MULTIPLE CHOICE QUESTIONS

PRICING

1. ____________ is the amount of money charged for a product or service.

a. Price
b. Accountancy
c. Demand
d. Value

Answer: (a)
2. _____________ is the sum of the values that consumers exchange for the benefits of
having or using the product or service.
a. Price
b. Elasticity
c. Demand
d. Value estimate

Answer: (a)

3. A ____________ policy means that a firm sets one price for all buyers in a given
product or service line.
a. fixed-price
b. variable-price
c. dynamic-price
d. standard-price

Answer: (a)
4. Which of the following factors is spurring a new movement in pricing toward
dynamic pricing?
a. the federal government
b. strong retailers
c. the Internet
d. strong wholesalers

Answer: (b)
5. ____________ is the practice of charging different prices depending on individual
customers and situations.
a. Fixed-pricing
b. Standard-pricing
c. Barter-pricing
d. Dynamic pricing

Answer: (d)

6. All of the following are among the internal factors that affect pricing EXCEPT:
(Pick the LEAST LIKELY.)
a. globalization.
b. the company’s marketing objectives.
 c. marketing mix strategy.
d. the organization.

Answer: (a)
7. Before setting price, the company must decide on its strategy for:
a. distribution.
b. promotion.
c. the environment.
d. the product.

Answer: (d)
8. Companies set ______________ as their major objective if they are troubled by too
much capacity, heavy competition, or changing consumer wants.
a. current profit maximization
b. survival
c. market share leadership
d. product quality leadership

Answer: (b)
9. Pricing to cover variable costs and some fixed costs, as in the case of some
automobile distributorships that sell below total costs, is typical of which of the
following pricing objectives?
a. current profit maximization
b. product quality leadership
c. market share leadership
d. survival

Answer: (d)

10. Choosing a price based upon its short-term effect on current profit, cash flow, or
return on investment reflects which of the following pricing objectives?
a. current profit maximization
b. product quality leadership
c. market share leadership
d. survival

Answer: (a)
12. If a company believes that the company with the largest market share will enjoy the
lowest costs and highest long-run profits, that company will probably choose which
of the following pricing objectives as their primary course of action?
a. current profit maximization
b. product quality leadership
c. market share leadership
d. survival

Answer: (c)

13. When a company sets a price for a new product on the basis of what it thinks the
product should cost, then develops estimates on what each component should cost to
meet the proposed price with an acceptable profit margin, the company is practicing:
 a. predatory pricing.
b. target costing.
c. strategic pricing.
d. low cost leadership.

Answer: (b)
14. ______________ set(s) the floor for the price that the company can charge for its
product.
a. Supply
b. Demand
c. Costs
d. Nonprofit factors

Answer: (c)
15. All of the following are considered to be forms of a cost-based approach to pricing
EXCEPT:
a. cost-plus pricing.
b. break-even analysis.
c. going-rate pricing.
d. target profit pricing.

Answer: (c)
16. Adding a standard markup to the cost of the product refers to:
a. cost-plus pricing.
b. break-even analysis.
c. target profit pricing.
d. perceived-value pricing.

Answer: (a)

17. Markup pricing remains popular in the marketplace. Which of the following is a
reason for this popularity?
a. Cost-plus pricing favors the best price.
b. Standard markups make the most sense.
c. Cost-plus pricing is fairer to both buyers and sellers.
d. The method focuses on demand as its base.

Answer: (c)

18. Setting prices to break even on the costs of making and marketing a product or make
the target profit it is seeking is called:
a. cost-plus pricing.
b. perceived-value pricing.
c. break-even pricing.
d. Going-rate pricing.

Answer: (c)

19. When a coffee shop in an airport and a fine restaurant in a luxury hotel charge
different prices for the same meal to customers who find the atmosphere in the hotel
 worth the difference in price, we can say that ____________ was being used.
a. value-based pricing
b. cost-plus pricing
c. break-even pricing
d. going-rate pricing

Answer: (a)
20. Which of the following pricing methods uses the idea that pricing begins
with analyzing consumer needs and value perceptions, and price is set to match
consumer’s perceived value?
a. cost-based pricing
b. service-based pricing
c. psychology-based pricing
d. value-based pricing

Answer: (d)
21. _____________ is offering just the right combination of quality and good service
at a fair price.
a. Value pricing
b. Cost pricing
c. Service pricing
d. Demand pricing

Answer: (a)

22. If the customers base their judgments of a product’s value on the prices that
competitors charge for similar products, then ___________________ is in place.
a. cost-plus pricing
b. value-based pricing
c. competition-based pricing
d. target profit pricing

