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Pricing Decision and Cost Management

Total questions: 100

Worksheet time: 2hrs 45mins

Name
Class
Date
1.

Major influences of competitors, costs, and customers on pricing decisions are factors of

a)

supply and demand

b)

activity-based costing and activity-based management.

c)

key management themes that are important to managers attaining success in their planning and control decisions.

d)

the value-chain concept

2.

Short-run pricing decisions include

a)

pricing a main product in a major market

b)

considering all costs in the value chain of business functions

c)

adjusting product mix and volume in a competitive market while maintaining a stable price if demand fluctuates from strong to weak.

d)

pricing for a special order with no long-term implications

3.

Burkhart Company manufactures a product that has a variable cost of $25 per unit. Fixed costs total $1,000,000, allocated on the basis of the number of units produced. Selling price is computed by adding a 25 percent markup to full cost. How much should the selling price be per unit for 200,000 units?

a)

$31.25

b)

$42.00

c)

$37.50

d)

$30.00

4.

The first step in implementing target pricing and target costing is

a)

choosing a target price

b)

determining a target cost.

c)

developing a product that satisfies needs of potential customers.

d)

performing value engineering

5.

The best opportunity for cost reduction is during the

a)

manufacturing phase of the value chain.

b)

product or process design phase of the value chain.

c)

marketing phase of the value chain.

d)

distribution phase of the value chain.

6.

Each month, Haddon Company has $275,000 total manufacturing costs (20 percent fixed) and $125,000 distribution and marketing costs (36 percent fixed). Haddon’s monthly sales are $500,000.


The markup percentage on full cost to arrive at the target (existing) selling price is

a)

25 percent.

b)

75 percent.

c)

80 percent.

d)

20 percent.

7.

Each month, Haddon Company has $275,000 total manufacturing costs (20 percent fixed) and $125,000 distribution and marketing costs (36 percent fixed). Haddon’s monthly sales are $500,000


The markup percentage on variable costs to arrive at the existing (target) selling price is

a)

20 percent.

b)

40 percent.

c)

80 percent.

d)

66 2/3 percent.

8.

The price of movie tickets for opening day and the few days following compared to the price six months later is an example of

a)

price gouging.

b)

peak-load pricing.

c)

dumping.

d)

demand elasticity.

9.

Price discrimination is

a)

always illegal.

b)

a type of peak-load pricing.

c)

not regulated in the United States.

d)

the practice of charging different prices to different customers for the same product or service.

10.

Which of these do antitrust laws on pricing not cover?

a)

Collusive pricing

b)

Dumping

c)

Peak-load pricing

d)

Predatory pricing

11.

What is one of the element of the marketing mix that produces revenue?

a)

Product

b)

Price

c)

Promotion

d)

People

12.

Pricing decisions are

a)

clearly complex and difficult

b)

complex

c)

easy

d)

merely complex and difficult

13.

These are the things needed to consider by the company except?

a)

The product's stage in the life cycle.

b)

Importance in the company's portfolio

c)

Market's quantity sensitivity

d)

Behavior of costs with volume.

14.

What most consumer would pay?

a)

Reservation price

b)

Lower - Bound Price

c)

Upper - Bound Price

d)

Cheap

15.

In business, a company in the same industry or a similar industry which offers a similar product or service is called?

a)

Coordinators

b)

Business Partners

c)

Management

d)

Competitor

16.

What is the main challenge for market leaders and firms trying to build a market share?

a)

aggressive price cutting

b)

salary increase

c)

adding manpower

d)

creating a different strategy

17.

Three possible responses to low cost competitors are, except:

a)

further differentiate the products and services

b)

introduce a low-cost venture

c)

higher the standards

d)

reinvent a low cost player

18.

This includes the desired payback period for R/D cost and investments.

a)

Customer

b)

Competition

c)

Pricing

d)

Company

19.

Consumer Psychology and Pricing encompasses the following except;

a)

Consumer Strategy

b)

Reference Prices

c)

Price Cues

d)

Price-quality Inferences

20.

It is a short-run objective and firm must learn how to add value or face extinction.

a)

Maximum Current Profit

b)

Survival

c)

Maximum Market Share

d)

Skimming

21.

It sums the reactions of many individuals who have different price sensitivities.

a)

Price Strategy

b)

Price Experiments

c)

Price Sensitivity

d)

Price Elasticity

22.

What is used by manufacturers to estimate the real profitability of dealing with different retailers?

a)

Activity - based Cost Accounting

b)

Target Costing

c)

Accumulated Production

d)

Variable Cost

23.

