CMC CMC Pricing Strategy & Revenue Management 2 — Questions and Answers
Question 1: Dynamic pricing adjusts prices based on:
- Annual cost-of-living increases
- Real-time market conditions such as demand fluctuations (Correct answer)
- A predetermined fixed annual schedule
- Government price guidelines
Correct answer: Real-time market conditions such as demand fluctuations
Dynamic pricing changes prices in real time in response to shifting demand, competitor prices, or inventory levels to optimize revenue.
Question 2: A company's price floor is defined as:
- The maximum price it can charge in a regulated market
- The minimum price below which it cannot profitably sell (Correct answer)
- The average price charged by competitors
- The price at which demand becomes perfectly inelastic
Correct answer: The minimum price below which it cannot profitably sell
The price floor is the lowest price a company can set while still covering its costs and achieving its minimum required profit margin.
Question 3: Bundle pricing involves:
- Charging different prices for the same product in different markets
- Offering several products together at a combined lower price (Correct answer)
- Setting prices based on time of purchase
- Pricing based on customer loyalty status
Correct answer: Offering several products together at a combined lower price
Bundle pricing packages multiple products or services together at a combined price lower than if purchased individually, increasing perceived value.
Question 4: Price discrimination involves:
- Charging the same price to all customer segments
- Charging different prices to different customer groups for the same product (Correct answer)
- Setting prices below cost to eliminate competition
- Using random pricing to test market response
Correct answer: Charging different prices to different customer groups for the same product
Price discrimination charges different customer segments different prices for the same product based on their varying willingness to pay, maximizing total revenue.
Question 5: In pricing decisions, contribution margin is defined as:
- Total revenue minus total fixed costs
- Revenue per unit minus variable cost per unit (Correct answer)
- Net profit after all expenses
- The percentage of market share held by a product
Correct answer: Revenue per unit minus variable cost per unit
Contribution margin is the revenue from a product minus its variable costs, showing how much each unit sold contributes toward covering fixed costs and generating profit.
Question 6: A freemium pricing model offers:
- A free product with no paid upgrade option
- A basic version for free with premium features available for a fee (Correct answer)
- Discounts for bulk purchases
- Free shipping on orders over a set threshold
Correct answer: A basic version for free with premium features available for a fee
The freemium model provides a free basic product to attract users, then monetizes by charging for advanced or premium features.
CMC CMC Pricing Strategy & Revenue Management 2
Dynamic pricing adjusts prices based on: