Tom Likes to Drink Scotch Whiskey

question 133

Multiple Choice

Tom likes to drink scotch whiskey.He was familiar with the Johnny Walker Black Label brand,which he purchased for around $30.When he found a bottle of Johnny Walker Black Label priced at more than $200,he was positive that it would be a much finer whiskey.For Tom,_____ indicated quality.

• A) premium pricing
• B) price lining
• C) prestige pricing
• D) exclusive pricing
• E) selective pricing

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Definitions:

Risk and Return

The principle that potential return on investment rises with an increase in risk. Higher risk is associated with the greater probability of higher return and vice versa.

Moral Hazard

The tendency of a person who is imperfectly monitored to engage in dishonest or otherwise undesirable behavior.

Diversification

An investment strategy that minimizes risk by allocating assets among various financial instruments, industries, or other categories.

Market Risk

Risk that affects all companies in the stock market.