Chapter 11 Pricing Strategies
1) A company sets not a single price, but rather a ________ that covers different items in its line that change over time as products move through their life cycles. A) pricing by-product B) pricing structure C) pricing loop D) pricing cycle ) pricing bundle Ans!er" B Diff" 1 #age $ef" %11 &'ill" Concept (bective" 11-1 *) Companies facing the challenge of setting prices for the first time can choose bet!een t!o broad strategies" mar'et-penetration pricing and ________. A) mar'et-level pricing B) mar'et-competitive pricing C) mar'et-s'imming pricing D) mar'et-price lining ) mar'et-price filling Ans!er" C Diff" * #age $ef" %1* &'ill" Concept (bective" 11-1 %) (f the follo!ing, !hich statement !ould +( support a mar'et-s'imming policy for a ne! product A) he products /uality and image support its higher price. B) nough buyers !ant the products at that price. C) Competitors are not able to undercut the high price. D) Competitors can enter the mar'et easily. ) C and D Ans!er" D Diff" % #age $ef" %1* &'ill" Concept (bective" 11-1
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5) A firm is using ________ !hen it charges a high, premium price for a ne! product !ith the intention of reducing the price in the future. A) price s'imming B) trial pricing C) value pricing D) mar'et-penetration pricing ) prestige pricing Ans!er" A Diff" * #age $ef" %1* &'ill" Concept (bective" 11-1 6) ________ pricing is the approach ap proach of setting a lo! initial price in order to attract a large number of buyers /uic'ly and !in a large mar'et share. A) 7ar'et-s'imming B) 7ar'et-penetration C) Belo!-mar'et D) 8alue-based ) 9eader Ans!er" B Diff" 1 #age $ef" %1% &'ill" Concept (bective" 11-1 :) Accent &oft!are faces the conditions belo!, all of !hich support Accents use of a mar'et penetration pricing strategy ;C# that ________. A) the mar'et is highly price sensitive B) production and distribution costs !ill fall as sales volume increases C) the products /uality and image support suppo rt a high price D) a lo! price !ould help 'eep out the competition ) A and C Ans!er" C Diff" % #age $ef" %1% &'ill" Concept (bective" 11-1
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) A mar'eter must be familiar !ith the five maor product mi? pricing situations.
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15) 4i#oint elephone Company uses t!o-part pricing for its long-distance call charges. Because this is a service, the price is bro'en into a fi?ed rate plus a ________. A) fi?ed rate usage B) variable usage rate C) standard usage rate D) mar'et usage rate ) none of the above Ans!er" B Diff" 1 #age $ef" %16 &'ill" Concept (bective" 11-* 16) Companies involved in deciding !hich items to include in the base price and !hich to offer as options are engaged in ________ pricing. A) product bundle B) optional-product C) captive-product D) by-product ) s'imming Ans!er" B Diff" 1 #age $ef" %15 &'ill" Concept (bective" 11-* 1:) eeping in mind that a seller must sell by-products at a price that covers more than the cost of storing and delivering them, !hich of the follo!ing !ill by-product pricing permit a seller to do A) increase the main products price B) ma'e e?tra profit C) reduce the main products price D) none of the above ) B and C Ans!er" Diff" % #age $ef" %16 &'ill" Concept (bective" 11-*
