Price Strategies

Does pricing affect the amount of money a business spends on product research?

• No; companies will spend a large amount on research regardless of the product’s price.

• No; there is no relationship between the amount spent on research and the product’s price.

• Yes; companies will not spend as much on research for lower priced products.

• Yes; companies spend more money on research for lower priced products.

When companies increase the quality of materials used in the production of their products, their prices will tend to be

• reduced

• the same.

• higher

• lower

Can pricing affect a business’s image?

• Yes; a business with low prices may have a discount image.

• Yes; a business with low prices will have a prestigious image.

• No; pricing does not affect a business’s image.

• No; pricing affects only selling and customer decisions.

Covering all of a businesses costs is a pricing objective related to

• profitability

• sales

• competition

• image

Can prices be set too low?

• Yes; customers may feel quality is too low.

• Yes; customers may feel quality is too high.

• No; the lower the price, the greater the product’s appeal.

• No; the lower the price, the more willing the customer is to buy.

A station across the street is offering gasoline for five cents cheaper per liter. The other stations in the area decide to lower their prices as well. This is an example of __________ pricing.

• inflexible

• unrealistic

• competitive

• realistic

What is an advantage of price skimming?

• It increases market share

• It covers costs and breaks even

• It allows a business to maximize the profit and cover development costs during the introductory phase

• Floods the market quickly, making it difficult for competitors

  gain market share.

What is the selling price of an item which costs $5 to make and has a 150% mark up?

• $7.50

• $12.50

What is price skimming?

• Setting a low price to "skim off" a large number of consumers.

• Setting an initially low price which further decreases as competitors enter the market.

• Setting a high initial price which consumers perceive as indicating high quality, and decreasing it once competition enters the market.

• Setting a price that is comparative to competitors prices.

Setting a price that is significantly below prices of the competition is called:

• Skimming.

• Competitive pricing.

• Penetration pricing.

• Cost based pricing