Chapter 13 Flashcards
Exam 3
1
Q
With a downward-sloping demand curve, marketing managers are especially interested in?
A
How sensitive consumer demand and the firm’s revenues are to changes in the product’s price.
2
Q
Price elasticity of demand
A
The percentage change in quantity demanded relative to a percentage change in price.
3
Q
Price elasticity of demand (E) is expressed as?
A
Percentage change in price
4
Q
Because quantity demanded usually decreases as price increases, price elasticity of demand is usually a?
A
Negative number, but are shown as positive numbers for the sake of simplicity.
5
Q
Price elasticity of demand assumes what two forms?
A
Elastic demand and Inelastic demand
6
Q
A manufacturer that uses coupons and other small price decreases to create large changes in demand is relying on?
A
Elastic demand for the product
7
Q
Elastic demand exists when?
A
A 1% decrease in price produces more than a 1% increase in quantity demanded, thereby actually increasing total revenue.
8
Q
Elastic demand results in a?
A
Price elasticity that is greater than 1 with elastic demand.
Product with a slight decrease in price results in a relatively large increase in demand or units sold. And vice versa.
9
Q
Price times quantity sold is
A
Total revenue
10
Q
Pure competition
A
Many sellers who follow the market price for identical, commodity products
11
Q
Monopolistic competition
A
Many sellers who compete on non-price factors
12
Q
Oligopoly
A
Few sellers who are sensitive to each other’s prices
13
Q
Pure monopoly
A
One seller who sets the price for a unique product
14
Q
A firm must know its competitors’ (?) in order to best set its own.
A
Prices
15
Q
Break-even analysis
A
A technique that analyzes the relationship between total revenue and total cost to determine profitability at various levels of output.
16
Q
Fixed cost divided by unit price less unit variable cost is known as?
A
The break-even point (BEP)
17
Q
A firm may set goals for its business in terms of profit, sales or unit volume. These are types of?
A
Pricing objectives
18
Q
The ratio of perceived benefits to price is a product’s?
A
Value
19
Q
Order the types of competitive markets from most competitive to least.
A
- Pure competition
- Monopolistic competition
- Oligopoly
- Pure monopoly
20
Q
What are the three factors that influence demand?
A
- Consumer tastes
- Price and availability of similar products
- Consumer income
21
Q
Consumer tastes
A
Depends on many forces such as demographics, culture and technology.
22
Q
Because consumer tastes can change quickly, up-to-date marketing research is essential to?
A
Estimate demand
23
Q
Price and availability of similar products
A
If the price of a competitor’s pizza that is a substitute for yours, – like Tombstone Pizza – falls, more people will buy it; its demand will rise and the demand for Red Baron pizza will fall.
Other low-priced dinners are also substitutes for pizza.
24
Q
As the price of a substitute falls or its availability increases, the demand for your Red Baron frozen cheese pizza will?
A
Fall
25
Consumer income
In general, as real consumers' incomes increase (allowing for inflation), demand for a product will also increase.
26
What is the sum of the expenses of the firm that vary directly with the quantity of a product that is produced and sold?
Variable Cost (VC)
27
Variable Cost (VC)
VC = TC - FC
Variable Cost = Total Cost - Fixed Cost
28
Total Cost (TC)
TC = FC + VC
Total Cost = Fixed Cost + Variable Cost
29
Fixed Cost (FC)
FC = TC - VC
Fixed Cost = Total Cost - Variable Cost
30
What is the total expense incurred by a firm in producing and marketing a product?
Total cost (TC)
31
What is the sum of the expenses of the firm that are stable and do not change with the quantity of a product that is produced and sold?
Fixed cost (FC)
32
Unit variable cost (UVC)
UVC = VC/Q
Unit variable cost = variable cost/quantity
33
The demand curve is?
A graph relating quantity sold and price
34
Fixed costs
Remain at the same level despite changes in production
35
In order, what are the following steps in setting prices?
