Final exam pool items (Chs. 9, 11, 12, 13, 14, 15 & 17 not 18)
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ANS: E
If demand is elastic, price increases will decrease demand by a larger amount, reducing total revenue. PTS: 1 REF: 259-260 OBJ: 17-3 TYPE: App TOP: AACSB Reflective Thinking | TB&E Model Pricing | TB&E Model Strategy 44. A bakery supply catalog sells 5-pound bags of moist apricots and cranberries, sweet dates, bits of pineapple, and candied cherries to be used in fruitcakes. Each bag costs $24.95. If the price of cranberries were to increase by 5 percent, it would have no effect on the price of the fruit mix because cranberries are only one of several fruits in the package. The demand for cranberries for this particular use is:
ANS: D
The decrease in the price will not significantly influence the price of the fruit mix. PTS: 1 REF: 259-260 OBJ: 17-3 TYPE: App TOP: AACSB Reflective Thinking | TB&E Model Pricing | TB&E Model Strategy 45. For about a year, AMD representatives have told journalists that they do not believe that AMD will have to react in any way to the launch of Intel's Core 2 Duo processor. But just a week before Intel’s introduction of this product, AMD reduced the price of its desktop processors by 47 percent. AMD is hoping that demand for its processors will be:
ANS: A If demand is elastic, price decreases will increase demand by a larger amount and increase total revenue. PTS: 1 REF: 259-260 OBJ: 17-3 TYPE: App TOP: AACSB Reflective Thinking | TB&E Model Pricing | TB&E Model Product 46. Procter & Gamble dropped the price of Pringles Potato Chips in the Southeast due to price competition and consumer demand. As a result of the price reduction, Procter & Gamble increased unit sales and earnings by 10 percent due to:
ANS: C When Procter & Gamble reduced prices, sales and revenues increase. This shows that the demand for chips is elastic. PTS: 1 REF: 260 OBJ: 17-3 TYPE: App TOP: AACSB Reflective Thinking | TB&E Model Pricing | TB&E Model Strategy 47. _____ occurs when an increase in sales exactly offsets a decrease in price so that total revenue remains exactly the same.
ANS: C PTS: 1 REF: 260 OBJ: 17-3 TYPE: Def TOP: AACSB Reflective Thinking | TB&E Model Strategy
ANS: D Under unitary elasticity, the increase in demand exactly offsets the decrease in price. 420 $10 and 525 $8 = $4,200. PTS: 1 REF: 260 OBJ: 17-3 TYPE: App TOP: AACSB Reflective Thinking | TB&E Model Pricing | TB&E Model Strategy 49. When price decreases and total revenue falls, demand is:
ANS: B PTS: 1 REF: 260 OBJ: 17-3 TYPE: Def TOP: AACSB Reflective Thinking | TB&E Model Strategy
ANS: E Inelastic demand is characterized by price and revenue both falling. PTS: 1 REF: 260 OBJ: 17-3 TYPE: App TOP: AACSB Reflective Thinking | TB&E Model Pricing | TB&E Model Strategy 51. Critics claim bank ATMs take advantage of the _____ of customers who suffer a poverty of time and have a strong need for convenience.
ANS: B
Customers are paying a premium for the convenience of ATM use. PTS: 1 REF: 260 OBJ: 17-3 TYPE: App TOP: AACSB Reflective Thinking | TB&E Model Pricing | TB&E Model Customer
ANS: A The first price is $59.99 with total revenue of $5,399.10; the second price is $44.95 with total revenue of $6,517.75. Therefore, price dropped, and total revenue went up. PTS: 1 REF: 260 OBJ: 17-3 TYPE: App TOP: AACSB Reflective Thinking | TB&E Model Pricing | TB&E Model Strategy 53. Which of the following factors does NOT directly affect the elasticity of demand?
ANS: B
Inputs at time of manufacture only indirectly affect the demand, if at all. PTS: 1 REF: 260 OBJ: 17-3 TYPE: Comp TOP: AACSB Reflective Thinking | TB&E Model Pricing 54. _____ use complex mathematical software to profitably fill unused capacity.
ANS: A PTS: 1 REF: 261 OBJ: 17-4 TYPE: Def TOP: AACSB Reflective Thinking | TB&E Model Pricing | TB&E Model Online/Computer 55. Yield management systems are used to:
ANS: B PTS: 1 REF: 261 OBJ: 17-4 TYPE: Def TOP: AACSB Reflective Thinking | TB&E Model Customer | TB&E Model Online/Computer 56. Hostlight Industries operate a chain of moderately-priced motels across the United States. There are many businesses that compete with them for tourist dollars, and some nights during the tourist season their motels are only half full. Other nights, they have to turn away guests because there are no vacancies. Assuming the quality of the rooms and the services provided by the motels remain the same, Hostlight Industries could use _____ to fill unused rooms.
