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# e-Learning : MAR3023, All Sections: Spring 2013 : Assessments

Logout My Workspace BCN3027: 6070, Spring 2013 BCN3224: 5905, Spring 2013

BCN3255: All Sections, Spring 2013 MAR3023, All Sections: Spring 2013

BCN3431: All Sections, Spring 2013 ARC2180/ARC6911: All Sections (Huang), Fall 2011

Assessments
Reviewing Test
Quiz 08 Raw Score Started: Mar 29, 2013 5:10 PM Home Resources Video Lectures Announcements Assessments Gradebook 2 Discussions Calendar Site Info Course Evaluation Student Help (TAC) Help Desk Wiki Extra Credit via CBHelp Kenny Chesney fans can buy his new CD at Target. Target purchases these CD's from the recording studio for \$7.00 per CD. If Target uses a markup of 30%, what price will the fans have to pay per CD? A. \$4.90 B. \$10.00 C. \$9.10 D. There is not enough information to calculate the price. E. \$7.30 Answer Key: B Feedback Lecture page 104 A. \$4.90 \$10.00 B. Man. Price = Retail Price x [ (100 - %Retail Markup) / 100 ] \$7 = RP x [ (100 30) / 100 ] \$7 = RP x 0.70 Question 1 of 10Score:1(of
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## e-Learning : MAR3023, All Sections: Spring 2013 : Assessments

(\$7 / .7)= RP \$10 =RP C. \$9.10 \$10.00 D. Enough information for solving for Retail Price is given in the quiz question. E. \$7.30 \$10.00

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A __________ involves successive price cutting by competitors to increase or maintain their unit sales or market share. A. price downsizing B. low-price policy C. price war D. price reduction E. pricing backlash Answer Key: C Feedback Text page 368 A. Price downsizing is not an actual marketing term. B. Low-price policy is not an actual marketing term. C. Price wars involve successive price cutting by competitors to increase or maintain their unit sales or market share. D. Price reduction is not the term used to describe the situation laid out in this quiz question. E P i i b kl h i t t l k ti t

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The former Soviet republic Turkmenistan in Central Asia is one of the last countries on the planet to gain Internet access. The only Internet service provider for the entire country is Turkmen Telecom. There is no need for price competition, promotion, or product differentiation because Turkmen Telecom is a(n): A. oligopoly. B. pure competitor. C. monopolistic competitor. D. pure monopoly. E. free enterprise. Answer Key: D

## e-Learning : MAR3023, All Sections: Spring 2013 : Assessments

Feedback Text page 338 A. An oligopoly exists when there are a few sellers who are sensitive to each others price. There is some price competition, various differentiated products, and some advertising. B. Pure competition exists when many sellers follow the market price for identical, commodity products. There is almost no price competition, no product differentiation, and little need for advertising. Although the characteristics of this may sound similar to those of pure monopoly, the difference is that with pure competition, the market is what determines the outcome, not the firm. C. Monopolistic competition exists when many sellers compete on nonprice factors. There is some price competition, some product differentiation, and much advertising. D. Pure monopoly exists when one seller sets the price for a unique product. There is no price competition, no product differentiation, and very little advertising. This is all b th ll t th i th th d d d ti i i i l

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## e-Learning : MAR3023, All Sections: Spring 2013 : Assessments

Toyota introduced a new mid-sized SUV, which it priced at \$30,000. However, many customers did not want to buy this new model because many competitors were offering a similar car for \$27,000. Therefore, Toyota informed its prospective customers that in addition to the equivalent cost of the car, they were also receiving services above that of the competition. Toyota's car care service is valued at \$4,000 and the extended warranty is valued at \$2,000. Therefore, when buying the Toyota SUV for \$30,000, the customers are actually receiving a discount of \$3,000. This technique is known as ____. A. Unbundling price B. Value-based pricing C. Benefit analysis D. Cost analysis E. Bundling price Answer Key: A Feedback Lecture page 110 A. Unbundling price is the identification of individual benefits and their relevant values that make up the price of the packaged product. In this quiz question, Toyota identifies the good itself and the services accompanying it to demonstrate what these components would be priced at individually. B. Value-based pricing is when subjective judgments are heavily taken into account in order to align the price with the value delivered to the customer. It includes understanding the use of the product, analyzing the benefits, analyzing the costs involved, and looking at the cost/benefit tradeoff. In this quiz question, Toyota is not using value pricing because it is instead breaking down the components that make up the price. C. Benefit analysis is not an actual marketing term. D. Cost analysis is an attempt to determine the costs incurred in marketing and di t ib ti d t I thi i l T t i i th i f it d d

