The Price Strategy

2.

When demand for your product is high and supply is low, you can command a high price

True
False

Correct Answer

A. True

Explanation

When the demand for a product is high and the supply is low, it creates a situation where there is more demand for the product than there is supply available. This scarcity of supply allows the seller to have more control over the price of the product. With high demand and limited supply, sellers can increase the price of the product because consumers are willing to pay more to acquire the limited quantity available. Therefore, it is true that when demand is high and supply is low, sellers can command a high price for their product.

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1

3.

Which cost changes depending on the number of units sold

Variable Costs
Fixed Costs
Unit Pricing
ROI

Correct Answer

A. Variable Costs

Explanation

Variable costs are expenses that change in direct proportion to the number of units sold. As the number of units sold increases, the variable costs also increase. This is because variable costs are directly related to the production or sale of each unit. Examples of variable costs include the cost of raw materials, direct labor, and sales commissions. In contrast, fixed costs remain constant regardless of the number of units sold. Unit pricing refers to the price at which a single unit is sold, and ROI (Return on Investment) is a measure of profitability.

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2

4.

Price gouging is the practice of letting supply and demand determine the price of a good or service

True
False

Correct Answer

A. False

Explanation

Price gouging is not the practice of letting supply and demand determine the price of a good or service. Price gouging refers to the unethical practice of charging excessively high prices for essential goods or services during times of crisis or emergency when the demand is high and the supply is limited. It is considered exploitative and unfair to consumers. Therefore, the correct answer is False.

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4

5.

Calculate the return on investment (ROI) if you invest $100,000 in new productive equipment, and you want a 30 percent return

$3,000
$30,000
$10,000

Correct Answer

A. $30,000

Explanation

The correct answer is $30,000. The return on investment (ROI) is calculated by multiplying the initial investment by the desired return percentage. In this case, the initial investment is $100,000 and the desired return is 30 percent. Therefore, the ROI would be $100,000 * 30% = $30,000.

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1

6.

Market share is a business's portion of the total sales generated by all competing companies in a given market

True
False

Correct Answer

A. True

Explanation

The statement accurately defines market share as the portion of total sales that a business generates in comparison to its competitors in a specific market. This means that if a business has a higher market share, it has a larger share of the total sales in that market. Therefore, the given answer, "True," is correct.

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2

7.

Check all of the following that are the steps in determining the pricing strategy

Select a basic approach to pricing
Determine your pricing policy
Use a random approach
Set a price based on the stage of the product life cycle

Correct Answer(s)

A. Select a basic approach to pricing
A. Determine your pricing policy
A. Set a price based on the stage of the product life cycle

Explanation

The correct answer is to select a basic approach to pricing, determine your pricing policy, and set a price based on the stage of the product life cycle. These steps are important in determining the pricing strategy for a product. Selecting a basic approach to pricing involves deciding whether to use cost-based pricing, value-based pricing, or competition-based pricing. Determining the pricing policy involves considering factors such as market demand, competition, and desired profit margins. Finally, setting a price based on the stage of the product life cycle takes into account factors such as product development costs, market demand, and competition.

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2

8.

Which pricing method is used in the introduction stage of the product life cycle

Penetration Pricing
Unit Pricing
Cost Benefit Analysis

Correct Answer

A. Penetration Pricing

Explanation

Penetration pricing is the pricing method used in the introduction stage of the product life cycle. It involves setting a low initial price for the product to attract customers and gain market share quickly. This strategy aims to encourage customers to try the new product and create a buzz in the market. By offering a lower price than competitors, the company can penetrate the market and establish a customer base. Once the product gains traction and market share, the company can gradually increase the price to maximize profits.

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3

9.

Involves charging a high price to recover costs and maximize profit as quickly as possible

Penetration pricing
Unit pricing
Price skimming

Correct Answer

A. Price skimming

Explanation

Price skimming involves charging a high price to recover costs and maximize profit as quickly as possible. This strategy is commonly used when a new product is introduced to the market and there is limited competition. By initially setting a high price, the company aims to target early adopters and customers who are willing to pay a premium for the product. As competition increases or market saturation occurs, the company gradually lowers the price to attract a wider customer base. This approach allows the company to capture maximum profits in the early stages of the product lifecycle.

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2

10.

This is a pricing technique in which higher-that-average prices are used to suggest status and prestige to the customer

Discount pricing
Prestige pricing
Promotional pricing

Correct Answer

A. Prestige pricing

Explanation

Prestige pricing is a pricing technique that involves setting higher-than-average prices to create an impression of status and exclusivity for the customer. By pricing products or services at a premium, the company aims to appeal to a specific target market that values luxury and prestige. This strategy suggests that the higher price reflects superior quality or uniqueness, making customers willing to pay more for the perceived prestige associated with the brand or product.

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The Price Strategy

When setting the price for a good, a service, or and idea, which of the following is not a factor to consider?

Quiz Preview

When demand for your product is high and supply is low, you can command a high price

Which cost changes depending on the number of units sold

Price gouging is the practice of letting supply and demand determine the price of a good or service

Calculate the return on investment (ROI) if you invest $100,000 in new productive equipment, and you want a 30 percent return

Market share is a business's portion of the total sales generated by all competing companies in a given market

Check all of the following that are the steps in determining the pricing strategy

Which pricing method is used in the introduction stage of the product life cycle

Involves charging a high price to recover costs and maximize profit as quickly as possible

This is a pricing technique in which higher-that-average prices are used to suggest status and prestige to the customer