Kotler mm14 tif14test bank for marketing management Koter PDF

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Marketing Management, 14e (Kotler/Keller) Chapter 14 Developing Pricing Strategies and Programs 1) When consumers examine products, they often compare an observed price to an internal price they remember. This is known as a(n) ________ price. A) markup B) reference C) market-skimming D) accumulated E) target Answer: B Page Ref: 387 Objective: 1 Difficulty: Easy 2) ________ price refers to what the consumers feel the product should cost. A) Fair B) Typical C) Usual discounted D) List E) Maximum retail Answer: A Page Ref: 387 Objective: 1 Difficulty: Easy 3) While shopping at the mall, Jane was asked by one of the sales representatives at the cosmetics counter to try out a new lipstick that her company was test marketing. The company representative asks her how much she would be willing to pay for the lipstick. After trying it out, Jane is of the opinion that $5 is just the right price for it. What type of a reference price is Jane using? A) usual discounted price B) fair price C) maximum retail price D) last price paid E) historical competitor price Answer: B Page Ref: 387 Objective: 1 AACSB: Analytic skills Difficulty: Moderate

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4) The reservation price or the maximum that most consumers would pay for a given product is known as the ________ price. A) expected future B) usual discounted C) upper-bound D) typical E) historical competitor Answer: C Page Ref: 387 Objective: 1 Difficulty: Easy 5) A company decided to conduct a market survey for its new MP3 player which it had priced at $150. However, in the survey, 95 percent of the participants said that the maximum they would pay for the MP3 player is $100. This is an example of which of the following possible consumer reference prices? A) historical competitor price B) expected future price C) usual discounted price D) upper-bound price E) last price paid Answer: D Page Ref: 387 Objective: 1 AACSB: Analytic skills Difficulty: Moderate 6) The minimum price that most consumers would pay for a given product is known as the ________ price. A) everyday low B) usual discounted C) fair D) typical E) lower-bound Answer: E Page Ref: 387 Objective: 1 Difficulty: Easy

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7) A company has developed the prototype of a mobile phone which it plans to launch in the next few months. The phone comes equipped with the most advanced technological features. As part of its test marketing efforts, it allows customers to examine and use the prototype and also gathers feedback regarding product features and price. The results of this test marketing effort show that customers are willing to pay at least $500, considering the phone's various features. As such, the company has found out about the customers' ________. A) last paid price B) expected future price C) lower-bound price D) upper-bound price E) typical price Answer: C Page Ref: 387 Objective: 1 AACSB: Analytic skills Difficulty: Moderate 8) Many consumers are willing to pay $100 for a perfume that contains $10 worth of scent because the perfume is from a well-known brand. What kind of a pricing is the company depending on? A) going-rate pricing B) image pricing C) market-skimming pricing D) target pricing E) markup pricing Answer: B Page Ref: 388 Objective: 1 Difficulty: Easy 9) Pricing cues such as sale signs and prices that end in 9 are more influential ________. A) when customers have substantial knowledge about prices B) when customers purchase the particular item regularly C) when product quality is standardized D) when product designs vary over time E) when prices do not vary from time to time Answer: D Page Ref: 388 Objective: 1 Difficulty: Moderate

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10) Which of the following is the first step in setting a pricing policy? A) selecting a pricing method B) selecting the pricing objective C) determining demand D) estimating cost E) analyzing competitors' costs, prices, and offers Answer: B Page Ref: 389 Objective: 2 Difficulty: Easy 11) After determining its pricing objectives, what is the next logical step a firm should take in setting its pricing policy? A) It should analyze its competitors' costs, prices, and offers. B) It should select its pricing method. C) It should select its final price. D) It should determine the demand for its product. E) It should estimate the cost of its product. Answer: D Page Ref: 389 Objective: 2 Difficulty: Easy 12) A firm that is plagued with overcapacity, intense competition, or changing wants would do better if it pursues ________ as its major objective. A) market skimming B) product-quality leadership C) survival D) profit maximization E) market penetration Answer: C Page Ref: 389 Objective: 2 Difficulty: Easy 13) After estimating the demand and costs associated with alternative prices, a company has chosen to price its product in such a way that it gains the highest rate of return on its investment. The company is looking to ________. A) maximize its market share B) skim the market C) become a product-quality leader D) survive in the market E) maximize its current profit Answer: E Page Ref: 389 Objective: 2 Difficulty: Easy 4 Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall

