Flexible element of a retailer's strategy mix is. A merchandise assortment



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Chapter 17

1) The sensitivity of consumers to price changes is measured by the ________.

A) law of demand

B) sales to price coefficient

C) coefficient of elasticity

D) price elasticity of demand

Answer: D

Diff: 2 Page Ref: 466

Skill: Terminology/Concept
2) A relatively small percentage change in the price of a computer results in large percentage changes in the number of units purchased for a retailer. The price elasticity of demand for computers can be described as ________.

A) price elastic

B) unitary elasticity

C) price inelastic

D) low

Answer: A



Diff: 1 Page Ref: 466

Skill: Terminology/Concept


3) When the price elasticity of demand is high and prices go up, total ________.

A) revenues stay the same

B) revenues decline

C) revenues increase

D) profits increase

Answer: B

Diff: 2 Page Ref: 466

Skill: Terminology/Concept


4) When the price elasticity of demand is unitary and prices go down, total ________.

A) revenues stay the same

B) revenues decline

C) revenues increase

D) profits increase

Answer: A

Diff: 1 Page Ref: 466

Skill: Terminology/Concept


5) Price elasticity of demand is negative since ________.

A) consumers are generally price conscious

B) quantities sold decline as prices increase

C) there are few status-oriented consumers

D) most retailers use markup pricing

Answer: B

Diff: 2 Page Ref: 466

Skill: Terminology/Concept

6) Horizontal price fixing involves an agreement ________.

A) to charge retail firms lower prices in areas with an undesirable competitor

B) by any channel member not to sell merchandise below cost

C) among manufacturers, among wholesalers, or among retailers to set prices

D) by retailers to charge the price level suggested by manufacturers or wholesalers

Answer: C

Diff: 1 Page Ref: 468

Skill: Terminology/Concept


7) In vertical price fixing, ________.

A) channel members conspire to set retail prices at given levels

B) channel members agree not to sell merchandise below their cost

C) retailers have no intention of selling advertised goods

D) manufacturers or wholesalers are able to control the retail prices of their goods and services

Answer: D

Diff: 1 Page Ref: 468-469

Skill: Terminology/Concept


8) The intent of vertical price-fixing legislation was to protect ________.

A) large retail chains

B) small manufacturers

C) small, full-service retailers

D) final consumers

Answer: C

Diff: 2 Page Ref: 469

Skill: Terminology/Concept


9) Manufacturers and wholesalers can legally control retail prices by ________.

A) charging price-cutting retailers higher prices

B) limiting sales to interstate commerce

C) using consignment selling

D) refusing to sell to price-cutting retailers

Answer: C

Diff: 2 Page Ref: 469

Skill: Terminology/Concept


10) Price-discrimination legislation is designed to limit the ability of ________.

A) retailers to charge less than a manufacturer's or wholesaler's suggested list price

B) manufacturers and wholesalers to grant large discounts or favorable terms to large retailers when the discount could not be justified by cost savings

C) manufacturers, wholesalers, and retailers from conspiring to fix retail prices

D) manufacturers from setting artificially-low prices with the intent of destroying competition

Answer: B

Diff: 2 Page Ref: 469

Skill: Terminology/Concept

11) Price discrimination is legal under the Robinson-Patman Act when ________.

A) different brand names are placed on a product

B) lower prices are offered in the form of favorable purchase terms (such as credit allowances)

C) a large customer threatens to cancel an order unless the seller reduces its price

D) price differences are equal to or less than a supplier's cost savings

Answer: D

Diff: 1 Page Ref: 469

Skill: Terminology/Concept


12) In predatory pricing, large retailers attempt to destroy smaller retailers by ________.

A) vertical integration

B) conspiring with manufacturers to refuse to sell to smaller retailers

C) selling goods at very low prices (sometimes even below cost)

D) providing free warranties with selected goods

Answer: C

Diff: 1 Page Ref: 470

Skill: Terminology/Concept


13) Retailers typically use loss leaders to ________.

A) increase store traffic

B) switch customers to other goods with higher profit margins

C) increase their bargaining power with select suppliers

D) practice opportunistic buying

Answer: A

Diff: 1 Page Ref: 420

Skill: Terminology/Concept


14) Unit pricing laws are necessary because of ________.

