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Unit 3 of 5

Unit 3: Product and Pricing Strategy

Study guide for CLEP CLEP Principles of Marketing — Unit 3: Product and Pricing Strategy. Practice questions, key concepts, and exam tips.

88

Practice Questions

13

Flashcards

7

Key Topics

Key Concepts to Study

product life cycle
branding
packaging
price elasticity
cost-plus pricing
penetration vs skimming pricing
new product development

Sample Practice Questions

Try these 5 questions from this unit. Sign up for full access to all 88.

Q1MEDIUM

Pricing method based on costs plus markup is

A) Cost-plus pricing
B) Competitive pricing
C) Target return pricing
D) Value-based pricing
E) Going-rate pricing
Show Answer

Answer: A — Cost-plus pricing is correct because cost-plus pricing adds a markup to the total cost, whereas competitive pricing is based on what competitors charge.

Q2HARD

A company is trying to reduce the service quality gap between customer expectations and perceptions. Which of the following strategies would be most effective?

A) Improving physical evidence to match customer expectations
B) Increasing the number of service staff to enhance responsiveness
C) Implementing a customer feedback system to identify areas for improvement
D) Reducing service prices to lower customer expectations
E) Standardizing service processes to reduce variability
Show Answer

Answer: C — Implementing a customer feedback system to identif... is correct because feedback helps identify gaps..

Q3HARD

When setting prices, what method considers both variable and fixed costs?

A) Cost-plus pricing with variable costs only
B) Cost-plus pricing with both variable and fixed costs
C) Competitive pricing with market analysis
D) Value-based pricing with consumer perceptions
E) Break-even analysis
Show Answer

Answer: B — Cost-plus pricing with both variable and fixed costs is correct because cost-plus pricing considers both variable and fixed costs, not A which only considers variable costs.

Q4MEDIUM

A company is considering a price increase for its product. If the price elasticity of demand is -0.5, what can be expected to happen to the quantity demanded if the price is increased by 10%?

A) Quantity demanded will decrease by 5%
B) Quantity demanded will decrease by 10%
C) Quantity demanded will increase by 5%
D) Quantity demanded will increase by 10%
E) Quantity demanded will decrease by 20%
Show Answer

Answer: A — Price elasticity of demand is calculated as the percentage change in quantity demanded divided by the percentage change in price. With an elasticity of -0.5, a 10% price increase will result in a 5% decrease in quantity demanded.

Q5MEDIUM

A company introduces a new product with a limited production capacity, resulting in a shortage of the product in the market. Which of the following is a likely consequence of this scarcity?

A) The company will lower the price to increase demand
B) The company will raise the price to capture more revenue
C) The company will increase production to meet the demand
D) The company will discontinue the product due to low demand
E) The company will maintain the price to stabilize the market
Show Answer

Answer: B — Scarcity leads to higher demand, allowing companies to raise prices and capture more revenue.

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Study Tips for Unit 3: Product and Pricing Strategy

  • Focus on understanding concepts, not memorizing facts — CLEP tests application
  • Practice with timed questions to build exam-day speed
  • Review explanations for wrong answers — they reveal common misconceptions
  • Use flashcards for key terms, practice questions for deeper understanding

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