1. When conducting break even analysis, the best decision to make with regard to price is:

1. Choose the highest selling price
2. Choose the selling price that gives you the lowest breakeven point
3. Analyze the market demand and competitive environment before deciding
4. Imitate the competition
5. Choose the lowest price because you can always raise it later if needed.

2. The most important determinant of how high or low the price for your product will be is:

a. Your cost

b. Your desired profit margin

c. Your investment

d. The nature and intensity of the competition (pricing environment)

e. The stage that your product is in the life cycle.

3. In deciding upon a particular price to be charged for a product, a marketing manager might ask herself many

questions. Which of these questions would be most important from a marketing point of view?

a. How about a 25 percent mark-up on cost?

b. What engineering and manufacturing costs are assignable to each unit?

c. Who are our customers, and what do they expect to pay?

d. Why consider distribution costs? They are built into product costs.

e. Where is the computer program that tells me what the price should be?

4. Demand for a product is said to be highly elastic when a relatively _________ change in

price leads to a relatively ____________change in demand.

a small .. small d. small .. large

b. large .large e. large small

c. large .moderate

5. Price is

a. money d. always includes a profit margin

b. a system that involves barter e. a statement of value

c. not something we negotiate in the United States

6. Which of the following markets would demonstrate the most inelastic demand?

a. Young people interested in a new stereo

b. Middle-aged people buying a bar of soap

c. People who are brand loyal to a certain cola

d. Collectors buying baseball cards

e. Diabetics buying insulin from a pharmacist

7. The floor upon which pricing strategies are built is

a. demand d. Sales projections

b. costs e. Supply

c. Return on investment

8. A companys pricing strategy should do all of the following EXCEPT:

a. give direction for price movements over the product life cycle

b. define the initial price

c. ignore the targeting and positioning strategy of the company

d. set a competitive price

e. interact with the other elements of the marketing mix

9. The average price Xerox charged when it introduced the first stand-alone fax machine was $12,700. This

higher price was a way for Xerox to recoup some of the research and development costs that went into

producing this machine. Xerox used __________.

a. a cream skimming price d. penetration pricing

b. trial pricing e. prestige pricing

c. price-quality inference pricing

10. A manufacturer sends a wholesaler an invoice dated March 1 with terms 4/15, n/60 in the amount of $650. If the wholesaler pays the bill on or before March 16, what does he pay?

a. $552.50 d. $630.50

b. $650.00 e. none of the above

c. $624.00

11. A manufacturer sends a wholesaler an invoice dated March 1 with terms 4/15, n/60 in the amount of $650. If the wholesaler pays the bill on May 1, what does he pay?

a. $552.50 d. $630.50

b. $650.00 e. $650.00 plus late fees assessed

c. $624.00