Companies must deliver the value promised by their value proposition, and the customer must perceive this value.

a)

Target Costing

b)

Accumulated Depreciation

c)

Accumulated Production

d)

Perceived - Value Pricing

24.

Many brands strive to be "affordable luxuries" or products or services characterized by high levels of perceived quality, taste and status with a price just high enough not to be out of consumer's reach.

a)

Product Leadership

b)

Quality Leadership

c)

Product - Quality Leadership

d)

Quality - Product Leadership

25.

Companies believe that a higher sale volume will lead to lower unit costs and higher long - run profit. They set the lowest price, assuming the market is price sensitive.

a)

Maximum Market - Share

b)

Minimum Market - Share

c)

Market - Share

d)

Maximum Customer - Share

26.

Companies win loyal customers by charging a fairly low price for a high quantity offering

a)

Typical Price

b)

Value Pricing

c)

Reference Price

d)

Expected Price

27.

Considering an observed price, consumer often compare it to an internal reference price or an external frame of reference

a)

Competitor Price

b)

Fair Price

c)

Reference Price

d)

Typical Price

28.
The quantity of peanuts supplied increased from 40 tons/week to 60 tons/week when the price of peanuts increased from $4/ton to $5/ton. The price elasticity of supply for peanuts over this price range is:
a)
Elastic
b)
Inelastic
c)
Unit Elastic
d)
Perfectly Inelastic
29.
A city's transit authority increases the price of subway and bus tickets from $1.25 to $1.50. If the demand for these tickets is price inelastic, 1) the # of people riding buses & subways AND 2) the city's revenues will change in which way (respectively)?
a)
1) Increase; 2)Increase
b)
1) Decrease; 2) Increase
c)
1) Decrease; 2) Decrease
d)
1) No Change; 2) Increase
30.
The market for goldfish is competitive. From year 1 to year 2, both the price and the quantity of goldfish increase. This is most likely caused by:
a)
An increase in the supply
b)
A decrease in the demand
c)
An increase in the demand
d)
A decrease in both the demand & the supply
31.
If a 10 percent increase in the price of a good leads to a 25 percent decrease in the quantity demanded of a good, demand is:
a)
Relatively inelastic
b)
Relatively elastic
c)
Perfectly elastic
d)
Perfectly inelastic
32.
For an inferior good, an increase in consumer income will cause:
a)
The demand curve to shift left
b)
The demand curve to shift right
c)
The supply curve to shift left
d)
The supply curve to shift right
33.
In which of the following cases would a firm's total revenue increase?
a)
Price increases and demand is elastic
b)
Price decreases and supply is inelastic
c)
Price decreases and demand is inelastic
d)
Price decreases and demand is elastic
34.
Based on the demand curve for good X, it can be determined that good x has:
a)
Many substitutes
b)
A few substitutes
c)
No substitutes
d)
Only one substitute
35.

A product is likely to have a price elasticity of demand that exceeds 1 when:

a)

Its price falls

b)

It is a necessity

c)

It has close substitutes

d)

