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| 1 | |
The practice of exchanging goods and services for other goods and services rather than for money is called: |
| | A) | pricing. |
| | B) | pricing substitution. |
| | C) | debt restructuring. |
| | D) | value-pricing. |
| | E) | barter. |
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| 2 | |
According to the profit equation, profit equals total revenue minus: |
| | A) | marginal cost. |
| | B) | discounts and allowances. |
| | C) | total cost. |
| | D) | variable cost. |
| | E) | fixed cost. |
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| 3 | |
Which of the following factors are important when estimating demand? |
| | A) | price |
| | B) | consumer tastes and preferences |
| | C) | consumer income |
| | D) | availability of substitutes |
| | E) | all of the above |
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| 4 | |
A demand curve shows: |
| | A) | the total number of buyers for all products in a particular industry. |
| | B) | the total sales for specified product lines, usually over a three-year period. |
| | C) | a maximum number of products consumers will buy at a given price. |
| | D) | anticipated marginal revenue obtained under specified customer demand conditions. |
| | E) | the opposing axis on a profit equation projection. |
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| 5 | |
LorAnn is a company that sells lollipop kits, which include cinnamon, peppermint, and lemon flavorings as well as sucker sticks and instructions to make Santa, Christmas tree, snowman, and candy cane lollipops. When estimating demand for the lollipop kits, its owner should consider all of the following EXCEPT: |
| | A) | whether her suppliers can deliver the molds and sucker sticks in the quantity she needs. |
| | B) | the availability of Wilton lollipop kits as a product substitute. |
| | C) | whether her target market (neighbors and friends) might view the kits as an unaffordable luxury. |
| | D) | the price that needs to be charged to achieve the company's price objective. |
| | E) | how customers like the available tastes and whether another flavoring might be preferable. |
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| 6 | |
Lots of Love is a small company that sells bean soup mixes—it packs nine layers of dry beans in a narrow plastic bag, attaches a bottle of hot sauce and a recipe, and sells it for $6.50. If it sells 3,000 bags during the spring quarter, it will still have 1,500 bags to see it through the summer until it can get a fresh crop of beans to dry. Calculate the company's total revenue in the spring quarter. |
| | A) | $19,500 |
| | B) | $18,000 |
| | C) | $26,000 |
| | D) | $9,750 |
| | E) | $4,875 |
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| 7 | |
Which of the following describes products that are price elastic? |
| | A) | products like milk, bread, soap, and toothpaste |
| | B) | cola, coffee and snack foods |
| | C) | gasoline, electricity, and water |
| | D) | products that have no product substitutes |
| | E) | radiation treatment for cancer |
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| 8 | |
LorAnn is a company that sells lollipop kits, which include cinnamon, peppermint, and lemon flavorings and molds to make Santa, Christmas tree, snowman, and candy cane lollipops, plus sucker sticks and instructions. Which of the following would be an example of a fixed cost for LorAnn? |
| | A) | lollipop sticks |
| | B) | boxes in which to pack the kits |
| | C) | Santa, Christmas tree, snowman, and candy cane molds |
| | D) | quarterly payment to bank on equipment to make and bottle flavorings |
| | E) | printing costs for instructions and labels |
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| 9 | |
Ampro-Mag is a small company that makes materials for safely controlling hazardous spills of all kinds. It sells these items as a neutralizing kit priced at $120. The costs of the materials that go into each kit are $45. It costs $5 in labor to assemble a kit. The company has monthly expenses of $1,000 for rent and insurance, $200 for heat and electricity, $500 for advertising in trade journals, and $3,500 for the monthly salary of its owner. Ampro-Mag's unit variable cost for its neutralizing kits is: |
| | A) | $45. |
| | B) | $50. |
| | C) | $120. |
| | D) | $170. |
| | E) | cannot be determined from the information provided. |
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| 10 | |
Ace Shoe Company sells heel replacement kits for men's shoes. It has fixed costs of $6 million and unit variable costs of $5 per pair. Suppose a consultant tells Ace it can sell 700,000 heel repair kits, what price must it charge to achieve a profit of $2.5 million? |
| | A) | $3.58 |
| | B) | $7.58 |
| | C) | $12.15 |
| | D) | $17.14 |
| | E) | $17.90 |
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| 11 | |
700,000 = [2,500,000 + 6,000,000]/[P - 5] P = $17.14