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*1) A /uantity discount is a price reduction to buyers !ho purchase ________. A) fre/uently B) large volumes C) close outs D) inferior merchandise ) superior merchandise Ans!er" B Diff" * #age $ef" %1: &'ill" Concept (bective" 11-% **) rade or functional discounts are offered by manufacturers to !hich of the follo!ing A) channel members !ho perform tas's that the manufacturer !ould other!ise have to perform B) consumers !ho earn a price reduction for buying in bul' C) intermediaries such as financing institutions as a cost of doing business !ith them D) manufacturers that agree to e?clusive distribution contracts ) the government mar'et and other organiations that re/uire bid proposals Ans!er" A Diff" % #age $ef" %1: &'ill" Concept (bective" 11-% *%)
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*6) Guantity discounts provide an incentive to the customer to buy ________. A) more products or services from a variety of sellers B) less from another competitor C) more from one given seller, rather than from many different sources D) more than he or she needs ) bundled merchandise Ans!er" C Diff" * #age $ef" %1: &'ill" Concept (bective" 11-% *:) By definition, this type of pricing is used !hen a firm sells a product or service at t!o or more prices, even though the difference in price is not based on differences in cost. A) segmented pricing B) variable pricing C) fle?ible pricing D) cost-plus pricing ) reference pricing Ans!er" A Diff" * #age $ef" %1: &'ill" Concept (bective" 11-* *0)
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%0) #romotional pricing can have all of the follo!ing adverse effects ;C# ________. A) creating deal-prone customers B) eroding the brands value in the eyes of customers C) giving pricing secrets a!ay to competitors D) becoming addicting to both the customer and business ) instigating industry price !ars Ans!er" C Diff" * #age $ef" %* &'ill" Concept (bective" 11-% %=) he most li'ely effect of the fre/uent use of promotional pricing is an industry ________. A) e?pansion B) price !ar C) erosion D) cooperation ) imbalance Ans!er" B Diff" * #age $ef" %* &'ill" Concept (bective" 11-% %>)
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51) Jnder !hich type of geographic pricing strategy does each customer pay the e?act freight for the product from the factory to its destination A) one pricing B) basing-point pricing C) uniform-delivered pricing D) I(B-origin pricing ) dynamic pricing Ans!er" D Diff" * #age $ef" %*1 &'ill" Concept (bective" 11-% 5*) Jsing this pricing strategy, the seller ta'es responsibility for part or all of the actual freight charges in order to get the desired business. A) I(B-origin B) freight-absorption C) basing-point D) loss leader ) one pricing Ans!er" B Diff" 1 #age $ef" %*1 &'ill" Concept (bective" 11-% 5%)
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5>) 7ost companies that conduct international business ________ to ________. A) adust their prices@ ta'e local mar'et conditions into consideration B) use promotional pricing@ create e?citement in ne! mar'ets C) use geographical pricing@ reduce delivery costs D) set a uniform price@ maintain a consistent product image ) initiate price cuts@ compensate for import tariffs and ta?es Ans!er" A Diff" * #age $ef" %*% AAC&B" 7ulticultural and Diversity &'ill" Concept (bective" 11-% 6) #rice escalation in international mar'ets may result from differences in mar'et conditions or ________. A) cultural preferences B) selling strategies C) regional tastes D) customer perceptions ) language barriers Ans!er" B Diff" * #age $ef" %*% AAC&B" 7ulticultural and Diversity &'ill" Concept (bective" 11-5 61)
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6*) #rice escalation in international mar'ets may result from four of these five mar'eting conditions.
