Tutorial 9 / Week commencing 9 th of Apr 2012 : Chap. 13

Section A : MCQs

1. The company designs what it considers to be a good product, totals the expenses of making the product, and sets a price that adds a standard markup to the cost of the product. This approach to pricing is called ________.A) penetration pricingB) fixed cost pricingC) cost-plus pricingD) variable pricingE) skimming pricing

2. Which of the following is a drawback of cost-based pricing?A) Sellers earn a fair return on their investment.B) By tying the price to cost, sellers simplify pricing.C) When all firms in the industry use this pricing method, prices tend to be similar.D) This method ignores demand.E) Without a standard markup, consumers don't know when they are being overcharged.

3. Which of the following should be true for a skimming price to be successful?A) Target consumers should be price sensitive.B) Supply should exceed demand.C) Demand must be stable.D) The producer should use intensive distribution.E) The product has clear, meaningful advantages over alternatives in the market.

4. The average price Xerox charged when it introduced the first stand-alone fax machine was $12,700. This premium price was a way for Xerox to recoup some of the research and development costs that went into production. Xerox used ________.A) a skimming priceB) a trial priceC) penetration pricingD) bundle pricingE) loss-leader pricing

5. A firm is using a(n) ________ strategy when it introduces a product at a very low price to quickly generate sales volume or market segment penetration.A) skimming pricingB) competitive pricingC) intensive pricingD) penetration pricingE) price bundling

6. Johnson Boats wants to introduce a new model of boat into mature markets in highly developed countries with the goal of quickly gaining mass-market share. As a consultant, you should recommend a ________ pricing strategy.A) skimmingB) penetrationC) price leadershipD) cost-plusE) dynamic

7. Some retailers advertise items at very low prices or even below cost just to get customers into the store. This ________ strategy is prohibited in some states. A) bait-and-switchB) price liningC) predatory pricingD) loss leader pricingE) dynamic pricing

8. The practice of ________ involves a firm injuring competition by charging different prices to different members of its distribution channel.A) price fixingB) price liningC) price bundlingD) deceptive pricingE) price discrimination

9. The Pure Drug Company produces insulin, a product with a very stable demand, even though the price has changed several times in the past two years. Insulin is a product with ________ demand.A) jointB) serviceC) inelasticD) elasticE) fluctuating

10. If demand is highly responsive to a change in price, we say the demand is ________.A) variableB) inelasticC) value-basedD) elasticE) fixed

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