A) deceptive price advertising by retailers

B) scanning and the Universal Product Code

C) item-price removal by supermarket chains

D) the presence of many different-sized packages

Answer: D

Diff: 2 Page Ref: 470

Skill: Terminology/Concept


15) Item price removal enables supermarkets to ________.

A) mark prices for goods on shelves or signs and not on individual items

B) charge the higher of two prices, if two prices are on a single package

C) sell goods for below cost if they are matching a nearby competitor

D) selectively mark prices on "key" items only

Answer: A

Diff: 1 Page Ref: 470

Skill: Terminology/Concept

16) A retailer typically has no intention of selling a promoted good or service in ________.

A) unit pricing

B) item price removal

C) price discrimination

D) bait-and-switch advertising

Answer: D

Diff: 1 Page Ref: 471

Skill: Terminology/Concept


17) Which strategy does not enable a retailer to control retail prices?

A) stocking private brands

B) selling gray market goods

C) selling pre-sold manufacturer brands

D) centralizing purchases with few manufacturers

Answer: C

Diff: 2 Page Ref: 471

Skill: Terminology/Concept


18) In selling against the brand, ________.

A) manufacturer brands are given secondary shelf-space locations

B) retailers require slotting allowances from manufacturers for shelf space

C) retailers disparage manufacturer brands

D) retailers charge artificially high prices on manufacturer brands in order to sell their own private labels

Answer: D

Diff: 1 Page Ref: 471

Skill: Terminology/Concept


19) In price guarantees, a manufacturer protects a retailer by ________.

A) indemnifying it for any antitrust action against the firm caused by the manufacturer's illegal action

B) refunding the difference if a retailer must lower its retail price

C) offering to sell its private-label merchandise if required

D) refusing to sell to price-cutting retailers

Answer: B

Diff: 1 Page Ref: 471

Skill: Terminology/Concept


20) Individual retailers have no control over the setting of retail prices in ________.

A) deregulated market pricing

B) market pricing

C) administered pricing

D) government-controlled pricing

Answer: B

Diff: 1 Page Ref: 471-472

Skill: Terminology/Concept

21) A retailer able to develop a strongly differentiated retail mix can utilize ________.

A) pricing at the market

B) pricing below the market

C) deregulated market pricing

D) administered pricing

Answer: D

Diff: 1 Page Ref: 472

Skill: Terminology/Concept


22) An aggressive low-price strategy designed to sell a high volume of goods is ________.

A) market skimming pricing

B) market penetration pricing

C) the price-quality association

D) markup pricing

Answer: B

Diff: 1 Page Ref: 473

Skill: Terminology/Concept


23) Market penetration is an appropriate strategy when ________.

A) a retailer seeks to attract consumers less concerned with price and more concerned with service, assortment, and status

B) new competitors are unlikely to enter the market

C) low prices discourage actual and potential competition

D) early recovery of cash is a goal of the retailer

Answer: C

Diff: 2 Page Ref: 473

Skill: Terminology/Concept


24) The price floor represents the ________.

A) highest price a consumer will pay

B) lowest acceptable price to a retailer

C) lowest competitor's price

D) lowest minimum price that is legal according to sales-below-cost laws

Answer: B

Diff: 1 Page Ref: 476

Skill: Terminology/Concept


25) Which of the following suggests that too low a price may hinder demand?

A) bait advertising

B) sales-below-cost laws

C) prestige pricing

D) predatory pricing laws

Answer: C

Diff: 1 Page Ref: 476

Skill: Terminology/Concept

26) The most widely practiced retail pricing technique is ________.

A) cost-oriented pricing

B) prestige pricing

C) competition-oriented pricing

D) demand-oriented pricing

Answer: A

Diff: 1 Page Ref: 476

Skill: Terminology/Concept


27) Markups in retailing are typically computed on the basis of ________.

A) merchandise cost

B) merchandise cost plus freight

C) retail selling price

D) retail selling price plus freight

Answer: C

Diff: 1 Page Ref: 476

Skill: Terminology/Concept


28) The difference between initial markups and maintained markups is due to ________.

