Podcast
Questions and Answers
The reimbursement model that is inherently inefficient because it provides an incentive to provide more services is:
The reimbursement model that is inherently inefficient because it provides an incentive to provide more services is:
A market condition where there are a few sellers is referred to as:
A market condition where there are a few sellers is referred to as:
With regards to pricing practices in oligopolistic market conditions, there often tends to exist:
With regards to pricing practices in oligopolistic market conditions, there often tends to exist:
The market condition where many sellers offer substitutable products is described as:
The market condition where many sellers offer substitutable products is described as:
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In which market condition is the focus of competition most away from price?
In which market condition is the focus of competition most away from price?
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In recent years, hospitals have increased their advertising budgets to draw consumers' attention to different service lines rather than the cost of services. This reflects that they are often operating in what type of market condition?
In recent years, hospitals have increased their advertising budgets to draw consumers' attention to different service lines rather than the cost of services. This reflects that they are often operating in what type of market condition?
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When the threat of new entrants is low, prices tend to be:
When the threat of new entrants is low, prices tend to be:
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The greater the intensity of rivalry within an industry, the greater the likelihood that prices will be:
The greater the intensity of rivalry within an industry, the greater the likelihood that prices will be:
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Which of the following is a major limitation to profit maximization as a pricing objective?
Which of the following is a major limitation to profit maximization as a pricing objective?
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In order to discourage competition, an organization would follow which type of pricing objective?
In order to discourage competition, an organization would follow which type of pricing objective?
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In mature industries, a common pricing objective would be:
In mature industries, a common pricing objective would be:
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Setting a high price relative to the competition or the true cost of a product is referred to as:
Setting a high price relative to the competition or the true cost of a product is referred to as:
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Products or services that are hard to differentiate in a tangible way are often priced using:
Products or services that are hard to differentiate in a tangible way are often priced using:
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The higher the quality a provider is perceived to have by the marketplace, the more likely the demand for that provider would be:
The higher the quality a provider is perceived to have by the marketplace, the more likely the demand for that provider would be:
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The more a product or service can be positioned as unique, the greater the likelihood that demand will be:
The more a product or service can be positioned as unique, the greater the likelihood that demand will be:
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Costs that do not change with the volume produced are:
Costs that do not change with the volume produced are:
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Total costs represent the combination of:
Total costs represent the combination of:
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Costs that are not identified with a particular patient or customer are referred to as:
Costs that are not identified with a particular patient or customer are referred to as:
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When an organization sets a selling price that represents the total cost plus some additional amount for profit, it is using the:
When an organization sets a selling price that represents the total cost plus some additional amount for profit, it is using the:
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When the major consideration for an organization is to ensure that they attract volume to the organization, then it must:
When the major consideration for an organization is to ensure that they attract volume to the organization, then it must:
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Patents for a pharmaceutical product can be extended by:
Patents for a pharmaceutical product can be extended by:
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When an organization is margin sensitive, it has a situation where there are:
When an organization is margin sensitive, it has a situation where there are:
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The break-even point is the point where:
The break-even point is the point where:
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Marginal pricing is based on the concept that:
Marginal pricing is based on the concept that:
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The pharmaceutical industry has been described as having a two-stage pricing approach. Stage one is__pricing at introduction and stage two is__pricing when the patent expires.
The pharmaceutical industry has been described as having a two-stage pricing approach. Stage one is__pricing at introduction and stage two is__pricing when the patent expires.
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When an organization sets a price to achieve a desired rate of return, it is using what type of pricing strategy?
When an organization sets a price to achieve a desired rate of return, it is using what type of pricing strategy?
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Capital-intensive industries and businesses tend to utilize which type of pricing methodology?
Capital-intensive industries and businesses tend to utilize which type of pricing methodology?
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Determining what the market is willing to pay and working backward to compute the cost is considered what type of pricing strategy?
Determining what the market is willing to pay and working backward to compute the cost is considered what type of pricing strategy?
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Giving consumers a perception that there are distinct differences between products referred to as "good," "better," and "best" is an example of:
Giving consumers a perception that there are distinct differences between products referred to as "good," "better," and "best" is an example of:
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Which of the following has not been given as a reason for odd pricing?
