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Self-test Quizzes
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1
The text says "markups":
A)should always be stated as a percentage of cost.
B)are a percentage of selling price—unless otherwise stated.
C)are never stated as a percentage of cost.
D)should never be stated in dollar amounts.
E)All of the above except B.
2
A retailer pays a wholesaler $24.00 for an item and then sells it with a 25 percent markup. The retailer's selling price is:
A)$32.00.
B)$56.00.
C)$48.00.
D)$30.00.
E)None of the above.
3
The markup approach to price setting used by most intermediaries:
A)makes little sense—given the large number of items carried and the small sales volume of any one item.
B)is very inflexible because the same markup percent must be applied to all products.
C)often uses the trade (functional) discount allowed by the manufacturer.
D)is quite complicated—because each product has a different delivered cost.
E)All of the above.
4
Which of the following is a TRUE statement about markups?
A)A firm can lose money even when using a high markup.
B)Markup percents are computed as a percent of the cost of the product.
C)It's easier for a producer to administer the prices consumers pay for products if the markup used varies from one intermediary to the next.
D)The lower the markup, the lower the profit.
E)None of the above is true.
5
With respect to markups and turnover, a marketing manager should be aware that:
A)a low stockturn rate increases inventory carrying costs.
B)depending on the industry, a stockturn rate of 2 or 3 may be quite profitable.
C)high markups don't always mean big profits.
D)speeding turnover often increases profits because the firm's operating costs are a function of time and the volume of goods sold.
E)All of the above are true statements.
6
Average-cost pricing:
A)consists of adding a "reasonable" markup to the average cost of a product.
B)puts a great deal of emphasis on determining how sensitive consumer demand is at different price levels.
C)does not consider cost variations at different levels of output.
D)focuses on the differences between fixed and variable costs.
E)Both A and C are true.
7
Average-cost pricing will result in larger than expected profit:
A)most of the time.
B)if the average fixed cost estimate is based on a quantity that is smaller than the actual quantity sold.
C)if the average total cost is higher than expected.
D)only if the manager makes arithmetic errors in computing average variable cost.
E)None of the above is correct.
8
Average-cost pricing
A)always results in a profit that is less than what was expected.
B)will work out as expected when the firm's actual average fixed cost per unit is what was estimated when prices were set.
C)sets the price at the point where average fixed cost is equal to average variable cost.
D)ignores variable costs.
E)is the only way to ensure that the firm will set a profitable price.
9
A typical break-even analysis assumes that:
A)the fixed-cost contribution per unit increases as units sold increases.
B)average fixed cost per unit is the same regardless of quantity sold.
C)demand curves are downward sloping.
D)average variable cost is the same regardless of quantity sold.
E)None of the above is true.
10
Trying to find the most profitable price and quantity to produce:
A)requires average-cost pricing.
B)requires an estimate of the firm's demand curve.
C)is easy once the average fixed cost is known.
D)is only sensible if demand estimates are exact.
E)All of the above are true.
11
An equipment producer is introducing a new type of paint sprayer to sell to automobile body-repair shops. The sprayer saves labor time, gives as good a job with less expensive paint, and requires less work polishing. The seller should probably use:
A)leader pricing.
B)bait pricing.
C)complementary product pricing.
D)odd-even pricing.
E)value in use pricing.
12
Which of the following statements concerning "reference prices" is FALSE?
A)A reference price is the price consumers expect to pay for an item.
B)Retailers sometimes want consumers to use the manufacturer's list price as the reference price even though their actual retail selling price is lower.
C)Different customers may have different reference prices for the same type of purchase.
D)Leader pricing is normally used with products for which consumers do not have a specific reference price.
E)None of the above is false.
13
The manager of Hot Topics Fashion Shop has concluded that her customers find certain prices very appealing. Customers see prices above or below these levels as roughly equal—and price cuts in these ranges don't increase sales. This seems to call for
A)prestige pricing.
B)bait pricing.
C)leader pricing.
D)psychological pricing.
E)odd-even pricing.
14
The practice of setting different price levels for different quality classes of merchandise—with no prices between the classes—is called:
A)full-line pricing.
B)prestige pricing.
C)price lining.
D)odd-even pricing.
E)psychological pricing.
15
Good Health Co. has set a suggested retail list price of $40 on its new vitamin tablets on the assumption that its target market will find the product attractive at this price. From this suggested retail list price, Good Health has subtracted its usual chain of markups for wholesalers and retailers to obtain its own selling price of $17. This is:
A)demand-backward pricing.
B)full-line pricing.
C)average-cost pricing.
D)odd-even pricing.
E)prestige pricing.
16
Which of the following statements is true?
A)Prestige pricing is used to target government buyers.
B)With full-line pricing, all products in the company's line must be targeted at the same market.
C)Demand-backward pricing is used to target industrial buyers.
D)Value pricing can only be used by mass-merchandisers.
E)None of the above is true.
17
Regarding "full-line pricing," which of the following statements is TRUE?
A)A good marketing manager usually tries to price products in a line so that the prices will seem logically related and make sense to target customers.
B)The marketing manager should try to cover all costs on the whole product line.
C)Most customers seem to feel that prices in a product line should be somewhat related to cost.
D)Not all companies that make a line of products must use full-line pricing.
E)All of the above are true.
18
When Walgreens Drugstores advertises one price for the cost of a roll of film and the cost of processing it, they are using
A)complementary product pricing.
B)flexible pricing.
C)product-bundle pricing.
D)a one-price policy.
E)bait pricing.
19
With regard to bid pricing, a marketing manager should be aware that:
A)the customer is always required to accept the lowest bid.
B)since it costs very little to submit a bid, most firms try to bid for as many jobs as possible.
C)the same overhead charges and profit rates usually apply to all bids.
D)a big problem is estimating all the costs—including the variable and fixed costs that apply to a particular job.
E)All of the above are true statements.
20
Regarding bid pricing:
A)the same overhead changes and profit rates should apply to all bids—to avoid legal problems.
B)most firms should try to bid for as many jobs as possible—to spread risk.
C)all business buyers are legally required to accept the lowest bid—if they ask for bids.
D)the big problem for sellers is estimating all the costs—including the variable and fixed costs—that apply to a particular job.
E)All of the above are true.





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