Module 7 Marketing
Settings
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- 1.When supply increases faster than demand increases:
- A.
Price increases
- B.
Price decreases
- C.
Price stays the same
- 2.When demand increases faster than supply increases:
- A.
Price increases
- B.
Price decreases
- C.
Price stays the same
- 3.When demand decreases faster than supply decreases:
- A.
Price increases
- B.
Price decreases
- C.
Price stays the same
- 4.When supply decreases faster than demand decreases:
- A.
Price increases
- B.
Price decreases
- C.
Price stays the same
- 5.The long-term solution to the high price of gasoline is .
- A.
To find new sources of supply
- B.
Decrease the fuel consumption of cars
- C.
Reduce the price through government subsidy
- D.
Increase the price further through government taxation
- 6.Prices are economic stop lights. They direct buying and selling. When prices become sticky:
- A.
The market is less efficient in allocating resources
- B.
Demand is increasing faster than supply so invest in supply
- C.
Supply is increasing faster than demand so divest in supply
- D.
The market is in efficient equilibrium
- 7.In which of the following continents do prices change most often?
- A.
Asia
- B.
Europe
- C.
North America
- 8.What is the consequence of increased general global demand that is only somewhat answered by increased supply?
- A.
General price increases
- B.
General price decreases
- C.
Prices stay the same
- 9.Which of the following does the Price Setting worksheet analysis do?
- A.
Tells you how much you have to sell to meet the profit targets
- B.
Tells you what market share you have to achieve to meet the profit targets
- C.
Specifies your allocation of fixed costs and variable costs
- D.
All of the above
- 10.What can you learn from the Price Change worksheet?
- A.
What price sensitivity it will take to make a price reduction pay off
- B.
What price sensitivity it will take to make a price promotion pay off
- C.
Both A and B
- 11.What is gross contribution?
- A.
Price minus variable cost per unit
- B.
Price minus total fixed cost
- C.
Quantity sold times contribut ion
- 12.If the contribution margin percentage is currently 40 percent and a price reduction of 20 percent is proposed, by what percentage will sales have to increase for the price- reduction to be worthwhile?
- A.
20%
- B.
50%
- C.
100%
- D.
200%
- 13.If you face fierce competition, the short-term effect on sales of a price reduction will be:
- A.
Greater than the long-term effect of a price reduction
- B.
Less than the long-term effect of a price reduction
- C.
The same as the long-term effect of a price reduction
- 14.The Price Change worksheet uses the “Wisdom of the Crowd” by:
- A.
Employing economic analysis that has been tested and proven
- B.
Using the forecasts of everyone involved
- C.
Both A and B
- D.
None of the above
- 15.Which of the following scenarios best describe a high negative price elasticity?
- A.
When price increases, demand decreases a lot
- B.
When price increases, demand decreases little
- C.
When price decreases, demand increases a lot
- D.
Both A and C
- 16.Which of the following increases consumer price sensitivity?
- A.
When the purchase accounts for an insignificant percentage of income
- B.
When prices are dropping
- C.
When product innovation increases
- D.
When prices can be searched on the Internet
- 17.Which of the following decreases consumer price sensitivity?
- A.
When the purchase is a necessity
- B.
When prices are increasing
- C.
When product innovation decreases
- D.
When there are close competitive substitutes
- 18.Which of the following price points should markets focus on?
- A.
Supply curve kink points
- B.
Demand curve kink points
- C.
Both supply curve and demand curve kink points
- 19.Optimal price is very likely to be at one of the demand curve kinks because it produces the:
- A.
Target return on investment
- B.
Lowest variable costs
- C.
Highest gross contribution
- D.
None of the above
- 20.Kinks in the demand curve for a particular product are more likely to occur when:
- A.
The firm has successfully distanced the product from potential substitute products
- B.
There exist perceptual price points wherein small changes in actual price are associated with rather large changes in perceived price and hence demand
- C.
There exist close substitute products
- D.
Both A and B occur
- E.
Both B and C occur
- 21.The different colours are more aesthetically attractive
- A.
Yes
- B.
No
- 22.The colours can be used to organize files
- A.
Yes
- B.
No
- 23.The folders are made of recycled paper
- A.
Yes
- B.
No
- 24.The extra cost is only a cent or so per file
- A.
Yes
- B.
No
- 25.Customers have to keep a larger inventory of files
- A.
Yes
- B.
No
- 26.When administered according to a careful feeding schedule, a premium nutritional additive called Supercowchow increases milk production earnings in a dairy herd to $1,050,000 from the $1,000,000 using the standard Cowchow that costs $50 a sack for the farmer to buy. The farmeruses 1,000 sacks of Cowchow a year. Supercowchow costs $10 per sack extra to manufacture and the farmer would use 1,000 sacks of it. Thus the added-value of Supercowchow over regular Cowchow is $50,000/1,000 sacks, which is $50 per sack. Which of the following would be the farmers’ highest acceptable price for the new Supercowchow per sack?
- A.
$60
- B.
