Study Guide, Chapter 17

 

Multiple Choice

Identify the letter of the choice that best completes the statement or answers the question.

 

____          1.   Price is best described as:

a.

the perceived value of a good or service

b.

money exchanged for a good or service

c.

the psychological results of purchasing

d.

the cost in dollars for a good or service as set by the producer

e.

the value of a barter good in an exchange

 

 

____          2.   Revenue:

a.

equals quantity sold times profit margin

b.

equals price minus costs

c.

equals return on investment

d.

is synonymous with profit

e.

equals price of goods times quantity sold

 

 

____          3.   _____ pay for every activity of the company.

a.

Revenues

b.

Investments

c.

Costs

d.

Profits

e.

Prices

 

 

____          4.   What is left over after paying for company activities is:

a.

return on investment

b.

revenue

c.

profit

d.

net worth

e.

a current asset

 

 

____          5.   Why are marketing managers finding it more difficult to set prices in today's environment?

a.

Inflationary and recessionary periods have made customers less price-sensitive.

b.

Fewer dealer and generic brands are available because the competition has been eliminated.

c.

The high rate of new product introductions has led to careful reevaluation by consumers.

d.

Marketing managers are finding it difficult to compare prices between suppliers.

e.

Buyers are less informed and are less price-sensitive.

 

 

____          6.   For convenience, pricing objectives can be divided into three categories. They are:

a.

returnable, competitive, and attainable

b.

measurable, competitive, and unique

c.

general, attainable, and unique

d.

profit-oriented, sales-oriented, and status quo

e.

competitive, fixed, and variable

 

 

____          7.   An organization is using _____ when it sets its prices so that total revenue is as large as possible relative to total costs.

a.

profit maximization

b.

market share pricing

c.

demand-oriented pricing

d.

sales maximization

e.

status quo pricing

 

 

____          8.   Ron Smith owner of Ron's Roofing wanted to strive for a profit that would be satisfactory, he is not interested in maximizing profits. He determines his prices by maintaining the company's profitability at acceptable levels. Smith is basing his pricing policy on:

a.

stable sales levels

b.

satisfactory profits

c.

profit maximization

d.

market share

e.

consumer demand

 

 

____          9.   _____ measures the overall effectiveness of management in generating profits with its available assets.

a.

ROI

b.

EOQ

c.

JIT

d.

UPC

e.

BEQ

 

 

____          10.  The Dockside Restaurant managed to exceed its target ROI for the current fiscal year. The following results were found on its financial statements:

 

Gross Revenues:

$250,000

Total Assets:

$500,000

Gross Profits:

$100,000

Total Liabilities:

$200,000

Net Profits after tax:

$ 50,000

Owner's Equity:

$300,000

 

What was the actual return on investment (ROI) for the Dockside Restaurant?

a.

6.67 percent

b.

10 percent

c.

22 percent

d.

28 percent

e.

none of the other answers

 

 

____          11.  Market share pricing is a:

a.

profit-oriented pricing technique

b.

sales-oriented concept

c.

demand-oriented concept

d.

supply-oriented concept

e.

status quo pricing technique

 

 

____          12.  Under which of the following conditions will companies with low market share be most likely to fail?

a.

competing in a slow-growth industry

b.

competing in an industry that makes frequently purchased items

c.

competing in an industry with few product changes

d.

competing in an industry requiring market power and economies of scale

e.

competing in none of the above industries

 

 

____          13.  In the end of April, Andy's Gift Shop has marked all of its Easter decorations 50 percent off in order to liquidate his Easter inventory. What type of pricing strategy is being used in this example?

a.

supply-oriented

b.

sales maximization

c.

target return on investment

d.

satisfactory profit

e.

profit maximization

 

 

____          14.  If a company's pricing objective is to meet the competition or to maintain existing prices, it is using _____ pricing.

a.

head-on

b.

target return on investment

c.

status quo

d.

market share

e.

peer pricing

 

 

____          15.  Although many factors can influence price, the primary determinants are:

a.

costs of manufacturing and distribution

b.

the demand for the good and the cost to the seller

c.

demand by the consumer and perceived quality

d.

distribution and promotion strategies

e.

stage of the product life cycle and costs to the consumer

 

 

____          16.  The quantity of a product that people will buy depends on its price, but the quantity of product that will be sold in the market at various prices for a specified period is called:

a.

price

b.

demand

c.

supply

d.

determinant

e.

costs

 

 

____          17.  The quantity of a product that people will buy/demand is most dependent on its:

a.

