Pricing Strategies Quiz

What does 'Variable Pricing' primarily involve?

Lowering prices when needing to increase sales

When would a business typically use Variable Pricing?

In extreme situations

What does 'Variable' signify in Variable Pricing?

Changing

What is the formula for Absorption Target Price?

$VC + FC + NP$ Signup and view all the answers

In Marginal Cost Pricing, when would a company reduce the cost to near the variable unit cost?

When there is excess production capacity Signup and view all the answers

What does Price Differentiation involve?

Charging different prices for different markets Signup and view all the answers

What is the key condition for successful price differentiation?

Customers are unaware of the price differences Signup and view all the answers

In Absorption Target Pricing, what is the role of the fixed cost?

Absorbing some of the fixed costs Signup and view all the answers

What is the formula for calculating the Absorption Target Price per unit?

($VC + FC + NP$) / Number of units Signup and view all the answers

What is the key disadvantage of Absorption Target Pricing?

Relies heavily on making accurate estimates of sales Signup and view all the answers

What does Marginal Cost represent?

The cost of providing one extra unit Signup and view all the answers

What is the primary goal of Price Differentiation?

Maximizing revenue Signup and view all the answers

In what situation would Marginal Cost Pricing result in a higher price?

When fulfilling a last-minute order at an extra cost Signup and view all the answers

What is the main factor that determines the success of Price Differentiation?

Customers' awareness of price differences Signup and view all the answers

What is the primary purpose of Absorption Target Pricing?

Covering variable costs and adding a markup Signup and view all the answers

In Marginal Cost Pricing, what does MC stand for?

Marginal Cost Signup and view all the answers

What is the key condition for Price Differentiation to work effectively?

Barriers to entry prevent consumers from buying in cheaper markets Signup and view all the answers

What is the main advantage of Absorption Target Pricing?

It is accepted by customers Signup and view all the answers

What does Absorption Target Price cover?

Variable Costs, Fixed Costs, and Net Profit Signup and view all the answers

What is the definition of Marginal Cost?

The cost of providing one extra (or one fewer) unit Signup and view all the answers

What is the condition for Marginal Cost Pricing to result in a lower price?

Need to lower the cost to sell before expiration Signup and view all the answers

What does Price Differentiation refer to?

Setting different prices for different markets or buyers Signup and view all the answers

What is the main disadvantage of Absorption Target Pricing?

It doesn't consider competitors' actions Signup and view all the answers

In which situation does Marginal Cost Pricing result in a higher price?

When there is high variable unit cost Signup and view all the answers

What is the purpose of Price Differentiation?

To set different prices for different markets or buyers Signup and view all the answers

What is the key factor for Price Differentiation to work effectively?

Customers are aware of paying more in certain markets Signup and view all the answers