Deck 13: Building the Price Foundation

Question 1

Susan hired an attorney to represent her in a court case involving an auto accident. The attorney charged her a $2,000 retainer fee for the services. Terry needed a haircut; the local stylist charged him $12 for his services. Aaron mowed his neighbor's lawn; in exchange, the neighbor repaired his gutters. The attorney fees, the $12 charged by the hair stylist, and the exchange of lawn mowing for gutter repair are all examples of

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

Answer 1

D

Question 2

VIZIO is the market leader in the North American ________ market.

A) designer eyewear
B) broadcast media
C) smart TV
D) virtual reality gaming
E) luxury travel

Answer 2

C

Question 3

A company that manages apartments decides to buy 15 new dishwashers at a list price of $550 each as replacements for old dishwashers in a small apartment complex it owns. Because the company is buying more than 10 dishwashers, it is eligible for a $150-per-unit quantity discount. Financing charges total $20 per unit. The company gets $10 per dishwasher for the 15 dishwashers traded in. What is the final price the company will pay for each dishwasher?

A) $390
B) $400
C) $410
D) $430
E) $730

Answer 3

C

Question 4

All of these statements about price are true exceptwhich?

A) Small changes in price can have big effects on both the number of units sold and company profit.
B) The price for a product or service must earn a profit for the company.
C) For most products and services, there is an agreed-upon price range set by makers.
D) The price must be "right"-in the sense that customers must be willing to pay it.
E) The price must generate enough sales dollars to pay for the cost of developing, producing, and marketing the product.

Question 5

Which of these is an example of a price?

A) fare
B) operating costs
C) liquidity
D) value
E) brand equity

Question 6

According to the price equation, final price equals list price minus ________ plus extra fees.

A) profits
B) commissions
C) trade-ins
D) taxes
E) allowances

Question 7

Wilkinson Sword exchanged some of its knives for advertising used to promote its razor blades. This is an example of

A) barter.
B) reciprocal pricing.
C) virtual pricing.
D) balance of payments.
E) value pricing.

Question 8

Insurance premiums, entrance fees, train fares, and organization dues are all examples of

A) charges.
B) countertrade.
C) profit.
D) price.
E) currency.

Question 9

Barter is the practice of exchanging products and services for other products and services rather than for

A) value.
B) ideas.
C) promises.
D) tariffs.
E) money.

Question 10

Suppose you want to buy a Tesla Model S, an all-electric, zero-emission car that has a 265-mile range and can be recharged in three hours. The Tesla Model S Performance model has a list price of $87,500. However, you want several options (Performance Plus Package, red multicoat armor paint, Tech Package, Sound Studio Package, home charging station, performance wheels, and others) that will cost $17,500. An extended warranty will add an additional $5,000. However, if you put $50,000 down now and finance the balance over the next year, you will receive a dealer rebate of $5,000 off the list price. The dealer will give you a $7,000 trade-in allowance for your 2014 Honda Civic DX four-door sedan. In addition, you will have to pay a state sales tax of $10,000, an auto registration fee of $1,000 to the state, and a $1,000 destination charge to ship and prep the car. But because the Tesla Model S is an alternative energy vehicle, you qualify for a $2,500 state rebate and a $7,500 federal tax credit! Finally, your total finance charge is $7,000. Applying the price equation, what is your final price for the Tesla Model S?

A) $57,000
B) $68,000
C) $87,500
D) $107,000
E) $151,000

Question 11

From a marketing viewpoint, ________ is the money or other considerations (including other products and services) exchanged for the ownership or use of a product or service.

A) value
B) price
C) barter
D) currency
E) a tariff

Question 12

VIZIO's HDTVs are sold through all of these types of retailers exceptwhich?

