Chapter 19

Question 1

Which of the following is a pricing policy whereby a firm charges a high introductory price, often coupled with heavy promotion?

Answer 1

Price skimming

Question 2

The price skimming strategy is sometimes called a “market- plus” approach to pricing because it denotes a high price relative to the prices of competing products. This strategy works best when:

Answer 2

The product is perceived as having unique advantages.

Question 3

A penetration strategy tends to be effective in a price-sensitive market. Thus, one of the purposes of penetration pricing is to:

Answer 3

discourage competitors from entering the market.

Question 4

A firm charging a price identical to or very close to the competition’s price is using a strategy.

Answer 4

Status quo pricing

Question 5

Acme Lawnmowers sells its mowers to retailers at different prices, depending on whether they are independent stores or members of a national chain. It uses:

Answer 5

Price discrimination

Question 6

Penetration pricing means charging a relatively low price for a product as a way to reach the mass market.

Answer 6

True

Question 7

Procter & Gamble entered the electric toothbrush market with the Crest Spinbrush at a price considerably lower than those of lesser-known competitors. It used penetration to gain market share.

Answer 7

True

Question 8

There are two limousine services that drive customers from communities in North Georgia to the Atlanta airport. Whenever one reduces its fare, its competitor reduces its fares by the same amount. This is an example of status quo pricing.

Answer 8

True

Question 9

In the United States,price fixing is only illegal in some instances

Answer 9

False

Price fixing is illegal under the Sherman Act and the Federal Trade Commission Act. Price fixing is one area where the law is quite clear, and the Justice Department’s enforcement is vigorous.