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Patty O'Rourke hired an attorney to represent her in a court case involving an auto accident. The attorney charged O'Rourke a fee for his services. Terry Thomas needed a haircut--the local stylist charged him \$12 for her services. Aaron Mathison mowed his neighbor's lawn; in exchange, the neighbor roto-tilled Mathison's garden. The attorney fees paid by O'Rourke, the \$12 charged by the hair stylist, and exchange of lawn mowing for garden tilling are examples of: A. product fares. B. price. C. unfair market exchanges. D. barter. E. fee setting. Answer Key: B

## e-Learning : MAR3023, All Sections: Spring 2013 : Assessments

Feedback Text page 331 A. Product fares is not an actual marketing term. B. Price is the money or other considerations (including other goods and services) exchanged for the ownership or use of a good or service. In this quiz question, the money given to the attorney and hair stylist and the service traded for garden work are examples of prices paid. C. Unfair market exchanges is not an actual marketing term. D. Barter is a type of price and is the practice of exchanging goods and services for another goods and services rather than for money. In this quiz question, the attorney and hairstylist fees are monetary prices

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Newsweek ran a pricing experiment that involved setting different prices for its magazine in different cities and counting the number of units sold. After adjusting for factors like the population of the different cities, Newsweek could plot these prices and units to result in a: A. target return curve. B. unit cost curve. C. unit volume curve. D. demand curve. E. consumer tastes curve. Answer Key: D Feedback Text page 339-340 A) Target returns deal with certain methods to set the price. The target return methods are profit based approaches. There is not a target return curve. B) The newspaper is interested in how the quantity demanded changes with the different prices. The unit cost of the newspapers will be the same. C) There is no such curve. D) A demand curve is the summation of points representing the maximum number of d t ill b t gi i

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Dell is entering the video game market with their new product, the Xtreme Sphere. They want a parity price with Microsoft's X-Box. The following are the brand ratings for the two products

Graphics Reliability

Xtreme Sphere 9 6

X-Box 8 8

Importance 9 5

## Games Selection Features

7 8

9 4

9 7

Microsoft currently charges \$150 for the X-Box. If Dell wishes to achieve a parity price with the X-Box for its Xtreme Sphere, it should charge _____. A. \$156.11 B. \$144.13 C. \$150.00 D. \$230.00 E. \$159.00 Answer Key: A Feedback Lecture page 109 To find the parity price we use the critical strategic pricing ratio: Value of Brand X = Value of Brand Y Value = Total perceived benefit/ price We need to find the price where Total perceived benefit of Xtreme Sphere/Price of Xtreme Sphere = Total perceived benefit of X-Box/ Price of X-Box Benefit of Xtreme Spehre = (9 x 9) + (6 x 5) + (7 x 9) + (8 x 7) = 230 Benefit of X-Box = (8 x 9) + (8 x 5) + (9 x 9) + (4 x 7) = 221 230/ price = 221/150 230 x 150 / 221 = Price = \$156.11

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Gina's Jewelry is an upscale store offering high quality jewelry. Gina charges prices that are considerably higher than those of her competitors. Despite this difference in price, Gina's sales revenues are consistently the highest in the market. This is an example of: A. Customary Pricing B. Cost-Based Pricing C. Penetration Pricing D. Competition-Based Pricing E. Prestige Pricing

Answer Key: E Feedback Lecture page 107 A) Customary pricing: a method of pricing based on tradition, a standardized channel of