A) Amazon.com
B) mass merchandisers, such as Target
C) its own brick-and-mortar stores
D) wholesale club stores such as Sam's Club
E) electronics stores such as Best Buy

Question 13

The practice of exchanging products and services for other products and services rather than for money is referred to as

A) barter.
B) reciprocal pricing.
C) virtual pricing.
D) balance of payments.
E) value pricing.

Question 14

In order to deliver a product that the average consumer can afford, VIZIO

A) handles product design and marketing in the United States and relies on contract manufacturers in other countries to build the product.
B) uses mass customization in other countries and then ships the HDTVs to the United States.
C) purchased a small company in China to distribute its products under the VIZIO name.
D) purchased a small company in Japan to distribute its products under the VIZIO name.
E) relies solely on recycled materials to build high-quality, no-frills products.

Question 15

Tara is enrolled for spring semester at college. The tuition is $6,000, but she has a scholarship for $1,000 as well as a work-study grant of $1,500. The health fees and student activity fees are $150 for the semester. What is the final price that Tara will pay for the spring semester?

A) $2,500
B) $2,650
C) $3,150
D) $3,650
E) $6,150

Question 16

A common pricing tactic today is the use of special fees and surcharges that add to a list price, a response to consumers' zeal for ________ combined with the ease of making price comparisons on the Internet.

A) readily accessible information
B) low prices
C) quality
D) value
E) warranties

Question 17

Barter is

A) a reciprocity agreement stipulating that if company A purchases services from company B, then company B must purchase similar services from company A.
B) a tying agreement stipulating that if company A purchases a product from company B, it must also purchase one of its services.
C) the practice of exchanging products and services for other products and services rather than for money.
D) the practice of exchanging services for products of equal or greater value.
E) the practice of exchanging products and services for money.

Question 18

According to the price equation, final price equals ________ minus allowances plus extra fees.

A) salaries
B) list price
C) profits
D) trade-ins
E) taxes

Question 19

All of these are alternate names for the price you pay on goods and services exceptwhich?

A) rent
B) interest
C) tuition
D) dues
E) profit

Question 20

Price is

A) the value assigned to the exchange of products and services for other products and services.
B) the value judgment made by both the buyer and seller regarding an item's worth.
C) the money or other considerations exchanged for the ownership or use of a product or service.
D) the value assessed for the benefits of using a product or service.
E) the highest monetary value a customer is willing to pay for a product or service.

Question 21

A reference value involves comparing the costs and benefits of

A) substitute items.
B) items of equal or greater value.
C) products with which a consumer is familiar and items the consumer has not seen or used before.
D) items from one particular manufacturer or distributor.
E) intangible items.

Question 22

The ratio of ________ to price is referred to as value.

A) prestige
B) perceived benefits
C) costs
D) anticipated quality
E) profits

Question 23

Marketers may engage in value pricing, which is the practice of simultaneously ________ while maintaining or decreasing price.

A) promoting specific product and service benefits
B) increasing product and service benefits
C) decreasing profit
D) analyzing benefits
E) decreasing cost

Question 24

The practice of simultaneously increasing product and service benefits while maintaining or decreasing price is referred to as

A) value pricing.
B) customer-value pricing.
C) competitive pricing.
D) cost pricing.
E) demand pricing.

Question 25

Most consumers realize that the quality of diamonds varies, and many believe the higher the price of a diamond, the higher its quality. This is an example of price influencing the perception of overall quality and therefore ________ to consumers.

A) acceptable cost
B) perceptual investment
C) barter potential
D) return on investment
E) value

Question 26

To increase value the most, marketers should

A) decrease benefits.
B) decrease benefits and increase price.
C) decrease price and increase benefits.
D) decrease price and decrease benefits.
E) hold the price steady and let the perceived value of the item increase as it matures in its life cycle.

Question 27

Which of these statements is most accurate?

A) For some products, price influences the perception of overall quality, and ultimately value, to consumers.
B) A consumer's view of a product's value depends almost entirely on external assessments of quality.
C) A consumer's view of value is a function of his or her education and income.
D) Price plays only a small part in a consumer's perceived value of a product or service.
E) Price plays a large role in assessing value but a very minor role in assessing quality.

