Question 1

The average price Washburn charges for a guitar is $349.This price must cover its variable costs of $25 for direct materials and $120 in direct labor.It must also cover fixed expenses of $38,000.Assuming everything else stays the same,the company's planned move to Nashville,Tennessee,will reduce its fixed costs by $4,800.This would cause total costs to __________ and the break-even quantity to __________.

Accepted Answer

A) decrease;stay the same 
B) decrease;increase 
C) increase;increase 
D) stay the same;increase 
E) decrease;decrease

Question 2

Washburn Guitars markets its guitars to four distinct market segments.The firm's one-of-kind custom instruments are targeted at

Accepted Answer

A) first-time buyers. 
B) professional musicians. 
C) stars and collectors. 
D) large institutional buyers such as high school and collegiate band programs. 
E) intermediate-skill players who may become professional musicians.

Question 3

Pure competition is the competitive situation where

Accepted Answer

A) many sellers follow market price for identical,commodity products. 
B) one seller sets the price for a unique product. 
C) few sellers are sensitive to one another's prices. 
D) many sellers compete on nonprice factors. 
E) one or few sellers compete solely on nonprice factors.

Question 4

Microsoft,Sony,and Nintendo are the three principal firms in the video game console market.How much price competition is most likely for video game makers?

Accepted Answer

A) There is almost none;the market sets the price. 
B) There is some competition within a range of prices. 
C) There is generally a price leader that sets the price. 
D) Each firm is aware of each other's prices and may adjust them based on the prices of the other two firms. 
E) Price is set by the seller but regulated by the government.

Question 5

Attorneys' fees,entrance fees,train fares,and organization dues are all examples of

Accepted Answer

A) premiums. 
B) barter. 
C) profit. 
D) price. 
E) outlays.

Question 6

To increase value,marketers may __________,decrease price,or do both.

Accepted Answer

A) decrease benefits 
B) increase benefits 
C) increase price 
D) increase advertising 
E) do nothing and let the perceived value of the item increase as it matures in the life cycle

Question 7

If you wanted to buy a McDonald's Big Mac,small fries,and a small drink separately,it will you cost you $6.19.However,if you purchased these three items together as part of the firm's Extra Value Meal package,you would pay only $4.39,savings 80¢.This "Extra Value Meal" price serves as __________ to you and other consumers,who compare the costs and benefits of substitute items to a bundle containing those items.

Accepted Answer

A) a marginal analysis 
B) a profit equation 
C) a reference value 
D) a break-even analysis 
E) price elasticity of demand

Question 8

Value-pricing refers to

Accepted Answer

A) the ratio of perceived benefits to price. 
B) is the money or other considerations exchanged for the ownership or use of a product or service. 
C) the practice of simultaneously increasing product and service benefits while maintaining or decreasing price. 
D) the ratio of price to perceived benefits. 
E) list price minus incentives and allowances plus extra fees.

Question 9

Each month,the owner of a carwash pays $2,500 in rent,$500 in utilities,$750 interest on the business loan,an insurance premium of $200,and $250 on advertising on local bus routes.A full-service carwash is priced at $10.50.Unit variable costs for the carwash are $7.50.At what level of revenue will the carwash break-even?

Accepted Answer

A) $4,200 
B) $10,500 
C) $14,700 
D) $30,000 
E) $39,900

Question 10

If a firm finds the demand for one of its products is inelastic,it can increase its total revenues by

Accepted Answer

A) lowering its price. 
B) increasing fixed costs only. 
C) increasing variable costs only. 
D) increasing both fixed and variable costs. 
E) raising its price.

Question 11

Figure 13-2 above represents the six steps in setting price.Which letter represents the step where a firm would estimate demand?

Accepted Answer

A) "A" 
B) "B" 
C) "C" 
D) "D" 
E) "E"

Question 12

What is StubHub's pricing formula?

Accepted Answer

The answer of What is StubHub's pricing formula?...

Question 13

Objectives like profit,market share,and survival as well as constraints such demand for product class and brand,newness,costs,and competition are issues that would be addressed during __________ of the price-setting process.

Accepted Answer

A) Step 1 
B) Step 2 
C) Step 3 
D) Step 4 
E) Step 5

Question 14

In Figure 13-10 above,which is a break-even chart that depicts a graphic presentation of a break-even analysis for a picture frame store,the green-shaded area "GAF" represents the firm's

Accepted Answer

A) fixed costs. 
B) break-even point. 
C) variable costs. 
D) profit. 
E) total revenue.

Question 15

Define marginal analysis.

Accepted Answer

The answer of Define marginal analysis....

Question 16

Which of the following statements would most likely be spoken during Step 2 of the price-setting process?

Accepted Answer

A) "It's important to offer discounts to seniors." 
B) "We have to try to achieve an 8% profit share." 
C) "The starting price should be $4.99 and we can raise the price again in six months." 
D) "But,if we increase the price even by one dollar,how many customers will we lose?" 
E) "We should probably price the extra large version somewhere between $600 and $650."

Question 17

The use of "special fees" and "surcharges" is driven by consumers' zeal for low prices and __________.

Accepted Answer

A) the ease of making price comparisons on the Internet 
B) value,the idea of getting "more" for their money 
C) the need for extra accessories 
D) avoiding state sales taxes from Internet purchases 
E) a dislike of price haggling or negotiating

Question 18

Which of the following is a typical example of a variable cost?

Accepted Answer

A) shipping costs 
B) rent on a building 
C) executive salaries 
D) insurance premiums 
E) leases on delivery trucks

Question 19

Campbell Soup spent seven years and $55 million on a super secret project to produce a line of Intelligent Quisine (IQ)food products "scientifically proven to lower high levels of cholesterol,blood sugar,and blood pressure." They were responding to the needs and desires expressed by consumers.However,after 15 months in an Ohio test market,Campbell Soup yanked the entire IQ line because

Accepted Answer

A) Progresso Soups got to the stores first with a similar product and dominated the shelf space. 
B) the product's claims were exaggerated and not backed up with scientific data. 
C) the product was priced too high and there was too little product variety. 
D) the price was too low,leaving the consumer believing that Campbell's sacrificed taste for nutrition. 
E) a downturn in the economy shifted people's desire from a healthy lifestyle to a desire for home and comfort.The new soups were too different from the product they remembered as children.

Question 20

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

Accepted Answer

A) "We can rely on our reputation for our other products in the line." 
B) "Experts are predicting a surge in global demand." 
C) "We need to make allowances for large quantity orders." 
D) "We should increase the price during the holiday shopping season." 
E) "Remember,we don't know what the selective demand for this new product will be."

Exam 13: Building the Price Foundation