5.1 AMA PCM Pricing Concepts & Methods Exam Questions Answered Correctly Latest Update 2025
Above-, At- Below-Market Pricing - Answers Setting a market price for a product or product class based
on a subjective feel for the competitors' price or market as the benchmark.
Bait Pricing (or Bait and Switch) - Answers A product is promised at a low price but is either not in stock
or a less attractive product is sold.
Barter - Answers A form of trade in which people exchange goods and services without the use of
money.
Break-Even Point - Answers The point at which the money from product sales equals the costs of making
and distributing the product.
Bundle Pricing - Answers Selling distinct multiple items offered together at a special price.
Captive Pricing - Answers Pricing the basic product in a product line low, while pricing related items
higher
Competition-Based Pricing - Answers A pricing strategy based on what all the other competitors are
doing.
Competition-Oriented Pricing Approach - Answers A pricing strategy that is based upon what the
competition does.
Cost-Oriented Pricing Approach - Answers Pricing approaches in which a price-setter stresses the cost
side of the pricing problem, not the demand side. Price is set by looking at the production and marketing
costs and then adding enough to cover direct expenses, overhead, and profit.
Demand Curve - Answers A graph illustrating how much of a given product a household would be willing
to buy at different prices.
Cost-Plus Pricing - Answers Summing the total unit cost of providing a product or service and adding a
specific amount to the cost to arrive at a price
Discounts - Answers Temporary price reductions, often employed to boost sales.
Everyday Low Pricing - Answers long-term pricing strategy, designed to achieve profitability through high
sales volume.
Experience Curve Pricing - Answers A method of pricing based on the learning effect, which holds that
the unit cost of many products and services declines by 10 percent to 30 percent each time a firm's
experience at producing and selling them doubles, resulting in possible rapid price reductions.
External Reference Price - Answers A price presented by a marketer for the consumer to use to compare
with the current price.
, Fixed Cost - Answers A periodic cost that remains (more or less) unchanged irrespective of the output
level or sales revenue of a firm.
FOB Origin Pricing - Answers The "free on board" (FOB) price the seller quotes that includes only the
cost of loading the product onto the vehicle and specifies the name of the location where the loading is
to occur (seller's factory or warehouse).
Geographic Pricing - Answers When price reflects different costs related to transportation and other
costs associated to hysical distance between buyers and sellers
Internal Reference Price - Answers A set price or a price range in consumers' minds that they refer to in
evaluating a product's price.
Price Fixing (or Horizontal Price Fixing) - Answers agreement between competitors on their pricing
(agreeing to charge the same price, to charge different prices at the same difference from each other,
offering of same credit terms)
Pricing Lining - Answers The practice of setting a limited number of different specific prices, called price
points, for items in a product line
Price Skimming (or Skimming Pricing) - Answers A pricing policy whereby a firm charges a high
introductory price, often coupled with heavy promotion.
Price War - Answers A series of competitive price cuts that lowers the market price below the cost of
production.
Pricing Constraints - Answers Factors that limit the range of prices a firm may set: demand for the
product class/product/brand, newness of the product (stage in the product life cycle), cost of producing
and marketing a product, competitor's prices, legal and ethical considerations
Professional Pricing - Answers Used by people who have great skill or experience in a particular field.
Professionals often don't believe that their fees should relate to time or effort rather a standard fee
regardless.
Loss-Leader Pricing - Answers Deliberately selling a product below its customary price not to increase
sales but to attract customers attention in hopes that they will buy other products as well
Marginal Cost - Answers Curve intersects average total cost and average variable cost at their minimum
points. Curve is upward sloping because marginal productivity is diminishing.
Marginal Revenue - Answers A change to the total revenue resulting from the sale of one more unit of
output in a perfectly competitive firm.
Multiple-Unit Pricing (Multiple Packaging) - Answers Discounts offered to customers who buy in quantity
or who buy a product bundle.
Above-, At- Below-Market Pricing - Answers Setting a market price for a product or product class based
on a subjective feel for the competitors' price or market as the benchmark.
Bait Pricing (or Bait and Switch) - Answers A product is promised at a low price but is either not in stock
or a less attractive product is sold.
Barter - Answers A form of trade in which people exchange goods and services without the use of
money.
Break-Even Point - Answers The point at which the money from product sales equals the costs of making
and distributing the product.
Bundle Pricing - Answers Selling distinct multiple items offered together at a special price.
Captive Pricing - Answers Pricing the basic product in a product line low, while pricing related items
higher
Competition-Based Pricing - Answers A pricing strategy based on what all the other competitors are
doing.
Competition-Oriented Pricing Approach - Answers A pricing strategy that is based upon what the
competition does.
Cost-Oriented Pricing Approach - Answers Pricing approaches in which a price-setter stresses the cost
side of the pricing problem, not the demand side. Price is set by looking at the production and marketing
costs and then adding enough to cover direct expenses, overhead, and profit.
Demand Curve - Answers A graph illustrating how much of a given product a household would be willing
to buy at different prices.
Cost-Plus Pricing - Answers Summing the total unit cost of providing a product or service and adding a
specific amount to the cost to arrive at a price
Discounts - Answers Temporary price reductions, often employed to boost sales.
Everyday Low Pricing - Answers long-term pricing strategy, designed to achieve profitability through high
sales volume.
Experience Curve Pricing - Answers A method of pricing based on the learning effect, which holds that
the unit cost of many products and services declines by 10 percent to 30 percent each time a firm's
experience at producing and selling them doubles, resulting in possible rapid price reductions.
External Reference Price - Answers A price presented by a marketer for the consumer to use to compare
with the current price.
, Fixed Cost - Answers A periodic cost that remains (more or less) unchanged irrespective of the output
level or sales revenue of a firm.
FOB Origin Pricing - Answers The "free on board" (FOB) price the seller quotes that includes only the
cost of loading the product onto the vehicle and specifies the name of the location where the loading is
to occur (seller's factory or warehouse).
Geographic Pricing - Answers When price reflects different costs related to transportation and other
costs associated to hysical distance between buyers and sellers
Internal Reference Price - Answers A set price or a price range in consumers' minds that they refer to in
evaluating a product's price.
Price Fixing (or Horizontal Price Fixing) - Answers agreement between competitors on their pricing
(agreeing to charge the same price, to charge different prices at the same difference from each other,
offering of same credit terms)
Pricing Lining - Answers The practice of setting a limited number of different specific prices, called price
points, for items in a product line
Price Skimming (or Skimming Pricing) - Answers A pricing policy whereby a firm charges a high
introductory price, often coupled with heavy promotion.
Price War - Answers A series of competitive price cuts that lowers the market price below the cost of
production.
Pricing Constraints - Answers Factors that limit the range of prices a firm may set: demand for the
product class/product/brand, newness of the product (stage in the product life cycle), cost of producing
and marketing a product, competitor's prices, legal and ethical considerations
Professional Pricing - Answers Used by people who have great skill or experience in a particular field.
Professionals often don't believe that their fees should relate to time or effort rather a standard fee
regardless.
Loss-Leader Pricing - Answers Deliberately selling a product below its customary price not to increase
sales but to attract customers attention in hopes that they will buy other products as well
Marginal Cost - Answers Curve intersects average total cost and average variable cost at their minimum
points. Curve is upward sloping because marginal productivity is diminishing.
Marginal Revenue - Answers A change to the total revenue resulting from the sale of one more unit of
output in a perfectly competitive firm.
Multiple-Unit Pricing (Multiple Packaging) - Answers Discounts offered to customers who buy in quantity
or who buy a product bundle.