distribution

b.

supply

c.

promotion

d.

quality

e.

price

 

 

____          18.  Lou is the manager of the popcorn stand at the local movie theater. He has decided to graph the demand per week for gourmet popcorn. The graph indicates a demand schedule that slopes downward and to the right. This graph indicates that the quantity demanded is increased as:

a.

cost is increased

b.

supply is decreased

c.

price is increased

d.

price is decreased

e.

supply is increased

 

 

____          19.  The quantity of product offered to the market by suppliers at various prices for a specified period is:

a.

supply

b.

demand

c.

sales

d.

equilibriums

e.

quotas

 

 

____          20.  The point at which there is no inclination for the price to rise or fall is called price:

a.

equilibrium

b.

shortage

c.

surplus

d.

elasticity

e.

status quo

 

 

____          21.  The responsiveness or the sensitivity of consumer demand to changes in price is referred to as _____ and occurs when consumers buy more or less of a product when the price changes.

a.

supply curves

b.

equilibrium

c.

unitary revenue

d.

rising demand

e.

elasticity

 

 

____          22.  A cost that changes with the level of output is called a(n) _____ cost.

a.

inventory

b.

variable

c.

fixed

d.

marketing

e.

demand

 

 

____          23.  _____ costs do not change as output is increased or decreased.

a.

Inventory

b.

Variable

c.

Fixed

d.

Marketing

e.

Demand

 

 

____          24.  _____ cost is the change in total costs associated with a one-unit change in output.

a.

Variable

b.

Intermittent

c.

Quota-change

d.

Marginal

e.

Flex

 

 

____          25.  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.

a.

profit maximization

b.

formula

c.

variable

d.

target return

e.

markup

 

 

____          26.  What is the most popular method used by wholesalers and retailers in establishing a sales price?

a.

markup pricing

b.

turnover pricing

c.

formula pricing

d.

marginal revenue pricing

e.

break-even pricing

 

 

____          27.  What is the biggest advantage associated with markup pricing?

a.

its simplicity

b.

its inability to be decoded by customers

c.

the way that the technique considers demand

d.

the fact that merchandise is never underpriced with this technique

e.

its reliance on marginal costs

 

 

____          28.  _____ is the practice of marking up prices by 100 percent (or doubling the cost to set the selling price).

a.

Margin pricing

b.

Keystoning

c.

Mark-on adding

d.

Formula double pricing

e.

Inequity pricing

 

 

____          29.  In the mature and highly competitive salty-snack business, you would expect Frito-Lay, Borden, and Anheuser-Busch to be engaged in:

a.

a price war

b.

price escalation

c.

above-market pricing

d.

prestige-pricing

e.

an ROI attack

 

 

____          30.  Eckerd Drug stores will place well-known brands on the shelves at high prices while offering their own Eckerd brand at lower prices. This practice is:

a.

illegal

b.

selling against the brand

c.

called price pressurization

d.

called brand cutting

e.

is an example of private-label cannibalization

 

 

____          31.  Marketing managers who attempt to raise the quality image of their product by selling it at high prices are following a(n) _____ strategy.

a.

profit maximization

b.

market share

c.

maintained markup pricing

d.

prestige pricing

e.

investment asset

 

 

____          32.  Byron knows little about computer diskettes and does not want to spend the time to learn about them. However, he needs to buy diskettes to use for a history project at school. Not wanting to make a poor choice, he is likely to:

a.

intuitively make the right choice

b.

avoid making a decision by not buying diskettes

c.

buy the most expensive diskettes (perhaps paying too much), guessing that the price is related to quality

d.

research the product and buy the least expensive diskettes

e.

buy the least expensive diskettes because most consumers feel that price is not directly related to quality

 


Study Guide, Chapter 17

Answer Section

 

MULTIPLE CHOICE

 

            1.    A

 

            2.    E

 

            3.    A

 

            4.    C

 

            5.    C

 

            6.    D

 

            7.    A

 

            8.    B

 

            9.    A

 

            10.  B

 

            11.  B

 

            12.  D

 

            13.  B

 

            14.  C

 

            15.  B

 

            16.  B

 

            17.  E

 

            18.  D

 

            19.  A

 

            20.  A

 

            21.  E

 

            22.  B

 

            23.  C

 

            24.  D

 

            25.  E

 

            26.  A

 

            27.  A

 

            28.  B

 

            29.  A

 

            30.  B

 

            31.  D

 

            32.  C