Consumers are not very responsive to changes in price

36.
 If the price elasticity of demand for a product equals 1, as its price rises the:
a)
Quantity demanded does not change.
b)
 Total revenue increases.
c)
 Total revenue does not change
d)
 Quantity demanded increases.
37.
A 10 percent decrease in the price of a Pepsi decreases the demand for a Coca-Cola by 50 percent. The cross elasticity of demand between a Pepsi and Coca-Cola is:
a)
50
b)
0.20
c)
10
d)
5
38.
A 10 percent decrease in income decreases the quantity demanded of scented candles by 3 percent. The income elasticity of demand for scented candles is:
a)
0.3
b)
-0.3
c)
3
d)
-3.3
39.
If a 1 percent decrease in the price of a pound of oranges results in a smaller percentage decrease in the quantity supplied, then:
a)
Supply is inelastic
b)
Demand is inelastic
c)
Supply is elastic
d)
Demand is elastic
40.
The price elasticity of demand measures how much
a)
quantity demanded responds to a change in price.
b)
quantity demanded responds to a change in income.
c)
price responds to a change in demand.
d)
demand responds to a change in supply.
41.
Suppose there is a 6 percent increase in the price of good X and a resulting 6 percent decrease in the quantity of X demanded. Price elasticity of demand for X is
a)
0
b)
1
c)
6
d)
36
42.
For a particular good, a 12 percent increase in price causes a 3 percent decrease in quantity demanded. Which of the following statements is most likely applicable to this good?
a)
There are many substitutes for this good.
b)
The good is a necessity.
c)
The market for the good is narrowly defined.
d)
The relevant time horizon is long.
43.
A key determinant of the price elasticity of supply is
a)
the ability of sellers to change the price of the good they produce.
b)
the ability of sellers to change the amount of the good they produce.
c)
how responsive buyers are to changes in sellers' prices.
d)
the slope of the demand curve.
44.
If the price elasticity of supply is 0.2, and a price increase led to a 3% increase in quantity supplied, then the price increase is about
a)
0.07%.
b)
0.60%
c)
6%
d)
15%
45.
Holding all other factors constant and using the midpoint method, if a candy manufacturer increases production by 20 percent when the market price of candy increases from $0.50 to $0.60, then supply is
a)
inelastic, since the price elasticity of supply is equal to .91.
b)
inelastic, since the price elasticity of supply is equal to 1.1.
c)
elastic, since the price elasticity of supply is equal to 0.91.
d)
elastic, since the price elasticity of supply is equal to 1.1.
46.
Income elasticity of demand measures how
a)
the quantity demanded changes as consumer income changes.
b)
consumer purchasing power is affected by a change in the price of a good.
c)
the price of a good is affected when there is a change in consumer income.
d)
many units of a good a consumer can buy given a certain income level.
47.
Which of the following statements about the consumers’ responses to rising gasoline prices is correct?
a)
About 10 percent of the long-run reduction in quantity demanded arises because people drive less and about 90 percent arises because they switch to more fuel-efficient cars.
b)
About 90 percent of the long-run reduction in quantity demanded arises because people drive less and about 10 percent arises because they switch to more fuel-efficient cars.
c)
About half of the long-run reduction in quantity demanded arises because people drive less and about half arises because they switch to more fuel-efficient cars.
d)
Because gasoline is a necessity, consumers do not decrease their quantity demanded in either the short run or the long run.
48.
An advance in farm technology that results in an increased market supply is
a)
good for farmers because it raises prices for their products but bad for consumers because it raises prices consumers pay for food.
b)
bad for farmers because total revenue will fall but good for consumers because prices for food will fall.
c)
good for farmers because it raises prices for their products and also good for consumers because more output is available for consumption.
d)
bad for farmers because total revenue will fall and bad for consumers because farmers will raise the price of food to increase their total revenue.
49.

If P = $10 for Tiny Tee-shirts, Q = 20, but if P = $5, Q = 25. The price elasticity of demand for Tiny Tee-shirts is:

a)

3.0.

b)

1/3

c)

1/2

d)

21

50.

If the price of Kellogg's Corn Flakes goes up from $1.89 to $2.05 and quantity demanded changes from 250 to 210, then the price elasticity of demand would be:

a)

0.47

b)

0.02

c)

250

d)

2.14

51.

Alyssa’s Floral Shoppe dropped its prices for a dozen roses from $45 to $35 this year. Because of this decrease in price, the quantity sold increased from 1000 to 1500. The price elasticity of demand for Alyssa’s roses is:

a)

1.00.

b)

1.6.

c)

0.625.

d)

2.25

52.

The income elasticity of demand is a measure of the:

a)

relative responsiveness of quantity demanded to changes in income.

b)

absolute change in demand yielded by an absolute change in income.

c)

slope of the income-consumption curve.

d)

negative slope of a market demand curve.

53.

If the income elasticity of market demand is negative, most consumers view the good as:

a)

a luxury good

b)

having many imperfect substitutes.

c)

an inferior good.

d)

) a normal good.

54.

If average income rises from $18,000 per year to $22,000 per year and annual gasoline consumption per household rises from 1000 to 1500 gallons, the income elasticity of demand for gas is:

a)

in the inferior range

b)

0.5

c)

1

d)

2

55.

If two goods have negative price cross‑elasticities of demand, the goods are:

a)

inferior goods.

b)

luxury goods.

c)

complementary goods:

d)

substitute goods.

56.

If a price hike from $15 to $20 for DVD disks causes sales of DVD players to fall from 100 to 50 units, the coefficient of cross-elasticity of demand between these goods is roughly:

a)

‑1/10.

b)

‑10.

c)

- 7/3.

d)

-3/7.

57.

A 2% price cut for doodads causes gizmo sales to fall by 3%. The price cross elasticity of demand between these goods is roughly _____ and these goods are _____.

a)

‑2/3, substitutes.

b)

1.5, substitutes.

c)

2/3, complements.

d)

‑1.5, complements.

58.

If Ford raises pickup truck prices 20% and Chevy pickup sales rise 12%, then these goods are _____ and their cross elasticity coefficient is roughly _____.

a)

complements; ‑0.6.

b)

substitutes; 0.6.

c)

substitutes; ‑1.67.

d)

inferior; 1.67.

