "Beyond the market and the economy, the company must consider several other factors in its external environment when setting prices." Explain this statement.