## e-Learning : MAR3023, All Sections: Spring 2013 : Assessments

distribution, or other competitive factors. This type of pricing is used in vending machines or other products where there is a common standard price. B) There is not mention of cost or markup in this question, so there is no evidence Gina is using cost-based pricing C) Gina is charging prices considerably higher than her competition so she is not using penetration pricing. Penetration prices starts with a low price and gradually brings it up. D) Competition-based pricing one of the five basic pricing approaches. This answer is too general. E) Prestige pricing involves setting a high price so that status-conscious consumers will be

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Ralph Lauren is happy with its current profit level and decided to set its prices to try to achieve the same level of profit next year, even though it may be possible to earn even more. This is an example of which pricing objective? A. predatory pricing B. profit maximization C. market share maintenance D. profit satisficing E. parity maintenance Answer Key: D Feedback Lecture page 102 A) Predatory pricing is the practice of charging a very low price for a product with the intent of driving competitors out of business. B) Profit maximization involves setting the price of the product so as to maximize profit. C) A firm may wish to set the price that maintains its current market share. D) Profit satisficing involves choosing a price that yields a satisfactory profit-level. It is usually employed when a firm is unable to precisely determine the profit maximizing price. In this example Ralph Lauren is satisfied with its current profit even though it is not its profit maximizing level. Therefore, Ralph Lauren is using a profit satisficing objective.

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## e-Learning : MAR3023, All Sections: Spring 2013 : Assessments

Gateway Mobile View The Sakai Project

Copyright 2003-2011 The Sakai Foundation. All rights reserved. Portions of Sakai are copyrighted by other parties as described in the Acknowledgments screen. e-Learning - [r1095,1141] - Sakai 1.4.3.0.1 (Kernel 1.2.6)- Server sakaiapp-prod01.osg.ufl.edu

## e-Learning : MAR3023, All Sections: Spring 2013 : Assessments

Logout My Workspace BCN3027: 6070, Spring 2013 BCN3224: 5905, Spring 2013

BCN3255: All Sections, Spring 2013 MAR3023, All Sections: Spring 2013

BCN3431: All Sections, Spring 2013 ARC2180/ARC6911: All Sections (Huang), Fall 2011

Assessments
Reviewing Test
Quiz 08 Raw Score Started: Mar 29, 2013 6:05 PM Home Resources Video Lectures Announcements Assessments Gradebook 2 Discussions Calendar Site Info Course Evaluation Student Help (TAC) Help Desk Wiki Extra Credit via CBHelp Demand factors are factors that determine: A. the number of consumers who can afford to purchase a product or service. B. the price that should be charged for a given product. C. consumers' willingness and ability to pay for goods and services D. the number of consumers who want to purchase a product. E. the number of consumers who can purchase a product. Answer Key: C Feedback Text page 340 A) This has to do with the ability of consumers to purchase a product. This number is affected by demand factors. B) The price of the product is only one of the demand factors. C) This is the definition of demand factors. Demand factors include price, consumer tastes, price and availability of similar products, and consumer income. D) This has to do with willingness to purchase a product. Demand factors like consumer Question 1 of 10Score:1(of
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## e-Learning : MAR3023, All Sections: Spring 2013 : Assessments

tastes affect the number of consumers who want to purchase a product, but this answer is too specific

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Megan just took her first vacation to India. She visited a market and was surprised to find that goods did not have fixed prices. Instead, she had to haggle with the vendors. This system was very different from the United States where prices are usually fixed. Pricing decisions by management are important in the Unites States because of reliance on what type of pricing? A. Competitive parity B. Market share C. Administered D. Profit satisficing E. Profit maximization Answer Key: C Feedback Lecture page 101 In the United States there is a reliance on administered pricing, which means prices are determined before hand (they are fixed) and in general there is no bargaining over prices.

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Ralph Lauren is happy with its current profit level and decided to set its prices to try to achieve the same level of profit next year, even though it may be possible to earn even more. This is an example of which pricing objective? A. predatory pricing B. profit maximization C. market share maintenance D. profit satisficing E. parity maintenance Answer Key: D Feedback Lecture page 102 A) Predatory pricing is the practice of charging a very low price for a product with the intent of driving competitors out of business.

