Principles of Marketing, 19e (Kotler/Armstrong)
Chapter 11 Pricing Strategies: Additional Considerations
1) Companies set not a single price, but a pricing that covers different items in its
line and changes over time as products move through their life cycles.
A) by-product
B) structure
C) loop
D) cycle
E) bundle
Answer: B
AACSB: Analytical thinking
Skill: Concept
Objective: LO 11.1: Describe the major strategies for pricing new products.
Difficulty: Easy
2) Companies facing the challenge of setting prices for the first time can choose between two
broad strategies: market-penetration pricing and pricing.
A) comparative
B) competitive
C) market-skimming
D) market-segmentation
E) cost-plus
Answer: C
AACSB: Analytical thinking
Skill: Concept
Objective: LO 11.1: Describe the major strategies for pricing new products.
Difficulty: Easy
3) A market-skimming pricing strategy should NOT be used for a new product when .
A) the product's quality and image support its higher price
B) enough buyers want the products at that price
C) competitors are unable to enter the market
D) competitors can undercut prices easily
E) producing a smaller number of goods is feasible
Answer: D
AACSB: Application of knowledge
Skill: Concept
Objective: LO 11.1: Describe the major strategies for pricing new products.
Difficulty: Easy
1
,4) When a company sets a high price for a new product with the intention of reducing the price
in the future, it is using the pricing strategy.
A) market-skimming
B) cost-plus
C) market-segmentation
D) market-penetration
E) competitive
Answer: A
AACSB: Application of knowledge
Skill: Concept
Objective: LO 11.1: Describe the major strategies for pricing new products.
Difficulty: Easy
5) Midnight Magic, a perfume manufacturing company, plans to release a new fragrance during
the holiday season at $99 per bottle. The company intends to bring the price down to $49 within
six months of its release to attract buyers who couldn't afford the initial price. Which of the
following pricing strategies is Midnight Magic using?
A) market-penetration pricing
B) market-skimming pricing
C) competitive pricing
D) cost-plus pricing
E) product-line pricing
Answer: B
AACSB: Application of knowledge
Skill: Application
Objective: LO 11.1: Describe the major strategies for pricing new products.
Difficulty: Moderate
6) Which of the following is true of price skimming?
A) It is effective in situations in which competitors are able to undercut prices easily.
B) It can be profitably used when the product's quality and image support its price.
C) It involves underpricing products so that companies make larger sales.
D) It is ineffective in situations in which competitors are unable to enter the market easily.
E) It leads to a situation in which the company completes more, though less profitable, sales.
Answer: B
AACSB: Analytical thinking
Skill: Concept
Objective: LO 11.1: Describe the major strategies for pricing new products.
Difficulty: Moderate
2
,7) Companies that set a low price for a new product in order to attract a large number of buyers
and a large market share are using the strategy.
A) market-skimming pricing
B) market-penetration pricing
C) cost-plus pricing
D) inclusive pricing
E) exclusive pricing
Answer: B
AACSB: Application of knowledge
Skill: Concept
Objective: LO 11.1: Describe the major strategies for pricing new products.
Difficulty: Easy
8) A market-penetration pricing policy should LEAST likely be used for a new product when
.
A) the market is highly price sensitive
B) production and distribution costs fall as sales volume increases
C) the product's quality and image support a high price
D) a high price helps keep out the competition
E) there are few or no competitors in the market
Answer: C
AACSB: Application of knowledge
Skill: Concept
Objective: LO 11.1: Describe the major strategies for pricing new products.
Difficulty: Moderate
9) Which of the following is true of market-penetration pricing?
A) It should be used when the product's quality and image support a high price.
B) It involves setting a high price for a new product to appeal to the elite in society.
C) It results in drawing in large numbers of buyers quickly, winning a large market share.
D) It is best used in conjunction with a market-skimming pricing strategy.
E) It results in the company making fewer and less profitable sales.
Answer: C
AACSB: Application of knowledge
Skill: Concept
Objective: LO 11.1: Describe the major strategies for pricing new products.
Difficulty: Moderate
3
, 10) In a bid to attract more customers in a market that has several competitors, Barrymore's
Bakery slashed the prices of all its products by 50 percent. Managers at the firm reasoned that
lower prices would draw in even more customers, making up for the reduction in price several
times over. Which of the following pricing strategies are they using?
A) market-skimming pricing
B) market-penetration pricing
C) captive-product pricing
D) cash discount pricing
E) by-product pricing
Answer: B
AACSB: Application of knowledge
Skill: Application
Objective: LO 11.1: Describe the major strategies for pricing new products.
Difficulty: Challenging
11) Whizz Corp. wishes to introduce a new hybrid car into mature markets in developed
countries with the goal of gaining mass-market share quickly. Which of the following pricing
strategies would help the firm meet its goal?
A) market-skimming pricing
B) market-penetration pricing
C) market-segmentation pricing
D) cost-plus pricing
E) captive-product pricing
Answer: B
AACSB: Application of knowledge
Skill: Application
Objective: LO 11.1: Describe the major strategies for pricing new products.
Difficulty: Challenging
12) Electrowhip, a company that manufacturers blenders and electric whisks, has decided to use
a market penetration pricing strategy. Which of the following, if true, proves their decision to
be a wise one?
A) Electrowhip's competitors utilize social media for marketing their products.
B) Electrowhip sells products whose image and quality support high prices.
C) Electrowhip operates in a market with many competitors.
D) Electrowhip does not operate in a price sensitive market.
E) Electrowhip's products are intended to appeal to the elite in society.
Answer: C
AACSB: Reflective thinking
Skill: Application
Objective: LO 11.1: Describe the major strategies for pricing new products.
