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The setting of prices for all items in a product line to cover the total cost and produce a profit for the complete line, not necessarily for each item, is referred to as


A) line item pricing.
B) product-line pricing.
C) price lining.
D) customary pricing.
E) discretionary pricing.

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Which cost-oriented pricing method holds that a product's unit costs predictably decline by 10 to 30 percent each time its production volume doubles?


A) experience curve pricing
B) cost-plus-percentage-of-cost pricing
C) capacity management pricing
D) standard markup pricing
E) derived demand pricing

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Odd-even pricing is most closely related to


A) retailers' perceptions of price.
B) customers' perceptions of price.
C) wholesalers' markups.
D) a manufacturer's costs.
E) competitors' perceptions of price.

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When a seller represents a price as reduced, the item must have been offered in good faith at a higher price for a substantial previous period. Former price comparisons are deceptive if


A) the high price tags were from a previous owner or retailer and were purchased that way from the reseller, even though that price didn't originate at the store.
B) the items for sale were part of a manufacturer's promotional allowance.
C) a high price was set for the purpose of establishing a reference for a price reduction.
D) the items for sale were available at the higher price for less than 30 days.
E) the items were purchased from the manufacturer at a higher price and the sale was part of a loss-leader promotion.

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The fashion buyer for Neiman Marcus is in Italy to view the new collections and to order for the coming season. In Milan, she negotiates a good price for a quantity of shoes in a range of sizes and styles, FOB factory. This means that


A) the factory selects the mode of transportation, pays the freight charges, and is responsible for any damage because the seller retains title to the goods until they are delivered to Neiman Marcus.
B) the factory selects the mode of transportation but Neiman Marcus pays freight charges and is responsible for any damage while the shoes are in transit because title passes to the firm at the point of loading.
C) Neiman Marcus and the factory will split the freight costs.
D) the factory pays the freight cost to a designated port (airport or seaport) in the United States while Neiman Marcus pays the freight from that port to its final destination within the United States.
E) the factory passes the title when the goods are loaded but will pay all shipping costs.

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Assume it costs Lady Marion Seafood, Inc., $30 to catch, process, freeze, package, and ship five-pound packages of Alaskan salmon. The firm adds 60 percent to the cost of its salmon products and charges customers a total of $48 for a postage-paid vacuum-sealed package. What type of pricing does Lady Marion Seafood use to arrive at its final price?


A) target return-on-sales pricing
B) bundle pricing
C) standard markup pricing
D) target profit pricing
E) customary pricing

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What pricing strategy did the National Aeronautics and Space Administration (NASA) use to pay Lockheed Martin for the Orion lunar spacecraft?


A) cost-plus-percentage-of-cost pricing
B) experience curve pricing
C) standard markup pricing
D) yield management pricing
E) cost-plus-fixed-fee pricing

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What are the two general methods for quoting prices related to transportation costs? Explain how each is used.

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The two general methods for quoting pric...

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Setting the price of a product or service by adding a fixed percentage to the total unit cost is referred to as


A) cost-plus-fixed-percentage fee pricing.
B) target pricing.
C) cost-plus-percentage-of-cost pricing.
D) experience curve percentage pricing.
E) target return on investment pricing.

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Instead of everyday low prices (EDLP) , supermarkets prefer a(n) __________ approach, which is based on frequent specials where prices are temporarily lowered for a brief period of time and then raised again.


A) lo-hi pricing
B) alternative pricing
C) hi-lo pricing
D) bundle-pricing
E) dynamic pricing policy

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What is the critical assumption when using target profit pricing?


A) A higher average price will usually cause the demand to fall.
B) A higher average price will always cause the demand to fall.
C) Profit is relative to the current value of the dollar so this form of pricing is extremely risky.
D) A higher average price will not cause the demand to fall.
E) If the average price is increased, all a firm's competitors will do the same.

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Which of the following is the fourth step in setting a final price for a product?


A) set list or quoted price
B) select an approximate price level
C) scan competitors for prices of similar products or services
D) determine cost, volume, and profit relationships
E) identify pricing objectives and constraints

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If a firm estimates that its costs will fall by 10 percent each time volume doubles for its product, then the cost of the l,000th unit produced and sold will be about 90 percent of the cost of the 500th unit, and the 2,000th unit will be 90 percent of the l,000th unit. Therefore, if the cost of the 500th unit is $100, the cost of the 4,000th unit would be


A) $0.
B) $72.90.
C) $81.00.
D) $90.00.
E) $100.00.

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Predatory pricing is


A) an arrangement a manufacturer makes with a reseller to handle only its products and not those of a competitor.
B) the practice of charging different prices to different buyers for goods of like grade and quality.
C) the practice of charging a very low price for a product with the intent of driving competitors out of business.
D) a conspiracy among firms to set prices for a product or service.
E) a seller's requirement that the purchaser of one product must also buy another product in the line.

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Another name for a dynamic pricing policy is


A) target pricing.
B) fluid pricing.
C) price lining.
D) market-based pricing.
E) a flexible-price policy.

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Explain why odd-even pricing may be successful.

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Odd-even pricing presumes that...

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Which pricing approach complements the demand-oriented pricing strategy of skimming followed by penetration pricing?


A) cost-plus-percentage-of-cost pricing
B) cost-plus-fixed-fee pricing
C) standard markup pricing
D) derived demand pricing
E) experience curve pricing

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When the Swiss watchmaker TAG Heuer raised the average price of its watches from $250 to $1,000, its sales volume jumped sevenfold. The likely cause of this volume increase is


A) because the watch market is highly conservative.
B) because economies of scale in production would be substantial.
C) because retailers are not willing to carry new brands of watches in this category.
D) because once the initial price is set, it is nearly impossible to lower the price without alienating early buyers.
E) because watches in this category have an element of prestige pricing, so that lower prices may result in lower sales.

Correct Answer

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The retail price of mobile phones (unsubsidized) has decreased from $4,000 in 1983 when Motorola commercialized the device, to less than $99 today as the volume increased from zero to millions of units sold. This is due in large part to which type of pricing approach?


A) skimming pricing
B) prestige pricing
C) experience curve pricing
D) odd-even pricing
E) customary pricing

Correct Answer

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The owner of a store that sells custom kitchen cabinets wishes to use a target return-on-sales pricing approach to establish a price for a typical section of cabinets. Assume that variable costs total $200 per unit, fixed cost is $44,000, and the storeowner desires a target profit of 20 percent return on sales at an annual volume of 400 cabinets. What price should be charged for a typical cabinet section?


A) $263.50
B) $311.00
C) $387.50
D) $445.50
E) $775.00

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