Jane Westerlund owns a picture-framing shop, The Caplow Co. 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. Assuming everything else stays the same, if Westerlund wants to increase her monthly salary to $4,000, this would cause the break-even quantity to __________. |
| | A) | decrease |
| | B) | double |
| | C) | increase |
| | D) | stay the same |
| | E) | not enough information given to determine the answer |
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| 12 | |
A break-even chart shows: |
| | A) | a list of all variable and fixed costs ranked from most influential to least. |
| | B) | the point at which a price increase causes demand to decrease. |
| | C) | the point at which consumers abandon old perceptions and embrace new ones. |
| | D) | the point at which total revenue equals total cost. |
| | E) | the point at which a price increase causes supply to decrease. |
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| 13 | |
A skimming pricing policy is likely to be most effective when: |
| | A) | consumers perceive your product to be similar to other products on the market. |
| | B) | a lower price will have a major effect on reducing unit costs. |
| | C) | competitors will be attracted to the market due to the potential for high sales revenues. |
| | D) | consumers tend to be price sensitive. |
| | E) | none of the above is true. |
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| 14 | |
Pharmacist and new father Kenneth Kramm wanted to get his young son to take his medicine, but it was a battle. As a result Kramm developed FLAVORx, a liquid medicine-flavoring system that can mask the most foul-tasting or bad-smelling medicine. Flavors range from strawberry and grape to bubble gum and chocolate and can be mixed. FLAVORx has no effect whatsoever on the medicinal value of the drug to which it is added. It is the first product of its kind and costs only $Which pricing strategy is Kramm using? |
| | A) | skimming pricing |
| | B) | penetration pricing |
| | C) | price lining |
| | D) | odd-even pricing |
| | E) | demand-backward pricing |
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| 15 | |
A bottle of shampoo shrink-wrapped with a bottle of conditioner for 10 cents more than the regular price of the shampoo is an example of __________ pricing. |
| | A) | penetration |
| | B) | prestige |
| | C) | bundle |
| | D) | odd-even |
| | E) | standard mark-up |
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| 16 | |
Which of the following pricing strategies is designed to deal most effectively with the service characteristic of inventory costs? |
| | A) | yield management pricing |
| | B) | target pricing |
| | C) | customary pricing |
| | D) | prestige pricing |
| | E) | price lining |
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| 17 | |
Woodsgift Farm sells floral jellies—jellies made from pansies, honeysuckle, wisteria, and other flowers. To price its jellies, the owners of the farm, add 30 percent to the cost of everything that goes into making the jellies including their salaries, jars, sugar, and pectin. What is this pricing method called? |
| | A) | target return-on-sales pricing |
| | B) | flexible pricing |
| | C) | cost-plus-fixed-fee pricing |
| | D) | standard markup pricing |
| | E) | customary pricing |
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| 18 | |
Loss-leader pricing is: |
| | A) | a pricing method where the price the seller quotes includes all transportation costs. |
| | B) | setting the same price for similar customers who buy the same product and quantities under the same conditions. |
| | C) | deliberately selling a product below its customary price to attract attention to it. |
| | D) | a method of pricing based on a product's tradition, standardized channel of distribution, or other competitive factors. |
| | E) | pricing based on intensity of customer demand. |
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| 19 | |
__________ discounts are rewarded to wholesalers and retailers for marketing functions they will perform in the future. These reductions off the list price are offered to resellers in the channel of distribution on the basis of where they are in the channel and the marketing activities they are expected to perform. |
| | A) | Seasonal |
| | B) | Flexible-price |
| | C) | Cash |
| | D) | Trade |
| | E) | Quantity |
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| 20 | |
"The customer is our enemy; the competitor is our friend." That's the unofficial world-view of $11-billion-in-sales Archer Daniels Midland (ADM), according to FBI mole-executive Mark Whitacre in an interview. Given this information, which of the following illegal pricing practices would ADM have been most likely to engage in? |
| | A) | price fixing |
| | B) | dynamic pricing |
| | C) | price differentiation |
| | D) | FOB origin pricing |
| | E) | cost justification defense |
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