Unit 3 of 5
Study guide for CLEP CLEP Principles of Marketing — Unit 3: Product and Pricing Strategy. Practice questions, key concepts, and exam tips.
85
Practice Questions
14
Flashcards
7
Key Topics
Try these 5 questions from this unit. Sign up for full access to all 85.
Pricing method based on costs plus markup is
Cost-plus pricing
Competitive pricing
Target return pricing
Value-based pricing
Going-rate pricing
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.
A company is trying to reduce the service quality gap between customer expectations and perceptions. Which of the following strategies would be most effective?
Improving physical evidence to match customer expectations
Increasing the number of service staff to enhance responsiveness
Implementing a customer feedback system to identify areas for improvement
Reducing service prices to lower customer expectations
Standardizing service processes to reduce variability
Answer: C — When you visit a restaurant and fill out a comment card, you're helping the business understand how to meet your expectations. Implementing a customer feedback system to identify areas for improvement is the most effective strategy to reduce the service quality gap, as it allows companies to directly address customer concerns. In contrast, simply increasing the number of service staff, like option "Increasing the number of service staff to enhance responsiveness", might not fix the root issues that are causing the gap.
When setting prices, what method considers both variable and fixed costs?
Cost-plus pricing with variable costs only
Cost-plus pricing with both variable and fixed costs
Competitive pricing with market analysis
Value-based pricing with consumer perceptions
Break-even analysis
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.
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%?
Quantity demanded will decrease by 5%
Quantity demanded will decrease by 10%
Quantity demanded will increase by 5%
Quantity demanded will increase by 10%
Quantity demanded will decrease by 20%
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.
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?
The company will lower the price to increase demand
The company will raise the price to capture more revenue
The company will increase production to meet the demand
The company will discontinue the product due to low demand
The company will maintain the price to stabilize the market
Answer: B — Scarcity leads to higher demand, allowing companies to raise prices and capture more revenue.
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