Question : 16.3   Other Pricing Strategies 1) Some firms practice odd pricing because A) : 1387955

16.3   Other Pricing Strategies

1) Some firms practice odd pricing because

A) they believe that customers will buy a larger quantity with an odd price.

B) it is a way to price discriminate.

C) it is too difficult for sellers to reeducate buyers into accepting even prices.

D) it lowers transactions costs.

2) Suppose the per-unit production cost of a book is $4.00 and the retail price is $32. If the book publisher sells books to a bookstore at a 40 percent discount, what is the amount of the publisher’s markup per book? Assume that bookstores sell books at the retail price.

A) $12.80

B) $15.20

C) $19.20

D) $21.60

3) One method of setting price using the cost-plus method is to add

A) a given percentage of marginal cost to marginal cost of production.

B) a given percentage of fixed cost to total fixed cost.

C) a given percentage of average total cost to average total cost.

D) a given percentage of average variable cost to average total cost.

4) Which of the following is not an advantage cost-plus pricing?

A) It leads to profit maximization.

B) It is an easy method to implement if a firm produces multiple products and has overhead costs that are difficult to allocate to a particular good.

C) It could lead to price stability if the industry is made up of identical firms all using the same method of pricing.

D) It is easy to justify price increases when total costs of production increase.

5) All of the following are disadvantages of cost-plus pricing except

A) It ignores the price elasticity of demand: for example, it may be possible to increase profits by raising or lowering price.

B) If the industry comprises identical firms (with identical costs), markups could be consistent among firms leading to no one firm having a competitive edge in terms of price.

C) Allocating and apportioning business overheads to individual products could be somewhat arbitrary.

D) The business has less incentive to cut or control costs: if costs increase, then selling prices increase. Consequently, this might further erode a firm’s competitiveness.

6) Cost-plus pricing is a reasonable way to determine the optimal price when

A) marginal cost and average cost are roughly equal.

B) fixed cost and variable costs are roughly equal.

C) fixed costs vary.

D) fixed costs are high.

7) If demand is taken into account, firms that use cost-plus pricing can adjust price by

A) letting sales fall, but hold the markup constant if demand falls.

B) lowering markups on price-elastic goods and raising markups on price-inelastic goods.

C) raising markups on price-elastic goods and lowering markups on price-inelastic goods.

D) letting sales rise, but hold the markup constant if demand rises.

8) Most supermarkets charge the same price for the majority of goods sold. This suggest that

A) the government regulates prices of most products sold in supermarkets.

B) supermarkets have colluded to fix prices on most of the goods sold.

C) mark-ups reflect the degree of competition in the supermarket industry.

D) the large supermarket chains are price leaders and smaller grocers take these prices as given.

9) Until the early 1980s, The Walt Disney Company used a pricing strategy in which visitors to its theme parks paid a low admission fee and also paid for rides. This pricing strategy is an example of

A) perfect price discrimination.

B) cost-plus pricing.

C) a two-part tariff.

D) monopoly pricing.

10) Which of the following describes two-part tariff pricing?

A) A firm charges two different prices for the same good.

B) An importer has to pay a tax at the nation’s borders, and a sales tax when the good is sold.

C) A buyer pays an initial price for entrance to the market and an additional fee for each unit of the product purchased.

D) A buyer must pay a down payment and monthly payments to buy big-ticket items such as a car, a plasma television or a suite of furniture.