Which of the following has not been given as a reason for odd pricing?
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Item budget theory suggests that consumers:
Item budget theory suggests that consumers:
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In industrial settings where the buyer can exert great power, which pricing strategy is most common?
In industrial settings where the buyer can exert great power, which pricing strategy is most common?
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In prestige pricing, as the price rises, demand:
In prestige pricing, as the price rises, demand:
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For leader pricing to be successful:
For leader pricing to be successful:
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As medical tourism grows, hospitals outside the United States are promoting services that include the surgery, doctors' fees, and recuperative stays in resorts for one price. This pricing strategy is:
As medical tourism grows, hospitals outside the United States are promoting services that include the surgery, doctors' fees, and recuperative stays in resorts for one price. This pricing strategy is:
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Reference pricing is what form of a pricing strategy?
Reference pricing is what form of a pricing strategy?
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Which of the following is not an approach to discounting?
Which of the following is not an approach to discounting?
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In offering a volume discount, the seller must demonstrate that:
In offering a volume discount, the seller must demonstrate that:
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Center of excellence contracting represents which of the following strategies?
Center of excellence contracting represents which of the following strategies?
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When price is active in the positioning, it is:
When price is active in the positioning, it is:
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When price is passive, the focus is on:
When price is passive, the focus is on:
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In oligopolistic market conditions, price increases tend to be greater for not-for-profit hospitals than for for-profit hospitals.
In oligopolistic market conditions, price increases tend to be greater for not-for-profit hospitals than for for-profit hospitals.
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In oligopolistic markets, there often tends to be a price leader who dictates the direction of price levels.
In oligopolistic markets, there often tends to be a price leader who dictates the direction of price levels.
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When there is the likelihood that few new entrants will enter an industry, prices tend to be higher.
When there is the likelihood that few new entrants will enter an industry, prices tend to be higher.
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When there is a lot of unused capacity in an industry, the prices tend to be higher so that the suppliers can make up their lost margin.
When there is a lot of unused capacity in an industry, the prices tend to be higher so that the suppliers can make up their lost margin.
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When buyers have a lot of power because they have consolidated, they can force suppliers to lower their prices.
When buyers have a lot of power because they have consolidated, they can force suppliers to lower their prices.
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Companies that want to maximize profits will often employ a skimming price strategy.
Companies that want to maximize profits will often employ a skimming price strategy.
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When a health system implements a narrow network plan to insure consumers, the system is using a market-share pricing objective.
When a health system implements a narrow network plan to insure consumers, the system is using a market-share pricing objective.
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When organizations need to meet an economy-of-scale point, they often use a skimming pricing strategy.
When organizations need to meet an economy-of-scale point, they often use a skimming pricing strategy.
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Organizations will often use a penetration pricing strategy to discourage competitors from entering the market.
Organizations will often use a penetration pricing strategy to discourage competitors from entering the market.
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Profit is a major objective in the early stages of competition for a product or service.
Profit is a major objective in the early stages of competition for a product or service.
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A market-share pricing objective is often used when a firm needs to reach an economy-of-scale point.
A market-share pricing objective is often used when a firm needs to reach an economy-of-scale point.
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Projecting an image of exclusivity or value is the purpose of prestige pricing.
Projecting an image of exclusivity or value is the purpose of prestige pricing.
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With stabilization pricing, all competitors agree to set the same price.
With stabilization pricing, all competitors agree to set the same price.
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Price sensitivity has been found to differ by type of service but not by customer type.
Price sensitivity has been found to differ by type of service but not by customer type.
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When healthcare consumers are shown quality data, demand can become elastic.
When healthcare consumers are shown quality data, demand can become elastic.
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When the cost of delivering a service does not change with the volume of the service delivered, it is referred to as a fixed cost.
When the cost of delivering a service does not change with the volume of the service delivered, it is referred to as a fixed cost.
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Variable costs are those that vary with the number of people who use the service divided by the hours of operation of the service.
Variable costs are those that vary with the number of people who use the service divided by the hours of operation of the service.
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Indirect costs are those that cannot be identified with a particular customer or business unit.
Indirect costs are those that cannot be identified with a particular customer or business unit.
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Setting a price by determining the total cost and adding some additional amount for profit is referred to as cost-plus pricing.
