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Setting the Right Price 2
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Setting the Right Price 2
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25 Questions

1. The basic assumption with price skimming is that the firm is customer driven, seeking to understand the attributes customers want in goods and services they buy and the value of that bundle of attributes to customers.
2. In the United States, price fixing is only illegal in some instances.
3. Flexible pricing enables a seller to close a sale with price-conscious consumers.
4. Loss-leader pricing is a tactic that prices products below cost in an attempt to run competitors out of business.
5. Kiddieland Amusement Park charges customers an admission fee of $10. Customers must pay 50 cents for each ride they want to ride while inside the park. This is an example of two-part pricing.
6. Most companies do a very good job of doing research to create a price strategy.
7. Penetration pricing means higher profit per unit.
8. An awning manufacturer that is allowed to deduct 3 percent from its total bill if it pays by a specific date is receiving a promotional discount.
9. Functional discounts are typically calculated as the wholesale price times the accumulated margin percentages.
10. Rebates involve a cash refund for the purchase of a product during a specific period.
11. Sometimes multinational firms will follow a penetration strategy in developed countries and a skimming strategy in developing countries.
12. A winery that makes a huge profit on merlot wines may lower its price on pinot noir wines to cause damage to wineries that only produce pinot noir. This is an example of predatory pricing.
13. Once he compiles information on pricing objectives, market demand, quantity supplied, and the price elasticity of demand, the owner/operator of a home cleaning service will be ready to determine the optimal price for a new service offering.
14. The first step in setting the right price for a new product is to estimate demand, costs, and profits.
15. Price discrimination can sometimes be justified.
16. Evergreen Lighting, a manufacturer of decorative, energy-efficient lighting products, requires its buyers to pay for the cost of transportation from the manufacturing site to their place of businesses. Evergreen Lighting uses FOB origin pricing.
17. One example of price bundling occurs when Nintendo sells the Wii Fit balance board with the Wii game system at a lower price than the total price of each if bought separately.
18. 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.
19. Markdown allowances are illegal.
20. More and more businesses are adopting consumer penalties—extra fees paid by consumers for violating the terms of a purchase agreement.
21. It makes the most sense to use price skimming as a pricing policy when supply is greater than demand.
22. Procter & Gamble entered the electric toothbrush market with the Crest SpinBrush at a price considerably lower than lesser-known competitors. It used penetration to gain market share.
23. All pricing objectives have trade-offs that managers must weigh.
24. Uniform delivered pricing is illegal because it discriminates against buyers who are located close to the point of shipping because they pay the same amount as buyers located far from the point of shipping pay.
25. Many businesses find recessions to be an excellent time to build market share through the use of price shading.

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