Question 1

If the price per unit is $1.00 and the average variable cost per unit is 60 cents,the fixed cost contribution per unit is $1.40.

Accepted Answer

A) True 
 B)False

Question 2

Even if a firm's average variable cost remains constant per unit,its average cost will increase as output increases.

Accepted Answer

A) True 
 B)False

Question 3

When customers have to pay the bill themselves,they are likely to be more price sensitive.

Accepted Answer

A) True 
 B)False

Question 4

Fly-Right Travel Agency arranges vacation packages to Disney World in Florida.The price includes airfare,a rental car,deluxe accommodations,and tickets to Disney World and other attractions.Fly-Right is using

Accepted Answer

A)  product-bundle pricing.
B)  complementary product pricing.
C)  full-line pricing.
D)  bid pricing.
E)  demand-backward pricing.F) A) and B)
G) A) and C)

Question 5

Michael Soles-owner of Soles Shoe Store-recently discovered that shoe stores in his trading area have an average markup of 40 percent.Upon investigation,Michael found that his average markup is $15 on shoes that he sells for $45.This suggests that

Accepted Answer

A)  Michael has higher-than-average costs.
B)  Michael is pricing his products higher than his competitors.
C)  Michael is taking a smaller average markup than his competitors.
D)  Michael has a relatively high stockturn rate.
E)  Michael's markups in dollar amounts are about the same as his competitors'.F) D) and E)
G) B) and E)

Question 6

When setting prices,the marketing manager should consider the firm's demand curve,or else the price may not even cover the firm's total cost.

Accepted Answer

A) True 
 B)False

Question 7

________ are costs that a customer faces by buying a product that is different from what has been purchased or used in the past.

Accepted Answer

A)  Marginal costs
B)  First-mover costs
C)  Switching costs
D)  Pioneering costs
E)  Opportunity costsF) B) and D)
G) A) and C)

Question 8

At zero output,total variable cost is

Accepted Answer

A)  higher than total fixed cost.
B)  equal to total fixed cost.
C)  unity.
D)  zero.
E)  substantial.F) A) and B)
G) D) and E)

Question 9

The form of pricing in which customers pay on a periodic basis for access to a product is referred to as

Accepted Answer

A)  subscription pricing.
B)  price lining.
C)  leader pricing.
D)  psychological pricing.
E)  bait pricing.F) B) and C)
G) A) and D)

Question 10

An advantage of average-cost pricing is that it considers competitors' costs and prices.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following does NOT change with an increase in output?

Accepted Answer

A)  total variable cost
B)  total fixed cost
C)  total cost
D)  average total cost per unit
E)  average fixed cost per unitF) A) and E)
G) B) and D)

Question 12

One disadvantage of average-cost pricing is that

Accepted Answer

A)  average-cost pricing does not consider historical values.
B)  average-cost pricing is a highly complicated method.
C)  the average cost is rarely useful information in making pricing decisions.
D)  it is easy to lose money with average-cost pricing.
E)  average-cost pricing does not help understand how costs operate at different levels of output.F) A) and B)
G) A) and C)

Question 13

A retailer pays a wholesaler $24.00 for an item and then sells it with a 25 percent markup.The retailer's selling price is

Accepted Answer

A)  $32.00.
B)  $56.00.
C)  $48.00.
D)  $30.00.
E)  None of these answers is correct.F) C) and E)
G) A) and C)

Question 14

A firm's break-even point is that point at which

Accepted Answer

A)  maximum profit is earned.
B)  total variable cost just equals total revenue.
C)  total profit just equals total cost.
D)  total cost just equals total revenue.
E)  None of these answers is correct.F) B) and D)
G) B) and E)

Question 15

A large supermarket chain purchases a box of cereal from a food wholesaler.If the supermarket chain uses a markup of 20 percent on its selling price of $2.85,what is the price the supermarket chain paid to the food wholesaler?