Question 28

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

A) decrease promotion
B) increase benefits
C) decrease distribution
D) increase advertising
E) allow the perceived value of the item to increase as it matures in the life cycle

Question 29

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 provides students with additional training while generating revenue as well. The haircut pricing is an example of

A) value pricing.
B) societal pricing.
C) revenue sharing.
D) barter.
E) cost-assist pricing.

Question 30

A major grocery chain pays its baggers a regular hourly wage. The baggers not only pack the groceries, but they also will take customers' groceries to their car, regardless of the weather. The baggers are not permitted to accept tips, even if they are offered. The consumer will experience this as

A) pricing enhancement.
B) societal pricing.
C) revenue sharing.
D) value pricing.
E) cost-plus pricing.

Question 31

The ratio of perceived benefits to ________ is referred to as value.

A) price
B) prestige
C) anticipated quality
D) profits
E) discounts

Question 32

If you know the contents and price of a McDonald's Extra Value Meal, it may serve as ________ to you when you visit other fast-food restaurants and consider the purchase of a meal option there.

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

Question 33

According to the profit equation, profit equals

A) Total cost + Total revenue.
B) Total revenue − Total cost.
C) Marginal revenue − Marginal cost.
D) Price × Quantity.
E) Total revenue + Marginal cost.

Question 34

When Pizza Hut announced it was going to add 25 percent more toppings to its Meat Lover's line of pizzas without increasing prices, consumers benefited from an increase in what?

A) cost
B) appearance
C) value
D) price
E) quality

Question 35

A reference valueis developed by the consumer through

A) considering the amount of time and energy a consumer puts into the purchase process.
B) judging the value assigned to similar items used by the consumer's peers.
C) performing a careful break-even analysis.
D) comparing the costs and benefits of substitute items.
E) examining the true difference between customers' "needs" and "wants."

Question 36

Value pricing is

A) the ratio of perceived benefits to price.
B) 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) the list price minus incentives and allowances plus extra fees.

Question 37

If a McDonald's menu board advertises Mini Meals, a small bundle of items for $3, McDonald's is most likely using which type of pricing strategy?

A) predatory pricing
B) value pricing
C) loss-leader pricing
D) odd-even pricing
E) barter

Question 38

________ = (Unit price × Quantity sold) − Total cost.

A) Total revenue
B) Variable cost
C) Net present value
D) Profit
E) Break-even point

Question 39

The ratio of perceived benefits to price is referred to as

A) the price-quality relationship.
B) customer-value pricing.
C) value-added pricing.
D) value analysis.
E) value.

Question 40

In the purchase of the sugar substitute Splenda, you may compare it to something you know about like real sugar. Although Splenda is more expensive than sugar, it is purchased by many consumers because it sweetens with no calories. Here, the consumer is considering

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

Question 41

George and Alice Renfro decided to start a family business in 1990 to produce chowchow, a Southern regional food. To determine how they would price the chowchow, the Renfros had to examine (1) the demand for the product the cost to distribute the product to area grocery stores. The Renfros are doing which step of the price-setting process?

A) identifying pricing constraints
B) estimating break-even points and revenue points
C) setting the list price
D) selecting an approximate price level
E) determining cost, volume, and profit relationships

Question 42

Which statement would most likely be spoken while determining cost, volume, and profit relationships in the price-setting process?

A) "In order to break even, we will need to sell at least 500,000 units."
B) "We have to try to achieve an 8 percent 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 $1, how many customers will we lose?"
E) "We should probably price the extra-large version somewhere between $600 and $650."

Question 43

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

A) risk opportunity investment.
B) revised organizational incentives.
C) return on investment.
D) regulated organizational investments.
E) replenishment of organizational inventories.