ANS: A A yield management system is complex mathematical software used to profitably filled unused capacity. PTS: 1 REF: 261 OBJ: 17-4 TYPE: App TOP: AACSB Reflective Thinking | TB&E Model Customer | TB&E Model Online/Computer 57. Which of the following statements about yield management systems (YMS) is true?
ANS: E
YMS was first used in the airline industry, but it is now used by automobile manufacturers to make use of underutilized capacity. PTS: 1 REF: 261 OBJ: 17-4 TYPE: Comp TOP: AACSB Reflective Thinking | TB&E Model Pricing | TB&E Model Online/Computer 58. Which of the following is most likely to be a variable cost for an Internet retailer that sells spices, herbs, and seasonings to consumers?
ANS: E
Postage is the only item that varies depending upon the amount of units sold. PTS: 1 REF: 261 OBJ: 17-5 TYPE: App TOP: AACSB Reflective Thinking | TB&E Model Strategy 59. A cost that changes with the level of output is called a(n) _____ cost.
ANS: B PTS: 1 REF: 262 OBJ: 17-5 TYPE: Def TOP: AACSB Reflective Thinking | TB&E Model Strategy 60. Craftarium, Inc. makes and sells beaded purses, jackets, slippers, and other fashion items. Which of the following is the BEST example of one of its fixed costs?
ANS: A The payment on leased equipment remains the same, no matter how many beaded items are produced and, therefore, is a fixed cost. PTS: 1 REF: 262 OBJ: 17-5 TYPE: App TOP: AACSB Reflective Thinking | TB&E Model Pricing 61. _____ costs do not change as output is increased or decreased.
ANS: C PTS: 1 REF: 262 OBJ: 17-5 TYPE: Def TOP: AACSB Reflective Thinking | TB&E Model Strategy
ANS: B A cost that changes with the level of output is called a variable cost. PTS: 1 REF: 262 OBJ: 17-5 TYPE: App TOP: AACSB Reflective Thinking | TB&E Model Pricing 63. Mitch owns a pet boarding kennel. The monthly payment on the land he purchased for his kennel, the mortgage on his small office building, and his business license are all examples of _____ costs.
ANS: C
Fixed costs do not change as output changes. PTS: 1 REF: 262 OBJ: 17-5 TYPE: App TOP: AACSB Reflective Thinking | TB&E Model Strategy
ANS: A Marginal cost is the change in total costs associated with a one-unit change in output. PTS: 1 REF: 262 OBJ: 17-5 TYPE: App TOP: AACSB Reflective Thinking | TB&E Model Pricing | TB&E Model Strategy 65. _____ cost is the change in total costs associated with a one-unit change in output.
ANS: D PTS: 1 REF: 262 OBJ: 17-5 TYPE: Def TOP: AACSB Reflective Thinking | TB&E Model Strategy 66. When a seller determines the selling price by adding to cost an amount for profit and expenses not previously accounted for, the seller is using _____ pricing.
ANS: E PTS: 1 REF: 262 OBJ: 17-5 TYPE: Def TOP: AACSB Reflective Thinking | TB&E Model Pricing | TB&E Model Strategy 67. The most popular method used by wholesalers and retailers in establishing a sales price is _____ pricing.
ANS: A PTS: 1 REF: 262 OBJ: 17-5 TYPE: Comp TOP: AACSB Reflective Thinking | TB&E Model Pricing | TB&E Model Strategy
ANS: C Markup is selling price minus cost: $1,600 - $800 = $800. PTS: 1 REF: 262 OBJ: 17-5 TYPE: App TOP: AACSB Reflective Thinking | TB&E Model Pricing 69. An independent retailer of specialty kitchen items wants to determine what price she should put on a set of plastic wine glasses. They cost her $7. She desires a markup of 30 percent based on selling price. Which of the following is closest to the price she should charge her customers?
ANS: D
Price = Cost + Markup Price = 7.00 + .3 Price = $10 PTS: 1 REF: 262 OBJ: 17-5 TYPE: App TOP: AACSB Reflective Thinking | TB&E Model Pricing 70. An educational toy store can buy a world globe for $30. If the store owner sells the globe for $45, what is the markup based on the selling price?
