BUSM 2010 PRINCIPLES OF MARKETING EXAM 2 (Clicker) QUESTIONS AND ANSWERS A+ GRADED

Exam 2 Clicker Questions
1. Which of the following statements about the product life cycle as a pricing constrains is MOST
ACCURATE?
a. The newer a product is, the higher the price that can usually be charged
b. The later in the product life cycle a product is, the higher the price that can usually be
charged
c. Once a product is considered nostalgic, the price will continue to rise indefinitely and
forever
d. Fads will generally have only two price points - high and low - but the values of those price
points usually are within 10% of each other
e. Pricesshould not be charged until a product reaches its maturity stage
2. Demand for a product is likely to be more price elastic if it:
a. Is considered a necessity
b. Has many substitutes
c. Has few substitutes
d. Required a small cash outlay
e. Is nondiscretionary
3. Yankee Candles is a US-based candle manufacturer. Each candle made costs the company $2 in
materials, like wicks, glass, and wax. To run the Yankee factory in Connecticut, the company pays
around $100,000 per year in rent and utilities. Each candle sells for $4. Unfortunately, Yankee's
wick supplier is threatening a price increase of $5 due to cotton price escalation. This change, all
else equal, would have what effect (if any) on Yankee's break-even point?
a. Break-even point units would decrease
b. Break-even point units would increase
c. Break-even points would remain unchanged
d. None of the above
4. As we know, at Yankee Candles, each candle currently made costs the company $2 in materials
like wicks, glass, and wax. To run the Yankee factory in Connecticut, the company pays around
$100,000 per year in rent and utilities. Each candle sells for $4. The company is considering
moving to a new factory location that will lower rent and utility payments to $80,000 per year. All
else equal, should they make the move?
a. Yes - this move would decrease the break-even quantity of candles Yankee must produce
b. Yes- this move would increase the break-even quantity of candles Yankee must produce
c. No - this move would increase the Yankee Candle'sfixed cost
d. No - this move would increase the break-even quantity of candles Yankee must produce
5. You are a marketing manager or Dasani bottled water, and need to find a way to raise the price of
your products due to the rising cost of plastic (used for your bottle). Based on the article "How
Companies Can Get Smart About Raising Prices," which of the following are recommended
approaches you could pursue?
a. Reduce the size of your bottles from 20 ounces to 19 ounces to increase the profitability of
each bottle.
b. Come out with a "Dasani Kids" - a reduced-size water bottle that's easier for kids to
handle and drink, at a premium price, due to its added value
c. Discontinue a 20%-off sales promotion you've been running for your water at 7-11 stores
d. Raise the price of your product from $1.99 to $2.09
e. None of the above
6. To respond to unique customer needs during last year's Hurricane season, Lowes' Home
Improvement stores began to offer value-packs filled with "Disaster Essentials" - a product not
currently offered by Lowes' main competitor - The Home Depot. Consumers purchased flood
essentials packs (filled with flashlights, batteries, and blankets) for $49.99. In this example, Lowes'
is using:
a. Cost-oriented pricing
b. Profit-oriented pricing
c. Competition-oriented pricing
d. Demand-oriented pricing
e. None of these
7. When Fiat, an Italian-made automobile, launched its line of compact cars in the US marketplace,
Fiat executives carefully analyzed the price of Mini Cooper vehicles in the US, choosing to price the
Fiat at a premium over other small compact cars, such as the Mini Cooper. Fiat was using which
pricing approach?
a. Above-market pricing
b. Loss-leader pricing
c. Price penetration
d. Prestige pricing
e. Yield-management pricing