$70
- C.
$80
- D.
$90
- E.
$100
- 27.Which of the following would the manufacturer find to be the lowest acceptable per sack price for the new Supercowchow?
- A.
$60
- B.
$70
- C.
$80
- D.
$90
- E.
$100
- 28.Which of the following do you think is the fairest price for the Supercowchow?
- A.
$60
- B.
$70
- C.
$80
- D.
$90
- E.
$100
- 29.If all dairy farmers adopt Supercowchow and overall supply increases by 10 percent, which of the following will happen to the long-term income of the farmers who adopted it first? Their long-term income compared to their short-term income will:
- A.
Stay the same
- B.
Increase
- C.
Decrease
- 30.Dell computer sets the price of its added-value notepad features based on:
- A.
The cost of the additional feature
- B.
Buyers’ perceived value of the feature
- C.
Both the cost and the perceived value
- 31.When the market has distinguishable segments that vary in their degree of price sensitivity, the best pricing strategy to use when initially introducing a new product is likely:
- A.
Penetration pricing
- B.
Price point pricing
- C.
Price skimming
- D.
Substitute pricing
- E.
Predatory pricing
- 32.Which of the following products can price skimming strategy be applied with?
- A.
Luxury goods
- B.
Highly demanded new drugs
- C.
A Rolex watch
- D.
All of the above
- 33.A price skimming strategy:
- A.
Is more likely to attract a large number of buyers
- B.
Is more likely to attract competitors
- C.
Is illegal if the price is set lower than the firm’s average cost
- D.
Will work only when there are substitute products on the market
- 34.Lower introductory prices can lead to higher per unit margins by:
- A.
Increasing demand for competing products
- B.
Decreasing demand for competing products
- C.
Increasing sales volume and achieving economies of scale and sales efficiencies
- D.
Maintaining brand loyalty with price discounts
- 35.According to the module, which of the following products/services uses a premium pricing strategy?
- A.
Extended appliance warranties of Walmart
- B.
P&G’s Crest Spinbrush
- C.
Extended appliance warranties of Best Buy
- D.
None of the above
- 36.Consistently pricing your product below your average cost:
- A.
Can be profitable if you can sell complementary products at a relatively high margin
- B.
Is price discrimination if certain consumer groups do not purchase the products
- C.
Can be considered predatory pricing if it results in taking sales away from competitors
- D.
Can be profitable if there are multiple substitutes in the market
- E.
Both A & C
- 37.What kind of pricing strategies have Toyota and Honda done over the last 50 years in the United States?
- A.
Penetration pricing strategy
- B.
Keep raising quality with each improved model
- C.
Keep reducing prices with each improved model
- D.
Both A and B
- 38.A penetration pricing strategy can be attractive when:
- A.
Creating the necessary long-term aftermarket relationship with a customer that generates profitability
- B.
It creates an industry platform or standard to which all other rivals must use or conform
- C.
Both A and B
- D.
None of the above
- 39.Price shading:
- A.
Is illegal in North America
- B.
Allows sellers to lower prices for buyers who are knowledgeable about competitive suppliers
- C.
Results when sellers maintain their prices at the same level when competitors raise prices
- D.
Results when sellers maintain their prices at the same level when competitors lower prices
- E.
Is useless when trying to deal with seasonal fluctuations of supply and demand
- 40.In a market where price shading is relatively common, sellers who do not shade their prices:
- A.
Are typically seen as much more ethical than their competitors
- B.
End up haggling with customers over prices
- C.
May be perceived as uncooperative and unreasonable
- D.
Are better able to deal with seasonal fluctuations in supply and demand
- E.
Often acquire greater brand loyalty as a result of their unwillingness to participate in this illegal activity
- 41.A method to reduce price shading’s potential to lower profits is to:
- A.
Fire employees who participate in this activity
- B.
Prosecute employees who participate in this activity
- C.
Educate employees regarding legal pricing practices
- D.
Set list prices relatively low and allow unrestricted salesperson price negotiations
- E.
Base commissions on profits and not sales volume
- 42.Payment terms:
- A.
Price discriminate against slow-paying customers
- B.
Many markets use the standard term “2-10, net 30”
- C.
Most sellers impose and charge interest penalties on delinquent customer debt
- D.
Both A and B
- 43.Volume discounting:
- A.
Is a form of price discrimination
- B.
Is a form of predatory pricing
- C.
Results in lower overall demand for the selling firm’s brand
- D.
Results in a sustainable competitive advantage over non-discounting sellers
- E.
Is more likely to occur when there are no substitutes in the marketplace
- 44.A tied pricing contract:
- A.
Is illegal in the United States
- B.
Results in lower profits for the selling firm, due to the necessarily lower margins
- C.
Fixes the price of a product for a period of time (usually one year)
- D.
Ties the firm’s price increases to changes in the consumer price index (CPI)
- E.
Results in lower prices for complementary products
- 45.Price discrimination:
- A.
Is illegal in the United States
- B.
