BUAD 332 FINAL EXAM 3 2026 QUESTIONS
AND COMPLETE SOLUTIONS
◉ Survival Answer: Low prices hoping to increase demand
◉ Current Profit Maximization Answer: Choose the price that
produces the maximum current profit
◉ Market Share Leadership Answer: Low as possible prices to
become the market share leader
◉ Product Quality Leadership Answer: High prices to cover higher
performance quality and R&D
◉ Product Quality Leadership Example Answer: Pharmaceuticals
◉ Fixed costs (overhead) Answer: Costs that don't vary with sales or
production levels
◉ Total costs Answer: Sum of the fixed and variable costs for any
given level of production
,◉ Costs determine the... Answer: Floor
◉ Customers determined the... Answer: Ceiling
◉ External factors affecting Pricing decisions Answer: - Markets and
Demand
- Competitors' costs, prices, and offers
- Other external factors: Economic conditions, reseller reactions,
government actions and social concerns
◉ Market and demand factors affecting pricing decisions Answer: -
Pure Competition
- Monopolistic competition
- Oligopolisitic competition
- Pure Monopoly
◉ Pure Competition Answer: Many buyers and sellers who have
little effect on the price
EX: Farming
◉ Monopolistic Competition Answer: Many buyers and sellers who
trade over a range of prices
EX: Jeans
,◉ Oligopolistic Competition Answer: Few sellers who are sensitive
to each other's pricing/marketing strategies
EX: Airlines
◉ Pure Monopoly Answer: Single seller
EX: KUB
◉ Downward sloping demand curve indicates that Answer: As price
gets lower, quantity demanded gets higher.
◉ MBA program example that contradicts a downward sloping
demand curve Answer: UTK was charging $25,000 15 years ago but
then decided that they could raise the price to $45,000.
The applications increased because...
If its hard to judge quality, price is usually a signal of quality
therefore a higher price indicates better quality
◉ Inelastic demand Answer: Demand hardly changes with a small
change in price
◉ Elastic demand Answer: Demand changes greatly with a small
change in price
, ◉ Marketers want to reduce price elasticity so that... Answer: -
Brands will not be perceived as easily substitutable
- Customers' wont always seek the lowest price
- Price cuts won't be the accepted way to increase demand
◉ Brands will be perceived as unique and will create a "monopoly"
in the customers' minds
and
Enhanced band equity will allow a premium price to be charged
Answer: by reducing price elasticity
◉ Market Skimming Pricing Strategy Answer: Setting a high price for
a new product to "skim" maximum revenues from the target market
- Results in fewer, but more profitable sales
◉ Market Skimming must be used under these conditions... Answer:
- Product's quality and image must support its higher price
- costs cant be sod high that the cancel the advantage of charging
more
- Competitors shouldn't be able to enter the market easily and
undercut the high price
AND COMPLETE SOLUTIONS
◉ Survival Answer: Low prices hoping to increase demand
◉ Current Profit Maximization Answer: Choose the price that
produces the maximum current profit
◉ Market Share Leadership Answer: Low as possible prices to
become the market share leader
◉ Product Quality Leadership Answer: High prices to cover higher
performance quality and R&D
◉ Product Quality Leadership Example Answer: Pharmaceuticals
◉ Fixed costs (overhead) Answer: Costs that don't vary with sales or
production levels
◉ Total costs Answer: Sum of the fixed and variable costs for any
given level of production
,◉ Costs determine the... Answer: Floor
◉ Customers determined the... Answer: Ceiling
◉ External factors affecting Pricing decisions Answer: - Markets and
Demand
- Competitors' costs, prices, and offers
- Other external factors: Economic conditions, reseller reactions,
government actions and social concerns
◉ Market and demand factors affecting pricing decisions Answer: -
Pure Competition
- Monopolistic competition
- Oligopolisitic competition
- Pure Monopoly
◉ Pure Competition Answer: Many buyers and sellers who have
little effect on the price
EX: Farming
◉ Monopolistic Competition Answer: Many buyers and sellers who
trade over a range of prices
EX: Jeans
,◉ Oligopolistic Competition Answer: Few sellers who are sensitive
to each other's pricing/marketing strategies
EX: Airlines
◉ Pure Monopoly Answer: Single seller
EX: KUB
◉ Downward sloping demand curve indicates that Answer: As price
gets lower, quantity demanded gets higher.
◉ MBA program example that contradicts a downward sloping
demand curve Answer: UTK was charging $25,000 15 years ago but
then decided that they could raise the price to $45,000.
The applications increased because...
If its hard to judge quality, price is usually a signal of quality
therefore a higher price indicates better quality
◉ Inelastic demand Answer: Demand hardly changes with a small
change in price
◉ Elastic demand Answer: Demand changes greatly with a small
change in price
, ◉ Marketers want to reduce price elasticity so that... Answer: -
Brands will not be perceived as easily substitutable
- Customers' wont always seek the lowest price
- Price cuts won't be the accepted way to increase demand
◉ Brands will be perceived as unique and will create a "monopoly"
in the customers' minds
and
Enhanced band equity will allow a premium price to be charged
Answer: by reducing price elasticity
◉ Market Skimming Pricing Strategy Answer: Setting a high price for
a new product to "skim" maximum revenues from the target market
- Results in fewer, but more profitable sales
◉ Market Skimming must be used under these conditions... Answer:
- Product's quality and image must support its higher price
- costs cant be sod high that the cancel the advantage of charging
more
- Competitors shouldn't be able to enter the market easily and
undercut the high price