1. Identifying pricing objectives and constraints
2. Estimate demand and revenue
3. Determine cost, volume and profit relationships
4. Select an approximate price level
5. Set list or quoted price
6. Make special adjustments to list or quoted price
36
By increasing (?) and holding all other variables constant, profit will decrease.
Variable cost
37
Profit equation
Profit = Total Revenue - Total cost = (Unit price x Quantity sold) - (Fixed cost - Variable Cost)
38
Total cost is equal to fixed cost
Plus the variable cost
39
According to the profit equation, profit is?
Total revenue minus total cost
40
Total revenue equals the product quantity sold times?
The unit price
41
The money or other considerations exchanged for the ownership or use of a product or service is its?
Price
42
Barter is?
The practice of exchanging products and services rather than for money
43
Barter transactions account for?
Billions of dollars annually in domestic and international trade
44
Consumers' zeal for low prices combined with the ease of making price comparisons on the Internet has resulted in many companies adding what to their list prices?
Surcharges
45
To many consumers, price provides information about?
The quality of the product
46
Value equals?
Value = Perceived benefits/Price
47
At McDonald's, you can get several items together as a meal, for less than purchasing those items separately. This is an example of?
Value pricing
48
Value pricing is?
The practice of simultaneously increasing product and service benefits while maintaining or decreasing price
49
Which element of the marketing mix is part of the profit equation and therefore, has a direct effect on a firm's profits?
Price
50
The price must be "right" in the sense that?
Customers must be willing to pay it
It must generate enough sales dollars to pay for the cost of developing, producing and marketing the product and
It must earn a profit for the company
51
Small changes in price have big effects on?
Both the number of units sold and company profit
52
Factors that limit the range of prices a firm set are known as pricing?
Constraints
53
When the New York Mets set higher ticket prices for games versus the popular New York Yankees than for those versus the Pittsburgh Pirates, its pricing is constrained by?
Demand
54
The newer a product and the earlier it is in its life cycle?
The higher the price that can usually be charged
55
In the long run, a firm's ____ and those of its distributors set a floor for its price, allowing the firm to both survive and get its product to consumers.
Costs
56
The cost of changing prices is a pricing constraint; as a result, most firms?
Change the prices of their products more often if they sell online
57
If a company sells many different laptops, its own product line constrains pricing for each product because?
Meaningful price differentials communicate value to consumers
58
Price transparency has encouraged what type of change in the marketplace?
Proliferation of low-cost providers
59
A consumer's near-instantaneous access to competitors' prices for the same offering through the use of websites, apps and smartphones is known as?
Price transparency
60
Strategies that can be used as part of a firm's profit objectives include which two of the following?
Managing for long-run profits
Maximizing current profit objective
Target return
61
Many Japanese car firms are willing to give up immediate profits for long-term penetration of the market. This is a pricing objective known as?
Managing for long-run profits
62
Which profit-oriented pricing objective is common in many firms because the targets can be set and performance measured quickly?
Maximizing current profit
63
When a company sets a profit goal of 20 percent for pretax ROI, it is using which type of pricing objective?
Target return
64
A firm with a sales objective will set prices at a level that generates more?
Revenues
65
While cutting the price on one product in a firm's line may increase its sales revenue, it may also?
Reduce the sales revenue of related products
66
A pricing objective of increasing sales can have the disadvantage of leading to price cuts that?
May reduce the revenues of related products in the firm's line
67
Firms often pursue _____ as a pricing objective when industry sales are relatively flat or declining.
Market share
68
Market share is the?
Ratio of the firm's sales revenues or unit sales to those of the industry (competitors plus the firm itself).
69
The pricing objective based on the quantity of product sold by a firm is also called?
Unit volume
70
The social responsibility pricing objective often results in?
Decreased profits
71
Firms that set _____ objectives believe that increased revenues will in turn lead to increases in market share and profit.
Sales
72
A demand curve is derived by measuring how many units of a product are sold at various
Levels of price
73
The typical relationship between price and demand is shown as?
