Exam 3 - Chp 16

Question 1

Price

Answer 1

That which is given up in an exchange to acquire a good or service

Question 2

Revenue

Answer 2

The price charged to customers multiplied by the number of units sold

Question 3

Profit

Answer 3

Revenue minus expenses

Question 4

Return on Investment (ROI)

Answer 4

Net Profit after taxes divided by total assets

Question 5

Market Share

Answer 5

A companies product sales as a percentage of total sales for that industry

Question 6

Status Quo Pricing

Answer 6

A pricing objective that maintains existing prices or meets the competitions prices

Question 7

Demand

Answer 7

The quantity of a product that will be sold in the market at various prices for a specified period

Question 8

Supply

Answer 8

The quantity of a product that will be offered to the market by a supplier at various prices for a specified period

Question 9

Price Equilibrium

Answer 9

The price at which demand and supply are equal

Question 10

Elasticity of Demand

Answer 10

Refers to consumers responsiveness or sensitivity to changes in price

Question 11

Elastic Demand

Answer 11

Occurs when consumers buy more or less of a product when the price changes

Question 12

Inelastic Demand

Answer 12

Means that an increase or a decrease in price will not significantly affect demand for the product

Question 13

Elasticity Formula

Answer 13

Percentage change in quantity demand of a good / Percentage change in price of a good

Question 14

Elastic Demand

Answer 14

E is greater than 1

Question 15

Inelastic Demand

Answer 15

E is less than 1

Question 16

Unitary Demand

Answer 16

E is equal to 1

Question 17

Unitary Elasticity

Answer 17

Means that an increase in sales exactly offsets a decrease in prices so total revenue remains the same

Question 18

Elastic Price

Answer 18

Price goes down, revenue goes up or price goes up and revenue goes down

Question 19

Inelastic Price

Answer 19

Price goes down, revenue goes down or price goes up and revenue goes up

Question 20

Unitary Price

Answer 20

Price goes either up or down and revenue stays the same

Question 21

Elasticity Price Formula

Answer 21

(Change in quantity/(Sum of Quantities/2))/((Change in price)/(Sum of prices/2))

Question 22

Yield Management Systems (YMS)

Answer 22

A technique for adjusting prices that uses complex mathematical software to profitably fill unused capacity by discontinuing early purchases, limiting early sales at these discounted prices, and overbooking capacity

Question 23

Variable Cost

Answer 23

A cost that varies with changes in the level of output

Question 24

Fixed Cost

Answer 24

A cost that does not change as output is increased or decreased

Question 25

Average Variable Cost (AVC)

Answer 25

Total costs divided by quantity of output

Question 26

Average Total Cost (ATC)

Answer 26

Total costs divided by quantity or output

Question 27

Marginal Cost (MC)

Answer 27

The change in total costs associated with a one-unit change in output

Question 28

Mark Up Pricing Formula

Answer 28

Retail Price= Cost/ 1-Desired return on sales

Question 29

Mark Up Pricing

Answer 29

The cost of buying the product from the producer plus amounts for profit and for expenses not otherwise accounted for

Question 30

Keystoning

Answer 30

The practice of marking up prices by 100 percent or doubling the cost

Question 31

Profit Maximization

Answer 31

A method of setting prices that occurs when marginal revenue equals marginal cost

Question 32

Marginal Revenue

Answer 32

The extra revenue associated with selling an extra unit of output or the change in total revenue with a one unit change in output

Question 33

Breakeven Analysis

Answer 33

A method of determining what sales volume must be reached before total revenue equals total costs

Question 34

Breakeven Formula

Answer 34

=Total Fixed Costs/ Fixed Cost Contribution

Question 35

Selling against the brand

Answer 35

Stocking well known branded items at high prices in order to sell store brands at discounted prices

Question 36

Prestige Pricing

Answer 36

Charging a high price to help promote a high quality image

Question 37

Price Strategy

Answer 37

A basic long term pricing framework which establishes the initial price for a product and the intended direction for movements over the product life cycle

Question 38

Price Skimming

Answer 38

A price policy where by a firm charges a high introductory price often coupled with heavy promotion

Question 39

Penetrating Pricing

Answer 39

A pricing policy whereby a firm charges a relatively low price for a product initially as a way to reach the mass market

Question 40

Unfair Trade Practice Acts

Answer 40

Laws that prohibit wholesalers and retailers from selling below costs

Question 41

Price Fixing

Answer 41

An agreement between two or more firms on the price they will charge for a product

Question 42

Resale price Maintenance

Answer 42

Retailers must sell a manufacturers product at or above a specific Price

Question 43

Predatory Pricing

Answer 43

the practice of charging a very low price for a product with the intent of driving competitors out of business or out of a market