Test 2 Chapter 11

Question 1

Market Skimming and

Financial Objectives

Answer 1

Charging a premium price
May occur at the introduction stage of product life cycle
Luxury goods marketers use price to differentiate products

Question 2

Penetration Pricing and Non-Financial Objectives

Answer 2

Charging a low price in order to penetrate market quickly

Appropriate to saturate market prior to imitation by competitors

Question 3

cost based approaches to pricing

Answer 3

see powerpoint

Question 4

price escalation

Answer 4

see powerpoint

Question 5

Extension pricing

Answer 5

Ethnocentric
Per-unit price of an item is the same no matter where in the world the buyer is located
Importer must absorb freight and import duties
Fails to respond to each national market

Question 6

Adaptation or Polycentric pricing

Answer 6

Permits affiliate managers or independent distributors to establish price as they feel is most desirable in their circumstances

Sensitive to market conditions but creates potential for gray marketing

Question 7

Geocentric

Answer 7

Intermediate course of action
Recognizes that several factors are relevant to pricing decision
Local costs
Income levels
Competition
Local marketing strategy

Question 8

dumping

Answer 8

Sale of an imported product at a price lower than that normally charged in a domestic market or country of origin
Occurs when imports sold in the U.S. market are priced at either levels that represent less than the cost of production plus an 8% profit margin or at levels below those prevailing in the producing countries
To prove, both price discrimination and injury must be shown

Question 9

transfer pricing

Answer 9

Pricing of goods, services, and intangible property bought and sold by operating units or divisions of a company doing business with an affiliate in another jurisdiction
Intra-corporate exchanges
Cost-based transfer pricing
Market-based transfer pricing
Negotiated transfer pricing

Question 10

types of counter trade

Answer 10

Countertrade occurs when payment is made in some form other than money