A downward-sloping demand curve
74
The relationship between price and quantity sold is called the?
Demand curve
75
The three factors influencing the demand curve are consumer tastes, the consumer income, and the price and availability of?
Similar products
76
Movement along a demand curve implies?
No changes have occurred in any demand factors except price
77
A shift in the demand curve is the result of?
A change in selling conditions
78
Despite the recent increases in gas prices, Americans have barely decreased their consumption, which is an example of?
Inelastic demand
79
Which two of the following are factors that cause price inelasticity?
Few available substitutes
and
Products are considered necessities
80
The slope of the demand curve shows that?
As price increases, demand decreases
81
What does *not* a cause shift in the demand curve?
A change in price
82
Which of the following products are likely to be price inelastic?
An open heart surgery
83
According to the price equation, to find the actual price, you should do which of the following to the list price?
Subtract incentives and allowances
and
add extra fees
84
To increase customer value for a given price, the market must?
Increase perceived benefits
85
When a consumer is comparing the costs and benefits of substitute items, he or she is developing a?
Reference value
86
Pricing decisions are difficult because?
Price simultaneously affects total revenue and total cost
87
According to the price equation, the actual price is the (?) price less incentives and allowances, plus extra fees.
List
88
According to the value equation, for a given price, as the (?) increase, the value increases.
Perceived benefits
89
A break-even analysis chart shows the intersection of which two curves?
Total revenue and total costs
90
The difference between pure competition and monopolistic competition is that in the latter,
Products are perceived to be different
91
Which of the following is an advantage of using break-even analysis?
Its simple
92
When a firm sells more product than it needs to cover its total costs, it will?
Make a profit
93
If you sell picture frames for $120 each, and you have fixed costs of $32,000 and unit variable costs of $40, what is your break-even point?
400 pictures
94
At the break-even point, profit is?
Zero
95
In which of the following does the market set prices?
Pure competition
96
When many sellers follow the market price for products the consumer sees as identical it is known as?
Pure competition
97
An example of a variable cost is?
Direct labor used to manufacture the product
98
When Wilkinson Sword exchanged some of its knives for advertising used to promote its razor blades, it was an example of?
Barter
99
When only a few firms dominate a market, it is known as (?) competition.
Oligopolistic
100
For a firm, rent, landscaping and insurance are examples of (?) costs.
Fixed
101
A marketing manager considers pricing objectives and constraints to?
Narrow the range of choices among the variety of pricing strategies
102
When there are many firms competing for customers in a given market, but the products are differentiated, it is known as?
Monopolistic competition
103
Why are customers willing to pay extra for a Kohler walk-in tub which eliminates the need to step over the side of the tub?
The safety features enhance the product's value
104
If loyalty toward a particular brand makes other brands seem less substitutable, it decreases?
Price elasticity of demand
105
The unit variable cost is?
The total variable cost divided by the quantity
106
In a pure competition market, the primary purpose for advertising is?
To inform buyers that a product is available
107
Small changes in price
Can have comparably big effects on company profit
108
A product for which nostalgia or fad factors come into play is likely to?
Have higher prices later in its product life cycle
109
An international firm that contracts with suppliers overseas would be most likely to do so for which of these reasons?
The suppliers might have efficiencies and lower hourly wages, reducing production prices
110
Out-of-control (?) compared to foreign car companies resulted in the U.S. government investing billions of dollars in U.S. car companies, trying to restructure them to make them competitive?
Manufacturing costs
111
In an industry that has an oligopoly, price wars are likely to benefit only?
The consumer
112
In which of the following does the competitive market NOT provide a pricing constraint for the marketer?
Pure monopoly
113
According to price elasticity, when the price of iPhones drop, the demand for iPhones is likely to?
Increase
114
The pricing objective known as (?) can be counterproductive if it is achieved by drastic price cutting that drives down profit.
Unit volume
115
When there are many substitute products available, the price elasticity of demand for a given product will likely be?
Higher
