Professional Documents
Culture Documents
1
Copyright 2014 Pearson Education, Inc.
4) When a company sets a high price for a new product with the intention of reducing the price in
the future, it is using the ________ pricing strategy.
A) market-skimming
B) cost-plus
C) market-segmentation
D) market-penetration
E) competitive
Answer: A
Page Ref: 314
Skill: Concept
Objective: 11-1
Difficulty: Easy
5) Midnight Magic, a perfume manufacturing company, plans to release a new fragrance during
the holiday season at $99 per bottle. The company intends to bring the price down to $49 within
six months of its release to attract buyers who couldn't afford the initial price. Which of the
following pricing strategies is Midnight Magic using?
A) market-penetration pricing
B) market-skimming pricing
C) competitive pricing
D) cost-plus pricing
E) product-line pricing
Answer: B
Page Ref: 314
Skill: Application
Objective: 11-1
Difficulty: Moderate
6) Which of the following is true of price skimming?
A) It is effective in situations in which competitors are able to undercut prices easily.
B) It can be profitably used when the product's quality and image support its price.
C) It involves underpricing products so that companies make larger sales.
D) It is ineffective in situations in which competitors are unable to enter the market easily.
E) It leads to a situation in which the company makes more, though less profitable, sales.
Answer: B
Page Ref: 314
Skill: Concept
Objective: 11-1
Difficulty: Moderate
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Copyright 2014 Pearson Education, Inc.
7) Companies which set a low price for a new product in order to attract a large number of
buyers and a large market share are using the ________ strategy.
A) market-skimming pricing
B) market-penetration pricing
C) cost-plus pricing
D) inclusive pricing
E) exclusive pricing
Answer: B
Page Ref: 315
Skill: Concept
Objective: 11-1
Difficulty: Easy
8) A market-penetration pricing policy should LEAST likely be used for a new product when
________.
A) the market is highly price sensitive
B) production and distribution costs fall as sales volume increases
C) the product's quality and image support a high price
D) a high price helps keep out the competition
E) there are few or no competitors in the market
Answer: C
Page Ref: 315
Skill: Concept
Objective: 11-1
Difficulty: Moderate
9) Which of the following is true of market-penetration pricing?
A) It should be used when the product's quality and image support a high price.
B) It involves setting a high price for a new product to appeal to the elite in society.
C) It results in drawing in large numbers of buyers quickly, winning a large market share.
D) It is best used in conjunction with a market-skimming pricing strategy.
E) It results in the company making fewer and less profitable sales.
Answer: C
Page Ref: 315
Skill: Concept
Objective: 11-1
Difficulty: Moderate
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Copyright 2014 Pearson Education, Inc.
10) In a bid to attract more customers in a market which has several competitors, Barrymore's
Bakery slashed the prices of all its products by 50%. Managers at the firm reasoned that lower
prices would draw in even more customers, making up for the reduction in price several times
over. Which of the following pricing strategies are they using?
A) market-skimming pricing
B) market-penetration pricing
C) captive-product pricing
D) cash discount pricing
E) by-product pricing
Answer: B
Page Ref: 314
Skill: Application
Objective: 11-1
Difficulty: Hard
11) Whizz Corp. wishes to introduce a new hybrid car into mature markets in developed
countries with the goal of gaining mass-market share quickly. Which of the following pricing
strategies would help the firm meet its goal?
A) market-skimming pricing
B) market-penetration pricing
C) market-segmentation pricing
D) cost-plus pricing
E) captive-product pricing
Answer: B
Page Ref: 314-315
Skill: Application
Objective: 11-1
Difficulty: Hard
12) Electrowhip, a company that manufacturers blenders and electric whisks, has decided to use
a market-penetration pricing strategy. Which of the following, if true, proves their decision to be
a wise one?
A) Electrowhip's competitors utilize social media for marketing their products.
B) Electrowhip sells products whose image and quality support high prices.
C) Electrowhip operates in a market with many competitors.
D) Electrowhip does not operate in a price sensitive market.
E) Electrowhip's products are intended to appeal to the elite in society.
Answer: C
Page Ref: 315
AACSB: Reflective Thinking Skills
Skill: Application
Objective: 11-1
Difficulty: Hard
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Copyright 2014 Pearson Education, Inc.
13) Which of the following product mix pricing strategies involves setting prices across an entire
product range based on cost differences between the products, customer evaluations of different
features, and competitors' prices?
A) by-product pricing
B) product bundle pricing
C) optional product pricing
D) captive product pricing
E) product line pricing
Answer: E
Page Ref: 315
Skill: Concept
Objective: 11-2
Difficulty: Easy
14) Tone Zone plans to introduce four mp3 player models over the next year. These models range
from basic players at $99 per unit, to more sophisticated players at $399 per unit. The more
features a model has, the more expensive it is. What pricing strategy is Tone Zone using for its
range of mp3 players?