Answer: (c)

23. Companies bringing out a new product face the challenge of setting prices for the
first time. They can choose between two broad strategies. What are these two
broad strategies?
a. product mix strategies and pricing mix strategies
b. product line pricing and captive-product pricing
c. market-skimming pricing and market-penetration pricing
d. market-expansion pricing and market-harvesting pricing

Answer: (c)
24. The process of setting a high price for a new product to gain maximum revenues
layer by layer from the segments willing to pay the high price is called:
a. market-penetration pricing.
b. market-layer pricing.
c. market-skimming pricing.
d. market-saturation pricing.
Answer: (c)
25. When Intel develops a strategy whereby they develop and introduce a newer,
higher margin microprocessor chip every 12 months and send the older models down
the industry food chain to feed demand at lower price points (their new chips can sell
for as much as a $1,000 apiece), they are using which of the following pricing
strategies?
a. market-layer pricing
b. market-segmentation pricing.
c. market-saturation pricing.
d. market-skimming pricing.

Answer: (d)
26. Market skimming makes sense only under certain conditions. Which of the
following WOULD NOT be a reason for using market skimming pricing?
a. The market must be highly price sensitive.
b. The product’s quality and image must support its higher price, and enough
buyers must want the product at that price.
c. The costs of producing a smaller volume cannot be so high that they cancel
the advantage of charging more.
d. Competitors should not be able to enter the market easily and undercut the high
price.

Answer: (a)
27. Setting a low initial price to attract a large number of buyers quickly and win a
large market share is called:
a. market-penetration pricing.
b. market-skimming pricing.
c. market-loss pricing.
d. market-competitive pricing.

Answer: (a)

28. Market-penetration pricing refers to the practice of:

a. setting a high initial price and then penetrating the market with successive prices
for each price sensitive layer.
b. setting a low initial price to penetrate the market quickly and attract a large number
of buyers to win a large market share.
c. pricing to attract low volume in many segments so as to gradually penetrate the
market as a whole.
d. pricing products very high to penetrate deeply and quickly into large profits for the
company.

Answer: (b)
29. When Dell Computer runs an advertisement that boosts “Superior Quality, Superior
Service, and Unbelievable Price,” they are most likely using which of the following
new product pricing strategies?
a. market-penetration pricing
b. market-skimming pricing
c. market-loss pricing
 d. market-competitive pricing

Answer: (a)
30. ________________ is setting the price steps between various products in a product
line based on cost differences between the products, customer evaluations of different
features, and competitors’ prices.
a. optional-product pricing
b. captive-product pricing
c. product line pricing
d. by-product pricing

Answer: (c)
31. The use of price points for reference to different levels of quality for a company’s
related products is typical of which product-mix pricing strategy?
a. optional-product pricing
b. captive-product pricing
c. by-product pricing
d. product line pricing

Answer: (d)
32. Using a low sticker price on automobiles to attract customers and then selling models
with additional accessory features to meet customer needs is a form of which of the
following pricing strategies?
a. optional-product pricing
b. captive-product pricing
c. by-product pricing
d. product line pricing

Answer: (a)

33. ______________ is setting a price for products that must be used along with a main
product, such as blades for a razor.
a. Optional-product pricing
b. Captive-product pricing
c. By-product pricing
d. Product line pricing

Answer: (b)

34. Captive-product pricing applies to services pricing. With respect to services, the
captive-product strategy is called:
a. demand pricing.
b. slack pricing.
c. two-part pricing.
d. referral pricing.

Answer: (c)

35. ________________ is setting a price for by-products in order to make the main
product’s price more competitive.
 a. Optional-product pricing
b. Captive-product pricing
c. By-product pricing
d. Product line pricing

Answer: (c)

36. If a zoo sells ZOO-DOO to customers as a great natural fertilizer, it is practicing a

form of:
a. product-bundle pricing.
b. optional-product pricing.
c. captive-product pricing.
d. by-product pricing.

Answer: (d)
37. Combining several products and offering them together at a reduced price is called:
a. product-bundle pricing.
b. optional-product pricing.
c. captive-product pricing.
d. by-product pricing.

Answer: (a)

38. All of the following are price-adjustment strategies EXCEPT:

a. segmented pricing.
b. market-penetration pricing.
c. psychological pricing.
d. promotional pricing.

Answer: (b)
39. A price reduction to buyers who buy in large volumes is called a:
a. quantity discount.
b. cash discount.
c. seasonal discount.
d. trade discount.