Question 44

Which statement would most likely be spoken by someone in the midst of estimating demand and revenue in the price-setting process?

A) "It's important to offer discounts to seniors."
B) "We have to try to achieve an 8 percent 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 $1, how many customers will we lose?"
E) "We should probably price the extra-large version somewhere between $600 and $650."

Question 45

Which of the following are elements involved in Step 1 of the price-setting process?

A) objectives and constraints
B) estimation of demand, sales revenue, and price elasticity
C) cost estimation, marginal analysis, and break-even analysis
D) demand for the product class and brand, newness of the product, and competition
E) market segmentation targeting, and positioning

Question 46

Which of these are elements of determining cost, volume, and profit relationships in the price-setting process?

A) objectives and constraints
B) estimation of demand, sales revenue, and price elasticity
C) cost estimation, marginal analysis, and break-even analysis
D) demand for the product class and brand, newness of the product, and competition
E) market segmentation targeting, and positioning

Question 47

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

A) We can rely on our reputation for our other products in the line.
B) We expect to make a profit of $1.2 million.
C) We need to make allowances for large quantity orders.
D) We should increase the price during the holiday shopping season.
E) We're going to face some aggressive competition.

Question 48

Which of the following represent elements of Step 2 of the price-setting process?

A) constraints and objectives
B) estimation of demand, sales revenue, and price elasticity
C) cost estimation, marginal analysis, and break-even analysis
D) demand for the product class and brand, newness of the product, and competition
E) market segmentation, targeting, and positioning

Question 49

While pricing objectives frequently reflect corporate goals, pricing constraints often relate to

A) stockholder demands.
B) political ideology.
C) conditions existing in the marketplace.
D) an organization's code of ethics.
E) the financial realities within the organization itself.

Question 50

All of these are examples of pricing objectives exceptwhich?

A) market share
B) survival
C) unit sales
D) social responsibility
E) product obsolescence

Question 51

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

A) choosing a pricing plan.
B) defining a profit mission.
C) developing pricing constraints.
D) setting pricing objectives.
E) determining the list or quoted price.

Question 52

Which of these statements regarding pricing objectives is most accurate?

A) Pricing objectives are similar to core values in that there is little to no change in them over time.
B) Pricing objectives may change depending on the segments in which a company is doing business.
C) Pricing objectives may change depending upon the cost of advertising.
D) Pricing objectives are established exclusively by the marketing department.
E) Pricing objectives are extremely sensitive to even the slightest change in the local economy.

Question 53

Calculate a firm's profit using the following information: the unit price (P) for a product is $40; the quantity sold (Q) is 2,000; the fixed cost (FC) is $50,000; and the variable cost (VC) is $20,000.

A) $10,000
B) $50,000
C) $110,000
D) $150,000
E) cannot be determined with the information provided

Question 54

The break-even point for a large grain farming operation was calculated to be 2 million bushels of corn. Break-even analysis would take place during which step of the price-setting process?

A) identify pricing objectives and constraints
B) determine cost, volume, and profit relationships
C) estimate demand and revenue
D) select an approximate price level
E) make special adjustments to list or quoted price

Question 55

An analysis of a prospective product shows that sales for it are expected to grow by at least 10 percent each year over the next five years before it enters the maturity phase of its product life cycle. This type of analysis would provide useful information in which step of the price-setting process?

A) identifying pricing objectives and constraints
B) determining cost, volume, and profit relationships
C) estimating demand and revenue
D) selecting an appropriate (approximate) price lining strategy
E) making special adjustments to list or quoted price

Question 56

Pricing objectives involve

A) reconciling the prices charged by an organization to the values set forth in its business mission.
B) taking specific steps to capitalize on an organization's internal strengths as they apply to price.
C) specifying the role of price in an organization's marketing and strategic plans.
D) taking specific steps to compensate for an organization's weaknesses as they apply to price.
E) subjectively setting intrinsic values to all products and services offered by an organization.