## e-Learning : MAR3023, All Sections: Spring 2013 : Assessments

B) Profit maximization involves setting the price of the product so as to maximize profit. C) A firm may wish to set the price that maintains its current market share. D) Profit satisficing involves choosing a price that yields a satisfactory profit-level. It is usually employed when a firm is unable to precisely determine the profit maximizing price. In this example Ralph Lauren is satisfied with its current profit even though it is not its profit maximizing level. Therefore, Ralph Lauren is using a profit satisficing objective.

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To enable manufacturers to smooth out manufacturing peaks and troughs and thereby contribute to more efficient production, manufacturers offer _________ to their channel members: A. trade discounts. B. functional discounts. C. noncumulative discounts. D. cumulative discounts. E. seasonal discounts.

Answer Key: E Feedback Text page 370 A. Trade (or functional) discounts are given by manufacturers to reward wholesalers and retailers for marketing functions they will perform in the future. These reductions off the list price or base price are offered to resellers in the channel of distribution on the basis of where they are in the channel and the marketing activities they are expected to perform in the future. B. Functional discounts is another term for trade discounts. C. Noncumulative discounts are a type of quantity discount that are based on the size of an individual purchase order. They encourage large individual purchase orders, not a series of orders. D. Cumulative discounts are a type of quantity discount that apply to the accumulation of purchases of a product over a given time period. They encourage repeat buying by a single customer to a far greater degree than do non-cumulative quantity discounts. E S l di t i b f t t b t t k

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Elizabeth is the manager of a new spa opening in Gainesville and wants to know how much to charge for a massage. She knows that her fixed costs are \$1850 and her variable costs per massage are \$25. Furthermore, she assumes that her staff can give 50 massages per day. To break even, she would have to charge what price? A. \$37.50 B. Can't tell from information given. C. \$62.00 D. \$1875.00

## e-Learning : MAR3023, All Sections: Spring 2013 : Assessments

E. \$25.00 Answer Key: C Feedback Lecture page 103 Breakeven price = (Total Fixed Cost / # units) + Variable Cost per unit Elizabeths fixed cost per massage is (\$1850 / 50) = \$37 Her variable cost per massage = \$25 Substituting, Breakeven price = \$37 + \$25 = \$62.00 This means Elizabeth must charge \$62 per massage in order to breakeven and cover her costs.

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Wham-O Inc. doesn't know what price it should charge its distributors in order to sell its newest product, "The Mean Lean Cleaning Machine". After some market research they learn that the retail price consumers are willing to pay is \$120.00. Wham-O's retailers charge a markup of 40%, and its distributors charge a 10% markup. The price that Wham-O should charge the distributors is: A. \$77.14 B. Not enough information given. C. \$77.90 D. \$65.45 E. \$64.80

Answer Key: E Feedback Lecture page 108 In this question you are asked to find the manufacturers price, or the price that WhamO will charge the distributors. The chain markup formula for manufacturers price is MP = RP x ((100 - %RMU) / 100) x ((100 - %DMU) / 100) Where, MP = Manufacturers price (the price charged by the manufacturer to the distributor) RP = Retail price (the price charged by the retailer to the consumer) %RMU = Retailers markup %DMU = Distributors markup

## Substituting, MP = \$120 x ((100 40) / 100) x ((100-10) / 100) MP = \$120 x .6 x .9 MP = \$64.80

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_____ is the marketing of two or more products for a single "package" price. A. Loss-leader pricing B. Multi-product pricing C. Packaged pricing D. Tie-in pricing E. Bundle pricing

Answer Key: E Feedback Text page 359 A) Loss-leader pricing involves deliberately selling a product below its customary price in order to attract customers in hopes they will buy other products as well. B) Created term. C) Created term. D) Created term. E) Bundle pricing by definition is marketing of two or more products for a single "package" price. Bundle pricing assumes that consumers value the package more than the individual items and usually provides a lower total cost to buyers and lower marketing costs to

