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Lady Marion Seafood, Inc., sells five-pound packages of Alaskan salmon. Assume that its unit variable cost per package is $30 and its fixed cost is $250,000. It wants a target profit of $38,000 based on a volume of 16,000 packages. What should the firm charge for a five-pound package of salmon?


A) $25.00
B) $33.94
C) $40.00
D) $48.00
E) $61.25

F) B) and D)
G) A) and E)

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The key to setting a price for a product is finding an approximate price level to use as a reasonable starting point. Four common approaches to selecting an approximate price level are (1) demand-oriented, (2) cost-oriented, (3) __________, and (4) competition-oriented approaches.


A) stakeholder-oriented
B) revenue-oriented
C) profit-oriented
D) distribution-oriented
E) cause-oriented

F) A) and D)
G) C) and D)

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Quantity discounts refers to


A) price reductions in unit costs for placing a larger order.
B) price reductions for placing long-term pre-scheduled orders.
C) price reductions to encourage retailers to stock inventory earlier than their normal demand would require.
D) BOGOs.
E) reductions in unit costs for taking merchandise that will soon be replaced by new and improved versions of the original product.

F) A) and B)
G) B) and E)

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To promote their business, some psychics advertise on television free tarot-card readings and other insights into their customers' futures. Unfortunately, this "free reading" has cost some unsuspecting callers as much as $700 in phone charges. This sort of pricing practice would be primarily monitored by the


A) Consumer Protection Agency.
B) U.S. Department of Justice.
C) Federal Trade Commission.
D) Federal Communications Commission.
E) Consumer Product Safety Commission.

F) A) and D)
G) A) and B)

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Price discrimination refers to


A) the practice of charging different prices to different buyers for goods of like grade and quality.
B) an arrangement a manufacturer makes with a reseller to handle only its products and not those of a competitor.
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 also buy another product in the line.

F) A) and D)
G) B) and D)

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To reward wholesalers and retailers for the risk they accept in assuming increased inventory carrying costs, manufacturers offer


A) noncumulative discounts.
B) cumulative discounts.
C) trade discounts.
D) seasonal discounts.
E) functional discounts.

F) B) and E)
G) B) and C)

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List four of the eight demand-oriented approaches to selecting an approximate price level and define what they are.

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Demand-oriented approaches are (1) skimm...

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Another name for a fixed-price policy is


A) customary pricing.
B) one-price policy.
C) dynamic pricing.
D) standard markup pricing.
E) uniform pricing.

F) A) and D)
G) A) and C)

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The retail price of fax machines has decreased from over $10,000 in the early 1970s to less than $100 today. This is due in large part to


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

F) A) and C)
G) None of the above

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Price fixing is illegal per se under the Sherman Act. What does per se mean?


A) according to
B) in lieu of
C) in regard to
D) in and of itself
E) without exception

F) B) and E)
G) D) and E)

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All of the following statements regarding the legal and regulatory aspects of pricing are true except


A) there has been a movement toward a "rule of reason" in both horizontal and vertical price fixing cases.
B) the Robinson-Patman Act allows for price differentials to different customers under the "cost justification defense."
C) a manufacturer's MSRP has been declared illegal per se by a recent U.S. Supreme Court decision.
D) the "rule of reason" perspective is the direct opposite of the per se rule.
E) wholesalers can fix the maximum retail price for their products provided the price agreement does not create an "unreasonable restraint of trade."

F) B) and C)
G) A) and D)

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It is relatively easy to measure the incremental cost of a new advertising campaign; what is not as easy is


A) measuring the extra fixed cost involved.
B) measuring the extra variable cost involved.
C) measuring the incremental revenue generated by the new advertising campaign.
D) determining whether customers who stop buying the product are reacting negatively to the advertisement or to some other aspect of the product itself.
E) determining what percentage of the ad-generated revenue should be reinvested into additional advertisements of the same form.

F) A) and E)
G) None of the above

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To encourage buyers to stock inventory earlier than their normal demand would require, manufacturers often use


A) noncumulative discounts.
B) cumulative discounts.
C) seasonal discounts.
D) trade discounts.
E) functional discounts.

F) A) and D)
G) A) and E)

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The pricing strategy that is almost the exact opposite of skimming pricing is


A) target pricing.
B) penetration pricing.
C) price lining.
D) odd-even pricing.
E) prestige pricing.

F) All of the above
G) C) and E)

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Tendollars.com offers thousands of gifts, all priced at $10. This is an example of


A) a skimming pricing approach.
B) a loss-leader pricing approach.
C) a fixed-price policy.
D) a penetration pricing approach.
E) an everyday low pricing approach.

F) All of the above
G) C) and E)

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Identifying pricing objectives and constraints occurs during __________ of the price-setting process.


A) Step 1
B) Step 2
C) Step 3
D) Step 4
E) Step 5

F) A) and B)
G) A) and C)

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Southern gardeners normally pay $5 for a two-cubic-foot bag of pine bark mulch that they buy at their local gardening-supply and home-improvement stores to keep the weeds down in their gardens. If the price being charged by a retailer is not within a narrow range that gardeners feel is appropriate, they will use substitutions-newspaper, grass clippings, or some other kind of covering. When pricing pine bark mulch, a garden-supply or home-improvement retailer should use


A) customary pricing.
B) at-market pricing.
C) loss-leader pricing.
D) penetration pricing.
E) bundle pricing.

F) A) and D)
G) D) and E)

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The practice of charging a very low price for a product with the intent of driving competitors out of business is referred to as


A) price fixing.
B) predatory pricing.
C) price discrimination.
D) deceptive pricing.
E) geographical pricing.

F) D) and E)
G) A) and E)

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Which of the following is a cost-oriented approach to pricing?


A) skimming pricing
B) prestige pricing
C) loss-leader pricing
D) experience curve pricing
E) bundle pricing

F) A) and D)
G) C) and D)

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Advertising such as "Retail Value $100, Our Price $85" is deceptive if


A) a verified and substantial number of stores in the market area do not price the item at $100.
B) even one store in that retail chain does not price the item at $100.
C) a competitor is selling the same item for $75 on sale and the normal price is only $85.
D) there is not enough product on hand at that price to satisfy the needs of the store's regular customer traffic.
E) the markup on the original price is more than 200 percent.

F) A) and D)
G) A) and C)

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