Setting a price by determining the total cost and adding some additional amount for profit is referred to as cost-plus pricing.
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Total costs are the sum of fixed and variable costs divided by indirect costs.
Total costs are the sum of fixed and variable costs divided by indirect costs.
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When an organization has high fixed costs to total costs, it is margin sensitive.
When an organization has high fixed costs to total costs, it is margin sensitive.
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When an organization has high variable costs to total costs, it is margin sensitive.
When an organization has high variable costs to total costs, it is margin sensitive.
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Volume-sensitive businesses tend to have high fixed cost structures relative to total costs.
Volume-sensitive businesses tend to have high fixed cost structures relative to total costs.
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The point where total revenue equals total cost is the break-even point.
The point where total revenue equals total cost is the break-even point.
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Annual fixed costs for an organization are $250,000; the average price per procedure is $250; variable costs are $150. The break-even point is $250.
Annual fixed costs for an organization are $250,000; the average price per procedure is $250; variable costs are $150. The break-even point is $250.
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Marginal cost pricing is useful when trying to attract smaller customer accounts to fill marginal business.
Marginal cost pricing is useful when trying to attract smaller customer accounts to fill marginal business.
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A common pricing scheme used by wholesalers and retailers is markup pricing.
A common pricing scheme used by wholesalers and retailers is markup pricing.
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The Chargemaster used by hospitals shows the allowable rate by Medicare that should be billed to patients.
The Chargemaster used by hospitals shows the allowable rate by Medicare that should be billed to patients.
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Capital-intensive firms tend to use demand-minus pricing approaches.
Capital-intensive firms tend to use demand-minus pricing approaches.
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In target pricing approaches, a firm sets a desired rate of return for the level of delivery of the service, but it does not consider market demand.
In target pricing approaches, a firm sets a desired rate of return for the level of delivery of the service, but it does not consider market demand.
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A Rand study found that despite the consolidation of hospitals, prices of outpatient care were not significantly higher to employers as a result of consolidation.
A Rand study found that despite the consolidation of hospitals, prices of outpatient care were not significantly higher to employers as a result of consolidation.
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The diagnostic-related group (DRG) system under which hospitals are now paid is based on average historical costs.
The diagnostic-related group (DRG) system under which hospitals are now paid is based on average historical costs.
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Coinsurance represents the fixed amount the person pays in getting a medical service.
Coinsurance represents the fixed amount the person pays in getting a medical service.
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A consumer decides bid on eBay for a rare healthcare marketing text. Prior to doing so, the individual says to him- or herself, “I will not spend more than $500 for this first edition.” This person is displaying the item budget theory approach.
A consumer decides bid on eBay for a rare healthcare marketing text. Prior to doing so, the individual says to him- or herself, “I will not spend more than $500 for this first edition.” This person is displaying the item budget theory approach.
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Item budget theory states that a consumer sets a predetermined spending level and will spend no more than 10% above that amount.
Item budget theory states that a consumer sets a predetermined spending level and will spend no more than 10% above that amount.
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The automobile industry tends to use a one-price policy because they place stickers on the windows of cars indicating the pricing of each vehicle.
The automobile industry tends to use a one-price policy because they place stickers on the windows of cars indicating the pricing of each vehicle.
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The simplest pricing method to administer that instills consumer confidence is the one- price policy.
The simplest pricing method to administer that instills consumer confidence is the one- price policy.
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In pricing any product or service, if prices rise, at some point demand will fall.
In pricing any product or service, if prices rise, at some point demand will fall.
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Reference pricing is a form of bundled pricing.
Reference pricing is a form of bundled pricing.
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Leader pricing is successful when the item being promoted is recognized to be of significant value.
Leader pricing is successful when the item being promoted is recognized to be of significant value.
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Occupational medicine programs in health care are often priced with a flexible pricing approach.
Occupational medicine programs in health care are often priced with a flexible pricing approach.
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International healthcare organizations are moving into bundled pricing of services as a way to attract medical tourists.
International healthcare organizations are moving into bundled pricing of services as a way to attract medical tourists.
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In many companies’ experience, a significant percentage of their employees who access their center of excellence plan go to a center of excellence referral hospital and learn they do not need specialized surgery.
