CH 18 -- Pricing Concepts

Question 1

Price

Answer 1

Exchange value of a good or service

Question 2

Robinson-Patman Act

Answer 2

Federal legistlation prohibiting price discrimination not based on cost differentials; also prohibits selling at an unreasonably low price to eliminate competition

Question 3

Unfair-Trade Law

Answer 3

State laws requiring sellers to maintain minimum prices for comparable merchandise

Question 4

Fair-Trade Laws

Answer 4

Statutes enacted in most states that once permitted manufacturers to stipulate a minimun retail price for their product

Question 5

Marginal Analysis

Answer 5

Method of analyzing the relationship among costs, sales price, and increased sales volume

Question 6

Profit Maximization

Answer 6

Point at which the additional revenue gained by increasing the price of a product equals the increase in total costs

Question 7

Target-Objective Return

Answer 7

Short-run or long-run pricing objectives of achieving a specified return on either sales or investment

Question 8

Market-Share Objective

Answer 8

Volume related pricing objective with the goal on controlling a portion of the market for a firm’s product

Question 9

Value Pricing

Answer 9

Pricing strategy that emphasizes benefits derived from a product in comparison to the price and quality levels of competing offerings

Question 10

Customary Prices

Answer 10

Traditional prices that customers expect to pay for certain goods and services

Question 11

Demand

Answer 11

Schedule of the amounts of a firm’s product that consumers will purchase at a different prices during a specified time period

Question 12

Supply

Answer 12

Schedule of teh amounts of a good or service that firms will offer for sale at different prices during a specified time period

Question 13

Pure Competition

Answer 13

Market structure characterized by homogenous products in which there are so many buyers and sellers that none has significant influence on price

Question 14

Monopolistic Competition

Answer 14

Market structure involving a heterogeneous product and product differentiation among competing suppliers, allowing the marketer some degree of control over prices

Question 15

Oligopoly

Answer 15

Market structure in which relatively few sellers compete and where high start-up costs form barriers to keep out new competitors

Question 16

Monopoly

Answer 16

Market structure in which a single seller dominates trade in a good or service for which buyers can find no subsitutes

Question 17

Variable Cost

Answer 17

Cost that changes with the level of production (such as labor and raw material costs)

Question 18

Fixed Cost

Answer 18

Cost that remains the same with levels of production

Question 19

Average Total Cost

Answer 19

Costs calculated by dividing the sum of the variable and fixed costs by the number of units produced

Question 20

Marginal Cost

Answer 20

Change in total cost that results from producing and additional unit of output

Question 21

Elasticity

Answer 21

Measure of responsiveness of purchasers and suppliers to a change in price.

Question 22

Cost-plus pricing

Answer 22

Practice of adding a percentage of specified dollar amount– or markup– to the base cost of a product to cover unassigned costs and to provide a profit.

Question 23

Full-cost pricing

Answer 23

Pricing method that uses all relevant costs in setting a products price and allocates those fixed costs not directly attributed to the production of the priced item

Question 24

Incremental-Cost Pricing

Answer 24

Pricing method that attempts to use only costs directly attributable to a specific output in setting price.

Question 25

Yield Management

Answer 25

Pricing strategy that allows marketers to vary prices based on such factors as demand, even though the cost of providing those goods or services remain the same