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6:) Competitors are most li'ely to react to a price change !hen ________. A) the number of firms involved is small B) the purchase is uniform C) the buyers are not !ell informed D) A and B ) all of the above Ans!er" D Diff" * #age $ef" %*6 &'ill" Concept (bective" 11-5 60) A competitor is li'ely to interpret your firms decision to cut prices in many !ays, including all of the follo!ing ;C# as ________. A) an attempt to ta'e more mar'et share B) an effort it to use e?cess capacity C) a personal decision due to managements personality D) an attempt to cut prices industry-!ide ) A and D Ans!er" C Diff" * #age $ef" %*: &'ill" Concept (bective" 11-5 6=)
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:*) A company !ould most li'ely consider launching a lo!-price Kfighting brandK in response to a competitor reducing prices if ________. A) the mar'et segment being lost is price sensitive B) the mar'et segment being lost is not price sensitive C) the mar'et segment being lost responds to arguments of higher /uality D) the mar'et segment being lost no longer demands the product ) the mar'et segment being lost has shifted culturally Ans!er" A Diff" * #age $ef" %*0 &'ill" Concept (bective" 11-5 :%) #rice-fi?ing, predatory pricing, retail price maintenance, and deceptive pricing are e?amples of ________. A) common pricing policies B) maor public policy issues in pricing C) common pricing strategies D) pricing policies used mostly in the !holesale sector ) pricing used mostly in the retail sector Ans!er" B Diff" 1 #age $ef" %*0 AAC&B" thical $easoning &'ill" Concept (bective" 11-5 :5) he &herman, Clayton, and $obinson-#atman Acts are all federal la!s that !ere enacted to curb the formation of ________. A) monopolies B) oligopolies C) competitive mar'ets D) international mar'ets ) limited partnerships Ans!er" A Diff" * #age $ef" %*0 AAC&B" thical $easoning &'ill" Concept (bective" 11-5
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:6) AAC&B" thical $easoning &'ill" Concept (bective" 11-5
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:=) ) he $obinson-#atman Act see's to prevent unfair ________ by ensuring that sellers offer the same price terms to customers at a given price level. A) mar'eting B) price discrimination C) competition D) price collusion ) treatment of small retailers Ans!er" B Diff" * #age $ef" %% AAC&B" thical $easoning &'ill" Concept (bective" 11-5 0) #rice discrimination is legal under !hich of the follo!ing conditions A) !hen a manufacturer and reseller have agreed upon a specified retail price for a product B) !hen a manufacturer sells to retailers in different mar'ets C) !hen a seller can prove its costs are different !hen selling to different retailers D) !hen a seller advertises prices that are not actually available to consumers ) !hen a seller has not communicated !ith competitors before announcing prices Ans!er" C Diff" % #age $ef" %% AAC&B" thical $easoning &'ill" Concept (bective" 11-5
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01) #rice discrimination may be used to match competition as long as the strategy is temporary, localied, and ________. A) defensive B) offensive C) published D) private ) used in all channels Ans!er" A Diff" % #age $ef" %% AAC&B" thical $easoning &'ill" Concept (bective" 11-5 0*) 7ar's 7ar'ers, a manufacturer of color mar'ers, has re/uired its dealers to charge a specified retail price for its mar'ers. 7ar's is most li'ely guilty of ________. A) price-fi?ing B) retail price maintenance C) price discrimination D) price collusion ) unfair price s'imming Ans!er" B Diff" * #age $ef" %% AAC&B" thical $easoning &'ill" Concept (bective" 11-5 0%) ________ results !hen a company uses pricing methods that ma'e it difficult for consumers to understand ust !hat price they are really paying. A) &canner fraud B) &'imming pricing C) #rice confusion D) #redatory pricing ) #rice collusion Ans!er" C Diff" * #age $ef" %% AAC&B" thical $easoning &'ill" Concept (bective" 11-5
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05) Iailure to enter the current price into a retailers system may result in charges of ________. A) predatory pricing B) scanner fraud C) retail maintenance pricing D) discriminatory pricing ) price-fi?ing Ans!er" B Diff" * #age $ef" %% AAC&B" Jse of 3 &'ill" Concept (bective" 11-5 06) Comparison pricing claims are legal if they are truthful. 4o!ever, sellers should not advertise a price reduction unless ________. A) it is a saving from the usual retail price B) a KfactoryK price, if listed, is !hat it is claimed to be C) a K!holesaleK price, if listed, is !hat it is claimed to be D) Kcomparable value itemsK are not actually imperfect goods ) all of the above Ans!er" Diff" 1 #age $ef" %% AAC&B" thical $easoning &'ill" Concept (bective" 11-5 0:) 8aleo Iashions has ust introduced a ne! line of fashion dresses for teens. hey !ill initially enter the mar'et at high prices in a ________ pricing strategy. A) mar'et-penetration B) mar'et-s'imming C) competitive mar'et D) psychological ) demographic Ans!er" B Diff" * #age $ef" %1* AAC&B" $eflective hin'ing &'ill" Application (bective" 11-1