59.

The percentage change in quantity supplied divided by the percentage change in price is a rough measure of a good's:

a)

unitary margin.

b)

price elasticity of supply.

c)

exclusivity ratio.

d)

price elasticity of demand.

60.

If a change in the supply of a good results in a percentage change in quantity demanded that exceeds in absolute value the percentage change in price, then demand is relatively:

a)

price elastic.

b)

inferior.

c)

normal.

d)

price inelastic

61.

Which of the following suggest that supply is most price elastic?

a)

A pay hike from $400 to $800 monthly raises military enlistees from 12,000 to 28,000 monthly

b)

A 20% increase in goat milk production follows a 40% rise in the price of cow milk.

c)

Per bushel wheat prices fall from $8 to $5; production drops from 460 to 340 million tons.

d)

Income rises from $2,500 to $3,500 and auto sales rise from 6 to 18 million annually.

62.

Price elasticities of demand tend to

a)

fall as higher prices are charged.

b)

rise as higher prices are charged.

c)

almost always be constant.

d)

not be related to the length of time.

63.
When replacing a certain item with with a less costly item is an example of
a)
the substitution effect 
b)
the income effect 
c)
demand elasticity 
d)
complements 
64.
Buying one ice-cream instead of two at lunch describes what concept 
a)
marginal utility 
b)
diminishing marginal utility
c)
demand
d)
consumerism 
65.
when consumers have a need for a product that is urgent 
a)
the demand curve is inelastic 
b)
the demand curve is elastic 
c)
the demand curve is complementary 
d)
the demand curve is unit demand 
66.
Area of economics that deals with behaviors and decision making of units 
a)
Microeconomics 
b)
demand curve 
c)
demand 
d)
marginal utility 
67.
The extra usefulness of satisfaction a person gets from acquiring of using one or more unit of a product 
a)
elasticity 
b)
marginal utility 
c)
substitutes 
d)
income effect 
68.
Products that tend to be used together 
a)
complements 
b)
substitutes
c)
goods
d)
needs 
69.
An increase or a decrease in quantity demanded due to a change in the relative price of the replacement product 
a)
Substitute 
b)
Substitute effect 
c)
marginal utility 
d)
income effect 
70.
Change in quantity demanded due to a change in price that alters a consumers real income 
a)
elasticity 
b)
inelastic 
c)
income effect 
d)
total expenditures 
71.
The formula for calculating elasticity of demand is:
a)
The % change in price over the % change in quantity demanded
b)
The % change in quantity demanded over the % change in price
c)
The change in price over the change in quantity demaned
d)
The change in quantity demanded over the change in price
72.
If the price on a product goes up the quantity demanded will go down. This follows the economic theory of:
a)
Law of Demand
b)
elasticity
c)
income effect
d)
None of the above
73.
which of the following is not a determinant of demand elasticity?
a)
availability of substitutes
b)
share of consumer's budget spend on good
c)
duration of adjustment period
d)
government spending
74.
Consuming more of one good because of a change in price of another good is known as the 
a)
income effect
b)
substitution effect
c)
elasticity effect
d)
demand effect
75.

What does it mean?

Ed = 0

a)

Perfectly inelastic demand

b)

Inelastic demand

c)

Unitarily elastic demand

d)

Elastic demand

e)

Perfectly elastic demand

76.

What does it mean?

Ed = 1

a)

Perfectly inelastic demand

b)

Inelastic demand

c)

Unitarily elastic demand

d)

Elastic demand

e)

Perfectly elastic demand

77.

What does it mean?

Ed = ∞

a)

Perfectly inelastic demand

b)

Inelastic demand

c)

Unitarily elastic demand

d)

Elastic demand

e)

Perfectly elastic demand

78.

What does it mean?

Ed > 1

a)

Perfectly inelastic demand

b)

Inelastic demand

c)

Unitarily elastic demand

d)

Elastic demand

e)

Perfectly elastic demand

79.

What does it mean?

Ed < 1

a)

Perfectly inelastic demand

b)

Inelastic demand

c)

Unitarily elastic demand

d)

Elastic demand

e)

Perfectly elastic demand

80.

What does it mean?

% change in Qd = % change in P

a)

Perfectly inelastic demand

b)

Inelastic demand

c)

Unitarily elastic demand

d)

Elastic demand

e)

Perfectly elastic demand

81.

Why does demand generally become more elastic over time?

a)

People don't change their shopping behavior over time.

b)

Few substitutes become available.

c)

People buy more products over time.

d)

People have time to find substitutes and change behaviors.