14) Companies who believe that a higher sales volume leads to lower unit costs and higher longrun profits are attempting to ________. A) maximize their market share B) skim the market C) become a product-quality leader D) merely survive in the market E) maximize their current profits Answer: A Page Ref: 389 Objective: 2 Difficulty: Easy 15) A company that is looking to maximize its market share would do well to follow ________ pricing. A) markup B) market-penetration C) market-skimming D) survival E) target-return Answer: B Page Ref: 389 Objective: 2 Difficulty: Easy 16) A market-penetration pricing strategy is most suitable when _______. A) a low price slows down market growth B) production and distribution costs fall with accumulated production experience C) a high price dissuades potential competitors from entering the market D) the market is characterized by inelastic demand E) a low price encourages actual competition Answer: B Page Ref: 389 Objective: 2 Difficulty: Moderate 17) When a company introduces a product at a very high price and then gradually drops the price over time, it is pursuing a ________ strategy. A) market-penetration pricing B) market-skimming pricing C) value-pricing D) switching cost E) loss-leader pricing Answer: B Page Ref: 390 Objective: 2 Difficulty: Easy 5 Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall

18) When Apple introduced its iPhone, it was priced at $599. This allowed Apple to earn the maximum amount of revenue from the various segments of the market. Two months after the introduction, the price has come down to $399. What kind of a pricing did Apple adopt? A) loss-leader pricing B) market-penetration pricing C) market-skimming pricing D) target-return pricing E) value pricing Answer: C Page Ref: 390 Objective: 2 AACSB: Analytic skills Difficulty: Moderate 19) Market skimming pricing makes sense under all the following conditions, EXCEPT ________. A) if a sufficient number of buyers have a high current demand B) if the unit costs of producing a small volume are high enough to cancel the advantage of charging what the traffic will bear C) if the high initial price does not attract more competitors to the market D) if consumers are likely to delay buying the product until its price drops E) if the high price communicates the image of a superior product Answer: D Page Ref: 390 Objective: 2 Difficulty: Easy 20) Companies that aim to ________ strive to be affordable luxuries. A) survive in the market B) partially recover their costs C) maximize their market share D) pursue value pricing E) be product-quality leaders Answer: E Page Ref: 390 Objective: 2 Difficulty: Moderate

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21) Starbucks, Aveda, and BMW have been able to position themselves within their categories by combining quality, luxury, and premium prices with an intensely loyal customer base. These companies are employing a ________ strategy. A) market-skimming B) market-penetration C) survival D) market share maximization E) product-quality leadership Answer: E Page Ref: 390 Objective: 2 Difficulty: Easy 22) The first step in estimating demand is to ________. A) analyze competitors' cost B) select a pricing method C) understand what affects price sensitivity D) calculate fixed costs E) decipher the experience curve Answer: C Page Ref: 390 Objective: 2 Difficulty: Moderate 23) Consumers are less price sensitive ________. A) to high cost items B) when they frequently change their buying habits C) when there are more substitutes D) when there are more competitors E) when they do not readily notice higher prices Answer: E Page Ref: 390-391 Objective: 2 Difficulty: Moderate 24) Consumers are less price sensitive when ________. A) price is only a small part of the total cost spent on the product over its lifetime B) they perceive the higher prices to be unjustified C) they change their buying habits regularly D) there are many substitutes and competitors in the market E) they are buying high-cost items Answer: A Page Ref: 391 Objective: 2 Difficulty: Moderate

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25) If demand hardly changes with a small change in price, the demand is said to be ________. A) strained B) marginal C) inelastic D) flexible E) unit elastic Answer: C Page Ref: 392 Objective: 2 Difficulty: Easy 26) If demand changes considerably, with a small change in price, the demand is said to be ________. A) unit elastic B) elastic C) inelastic D) marginal E) strained Answer: B Page Ref: 392 Objective: 2 Difficulty: Easy 27) If consumers were largely indifferent to a $0.5 increase in the price of a gallon of milk, the price rise is said to fall within customers' ________. A) price indifference band B) experience curve C) arm's-length price D) learning curve E) net price index Answer: A Page Ref: 392 Objective: 2 AACSB: Analytic skills Difficulty: Moderate 28) Which of the following is true regarding price elasticity? A) The higher the elasticity, the lesser is the volume growth resulting from a 1 percent price reduction. B) Within the price indifference band, price changes have little or no effect on demand. C) If demand is elastic, sellers will consider increasing the price. D) Price elasticity does not depend on magnitude and direction of the contemplated price change. E) When demand is inelastic, sellers should lower prices in order to increase total revenue. Answer: B Page Ref: 392 Objective: 2 Difficulty: Moderate 8 Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall

