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Marketing: A McGraw-Hill and QUT Custom Publication

Marketing

A McGraw Hill and QUT Custom Publication

Building the Price Foundation

Multiple Choice Quiz


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.


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.


3		Everyone told Roseann Muscarella Egan that she ought to go in business and sell the Italian cookies she made and gave away at Christmas. When she decided to launch her business, Cookies, Etc., she should have _____ as the first step of setting her prices.
			A)	decided how to distribute the cookies
			B)	determined her target market
			C)	decided whether her objective was to maximize short-term or long-term profits.
			D)	selected a supplier of cans and boxes for the cookies
			E)	used word-of-mouth advertising


4		_____ is the competitive market situation in which one seller sets the price for a unique product.
			A)	Pure monopoly
			B)	Oligopoly
			C)	Monopolistic competition
			D)	Pure competition
			E)	Monopolistic oligopoly


5		Which of the following statements about oligopolies is true?
			A)	There is no product differentiation used in oligopolies.
			B)	Companies that sell in oligopolies try to avoid price competition.
			C)	The market sets the price in an oligopoly.
			D)	There are never any price leaders or followers in an oligopoly.
			E)	Oligopolies use advertising to increase demand for a product class.


6		A manufacturing company that introduces a product must know or anticipate what specific price its _____ currently charge or will charge in the future.
			A)	other marketing departments
			B)	subsidiary manufacturing divisions
			C)	previous industry relations
			D)	present and potential competitors
			E)	government bureaus and labor unions


7		Companies often pursue a market share objective:
			A)	after they recognize their obligations to customers and society in general.
			B)	when industry sales are gradually decreasing.
			C)	when companies let the market determine their promotion strategies.
			D)	when the product category is in the introduction stage.
			E)	when industry sales are relatively flat or declining.


8		Which of the following factors are important when estimating demand?
			A)	price
			B)	consumer tastes and preferences
			C)	customer income
			D)	availability of other products
			E)	all of the above


9		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.


10		LorAnn is a company that sells lollipop kits, which include cinnamon, peppermint, and lemon flavorings to make Santa, Christmas tree, snowman, and candy cane lollipops, plus sucker sticks and instructions. 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.


11		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


12		At a price of $3 each, SH?PE 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. Fixed costs are $1 million and unit variable costs are $0.50 per magazine. Calculate the average revenue for SH?PE magazine at the higher price.
			A)	$.50
			B)	$1.25
			C)	$1.65
			D)	$3.00
			E)	$3.25


13		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)	$9,750
			C)	$4,875
			D)	$6.50
			E)	cannot be determined from the information provided


14		Which of the following describes products that are price elastic?
			A)	products like milk, bread, soap, and toothpaste
			B)	items that require a large price outlay compared with a customer's disposable income
			C)	gasoline, electricity, and water
			D)	products that have no product substitutes
			E)	radiation treatment for cancer


15		Unitary elasticity of demand exists when:
			A)	a small percentage decrease in price produces a larger percentage increase in quantity demanded.
			B)	a small percentage decrease in price produces a smaller percentage increase in quantity demanded.
			C)	an increase in price causes a larger increase in quantity demanded.
			D)	a small percentage decrease in price is identical to the percentage increase in quantity demanded.
			E)	percentage change in the target market size is equal to the change in quantity demanded.


16		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


17		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.


18		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


19		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 slope of the total cost curve to _____ and the break-even quantity to _____.
			A)	decrease; stay the same
			B)	decrease; increase
			C)	increase; increase
			D)	stay the same; increase
			E)	stay the same; decrease


20		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)	how changes in price, fixed costs, and variable costs affect sales.
			E)	the point at which a price increase causes supply to decrease.

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