OUR LADY OF FATIMA UNIVERSITY

College of Business & Accountancy

Valenzuela City
1st Sem SY 2019-2020

Preliminary Examination
MKTG 214 –PRICING and COSTING

Test I: General Instructions: Read and understand the statements carefully. Alterations, erasures and superimpositions will not be
considered. SHADE THE LETTER OF YOUR ANSWER.

1. Consumer promotion technique according to b. customary pricing. 

which seller sells two or three units of product c.  penetration pricing.  
at reduced price is classified as: d. second-market discounting.
a. price packs 8. Having to choose between alternatives when
b. cents off deals one has limited resources is called:
c. advertising specialties a. the value chain.
d. both a and b b. the economic choice
2. Pricing issues across channel levels includes c. the decision-making unit.
a. predatory pricing d. choice dissonance.
b. deceptive pricing 9. Demand pricing is used because:
c. price fixing a. it is consumer-orientated.
d. none of the above b. it is the most common method.
3. Strategy which set prices in two dimensions c. it gives the most profit per unit of
such as charging fixed fee with variable usage production.
rate is called: d. it is easiest to apply.
a. double pricing 10. Ending a price with 99p is an example of:
b. optional part pricing a. predatory pricing.
c. two-part pricing b. demand pricing.
d. combine pricing c. psychological pricing.
d. customary pricing.
4. Pricing which is based on how much it costs to
11. The price a retailer sells for is called ______
produce a product is called:
a. customary pricing. price.
b. cost-plus pricing. a. mark-up
c. psychological pricing. b. margin
d. demand pricing c. shelf
5. What is the difference between mark-up and d. demand
margin? 12. _____ pricing means setting prices high so as to
give an impression of high quality.
a. Mark-up is about price; margin is about
a. Prestige
profit.
b. Demand
b. Mark-up is based on customer's
c. Skimming
perceptions; margin is based on d. Customary
producer's perceptions. 13. Which pricing method is used in the
c. Mark-up is based on a fixed introduction stage of the product life cycle
percentage; margin is variable. a. Penetration Pricing
d. Mark-up is based on bought-in price; b. Unit Pricing
c. Cost benefit pricing
margin is based on selling price
d. None of the above
6. Setting a high price which gradually reduces as 14. Calculate the return on investment (ROI) if you
competitors enter the market is called: invest $100,000 in new productive equipment,
a. customary pricing. and you want a 30 percent return
b. penetration pricing. a. 3,000
c. competitive pricing b. 30,000
c. 10,000
d. Skimming
d. 20,000
7. Selling a product at one price in one market
15. When setting the price for a good, a service, or
and a lower price in another is called:
and idea, which of the following is not a factor
a. competitive pricing.  
to consider?
 a. Cost a. equilibrium point
b. Supply and Demand b. target profit
c. Competition c. maximum profit
d. Location d. breakeven point
16. Involves charging a high price to recover costs e. match point
and maximize profit as quickly as possible
a. Penetration pricing 24. Grey market goods are products that:
b. Unit Pricing a. are targeted to senior citizens
c. Price skimming b. use counterfeit labels
d. None of the above
c. are purchased in foreign markets, or
17. This is a pricing technique in which higher-that-
goods that have been transshipped
average prices are used to suggest status and
from other retailers
prestige to the customer
d. are purchased from bankrupt retailers
a. Discount pricing
b. Prestige pricing 25. The starting point in developing a retail price
c. Promotional Pricing strategy is:
d. None of the above a. selecting a broad price policy
18. Which cost changes depending on the number b. choosing specific prices
of units sold c. outlining a retail strategy mix
a. Variable costs d. developing objectives
b. Fixed costs 26. A pricing approach that is appropriate when a
c. Unit pricing target market is price sensitive is:
d. ROI
a. market penetration
19. That minor stimuli which determines when and
b. market skimming
how customer will respond in certain way is
c. early recovery of cash
called
d. the multistage approach
a. perception
27. Prestige pricing is based on:
b. cues a. markup pricing
c. motives b. competition-oriented pricing
d. both a and c c. cost-oriented pricing
20. Which of the following is not a market-based d. the price-quality association
pricing method? 28. What is the markup equivalent at cost of a 50
a. customer value pricing percent markup at retail?
b. psychological price barriers a. 25 percent
c. contribution pricing b. 50 percent
d. going-rate pricing c. 75percent
e. tenders d. 100 percent
21. For his basic sandwiches, Johnny checks out 29. Which of the following pricing strategies is a
what other sandwich bars charge and charges form of leader pricing?
a. early markdowns
approximately the same. What kind of pricing is
b. fair trade
this?
c. loss leaders
a. customer value pricing
d. unit pricing
b. psychological price barriers
30. An advantage of a late markdown policy is:
c. contribution pricing
a. lower markdowns are needed to sell
d. going-rate pricing
merchandise than with an early
e. tenders markdown policy
22. What type of cost is ‘mark-up’ pricing based on b. greater opportunity is given to sell
a. fixed cost merchandise at original prices
b. variable cost c. a retailer's cash flow can be improved
c. direct cost d. the freeing of selling space for new
d. indirect cost merchandise
e. marginal cost choices for 31 – 50
23. What is the term for the volume of products a. True
sold that, at a given price, will cover the b. False
company’s costs? 31. If demand is unaffected by price, it is said to be
elastic.
 32. Cost-plus pricing is still the most customer- 56. Purchases of other items more than covers
orientated method. ‘loss’ on item sold
33. The economic choice means having to reject 57. A perfect example is ‘Free’ mobile phone when
one alternative when choosing another. taking on contract package
34. Mark-up pricing is based on the price the 58. High price, Low volumes
retailer buys for. 59. Skim the profit from the market
35. Margin and mark-up are the same thing. 60. Suitable for products that have short life cycles
36. Skimming means starting out with a high price, or which will face competition at some point in
then gradually reducing it as the product is the future
adopted. 61. Playstation, jewellery, digital technology,
37. Prestige pricing is the same as skimming. 62. New DVDs, innovations
38. A policy of charging less than competitors is a 63. First to Market products etc.
meet-the-competition strategy. 64. Prices set to ‘penetrate the market’
39. Penetration pricing is usually a safe option in 65. ‘Low’ price to secure high volumes
new markets. 66. Typical in mass market products – chocolate
40. Odd-even pricing has little effect on sales, but bars, food stuffs, household goods, etc.
does affect perceptions of value for money. 67. Suitable for products with long anticipated life
41. A reduction in price in order to increase cycles
business is called a price leader. 68. May be useful if launching into a new market
42. Price gouging is the practice of letting supply Choices for : 69 - 82
and demand determine the price of a good or a. Competitor Pricing (Going Rate)
service. b. Destroyer/Predatory Pricing
43. Market share is a business's portion of the total c. Contribution Pricing
sales generated by all competing companies in a d. Cost-Plus Pricing
given market. 69. Product + mark-up = selling price.
44. When demand for your product is high and 70. You can do this by using a fixed percentage.
supply is low, you can command a high price. 71. The advantage of this method is that you are
45. Mark-up pricing is common in retailing. able to calculate your expected profit level very
46. Charging a high price for products tends to easily.
encourage new competition into a market. 72. The disadvantage is that it may be less, or more,
47. In a free market, a product’s price would be set than customers are willing to pay
by the forces of demand and supply. 73. Prices set to ensure coverage of variable costs
48. Cost and price are interchangeable terms. and a ‘contribution’ to the fixed
49. Grey market goods are products are targeting costs/overheads
old customers. 74. Similar in principle to cost-plus pricing
50. The starting point in developing a retail price 75. Every product sold gives back a contribution
strategy is selecting a broad type policy . towards covering the running costs of the
business
Choices for 51- 68 76. Break-even analysis might be useful in such
a. Penetration Pricing
circumstances
b. Market Skimming
77. Deliberate price cutting or offer of ‘free
c. Value Pricing
gifts/products’ to force rivals (normally smaller
d. Loss Leader
and weaker) out of business or prevent new
e. Psychological Pricing
entrants
51. Used to play on consumer perceptions
78. Flooding the market with cheap (often
52. Classic example - R9.99 instead of R10.99!
imported) goods
53. Links with value pricing – high value goods
79. Anti-competitive and illegal if it can be proved
priced according to what consumers THINK
80. In case of a price leader, rivals have difficulty in
should be the price
competing on price – too high and they lose
54. Goods/services deliberately sold below cost to
market share, too low and the price leader
encourage sales elsewhere
would match price and force smaller rival out of
55. Typical in supermarkets, e.g. at Christmas,
market
selling bottles of gin at R30 in the hope that
81. In this strategy, we are compelled to follow
people will be attracted to the store and buy
pricing leads of rivals especially where those
other things
rivals have a clear dominance of market share
82. Where competition is limited, ‘going rate’
pricing may be applicable – banks, petrol,
supermarkets, electrical goods – find very
similar prices in all outlets
Choices for 83 – 92
a. EVC Prepared by:
Dindo C. Inso
b. Reference value Faculty, CBA
c. Differentiation value
d. Substitutes awareness effect
83. Buyers are more price sensitive the higher the Reviewed by:

