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