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| 1 | |
The use of "special fees" and "surcharges" is driven by consumers' zeal for __________ and the ease of making price comparisons on the Internet. |
| | A) | high prices |
| | B) | low prices |
| | C) | extra accessories |
| | D) | service contracts |
| | E) | warranties |
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| 2 | |
A company that manages apartments decides to buy 15 new dishwashers at a list price of $550 each as replacements for old dishwashers in a small apartment complex it owns. Because the company is buying more than 10 dishwashers, it is eligible for a $150 per unit quantity discount. Financing charges total $20 per unit. The company gets $10 per dishwasher for the 15 dishwashers traded in. What is the actual price the company will pay for each dishwasher? |
| | A) | $390 |
| | B) | $400 |
| | C) | $410 |
| | D) | $530 |
| | E) | $560 |
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| 3 | |
Most consumers realize the quality of diamonds varies and most believe the higher the price of the diamond the higher its quality. This is an example of price influencing the perception of overall quality and __________ to consumers. |
| | A) | acceptable cost |
| | B) | perceptual investment |
| | C) | barter potential |
| | D) | return on investment |
| | E) | value |
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| 4 | |
Which of the following is an example of the elements of Step 1 of the price-setting process, Identify pricing objectives and constraints? |
| | A) | Profit, market share and newness of product |
| | B) | Demand estimation, sales revenue |
| | C) | Cost estimation, break-even analysis |
| | D) | Marginal analysis |
| | E) | Price elasticity estimation |
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| 5 | |
Which of the following is NOT one of the six major pricing objectives discussed in the text? |
| | A) | Profit |
| | B) | Unit volume |
| | C) | Break-even |
| | D) | Survival |
| | E) | Market share |
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| 6 | |
Netflix used to charge $14.99 per month for its movie rental service. However when Blockbuster introduced the same service at $13.99, Netflix then dropped its price to $13.99. Netflix most likely made this price reduction in an attempt to __________. |
| | A) | maintain market share |
| | B) | decrease revenue but increase profit |
| | C) | increase profit by decreasing revenue |
| | D) | decrease market share |
| | E) | increase efficiency |
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| 7 | |
Which term describes factors that affect price and include: newness of the product, whether it is part of a product line and cost of changing a price? |
| | A) | Price fixings |
| | B) | Pricing constraints |
| | C) | Price elasticities |
| | D) | Pricing demands |
| | E) | Pricing margins |
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| 8 | |
Imagine you have some extra cash and would like to invest in something that will give you some extra money while you look for a job after graduation. If you invest $100 in an original limited edition DVD signed by Mariah Carey, should remember that its price is most closely tied to __________. |
| | A) | whether it is listed on the eBay website |
| | B) | the price at the same time last year because of seasonal factors |
| | C) | the price a decade ago because of long-term trend factors |
| | D) | the relation of its changing price to gross domestic product |
| | E) | supply and demand |
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| 9 | |
Which of the following statements about the factors that influence demand is true? |
| | A) | As the availability of close substitutes increases, the demand for a product increases |
| | B) | As real consumer income increases, demand for a product increases |
| | C) | As the price of close substitutes increases, demand for a product declines |
| | D) | Changing consumer tastes have little impact on demand for a product |
| | E) | All of the above statements about the factors that influence demand are true |
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| 10 | |
Movement along the demand curve is illustrated by which of the following? |
| | A) | As the price is lowered, the quantity demanded increases, assuming all else stays the same |
| | B) | As the price is raised, the quantity demanded increases, assuming all else stays the same |
| | C) | As the amount of advertising increases, the quantity demanded decreases, assuming all else stays the same |
| | D) | As the amount of advertising increases, the quantity demanded increases, assuming all else stays the same |
| | E) | As consumer incomes rise, the quantity demanded decreases, assuming all else stays the same |
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| 11 | |
At a price of $4 each, SHPE magazine sells 1.25 million copies of its magazine targeted to young women seeking a healthier lifestyle. If the price per issue is increased to $4.50 each, only 1 million copies will be sold. Fixed costs are $1 million and unit variable costs are $0.50 per magazine. Calculate the average revenue for SHPE magazine at the higher price. |
| | A) | $.50 |
| | B) | $1.25 |
| | C) | $4.00 |
| | D) | $4.50 |
| | E) | $5.68 |
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| 12 | |
At a price of $3 each, a magazine sells 1.25 million copies of its magazine targeted to young women seeking a healthier lifestyle. If the price per issue is increased to $3.25 each, only 1 million copies will be sold. For the information provided, the price elasticity of demand for the magazine in this price range can be described as __________. |
