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Which of the following would be an example of a fixed cost for a company that makes carbon monoxide monitoring systems for workers to wear in hazardous areas?


A) the lithium batteries that are used in each monitor
B) the chest harness used to wear the monitor
C) the insurance for the company's factory
D) the free training videos that are sent to each new customer
E) the stainless-steel, water-resistant cases in which the monitors are stored

F) C) and D)
G) A) and E)

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List four of the seven demand-oriented approaches to selecting an approximate price level and define what they are.

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Demand-oriented approaches are (1) skimm...

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Price elasticity of demand (E) is expressed as (Δ means change)


A) E = Percentage change in price (%Δ in P) ÷ Percentage change in quantity demanded (%Δ in Q) .
B) E = Price (P) ÷ Quantity demanded (Q) .
C) E = Percentage change in quantity demanded (%Δ in Q) ÷ Percentage change in price (%Δ in P) .
D) E = Quantity demanded (Q) ÷ Price (P) .
E) E = Quantity demanded (Q) × Price (P) .

F) A) and E)
G) D) and E)

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A single jar of original formula Carmex has different prices for the product depending upon where it is sold, but each price will end in a nine ($0.99 at mass merchandisers like Walmart or Target; $1.59 at drugstores; and $1.79 at grocery stores) . This pricing strategy is called


A) standard pricing
B) odd-even pricing.
C) customary pricing.
D) everyday lower pricing.
E) at-market pricing.

F) B) and D)
G) None of the above

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Figure 11-6a -In the break-even chart in Figure 11-7a, the triangular area FBE represents the firm's A) fixed costs. B) break-even point. C) variable costs. D) profit. E) total revenue. Figure 11-6a -In the break-even chart in Figure 11-7a, the triangular area FBE represents the firm's


A) fixed costs.
B) break-even point.
C) variable costs.
D) profit.
E) total revenue.

F) All of the above
G) C) and E)

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A new car dealer can reduce the price you pay without cutting the list price of a new Ford F-150 pickup truck by offering you a ________ of $1,000 for your 2006 Nissan Altima.


A) cash discount
B) functional discount
C) seasonal discount
D) trade-in allowance
E) promotional allowance

F) A) and C)
G) D) and E)

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Which of the following statements regarding cost-oriented approaches is most accurate?


A) These methods focus on the demand side of the pricing problem.
B) These methods account for production, marketing, and overhead expenses.
C) Skimming is an example of a cost-oriented method.
D) These methods are simple to use because costs predictably decrease with each doubling of production.
E) Cost-oriented approaches are a subcategory of competition-oriented methods.

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

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A negative aspect of selecting unit volume as a pricing objective is that


A) production often cannot keep up with demand.
B) there are increased carrying costs with extensive inventories.
C) if price reductions are used to achieve volume objectives, it can sometimes come at the expense of profits.
D) it can create competition between divisions within the organization itself, causing conflicts over the allocation of resources.
E) it always positively correlates with a sales revenue objective.

F) A) and D)
G) B) and E)

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Which of the following statements regarding a market share pricing objective is most accurate?


A) A market share objective is often difficult for product managers since stockholders are looking for immediate dividends (return of profits) .
B) Although increased market share is a primary goal of some firms, others see it as a means to other ends, such as increased sales or profits.
C) Selecting market share as a pricing objective is particularly effective if industry sales are growing.
D) An advantage of market share as a pricing objective is that it is particularly insensitive to competitors' actions.
E) Ironically, a market share objective is realized by raising prices in order to increase consumer confidence during the decline stage of a product's life cycle.

F) A) and B)
G) A) and C)

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A custom tailor wishes to use target profit pricing to establish a price for a custom-designed business suit. Assume variable cost is $200 per suit, fixed cost is $44,000, and the target profit is $50,000 based on a volume of 50 suits. What price should be charged for a typical custom suit?


A) $520
B) $1,040
C) $1,880
D) $2,080
E) $10,000

F) A) and B)
G) A) and C)

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According to the textbook, clothing manufacturer Christian Dior and retailer Neiman Marcus use ________ pricing.