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Which cost-based pricing method entails adding a fixed percentage to the cost of all items in a specific product class? A. cost plus fixed-fee pricing B. experience curve pricing C. target profit pricing D. demand backward pricing E. standard markup pricing

## e-Learning : MAR3023, All Sections: Spring 2013 : Assessments

Feedback Text page 360 A. Cost-plus fixed-fee pricing means that a supplier is reimbursed for all costs, regardless of what they turn out to be, but is allowed only a fixed fee as profit that is independent of the final cost of the project. B. Target profit pricing is when a firm sets an annual target of a specific dollar volume of profit. C. Experience curve pricing is a method based on the learning effect, which holds that the unit cost of many products and services declines by 10 percent to 30 percent each time a firms experience at producing and selling them doubles. D. Demand backward pricing is not an actual marketing term. E. Standard markup pricing, by definition, entails adding a fixed percentage to the cost

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__________ is charging different prices to maximize revenue for a set amount of capacity at any given time. A. Skimming pricing B. Yield management pricing C. Demand backward pricing D. Penetration pricing E. Target pricing Answer Key: B Feedback Text page 359 A. Skimming pricing is the practice of setting the highest initial price that customers really desiring the product are willing to pay. B. Yield management pricing, by definition, is the charging of different prices to maximize revenue for a set amount of capacity at any given time. It is a complex approach that continually matches demand and supply to customize the price for a service. C. Demand backward pricing is not an actual marketing term. D. Penetration pricing is the practice of setting a low initial price on a new product to appeal immediately to the mass market. E. Target pricing involves estimating the price that the ultimate consumer would be

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Which of the following is NOT a problem associated with the Cost-Based and Profit-Based pricing strategies? A. These strategies do not take into consideration increases in production efficiency that would create economies of scale. B. These strategies do not take into consideration competitors' prices.

## e-Learning : MAR3023, All Sections: Spring 2013 : Assessments

C. These strategies do not take into consideration the cost of goods in relation to profits. D. These strategies do not take into consideration demand factors. E. These strategies do not take into consideration factors external to the firm. Answer Key: C Feedback Lecture page 106 A) The failure to account for economies of scale is a problem associated with these pricing strategies. The variable cost may be reduced as more and more units are produced, so the unit cost of production usually drops as the firms output increases. B) Cost-Based and Profit-Based pricing strategies do not include competitive factors such as competitors prices. C) This is not a problem. These strategies do take into consideration the cost of goods in relation to profits. D) Both these strategies ignore demand factors. They have an internal focus so there is no reflection of the external market factors like demand.

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## Gateway Mobile View The Sakai Project

Copyright 2003-2011 The Sakai Foundation. All rights reserved. Portions of Sakai are copyrighted by other parties as described in the Acknowledgments screen. e-Learning - [r1095,1141] - Sakai 1.4.3.0.1 (Kernel 1.2.6)- Server sakaiapp-prod01.osg.ufl.edu

## e-Learning : MAR3023, All Sections: Spring 2013 : Assessments

Logout My Workspace BCN3027: 6070, Spring 2013 BCN3224: 5905, Spring 2013

BCN3255: All Sections, Spring 2013 MAR3023, All Sections: Spring 2013

BCN3431: All Sections, Spring 2013 ARC2180/ARC6911: All Sections (Huang), Fall 2011

Assessments
Reviewing Test
Quiz 08 Raw Score Started: Mar 29, 2013 6:50 PM Home Resources Video Lectures Announcements Assessments Gradebook 2 Discussions Calendar Site Info Course Evaluation Student Help (TAC) Help Desk Wiki Extra Credit via CBHelp Most consumers realize the quality of diamonds varies, and most believe the higher the price of the diamond the higher its quality. This is an example of price influencing the perception of overall quality, and _____ to consumers. A. acceptable cost B. value C. barter potential D. return on investment E. perceptual investment Answer Key: B Feedback Text page 332 A) Acceptable cost is not a real marketing term. B) Value can be defined as the ratio of perceived benefits to price (value = perceived benefits/price). The higher diamond price is a signal to consumers that they will receive more benefit from the higher priced diamond. Question 1 of 10Score:1(of
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## e-Learning : MAR3023, All Sections: Spring 2013 : Assessments