ANS: D
Price - Cost = Markup $45 - $30 = $15 $15 ÷ $45 = 33% markup PTS: 1 REF: 262 OBJ: 17-5 TYPE: App TOP: AACSB Reflective Thinking | TB&E Model Pricing 71. A distributor of bakery suppliers sells 5-pound bags of moist apricots and cranberries, sweet dates, bits of pineapple, and candied cherries for $24.95 to be used in fruitcakes. Since the amount of cranberries purchased depends on how many bags of fruit are demanded, the cost of the cranberries is a:
ANS: A PTS: 1 REF: 262 OBJ: 17-5 TYPE: App TOP: AACSB Reflective Thinking | TB&E Model Strategy 72. What is the biggest advantage associated with markup pricing?
ANS: A
What could be easier than adding a percentage to cost to get a price? PTS: 1 REF: 262 OBJ: 17-5 TYPE: Comp TOP: AACSB Reflective Thinking | TB&E Model Pricing | TB&E Model Strategy 73. Which of the following describes a disadvantage associated with markup pricing?
ANS: B
Because the method does not explicitly consider demand, overpricing and/or underpricing can occur. PTS: 1 REF: 262 OBJ: 17-5 TYPE: Comp TOP: AACSB Reflective Thinking | TB&E Model Pricing | TB&E Model Strategy 74. _____ is the practice of marking up prices by 100 percent (or doubling the cost to set the selling price).
ANS: B PTS: 1 REF: 262 OBJ: 17-5 TYPE: Def TOP: AACSB Reflective Thinking | TB&E Model Pricing
ANS: A Keystoning is the practice of marking up prices by 100 percent (or doubling the cost to set the selling price). PTS: 1 REF: 262 OBJ: 17-5 TYPE: Def TOP: AACSB Reflective Thinking | TB&E Model Pricing 76. Profit maximization occurs when:
ANS: E PTS: 1 REF: 263 OBJ: 17-5 TYPE: Def TOP: AACSB Reflective Thinking | TB&E Model Strategy 77. _____ is the extra revenue associated with selling an additional unit of output.
ANS: B PTS: 1 REF: 263 OBJ: 17-5 TYPE: Def TOP: AACSB Reflective Thinking | TB&E Model Strategy 78. As long as the revenue of the last unit produced and sold is greater than the cost of the last unit produced and sold, a firm should:
ANS: A
Diminishing returns have not set in, so the firm should continue manufacturing. PTS: 1 REF: 264 OBJ: 17-5 TYPE: Comp TOP: AACSB Reflective Thinking | TB&E Model Strategy 79. The point at which marginal cost and marginal revenue are equal always results in:
ANS: D
Until the point where MC = MR, each unit of sales has contributed to additional profit; therefore, profit, not revenue or costs, has been maximized at MC = MR. PTS: 1 REF: 263-264 OBJ: 17-5 TYPE: Comp TOP: AACSB Reflective Thinking | TB&E Model Strategy 80. _____ determine what sales volume must be reached for a product before the company's total costs equal total revenue and no profits are earned.
ANS: C PTS: 1 REF: 264 OBJ: 17-5 TYPE: Def TOP: AACSB Reflective Thinking | TB&E Model Strategy 81. Keystoning is:
ANS: A PTS: 1 REF: 263 OBJ: 17-6 TYPE: Def TOP: AACSB Reflective Thinking | TB&E Model Strategy 82. The typical break-even model assumes a given fixed cost and a:
ANS: E PTS: 1 REF: 264 OBJ: 17-5 TYPE: Def TOP: AACSB Reflective Thinking | TB&E Model Strategy 83. Bill Needles makes and sells customized silver belt buckles for $225 each. He has determined that his fixed costs are $8,000, and his average variable costs per buckle are $145. What is his fixed cost contribution per buckle?
ANS: B $225 – $145 PTS: 1 REF: 264 OBJ: 17-5 TYPE: App TOP: AACSB Reflective Thinking | TB&E Model Pricing 84. Bill Needles makes and sells customized silver belt buckles for $225 each. He has determined that his fixed costs are $8,000, and his average variable costs per buckle are $145. What is his break-even point in units?
ANS: D ($8,000)/($225 – $145) PTS: 1 REF: 264 OBJ: 17-5 TYPE: App TOP: AACSB Reflective Thinking | TB&E Model Pricing 85. Furr Friends sells kits for making personalized grave markers for pets. The company sells each kit for $22. The average variable cost for each kit is $13, and the total annual fixed costs for plant operation are $78,300. What is the break-even point in units?
