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False

If Brandon buys hats for his store for $5 each and sells them for $15 each, he is using a keystoning pricing strategy.

True

In general, prices should not be based on costs because consumers make their purchase decisions based on perceived value, not the cost of production.

Unemployment rates, distribution of wealth, levels of disposable income, and interest rates

Economic conditions cannot be ignored by marketers when setting prices. Among the important domestic economic considerations are:

Predatory pricing

Winston's Ice Cream Shop has been in the same location for two decades. Last week, a new ice cream shop opened up just one block down the street. Winston's decides to sell ice cream below cost in order to drive the new shop out of business. What kind of pricing is Winston's using?

Sales-oriented

Bernard's firm has set corporate direction to become one of the leaders in each of its significant market segments. It was Bernard's job to examine the pricing to determine how to maximize market share, even at the expense of profits in the short run. What kind of company objective would guide Bernard's effort?

Prestige pricing

There is an old saying, "If you have to ask the price of a yacht, you cannot afford it." Products like yachts are most likely to be associated with:

False

Competitor-based pricing is when a company determines the final price of a good based on the cost.

True

Price lining is setting a price floor and a price ceiling for a line of products and then setting price points in between to represent differences in quality.

will not vary much for different levels of production.

Cost-based pricing assumes costs:

zone

Clark Manufactured Housing Company charges $500 for deliveries within 50 miles and $800 for deliveries 51 to 100 miles away from their factory. The company is using a ____________ pricing tactic.

offer consumers some new benefit currently unavailable.

For a price skimming strategy to work, the product or service must:

cost-based

Yvonne estimates the average cost of her floral arrangements is $14 regardless of whether she is doing 5 or 20 arrangements that day. She adds a standard markup to the $14 estimate to determine her price. Yvonne is using a ________________ pricing method.

Cost of ownership

In determining the price for his company's new personal computer photography printer, Raymond is assessing the total cost of owning his printer as compared to alternative products available in the market. Raymond is using _______________ pricing.

False

Brands that have developed loyal customers have a higher price elasticity of demand.

Substitution effect

A major hotel chain found that if they were to reduce the cost of the ice cream they currently served they would be able to save over 400 employees jobs. Therefore, they switched from a high priced brand of ice cream to a more moderate priced ice cream. This is known as the:

Price elasticity of demand

_________________ measures consumers' sensitivity to price changes.

decrease demand for their products

Managers of Wendy's fast food restaurants keep track of prices at competitors such as McDonald's, Burger King, and Arby's, knowing that a decrease in the prices at these other fast food restaurants will:

price and demand

A demand curve shows the relationship between ___________________ in a period of time.

True

Cost-based pricing assumes costs will not vary much for different levels of production.

zone pricing

When Sheila decided to sell her shoe racks on eBay, she stated the price and a shipping rate according to delivery area. Which method of pricing was Sheila using?

bait and switch

In a __________________ pricing tactic, sellers advertise low prices and then aggressively pressure customers to purchase higher-priced versions of the product advertised with the low price.

new products

Developing pricing strategies for __________________ is one of the most challenging tasks a manager can undertake.

price discrimination

The Clayton Act and the Robinson-Patman Act forbid certain types of:

consumers make their purchase decisions based on perceived value.

In general, prices should not be based on costs because:

sales orientation

Health clubs often use a low, introductory offer price to get people to join their club. These low prices represent a ______________ pricing strategy.

the reference point has been inflated or is fictitious.

A reference price might be considered deceptive if:

variable

Labor, materials, and energy are typically __________ costs

break-even point

The point at which the number of units sold generates enough revenue to equal the total costs of running an operation is known as the:

False

Proving that a company has engaged in the deceptive bait and switch practice is easy.

is low

Research shows that odd prices signal to the consumers that the price:

the additional cost of handling the coupons might be a hidden cost, customers might stock up on inventory and hurt future sales, customers might hold off on future purchases hoping for additional coupons later on, and they might not generate sales on other merchandise to cover lost profits.

Dan and Ken were discussing the use of coupons as a sales promotion for their paper products store. They knew that coupons would increase immediate sales, but they were concerned that:

competitor-based

When Greenbelt Construction Company began building houses in a large subdivision with many other builders, they priced their homes slightly higher than their competitors and promoted the added quality features in their homes. Greenbelt was using a ________________ pricing strategy.

the price of alternative products and services

The full price of a product or service includes all of the following except:

reserve price

When you place an item up for bid on eBay, you have the option to stipulate the lowest bid you will accept for the item. This is known as the:

True

The Robinson-Patman Act does NOT apply to end consumers, at which point many forms of price discrimination occur.

price bundling

Mona is selling her artwork at a local festival. Her art is selling well, but t-shirts she had made up with her artwork are not selling. She decides to offer a package price for her art with a t-shirt included. Mona is using:

lessen inventories of finished goods

The primary reasons manufacturers offer seasonal discounts to retailers are to more easily plan production schedules and to:

competitive parity

When firms set prices similar to those of competitors, they are following a strategy of:

an increase in the price of natural gas will increase demand for his electrical heating systems

Frank's Heating and Air Conditioning Company specializes in electric heat pumps. Frank keeps track of the price of natural gas, knowing that:

skimming

When Burroughs-Welcome introduced the first anti-AIDS drugs, they initially set the price at $10,000 for a year's supply. Burroughs-Welcome was probably pursuing a _____________________ pricing strategy.

valuable customer information

Rebates provide manufacturers with greater control than coupons and provide the firm with:

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