The University of Oklahoma

MKT 3013

Ch. 10

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

2. Price is the only element in the marketing mix that produces    .

3.                    is an important element in the marketing mix. It is the only element that does not represent costs.

4. Consumer perceptions of the product's value set the    for prices.

5. Product costs set a(n)             to a product's price.

6. Which of the following is a customer-oriented approach to pricing?

7.                    uses buyers' perceptions of what a product is worth, not the seller's cost, as the key to pricing. -

8. In                   , price is considered along with the other marketing mix variables before the marketing program is set.

9. Value-based pricing is the reverse process of        .

10. With                  , price is set to match consumers' perceptions of product value. -

11. Measuring                can be difficult. A company might conduct surveys or experiments to test this in the different products they offer.

12. Underpriced products sell very well, but they produce less revenue than they would have if price were raised to the                  level.

13. If a seller charges               than the buyer's perceived value, the company's sales will     .

14. Some companies have adopted a         strategy, offering just the right combination of quality and good service at a fair price.

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15. Wal-Mart is famous for using what important type of value pricing?

16.                    involves charging a constant, everyday low price with few or no temporary price discounts.

17.                    involves attaching features and services to differentiate a company's offers and to support charging higher prices..

18.                    is a company's power to escape price competition and to justify higher prices and margins.

19. To maintain and increase a company's          , a firm must retain or build the value of its marketing offer.

20. When there is price competition, many companies adopt    rather than cutting prices to match competitors.

21. Ryanair offers free flights to a quarter of its customers and rock-bottom prices to many of its other customers. Ryanair then charges for all extra services, such as baggage handling and in-flight refreshments. Which of the following best describes Ryanair's pricing method?

22.                    pricing involves setting prices based on the costs for producing, distributing, and selling the product plus a fair rate of return for the company's efforts and risks.

23. Fixed costs                 as the number of units produced increases.

24. Costs that do not vary with production or sales level are referred to as .

25. Rent, electricity and executive salaries are examples of     .

26. Costs that vary directly with the level of production are referred to as  .

27.                    are the sum of the             and                   for any given level of production.

28. SRAC is the acronym for which concept related to costs at different levels of production?

29. As production workers become better organized and more familiar with equipment, the average cost per unit decreases. This is called the     .

30. With a higher volume of product, most companies can expect to   .

31. The experience curve reveals that          .

32. When a downward-sloping experience curve exists, a company should usually the selling price of that product in order to bring in higher revenues.
33. Which of the following is a risk a company takes when building a strategy around the experience curve?

34. A company building its pricing strategy around the experience curve would be likely to         .

35. The company designs what it considers to be a good product, totals the expenses of making the product, and sets a price that adds a standard mark-up to the cost of the product. This approach to pricing is called   .

36. Lawyers, accountants, and other professionals typically price by adding a standard markup for profit. This is known as                .

37. The simplest pricing method is            .

38. Which of the following is a reason why markup pricing is NOT practical?

39. One reason               remains popular is that sellers are more certain about costs than about demand.

40. Price competition is minimized when all firms in an industry use which pricing method?

41. Many people feel that            pricing is fairer to both buyers and sellers. Sellers earn a fair return on their investment but do not take advantage of buyers when buyers' demand becomes great.

42. Which of the following is a cost-based approach to pricing?

43. Break-even pricing, or a variation called           , is when the firm tries to determine the price at which it will break even or make the profit it is seeking.

44. Target profit pricing uses the concept of a         , which shows the total cost and total revenue expected at different sales volume levels.

45. The break-even volume is the point at which        .

46.                    pricing works only if that price actually brings in the expected level of sales.

47. Which of the following statements about break-even analysis is?
48. As a manufacturer increases price, the         drops.

49. Which of the following is an external factor that affects pricing decisions?

50.                    that influence pricing decisions include the nature of the market and demand and competitors' prices.

51. Companies may set prices low for which of the following reasons EXCEPT      .

52. In order to form a consistent and effective integrated marketing program, price decisions should be coordinated with each of the following EXCEPT .

53. With target costing, marketers will first           and then                 .

54. Price setting is usually determined by          in small companies.

55. Price setting is usually determined by          in large companies.

56. In industrial markets,              typically has the final say in setting the pricing objectives and policies of a company.

57. In industries in which pricing is a key factor,           often set the best prices or help others in setting them.

58. Under                 , the market consists of many buyers and sellers trading in a uniform commodity such as wheat, copper, or financial securities.

59. Under                 , the market consists of many buyers and sellers who trade over a range of prices rather than a single market price.

60. Under                 , the market consists of a few sellers who are highly sensitive to each other's pricing and marketing strategies.

61. Nonregulated monopolies are free to price at what the market will bear. However, they do not always charge the full price for a number of reasons. What is NOT one of those reasons?

62. The relationship between the price charged and the resulting demand level can be shown as the    .

63. Consumers usually perceive higher-priced products as      .

64. Why do marketers consider prestige goods to be an exception to the typical demand curve?

65. Which of the following is about the demand curve?

66. When Gibson Guitar Corporation, long known for its high quality instruments, lowered its prices to compete more effectively with Japanese rivals, the company sold fewer guitars. Which of the following best explains this?