ANS: C Break-even quantity equals the total fixed costs ($78,300) divided by the fixed cost contribution per unit ($22 – $13 = $9). PTS: 1 REF: 264 OBJ: 17-5 TYPE: App TOP: AACSB Reflective Thinking | TB&E Model Pricing 86. Regency, Inc. makes disposable cap and gown sets for graduations. Each cap and gown set sells for $15. The average variable cost for manufacturing 10 cap and gown sets is $100. Total fixed costs for the year equal $65,000. Calculate the break-even point in units.
ANS: E Break-even = $65,000/[15 – (100/10)] = 13,000 PTS: 1 REF: 264 OBJ: 17-5 TYPE: App TOP: AACSB Reflective Thinking | TB&E Model Pricing 87. Ceylon Express sells bottled pasteurized tea to retailers. It has the following revenues and costs:
What is the annual break-even point in units for the company?
ANS: B Break-even quantity is the total fixed costs ($50,000) divided by fixed cost contribution per unit ($.20). PTS: 1 REF: 264 OBJ: 17-5 TYPE: App TOP: AACSB Reflective Thinking | TB&E Model Pricing 88. Chulo Ibsen makes and sells hand-forged wrought iron firescreens for $125 each. He has determined that his fixed costs are $8,000, and his average variable costs per firescreen are $45. What is his break-even point in dollars?
ANS: B [$8,000)/($125 – $45)] $125 = $12,500 PTS: 1 REF: 264 OBJ: 17-5 TYPE: App TOP: AACSB Reflective Thinking | TB&E Model Pricing 89. MusicMatch Central makes reproduction jukeboxes, which it sells to baby boomers for $500. It estimates its average variable costs to be $200 per jukebox. It figures its fixed costs to be $600,000 per year. How many jukeboxes does it have to sell to break even?
ANS: A Break-even quantity equals the total fixed costs ($600,000) divided by the fixed cost contribution per unit ($500 - $200 = $300). PTS: 1 REF: 264 OBJ: 17-5 TYPE: App TOP: AACSB Reflective Thinking | TB&E Model Pricing 90. Which of the following statements describes a limitation associated with break-even analysis?
ANS: A
Not all costs are easily categorized because a cost may be fixed when viewed in the short term but variable when considered over a longer period of time. PTS: 1 REF: 265 OBJ: 17-5 TYPE: Comp TOP: AACSB Reflective Thinking | TB&E Model Strategy
ANS: B Loude's analyst only includes company costs and does not consider consumer demand. PTS: 1 REF: 259 OBJ: 17-5 TYPE: App TOP: AACSB Reflective Thinking | TB&E Model Strategy 92. Which of the following statements about pricing strategies throughout the product life cycle is FALSE?
ANS: E
With inelastic demand, prices are set high at introduction. PTS: 1 REF: 265 OBJ: 17-6 TYPE: Comp TOP: AACSB Reflective Thinking | TB&E Model Pricing | TB&E Model Product
ANS: B A high initial price is used when a new product faces little competition, needs to recoup R&D costs, and has inelastic demand. Prices will fall slightly when entering the growth stage. PTS: 1 REF: 265-266 OBJ: 17-6 TYPE: App TOP: AACSB Reflective Thinking | TB&E Model Pricing | TB&E Model Strategy 94. In the mature and highly competitive furniture industry, you would expect furniture manufacturers to engage in:
ANS: A
In the maturity stage, with heavy competition, below-market pricing leads to price wars. PTS: 1 REF: 266 OBJ: 17-6 TYPE: App TOP: AACSB Reflective Thinking | TB&E Model Pricing | TB&E Model Product
ANS: D The pizza manufacturer is passing a large portion of the profit margin on to the wholesalers and retailers, not maximizing profit margin for itself. PTS: 1 REF: 267 OBJ: 17-6 TYPE: App TOP: AACSB Reflective Thinking | TB&E Model Strategy 96. Kroger supermarkets will place well-known brands on the shelves at high prices while offering their own Kroger brand at lower prices. This practice is an example of:
ANS: B Selling against the brand with private labels causes sales of the higher-priced brands to decline. PTS: 1 REF: 267 OBJ: 17-6 TYPE: App TOP: AACSB Reflective Thinking | TB&E Model Pricing | TB&E Model Strategy 97. Manufacturers can regain some control over the price their products are sold for at the retail level by:
ANS: E PTS: 1 REF: 267 OBJ: 17-6 TYPE: Comp TOP: AACSB Reflective Thinking | TB&E Model Pricing | TB&E Model Distribution 98. Which of the following statements about the Internet is true?