In many companies’ experience, a significant percentage of their employees who access their center of excellence plan go to a center of excellence referral hospital and learn they do not need specialized surgery.
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In going-rate pricing, organizations tend to not consider their internal costs or margin requirements.
In going-rate pricing, organizations tend to not consider their internal costs or margin requirements.
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Many healthcare organizations offer patients discounts when they pay cash. This might be considered an allowance.
Many healthcare organizations offer patients discounts when they pay cash. This might be considered an allowance.
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When considering the positioning value of price, whether it is active or passive pertains to how visible price is in promoting the product or service.
When considering the positioning value of price, whether it is active or passive pertains to how visible price is in promoting the product or service.
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Study Notes
Additional Quiz - Chapter 10
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Reimbursement Model Inefficiency: Fee-for-service reimbursement model is inefficient as it incentivizes providing more services.
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Oligopoly Definition: A market condition where a few sellers dominate the market.
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Oligopoly Pricing Practices: Price leaders often dictate pricing levels, leading to relatively consistent pricing practices. There is often high consumer dissatisfaction due to price levels in the market.
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Monopolistic Competition Definition: A market characterized by many sellers offering substitutable products. This type of competition is most away from competing solely on price.
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Competition and Price Focus: In monopolistic competition, the focus of competition shifts away from price and towards other differentiating factors such as branding and quality.
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Hospital Advertising Strategy: Hospitals in recent years have increased advertising to promote various service lines, prioritizing consumer attention shifts from service cost to other considerations. This reflects oligopolistic market conditions.
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Threat of New Entrants and Prices: In markets with a low threat of new entrants, prices tend to be higher.
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Industry Rivalry and Prices: Increased rivalry in an industry typically leads to lower prices.
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Profit Maximization Limitations: A major limitation to profit maximization as a pricing objective is the difficulty in accurately determining and predicting profits in the healthcare industry. Competition from similar services can rapidly erode profit margins.
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Pricing Objective in Discouraging Competition: In order to discourage competition, an organization needs to prioritize profitability and return on investment (ROI). A profit maximization objective tends to provoke the least competitive price responses, and a cost adjusted pricing strategy will likely decrease competitiveness in a market.
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Pricing Objective for Mature Industries: Market share is a common objective in mature industries.
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Prestige Pricing: High prices relative to competitors reflect a brand value or quality perceived by the consumer, shifting focus from cost to perceived benefit.
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Pricing Products with Low Differentiation: Businesses often price products with low differentiation or in less tangible ways using prestige or market share strategies rather than price-focused strategies.
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Demand Elasticity and Quality Perception: Higher perceived quality of a provider typically leads to more inelastic demand, making consumers less sensitive to price fluctuations.
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Demand and Uniqueness: A higher perceived product or service uniqueness usually correlates to a more inelastic demand, making consumers less price sensitive.
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Fixed Costs: Costs that do not alter with production volumes.
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Total Cost Composition: Total costs are the sum of fixed and variable costs.
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Unallocated Costs: Costs that cannot be specifically attributed to a particular customer or patient.
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Cost-Plus Pricing: A pricing method where businesses add a markup to their total costs to determine the selling price.
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Margin Sensitivity: Organizations with high fixed costs, relative to total costs, are less likely to be margin-sensitive.
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Break-Even Point: The point where total revenue equals total cost.
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Marginal Cost Pricing: A pricing strategy based on the concept that prices should cover at least the marginal cost (additional cost of another service).
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Two-Stage Pricing Approach (Pharmaceutical): The pharmaceutical industry uses a two-stage approach: initial pricing focused on revenue maximization, and a shift to pricing focused on margin maximization upon patent expiration.
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Target Pricing: A pricing strategy aimed at a desired return on investment for a service or product.
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Demand-Minus Pricing: A pricing strategy focused on consumer demand.
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One-Price Strategy: A pricing method where a single price is set for a product or service.
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Reference Pricing: A pricing strategy that uses established prices of competing products to influence consumer perception of the current product's value.
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Price Lining: A pricing strategy based on distinct price points (good, better, best) to reflect perceived quality or value differences.
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True/False Statements: A selection of true and false questions covering various pricing concepts, and the rationale behind the correct or incorrect response.
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