Difficulty: Challenging
4
Chapter 11 Pricing Strategies: Additional Considerations
1) Companies set not a single price, but a pricing that covers different items in its
line and changes over time as products move through their life cycles.
A) by-product
B) structure
C) loop
D) cycle
E) bundle
Answer: B
AACSB: Analytical thinking
Skill: Concept
Objective: LO 11.1: Describe the major strategies for pricing new products.
Difficulty: Easy
2) Companies facing the challenge of setting prices for the first time can choose between two
broad strategies: market-penetration pricing and pricing.
A) comparative
B) competitive
C) market-skimming
D) market-segmentation
E) cost-plus
Answer: C
AACSB: Analytical thinking
Skill: Concept
Objective: LO 11.1: Describe the major strategies for pricing new products.
Difficulty: Easy
3) A market-skimming pricing strategy should NOT be used for a new product when .
A) the product's quality and image support its higher price
B) enough buyers want the products at that price
C) competitors are unable to enter the market
D) competitors can undercut prices easily
E) producing a smaller number of goods is feasible
Answer: D
AACSB: Application of knowledge
Skill: Concept
Objective: LO 11.1: Describe the major strategies for pricing new products.
Difficulty: Easy
1
,4) When a company sets a high price for a new product with the intention of reducing the price
in the future, it is using the pricing strategy.
A) market-skimming
B) cost-plus
C) market-segmentation
D) market-penetration
E) competitive
Answer: A
AACSB: Application of knowledge
Skill: Concept
Objective: LO 11.1: Describe the major strategies for pricing new products.
Difficulty: Easy
5) Midnight Magic, a perfume manufacturing company, plans to release a new fragrance during
the holiday season at $99 per bottle. The company intends to bring the price down to $49 within
six months of its release to attract buyers who couldn't afford the initial price. Which of the
following pricing strategies is Midnight Magic using?
A) market-penetration pricing
B) market-skimming pricing
C) competitive pricing
D) cost-plus pricing
E) product-line pricing
Answer: B
AACSB: Application of knowledge
Skill: Application
Objective: LO 11.1: Describe the major strategies for pricing new products.
Difficulty: Moderate
6) Which of the following is true of price skimming?
A) It is effective in situations in which competitors are able to undercut prices easily.
B) It can be profitably used when the product's quality and image support its price.
C) It involves underpricing products so that companies make larger sales.
D) It is ineffective in situations in which competitors are unable to enter the market easily.
E) It leads to a situation in which the company completes more, though less profitable, sales.
Answer: B
AACSB: Analytical thinking
Skill: Concept
Objective: LO 11.1: Describe the major strategies for pricing new products.
Difficulty: Moderate
2
,7) Companies that set a low price for a new product in order to attract a large number of buyers
and a large market share are using the strategy.
A) market-skimming pricing
B) market-penetration pricing
C) cost-plus pricing
D) inclusive pricing
E) exclusive pricing
Answer: B
AACSB: Application of knowledge
Skill: Concept
Objective: LO 11.1: Describe the major strategies for pricing new products.
Difficulty: Easy
8) A market-penetration pricing policy should LEAST likely be used for a new product when
.
A) the market is highly price sensitive
B) production and distribution costs fall as sales volume increases
C) the product's quality and image support a high price
D) a high price helps keep out the competition
E) there are few or no competitors in the market
Answer: C
AACSB: Application of knowledge
Skill: Concept
Objective: LO 11.1: Describe the major strategies for pricing new products.
Difficulty: Moderate
9) Which of the following is true of market-penetration pricing?
A) It should be used when the product's quality and image support a high price.
B) It involves setting a high price for a new product to appeal to the elite in society.
C) It results in drawing in large numbers of buyers quickly, winning a large market share.
D) It is best used in conjunction with a market-skimming pricing strategy.
E) It results in the company making fewer and less profitable sales.
Answer: C
AACSB: Application of knowledge
Skill: Concept
Objective: LO 11.1: Describe the major strategies for pricing new products.
Difficulty: Moderate
3
, 10) In a bid to attract more customers in a market that has several competitors, Barrymore's
Bakery slashed the prices of all its products by 50 percent. Managers at the firm reasoned that
lower prices would draw in even more customers, making up for the reduction in price several
times over. Which of the following pricing strategies are they using?
A) market-skimming pricing
B) market-penetration pricing
C) captive-product pricing
D) cash discount pricing
E) by-product pricing
Answer: B
AACSB: Application of knowledge
Skill: Application
Objective: LO 11.1: Describe the major strategies for pricing new products.
Difficulty: Challenging
11) Whizz Corp. wishes to introduce a new hybrid car into mature markets in developed
countries with the goal of gaining mass-market share quickly. Which of the following pricing
strategies would help the firm meet its goal?
A) market-skimming pricing
B) market-penetration pricing
C) market-segmentation pricing
D) cost-plus pricing
E) captive-product pricing
Answer: B
AACSB: Application of knowledge
Skill: Application
Objective: LO 11.1: Describe the major strategies for pricing new products.
Difficulty: Challenging
12) Electrowhip, a company that manufacturers blenders and electric whisks, has decided to use
a market penetration pricing strategy. Which of the following, if true, proves their decision to
be a wise one?
A) Electrowhip's competitors utilize social media for marketing their products.
B) Electrowhip sells products whose image and quality support high prices.
C) Electrowhip operates in a market with many competitors.
D) Electrowhip does not operate in a price sensitive market.
E) Electrowhip's products are intended to appeal to the elite in society.
Answer: C
AACSB: Reflective thinking
Skill: Application
Objective: LO 11.1: Describe the major strategies for pricing new products.
Difficulty: Challenging
4
