QUIZ Managing in Complex Environments QUIZ 3 Name Answers Fall Semester 2012 Professor Atkin statistics This closed book closed note quiz has 35 3 point questions to be answered on optical scan sheets To get a grade you must return a the quiz b the answer sheet and c the completed peer evaluation Good luck My lecture time is Please see end for FORM 1 2 3 4 5 6 B true true b false b false If CM 0 then break even has been achieved a Firms selling premium priced goods generally produce greater revenue than do firms selling discount priced goods B a Pitt has lower tuition rates for in state students as compared to out of state students This is an example of a Earning monopolistic rent usually implies that explicit collusion has occurred a If price unit variable cost then breakeven occur a will b probably will c probably will not d cannot Price penetration can be used to achieve an entry barrier pricing objective a b pricing skimming c both of these d none of these B price discrimination b false b false true true D A A 7 Other things equal contribution margin increases if D a b fixed cost decreases both of the above b breakeven quantity decreases d none of the above 8 Assume two price policies Pol1 and Pol2 Further assume that the firm observes Pol2 is revenue neutral Given just this information Pol2 most likely produces D a more NI than Pol1 b the same NI as Pol1 c less NI than Pol1 d insufficient information to determine B 9 A November 20 2012 Wall Street Journal article observed that Driving the growing gray market in foreign drugs is a significant shift in the economics of cancer care suggesting that a US patients increasingly seek cancer treatment outside of the US a b c cancer care drugs may be available at lower prices outside of the US than inside the US non US residents frequently seek cancer care in the US driving up the prices for drugs all of these 10 Assume you are a brand manager You know from experience that the market is very price sensitive and all rivals are fighting to increase share Your boss has challenged you to increase contribution margin by 4 5 over the next year Your first move is most likely to consider C a c increasing price decreasing variable costs d all three are equally appropriate b decreasing fixed costs 11 Assume that Pitt as an incentive to increase enrollment in early morning classes reduced tuition for 8 and 9 am classes by 10 This is an example of B price penetration b demand based pricing c both of these a d none of these 12 Last year Whole Foods increased the price of prepared sandwiches by 10 and observed that quantity sold decreased by about 12 All costs remain unchanged From just this information we can conclude that breakeven Q has increased a b false true B 13 An assumption of the breakeven model is that worker and machine productively increases monotonically true a b false B 14 As a product enters maturity there are incentives to decrease D a direct labor costs b direct material costs c fixed costs d all of these 15 According to online wsj com Nov 23 2012 When Target Corp advertised plans to sell a 400 Dyson Ball vacuum cleaner for 269 Best Buy Co responded by cutting its online price for the vacuum by 80 to 300 This is an example of C a discrimination b penetration pricing c defensive pricing price d all of these 16 In class I discussed a type of auction in which the price starts very high then drops and is won by the first bidder In this case the final price is set by B a the seller b the buyer c jointly by the buyer and seller d none of the above 17 This season the Pittsburgh Pirates baseball team offered one class of seats in using a dynamic pricing system which enabled the team to adjust single game ticket prices in real time based on ticket availability and changing factors such as league standings opposing team rivalries star players day of the week and supply and demand according to team s official web site This is an example of pricing C a cost based b competition based c demand based d auction 18 According to a press release issued by Starbucks on November 23 2012 customers who purchase the Verismo R System by Starbucks a single cup brewing machine will receive Starbucks Gold level status and all of the highly coveted year round rewards that come with Gold status This is an example of A a b a horizontal marketing system c both of these d none of sales promotion these 19 Giant Eagle has an affiliation program in which every 50 in groceries earns you 10 cents reduction on the price of gasoline and every 10 gallons of gasoline purchased earns you a 1 reduction on groceries This is an example of a c both of these d none of these b switching costs sales promotion C 20 One product sold under the Haines brand is 100 cotton tee shirts In 2010 the price of cotton increased 50 Their manufacturing is typically done in very low labor cost countries and market research suggests that Haines customers are very price sensitive Given just this information we would expect Haines to C a b c d In the airline industry we have seen many firms add fuel surcharges and fees for a second piece of luggage This is probably the result of A a increase tee shirt prices to offset the increase in cotton prices decrease the pay of their manufacturing employees to offset the increase in cotton prices attempt to shift to a less expensive cotton blend switch to cost plus pricing b explicit collusion c demand based pricing d all of these signaling 13 21 Sales promotions are generally not used with premium priced goods B a true b false 21 After years of not using it Starbucks now does significant national advertising One likely 22 2 C decreased c increased b stayed constant d now exceeds capacity implication is that breakeven quantity most likely C a If you log onto the web site of The Financial Times sort of the WSJ of the UK you get a pop up that says in part We use cookies on our websites to enhance your user experience and then provides instructions how to disable cookies If you do disable these cookies a likely result is a c In class we estimated the cost of a marketing campaign in which a local dealership tried to get me to purchase a Mercedes concluding that a c d the dealership probably paid all or most of the costs of the campaign the main focus of the campaign was public relations both of the above b less data mining d none of the above less direct marketing both of the above d none of the above D 14 Choice of advertising …