Question 1

A firm that sets prices such that consumers will save 15 percent of their fuel costs by buying its products is employing

Accepted Answer

A)  leader pricing.
B)  value in use pricing.
C)  odd-even pricing.
D)  price lining.
E)  product-bundle pricing.F) B) and C)
G) A) and D)

Question 2

At zero output,total variable cost is zero.

Accepted Answer

A) True 
 B)False

Question 3

Average-cost pricing guarantees that the firm will earn enough to at least cover its costs.

Accepted Answer

A) True 
 B)False

Question 4

A ________ is a dollar amount added to the cost of products to get the selling price.

Accepted Answer

A)  markup
B)  rebate
C)  list price
D)  spiff
E)  dealF) A) and C)
G) B) and D)

Question 5

Demand-backward pricing is commonly used by producers of consumer products,especially shopping products such as women's clothing and appliances.

Accepted Answer

A) True 
 B)False

Question 6

A retailer who advertises a low price on an item-with no intent to sell that item-but only to attract customers to try to sell more expensive products is using

Accepted Answer

A)  full-line pricing.
B)  leader pricing.
C)  odd-even pricing.
D)  psychological pricing.
E)  bait pricing.F) B) and E)
G) All of the above

Question 7

Stockturn rate refers to

Accepted Answer

A)  the number of days required to sell a given output of products.
B)  the amount of time needed to sell every item in a retailer's inventory.
C)  the number of times the average inventory is sold in a year.
D)  the rate at which products enter and leave an intermediary's establishment.
E)  None of these answers is correct.F) B) and E)
G) B) and C)

Question 8

The big problem with average-cost pricing is that

Accepted Answer

A)  fixed costs are hard to estimate.
B)  it ignores the firm's demand curve.
C)  it doesn't consider the effect of variable costs.
D)  there is no way to include a desired profit per unit.
E)  None of these answers is correct.F) All of the above
G) C) and E)

Question 9

Break-even analysis evaluates whether the firm will be able to cover all its costs with a particular price.

Accepted Answer

A) True 
 B)False

Question 10

Cost-oriented selling price per unit is obtained by adding a firm's desired profit per unit to the average total cost.

Accepted Answer

A) True 
 B)False

Question 11

Price lining tends to result in faster turnover,fewer markdowns,quicker sales,and simplified buying.

Accepted Answer

A) True 
 B)False

Question 12

Which of the following statements about average cost-pricing is true?

Accepted Answer

A)  It can result in losses if actual sales are higher than expected.
B)  It is more profitable if actual sales are lower than expected.
C)  It does not take the demand curve into account when setting prices.
D)  It works better in practice than it does in theory.
E)  It can be used to set a price without an estimate of the quantity to be sold.F) C) and E)
G) B) and D)

Question 13

A markup chain

Accepted Answer

A)  only applies to consumer products,not to business products.
B)  implies that a retailer must always apply a smaller markup than a wholesaler.
C)  causes lower prices in longer channel systems.
D)  determines the price structure in a channel of distribution.
E)  None of these answers is correct.F) C) and D)
G) B) and D)

Question 14

Which of the following is true regarding markups and turnover?

Accepted Answer

A)  High markups usually lead to high profits.
B)  Speeding turnover usually decreases profits.
C)  Items sold at low markups (e.g.,20 percent) cannot be profitable.
D)  Depending on the industry,a stockturn rate of 1 or 2 may be quite profitable.
E)  All these answers are correct.F) C) and D)
G) C) and E)

Question 15

Setting a few price levels for a product line and then marking all items at these price levels is

Accepted Answer

A)  leader pricing.
B)  price lining.
C)  product-bundle pricing.
D)  penetration pricing.
E)  odd-even pricing.F) B) and E)
G) C) and E)

Question 16

Marginal analysis focuses on the changes in average fixed cost per unit and average variable cost from selling one more unit to find the most profitable price and quantity.