A) product line pricing
B) product bundle pricing
C) captive product pricing
D) by-product pricing
E) optional product pricing
Answer: A
Page Ref: 315
Skill: Concept
Objective: 11-2
Difficulty: Moderate
15) Which of the following is true of product line pricing?
A) The price steps take cost differences between products in the line into account.
B) The pricing strategy cannot be availed of by companies in developed countries.
C) The price steps do not account for the prices of similar products from competitors.
D) The pricing strategy involves overpricing products so that they appeal to the elite.
E) The customer's perception of the value of different features is considered irrelevant.
Answer: A
Page Ref: 315
Skill: Concept
Objective: 11-2
Difficulty: Moderate
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Copyright 2014 Pearson Education, Inc.
19) Which of the following product mix pricing strategies involves pricing products that must or
can only be used with the main product?
A) by-product pricing
B) product bundle pricing
C) captive product pricing
D) product line pricing
E) optional product pricing
Answer: C
Page Ref: 316
Skill: Concept
Objective: 11-2
Difficulty: Easy
20) Multiprint, a printer manufacturing firm, sells ink cartridges for each of its specific models.
Only Multiprint cartridges are compatible with Multiprint printers, and no two of the firm's
models share the same specifications. What type of pricing does Multiprint use?
A) product line pricing
B) optional product pricing
C) captive product pricing
D) by-product pricing
E) product bundle pricing
Answer: C
Page Ref: 316
Skill: Application
Objective: 11-2
Difficulty: Hard
21) Which of the following product mix pricing strategies did Polaroid use when it set the
general price range of its cameras low and the markup on its film high?
A) product-segmented pricing
B) by-product pricing
C) customer-segmented pricing
D) captive product pricing
E) product bundling pricing
Answer: D
Page Ref: 316
Skill: Application
Objective: 11-2
Difficulty: Hard
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Copyright 2014 Pearson Education, Inc.
22) In the case of services, captive product pricing is called ________ pricing.
A) by-product
B) optional product
C) two-part
D) bundle
E) segmented
Answer: C
Page Ref: 316
Skill: Concept
Objective: 11-2
Difficulty: Easy
23) Which of the following companies uses captive product pricing?
A) Photo Genie, which sells inexpensive cameras that run only on their own expensive batteries
B) Tune Zone, which launched a range of mp3 player models, each priced according to its
features
C) Penguin's Parlor, which offers customers a 20% discount on their birthdays
D) Sportsprint, which prices sports equipment according to customer evaluations
E) Burger Den, whose combo meals are priced lower than its individual components sold
together
Answer: A
Skill: Application
Objective: 11-2
Difficulty: Hard
24) When amusement parks charge customers for admission and later for food and beverages,
they are following a ________ pricing strategy.
A) by-product
B) product line
C) two-part
D) skimming
E) penetration
Answer: C
Page Ref: 316
Skill: Concept
Objective: 11-2
Difficulty: Moderate
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Copyright 2014 Pearson Education, Inc.
25) Cellpoint uses two-part pricing for its long-distance call charges. Because this is a service,
the price is broken into a fixed fee plus a(n) ________ rate.
A) fixed usage
B) variable usage
C) standard usage
D) market usage
E) optional usage
Answer: B
Page Ref: 316
Skill: Concept
Objective: 11-2
Difficulty: Moderate
26) Using ________ pricing, companies are able to turn their trash into cash, allowing them to
make the price of their main product more competitive.
A) product bundle
B) optional product
C) captive product
D) by-product
E) product line
Answer: D
Page Ref: 316, 318
Skill: Concept
Objective: 11-2
Difficulty: Easy
27) Which of the following product mix pricing strategies involves pricing multiple products to
be sold together?
A) product line pricing
B) product bundle pricing
C) optional product pricing
D) by-product pricing
E) captive product pricing
Answer: B
Page Ref: 318
Skill: Concept
Objective: 11-2
Difficulty: Easy
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Copyright 2014 Pearson Education, Inc.
32) A(n) ________ is a straight reduction in price on purchases during a stated period of time or
of larger quantities.
A) allowance
B) free sample
C) discount
D) tax credit
E) intromit
Answer: C
Page Ref: 319
Skill: Concept
Objective: 11-3
Difficulty: Easy
33) Solar Tanning Salon prices tanning sessions at $25 per visit. It also offers seasonal passes for
$175 which permit the customer to visit the salon multiple times in a year. This is an example of
a(n) ________.
