96) Among the following, a market-penetration strategy will likely be most effective with ________.
A) pharmaceuticals
B) an electronic device for which R&D must be recouped
C) convenience items for which there is much competition
D) any specialty item
E) a product manufactured in small quantities and distributed in limited areas
Answer: C
Diff: 3 Page Ref: 315
AACSB: Reflective Thinking Skills
Skill: Critical Thinking
Objective: 11-1
97) A manufacturer offers 3/10, net 30 terms to a wholesaler for a recent purchase. The wholesaler may deduct ________ percent if the bill is paid within ________ days.
A) 10; 30
B) 10; 3
C) 3; 30
D) 3; 10
E) 7; 10
Answer: D
Diff: 3 Page Ref: 319
AACSB: Reflective Thinking Skills
Skill: Synthesis
Objective: 11-3
98) Lancaster Recycling has a history of problems with customers who do not pay their bills on time. Lancaster Recycling wants to improve its cash situation, reduce bad debts, and reduce credit-collection costs. The company might consider which of the following forms of pricing?
A) by-product
B) inflation-adjusted
C) cash discounts
D) captive-product
E) penetration
Answer: C
Diff: 3 Page Ref: 319
AACSB: Reflective Thinking Skills
Skill: Critical Thinking
Objective: 11-3
Refer to the scenario below to answer the following questions. Quills, Inc. is a manufacturer of ballpoint pens, pencils, and stationery. The firm's primary distribution strategy is to sell in large volumes to office supply stores and large discount chains. Charles Powell, CEO of Quills, had hoped to manufacture and sell in large enough quantities that prices could be held low. However, in the first several months, the firm experimented with the price portion of its marketing mix in an effort to cater to a number of markets.
99) Why might have Charles Powell have avoided using market-skimming pricing at Quills?
A) A high price was likely to produce more market growth.
B) It was difficult for competitors to enter the market.
C) The costs of producing a larger volume of the firm's products were too high.
D) The quality and image of the products would not have likely supported the high initial price.
E) The market for the products was not highly price sensitive.
Answer: D
Diff: 2 Page Ref: 314
AACSB: Reflective Thinking Skills
Skill: Critical Thinking
Objective: 11-1
100) By offering a set of pens packaged with stationery and matching envelopes, Quills is using ________.
A) optional product pricing
B) product bundle pricing
C) by-product pricing
D) dynamic pricing
E) price fixing
Answer: B
Diff: 2 Page Ref: 318
AACSB: Analytic Skills
Skill: Application
Objective: 11-2
101) Pricing strategies tend to change and evolve as the average product passes through its life cycle.
Answer: TRUE
Diff: 1 Page Ref: 314
Skill: Concept
Objective: 11-1
102) Market-skimming is a more popular strategy for pricing new products, and market-penetration is a more popular strategy for pricing products that are more advanced in the product life cycle.
Answer: FALSE
Diff: 3 Page Ref: 314
Skill: Concept
Objective: 11-1
103) Pricing is often difficult because various products have related demand and costs, and they face different degrees of competition.
Answer: TRUE
Diff: 1 Page Ref: 315
Skill: Concept
Objective: 11-2
104) Water Light Fishing Boats is like most companies. The company commercializes its new-product ideas one at a time rather than developing a product line.
Answer: FALSE
Diff: 2 Page Ref: 315
Skill: Concept
Objective: 11-2
105) Some industries commonly use two-part pricing, breaking the price down into a fixed fee and a fixed usage rate.
Answer: FALSE
Diff: 3 Page Ref: 316
Skill: Concept
Objective: 11-2
106) When using product bundle pricing, sellers combine several of their products and offer the bundle at an increased price for increased profit.
Answer: FALSE
Diff: 1 Page Ref: 318
Skill: Concept
Objective: 11-2
107) Most companies adjust their basic prices to account for various customer differences and changing situations.
Answer: TRUE
Diff: 2 Page Ref: 319
Skill: Concept
Objective: 11-3
108) A seasonal discount is a price reduction to buyers who buy merchandise or services while they are in season.