29) Costs that do not vary with production levels or sales revenue are known as ________. A) overhead costs B) variable costs C) average costs D) opportunity costs E) total costs Answer: A Page Ref: 393 Objective: 2 Difficulty: Easy 30) A company must make payments each month for rent, heat, interest, and salaries. These are ________. A) total costs B) fixed costs C) variable costs D) opportunity costs E) target costs Answer: B Page Ref: 393 Objective: 2 Difficulty: Easy 31) Costs that differ directly with the level of production are known as ________. A) fixed costs B) overhead costs C) opportunity costs D) target costs E) variable costs Answer: E Page Ref: 393 Objective: 2 Difficulty: Easy 32) ________ consist of the sum of the fixed and variable costs for any given level of production. A) Total costs B) Average costs C) Opportunity costs D) Learning costs E) Target costs Answer: A Page Ref: 393 Objective: 2 Difficulty: Easy

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33) ________ is the cost per unit at that level of production. A) Target cost B) Average cost C) Marginal cost D) Opportunity cost E) Fixed cost Answer: B Page Ref: 393 Objective: 2 Difficulty: Easy 34) The decline in the average cost of production with accumulated production experience is called the ________. A) demand curve B) supply chain C) learning curve D) value chain E) indifference curve Answer: C Page Ref: 393 Objective: 2 Difficulty: Easy 35) Experience-curve pricing ________. A) assumes competitors are weak followers B) allows products to project a high quality image C) is applicable only to manufacturing costs D) focuses on reducing fixed costs E) is generally risk-free Answer: A Page Ref: 394 Objective: 2 Difficulty: Moderate 36) Deducting the desired profit margin from the price at which a product will sell, given its appeal and competitors' prices, is known as ________. A) overhead costing B) target costing C) activity based costing D) benefit analysis E) estimate costing Answer: B Page Ref: 394 Objective: 2 Difficulty: Easy

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37) Competitors are most likely to react to a price change, when ________. A) the firm has a weak value proposition B) the firm enjoys a monopoly C) there are few competing firms D) the product is heterogeneous E) buyers have limited information Answer: C Page Ref: 395 Objective: 2 Difficulty: Moderate 38) Which of the following is the most elementary pricing method? A) value pricing B) going-rate pricing C) markup pricing D) target-return pricing E) perceived-value pricing Answer: C Page Ref: 396 Objective: 2 Difficulty: Easy 39) Despite its weaknesses, markup pricing remains popular for which of the following reasons? A) Sellers can determine demand much more easily than they can estimate costs. B) By tying the price to cost, the pricing task becomes more sophisticated. C) When all firms in the industry use markup pricing, price competition flourishes. D) Sellers take advantage of buyers when the latter's demand becomes acute. E) Many people feel that cost-plus pricing is fairer to both buyers and sellers. Answer: E Page Ref: 396-397 Objective: 2 Difficulty: Moderate 40) A manufacturer has invested $750,000 in a new product and wants to set a price to earn a 15 percent ROI. The cost per unit is $18 and the company expects to sell 50,000 units in the first year. Calculate the company's target-return price for this product. A) $20.25 B) $18.23 C) $18.10 D) $20.70 E) $25.50 Answer: A Page Ref: 397 Objective: 2 AACSB: Analytic skills Difficulty: Moderate 11 Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall

41) An umbrella manufacturing company's fixed costs are $275,000. The variable cost per unit is $5 and each umbrella is sold at $10. How many units should the firm sell in order to break even? A) 18000 B) 5500 C) 27500 D) 55000 E) 1819 Answer: D Page Ref: 397 Objective: 2 AACSB: Analytic skills Difficulty: Moderate 42) ________ pricing takes into account a host of inputs, such as the buyer's image of the product performance, the channel deliverables, the warranty quality, customer support, and attributes such as the supplier's reputation, trustworthiness, and esteem. A) Perceived-value B) Value C) Going-rate D) Auction-type E) Markup Answer: A Page Ref: 398 Objective: 2 Difficulty: Easy 43) The key to perceived-value pricing is to ________. A) reengineer the company's operations B) deliver more unique value than competitors C) adopt subtle marketing tactics compared to competitors D) deliver more value but at a lower cost E) invest heavily in advertising in order to convey superior value Answer: B Page Ref: 399 Objective: 2 Difficulty: Moderate