Question 57

The formula Total revenue − Total cost or [(Unit price × Quantity sold) − (Fixed cost + Variable cost)] represents

A) the value equation.
B) the sales ratio.
C) average revenue.
D) the break-even point.
E) the profit equation.

Question 58

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

A) We need to estimate the demand for this new product.
B) We can rely on our reputation to introduce this product.
C) Experts are predicting a slowing global economy.
D) We need to forget profits right now; just make sure we break even.
E) We need to hire a professional accountant.

Question 59

A firm's profit equals

A) Total cost + Total revenue or [(Fixed cost + Variable cost) + (Unit price × Quantity sold)].
B) Total revenue − Total cost or [(Unit price × Quantity sold) − (Fixed cost + Variable cost)].
C) Total cost − Marginal cost or [(Fixed cost + Variable cost) − (Unit price × Quantity sold)].
D) Total cost − Variable cost or [(Fixed cost + Variable cost) − (Unit price × Quantity sold)].
E) Total revenue/Total cost or [(Unit price × Quantity sold) ÷ (Fixed cost + Variable cost)].

Question 60

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

A) We need to set an initial price of $259 per unit.
B) We need to obtain a 10 percent market share.
C) We need to find the least expensive distributor.
D) We need to make allowances for large quantity orders.
E) We need to increase the price during the holiday shopping season.

Question 61

The ratio of the firm's sales revenues or unit sales to those of the industry (competitors plus the firm itself) is referred to as

A) target return on sales.
B) industry profit.
C) unit volume.
D) market share.
E) profit.

Question 62

Three different pricing objectives relate to a firm's profit. One objective, known as ________, is common in many firms because the targets can be set and performance measured quickly though sometimes criticized for its short-term orientation.

A) managing for long-run profits
B) target return
C) break-even strategy
D) maximizing current profit
E) minimizing risk

Question 63

An online movie streaming service charges $14.99 per month for its basic package. However, when a competitor introduced the same service at $13.99, the firm dropped its price to $13.99. The firm most likely made this price reduction in an attempt to

A) decrease revenue but increase profit.
B) increase profit by increasing revenue.
C) maintain market share.
D) decrease market share.
E) increase efficiency.

Question 64

A target return profit pricing objective implies that a company chooses to

A) set targets whose performance can be measured quickly.
B) give up immediate profit in exchange for achieving a higher market share in hopes of penetrating competitive markets.
C) set a profit goal that is often determined by its board of directors.
D) reduce investment in any further market or product research.
E) set prices based on return on sales.

Question 65

If the CEO of the Clorox Co. were to say, "We want to control 40 percent of the household bleach category within the next five years," he would have set a ________ pricing objective.

A) profit
B) sales
C) unit volume
D) market share
E) social responsibility

Question 66

A maximizing current profit pricing objective implies that a company chooses to

A) set targets for which performance can be measured quickly.
B) give up immediate profit in exchange for achieving a higher market share in hopes of penetrating competitive markets.
C) set a profit goal that is often determined by its board of directors.
D) reduce investment in any further market or product research.
E) set prices based on return on sales.

Question 67

Three different objectives relate to a firm's profit, each of which have different implications for pricing strategy. One of these is

A) accumulating profits.
B) reinvesting profits.
C) redistributing profits.
D) maximizing gross margin.
E) achieving a target return.

Question 68

Three different pricing objectives relate to a firm's profit. One objective, known as ________, occurs when a firm sets a profit goal, usually determined by its board of directors.

A) maximizing current profit
B) managing for long-run profits
C) target return
D) break-even strategy
E) minimizing risk

Question 69

Market share is the ratio of the ________ to those of the industry, including the firm itself.