Answer: FALSE
Diff: 2 Page Ref: 319
Skill: Concept
Objective: 11-3
109) Manufacturers may offer functional discounts within trade channels for channel members who store inventory.
Answer: TRUE
Diff: 3 Page Ref: 319
Skill: Concept
Objective: 11-3
110) Segmented pricing takes several forms; two of the most common are psychological pricing and reference pricing.
Answer: FALSE
Diff: 2 Page Ref: 320
Skill: Concept
Objective: 11-3
111) When consumers cannot judge the quality of a product because they lack information or skill, they are likely to perceive a higher-priced product as having higher quality.
Answer: TRUE
Diff: 2 Page Ref: 320
Skill: Concept
Objective: 11-3
112) The frequent use of promotional pricing can encourage customers to only buy when a brand is on sale.
Answer: TRUE
Diff: 2 Page Ref: 321
Skill: Concept
Objective: 11-3
113) Used too frequently, promotional pricing can have the negative effect of decreasing the brand's value in the eyes of customers.
Answer: TRUE
Diff: 2 Page Ref: 321
Skill: Concept
Objective: 11-3
114) The FOB-origin pricing strategy means that the goods sold are placed free on board a carrier. At that point, the title and responsibility pass to the customer, who pays the freight from the factory to the destination.
Answer: TRUE
Diff: 3 Page Ref: 322
Skill: Concept
Objective: 11-3
115) Zone pricing involves the customers paying for the shipping if they live outside the zone where the company is located.
Answer: FALSE
Diff: 2 Page Ref: 322
Skill: Concept
Objective: 11-3
116) A fixed price policyone price for all buyersis a relatively modern idea that arose at the end of the nineteenth century.
Answer: TRUE
Diff: 2 Page Ref: 323
Skill: Concept
Objective: 11-3
117) A company considering a price change should be more concerned about consumers' reactions than competitors' reactions.
Answer: FALSE
Diff: 3 Page Ref: 326
Skill: Concept
Objective: 11-4
118) Your company may respond to a competitor's price reduction by launching a low-price fighter brand. This is likely necessary if the particular market segment being lost is price sensitive and will not respond to arguments of higher quality.
Answer: TRUE
Diff: 3 Page Ref: 328
Skill: Concept
Objective: 11-4
119) State and federal governments accept some reasons for price fixing when it does not limit competition.
Answer: FALSE
Diff: 2 Page Ref: 328
AACSB: Ethical Understanding and Reasoning Abilities
Skill: Concept
Objective: 11-5
120) When Murphy's Candies sets a low initial price in order to get its "foot in the door" and quickly attract a large number of buyers, the company is practicing market-skimming pricing.
Answer: FALSE
Diff: 2 Page Ref: 314
AACSB: Analytic Skills
Skill: Application
Objective: 11-1
121) Just Hats prices its various types of caps at ten different price levels, ranging from $2.00 to $4.95. This is an illustration of price steps.
Answer: TRUE
Diff: 2 Page Ref: 315
AACSB: Analytic Skills
Skill: Application
Objective: 11-2
122) When Johnny On the Spot, a house mover, sells boxes and pads that must be used in moving a household's furniture, the company is practicing by-product pricing.
Answer: FALSE
Diff: 2 Page Ref: 316
AACSB: Analytic Skills
Skill: Application
Objective: 11-2
123) When a manufacturer seeks a market for by-products and accepts a price that covers more than the cost of storing and delivering those by-products, the manufacturer is able to reduce the main product's price to make it more competitive.
Answer: TRUE
Diff: 2 Page Ref: 316
AACSB: Reflective Thinking Skills
Skill: Application
Objective: 11-2
124) The basic difference between customer-segment pricing and product-form pricing is that the latter offers alternative versions of the product that are priced differently but not according to differences in their costs.
Answer: TRUE
Diff: 3 Page Ref: 320
AACSB: Reflective Thinking Skills
Skill: Application
Objective: 11-3
125) When Redman's Variety raised its store prices 40 percent and then ran a 20 percent off sale, Redman's was guilty of deceptive pricing.
Answer: TRUE
Diff: 2 Page Ref: 331
AACSB: Ethical Understanding and Reasoning Abilities
Skill: Application
Objective: 11-5
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