Marketing
Chapter 14
Professor Myles Bassell
page 1
Determining The Price
Question The first handheld calculators were priced at several hundred dollars so that its
manufacturer could recoup research and development costs. Even though the first calculators
only added, subtracted, multiplied, divided, and did square roots, they were so superior to other
methods that customers were willing to pay the asked price. The manufacturer of the first
handheld calculators used:
Answer
skimming pricing.
penetration pricing.
price lining.
odd-even pricing.
demand-backward pricing.
Question While many people believe shoes are simply something that you wear on your feet to
protect them from the environment, many other people believe the kind of shoes a person wears
makes a statement about them and their lifestyle. These people are willing to pay $400 or more
for a pair of shoes because to them the price indicates quality. The marketer of these shoes would
use:
Answer
yield management pricing.
target pricing.
customary pricing.
prestige pricing.
price lining.
Question The prices for all fruit trees sold in Stark Bros. fruit trees and landscaping catalog end
in $.99. Stark Bros. uses:
Answer
odd-even pricing.
dynamic pricing.
price lining.
bundle pricing.
experience curve pricing.
Marketing
Chapter 14
Professor Myles Bassell
page 2
Determining The Price
Question If you are planning a trip to New York City and want a hotel room overlooking Central
Park, you are likely to pay over $500 per night if you reserve the room through a hotel, but if you
are flexible about the night you want, you can contact Travelocity and stay in that room for $100.
To what kind of pricing policy is this practice most closely related?
Answer
yield management pricing
target pricing
customary pricing
prestige pricing
price lining
Question The two variations of cost-plus pricing are:
Answer
cost-plus percentage-of-cost pricing and cost-plus fixed-fee pricing.
cost-plus ROI pricing and cost-minus markdown pricing.
target return on sales pricing and target return on investment pricing.
cost-plus fixed-fee pricing and cost-plus variable-fee pricing.
dynamic pricing and one-price pricing.
Question Which of the following statements about cost-oriented approaches is true?
Answer
These methods focus on the demand side of the pricing problem and
involve stimulating demand and decreasing revenue.
These methods focus on the supply side of the pricing problem and
involve considerations of production and marketing expenses.
Target return on investment is an example of a cost-based method.
Experience curve pricing is simple to use because costs predictably
decrease by 25 percent with each doubling of production.
Cost-oriented approaches are subcategories of competition-based
methods so revenues are a critical factor.
Question Imagine that the owner of Lewis Edibles, Inc., the manufacturer of Tongue Tinglin'
barbecue sauce has sold on average 1,000 jars for the last five years. The company's costs over
the same period of time have averaged $4,000. If the company earns a 20 percent return on sales,
what is the price of a jar of barbecue sauce?
Answer
$2.00
$2.50
$4.00
$5.00
$10.00
Marketing
Chapter 14
Professor Myles Bassell
page 3
Determining The Price
Question A manufacturer estimates that consumers will accept a price of $75 for a handbag. If
the manufacturer expects to offer trade discounts of 35/15/5 to retailers, wholesalers, and agents,
what price will the manufacturer receive for the handbag?
Answer
$26.25
$33.75
$39.37
$41.25
$63.25
Question When Ruth makes a purchase on www.ebay.com, she is responsible for paying all
shipping costs for the purchased item. In fact, once the item is shipped, she owns it and should
purchase insurance if it is likely to get broken while in transit. This shipping arrangement is most
closely related to:
Answer
basing-point pricing.
FOB origin pricing.
functional pricing.
quantity pricing.
geographic pricing.
Question A company placing an order from the Lab Safety Supply catalog is instructed to add 6
percent of the total cost of the order to pay shipping. Which method of shipping does this catalog
supplier use?
Answer
single-zone pricing
flexible-price pricing
FOB origin pricing
uniform delivered pricing
basing-point pricing