Chap 18**

Question 1

Firms that adopt volume objectives believe that:

Answer 1

companies should continue to expand sales as long as their total profits do not drop below a specified minimum return

Question 2

Which of the following actions is most likely to be taken by a company in order to implement the value pricing objective?

Answer 2

Convincing consumers that the quality of their lower-priced product is the same as that of a comparatively higher-priced product sold by a competitor

Question 3

Prestige pricing objectives emphasize:

Answer 3

quality and exclusivity

Question 4

What is the Robinson-Patman Act?

Answer 4

• Fed legislation prohibiting price discrimination that is not bases on a cost differential
• Prohibits selling at an unreasonably low price to eliminate competition
• Inspired by price competition triggered by the rise of grocery store chains

Question 5

State law that requires sellers to maintain minimum prices for comparable merchandise and was intended to protect small specialty stores from loss-leader tactics.

Answer 5

Unfair-Trade Laws

Question 6

The statutes enacted in most states that once permitted manufacturers to stipulate a minimum retail price for their product are called what?

Answer 6

Fair-Trade Laws

Question 7

What are the purposes of profitability objectives (pricing objective)?

Answer 7

• profit maximization (point at which the additional revenue gained by increasing the price of a product equals the increase in total cost)
• target return (short or long run pricing objectives of achieving a specified return on either sales or investment

Ex. Samsung’s initially high price for the Blu-ray players

Question 8

What are the purposes of volume objectives?

Answer 8

• sales maximization (through service and quality)
• market share (goal of controlling a portion of market for a firm’s product)

Ex. Delta’s low fares in new markets

Question 9

What discovered a strong positive relationship between a firm’s market share and product quality and its return on investment?

Answer 9

Profit Impact of Market Studies (PIMS) project

Question 10

What are the purpose of prestige objectives?

Answer 10

• to develop and maintain an image of quality and exclusiveness that appeals to status conscious consumers levels of competing offerings

Question 11

How does value pricing work?

Answer 11

• emphasizes benefits derived from a product in comparison to the price and quality levels of competing offerings
• works best for relatively low-prices goods and services
• challenge is convincing customers that low-priced brands offer quality comparable to that of a higher priced product

Question 12

What is an oligopoly vs monopoly?

Answer 12

O = relatively few sellers; each has large influence on price
M = only on seller of a product exists and for which there are no close substitutes

Question 13

A variable cost is a ?

Answer 13

cost that changes with the level of production

Question 14

A fixed cost is a ?

Answer 14

remain stable at any production level within a certain range

- lease payments or insurance costs

Question 15

What is elasticity?

Answer 15

it is the measure of responsiveness of purchasers and suppliers to a change in price

Question 16

A pricing technique used to determine the number of products that must be sold a specified price to generate enough revenue to cover total cost is called?

Answer 16

breakeven analysis

Question 17

A pricing strategy that allows marketers to vary prices based on such factors as demand even though the cost of providing those goods or services remains the same is called?

Answer 17

yield management