A) above-market
B) at-market
C) below-market
D) prestige
E) everyday low

F) A) and C)
G) C) and D)

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Identifying pricing objectives and constraints would occur during which stage of the price-setting process?


A) Selecting an approximate price level
B) Defining the scope of the product
C) Setting the list or quoted price
D) Evaluating the success of the price strategy
E) Making special adjustments to the list price

F) A) and B)
G) A) and C)

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When estimating demand, price is not the only factor to be considered. Three other elements emphasized by economists are consumer tastes, price and availability of similar products, and


A) consumer income.
B) consumer psychographics.
C) size of the target market.
D) current political agendas.
E) green substitutes.

F) B) and E)
G) A) and B)

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Figure 11-6 -The owner of a picture frame store has generated a spreadsheet of several calculations based on different quantity, price, revenue, cost, and profit scenarios shown in Figure 11-6 above. Of the following options, at what sales level is profit maximized? A) 0 B) 400 C) 800 D) 1,600 E) 2,000 Figure 11-6 -The owner of a picture frame store has generated a spreadsheet of several calculations based on different quantity, price, revenue, cost, and profit scenarios shown in Figure 11-6 above. Of the following options, at what sales level is profit maximized?


A) 0
B) 400
C) 800
D) 1,600
E) 2,000

F) B) and C)
G) B) and E)

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Penetration pricing is considered to be a ________ approach to pricing.


A) demand-oriented
B) cost-oriented
C) profit-oriented
D) competition-oriented
E) service-oriented

F) A) and D)
G) A) and E)

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Mike Morgan, a sales representative for a major food service distributor of Betty Crocker's Warm Delights, wanted to encourage larger purchases by his grocery customers. Morgan offered 10 percent discount for buying 1 to 49 cases of Warm Delights within a calendar month, 12 percent for 50 to 99 cases, and 15 percent for 100 or more cases. What type of discount was Morgan offering his customers?


A) a seasonal discount
B) a quantity discount
C) a cash discount
D) a trade discount
E) a case allowance discount

F) A) and D)
G) None of the above

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The sum of the expenses of a firm that is stable and does not change with the quantity of the product that is produced and sold is referred to as


A) fixed cost.
B) total cost.
C) variable cost.
D) marginal cost.
E) overhead cost.

F) A) and B)
G) C) and D)

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Unit volume as a pricing objective refers to


A) the quantity of products to be produced or sold.
B) the ratio of price per unit to unit variable cost.
C) the ratio of production costs to the minimum sales price that would still generate profit.
D) the total quantity of product sold by a firm relative to the total quantity of product sold by all firms in the industry.
E) variable cost expressed on a per unit basis for a product.

F) C) and E)
G) C) and D)

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Figure 11-7 -Suppose you are the owner of a picture frame store. Assume that the average price customers are willing to pay for each picture frame is $120. Also, suppose your fixed costs (FC) total $32,000 (real estate taxes, interest on a bank loan, etc.) and unit variable cost (UVC) for a picture frame is $40 (labor, glass, frame, and matting) . Figure 11-7a above shows that by selling 200 pictures, your picture frame store will A) break even. B) earn a profit. C) incur a loss. D) have no fixed costs. E) have no variable costs. Figure 11-7 -Suppose you are the owner of a picture frame store. Assume that the average price customers are willing to pay for each picture frame is $120. Also, suppose your fixed costs (FC) total $32,000 (real estate taxes, interest on a bank loan, etc.) and unit variable cost (UVC) for a picture frame is $40 (labor, glass, frame, and matting) . Figure 11-7a above shows that by selling 200 pictures, your picture frame store will


A) break even.
B) earn a profit.
C) incur a loss.
D) have no fixed costs.
E) have no variable costs.

F) A) and D)
G) None of the above

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Break-even analysis is


A) a process that investigates the difference between marginal revenue and marginal cost.
B) a method of determining just how much a consumer is willing to pay for a product or service.
C) a technique that analyzes the relationship between total revenue and total cost to determine profitability at various levels of output.
D) the process of determining the quantity of product consumers will buy relative to the quantity produced by the firm.
E) the graph that shows the maximum number of products consumers will buy at a given price.

F) None of the above
G) B) and E)

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