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Exam 13: Pricing Products and Services

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Question 101

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Which of the following statements about price elasticity of demand is true?

A) The more substitutes a product has, the less likely it is to be price elastic.
B) Price elasticity with unitary demand is less than 1.
C) With inelastic demand, a reduction in price increases total revenue.
D) With inelastic demand, price elasticity is less than 1.

E) B) and D)
F) C) and D)

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Question 102

Multiple Choice

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A Swedish company such as Asko that prides itself on manufacturing and marketing some of the best built and most expensive appliances in the world is using which competition-based method of pricing?

A) loss-leader pricing
B) above-market pricing
C) bait-and-switch pricing
D) customary pricing

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

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Question 103

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Lady Marion Seafood, Inc. sells 5-pound packages of Alaska salmon. Assume its variable costs per package is $30, and its fixed cost is $250,000. It wants a target profit of $38,000 on a volume of 16,000 packages. What should it charge for a 5-pound package of salmon?

The retail price of laser printers has decreased from $900 to less than $200 over several years. This is due in large part to:

The owner of a small restaurant that sells take-out fried chicken and biscuits pays $2,500 in rent each month, $500 in utilities, $750 interest on his loan, insurance premium of $200, and advertising on local bus $250 a month. A small bucket of take-out chicken, the only menu item, is priced at $9.50. Unit variable costs for the bucket of chicken are $5.50. At what level of sales of dollars of revenue will the restaurant break even?

Vending machines are a good example of what type of competition-based pricing?

Which of the following statements about penetration pricing is true?

When is skimming pricing an effective strategy?

If competitive market circumstances are such that there is almost no price competition, no product differentiation, and the only advertising that informs prospects that the product is available, then_________ must exist in this industry.

The manufacturer of a new kind of fat-free ice cream that has the consistency and taste of regular ice cream is thinking of using a skimming pricing strategy for its new product. Which of the following conditions would argue AGAINST using a skimming pricing strategy for the tasty fat-free ice cream?

The pricing model in your text, has six distinct steps in the pricing process. Considering the following list of steps in setting prices: identify pricing constraints and objectives; estimate demand and revenue;___________; select an approximate price level; set the list or quoted price; and make special adjustments to the list or quoted price.

A bottle of shampoo shrink-wrapped with a bottle of conditioner for 10 cents more than the regular price of the shampoo is an example of _______pricing.

A skimming pricing policy is likely to be most effective when:

Describe a pricing objective used by many Japanese firms.

What are the five most common deceptive pricing practices? Give an example of each one.

What is the difference between a one-price policy and a flexible-price policy?

Hallmark was the official supplier of flowers at the last Winter Olympics. It was the first time that it has participated in the Olympics. Hallmark presented each Olympic winner with a special bouquet of roses designed to resemble the Olympic torch. Consumers can buy a smaller version of this same bouquet at the Hallmark website for $74.95. The Olympic bouquet that consumers can buy contains two dozen yellow roses, yet you can buy two dozen yellow roses for less than $35 at most supermarkets. If Hallmark is treating the Olympic bouquet as an innovative product, then it is using which demand-oriented approach to pricing?

The competitive market situation in which the few sellers are sensitive to one another's prices is called:

All of the following would be considered pricing constraints, except

Your local instant photocopying service charges 10 cents a copy for copies up to a quantity of 25, 9 cents a copy for 26 to 100, and 8 cents a copy for 101 or more. What kind of adjustment to list or quoted prices is the photocopying service using?