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00) 7ar'et-s'imming pricing !ould li'ely be most effective in selling ________. A) any convenience item B) an electronic device for !hich research and development must be recouped C) shampoo and bath soap D) anything easily copied by competitors ) most items at D9# retailers such as )
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=) Hohnson Boats !ants to introduce a ne! model of boat into mature mar'ets in highly developed countries !ith the goal of /uic'ly gaining mass-mar'et share. As a consultant, you should recommend a ________ pricing strategy. A) mar'et-s'imming B) mar'et-penetration C) one D) loss-leader ) captive-product Ans!er" B Diff" * #age $ef" %1% AAC&B" $eflective hin'ing &'ill" Application (bective" 11-1 =1) >, E=>>, and E1,>>, it is using ________. A) product line pricing B) mar'et-s'imming pricing C) mar'et-penetration pricing D) brea'-even pricing ) target profit pricing Ans!er" A Diff" 1 #age $ef" %15 AAC&B" $eflective hin'ing &'ill" Application (bective" 11-* =*)
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=:) A manufacturer offers %1, net %, terms to a !holesaler for a recent purchase. he !holesaler may deduct ________ percent if the bill is paid !ithin ________ days. A) 1@ % B) 1@ % C) %@ % D) %@ 1 ) 0@ 1 Ans!er" D Diff" % #age $ef" %1: AAC&B" Analytic &'ills &'ill" Application (bective" 11-% =0)
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=>) Bro!n Baby anning &alon offers !ee'ly tanning sessions for E16 and season passes !ith unlimited tanning for E16. Bro!n Baby anning &alon is offering ________ pricing. A) by-product B) captive-product C) product bundling D) discount ) psychographic Ans!er" D Diff" * #age $ef" %1: AAC&B" Analytic &'ills &'ill" Application (bective" 11-% >) 9ancaster $ecycling has a history of problems !ith customers !ho do not pay their bills on time. 9ancaster $ecycling !ants to improve its cash situation, reduce bad debts, and reduce credit-collection costs. he company might consider !hich of the follo!ing forms of pricing A) by-product B) inflation-adusted C) cash discounts D) captive-product ) penetration Ans!er" C Diff" % #age $ef" %1: AAC&B" $eflective hin'ing &'ill" Application (bective" 11-% >1) &ecret &nea'er !ill give anyone E1 for their old snea'ers, regardless of condition, !hen purchasing a ne! pair of snea'ers. he end result is essentially reducing the price of the ne! snea'ers by E1.
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>*) Bose prices its most e?pensive noise reduction earphones at E%>>.>6, !hich is a full E1. more than its ne?t most e?pensive earphones. 3t costs Bose only a fe! dollars more to ma'e the most e?pensive earphones. Bose is using ________ pricing. A) customer-segment B) product-form C) s'imming D) penetration ) captive-product Ans!er" B Diff" % #age $ef" %1: AAC&B" $eflective hin'ing &'ill" Application (bective" 11-% >%) he Chicago Bears organiation charges different prices for seats in different areas of the &oldier Iield, even though the costs are the same. his form of pricing is called ________. A) location pricing B) s'imming pricing C) product form pricing D) fle?ible pricing ) penetration pricing Ans!er" A Diff" * #age $ef" %1: AAC&B" $eflective hin'ing &'ill" Application (bective" 11-% >5) 7anor Cinemas has announced that seniors over : years of age can enter the theater for free prior to 5" p.m. !hen accompanied by a paying customer. his is an e?ample of ________. A) promotional pricing B) discounts and allo!ances C) by-product pricing D) product bundle pricing ) none of the above Ans!er" A Diff" * #age $ef" %* AAC&B" $eflective hin'ing &'ill" Application (bective" 11-%
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>6) he HC :) 3f +orth!est A!nings charges the same price for delivery of their product to any customer that is located !ithin the Freat 9a'es states, the company is using ________. A) psychological pricing B) promotional pricing C) reference pricing D) one pricing ) uniform-delivered pricing Ans!er" D Diff" % #age $ef" %*1 AAC&B" $eflective hin'ing &'ill" Application (bective" 11-% >0) Big 7i'es 4ealth Iood &tore sells nutritional energy-producing foods. he price of the products sold varies according to individual customer accounts and situations. Ior e?ample, long-time customers receive discounts. his strategy is an e?ample of ________. A) price elasticity B) cost-plus pricing C) dynamic pricing D) value pricing ) penetration pricing Ans!er" C Diff" % #age $ef" %** AAC&B" $eflective hin'ing &'ill" Application (bective" 11-%
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>=) &avings for Mou, a discount retail chain, is highly competitive.