price difference between this product and the Mrs. Arsenia U. Gallardo
perceived substitute Program Coordinator, CBA
84. the price of perceived closest substitute
adjusted by difference in quantity used
Approved by:
85. value of a product’s attribute difference
between your offering and the closest Dr. Ignacio C. Cordova, Jr.
substitute (+ or -) Dean, CBA
86. the maximum amount a customer should be
willing to pay, assuming that s/he is fully
informed about the benefits of the product and
the offerings of competitors
87. Reference Value + Differentiation Value
88. Superior performance
89. Better reliability
90. Additional features
91. Lower maintenance cost
92. Faster service
Choices for 93-100
a. EVC analysis
b. EVC Advantages
c. EVC Limitations
d. Punchline
93. Always examine and enhance your product,
place, and promotion strategies to attain EVC
94. Pay attention to factors that influence actual
willingness to pay
95. Describe decision process of sophisticated
purchasers
96. Enables firm to distinguish between under-
promoted vs. overpriced product
97. Can indicate attribute improvements which give
largest gain in EVC (i.e., channel your
improvement effort)
98. Can be a great aid to sales force
99. Actual willingness to pay depends perceived
differentiation value and perceived value of the
competitive product
100. Develop marketing programs to
educate consumers about EVC

Test 11 Essay ( 20 pts)

As a buyer, what information do you use to
determine how much you are willing to pay for
a Laptop?