Mktg Test Bank-2 PDF

Chapter: Chapter 10 – Additional Quiz 1.​The reimbursement model that is inherently inefficient because it provides an incentive to provide more services is: A)​diagnostic-related groups. B)​cost-based reimbursement. C)​volume-adjusted payments. D)​fee-for-service. ANSWER: D 2.​A market conditi...

Chapter: Chapter 10 – Additional Quiz 1.​The reimbursement model that is inherently inefficient because it provides an incentive to provide more services is: A)​diagnostic-related groups. B)​cost-based reimbursement. C)​volume-adjusted payments. D)​fee-for-service. ANSWER: D 2.​A market condition where there are a few sellers is referred to as: A)​a pure monopoly. B)​an oligopoly. C)​monopolistic competition. D)​restricted competition. ANSWER: B 3.​With regards to pricing practices in oligopolistic market conditions, there often tends to exist: A)​strong government control. B)​a significant amount of consumer dissatisfaction with regard to pricing practices. C)​a price leader that dictates the direction of price levels. D)​a price structure that is often unrelated to industry cost structure. ANSWER: C 4.​The market condition where many sellers offer substitutable products is described as: A)​monopolistic competition. B)​an overlapping market. C)​an oligopoly. D)​unrestricted competition. ANSWER: A 5.​In which market condition is the focus of competition most away from price? A)​Unrestricted markets B)​Oligopoly C)​Monopolistic competition D)​Pure monopoly ANSWER: C 6.​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? A)​Pure monopoly B)​Oligopoly C)​Unrestricted competition D)​Oligarchy ANSWER: A 7.​When the threat of new entrants is low, prices tend to be: A)​stable. B)​higher. C)​lower. D)​variable. ANSWER: B 8.​The greater the intensity of rivalry within an industry, the greater the likelihood that prices will be: A)​constant. B)​variable. C)​lower. D)​higher. ANSWER: C 9.​Which of the following is a major limitation to profit maximization as a pricing objective? A)​It is very difficult in health care to actually determine profits. B)​It may encourage competitors to offer similar services at lower prices and capture market share, resulting in long-term lower profits for the original organization. C)​Profit maximization results in difficult cross-subsidization problems within a healthcare setting. D)​Skimming strategies lead to regulatory reform. ANSWER: B 10.​ In order to discourage competition, an organization would follow which type of pricing objective? A)​Sales B)​Profit maximization C)​Return on investment (ROI) D)​Cost adjusted ANSWER: A 11.​ In mature industries, a common pricing objective would be: A)​profit maximization. B)​sales. C)​market share. D)​demand adjusted. ANSWER: C 12.​ Setting a high price relative to the competition or the true cost of a product is referred to as: A)​predatory pricing. B)​prestige pricing. C)​preemptive pricing. D)​exclusive pricing. ANSWER: B 13.​ Products or services that are hard to differentiate in a tangible way are often priced using: A)​market share pricing. B)​price stabilization. C)​prestige pricing. D)​ROI pricing. ANSWER: C 14.​ The higher the quality a provider is perceived to have by the marketplace, the more likely the demand for that provider would be: A)​insensitive. B)​sensitive. C)​price elastic. D)​price inelastic. ANSWER: D 15.​ The more a product or service can be positioned as unique, the greater the likelihood that demand will be: A)​high. B)​fixed. C)​inelastic. D)​elastic. ANSWER: C 16.​ Costs that do not change with the volume produced are: A)​fixed costs. B)​total costs. C)​totally allocated costs. D)​unavoidable costs. ANSWER: A 17.​ Total costs represent the combination of: A)​fixed costs and allocated costs. B)​fixed costs and variable costs. C)​variable costs and allocated costs. D)​variable costs and marginal costs. ANSWER: B 18.​ Costs that are not identified with a particular patient or customer are referred to as: A)​unallocated costs. B)​unassigned costs. C)​undetermined costs. D)​indirect costs. ANSWER: D 19.​ When an organization sets a selling price that represents the total cost plus some additional amount for profit, it is using the: A)​marginal profit approach. B)​break-even approach. C)​cost-plus approach. D)​markup pricing approach. ANSWER: C 20.​ When the major consideration for an organization is to ensure that they attract volume to the organization, then it must: A)​be margin sensitive. B)​have a high total cost to marginal cost. C)​have a high variable cost to marginal cost. D)​have a high fixed cost to total cost. ANSWER: A 21.​ Patents for a pharmaceutical product can be extended by: A)​simplifying the dosage. B)​changing one or more ingredients. C)​changing the packaging. D)​applying for a one-time extension under the Patent Extension Act. ANSWER: A 22.​ When an organization is margin sensitive, it has a situation where there are: A)​high fixed costs to total costs. B)​high variable costs to total costs. C)​high marginal costs to total costs. D)​high incremental costs to marginal costs. ANSWER: B 23.​ The break-even point is the point where: A)​total revenue equals total cost. B)​incremental revenue equals incremental costs. C)​marginal revenue equals marginal cost. D)​the slope of the demand curve equals the slope of the cost curve. ANSWER: A 24.