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Exam 13: Setting the Right Price

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Question 31

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A winery that makes a huge profit on merlot wines may lower its price on pinot noir wines to cause damage to wineries that produce only pinot noir. This is an example of predatory pricing.

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Question 32

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In a catalogue targeted to people who like to bake, customers can buy a single yeast bread mix designed specifically to be baked in bread machines for $3.95 each or 12 different mixes for $37.50. What is this an example of?

A) price bundling
B) psychological pricing
C) penetration pricing
D) basing-point bundling

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Question 33

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A manufacturer using uniform delivered pricing is legally discriminating against buyers who are located close to the point of shipping because they pay the same amount as buyers located far from the point of shipping.

Under what conditions is each of the three basic pricing methods successful?

A 16-ounce bottle of Prairie Herb vinegar sells for $4.95, and a 16-ounce bottle of Heinz vinegar costs $1.05. Prairie Herb vinegar is new to the market, is perceived to be of higher quality, and provides a unique flavour to foods even though it is used in the same way as Heinz vinegar. Which type of policy is Prairie Herb vinegar most likely using?

When the Mosquito Magnet was introduced, it was designed to rid the immediate area of mosquitoes and other annoying insects. It is a patented grill-like apparatus that emits carbon dioxide to attract bugs to a fan that draws them into the device where they die. What type of pricing policy would you recommend the company use to introduce this product to the market?

Price fixing is clearly illegal in all instances.

There are two limousine services that drive customers from communities in Winnipeg to the airport. Whenever one reduces its fare, its competitor reduces its fares by the same amount. This is an example of status quo pricing.

If the seller pays all or part of the actual freight charges and does not pass them on to the buyer, which type of pricing is the seller using?

A penetration strategy tends to be effective in a price-sensitive market. What is one of the purposes of penetration pricing?

One of the advantages of penetration pricing is that it can make it difficult for the competition to compete.

Penetration pricing means charging a relatively low price for a product as a way to reach the mass market. The low price is designed to capture a large share of a substantial market. Thus, penetration pricing tends to do which of the following?

If you want to buy season tickets in the comfortable seating behind the batter at the Fullerton Softball Complex, you can expect to make a qualifying payment that gives you the right to purchase the tickets. This payment is not deemed to be part of the ticket price. It is one of the costs that must be paid in order to buy a season ticket. What is Fullerton using?

The basic idea with price skimming is that the firm is customer driven, and seeks to understand the attributes customers want in goods and services they buy and the value of that bundle of attributes to customers.

If the grocery chain Safeway were to sell its bread at near or below cost in the hopes of inducing store patronage, what type of pricing would they be using?

The market for turkey products is large. If a major producer of turkeys were to introduce a boneless fresh turkey wrapped around spicy dressing, most of the large market for this new product would be aware of its existence. The market is price sensitive, and there is some potential competition. What would be the appropriate strategy?

After establishing pricing goals, managers should estimate total revenue at a variety of prices. Which of the following should they do next?

If your favourite mail-order catalogue lists freight charges according to the dollar amount of merchandise purchased, which type of pricing is it using?

The first step in setting the right price for a new product is to estimate demand, costs, and profits.

If the book sellerChapters decides to divides its market area into segments or regions and charge a flat rate for freight to all customers in a given region, which type of pricing is the company using?