A) different terms offered to larger customers

B) seasonal discounts

C) markdowns, added markups, shortages, and discounts

D) revisions in planned profits

Answer: C

Diff: 2 Page Ref: 478

Skill: Terminology/Concept


29) Direct product profitability (DPP) is an example of ________.

A) a variable markup policy

B) pricing at the market

C) administered pricing

D) unit pricing

Answer: A

Diff: 2 Page Ref: 479

Skill: Terminology/Concept


30) Which pricing strategy seeks to stabilize demand throughout the year?

A) variable pricing

B) everyday low pricing (EDLP)

C) one-price policy

D) flexible pricing

Answer: B

Diff: 2 Page Ref: 481

Skill: Terminology/Concept

31) A retailer that seeks to alter prices to reflect fluctuations in costs or consumer demand should practice ________.

A) variable pricing

B) customary pricing

C) a one-price policy

D) price lining

Answer: A

Diff: 1 Page Ref: 482

Skill: Terminology/Concept


32) The opposite of setting prices by negotiation or bargaining is ________.

A) leader pricing

B) odd pricing

C) customary pricing

D) a one-price policy

Answer: D

Diff: 2 Page Ref: 483

Skill: Terminology/Concept


33) In which pricing technique does a retailer advertise and sell key items in the product assortment at less than the usual profit margin?

A) price lining

B) leader pricing

C) odd pricing

D) bait-and-switch advertising

Answer: B

Diff: 1 Page Ref: 484

Skill: Terminology/Concept


34) A retailer sells men's suits for $179, $229, $309, and $359. This illustrates ________.

A) price lining

B) leader pricing

C) odd pricing

D) bait advertising

Answer: A

Diff: 2 Page Ref: 485

Skill: Terminology/Concept


35) A major advantage of an early markdown policy is that ________.

A) consumer interest is heightened during storewide clearances

B) merchandise offered for sale is fresh

C) goods can be resold during next season without any need for a price reduction

D) the retailer has greater opportunity to sell the good

Answer: B

Diff: 2 Page Ref: 487

Skill: Terminology/Concept

36) Price elasticity is ________ when the urgency for a purchase is low and the number of acceptable substitutes is high.

A) inelastic

B) elastic

C) unitary

D) positive

Answer: B

Diff: 1 Page Ref: 466

Skill: Applied/Comprehensive/Integrative


37) Total demand for a movie drops from 400 to 350 units when a theater operator increases the ticket price for a popular movie from $7 to $9. Price elasticity of demand (expressed as a positive number) equals ________.

A) 0.125

B) 0.53

C) 0.67


D) 2.50

Answer: B

Diff: 2 Page Ref: 466-467

Skill: Applied/Comprehensive/Integrative


38) When a stationery store increases its price for a popular computer notebook from $1,000 to $1,250, its quantity demanded decreases from 400 to 250 per month. Its price elasticity of demand (expressed as a positive number) equals ________.

A) 1.11


B) 2.07

C) 2.30


D) 2.50

Answer: B

Diff: 2 Page Ref: 466-467

Skill: Applied/Comprehensive/Integrative


39) A negatively-sloped demand curve means that ________.

A) the price elasticity of demand is negative

B) demand is elastic

C) demand is inelastic

D) demand is unitary

Answer: A

Diff: 2 Page Ref: 466

Skill: Applied/Comprehensive/Integrative


40) The difference between horizontal price fixing and vertical price fixing is based on ________.

A) whether the channel members are at the same level

B) the legality of the resulting prices

C) the effect on final selling prices

D) whether collusion is involved

Answer: A

Diff: 2 Page Ref: 468, 469

Skill: Applied/Comprehensive/Integrative

41) Many manufacturers feel that vertical price fixing should be legal since it protects ________.

A) large chain organizations

B) final consumers seeking lower prices

C) manufacturers seeking large promotional budgets for innovative products

D) a brand's image that may be hurt from repeated price cutting by retailers

Answer: D

Diff: 2 Page Ref: 469-470

Skill: Applied/Comprehensive/Integrative


42) The Robinson-Patman Act was developed to ________.

A) provide lower prices to final consumers

B) make price conspiracies between channel members illegal

C) allow smaller retailers to receive similar prices to large retail chains that had high bargaining power

D) limit price competition among retailers

Answer: C

Diff: 2 Page Ref: 469

Skill: Applied/Comprehensive/Integrative


43) Loss leaders are viewed as being particularly attractive by many retailers since they ________.