A) sample
B) promotional allowance
C) product bundle
D) discount
E) product line
Answer: D
Page Ref: 319
Skill: Concept
Objective: 11-3
Difficulty: Easy
34) Which of the following price adjustment strategies offers a price reduction to buyers who pay
their bills promptly?
A) cash discount
B) season discount
C) quantity discount
D) trade discount
E) functional discount
Answer: A
Page Ref: 319
Skill: Concept
Objective: 11-3
Difficulty: Easy
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Copyright 2014 Pearson Education, Inc.
35) Leicestershire Renovations has a history of problems with customers who do not pay their
bills on time. Leicestershire Renovations wants to improve its cash situation, reduce bad debts,
and reduce credit-collection costs. Which of the following forms of pricing would most likely
help the firm achieve its goal?
A) by-product pricing
B) zone pricing
C) cash discounts
D) product bundling
E) quantity discounts
Answer: C
Page Ref: 319
Skill: Application
Objective: 11-3
Difficulty: Hard
36) A quantity discount is a price reduction for buyers who ________.
A) buy merchandise out of season
B) buy merchandise in bulk
C) pay their bills on time
D) buy discontinued products
E) return old items while buying new ones
Answer: B
Page Ref: 319
Skill: Concept
Objective: 11-3
Difficulty: Easy
37) A seller offers a ________ to trade-channel members who perform certain functions, such as
selling, storing, and record keeping.
A) functional discount
B) storage allowance
C) cash discount
D) promotional allowance
E) quantity discount
Answer: A
Page Ref: 319
Skill: Concept
Objective: 11-3
Difficulty: Easy
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Copyright 2014 Pearson Education, Inc.
38) The discount offered by Glamor Gifts to customers who bought Valentine-themed
merchandise the week following Valentines Day is an example of a ________.
A) functional discount
B) seasonal discount
C) trade discount
D) cash discount
E) time-based discount
Answer: B
Page Ref: 319
Skill: Application
Objective: 11-3
Difficulty: Hard
39) A(n) ________ refers to promotional money paid by manufacturers to retailers in return for
an agreement to feature the manufacturer's products in some way.
A) allowance
B) sample
C) discount
D) tax credit
E) tax exemption
Answer: A
Page Ref: 319
Skill: Concept
Objective: 11-3
Difficulty: Easy
40) ________ allowances are price reductions given for turning in an old item when buying a
new one.
A) Promotional
B) Trade-in
C) Depreciation
D) Segmented
E) Functional
Answer: B
Page Ref: 319
Skill: Concept
Objective: 11-3
Difficulty: Easy
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Copyright 2014 Pearson Education, Inc.
41) Trade-in allowances are most commonly used in the ________ industry.
A) real estate
B) automobile
C) dairy products
D) financial services
E) health care
Answer: B
Page Ref: 319
Skill: Concept
Objective: 11-3
Difficulty: Easy
42) Shoe Trends, a company that manufactures formal shoes for men and women, offers to give
its customers $10 for an old pair of shoes when they buy a new pair. In essence, they're reducing
the price of the new shoes by $10. What is this type of price adjustment called?
A) functional discount
B) captive product pricing
C) seasonal discount
D) trade-in allowance
E) by-product pricing
Answer: D
Page Ref: 319
Skill: Concept
Objective: 11-3
Difficulty: Easy
43) ________ allowances are payments or price reductions that reward dealers for participating
in advertising and sales support programs.
A) Promotional
B) Trade-in
C) Segmented
D) Functional
E) Dynamic
Answer: A
Skill: Concept
Objective: 11-3
Difficulty: Easy
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Copyright 2014 Pearson Education, Inc.
44) In return for participating in Honda advertising and sales support programs, Honda
dealerships are rewarded with payments or price reductions, which are known as ________.
A) seasonal discounts
B) functional allowances
C) cash discounts
D) promotional allowances
E) trade-in allowances
Answer: D
Page Ref: 319
Skill: Application
Objective: 11-3
Difficulty: Moderate
45) By definition, ________ is used when a firm sells a product or service at two or more prices,
even though the difference in price is not based on differences in cost.
A) segmented pricing
B) variable pricing
C) flexible pricing
D) cost-plus pricing
E) reference pricing
Answer: A
Page Ref: 319
Skill: Concept
Objective: 11-3
Difficulty: Easy
46) The New Age Gallery has three admission prices for students, adults, and seniors, even
though all three groups are entitled to the same services. This form of pricing is called ________.
A) psychological pricing
B) product-form pricing
C) customer-segmented pricing
D) captive product pricing
E) by-product pricing
Answer: C
Page Ref: 320
Skill: Application
Objective: 11-3
Difficulty: Moderate
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Copyright 2014 Pearson Education, Inc.