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44) ________ pricing is a matter of reengineering the company's operations to become a lowcost producer without sacrificing quality. A) Value B) Going-rate C) Auction-type D) Markup E) Perceived-value Answer: A Page Ref: 400 Objective: 2 Difficulty: Easy 45) A retailer who holds on to a(n) ________ policy charges a constant low price with little or no price promotions and special sales. A) everyday low pricing B) high-low pricing C) low cost D) going-rate pricing E) auction-type pricing Answer: A Page Ref: 400 Objective: 2 Difficulty: Easy 46) Matt's retail store offers all its products at $2 lesser than its competitors throughout the year. The store never runs any promotional campaigns or offers any additional special discounts. Matt's retail store is following a(n) ________. A) auction-type pricing policy B) target-plus pricing policy C) everyday low pricing policy D) high-low pricing policy E) going-rate pricing policy Answer: C Page Ref: 400 Objective: 2 AACSB: Analytic skills Difficulty: Moderate

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47) Everyday low pricing is most suitable if ________. A) consumers are willing to perform activities such as clip coupons to avail of discounts B) consumers tend to associate price with quality C) customers are insensitive to changes in price D) the cost of conducting frequent sales and promotions is high E) consumers have sufficient time to find the best prices Answer: D Page Ref: 401 Objective: 2 Difficulty: Moderate 48) In ________, the firm bases its price largely on competitor's prices. A) going-rate pricing B) auction-type pricing C) markup pricing D) target-return pricing E) perceived-value pricing Answer: A Page Ref: 401 Objective: 2 Difficulty: Easy 49) Which of the following auctions is characterized by one seller and many buyers? A) Walrasian auctions B) ascending bid auctions C) closed auctions D) sealed-bid auctions E) reverse auctions Answer: B Page Ref: 402 Objective: 2 Difficulty: Easy 50) In which of the following auctions does the auctioneer first announce a high price for a product and then slowly decreases the price until a bidder accepts? A) a Dutch auction with one buyer and many sellers B) an English auction with one seller and many buyers C) an ascending bid auction D) a sealed-bid auction E) a Dutch auction with one seller and many buyers Answer: E Page Ref: 402 Objective: 2 Difficulty: Moderate

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51) In a(n) ________, the buyer announces something he or she wants to buy, and potential sellers compete to offer the lowest price. A) Dutch auction with one buyer and many sellers B) English auction with one buyer and many sellers C) English auction with one seller and many buyers D) sealed-bid auction E) ascending auction Answer: A Page Ref: 402 Objective: 2 Difficulty: Easy 52) ________ let would-be suppliers submit only one bid; they cannot know the other bids. A) Descending bid auctions B) Sealed-bid auctions C) English auctions D) Dutch auctions E) Reverse auctions Answer: B Page Ref: 402 Objective: 2 Difficulty: Easy 53) In which of the following forms of countertrade do buyers and sellers directly exchange goods, with no money and no third party is involved? A) buyback arrangements B) offsets C) barter D) sealed bids E) compensation deals Answer: C Page Ref: 404 Objective: 3 Difficulty: Easy

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54) A Japanese firm is ready to sell its recent technological innovation to the U.S. government. But it has asked for 80 percent in cash and the rest in mica. The Japanese firm is looking to enter into a(n) ________ with the U.S. government. A) functional discount B) compensation deal C) buyback arrangement D) offset agreement E) barter deal Answer: B Page Ref: 404 Objective: 3 AACSB: Analytic skills Difficulty: Moderate 55) Armac Ltd., is a sluice-box manufacturer based in China. A sluice-box is used for gold prospecting. Armac is interested in selling a few of its machines to an American mining company, but it wants 95 percent of the machines' price in gold and the rest in ores recovered by using the machines. This is an example of a ________. A) buyback arrangement B) functional discount C) barter deal D) compensation deal E) sealed bid Answer: A Page Ref: 404 Objective: 3 AAC...