A) generate consumer store traffic throughout the store

B) ultimately destroy small, marginal competitors

C) are legal

D) are not forms of deceptive advertising according to FTC guidelines

Answer: A

Diff: 2 Page Ref: 470

Skill: Applied/Comprehensive/Integrative

44) A key difference between a loss leader and leader pricing is based upon whether ________.

A) the goods are sold above cost

B) bait advertising is used as part of the retailer's strategy

C) sufficient customer traffic is generated

D) competing retailers are hurt by the action

Answer: A

Diff: 2 Page Ref: 470, 484

Skill: Applied/Comprehensive/Integrative


45) A key difference between loss leaders and bait-and-switch advertising is based upon whether ________.

A) the strategy is legal

B) competitors are hurt by the offer

C) the retailer intends to sell the advertised good or service

D) ample store traffic is created by the strategy

Answer: C

Diff: 2 Page Ref: 470, 479

Skill: Applied/Comprehensive/Integrative

46) The key difference between bait-and-switch advertising and "trading the customer up" to a more expensive substitute is that in "trading the customer up," the advertised low-price good ________.

A) is sold below cost

B) is available for sale at the advertised price

C) is disparaged

D) must be specially ordered

Answer: B

Diff: 2 Page Ref: 471

Skill: Applied/Comprehensive/Integrative


47) Selling against the brand and private labels are two strategies retailers use to ________.

A) increase consumer price elasticity

B) create nonprice competition

C) generate price competition

D) assert channel power

Answer: D

Diff: 2 Page Ref: 471

Skill: Applied/Comprehensive/Integrative


48) A retailer has the least control over retail price setting in ________.

A) a price war

B) a regulated pricing situation

C) an administered pricing situation

D) market pricing

Answer: D

Diff: 1 Page Ref: 471

Skill: Applied/Comprehensive/Integrative

49) Administered pricing utilizes ________.

A) nonprice competition

B) price guarantees

C) quantity and seasonal discounts

D) bargaining power

Answer: A

Diff: 2 Page Ref: 472

Skill: Applied/Comprehensive/Integrative


50) Administered pricing can be used in association with ________.

A) market penetration

B) price wars

C) market skimming

D) elastic demand

Answer: C

Diff: 2 Page Ref: 472, 473

Skill: Applied/Comprehensive/Integrative

51) A market penetration strategy should be used when a retailer ________.

A) believes in the price-quality association

B) seeks to maximize profits

C) seeks to maximize sales

D) seeks to differentiate its offerings through superior customer service

Answer: C

Diff: 1 Page Ref: 473

Skill: Applied/Comprehensive/Integrative


52) A market penetration strategy should be used when consumer price elasticity of demand is ________.

A) negative

B) inelastic

C) elastic

D) unitary

Answer: C

Diff: 2 Page Ref: 473

Skill: Applied/Comprehensive/Integrative


53) A retailer has exclusive distribution for a new product in its market area, views the market as price inelastic, and desires an early-recovery-of-cash objective. What pricing strategy should it pursue?

A) market pricing

B) price competition

C) market penetration

D) market skimming

Answer: D

Diff: 2 Page Ref: 473

Skill: Applied/Comprehensive/Integrative

54) At which price does the retailer maximize total sales revenue?
Selling Price Quantity Demanded

(in $) (in units)

7 11,000

8 9,500

9 9,000


10 8,000

A) $7.00

B) $8.00

C) $9.00

D) $10.00

Answer: C

Diff: 2 Page Ref: 474

Skill: Applied/Comprehensive/Integrative

55) A 25 percent markup at cost equals what markup at retail?

A) 10 percent

B) 15 percent

C) 20 percent

D) 40 percent

Answer: C

Diff: 2 Page Ref: 476

Skill: Applied/Comprehensive/Integrative


56) A 60 percent markup at retail equals what markup at cost?

A) 52 percent

B) 60 percent

C) 150 percent

D) 200 percent

Answer: C

Diff: 2 Page Ref: 476

Skill: Applied/Comprehensive/Integrative


57) A close-out retailer can purchase a discontinued digital camera for $79 and wants to obtain a 40 percent markup at retail. What retail price should be charged?

