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Mr. Calkins Economics Spring 2008 PRICING PART I DIRECTIONS: Complete each sentence by filling in the correct term provided in the box below: Bait & switch Price discrimination Price guarantee Flexible-price policy Penetration pricing 1) 2) 3) 4) 5) 6) 7) 8) 9) 10) 11) 12) 13) 14) 15) 16) 17) 18) 19) 20) loss leader collusion cash discounts one-price policy skimming pricing price fixing unit pricing markup promotional discounts break-even point price prestige pricing list prices An item priced at cost to draw customers into a store is called______________. Advertising a non-existent bargain to lure customers in so that they can be sold more expensive merchandise is an illegal practice called ___________________. ________________is the value of money placed on a good or service. __________occurs when a firm charges different prices to similar customers, in similar situations. ___________allows consumers to compare prices in relation to a standard of unit measure, such as an ounce or pound. A______________is a promise that all discounts given to competitors will be offered offered to original purchasers as well. Business communicating with each other for illegal purposes are guilty of __________. _____________occurs when competitors agree on certain price ranges within which they set their own prices. The __________is the point at which sales revenue equals the costs and expenses of making and distributing a product. __________is a pricing technique that says $79.95 is a bargain while $80.00 represents quality above price. _________All costs are calculated and the desired profit is added to arrive at a price. The offer to buyers called ______encourages them to pay their bills quickly. A pricing policy called _________sets a very low price for a new product to capture large numbers of customers in a relatively short time. ___________is used as the basis for trade discounts. Something called __________is policy that permits customers to bargain for goods. A technique called ______relies on the consumer belief that higher prices mean higher quality. This type of pricing ___________sets a very high price for a new product to capitalize on the high demand for it during an introductory period. __________is the difference between the price of an item and its cost. Wholesalers and Retailers offer _______to those willing to advertise manufacturer’s product. A pricing technique called __________requires a store to offer all merchandise in a given category certain prices. PRICING PART II DIRECTIONS: PUT THE LETTER OF THE CORRECT ANSWER TO THE LEFT OF QUESTION NUMBER 1) The theory of supply and demand states that: a) people’s spending habits vary with income b) people will buy less of an item when the price is higher and less when lower. c) People will buy more of an item when the price is higher and more when lower. d) people will buy the same amount of an item regardless of the price. 2) The equilibrium price is the price: a) At which a retailer balances high and low prices in a product line to reach all types of customers. b) At which the demand and supply curves meet c) No customers expect to pay for an item d) That would satisfy neither buyers nor sellers 3) When the purchase is dependent on price, demand is said to be: a) elastic b) high c) inelastic d) low 4) When consumers buy items regardless of price, demand is said to be: a) elastic b) high c) inelastic d) low 5) All of the following have a bearing on what the consumer is willing to pay for an item except: a) government regulations b) supply and demand c) the availability of an item d) the consumer’s perceptions about the quality of the item 6) When manufacturers succeed in establishing brand loyalty among consumer, retailers and wholesalers: a) are generally less concerned with price increases on those items b) buy less of those items to keep them in short supply c) have difficulty selling those items d) offer those items to consumers below cost 7) To maintain a firm’s profits in the face of rising costs and expenses, marketers can: a) decrease prices b) improve products quality to justify a higher price c) maintain prices while increasing product size d) start a price war 8) Cost plus pricing is used primarily by: a) Consumers b) b) manufacturers c) c) retailers d) d) wholesalers 9) The consumer’s perceived value of an item is the basis for: a) competition oriented pricing b) cost-oriented pricing c) demand-oriented pricing d) markup pricing 10) In competition-oriented pricing: a) businesses take bids from customers b) marketers set prices on the basis of what their competitors charge. c) There is a direct relationship between cost and price. d) There is a direct relationship between demand and price. 11) Skimming pricing permits marketers to: a) cover the research and development costs incurred in designing the product b) enjoy a bargain image c) lure customers away from higher-priced brands d) raise their product’s price in the future without affecting customer loyalty. 12) The main goal of marketers is to keep products in the: a) decline stage b) introduction stage c) growth stage d) maturity stage 13) A retail department store that has price tags on all of its merchandise is practicing: a) flexible pricing policy b) one-price policy c) penetration pricing policy d) skimming pricing policy 14) Common psychological pricing techniques include all of the following except: a) going-rate pricing b) odd-even pricing c) price lining d) promotional pricing 15) The trade discount for a wholesaler who is granted series discounts of %20 and 10% for merchandise that lists for $1500 is: a) $300 b) $420 c) $450 d) $1050