A) target return on sales
B) marginal profit of the firm
C) firm's sales revenues or unit sales
D) marketing expenses of the firm
E) profits of the firm

Question 70

Companies often pursue a market share objective when

A) industry sales are flat or declining.
B) profits are increasing.
C) industry sales are beginning to rise.
D) there is a sudden increase in production costs.
E) stockholders are seeking higher dividends.

Question 71

Unit volume as a pricing objective refers to

A) the quantity of products to be produced or sold.
B) the ratio of price per unit to unit variable cost.
C) the ratio of production costs to the minimum sales price that would still generate profit.
D) the total quantity of product sold by a firm relative to the total quantity of product sold by all firms in the industry.
E) variable cost expressed on a per unit basis for a product.

Question 72

If a firm's profit is high enough for it to remain in business, a pricing objective may be to ________, which will in turn may lead to increases in market share and profit.

A) increase the commitment to social responsibility
B) increase dollar sales revenue
C) decrease unit volume while maintaining price
D) increase research and development funding for new product line extensions
E) continue with previous policies that seem to be working

Question 73

A negative aspect of selecting unit volume as a pricing objective is that

A) production often cannot keep up with demand.
B) there are increased carrying costs with extensive inventories.
C) if price reductions are used to achieve volume objectives, it can sometimes come at the expense of profits.
D) it can create competition between divisions within the organization itself, causing conflicts over the allocation of resources.
E) it always positively correlates with a sales revenue objective.

Question 74

Which of the following statements regarding a market share pricing objective is most accurate?

A) A market share objective is often difficult for product managers since stockholders are looking for immediate dividends (return of profits).
B) Although increased market share is a primary goal of some firms, others see it as a means to other ends, such as increased sales or profits.
C) Selecting market share as a pricing objective is particularly effective if industry sales are growing.
D) An advantage of market share as a pricing objective is that it is particularly insensitive to competitors' actions.
E) Ironically, a market share objective is realized by raising prices in order to increase consumer confidence during the decline stage of a product's life cycle.

Question 75

Some firms pursue a ________ pricing objective, perhaps using discounting to generate cash to stave off bankruptcy.

A) market share
B) survival
C) sales revenue
D) single product line
E) profit

Question 76

Which of these statements regarding sales goals is most accurate?

A) For marketing managers, sales revenue or unit sales objectives can be easily translated into meaningful targets for a product line or brand.
B) Cutting prices for a single product in a product line to raise unit sales often results in an increase in sales for related products in the line.
C) Very often, cutting prices results in a decrease in market share.
D) Setting unit volume sales as a pricing objective results in price wars with competitors, so the practice is limited to industries with few competitors.
E) An advantage of increasing unit volume sales is that it always results in an increase in profits.

Question 77

Managing for long-run profits as a pricing objective implies that a company will

A) give up immediate profit in exchange for achieving a higher market share in hopes of penetrating competitive markets.
B) maintain a given price range to ensure there is no loss of customers over time, even if the profit margin declines.
C) invest excess cash in bonds and certificates of deposit in order to counteract any inflationary economic changes in the future.
D) reinvest all profits into market research or product research rather than returned to shareholders.
E) drop all products, product lines, or divisions that cannot maintain their pricing goals.

Question 78

Several pricing objectives relate to a firm's profit. In one known as ________, a company gives up immediate profit in exchange for achieving a higher market share in the hopes of penetrating competitive markets.

A) maximizing current profit
B) target return
C) break-even strategy
D) minimizing risk
E) managing for long-run profits

Question 79

A firm may forgo a higher profit on sales and follow which of the following pricing objectives because it wants to recognize its stakeholder obligations?

A) profit
B) market share
C) unit volume
D) survival
E) social responsibility

Question 80

RadioShack, an electronics retail chain, couldn't compete with the prices offered by other retailers. The company enacted price matching programs and promoted large discounts on its merchandise to raise cash and to try to stave off bankruptcy. The best pricing objective at this point for RadioShack most likely was

A) profit.
B) market share.
C) unit volume.
D) survival.
E) social responsibility.