Results when sellers maintain their prices even though competitors raise their pr ices
- C.
Results when sellers maintain their prices even though competitors lower their pr ices
- D.
Is a form of predatory pricing
- E.
Results when a seller differentially adapts prices to various buyers
- 46.A movie theatre that prices afternoon showings lower than more popular evening showings:
- A.
Is in danger of a class action lawsuit for price discrimination
- B.
Must prove that afternoon showings cost less on average than evening showings
- C.
Cannot sustain such a strategy over the long term
- D.
Does so because of lower demand and because it cannot store its excess seating capacity
- E.
Is foolishly losing revenue that could have been generated by pricing evening showings at the lower price
- 47.Electric utilities have developed to compete in the home heating market segment.
- A.
Usage segment discounting
- B.
Volume discounting
- C.
Price shading
- D.
All are correct answers
- 48.What impact(s) might occur when off-peak demand pricing is applied?
- A.
Increasing the annual overall average selling price
- B.
Reducing the annual overall contribution margin
- C.
Price-sensitive shoppers wait for the sales to occur
- D.
Both B and C
- 49.A negative aspect of price promotions in a mature market is:
- A.
That they can reduce the degree of brand loyalty in the market
- B.
That they cause buyers to switch to non-promoted brands
- C.
The lack of competition that results
- D.
That brand switching decreases
- E.
None of the above
- 50.Price promotions:
- A.
Lead to a transfer of positive feelings to the product or brand
- B.
Are typically superior to free sample promotions
- C.
Work best with mature brands
- D.
Have strong reinforcing effects and train shoppers to become deal-seeking shoppers
- E.
None of the above
- 51.Many price discounts are wasted because:
- A.
About two in three are not supported by special point-of-purchase displays
- B.
About 30 percent are not passed on to consumers
- C.
They are not noticed by buyers
- D.
They are automatically given to all consumers
- E.
Both B and D
- 52.Research suggests that compared to price promotions, consumers may have a more positive feeling about:
- A.
An equivalent price reduction made in the base price
- B.
Coupons and rebates
- C.
None of the options are true
- 53.Which of the following statements is true?
- A.
The timing of promotion isn’t an important tactical decision
- B.
In the fashion world, promotions running late in the season are designed to reduce inventory carrying costs and the risk of fashion obsolescence
- C.
Retailers don’t manage the promotions by scheduling their manufacturer orders
- D.
Providing an early promotion will not attract buyers who would buy later at the usual higher price
- 54.Which of the following scenarios described in the price module best represents the advantage of differentiation over price promotion?
- A.
Procter & Gamble’s patented innovation “Pert Plus”
- B.
Grind-your–own gourmet coffee beans by entrepreneurial firms
- C.
Maxwell House coffee
- D.
Both A and B
- 55.What are the possible underlying implications when companies rely on price promotions to sell their mature product?
- A.
Companies don’t have innovative strategies
- B.
The product- development process is broken
- C.
The product-development process needs to be fixed
- D.
All of the above
- 56.What can be done to discourage price promotions?
- A.
Operate close to production capacity
- B.
Salesforce incentives should be based on sales volume
- C.
No need to discourage price promotions
- D.
None of the above
- 57.Transfer pricing is
- A.
The price you charge transfer companies for a product or service
- B.
The price you charge another unit or subsidiary of your company for a product or service
- C.
The price you charge an overseas subsidiary of your company for a product or service
- D.
The price you pay transfer companies for a product or services
- 58.The most efficient transfer price is:
- A.
The market price of the goods and services that the subsidiary faces
- B.
The price that minimizes overall taxes
- C.
The price that minimizes taxes of the selling subsidiary
- D.
The price that minimizes taxes of the buying subsidiary
- 59.Transfer prices are most often adjusted because of:
- A.
Tax implications
- B.
Currency fluctuations
- C.
The personalities involved
- D.
The organizational politics involved
- 60.Which of the following statements is true?
- A.
If a company can, and it is legal, it will keep most of the profits earned in the country with the highest corporate income tax on profits
- B.
If a company can, and it is legal, it will keep most of the profits earned in the country with the lowest corporate income tax on profits
- C.
Financial accountants are likely to use the market price as a starting point and make a taxation consideration adjustment
- D.
Both B and C
- E.
None of the above
- 61.It is likely that the internal buyer will suggest that the transfer price should be the market price:
- A.
Less half the cost savings in sales commissions and distribution that result from selling to a subsidiary (an internal buyer)
- B.
Less the cost in sales commissions and distribution that result from selling to a subsidiary (an internal buyer)
- C.
Plus half the cost savings in sales commissions and distribution that result from selling to a subsidiary (an internal buyer)
- D.
Plus the cost in sales commissions and distribution that result from selling to a subsidiary (an internal buyer)
- 62.In addition to economic efficiency and tax arguments, most of the rest of transfer pricing is about:
- A.
Organization politics
- B.
Power plays
- C.
Pushing the legal and ethical limits of tax-based transfer pricing
- D.
All of the above
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