#1
What is the formula for calculating profit?
Profit = Revenue - Cost
ExplanationProfit is what remains after deducting costs from revenue.
#2
What is the break-even point?
The point where total revenue equals total costs
ExplanationBreak-even point is where a business covers all its costs and makes no profit.
#3
What does price elasticity of demand measure?
The responsiveness of quantity demanded to changes in price
ExplanationPrice elasticity of demand assesses how demand changes with price.
#4
What is contribution margin?
The difference between total revenue and total variable costs
ExplanationContribution margin shows the proportion of revenue remaining after variable costs.
#5
What is the difference between markup and margin?
Markup is the percentage of profit on cost, while margin is the percentage of profit on revenue.
ExplanationMarkup represents profit as a percentage of cost, while margin represents profit as a percentage of revenue.
#6
Which of the following is NOT a pricing strategy?
Marginal pricing
ExplanationMarginal pricing is not a recognized pricing strategy.
#7
What is the role of cost-plus pricing?
To set prices by adding a markup to the cost of production
ExplanationCost-plus pricing adds a markup to production costs to determine prices.
#8
Which of the following is an advantage of dynamic pricing?
Ability to respond to changes in demand and competition
ExplanationDynamic pricing allows adjustment of prices based on market conditions in real-time.
#9
What is the purpose of sensitivity analysis in pricing?
To assess how sensitive profit is to changes in key variables
ExplanationSensitivity analysis evaluates how changes in variables affect profit.
#10
What is the goal of value-based pricing?
To set prices based on the perceived value to customers
ExplanationValue-based pricing aligns prices with customer perception of value.
#11
What is price skimming?
Setting a high initial price to target early adopters and recoup development costs
ExplanationPrice skimming involves setting high prices initially to capture early adopter segments.
#12
What is the purpose of a price floor?
To set a minimum acceptable price for a product
ExplanationPrice floor establishes a minimum price for a product or service.
#13
What is target costing?
Setting prices based on production costs and desired profit margin
ExplanationTarget costing involves setting prices based on desired profit margins and production costs.
#14
What is meant by predatory pricing?
Setting low prices to eliminate competition
ExplanationPredatory pricing involves setting low prices to drive competitors out of the market.