47) Under ________, different versions of the product are priced differently but not according to
differences in their costs.
A) product-form pricing
B) optional product pricing
C) captive product pricing
D) by-product pricing
E) seasonal pricing
Answer: A
Page Ref: 320
Skill: Concept
Objective: 11-3
Difficulty: Easy
48) Sparkling Valley, a luxury resort, prices cottages facing the lake higher than cottages that do
not, even though the cottages and services offered are identical in every other aspect. This form
of pricing is called ________.
A) location-based pricing
B) time-based pricing
C) by-product pricing
D) seasonal pricing
E) captive product pricing
Answer: A
Page Ref: 320
Skill: Application
Objective: 11-3
Difficulty: Hard
49) When theaters vary their seat prices because of audience preferences for seats in coveted
rows, they use ________.
A) customer-segment pricing
B) location-based pricing
C) time-based pricing
D) product line pricing
E) captive product pricing
Answer: B
Page Ref: 320
Skill: Application
Objective: 11-3
Difficulty: Hard
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Copyright 2014 Pearson Education, Inc.
50) When a firm varies its price by the season, it is using ________.
A) product-form pricing
B) customer-segment pricing
C) location-based pricing
D) time-based pricing
E) value-added pricing
Answer: D
Page Ref: 320
Skill: Concept
Objective: 11-3
Difficulty: Easy
51) Segmented pricing is only effective when ________.
A) the segments show similar degrees of demand
B) the cost of segmenting does not exceed the revenue obtained from the price difference
C) the segmented prices do not reflect real differences in customers' perceived value
D) the customers of different socio-economic classes are treated according to their rank
E) companies make their services and products accessible exclusively to wealthy patrons
Answer: B
Page Ref: 320
Skill: Concept
Objective: 11-3
Difficulty: Moderate
52) Which of the following is a price adjustment strategy that considers how a customer's
perception of a product is influenced by its price?
A) captive product pricing
B) psychological pricing
C) by-product pricing
D) promotional pricing
E) international pricing
Answer: B
Page Ref: 320
Skill: Concept
Objective: 11-3
Difficulty: Moderate
53) Consumers are less likely to use price to judge the quality of a product when they ________.
A) have never tried the product before
B) have little knowledge of the brand
C) have experience with the product
D) are shopping for luxury items
E) cannot physically examine the product
Answer: C
Page Ref: 320
Skill: Concept
Objective: 11-3
Difficulty: Moderate
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54) Which term refers to prices that buyers carry in their minds and check with when they look at
a given product?
A) product line prices
B) reference prices
C) location-based prices
D) product-form prices
E) time-based prices
Answer: B
Page Ref: 320
Skill: Concept
Objective: 11-3
Difficulty: Easy
55) ________ are formed by noting current prices, remembering past prices, or assessing the
buying situation.
A) Product line prices
B) Seasonal prices
C) Reference prices
D) Time-based prices
E) Product bundle prices
Answer: C
Page Ref: 320
Skill: Concept
Objective: 11-3
Difficulty: Easy
56) La Belle released a a cut glass bottle of perfume at $299 per item, even though its major
competitor prices its signature scent at $99 per item. La Belle reasons that customers in search of
luxury goods will prefer its product because they are likelier to believe that high price indicates
superior quality. What price adjustment strategy is evident in its reasoning?
A) seasonal pricing
B) time-based pricing
C) captive product pricing
D) psychological pricing
E) location-based pricing
Answer: D
Page Ref: 320
Skill: Concept
Objective: 11-3
Difficulty: Hard
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Copyright 2014 Pearson Education, Inc.
57) A supermarket places its store brand of blackberry jam priced at $5 per jar in the fruit
preserves aisle, alongside the jam jars of a better known brandwhose products are priced at $8
apiece. Store managers reason that customers are more likely to choose the store brand instead of
the better known brand when they realize the price difference. What price adjustment strategy is
evident in the supermarket's reasoning?
A) by-product pricing
B) product bundle pricing
C) captive product pricing
D) psychological pricing
E) seasonal pricing
Answer: D
Page Ref: 320
Skill: Concept
Objective: 11-3
Difficulty: Hard
58) What type of pricing is being used when a company temporarily prices its product below the
list price or even below cost to create buying excitement and urgency?
A) segmented pricing
B) international pricing
C) reference pricing
D) promotional pricing
E) basing-point pricing
Answer: D
Page Ref: 321
Skill: Concept
Objective: 11-3
Difficulty: Easy
59) Hearth & Home, a store which sells household products, has announced a one-week sale on
its new carpet line. This is an example of ________.