Guills, 3nc., is a manufacturer of ballpoint pens, pencils, and stationery. he firms primary distribution strategy is to sell in large volumes to office supply stores and large discount chains. Charles #o!ell, C( of Guills, had hoped to manufacture and sell in large enough /uantities that prices could be held lo!. 4o!ever, in the first several months, the firm e?perimented !ith the price portion of its mar'eting mi? in an effort to cater to a number of mar'ets. >>) > Copyright 2 *1 #earson ducation, 3nc. #ublishing as #rentice 4all
11) #ricing strategies tend to change and evolve as the average product passes through its life cycle. Ans!er" $J Diff" 1 #age $ef" %1* &'ill" Concept (bective" 11-1 1*) 6. his is an illustration of price steps. Ans!er" $J Diff" 1 #age $ef" %15 AAC&B" $eflective hin'ing &'ill" Application (bective" 11-*
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11%) 7anufacturers may offer functional discounts !ithin trade channels for channel members !ho store inventory. Ans!er" $J Diff" % #age $ef" %1: &'ill" Concept (bective" 11-% 115) he basic difference bet!een customer-segment pricing and product-form pricing is that the latter offers alternative versions of the product that are priced differently but not according to differences in their costs. Ans!er" $J Diff" % #age $ef" %1: AAC&B" Analytic &'ills &'ill" Application (bective" 11-% 116) &egmented pricing is 'no!n by other names@ t!o of the most common are revenue management and yield management. Ans!er" $J Diff" * #age $ef" %10 &'ill" Concept (bective" 11-% 11:)
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11>) he I(B-origin pricing strategy means that the goods sold are placed free on board a carrier. At that point the title and responsibility pass to the customer, !ho pays the freight from the factory to the destination. Ans!er" $J Diff" % #age $ef" %*1 &'ill" Concept (bective" 11-% 1*) None pricing involves the customer paying for the shipping if they live outside the one !here the company is located. Ans!er" IA9& Diff" * #age $ef" %*1 &'ill" Concept (bective" 11-% 1*1) Ii?ed price policiesone price for all buyersis a relatively modern idea that arose at the end of the nineteenth century. Ans!er" $J Diff" * #age $ef" %** &'ill" Concept (bective" 11-% 1**) A company considering a price change should be more concerned about consumers reactions than competitors reactions. Ans!er" IA9& Diff" % #age $ef" %*6 &'ill" Concept (bective" 11-5 1*%) Mour company may respond to a competitors price reduction by launching a lo!-price fighting brand. his is li'ely necessary if the particular mar'et segment being lost is price sensitive and !ill not respond to arguments of higher /uality. Ans!er" $J Diff" % #age $ef" %*0 &'ill" Concept (bective" 11-5 1*5) &tate and federal governments accept some reasons for price-fi?ing !hen it does not limit competition. Ans!er" IA9& Diff" * #age $ef" %*= AAC&B" thical $easoning &'ill" Concept (bective" 11-5
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1*=) ?plain product line pricing. Ans!er" )
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1%1) ?plain the factors involved in setting international pricing. Ans!er" 3n some cases, a company can set a uniform !orld!ide price. 4o!ever, most companies adust their prices to reflect local mar'et conditions and cost considerations. A firm must consider economic conditions, competitive situations, la!s and regulations, and development of the !holesale and retail system. Consumer perceptions and preferences also may vary from country to country, calling for different prices. he company may have different mar'eting obectives in various !orld mar'ets. Costs play an important role in setting international prices. 7anagement must prepare for price escalation that may result from the differences in selling strategies or mar'et conditions. he additional costs of product modifications, shipping and insurance, import tariffs and ta?es, e?change-rate fluctuations, and physical distributions must all be factored into the Kprice.K Diff" * #age $ef" %*% AAC&B" 7ulticultural and Diversity &'ill" Application (bective" 11-% 1%*)