67.                    describes how responsive demand will be to a change in price.

68. If demand hardly changes with a small change in price, we say the demand is .

69. If demand changes greatly with a small change in price, we say the demand is .

70. Price elasticity of demand is             divided by                  .
71. Buyers are less price sensitive in all of the following situations EXCEPT        .

72. The less                 the demand, the              it pays for the seller to raise the price.

73. Each of the following economic factors can have a strong impact on a firm's pricing strategy EXCEPT

                  .

74. A company should set prices that will allow           to receive a fair profit.

75. When companies set prices, the government and social concerns are two   affecting pricing decisions.

76. Amos Zook, an Amish farmer, sells organically grown produce. Often he will trade some of his produce for dairy products produced by other Amish farmers. The sum of the values that others exchange is called a            .

77. Trader Joe's offers an assortment of exclusive gourmet products at impossibly low prices. These prices are not limited-time offers or special discounts. Instead, they reflect Trader Joe's   strategy.

78. Jimmy's Hardware, an independent local retailer, is losing business to Wal-Mart. This is most likely because he cannot match Wal-Mart's pricing strategy of         .

79. When McDonald's and other fast food restaurants offer "value menu" items at surprisingly low prices, they are using           .

80. Consumers who have less time and patience for watching for supermarket specials and clipping coupons would most likely prefer  .

81. Xbox 360 decides to add a free subscription to XBOX magazine with every game bought in an effort to differentiate its offering from PS3 games. This is an example of     .

82. The long-run average cost curve (LRAC) helps the producer understand which of the following?
83. Assume a manufacturer with fixed costs of $100,000, a variable cost of $10, and expected sales of 50,000 units wants to earn a 20-percent markup on sales. What is the manufacturer's markup price?

84. General Motors prices its automobiles to achieve a 15 to 20 percent profit on its investment. This approach is called               .

85. A company faces fixed costs of $100,000 and variable costs of $8.00/unit. They plan to directly sell their product to the market for $12.00. How many units must they produce and sell to break even?

86. Ecstasy Pharmaceuticals faces fixed costs with their new drug of $1,000,000. The company sells the drug in bottles of 50 pills for $10.00. They estimate that they must sell 200,000 bottles to break even. What is the total cost to produce a bottle of 50 pills?

87. A manufacturer is trying to determine its break-even volume.

$10, and expected sales of 50,000 units, what should the manufacturer's unit cost be to break even?

88. As a manufacturer decreases price,          volume increases.

89. P&G surveyed the market and identified an unserved segment of electric toothbrush market. Using these results, they created Spinbrush. The unorthodox order of this marketing mix decision is an example of .

90. PoolPak produces climate-control systems for large swimming pools. The company's customers are more concerned about service support for maintaining a system than its initial price. PoolPak may use this knowledge to become more competitive through    .

91. By pledging to be a leader in providing clean, renewable energy sources and developing products and services that help consumers protect the environment, Green Mountain Power competes successfully against "cheaper" brands that focus on more price-sensitive consumers.Green Mountain Power has the firm belief that even kilowatt- hours can be      .

92. In Vin del Mar, Chile, there are a dozen stores specializing in selling the same quality of seafood products on one street. An individual store dare not charge more than the going price without the risk of losing business to the other stores that are selling the fish at a common price. This is an example of what type of market?

93. Ascot Tires has decided to decrease its prices. The company can expect that for their product will increase.

94. If Canon Camera Company follows a high-price, high-margin strategy, what will competitors such as Nikon, Minolta, and Pentax most likely do?

95. If Canon Camera Company follows a low-price, low-margin strategy for a product, what will competitors most likely do?

96. Companies are fortunate to have demand that is more   because they may be able to set higher prices.

97. If demand falls by 1 percent when price is increased by 2 percent, then .

Refer to the scenario below to answer the following questions.

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.

In considering that most young households have limited financial resources, Alden has attempted to engage in target costing. "In doing this," Milt Alden stated, "we have better control over keeping price right in line with customers."

Alden manufactures a three-speed blender, its top seller, and a five-speed blender. The hand mixers are manufactured in two styles?a small hand-held mixer with two rotating beaters and a similar style that comes with an optional stand and attached mixing bowl. Alden's temperature-controlled skillets are manufactured in one 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."

98. 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 uses which of the following strategies?

99. Milt Alden uses a target costing strategy. Which of the following is he most likely to do in executing this strategy?

100. If Alden raises the price on the handheld mixer by 2 percent and quantity demanded falls by 10 percent what is the price elasticity of demand?

101. When faced with price competition cutting prices is often not the best answer.

102. Prices have a direct impact on a company's bottom line.

103. Demand and consumer value perceptions set the floor for prices.

104. Product costs set a floor to the price; consumer perceptions of the product's value set the ceiling.

105. Value-based pricing is being used when costs vary directly with the level of product.

106. Value-based pricing uses the company's perception of value.

107. Value-based pricing is the reverse of cost-based pricing.