A) $82.60

B) $98.33

C) $119.00

D) $131.67

Answer: D

Diff: 2 Page Ref: 477

Skill: Applied/Comprehensive/Integrative


58) A golf specialty store desires a minimum 40 percent markup for all of its golf sets and accessories. The retailer feels that a popular golf set should retail at $895. What is the maximum price the retailer can pay for the set?

A) $358.00

B) $398.00

C) $537.00

D) $577.00

Answer: C

Diff: 2 Page Ref: 477

Skill: Applied/Comprehensive/Integrative


59) A jewelry store has been offered a special price on estate jewelry. A typical 14-karat pin costs the jeweler $350 and can retail at $595. What markup at retail will the jeweler obtain?

A) 20.0 percent

B) 36.4 percent

C) 41.2 percent

D) 57.1 percent

Answer: C

Diff: 2 Page Ref: 477

Skill: Applied/Comprehensive/Integrative

60) A retailer has planned operating expenses of 44 percent of planned sales and a planned profit of 6 percent of sales. What markup percentage at retail does the retailer require?

A) 38 percent

B) 44 percent

C) 50 percent

D) The answer cannot be determined based on the information provided.

Answer: C

Diff: 2 Page Ref: 477

Skill: Applied/Comprehensive/Integrative


61) The major difference between an initial markup and a maintained markup is that the maintained markup reflects ________.

A) actual (not planned) retail operating expenses

B) planned (not actual) retail operating expenses

C) planned shortages and overages

D) actual prices received and actual shortages

Answer: D

Diff: 2 Page Ref: 478

Skill: Applied/Comprehensive/Integrative


62) The most intensive cost analysis on a product basis occurs with ________.

A) price lining

B) variable pricing

C) direct product profitability

D) a variable markup policy

Answer: C

Diff: 2 Page Ref: 479

Skill: Applied/Comprehensive/Integrative


63) Manufacturers seek to reduce extreme shifts in demand due to stocking up by wholesalers, retailers, and final consumers through ________.

A) a one-price policy

B) leader pricing

C) everyday low pricing (EDLP)

D) customary pricing

Answer: C

Diff: 2 Page Ref: 481

Skill: Applied/Comprehensive/Integrative


64) Some of the legal difficulties associated with the Robinson-Patman Act can be avoided through use of ________.

A) a one-price policy

B) variable markup pricing

C) the price-quality association

D) customary pricing

Answer: A

Diff: 2 Page Ref: 483

Skill: Applied/Comprehensive/Integrative

65) The demand curve may not be negatively sloped throughout its range in ________.

A) variable pricing

B) odd pricing

C) flexible pricing

D) a one-price policy

Answer: B

Diff: 2 Page Ref: 484

Skill: Applied/Comprehensive/Integrative


66) An item originally priced at $50.00 is reduced to $29.95. The off-retail markdown percentage is approximately ________.

A) 20 percent

B) 40 percent

C) 60 percent

D) 66 percent

Answer: B

Diff: 2 Page Ref: 486

Skill: Applied/Comprehensive/Integrative

67) An item originally priced at $75.00 is raised to $90.00 based upon unanticipated demand. The addition to retail percentage is ________.

A) 16.7 percent

B) 20 percent

C) 23 percent

D) 25 percent

Answer: B

Diff: 2 Page Ref: 486

Skill: Applied/Comprehensive/Integrative


68) A computer retailer generally prices portable computers using a 25 percent markup. The firm expects to sell 100 portable computers at the 25 percent markup. How many units would it have to sell at a 15 percent discount from the original price to maintain the same gross profit?

A) 115


B) 167

C) 250


D) The answer cannot be determined from the information provided.

Answer: C

Diff: 2 Page Ref: 486-487

Skill: Applied/Comprehensive/Integrative

69) A stationery retailer generally prices portable computers using a 30 percent markup. The retailer expects to sell 100 portable computers at the 30 percent markup. How many units would it have to sell at a 10 percent increase in price from the original price to maintain the same gross profit?

A) 75


B) 80

C) 82


D) 125

Answer: A

Diff: 2 Page Ref: 486-487

Skill: Applied/Comprehensive/Integrative


70) An early markdown policy can be assured through the use of a(n) ________.

