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MINI-CASE Smith Automotive is a company that produces component parts for automobile engines.A margin of $4 per unit produces fixed expenses of $80 million.The market demand for the component parts is 400 million units per year. -Mini-Case Question.Calculate the break-even market share if the break-even volume is 40 million units.


A) 5%
B) 10%
C) 12.5%
D) 15%
E) 20%

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For which of the following products or services is the seller most likely to use life-cycle value pricing?


A) lottery tickets
B) a hotel reservation
C) shampoo
D) a meal at a restaurant
E) a car

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Which of the following statements is true of pricing decisions?


A) Market-based pricing starts with a good understanding of customer needs and the benefits that a product offers relative to competitors' products.
B) The business with the lowest price will always offer customers the best economic value.
C) It is possible to implement market-based pricing with low levels of customer and competitor intelligence.
D) Competitors' product-price positioning and company product-price positioning are the two primary determinants in setting a cost-based price.
E) Cost-based pricing takes into account what the customer would be willing to pay for a certain level of product performance.

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In which of the following situations would a firm most likely pursue a low-cost leader strategy?


A) There are no competitors in the market and the firm is the market leader.
B) The nature of its products does not allow the firm to maintain a volume advantage in the market.
C) The company's product is a niche product and appeals to only a few customers.
D) The market is quality-sensitive rather than price-sensitive.
E) The firm can minimize its operational expenses in order to sell higher volumes of products.

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Compare and contrast skim pricing strategy and penetration pricing strategy.

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Skim pricing is a market-based pricing s...

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Javier's Pizza Point has a margin per unit of $2.00 for a typical pizza,total fixed expenses of $10,000,and average variable costs of $3.00 per pizza.How many pizzas must Javier sell to break even?


A) 2,000
B) 3,334
C) 5,000
D) 20,000
E) 30,000

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As a business adds more products to its product line,it decreases the risk of cannibalizing existing product sales.

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A reduce-focus pricing strategy calls for price increases with the intent of reducing volumes and market share in exchange for higher margins.

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When a price is inelastic,a price increase improves all aspects of performance.

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Crissel Food products has a margin per unit of $5.00 for a high-end brand of pasta,total fixed expenses of $50 million,and a market demand of 400 million packs per year.Calculate the break-even market share of the company.


A) 2.5%
B) 5%
C) 7.5%
D) 10%
E) 12.5%

Correct Answer

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________ is the ratio of the percentage change in volume to the percentage change in price.


A) Market demand
B) Market share needed
C) Price elasticity
D) Average selling price
E) Volume sold

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Products that complement a certain product will not be affected whenever that product's price changes.

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Which of the following is true of value-based pricing?


A) The cost of making a product and the desired profit margin are the two primary determinants in setting a value-based price.
B) Value-based pricing does not consider what customers require from a product in terms of performance and price.
C) Value-based pricing takes customer needs into account,but fails to consider customers' price sensitivity.
D) In value-based pricing,price is developed around a product's relative strengths to give customers greater benefits than competing products offer.
E) Value-based pricing is based on features of the product,but fails to consider the prices of similar products in the market.

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Which of the following is true of product line pricing?


A) As a business adds more products to its product line,it decreases the risk of cannibalizing existing product sales.
B) Adding more products to a business's product line enhances sales growth.
C) Products that have a negative cross-price elasticity are substitutes.
D) It is not necessary to know the degree to which a product has cross-price elasticity with other products.
E) Products that have a positive cross-price elasticity are complementary products.

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A ________ market-based pricing strategy product position is one in which a business can equal competitors on all areas of product and service quality but can find one area of meaningful performance in which it is clearly superior.


A) penetration
B) multi-segment
C) plus-one
D) reduce-focus
E) harvest

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________ pricing allows buyers of a product to select the performance configurations that best fit their needs and price budgets.


A) Customerization value
B) Performance-based
C) Perceived-value
D) Life-cycle value
E) Value-in-use

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Market-based pricing is not possible without extensive customer and competitor intelligence.

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A plus-one market-based pricing strategy means a business sets its price 1% higher than the competitors' price.

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When a business's product has no considerable and sustainable differential advantage in a quality-sensitive market,with many competitors,many substitutes and easy competitor entry,conditions are favorable for a skim pricing strategy.

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In order for a company to use single-segment pricing,it is necessary that ________.


A) the company set a higher price than competitors for its product
B) the company first use a price skimming strategy when entering the market
C) the total cost of ownership of the company's product be less than that of competing products
D) the company set the lowest product price among similar products
E) there be no other competitor in the market

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