​ Marginal pricing is based on the concept that: A)​any marginal revenue that covers incremental cost is valuable. B)​marginal cost always needs to be covered by marginal revenue. C)​pricing for any additional service or product must exceed or equal the cost of the additional product or service. D)​margins must always be achieved in pricing a service. ANSWER: C 25.​ 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. A)​penetration; stabilization B)​ROI; premium C)​targeted; marginal D)​premium; marginal ANSWER: D 26.​ When an organization sets a price to achieve a desired rate of return, it is using what type of pricing strategy? A)​ROI pricing B)​Targeted pricing C)​Investment guaranteed pricing D)​Target pricing ANSWER: D 27.​ Capital-intensive industries and businesses tend to utilize which type of pricing methodology? A)​Target pricing B)​Return on investment C)​Markup pricing D)​Prestige pricing ANSWER: A 28.​ Determining what the market is willing to pay and working backward to compute the cost is considered what type of pricing strategy? A)​Cost directed B)​Demand minus C)​Demand sensitive D)​Cost inverted ANSWER: B 29.​ Giving consumers a perception that there are distinct differences between products referred to as “good,” “better,” and “best” is an example of: A)​odd pricing. B)​prestige pricing. C)​price zoning. D)​price lining. ANSWER: D 30.​ Which of the following has not been given as a reason for odd pricing? A)​Pluralistic ignorance B)​Reduce shrinkage C)​Iconoclastic determinism D)​Perceived discounting ANSWER: C 31.​ Item budget theory suggests that consumers: A)​a priori set a predetermined limit to spend on a product or service. B)​have a budget they spend for all items whether it is groceries, medical care, or entertainment. C)​have a rationale for certain purchases but do engage in impulse shopping for certain items. D)​have certain items that are never accounted for in any budget. ANSWER: A 32.​ In industrial settings where the buyer can exert great power, which pricing strategy is most common? A)​One price B)​Flexible C)​Prestige D)​Markup ANSWER: B​ 33.​ In prestige pricing, as the price rises, demand: A)​declines and then increases. B)​levels and then sharply rises. C)​remains at the same level. D)​rises, and then eventually declines. ANSWER: D 34.​ For leader pricing to be successful: A)​there must be a strong industry leader who others will follow. B)​the leader must openly declare the price so competitors have enough time to adjust their prices. C)​consumers must recognize the promoted price to be a value. D)​consumers must decide to follow the leader and believe the competitor’s products or services are inferior. ANSWER: C 35.​ 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: A)​price lining. B)​leader pricing. C)​bundled pricing. D)​price leader. ANSWER: C 36.​ Reference pricing is what form of a pricing strategy? A)​Bundled pricing B)​Penetration pricing C)​Price skimming D)​Price lining ANSWER: A 37.​ Which of the following is not an approach to discounting? A)​Functional B)​Time C)​Volume D)​Allowances ANSWER: B 38.​ In offering a volume discount, the seller must demonstrate that: A)​real savings can be achieved if the service is utilized at some level. B)​the buyer deserves a discount if they buy the service. C)​there is no discrimination. D)​all discount prices are transparent to the market. ANSWER: A 39.​ Center of excellence contracting represents which of the following strategies? A)​A flexible pricing approach B)​A discounting approach C)​A market penetration approach D)​An active pricing strategy ANSWER: B 40.​ When price is active in the positioning, it is: A)​always changing. B)​always higher than the competition. C)​always lower than the competition. D)​a very visible part of the promotion. ANSWER: D 41.​ When price is passive, the focus is on: A)​other product attributes. B)​the low nature of the price. C)​the low price relative to the competition. D)​keeping the price at the same level for as long as possible. ANSWER: A True/False 1.​True or False? In oligopolistic market conditions, price increases tend to be greater for not-for-profit hospitals than for for-profit hospitals. ANSWER: False 2.​True or False? In oligopolistic markets, there often tends to be a price leader who dictates the direction of price levels. ANSWER: True 3.​True or False? When there is the likelihood that few new entrants will enter an industry, prices tend to be higher. ANSWER: True ​ 4.​True or False? 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. ANSWER: False 5.​True or False? When buyers have a lot of power because they have consolidated, they can force suppliers to lower their prices. ANSWER: True 6.​True or False? Companies that want to maximize profits will often employ a skimming price strategy. ANSWER: True 7.​True or False? When a health system implements a narrow network plan to insure consumers, the system is using a market-share pricing objective. ANSWER: True 8.​True or False? When organizations need to meet an economy-of-scale point, they often use a skimming pricing strategy. ANSWER: False 9.​True or False? Organizations will often use a penetration pricing strategy to discourage competitors from entering the market. ANSWER: True 10.​ True or False? Profit is a major objective in the early stages of competition for a product or service. ANSWER: False 11.​ True or False? A market-share pricing objective is often used when a firm needs to reach an economy-of-scale point. ANSWER: True 12.​ True or False? Projecting an image of exclusivity or value is the purpose of prestige pricing. ANSWER: True 13.