Multiple Choice Quiz


1	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.


2	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 $2. Which pricing strategy is Kramm using?
		A)	skimming pricing
		B)	penetration pricing
		C)	price lining
		D)	odd-even pricing
		E)	demand-backward pricing


3	Penetration pricing is intended to appeal to which market?
		A)	highly selective quality-seeking consumers
		B)	price-insensitive markets
		C)	the mass market
		D)	specialty goods markets
		E)	the same markets as skimming pricing


4	Which of the needs, as demonstrated by Maslow's hierarchy of needs, does prestige pricing most likely satisfy?
		A)	physiological needs
		B)	safety needs
		C)	social needs
		D)	personal needs
		E)	self actualization needs


5	The assumption that demand is elastic at a number of price points but is inelastic between these price points leads to which approach to pricing?
		A)	target pricing
		B)	skimming pricing
		C)	penetration pricing
		D)	price lining
		E)	odd-even pricing


6	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


7	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


8	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


9	A custom kitchen cabinet storeowner wishes to use target profit pricing to establish a price for a typical section of cabinets. Assume variable cost is $200 per unit, fixed cost is $44,000, and a target profit of $10,000 on a volume of 400 cabinets is desired? What should be charged for a typical cabinet section?
		A)	$335.00
		B)	$310.00
		C)	$455.00
		D)	$398.00
		E)	cannot be determined from the information provided


10	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 a product based on tradition, standardized channel of distribution, or other competitive factors.
		E)	pricing based on intensity of customer demand.


11	Embroidery Express does machine embroidery on hats, jackets, shirts, baby clothes, and uniforms. If the owner is embroidering a single jacket for an ultimate consumer, she will charge $100, but if she is embroidering two dozen jackets for a business, the price per jacket drops to $85 each. What pricing policy does the owner of Embroidery Express use?
		A)	customary pricing
		B)	flexible-price policy
		C)	basing-point pricing
		D)	price lining
		E)	loss-leader pricing


12	Leupold & Stevens, Inc., a U.S. manufacturer of rifle scopes, uses a variety of pricing strategies for its rifle scopes. For some, the company uses above-, at-, or below-market pricing to reach as many customers as possible. The company is more concerned about making a profit for the complete line of its scopes-rather than making a profit on just one item in its product. Leupold & Stevens uses:
		A)	line item pricing.
		B)	product line pricing.
		C)	price lining.
		D)	customary pricing.
		E)	discretionary pricing.


13	In what kind of a competitive market situation are you most likely to find price wars occurring?
		A)	oligopolistic competition
		B)	pure monopoly
		C)	oligopoly
		D)	pure competition
		E)	oligopolistic monopoly


14	Which of the following types of discounts is most likely to encourage the development of a strong marketing relationship between seller and buyer?
		A)	a promotional allowance
		B)	a cumulative quantity discount
		C)	a cash discount
		D)	a seasonal discount
		E)	a noncumulative quantity discount


15	What would be the ultimate selling price of a pair of shoes if the cost to the manufacturer is $15.20 and the manufacturer, wholesaler, and retailer (no other members of the channel) took markups on selling price of 25 percent, 10 percent, and 50 percent?
		A)	$23.75
		B)	$26.60
		C)	$27.36
		D)	$33.75
		E)	$45.04


16	_____ 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


17	Rebecca Gollannek makes maple wood cooling racks for cookies, cakes, and breads. The cost to order one rack is $22.50. This price includes shipping charges. Gollanek is using _____ to determine shipping costs.
		A)	freight destination pricing
		B)	single-zone pricing
		C)	multiple-zone pricing
		D)	FOB origin pricing
		E)	basing-point pricing


18	The _____ is the federal regulation that is used to determine whether a company has engaged in deceptive pricing and what should be done if in fact deceptive pricing has occurred.
		A)	Federal Trade Commission Act
		B)	Robinson-Patman Act
		C)	Sherman Act
		D)	Food and Drug Administration Act
		E)	Consumer Goods Pricing Act


19	"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


20	Rebecca Golanek makes and sells wooden cooling racks for cakes, cookies, and bread for $22.50 each. She has invested $4,300 in the venture and made $2,200 in net profit. Calculate her return on investment.
		A)	19.5 percent
		B)	20.5 percent
		C)	43 percent
		D)	48.8 percent
		E)	51.2 percent

2003 McGraw-Hill Higher Education
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2003 McGraw-Hill Higher Education
Any use is subject to the Terms of Use and Privacy Policy.
McGraw-Hill Higher Education is one of the many fine businesses of The McGraw-Hill Companies.