A) off-retail markdown percentage plan

B) price-adjustment plan

C) stock-shortage control plan

D) automatic markdown plan

Answer: D

Diff: 1 Page Ref: 487

Skill: Applied/Comprehensive/Integrative


71) If total revenue increases when prices increase, the price elasticity of demand is inelastic.

Answer: FALSE

Diff: 2 Page Ref: 466

Skill: Terminology/Concept


72) Economic consumers are more price elastic than personalizing consumers.

Answer: TRUE

Diff: 1 Page Ref: 468

Skill: Terminology/Concept


73) Horizontal price fixing refers to the ability of manufacturers and wholesalers to set final retail selling prices.

Answer: FALSE

Diff: 1 Page Ref: 468

Skill: Terminology/Concept


74) The Robinson Patman Act strove to curb the bargaining power of large retail chains.

Answer: TRUE

Diff: 1 Page Ref: 469

Skill: Terminology/Concept


75) The Robinson-Patman Act allows price discrimination when the products sold to competing retailers are physically different.

Answer: TRUE

Diff: 2 Page Ref: 469

Skill: Terminology/Concept

76) With loss leaders, the retailer has no intention of selling the advertised item at the advertised price.

Answer: FALSE

Diff: 1 Page Ref: 470

Skill: Terminology/Concept


77) Unit pricing requires that retailers list the price of each item in a conspicuous location on the item.

Answer: FALSE

Diff: 1 Page Ref: 470

Skill: Terminology/Concept


78) High brand loyalty, an excellent location, and strong customer service allow a retailer to utilize market pricing.

Answer: FALSE

Diff: 2 Page Ref: 471-472

Skill: Terminology/Concept


79) A market skimming strategy is most appropriate when customers are highly insensitive to price and when the retailer seeks high profit per unit.

Answer: TRUE

Diff: 2 Page Ref: 473

Skill: Terminology/Concept


80) Psychological pricing is concerned with consumer perceptions of retail price.

Answer: TRUE

Diff: 2 Page Ref: 476

Skill: Terminology/Concept


81) The most widely used retail-pricing technique is markup pricing.

Answer: TRUE

Diff: 1 Page Ref: 476

Skill: Terminology/Concept


82) Maintained markup is based on the original retail value assigned to the merchandise.

Answer: FALSE

Diff: 1 Page Ref: 478

Skill: Terminology/Concept


83) In flexible pricing, a retailer allows buyers to negotiate.

Answer: TRUE

Diff: 1 Page Ref: 483

Skill: Terminology/Concept


84) Leader pricing seeks to increase store traffic through heavily promoted specials.

Answer: TRUE

Diff: 2 Page Ref: 484

Skill: Terminology/Concept

85) An early markdown policy enables a retailer to have every opportunity in the selling season to sell the good at the originally designated price.

Answer: FALSE

Diff: 1 Page Ref: 487

Skill: Terminology/Concept


86) According to traditional economic pricing theory, price elasticity tends to be a negative number.

Answer: TRUE

Diff: 2 Page Ref: 466

Skill: Applied/Comprehensive/Integrative


87) A retailer reduced the price of a disposable camera from $7 to $5; it expected annual demand to increase from 500 units to 900 units. The retailer assumed that the price elasticity of demand would be 2.71.

Answer: FALSE

Diff: 2 Page Ref: 466-467

Skill: Applied/Comprehensive/Integrative


88) The price elasticity of demand for a product can be elastic, inelastic, and unitary over different price levels.

Answer: TRUE

Diff: 2 Page Ref: 466-467

Skill: Applied/Comprehensive/Integrative


89) An argument used by manufacturers and wholesalers for the legalization of vertical price fixing is negative consumer perceptions of their products due to prestige pricing.

Answer: TRUE

Diff: 2 Page Ref: 468-469

Skill: Applied/Comprehensive/Integrative


90) Leader pricing accomplishes a similar objective as loss leaders, yet is legal.

Answer: TRUE

Diff: 2 Page Ref: 470, 484

Skill: Applied/Comprehensive/Integrative


91) The difference between loss leaders and bait-and-switch advertising is that with loss leaders, the retailer stocks the good in sufficient quantities to meet anticipated demand.