​ True or False? With stabilization pricing, all competitors agree to set the same price. ANSWER: False 14.​ True or False? Price sensitivity has been found to differ by type of service but not by customer type. ANSWER: False 15.​ True or False? When healthcare consumers are shown quality data, demand can become elastic. ANSWER: True 16.​ True or False? 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. ANSWER: True 17.​ True or False? Variable costs are those that vary with the number of people who use the service divided by the hours of operation of the service. ANSWER: False 18.​ True or False? Indirect costs are those that cannot be identified with a particular customer or business unit. ANSWER: True 19.​ True or False? Setting a price by determining the total cost and adding some additional amount for profit is referred to as cost-plus pricing. ANSWER: True 20.​ True or False? Total costs are the sum of fixed and variable costs divided by indirect costs. ANSWER: False 21.​ True or False? When an organization has high fixed costs to total costs, it is margin sensitive. ANSWER: False 22.​ True or False? When an organization has high variable costs to total costs, it is margin sensitive. ANSWER: True 23.​ True or False? Volume-sensitive businesses tend to have high fixed cost structures relative to total costs. ANSWER: True 24.​ True or False? The point where total revenue equals total cost is the break-even point. ANSWER: True 25.​ True or False? 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. ANSWER: False 26.​ True or False? Marginal cost pricing is useful when trying to attract smaller customer accounts to fill marginal business. ANSWER: False 27.​ True or False? A common pricing scheme used by wholesalers and retailers is markup pricing. ANSWER: True 28.​ True or False? The Chargemaster used by hospitals shows the allowable rate by Medicare that should be billed to patients. ANSWER: False 29.​ True or False? Capital-intensive firms tend to use demand-minus pricing approaches. ANSWER: False 30.​ True or False? 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. ANSWER: True 31.​ True or False? 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. ANSWER: False 32.​ True or False? The diagnostic-related group (DRG) system under which hospitals are now paid is based on average historical costs. ANSWER: True 33.​ True or False? The “good, “better,” “best” approach is often seen in the flexible pricing policy. ANSWER: False 34.​ True or False? The bronze, silver, and platinum health insurance plans on state and federal health exchanges may be considered an example of price lining. ANSWER: True 35.​ True or False? Coinsurance represents the fixed amount the person pays in getting a medical service. ANSWER: False 36.​ True or False? For price lining to be effective, consumers must perceive distinct differences between each line. ANSWER: True 37.​ True or False? In order to minimize in-store theft, many retailers have used price lining to force cashiers to make change. ANSWER: False 38.​ True or False? 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. ANSWER: True 39.​ True or False? Item budget theory states that a consumer sets a predetermined spending level and will spend no more than 10% above that amount. ANSWER: False 40.​ True or False? 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. ANSWER: False 41.​ True or False? The simplest pricing method to administer that instills consumer confidence is the one- price policy. ANSWER: True 42.​ True or False? In pricing any product or service, if prices rise, at some point demand will fall. ANSWER: False 43.​ True or False? Reference pricing is a form of bundled pricing. ANSWER: True 44.​ True or False? Leader pricing is successful when the item being promoted is recognized to be of significant value. ANSWER: True 45.​ True or False? Occupational medicine programs in health care are often priced with a flexible pricing approach. ANSWER: False 46.​ True or False? Group purchasing organizations (GPOs) have been found to save healthcare organizations a significant amount on supplies, which account for almost 30% of their total healthcare budget. ANSWER: False 47.​ True or False? International healthcare organizations are moving into bundled pricing of services as a way to attract medical tourists. ANSWER: True 48.​ True or False? 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. ANSWER: True 49.​ True or False? In going-rate pricing, organizations tend to not consider their internal costs or margin requirements. ANSWER: True 50.​ True or False? When giving a volume discount, it is not necessary to offer one on an equal level to all buyers. ANSWER: False 51.​ True or False? In recent years, employers have been moving more toward a bundled payment model. ANSWER: True 52.​ True or False? When buyers agree to perform certain functions, they can be offered a functional discount that is often larger than other discounts. ANSWER: False 53.​ True or False? Many healthcare organizations offer patients discounts when they pay cash. This might be considered an allowance. ANSWER: True​ 54.​ True or False? Center of excellence contracting is a market share strategy rather than a discounting approach. ANSWER: False 55.​ True or False? When companies contract with a center of excellence for a service such as cardiovascular care, they require their employees to go to that location for such care. ANSWER: False 56.​ True or False? 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. ANSWER: True