71) The less ________ the demand, the ________ it benefits the seller to raise the price.
A) focused; more
B) elastic; more
C) elastic; less
D) constant; more
E) concentrated; more
Answer: B
Diff: 3 Page Ref: 303
Skill: Concept
Objective: 10-3
72) Dips in the economy and the instant price comparisons made possible by the Internet have both contributed to ________.
A) decreased consumer price sensitivity
B) increased consumer price sensitivity
C) a less direct relationship between supply and demand
D) a more direct relationship between supply and demand
E) decreased brand loyalty
Answer: B
Diff: 2 Page Ref: 303
AACSB: Use of Information Technology
Skill: Concept
Objective: 10-3
73) In the aftermath of the Great Recession, consumers have become ________.
A) more value conscious
B) less value conscious
C) more interested in prestige pricing
D) less interested in price cutting
E) more loyal to prestigious products
Answer: A
Diff: 2 Page Ref: 303
Skill: Concept
Objective: 10-3
74) A company should set prices that will allow ________ to receive a fair profit.
A) resellers
B) producers
C) consumers
D) the market
E) competitors
Answer: A
Diff: 2 Page Ref: 304
Skill: Concept
Objective: 10-3
75) When companies set prices, the government and social concerns are two ________ affecting pricing decisions.
A) external factors
B) internal factors
C) economic conditions
D) demand curves
E) temporary influences
Answer: A
Diff: 1 Page Ref: 304
Skill: Concept
Objective: 10-3
76) Amos Zook, an Amish farmer, sells organically grown produce. Often he will trade some of his produce for dairy products produced by other Amish farmers. The sum of the values exchanged for the produce is the ________.
A) price
B) cost-plus price
C) dynamic price
D) common value price
E) penetration price
Answer: A
Diff: 2 Page Ref: 290
AACSB: Analytic Skills
Skill: Application
Objective: 10-1
77) Trader Joe's offers an assortment of exclusive gourmet products at impossibly low prices. These prices are not limited-time offers or special discounts. Instead, they reflect Trader Joe's ________ strategy.
A) everyday low pricing
B) cost-plus pricing
C) dynamic pricing
D) value-based pricing
E) cost-based pricing
Answer: A
Diff: 2 Page Ref: 293
AACSB: Analytic Skills
Skill: Application
Objective: 10-2
78) Xbox 360 decides to add a free subscription to XBOX magazine with every game bought in an effort to differentiate its offering from PS3 games. This is an example of ________.
A) good-value pricing
B) add-on pricing
C) product-support pricing
D) value-added pricing
E) cost-based pricing
Answer: D
Diff: 2 Page Ref: 293
AACSB: Analytic Skills
Skill: Application
Objective: 10-2
79) The long-run average cost curve (LRAC) helps the producer understand which of the following?
A) how large a business should be in order to be most efficient
B) how to deal with competitors' prices
C) how to deal with external factors
D) how to price under conditions of inelastic demand
E) how to price under conditions of elastic demand
Answer: A
Diff: 2 Page Ref: 296
AACSB: Reflective Thinking Skills
Skill: Application
Objective: 10-2
80) Assume a manufacturer with fixed costs of $100,000, a variable cost of $10, and expected sales of 50,000 units wants to earn a 20 percent markup on sales. What is the manufacturer's markup price?
A) $14
B) $15
C) $18
D) $18.50
E) none of the above
Answer: B
Diff: 3 Page Ref: 297
AACSB: Reflective Thinking Skills
Skill: Application
Objective: 10-2
81) General Motors prices its automobiles to achieve a 15 to 20 percent profit on its investment. This approach is called ________.
A) value-based pricing
B) going-rate pricing
C) cost-plus pricing
D) low-price image
E) target-return pricing
Answer: E
Diff: 2 Page Ref: 298
AACSB: Analytic Skills
Skill: Application
Objective: 10-2
82) A company faces fixed costs of $100,000 and variable costs of $8.00/unit. It plans to directly sell its product to the market for $12.00. How many units must it produce and sell to break even?
A) 20,000
B) 25,000
C) 40,000
D) 50,000
E) not enough information to calculate
Answer: B
Diff: 3 Page Ref: 298
AACSB: Reflective Thinking Skills
Skill: Application
Objective: 10-2
83) Ecstasy Pharmaceuticals faces fixed costs with its new drug of $1,000,000. The company sells the drug in bottles of 50 pills for $10.00. It estimates that it must sell 200,000 bottles to break even. What is the total cost to produce a bottle of 50 pills?
A) $2.50
B) $5.00
C) $6.00
D) $7.50
E) not enough information to calculate
Answer: B
Diff: 3 Page Ref: 298
AACSB: Reflective Thinking Skills
Skill: Application
Objective: 10-2
84) A manufacturer is trying to determine its break-even volume. With fixed costs of $100,000, a variable cost of $10, and expected sales of 50,000 units, what should the manufacturer's unit cost be to break even?
A) $10
B) $12
C) $16
D) $20
E) none of the above
Answer: B
Diff: 3 Page Ref: 298
AACSB: Reflective Thinking Skills
Skill: Application
Objective: 10-2
85) As a manufacturer decreases price, ________ volume increases.
A) target
B) break-even
C) cost-plus pricing
D) total cost
E) sales
Answer: B
Diff: 3 Page Ref: 298
AACSB: Reflective Thinking Skills
Skill: Application
Objective: 10-2
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