| | A) | inelastic demand |
| | B) | elastic demand |
| | C) | unitary demand |
| | D) | null elasticity |
| | E) | subsidized elasticity |
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| 13 | |
Ace Shoe Co. has fixed costs of $6 million and unit variable costs of $5 per pair. Suppose a consultant tells Ace it can sell 700,000 pairs of shoes, thus earning a profit of $2.5 million. What potential error is the consultant making? |
| | A) | Assuming that fixed costs are independent of price |
| | B) | Assuming that units sold is independent of price |
| | C) | Assuming that some fixed costs are variable |
| | D) | Assuming that some variable costs are fixed |
| | E) | Neglecting the elasticity of supply |
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| 14 | |
Inelastic demand exists when __________. |
| | A) | a small percentage decrease in price produces a smaller percentage increase in quantity demanded and total revenue falls |
| | B) | a small percentage decrease in price produces a larger percentage increase in quantity demanded and total revenue falls |
| | C) | an increase in price causes a larger increase in quantity demanded and total revenue falls to zero |
| | D) | the quantity demanded remains the same regardless of level of price and total revenue is unchanged |
| | E) | a small percentage decrease in price produces a smaller percentage decrease in quantity demanded and total revenue increases |
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| 15 | |
Parker has two iconic pens—the Duofold design and the Sonnet design. These data apply, regardless of which of two pen designs is being implemented. Materials cost per pen is $6. Labor cost per pen is $5. Production overhead is $1,000,000. Advertising and promotion is $1,000,000. Marketing research has estimated the following demand functions for the next year of sales for the two pen designs where Q represents demand in thousands and P represents price. For the Duofold design, Q = 150 - 2.5P. For the Sonnet design, Q = 175 - 2.1P. What are the total costs for sales of 500,000 units of the Duofold design? |
| | A) | $1,000,000 |
| | B) | $2,000,000 |
| | C) | $3,650,00 |
| | D) | $5,500,000 |
| | E) | $7,500,000 |
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| 16 | |
Online travel websites have not experienced the same problems as other dot-com companies because these websites __________. |
| | A) | rarely attempt to establish any type of long-term relationships with customers |
| | B) | focus on market share |
| | C) | use tactical objectives instead of strategic objectives |
| | D) | reach key customer segments that will actually pay higher prices for hotel rooms or airline tickets |
| | E) | create form utility for customers |
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| 17 | |
According to the text, one of the reasons for the failure of so many brick-and-mortar dot-com businesses was __________. |
| | A) | the need to conduct almost all operations electronically |
| | B) | setting prices too low to cover huge costs of inventory and warehousing |
| | C) | setting prices too high relative to customer income |
| | D) | the ability to reach customers who had a great deal of flexibility in what would satisfy their needs |
| | E) | spending too little on traditional promotion on TV |
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| 18 | |
The owner of a small restaurant that sells take-out fried chicken and biscuits pays $2,500 in rent each month, $500 in utilities, $750 interest on his loan, insurance premium of $200 and advertising on local buses $250 a month. A bucket of take-out chicken is priced at $9.50. Unit variable costs for the bucket of chicken are $5.50. How many small buckets of chicken does the restaurant need to sell to break-even? |
| | A) | 988 buckets |
| | B) | 1,000 buckets |
| | C) | 1,050 buckets |
| | D) | 3,150 buckets |
| | E) | 4,200 buckets |
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| 19 | |
Chai owns a picture-framing shop, Chaiseng Co. in Thailand. The average price she receives for a picture she frames for a customer is $120. This price must cover her average costs for a typical framed picture of $5 for glass, $2 for matting and $13 for the frame and $30 for the labor involved. She must also cover monthly expenses of $1,000 for rent and insurance, $200 for heat and electricity, $500 for advertising and $3,500 for her salary. Chai is considering buying an automatic mat-cutting machine in order to reduce the number of hours of direct labor required to produce a framed picture. In considering this purchase, she should recognize this purchase will _____ Chaiseng’s variable cost and _____ Chaiseng’s fixed cost. |
| | A) | decrease; increase |
| | B) | decrease; decrease |
| | C) | increase; decrease |
| | D) | increase; increase |
| | E) | have no effect on; have no effect on |
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| 20 | |
The survey carried out by NUS students found out that very few consumers were willing to pay more than S$20 for Glitzz. What does this mean? |
| | A) | This is not a constraint on Glitzz’s pricing strategy |
| | B) | Setting prices above S$20 will significantly reduce Glitzz’s profitability. |
| | C) | This is a constraint on Glitzz’s pricing strategy because it involves Glitzz’s cost structure |
| | D) | The demand for the guitar will stay the same no matter what the price increase |
| | E) | The potential buyers of the Glitzz are completely price insensitive |
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