A) promotional pricing
B) seasonal pricing
C) by-product pricing
D) product bundle pricing
E) time-based pricing
Answer: A
Page Ref: 321
Skill: Application
Objective: 11-3
Difficulty: Hard
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Copyright 2014 Pearson Education, Inc.
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Copyright 2014 Pearson Education, Inc.
67) Which form of geographic pricing is a company using when it charges the same rate to ship a
product anywhere in the United States?
A) FOB-origin pricing
B) psychological pricing
C) zone pricing
D) uniform-delivered pricing
E) basing-point pricing
Answer: D
Page Ref: 322
Skill: Concept
Objective: 11-3
Difficulty: Easy
68) If Detroit DLX charges the same price for the delivery of its product to customers located
within the Great Lakes states, but a different price to customers elsewhere, the company is using
________.
A) psychological pricing
B) promotional pricing
C) reference pricing
D) zone pricing
E) uniform-delivered pricing
Answer: D
Page Ref: 322
Skill: Application
Objective: 11-3
Difficulty: Hard
69) Motorzone offers replacement parts for old Volkswagen Beetles. The company calculates
shipping charges based on shipping parts from Boston, even though some parts actually ship
from St. Louis. Motorzone most likely practices ________ pricing.
A) FOB-origin
B) uniform-delivered
C) zone
D) basing-point
E) freight-absorption
Answer: D
Page Ref: 322
Skill: Application
Objective: 11-3
Difficulty: Hard
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70) ________ is a pricing strategy in which the company sets up two or more clearly identified
geographic regions within which all customers pay the same total price.
A) Freight-absorption pricing
B) Zone pricing
C) Uniform-delivered pricing
D) FOB-origin pricing
E) Basing-point pricing
Answer: B
Page Ref: 322
Skill: Concept
Objective: 11-3
Difficulty: Moderate
71) In which of the following geographic pricing strategies would customers located close to the
company pay the same amount as customers in distant locations?
A) uniform-delivered pricing
B) zone pricing
C) FOB-origin pricing
D) location-based pricing
E) reference pricing
Answer: A
Page Ref: 323
Skill: Concept
Objective: 11-3
Difficulty: Moderate
72) With which pricing strategy does the seller take responsibility for part or all of the actual
freight charges in order to get the desired business?
A) FOB origin pricing
B) freight-absorption pricing
C) basing-point pricing
D) location-based pricing
E) uniform-delivered pricing
Answer: B
Page Ref: 323
Skill: Concept
Objective: 11-3
Difficulty: Easy
23
Copyright 2014 Pearson Education, Inc.
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Copyright 2014 Pearson Education, Inc.
76) Which of the following factors would most likely lead to a company initiating a price cut?
A) overdemand
B) weakened economy
C) poor competition
D) cost inflation
E) weak price competition
Answer: B
Page Ref: 324
Skill: Concept
Objective: 11-4
Difficulty: Easy
77) Which of the following would most likely lead to a company initiating a price increase?
A) weakened economy
B) possession of outdated merchandise
C) excess capacity
D) overdemand
E) possession of defective merchandise
Answer: D
Page Ref: 324
Skill: Concept
Objective: 11-4
Difficulty: Easy
78) The "bottom of the pyramid" refers to ________.
A) the world's poorest consumers
B) the middle classes of Brazil, Russia, India, and China
C) a market with little or no purchasing power
D) people with easy access to luxury goods
E) the middle class of high income countries
Answer: A
Page Ref: 324
Skill: Concept
Objective: 11-4
Difficulty: Easy
79) Which of the following is true of the bottom of the pyramid?
A) It is a market segment that has been tapped into and depleted.
B) It consists of people who have easy access to luxury goods.
C) It comprises people who have easy access to the basic amenities of life.
D) It is considered a source of fresh growth opportunities.
E) It is a market segment which has insignificant purchasing power.
Answer: D
Page Ref: 325
Skill: Concept
Objective: 11-4
Difficulty: Moderate
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Copyright 2014 Pearson Education, Inc.
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Copyright 2014 Pearson Education, Inc.
83) When faced with a competitor who has cut its product's price, which of the following is the
most cost-effective way for a company to maintain its own price but raise the perceived value of
its offer?
A) by improving the quality of the product
B) by introducing a higher-priced premium brand
C) by altering the company's marketing communications
D) by bundling the offer with add-ons
E) by distributing the product through less costly channels
Answer: C
Page Ref: 327
Skill: Concept
Objective: 11-4
Difficulty: Moderate
84) In response to price cuts from competitors, a cereal company with several more expensive
and higher quality cereals introduced a lower-priced option to its product line. This is an example
of which of the following responses to a competitor's price cut?