Answer: (a)

40. A(n) _________ is a straight reduction in price on purchases during a stated period
of time.
a. allowance
b. discount
c. pricing segment
d. reference price

Answer: (b)

41. A(n) ________________ is a price reduction to buyers who pay their bills promptly.
a. quantity discount
b. functional discount
 c. cash discount
d. allowance

Answer: (c)

42. In an attempt to keep production steady during an entire year, especially for products
whose use is for only part of the year, sellers often use which of the following?
a. cash discounts
b. quantity discounts
c. functional discounts
d. seasonal discounts

Answer: (d)

43. A functional discount is also called a _________ discount.

a. segmented
b. quantity
c. trade
d. service

Answer: (c)
44. Promotional money paid by manufacturers to retailers in return for an agreement
to feature the manufacturer’s products in some way is called a(n):
a. discount.
b. allowance.
c. rebate.
d. off-retail price.

Answer: (b)

45. If a state university charges different tuition rates to in-state and out-of-state students,
then the university is practicing a form of:
a. promotional pricing.
b. institutional pricing.
c. segmented pricing.
d. psychological pricing.

Answer: (c)

46. When different versions of a product are priced differently but not in accordance to
differences in their value, it is a form of:
a. customer-segment pricing.
b. product-form pricing.
c. location pricing.
d. time pricing.

Answer: (b)

47. When consumers pay $100 for a bottle of perfume that only contains $3 worth of
ingredients, they are participating in:
 a. upscale pricing.
b. discriminatory pricing.
c. psychological pricing.
d. promotional pricing.

Answer: (c)

48. Prices that buyers carry in their minds and refer to when they look at a given product
are called:
a. segmented prices.
b. reference prices.
c. relationship prices.
d. basing-point prices.

Answer: (b)
49. With respect to setting pricing amounts, the belief that individual digits in a
product’s price have symbolic and visual qualities that should be considered in setting
price is linked to:
a. psychological pricing.
b. promotional pricing.
c. symbolic pricing.
d. psychographic pricing.

Answer: (a)

50. If a company pursues ________________, it often temporarily prices products

below the list price, and sometimes even below cost, to increase short-run sales.
a. psychological pricing
b. promotional pricing
c. symbolic pricing
d. psychographic pricing

Answer: (b)

51. The type of promotional pricing that uses a few products with very low prices to
attract customers into the store in the hope that they will then buy regularly priced
items is called:
a. special-event pricing.
b. cash rebates.
c. loss leaders.
d. low-value pricing.

Answer: (c)
52. When the seller places products at no charge with a carrier and the title an
responsibility pass to the customer who pays the freight, it is which type of pricing
strategy?
a. FOB-origin pricing
b. uniform-delivered pricing
c. zone pricing
d. basing-point pricing
Answer: (a)

53. __________________ is a geographical pricing strategy in which the company

charges the same price plus freight to all customers, regardless of their location.
a. FOB-origin pricing
b. uniform-delivered pricing
c. zone pricing
d. basing-point pricing

Answer: (b)
54. The pricing method that charges different prices to customers in different zones (but
the same prices to customers within a zone) is called:
a. FOB-origin pricing.
b. uniform-delivered pricing.
c. zone pricing.
d. basing-point pricing.
Answer: (c)

55. When a seller selects a given city as the source from which to charge all customers
freight costs from that location, they are practicing which of the following?
a. FOB-origin pricing
b. uniform-delivered pricing
c. zone pricing
d. basing-point pricing

Answer: (d)

56. A major factor in price increases is:

a. promotional expenditures.
b. government regulations.
c. cost inflation.
d. underdemand.

Answer: (c)

57. How does a company respond to a price change by a competitor. The text suggests
four alternative strategies. Which of the following WOULD NOT be among those
four strategies?
a. reduce price
b. raise perceived quality
c. launch low-price “fighting brand”
d. increase price to force response

Answer: (d)

58. In response to a price reduction by a competitor, a company can introduce a “fighting

brand.” A good definition of a “fighting brand” would be one that:
a. raises a price to offer a high price alternative.
b. raises quality and increases price.
 c. becomes a lower-priced brand or line to combat the competitor’s price reduction.
d. copies the competitor’s brand to confuse the buyer.

Answer: (c)

59. Which of the following strategies best describes the attempt on the part of sellers to
sell below cost with the intention of punishing a competitor or gaining higher
long-run profits by putting competitors out of business?
a. price-fixing strategy
b. deceptive pricing strategy
c. price discrimination strategy
d. predatory pricing strategy

Answer: (d)