C) Barter is the practice of exchanging goods and services for other goods and services rather than for money. Barter does not have to do with the overall quality or perception of quality of goods. D) Return on investment has to do with manufacturers earning a certain percentage on their investment It does not deal with consumer perception of quality

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__________ is a pricing method where a supplier is reimbursed for all costs, regardless of what they may be, plus a set earlier-agreed-on dollar amount that is independent of the final cost of the project. A. Cost-plus-fixed-fee pricing B. Experience curve pricing C. Target return on investment pricing D. Target return on sales pricing E. Cost-plus-percentage-of-cost pricing Answer Key: A Feedback Text page 360 A. Cost-plus fixed-fee pricing is, by definition, a method where a supplier is reimbursed for all costs, regardless of what they turn out to be, plus a set earlieragreed-on dollar amount that is independent of the final cost of the project. The supplier is allowed only a fixed fee at a profit that is independent of the final cost of the project. B. Experience curve pricing is based on the learning effect, which holds that the unit cost of many products and services declines by 10 percent to 30 percent each time a firms experience at producing and selling them doubles. C. Target return-on-investment pricing is a method of setting prices to achieve a predetermined ROI. D. Target return-on-sales pricing is where a firm sets typical prices that will give it a profit that is a specified percentage of the sales volume. The formula to determine this

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Which of the following is NOT a problem associated with the Cost-Based and Profit-Based pricing strategies? A. These strategies do not take into consideration increases in production efficiency that would create economies of scale. B. These strategies do not take into consideration competitors' prices. C. These strategies do not take into consideration the cost of goods in relation to profits. D. These strategies do not take into consideration demand factors. E. These strategies do not take into consideration factors external to the firm.

## e-Learning : MAR3023, All Sections: Spring 2013 : Assessments

Answer Key: C Feedback Lecture page 106 A) The failure to account for economies of scale is a problem associated with these pricing strategies. The variable cost may be reduced as more and more units are produced, so the unit cost of production usually drops as the firms output increases. B) Cost-Based and Profit-Based pricing strategies do not include competitive factors such as competitors prices. C) This is not a problem. These strategies do take into consideration the cost of goods in relation to profits. D) Both these strategies ignore demand factors. They have an internal focus so there is no reflection of the external market factors like demand

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Old Navy wants to introduce a new line of fleece pullovers. They have an extra lining that makes them even better at keeping out the cold than the previous year's pullovers. It costs Old Navy \$10 to acquire each pullover from the manufacturer. Old Navy then sells each pullover for \$25. What percent markup is Old Navy using? A. 60% B. 250% C. 40% D. 150% E. 25% Answer Key: A Feedback Lecture page 104 In order to find the percent markup we will use the markup pricing formula and solve for % markup. P = Cost of Goods / ((100 - % markup) / 100) Substituting, \$25 = \$10 / ((100 - % markup) / 100) ((100 - % markup) / 100) x \$25 = \$10 ((100 - % markup) / 100) = .4 (100- % markup) = 40 % markup = 60

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## e-Learning : MAR3023, All Sections: Spring 2013 : Assessments

Value-pricing is: A. the practice of simultaneously increasing product and service benefits and maintaining or decreasing price. B. the ratio of perceived benefits to price. C. list price minus discounts and allowances plus extra fees. D. the practice of simultaneously increasing product and service benefits and increasing price. E. the ratio of price to perceived benefits. Answer Key: A Feedback Text page 332 By definition value-pricing is the practice of simultaneously increasing product and service benefits while maintaining or decreasing price.