82.

Price elasticity of supply is the responsiveness of

a)

demand to a change in price.

b)

price to a change in supply.

c)

quantity supplied to a change in price.

d)

price to a change in supply.

83.

Factory owner Susan has calculated that her PES is 3. This number means that,

a)

if price were to rise by 2% Susan would supply 6% more products.

b)

If price were to rise by 2% Susan would supply 3% more products.

c)

the percentage change in price is three times the percentage change in quantity.

d)

in the PES formula, the top number is smaller than the bottom number.

84.

If storage of a good is cheap and readily available, supply is likely to be

a)

relatively elastic.

b)

relatively inelastic.

c)

perfectly inelastic.

d)

perfectly elastic.

85.
Suppose that elasticity of demand of socks is 0.7.  If the price of socks is reduced by 10%, how will sales be effected?
a)
sales will grow by more than 10%
b)
Sales will grow by 10%
c)
Sales will grow by less than 10%
d)
Sales will decrease by 10%
86.
The formula for calculating elasticity of demand is:
a)
The % change in price over the % change in quantity demanded
b)
The % change in quantity demanded over the % change in price
c)
The change in price over the change in quantity demaned
d)
The change in quantity demanded over the change in price
87.

Water has seen an increase in demand 8% this summer, while the price has decreased 12%

a)

1.5 inelastic

b)

1.5 elastic

c)

.67 inelastic

d)

.67 elastic

88.

Wheat has seen a decrease in demand of 5%, while the price has increased 7%

a)

1.4 inelastic

b)

1.4 elastic

c)

.71 inelastic

d)

.71 elastic

89.

Elastisitas harga permintaan (Ed) mengukur perubahan kuantitas barang yang diminta diminta terhadap-----?

a)

kuantitas baru

b)

penawaran

c)

persen perubahan harga

d)

persen perubahan pendapatan

90.

Elastisitas harga permintaan elastis mempunyai kurva permintaan yang?

a)

Landai

b)

Tinggi

c)

Curam

d)

Lurus

91.

Hitung nilai elastisitas permintaan buah rambutan apabila harga buah rambutan meningkat dari Rp. 4.00 menjadi Rp. 5.00 dan kuantitas barang yang diminta turun dari 50 kg kepada 45 kg.

a)

0.4

b)

2.6

c)

-10

d)

25

92.

Tanda negatif pada koefisien elastisitas harga permintaan menunjukkan hubungan --------------------------------------------antara harga dengan kuantitas barang yang diminta

a)

Positif

b)

Songsang

c)

Negatif

d)

Sama

93.

Hitung nilai elastisitas persen perubahan jumlah barang yang diminta berupa beras apabila harga beras meningkat dari Rp. 5.00 menjadi Rp. 6.00 dan kuantitas barang yang diminta turun dari 20 kg menjadi 18 kg.

a)

5

b)

-30%

c)

25

d)

-10%

94.

Seorang pedagang buah segar membeli 200 buah belimbing dengan harga keseluruhan Rp800.000,00. Belimbing itu kemudian dijual seharga Rp25.000,00 setiap 5 buah dan habis terjual. Pernyataan berikut yang benar adalah ....

a)

Pedagang mengalami rugi Rp200.000,00

b)

Pedagang mengalami untung Rp1.000.000,00

c)

Pedagang mengalami untung Rp200.000,00

d)

Pedagang mengalami rugi Rp1.000.000,00

95.
How does supply and demand affect pricing?
a)
Supply and demand determine how much of a good a consumer will.  purchase 
b)
Supply and demand determine how a good will be remembered by others.
c)
Supply and demand determine if a consumer seeks a bargain.
96.

Term for a item that is intentionally priced below cost to draw people into the store

a)

Loser Item

b)

Sale

c)

Discount Item

d)

Loss Leader

97.

The 3rd step in Setting Prices is....

a)

Determine Pricing Objectives

b)

Study the Competition

c)

Estimate Demand

d)

Set Price

98.

What is the Pricing strategy being used when people think they are getting a bargain because price ends in an odd number?

a)

Multiple Pricing

b)

Odd-Even Pricing

c)

Bundle Pricing

d)

Mark Up Mark Up

99.

Which of the following is NOT an item in our pricing strategies grid?

a)

Introductory Pricing

b)

Skimming

c)

Premium

d)

Economy

100.

Companies A, B, and C sell similar products. Together, they recently decided to sell their products for the same price. The businesses are engaging in which unethical activity?

a)

Bait and switch

b)

Price-fixing

c)

Loss-leader pricing

d)

Gray Markets

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