Accepted Answer

A)  $2.12
B)  $2.28
C)  $2.45
D)  $2.55
E)  $2.67F) D) and E)
G) C) and D)

Question 16

Subscription pricing is popular because it gives sellers a regular and predictable stream of revenue.

Accepted Answer

A) True 
 B)False

Question 17

Marginal analysis

Accepted Answer

A)  can be very useful if a firm's pricing objective is profit maximization.
B)  focuses on the last unit that will be sold.
C)  can be used to find the most profitable price and quantity.
D)  can help find the price that results in the greatest difference between total revenue and total cost.
E)  All these answers are correct.F) C) and D)
G) A) and E)

Question 18

A markup chain can be used to calculate the price structure in a whole channel.

Accepted Answer

A) True 
 B)False

Question 19

Demand-backward pricing involves a producer estimating an acceptable final consumer price and working backward to determine what the producer can charge in the channel.

Accepted Answer

A) True 
 B)False

Question 20

Total fixed cost

Accepted Answer

A)  is the sum of all expenses that are closely related to output.
B)  is the sum of those costs that do not change in total no matter how much is produced.
C)  may vary in the short run but is more or less fixed in the long run.
D)  is the sum of all costs of manufacturing and distributing a product.
E)  would be zero if the quantity produced were zero.F) C) and E)
G) B) and D)

Exam 18: Price Setting in the Business World

A markup chain can be used to calculate the price structure in a whole channel.

Correct AnswerverifiedShow Answer

When setting prices,the marketing manager should consider the firm's demand curve,or else the price may not even cover the firm's total cost.

Correct AnswerverifiedShow Answer

At zero output,total variable cost is

Correct AnswerverifiedShow Answer

A firm's break-even point is that point at which

Correct AnswerverifiedShow Answer

Michael Soles-owner of Soles Shoe Store-recently discovered that shoe stores in his trading area have an average markup of 40 percent.Upon investigation,Michael found that his average markup is $15 on shoes that he sells for $45.This suggests that

Correct AnswerverifiedShow Answer

The form of pricing in which customers pay on a periodic basis for access to a product is referred to as

Correct AnswerverifiedShow Answer

Total fixed cost

Correct AnswerverifiedShow Answer

An advantage of average-cost pricing is that it considers competitors' costs and prices.

Correct AnswerverifiedShow Answer

A retailer pays a wholesaler $24.00 for an item and then sells it with a 25 percent markup.The retailer's selling price is

Correct AnswerverifiedShow Answer

One disadvantage of average-cost pricing is that

Correct AnswerverifiedShow Answer

Demand-backward pricing involves a producer estimating an acceptable final consumer price and working backward to determine what the producer can charge in the channel.

Correct AnswerverifiedShow Answer

Marginal analysis

Correct AnswerverifiedShow Answer

Which of the following does NOT change with an increase in output?

Correct AnswerverifiedShow Answer

A large supermarket chain purchases a box of cereal from a food wholesaler.If the supermarket chain uses a markup of 20 percent on its selling price of $2.85,what is the price the supermarket chain paid to the food wholesaler?

Correct AnswerverifiedShow Answer

If the price per unit is $1.00 and the average variable cost per unit is 60 cents,the fixed cost contribution per unit is $1.40.

Correct AnswerverifiedShow Answer

________ are costs that a customer faces by buying a product that is different from what has been purchased or used in the past.

Correct AnswerverifiedShow Answer

Subscription pricing is popular because it gives sellers a regular and predictable stream of revenue.

Correct AnswerverifiedShow Answer

Even if a firm's average variable cost remains constant per unit,its average cost will increase as output increases.

Correct AnswerverifiedShow Answer

When customers have to pay the bill themselves,they are likely to be more price sensitive.

Correct AnswerverifiedShow Answer

Fly-Right Travel Agency arranges vacation packages to Disney World in Florida.The price includes airfare,a rental car,deluxe accommodations,and tickets to Disney World and other attractions.Fly-Right is using

Correct AnswerverifiedShow Answer

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