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You can buy a General Electric dishwasher for \$399, or you can buy a similar sized under-thecounter Bosch brand dishwasher for \$989. Since Bosch uses its pricing strategy to project a certain product image, it is most likely using _____ pricing. A. standard markup B. bait and switch C. penetration D. target profit E. prestige

Answer Key: E Feedback Text page 357-358 A) Standard markup entails adding a fixed percentage to the cost of all items in a specific product class. B) Bait and switch is a deceptive practice whereby firms bait customers by offering a low price on a particularly item, and then persuade them to purchase a higher-priced item (switch) using a variety of tricks. C) Penetration pricing entails setting a low introductory price on a new product to appeal immediately to the mass market. D) Target profit pricing involves setting the price of the product in order to achieve a specified amount of profit. E) Prestige pricing involves setting a high price so that quality or status conscious

## e-Learning : MAR3023, All Sections: Spring 2013 : Assessments

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Other things equal, if a firm finds the demand for one of its products is inelastic, it can INCREASE its total revenues by: A. lowering its price. B. reducing variable costs. C. raising its price. D. reducing both fixed and variable costs. E. reducing fixed costs. Answer Key: C Feedback Text page 343-344 Inelastic Price exists in a marketplace when the percentage change in demand is less than the percentage a change in price. In other words, an increase in price results in more total revenue that offsets any slight drop in the number of units sold. A) Since the price for its products is inelastic, lowering price actually will reduce total revenue. For example, pretend the current selling price is \$10 and demand is 100 units. Current total revenue equals \$1000. If the firm reduced its price to \$5, the total number of additional units sold would not make up for the lost revenue due to the lower price. B) Although a reduction in fixed and variable costs would affect total profit, a reduction of the two would not affect total revenue. C) Increasing price would affect total revenue, but reducing total costs would not. This answer is incorrect. D) A reduction of fixed costs would not affect total revenue. E) Pick numbers to prove this answer choice For example pretend the current selling

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The iPod is a very popular item among people of all ages. The demand is continuing to grow. The iPod's introductory price was around \$300, but it is now down to \$199.00 for the basic model. As the price has dropped, sales have increased. Which pricing strategy was used for iPod? A. Price Elasticity B. Penetration Pricing C. Prestige Pricing D. Bundle Pricing E. Skimming Pricing

## e-Learning : MAR3023, All Sections: Spring 2013 : Assessments

A) Price elasticity is not a pricing strategy. Price elasticity deals with the percentage change in quantity demanded relative to a percentage change in price. B) A penetration pricing strategy starts by setting a low initial price on a new product to appeal immediately to the mass market. This is opposite of what the iPod did. C) Prestige pricing is a pricing strategy that involves setting a high price so that statusconscious consumers will be attracted to the product and buy it. Apple lowered the price of its iPod, so it not using prestige pricing. D) Bundle pricing is the marketing of two or more products in a single package price. There is no bundle or package in this question. E) Skimming pricing involves setting the highest initial price that customers really

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Firehouse Subs just opened in Gainesville. Firehouse's _______ costs include the rent for the location and utilities, and their _______ costs include the ingredients and labor for each sub that is made. A. Fixed, Variable B. Fixed, Controllable C. Input, Output D. Uncontrollable, Variable E. Variable, Fixed Answer Key: A Feedback Lecture page 102 Fixed costs are constant in the short run and do not change with the quantity of output. Rent and utilities are examples of fixed costs. Variable costs vary directly with the amount of output. Ingredients and labor are examples of variable costs.

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Kristen and David are shopping for a new television set. They research two different, wellknown brands and conclude the following. (Their ratings and importance weights are measured on 1-10 scales, as used in class.) If the Toshiba TV costs \$100, what is the parity price of the Sony TV? (Round upward to the nearest dollar.)

## A. \$100.00 B. \$98.00 C. \$96.00 D. \$104.00 E. \$102.00

Answer Key: E Feedback Lecture page 109 To find the parity price we use the critical strategic pricing ratio: Value of Brand X = Value of Brand Y Value = Total perceived benefit/ price We need to find the price where Total Perceived Benefit of Toshiba/ Price of Toshiba = Total Perceived Benefit of Sony / Price of Sony Benefit of Toshiba = (8 x 9) + (7 x 8) + (5 x 5) + (8 x 6) = 201 Benefit of Sony = (7 x 9) + (9 x 8) + (8 x 5) + (5 x 6) = 205 201/100 = 205/price --> Price = 205 x 100 / 201 = \$102.00

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