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1%5) AAC&B" thical $easoning &'ill" Application (bective" 11-5 1%:) Ior !hat types of products might mar'eters use mar'et-s'imming pricing Ans!er" &uch pricing !or's !hen the products /uality and image support the higher price@ for e?ample, companies selling high-tech electronics may use mar'et-s'imming pricing. Diff" * #age $ef" %1* AAC&B" Analytic &'ills &'ill" Application (bective" 11-1 1%0) Ior !hat types of products might mar'eters use mar'et-penetration pricing Ans!er" 7ar'eters use such pricing !hen attempting to attract a large number of buyers /uic'ly and !in a large mar'et share@ such pricing may be common !hen competition for products is high. Diff" * #age $ef" %1% AAC&B" Analytic &'ills &'ill" Application (bective" 11-1
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1%=) ) Five t!o e?amples of products for !hich mar'eters may use optional-product pricing. Ans!er" &uch products may include refrigerators !ith icema'ers and cars !ith options such as stereos, F#&, and cruise control. Diff" 1 #age $ef" %15 AAC&B" $eflective hin'ing &'ill" Application (bective" 11-* 15) Five t!o e?amples of products for !hich captive-product pricing may be used. Ans!er" Captive-product pricing is used !hen pricing theater tic'ets and selling refreshments at a higher rate@ it is also used !hen pricing game consoles along !ith video games. Diff" % #age $ef" %15 AAC&B" $eflective hin'ing &'ill" Application (bective" 11-* 151) Five t!o e?amples of by-product pricing. Ans!er" ?amples could include selling scrap metal after producing metal stampings or selling donut holes after producing donuts. Diff" * #age $ef" %16 AAC&B" $eflective hin'ing &'ill" Application (bective" 11-* 15*) 4o! do consumers benefit from product bundle pricing Ans!er" &everal products are sold together at a reduced rate@ vacation pac'ages that include air and hotel or value meals in the fast-food industry are e?amples. Diff" * #age $ef" %16 AAC&B" Analytic &'ills &'ill" Application (bective" 11-* 15%) Five an e?ample of a cash discount. Ans!er"
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155) 9ist four types of segmented pricing. Ans!er" Customer-segment pricing, product-form pricing, location pricing, and time pricing are all e?amples. Diff" % #age $ef" %1: AAC&B" Analytic &'ills &'ill" Application (bective" 11-% 156) ?plain the psychology behind a price of E>.>> instead of E1.. Ans!er" Consumers typically see the E>.>> product in the E> range instead of the E1 range@ the price appears to psychologically be cheaper. Diff" * #age $ef" %* AAC&B" Analytic &'ills &'ill" Application (bective" 11-% 15:) 9.9. Bean sells its catalog items I(B-origin pricing. AAC&B" thical $easoning &'ill" Application (bective" 11-5 15>) 4o! can a manufacturer avoid using retail price maintenance but still e?ert some influence over the price retailers charge for its product Ans!er" he manufacturer can propose a suggested retail price. Diff" 1 #age $ef" %% AAC&B" thical $easoning &'ill" Application (bective" 11-5
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