A) raising the perceived value of a product
B) improving product quality
C) accepting a reduced market share
D) launching a "fighter brand"
E) using high-low pricing
Answer: D
Page Ref: 328
Skill: Application
Objective: 11-4
Difficulty: Hard
85) Which of the following is true of public policies and pricing?
A) The government imposes no limits on intrastate pricing issues.
B) The Robinson-Patman Act governs interstate commerce.
C) Companies have free reign when it comes to setting prices.
D) The Sherman Act governs intrastate commerce.
E) The Clayton Act encourages the formation of monopolies.
Answer: B
Page Ref: 328
Skill: Concept
Objective: 11-5
Difficulty: Moderate
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Copyright 2014 Pearson Education, Inc.
86) The Sherman, Clayton, and Robinson-Patman Acts are all federal laws that were enacted to
curb the formation of ________.
A) monopolies
B) global partnerships
C) competitive markets
D) internal markets
E) intrastate partnerships
Answer: A
Page Ref: 328
Skill: Concept
Objective: 11-5
Difficulty: Easy
87) When sellers set prices after talking to competitors and engaging in collusion, they are
involved in ________.
A) interstate commerce
B) comparative pricing
C) price fixing
D) skimming pricing
E) price bundling
Answer: C
Page Ref: 328
AACSB: Ethical Understanding and Reasoning Abilities
Skill: Concept
Objective: 11-5
Difficulty: Easy
88) A number of top fashion-modeling agencies would most likely be charged with ________ for
jointly determining what commissions they charge for models.
A) prestige pricing
B) competitive pricing
C) price bundling
D) dynamic pricing
E) price fixing
Answer: E
Page Ref: 328
Skill: Application
Objective: 11-5
Difficulty: Hard
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89) Federal legislation on price fixing requires that sellers set their prices ________.
A) based on their fixed and variable costs
B) without communication from competitors
C) to achieve a specific profit margin
D) without the intention of cutting into competitors' profits
E) consistently throughout a region
Answer: B
Page Ref: 328
AACSB: Ethical Understanding and Reasoning Abilities
Skill: Concept
Objective: 11-5
Difficulty: Moderate
90) If a large retailer sold numerous items below cost with the intention of punishing small
competitors and gaining higher long-run profits by putting those competitors out of business, the
retailer would be guilty of ________.
A) price collusion
B) price fixing
C) predatory pricing
D) competitive pricing
E) penetration pricing
Answer: C
Page Ref: 330
AACSB: Ethical Understanding and Reasoning Abilities
Skill: Concept
Objective: 11-5
Difficulty: Moderate
91) Savings for You, a discount retail chain, is highly competitive. When entering a new market,
Savings for You often cuts prices so deeply that it sells below costs, effectively pushing smaller
companies with less purchasing power out of the market. Savings for You is most likely guilty of
________.
A) market skimming
B) price fixing
C) deceptive pricing
D) price collusion
E) predatory pricing
Answer: E
Page Ref: 330
AACSB: Ethical Understanding and Reasoning Abilities
Skill: Application
Objective: 11-5
Difficulty: Hard
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Copyright 2014 Pearson Education, Inc.
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Copyright 2014 Pearson Education, Inc.
95) Price discrimination may be used to match competition as long as the strategy is temporary,
localized, and ________.
A) defensive
B) offensive
C) publicized
D) private
E) uniform across channels
Answer: A
Page Ref: 331
AACSB: Ethical Understanding and Reasoning Abilities
Skill: Concept
Objective: 11-5
Difficulty: Easy
96) Mark's Markers, a manufacturer of white board markers, has required its dealers to charge a
specified retail price for its markers. Mark's is most likely guilty of ________.
A) captive pricing
B) retail price maintenance
C) price discrimination
D) competitive pricing
E) unfair price skimming
Answer: B
Page Ref: 331
AACSB: Ethical Understanding and Reasoning Abilities
Skill: Concept
Objective: 11-5
Difficulty: Moderate
97) ________ occurs when a seller states price savings that are not actually available to
consumers.
A) Comparative pricing
B) Scanner fraud
C) Deceptive pricing
D) Market skimming
E) Price collusion
Answer: C
Page Ref: 332
AACSB: Ethical Understanding and Reasoning Abilities
Skill: Concept
Objective: 11-5
Difficulty: Easy
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98) Failure to enter the current price into a retailer's system may result in charges of ________.
A) predatory pricing
B) scanner fraud
C) retail maintenance pricing
D) discriminatory pricing
E) price fixing
Answer: B
Page Ref: 332
AACSB: Ethical Understanding and Reasoning Abilities
Skill: Concept
Objective: 11-5
Difficulty: Easy
Champion, Inc. is a manufacturer of lunch boxes, school bags, and school stationery. Charles
Payton, the CEO of Champion, hopes to sell the products at a low price to penetrate the market
quickly.