Accepted Answer

A) True 
 B)False

Question 17

Prestige pricing is most common for luxury products such as furs,jewelry,and perfume.

Accepted Answer

A) True 
 B)False

Question 18

A producer incurred costs of $54,000 for labor and materials and $26,000 for fixed overhead expenses in a year.The firm produced 20,000 units during the year.If the producer desires a profit of $1 per unit in the coming year,what should the producer's selling price be,using average-cost pricing?

Accepted Answer

A)  $3.70
B)  $2.30
C)  $5.00
D)  $6.00
E)  The amount cannot be determined from the information provided.F) C) and D)
G) All of the above

Question 19

A producer sells an item to a wholesaler for $4.00,and the wholesaler uses a markup of 25 percent on its selling price and the retailer uses a markup of 30 percent on its selling price.What will be the retailer's selling price to its customers?

Accepted Answer

A)  $7.61
B)  $7.55
C)  $7.36
D)  $7.24
E)  $7.12F) D) and E)
G) B) and E)

Question 20

Which of the following observations concerning reference prices is true?

Accepted Answer

A)  The reference price is the company's cost to produce the product.
B)  Reference prices are set by regulators.
C)  Demand may increase if a firm's price is lower than a customer's reference price.
D)  All customers have the same reference prices for the same basic type of purchase.E) B) and D)
F) B) and C)

Exam 18: Price Setting in the Business World

A firm that sets prices such that consumers will save 15 percent of their fuel costs by buying its products is employing

Correct AnswerverifiedShow Answer

A markup chain

Correct AnswerverifiedShow Answer

A producer sells an item to a wholesaler for $4.00,and the wholesaler uses a markup of 25 percent on its selling price and the retailer uses a markup of 30 percent on its selling price.What will be the retailer's selling price to its customers?

Correct AnswerverifiedShow Answer

Average-cost pricing guarantees that the firm will earn enough to at least cover its costs.

Correct AnswerverifiedShow Answer

Marginal analysis focuses on the changes in average fixed cost per unit and average variable cost from selling one more unit to find the most profitable price and quantity.

Correct AnswerverifiedShow Answer

Prestige pricing is most common for luxury products such as furs,jewelry,and perfume.

Correct AnswerverifiedShow Answer

Break-even analysis evaluates whether the firm will be able to cover all its costs with a particular price.

Correct AnswerverifiedShow Answer

The big problem with average-cost pricing is that

Correct AnswerverifiedShow Answer

Demand-backward pricing is commonly used by producers of consumer products,especially shopping products such as women's clothing and appliances.

Correct AnswerverifiedShow Answer

Which of the following observations concerning reference prices is true?

Correct AnswerverifiedShow Answer

Which of the following is true regarding markups and turnover?

Correct AnswerverifiedShow Answer

A producer incurred costs of $54,000 for labor and materials and $26,000 for fixed overhead expenses in a year.The firm produced 20,000 units during the year.If the producer desires a profit of $1 per unit in the coming year,what should the producer's selling price be,using average-cost pricing?

Correct AnswerverifiedShow Answer

Which of the following statements about average cost-pricing is true?

Correct AnswerverifiedShow Answer

At zero output,total variable cost is zero.

Correct AnswerverifiedShow Answer

Price lining tends to result in faster turnover,fewer markdowns,quicker sales,and simplified buying.

Correct AnswerverifiedShow Answer

A retailer who advertises a low price on an item-with no intent to sell that item-but only to attract customers to try to sell more expensive products is using

Correct AnswerverifiedShow Answer

A ________ is a dollar amount added to the cost of products to get the selling price.

Correct AnswerverifiedShow Answer

Setting a few price levels for a product line and then marking all items at these price levels is

Correct AnswerverifiedShow Answer

Cost-oriented selling price per unit is obtained by adding a firm's desired profit per unit to the average total cost.

Correct AnswerverifiedShow Answer

Stockturn rate refers to

Correct AnswerverifiedShow Answer

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