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Pricing Quiz Answers

This document contains multiple choice questions about pricing strategies and concepts. It addresses different pricing methods like cost-based pricing, value-based pricing, competition-based pricing, and break-even pricing. It also covers pricing-related concepts such as fixed costs, variable costs, average costs, markups, and break-even points. The questions assess understanding of how different pricing approaches are used and how costs impact pricing decisions.

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Ammar Hussain
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745 views

Pricing Quiz Answers

This document contains multiple choice questions about pricing strategies and concepts. It addresses different pricing methods like cost-based pricing, value-based pricing, competition-based pricing, and break-even pricing. It also covers pricing-related concepts such as fixed costs, variable costs, average costs, markups, and break-even points. The questions assess understanding of how different pricing approaches are used and how costs impact pricing decisions.

Uploaded by

Ammar Hussain
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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1) ________ refers to the amount of money charged for a product or service.

A) Value
B) Cost
C) Price
D) Wage
E) Salary
Answer: C

2) ________ is the only element in the marketing mix that produces revenue.
A) Price
B) Product
C) Place
D) Fixed costs
E) Variable costs
Answer: A

3) What sets the ceiling for product prices?


A) product manufacturing costs
B) sellers' perceptions of the product's value
C) customer perceptions of the product's value
D) variable costs
E) break-even volume
Answer: C

4) What sets the floor for product prices?


A) consumer perceptions of the product's value
B) product costs
C) competitors' strategies
D) advertising budgets
E) market competition
Answer: B

5) ________ pricing uses buyers' perceptions of value as the key to pricing.


A) Customer value-based
B) Cost-based
C) Time-based
D) Markup
E) Target return
Answer: A
6) What is usually the first step in cost-based pricing?
A) testing the product concept with potential customers
B) determining the marketing mix strategy
C) setting a price that covers costs plus a target profit
D) designing a good product
E) adding up the costs of making the product
Answer: D

7) A pharmaceutical company in Utah recently released a new and expensive anti-ulcer drug
in the market. The company justifies the high price of the drug by claiming that it is highly
effective for treating all kinds of ulcers. The company also claims that the new drug will
help bring down the need for invasive surgeries, an additional benefit for patients. Which of
the following pricing strategies is the pharmaceutical company most likely using in this
instance?
A) target pricing
B) markup pricing
C) cost-based pricing
D) value-based pricing
E) break-even pricing
Answer: D

8) When McDonald's and other fast food restaurants offer "value menu" items at
surprisingly low prices, they are most likely using ________ pricing.
A) break-even
B) target profit
C) good-value
D) cost-plus
E) target return
Answer: C

9) Azure Air, an airline company, offers attractive prices to customers with tighter budgets.
A no-frills airline, it charges for all other additional services, such as baggage handling and
in-flight refreshments. Which of the following best describes Azure Air's pricing method?
A) target profit pricing
B) good-value pricing
C) cost-based pricing
D) break-even pricing
E) penetration pricing
Answer: B

10) Retailers such as Costco and Walmart charge a constant, daily low price with few or no
temporary price discounts. This is an example of ________ pricing.
A) competition-based
B) everyday low
C) cost-plus
D) break-even
E) penetration
Answer: B
11) ________ pricing involves charging higher prices on an everyday basis but running
frequent promotions to lower prices temporarily on selected items.
A) High-low
B) Everyday low
C) Cost-plus
D) Break-even
E) Penetration
Answer: A

12) ________ involves setting prices based on the costs for producing, distributing, and
selling the product plus a fair rate of return for effort and risk.
A) Value-based pricing
B) Competition-based pricing
C) Cost-based pricing
D) Penetration pricing
E) Break-even pricing
Answer: C

13) Companies with lower costs ________.


A) specialize in selling products with value-added features
B) usually market products with inferior quality, thereby justifying the low selling price
C) can set lower prices that result in smaller margins but greater sales and profits
D) tend to overprice products owing to their monopolistic advantage
E) usually set higher prices that result in higher margins
Answer: C

14) Companies with higher costs ________.


A) can drive out competitors through their pricing strategy
B) intentionally pay higher costs so that they can add value through higher quality and claim
higher prices and margins
C) can set lower prices that result in increased sales though with lower margins
D) specialize in selling products without value-added features
E) are more financially successful
Answer: B

15) Fixed costs ________.


A) are costs that do not vary with production or sales level
B) vary directly with the level of production
C) decrease with accumulated production experience
D) are the sum of the overhead and variable costs for any given level of production
E) represent the annual costs of inputs incurred by a company
Answer: A
16) Costs that change with the level of production are referred to as ________.
A) fixed costs
B) variable costs
C) target costs
D) total costs
E) overhead costs
Answer: B

17) In 2011, the fixed costs of a company were $500,000, and its variable costs equaled
$150,000. In 2010, the company made an annual profit of $200,000. It has been
predicted that, despite a steady growth, the company's variable costs will likely equal
$300,000 by 2013. The total costs of the company in 2011 were ________.
A) $350,000
B) $450,000
C) $650,000
D) $800,000
E) $950,000
Answer: C

18) As production moves up, the average cost per unit decreases because ________.
A) variable costs decrease
B) of increasing diseconomies of scale
C) fixed costs are spread over more units
D) overhead costs decrease
E) revenue increases
Answer: C

19) The simplest pricing method is ________ pricing.


A) value-based
B) fixed cost
C) cost-plus
D) target return
E) competition-based
Answer: C

20) Why is markup pricing most likely impractical?


A) Calculating costs is complicated due to fluctuations.
B) By tying the price to cost, sellers oversimplify pricing.
C) When all firms in the industry use this pricing method, prices tend to be similar.
D) The method ignores demand and competitor prices.
E) With a standard markup, consumers know when they are being overcharged.
Answer: D
21) The break-even volume is the point at which ________.
A) the total revenue and total cost curves intersect
B) demand equals supply
C) the production of one more unit will not lead to increase in demand
D) the company can pay off all its long-term debt
E) a firm exceeds the sales forecast
Answer: A

22) List some important characteristics of price.

Answer: Price is the only element in the marketing mix that produces revenue; all other
elements represent costs. Price is also one of the most flexible marketing mix elements.
Unlike product features and channel commitments, prices can be changed quickly.

23) Prices have a direct impact on a firm's bottom line.


Answer: TRUE

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