ANS: C
The Internet has shifted some, but not all, shopping power to consumers. Consumer reviews vary in quality. Fraud is a huge problem. PTS: 1 REF: 268 OBJ: 17-6 TYPE: Comp TOP: AACSB Reflective Thinking | TB&E Model Pricing | TB&E Model Online/Computer | TB&E Model Strategy 99. Shopping bots:
ANS: D PTS: 1 REF: 267 OBJ: 17-6 TYPE: Def TOP: AACSB Reflective Thinking | TB&E Model Pricing | TB&E Model Online/Computer | TB&E Model Strategy
ANS: E See ski resort example in text. PTS: 1 REF: 268 OBJ: 17-6 TYPE: App TOP: AACSB Reflective Thinking | TB&E Model Pricing | TB&E Model Promotion 101. When pricing is used as part of a promotion strategy, it:
ANS: A PTS: 1 REF: 268 OBJ: 17-6 TYPE: Comp TOP: AACSB Reflective Thinking | TB&E Model Pricing | TB&E Model Promotion
ANS: A Price is used here as a promotional tool to increase consumer interest PTS: 1 REF: 268 OBJ: 17-6 TYPE: App TOP: AACSB Reflective Thinking | TB&E Model Pricing | TB&E Model Promotion 103. Many consumers, especially when faced with an uncertain purchase decision, think that a high price:
ANS: A
Numerous studies have shown that consumers equate high price with high quality. PTS: 1 REF: 268-269 OBJ: 17-6 TYPE: Comp TOP: AACSB Reflective Thinking | TB&E Model Pricing | TB&E Model Product 104. Marketing managers who attempt to raise the quality image of their product by selling it at high prices are following a(n) _____ strategy.
ANS: D
Prestige pricing strategy sets high prices to connote high product quality. PTS: 1 REF: 269 OBJ: 17-6 TYPE: Def TOP: AACSB Reflective Thinking | TB&E Model Pricing | TB&E Model Strategy
ANS: C Prestige pricing is the charging of a higher price to help promote high quality. PTS: 1 REF: 269 OBJ: 17-6 TYPE: App TOP: AACSB Reflective Thinking | TB&E Model Pricing | TB&E Model Strategy 106. Prestige pricing:
ANS: B
Actually, prestige pricing emphasizes all the intangible considerations buyers make when purchasing. PTS: 1 REF: 269 OBJ: 17-6 TYPE: Def TOP: AACSB Reflective Thinking | TB&E Model Pricing | TB&E Model Strategy 107. The dimensions of quality that are important to consumers include:
ANS: E PTS: 1 REF: 269 OBJ: 17-6 TYPE: Comp TOP: AACSB Reflective Thinking | TB&E Model Product 108. The advertisements for Bernard Hinault brand bicycles claim that it is the most expensive bicycle in the world. This is an example of _____ pricing.
ANS: B Prestige pricing strategy sets high prices to connote high product quality and exclusiveness. PTS: 1 REF: 269 OBJ: 17-6 TYPE: App TOP: AACSB Reflective Thinking | TB&E Model Pricing | TB&E Model Promotion 109. Petra knows little about cooking and does not want to spend the time to learn how to make a quiche. However, she has been asked to bring a quiche to an office retirement party. Not wanting to make a poor choice, she is likely to:
ANS: C Most consumers equate price and quality. PTS: 1 REF: 269 OBJ: 17-6 TYPE: App TOP: AACSB Reflective Thinking | TB&E Model Pricing | TB&E Model Product 110. Kables Optic builds quality binoculars, which have innovative components (such as water resistance) and superior durability. Kables Optic has managed to keep its price lower than its competitors. However, Kables's sales have been disappointing. For a fast and simple remedy, Kables should:
ANS: B The price needs to fit the product quality for a more cohesive image. PTS: 1 REF: 269 OBJ: 17-6 TYPE: App TOP: AACSB Reflective Thinking | TB&E Model Pricing | TB&E Model Customer Directory: ~ecarter2 ~ecarter2 -> SP14 mktg 490 case analysis – product/brand strategy – samsung electronics ~ecarter2 -> The menu of mktg 490 cases [Dr. Carter] ~ecarter2 -> Real-world Download 3.11 Mb. Share with your friends:
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