Exam 13: Building the Price Foundation

A recently graduated business student decided to open a small Internet café serving a variety of unusual nonalcoholic beverages from around the world. He carefully used all the pricing formulas he learned in school and set a goal to break even the first six months and make a moderate profit for the next six months, at which time he would review his pricing strategies. Within a week after opening, every seat was filled and he had to replenish his beverage orders several times. At his six-month review, he was devastated to find that despite huge sales, he had actually lost money. He realized it wasn't his math that was wrong; he forgot to include monthly expenses such as toilet paper, paper towels, and hand soap in his calculations. These costs should have appeared as __________ in his break-even analysis.

List four key factors used to estimate demand.

Factors that determine consumers' willingness and ability to pay for products and services are referred to as

A firm's profit objective is often measured in terms of ROA. The acronym ROA stands for

Factors other than price affect demand. What are they and how do they work?

The quantity at which total revenue and total cost are equal is referred to as

According to the price equation, a product's or service's final price equals its list price minus incentives and allowances plus

Describe the pricing constraints a firm is likely to face.

Rent, executive salaries, and insurance are typical examples of

Specifying the role of price in an organization's marketing and strategic plans is referred to as

Value-pricing refers to

Which of the following would be an example of an objective in Step 1 of the price-setting process?

Many cosmetology schools allow their advanced students to style hair for "real-world" clients for a reduced fee. The students benefit from the experience, the clients get a less expensive haircut, and the school is able to provide students with additional training without costing it anything; in fact, they even profit from it. This is an example of

What is the difference between a movement along a demand curve and a shift of a demand curve?

The break-even point (BEP) = [Fixed cost ÷ (__________ - Unit variable cost)].

Over time, Apple has had great latitude in setting and maintaining a premium price. Its long-term strategy was to have only a single model in a product line targeted at high-end users. However, lower-cost rival smartphones, many of which were powered by Google's Android operating system, entered the market. One concern for Apple is

Which of the following statements regarding pricing constraints is most accurate?

The maximum quantity of products consumers will buy at given price is shown by

Managing for long-run profits implies that a company will

Florida Power & Light, an electric power company, is the only source of electricity for consumers in most parts of the Florida panhandle. The company is __________, despite the fact that it must seek approval from the state utility commission for the rates it can charge.