99) Which of the following best supports a market-penetration strategy for Champion?
A) Production costs increase as sales volume increases.
B) It is very difficult for competitors to enter the market.
C) The cost of producing a smaller volume is negligible.
D) The quality of the products supports high initial prices.
E) The market for the products is highly price sensitive.
Answer: E
Page Ref: 314
AACSB: Reflective Thinking Skills
Skill: Critical Thinking
Objective: 11-1
Difficulty: Hard
100) Noticing that the themed envelopes aren't selling well, Charles Payton decides to offer
customers a special "letter writing" kit, He prices the kitwhich comprises letter paper,
matching envelopes, and pensat $5, even though the combined prices of the individual items is
$8. Which of the following pricing strategies is he using?
A) optional product pricing
B) product bundle pricing
C) by-product pricing
D) dynamic pricing
E) captive product pricing
Answer: B
Page Ref: 318
Skill: Application
Objective: 11-2
Difficulty: Hard
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101) Pricing strategies tend to change and evolve as the average product passes through its life
cycle.
Answer: TRUE
Page Ref: 314
Skill: Concept
Objective: 11-1
Difficulty: Easy
102) For market skimming to be successful, the cost of producing a smaller quantity of goods
should not be higher than the prices charged.
Answer: TRUE
Page Ref: 314
Skill: Concept
Objective: 11-1
Difficulty: Easy
103) When The Candy Store sets a low initial price in order to get its "foot in the door" and to
quickly attract a large number of buyers, the company is practicing market-skimming pricing.
Answer: FALSE
Page Ref: 314
Skill: Application
Objective: 11-1
Difficulty: Moderate
104) Pricing is difficult because various products have related demand and costs, and producers
face different degrees of competition.
Answer: TRUE
Page Ref: 315
Skill: Concept
Objective: 11-2
Difficulty: Easy
105) In product line pricing, the price steps should account for differences in customer
perceptions of the value of different features.
Answer: TRUE
Page Ref: 315
Skill: Concept
Objective: 11-2
Difficulty: Easy
106) Thinking Cap Corp. prices its various cap designs at different price levels, ranging from
$2.05 to $5.95. This is an example of optional product pricing.
Answer: FALSE
Page Ref: 315
Skill: Application
Objective: 11-2
Difficulty: Moderate
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107) In addition to its customary services, On the Spot, a house mover, also sells the boxes and
padding that are used when moving household furniture. This is an example of customersegmented pricing.
Answer: FALSE
Page Ref: 316
Skill: Application
Objective: 11-2
Difficulty: Moderate
108) When a manufacturer seeks a market for by-products and accepts a price that covers more
than the cost of storing and delivering those by-products, the manufacturer is able to reduce the
main product's price to make it more competitive.
Answer: TRUE
Page Ref: 316
Skill: Application
Objective: 11-2
Difficulty: Moderate
109) Some industries commonly use two-part pricing, breaking the price down into a fixed fee
and a fixed usage rate.
Answer: FALSE
Page Ref: 316
Skill: Concept
Objective: 11-2
Difficulty: Moderate
110) When using product bundle pricing, sellers combine several of their products and offer the
bundle at an increased price for increased profit.
Answer: FALSE
Page Ref: 318
Skill: Concept
Objective: 11-2
Difficulty: Moderate
111) Consumers who have no past experience with a product are especially likely to judge it by
its price.
Answer: TRUE
Page Ref: 319
Skill: Concept
Objective: 11-3
Difficulty: Easy
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112) A seasonal discount is a price reduction to buyers who buy merchandise while the products
are in season.
Answer: FALSE
Page Ref: 319
Skill: Concept
Objective: 11-3
Difficulty: Easy
113) Online flash sales are used to create buying urgency and make buyers feel lucky to have
gotten in on the deal.
Answer: TRUE
Page Ref: 319
Skill: Concept
Objective: 11-3
Difficulty: Easy
114) If used infrequently, price promotions create "deal-prone" customers who wait until brands
go on sale before buying them.
Answer: FALSE
Page Ref: 320
Skill: Concept
Objective: 11-3
Difficulty: Easy
115) Constantly reduced prices can erode a brand's value in the eyes of customers.
Answer: TRUE
Page Ref: 320
Skill: Concept
Objective: 11-3
Difficulty: Easy
116) In segmented pricing, the difference in prices is based on differences in costs.