Answer: TRUE

Diff: 2 Page Ref: 470, 471

Skill: Applied/Comprehensive/Integrative


92) Pricing above the market as a retail strategy is most appropriate in administered pricing.

Answer: TRUE

Diff: 2 Page Ref: 472, 480

Skill: Applied/Comprehensive/Integrative

93) The range of acceptable prices to both retailers and final consumers is between the demand ceiling and the price floor.

Answer: FALSE

Diff: 2 Page Ref: 476

Skill: Applied/Comprehensive/Integrative


94) According to prestige pricing, the demand curve can be positively sloped at price levels that are considered too low by consumers.

Answer: TRUE

Diff: 2 Page Ref: 476

Skill: Applied/Comprehensive/Integrative


95) A retailer can buy a leather portfolio case for $50.00 and wants to obtain a 50 percent markup at retail. The retailer should charge a retail price of $125.00.

Answer: FALSE

Diff: 2 Page Ref: 477

Skill: Applied/Comprehensive/Integrative


96) A 100 percent markup at retail is equivalent to a 45 percent markup at cost.

Answer: FALSE

Diff: 2 Page Ref: 477

Skill: Applied/Comprehensive/Integrative


97) A retailer's planned operating expenses are 29 percent of its planned net sales. Its planned profit is 5 percent of sales and its planned retail reductions are 8 percent of sales. Its planned markup percent at retail is 42 percent of sales.

Answer: FALSE

Diff: 2 Page Ref: 477

Skill: Applied/Comprehensive/Integrative


98) Direct product profitability allows retailers to take into account differences in the costs of installation, delivery, customer service, and merchandise handling in setting markups for categories of merchandise.

Answer: TRUE

Diff: 2 Page Ref: 479

Skill: Applied/Comprehensive/Integrative


99) Profitability is determined on an item basis in direct product profitability (DPP).

Answer: TRUE

Diff: 2 Page Ref: 479

Skill: Applied/Comprehensive/Integrative


100) To stimulate additional sales, a men's clothing retailer is anticipating reducing its retail prices by 10 percent from its current markup of 50 percent as a means of blunting competition from a new category killer men's clothing chain that has opened in its trading area. It needs a 20 percent sales increase to maintain its former gross profit.

Answer: FALSE

Diff: 2 Page Ref: 486-487

Skill: Applied/Comprehensive/Integrative

101) How do the price-quality association, prestige pricing, customary pricing, and odd pricing impact the price elasticity of demand?

Diff: 2 Page Ref: 466-467, 476, 481, 484


102) Outline the major manufacturer and wholesaler arguments for legalizing minimum pricing across the board.

Diff: 2 Page Ref: 468-469

103) a. Define loss leaders, bait-and-switch advertising, trading up, and leader pricing.

b. Explain the differences among each. Use an example.

Diff: 1 Page Ref: 470, 471, 484
104) Many channel price strategies reflect channel conflict among manufacturers, wholesalers, and retailers. Select two price strategies that illustrate such conflict. Describe how the conflict can be fairly resolved.

Diff: 2 Page Ref: 471


105) a. Differentiate between administered and market pricing.

b. How can a retailer turn a market pricing environment into an administered pricing environment?

Diff: 1 Page Ref: 472
106) What is the role of demand-, cost-, and competition-oriented pricing in developing and implementing a price strategy?

Diff: 2 Page Ref: 476-481


107) What factors account for the popularity of markup pricing in retailing? Explain your answer.

Diff: 1 Page Ref: 476


108) Explain how markup pricing can include a demand and a cost component.

Diff: 2 Page Ref: 476-478


109) Convert each of the following markup percentages at retail to markup percentages at cost: 30, 40, 50, and 60.

Diff: 1 Page Ref: 477


110) a. Differentiate between the initial markup and maintained markup concepts on a conceptual level.

b. Show how the formula for computing initial and maintained markups differ.

Diff: 1 Page Ref: 478
111) Explain the advantages and disadvantages of the use of everyday low pricing, a one-price policy, leader pricing, and price lining to a retailer.

Diff: 1 Page Ref: 481, 483, 484, 485


112) Develop a checklist for use by a computer retailer for effective markdown control.

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