3100 Marketing Study Guide for Chapters 17 through 21. True/False 1.

If the formula for elasticity results in a measure of elasticity (E) greater than 1, demand is said to be inelastic. False 2. If demand for English riding saddles is elastic, consumers will not change their purchasing habits greatly when the price of this type of saddle changes. False 3. If the formula for elasticity results in a measure of elasticity (E) equal to 1, the increase in sales exactly offsets the decrease in price so that total revenue remains the same. True 4. Seasonal discounts are probably the most common form of discount. False

5 If the world's largest manufacturer of door knobs and dead bolt locks set wholesale prices below its cost, with the intention of driving its competitors out of business, the manufacturer would be engaged in predatory pricing. True 6. The marketing manager for a high-tech crash investigation system is ready to determine optimal price for the new product once he compiled information on pricing objectives, market demand, quantity supplied, and the price elasticity of demand. False 7. Interstitial advertisements are also known as pop-up ads. True

8. Seasonal discounts are probably the most common form of discount. False Multiple Choice
1. The responsiveness or the sensitivity of consumer demand to changes in price is referred to as _____and occurs when consumers buy more or less of a product when the price changes. a. the break-even point b. the point of equilibrium c. unitary revenue d. rising liquidity e. Elasticity 2. a. b. c. d. e. When consumers are sensitive to price changes, ______ occurs. inelastic demand elastic supply elastic demand inelastic supply unitary elasticity

3. _____ measures the overall effectiveness of management in generating profits with its available assets. a. Return on investment b. Economic order quantity c. Target-on-sales d. Retained earnings e. Break-even quotient

4. a. b. c. d. e.

Market share pricing is a: profit-oriented pricing technique sales-oriented concept demand-oriented concept supply-oriented concept status quo pricing technique

5. A price tactic that requires the purchaser to absorb the freight costs from the shipping point is called _____. In this case, the farther buyers are from sellers, the more they pay because transportation costs generally increase with the distance merchandise is shipped. a. basing-point pricing b. zone pricing c. uniform delivered pricing d. freight absorption pricing e. FOB origin pricing 6 . 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: a. competition is abundant b. revenues are equal to expenses c. supply is greater than demand d. production capacity is large and flexible e. demand is greater than supply 7. When a firm introduces a new product at a relatively low price because it hopes to reach the mass market, it is following a _____ strategy. The low price is designed to capture a large share of a substantial market and produce lower production costs. a. penetration pricing b. price-insensitive demand c. price skimming d. price lining e. geodemographic price 8. A(n) _____ is an electronic piece of information written to the user's local hard drive. It is keyed to a specific server and is passed back to the server when the user's browser again accesses the site. a. Internet bot b. Spam c. Cookie d. control agent e. customer information file 9. The marketing manager of icruise.com (a Web site travel site targeted to consumers who want a luxury vacation) finds that the firm can gain market share and become the industry leader if it slashes prices by 50 percent during the month of December. However, the vice-president of finance is committed to reporting a 25 percent return on investment at all times. This conflict illustrates: a. a need to eliminate low-profit products b. a lack of corporate concentration on the marketing concept c. how pricing operates in a mature marketplace d. trade-offs in pricing objectives e. how target markets can be ignored

10. After establishing pricing goals, managers should estimate total revenue at a variety of prices. Next, they should _____. Only after performing this task are they are ready to estimate how much profit and how much market share can be earned at each possible price.

a. b. c. d. e.

choose the ROI target set corresponding cost for each price estimate industry supply implement pricing segmentation establish geographic pricing heuristics

11. Marketers trying to maintain conventional marketing plans and Internet marketing plans should: a. keep the two programs distinct since the elements of each require different resources b. abandon conventional marketing in favor of new technology c. abandon the Internet marketing plan in the wake of the dot com bust d. integrate the two plans to create cross-channel synergies e. done none of these