Answer: FALSE
Page Ref: 320
Skill: Concept
Objective: 11-3
Difficulty: Easy
117) For segmented pricing to be an effective strategy, the prices should reflect real differences
in customers' perceived value.
Answer: TRUE
Page Ref: 321
Skill: Concept
Objective: 11-3
Difficulty: Easy
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118) Sellers cannot influence or use consumers' reference prices when setting prices.
Answer: FALSE
Page Ref: 321
Skill: Concept
Objective: 11-3
Difficulty: Moderate
119) Customers located close to a firm are less likely to benefit from FOB-origin pricing than
customers located further away.
Answer: FALSE
Page Ref: 322
Skill: Concept
Objective: 11-3
Difficulty: Easy
120) The uniform-delivered pricing strategy means that the goods sold are placed free on board a
carrier with the customer paying the freight from the factory to the destination.
Answer: FALSE
Page Ref: 322
Skill: Concept
Objective: 11-3
Difficulty: Easy
121) Dynamic pricing is least prevalent online.
Answer: FALSE
Page Ref: 323
Skill: Concept
Objective: 11-3
Difficulty: Easy
122) Excess capacity leads to companies initiating an increase in price.
Answer: FALSE
Page Ref: 326
Skill: Concept
Objective: 11-4
Difficulty: Easy
123) Launching a fighter brand is an effective way to deal with a situation in which the market
segment being lost is price sensitive and will not respond to arguments of higher quality.
Answer: TRUE
Page Ref: 328
Skill: Concept
Objective: 11-4
Difficulty: Moderate
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124) Price discrimination is permissible if if the seller manufactures different qualities of the
same product for different retailers and can prove that the price difference is proportional.
Answer: TRUE
Page Ref: 328
AACSB: Ethical Understanding and Reasoning Abilities
Skill: Concept
Objective: 11-5
Difficulty: Easy
125) The widespread use of scanner-based computer checkouts has eradicated complaints of
retailers overcharging their customers.
Answer: FALSE
Page Ref: 331
AACSB: Ethical Understanding and Reasoning Abilities
Skill: Concept
Objective: 11-5
Difficulty: Easy
126) Differentiate between market skimming and market penetration pricing strategies. Explain
the conditions within which they are effective.
Answer: Market skimming is used to skim revenues layer by layer from the market by entering
the market with high initial prices. The product's quality and image must support its higher price,
and enough buyers must want the product at that price. The costs of producing a smaller volume
cannot be so high that they cancel the advantage of charging more. Competitors should not be
able to enter the market easily and undercut the high price. Market penetration is used to
penetrate the market quickly and deeply to attract a large number of buyers quickly and win a
large market share by setting a low price initially when it enters the market. The market must be
highly price sensitive so that a low price produces more market growth. Production and
distribution costs must fall as sales volume increases. Also, the low price must help keep out
competition and be maintained over time.
Page Ref: 314-315
Skill: Synthesis
Objective: 11-1
Difficulty: Hard
127) Sensenig Propeller manufactures replica antique wooden airplane propellers. In the process
of production, the company generates a great deal of scrap hardwood. How can using by-product
pricing benefit the company?
Answer: Using by-product pricing, Sensenig can seek a market for the hardwood and should
accept any price that covers more than the cost of storing and delivering the by-products. This
practice allows Sensenig to reduce the main product's price to make it more competitive.
Sensenig might even find that the by-products themselves are profitable.
Page Ref: 316
Skill: Application
Objective: 11-2
Difficulty: Hard
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138) What should the price steps of product line pricing take into account?
Answer: The price steps should take into account cost differences between products in the line.
More importantly, they should account for differences in customer perceptions of the value of
different features.
Page Ref: 315
Skill: Concept
Objective: 11-2
Difficulty: Moderate
139) Give two examples of products for which marketers might use optional-product pricing.
Answer: Such products may include refrigerators with ice makers and cars with options such as
stereos, GPS, and cruise control.
Page Ref: 316
Skill: Application
Objective: 11-2
Difficulty: Hard
140) Give two examples of products for which captive product pricing might be used.
Answer: Examples of captive products are razor blade cartridges, video games, printer
cartridges, and e-books.
Page Ref: 316
Skill: Application
Objective: 11-2
Difficulty: Hard
141) Give two examples of by-product pricing.
Answer: Examples include selling scrap metal after producing metal clamps or selling donut
holes after producing donuts.
Page Ref: 316
Skill: Application
Objective: 11-2
Difficulty: Hard
142) Give two examples of product bundle pricing.
Answer: Examples include vacation packages that include airfare, hotel charges, and tourist
charges, or value meals in the fast-food industry.
Page Ref: 318
Skill: Application
Objective: 11-2
Difficulty: Hard
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