Deck 13: Building the Price Foundation

Question 1

Barter refers to

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.

Answer 1

C

Question 2

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.

Answer 2

E

Question 3

All of the following are synonyms for price except

A)a premium.
B)barter.
C)tuition.
D)a commission.
E)profit.

Answer 3

E

Question 4

Which of the following is an example of a price?

A)tuition
B)operating costs
C)liquidity
D)value
E)stockholders' equity

Question 5

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

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

Question 6

Vizio's HDTVs are sold through all of the following types of retailers except

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

Question 7

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

A)profits.
B)commissions.
C)trade-ins.
D)extra fees.
E)taxes.

Question 8

Vizio, Inc., is the largest contender in the North American __________ market.

A)designer eyewear
B)virtual media
C)smart TV
D)3-D video game
E)exotic travel

Question 9

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 10

According to the price equation, final price equals __________ minus incentives and allowances plus extra fees.

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

Question 11

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

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

Question 12

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

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 13

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 14

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

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

Question 15

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 16

The use of "special fees" and "surcharges" is driven by consumers' zeal for __________ combined with the ease of making price comparisons on the Internet.

A)high prices
B)low prices
C)quality
D)value
E)warranties

Question 17

All of the following statements about price are true except

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)the price for most products and services is always the same.
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 18

Price refers to

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 (including other products and services) 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 19

The money or other considerations (including other products and services) exchanged for the ownership or use of a product or service is referred to as

A)a fee.
B)value.
C)remuneration.
D)a price.
E)an exchange rate.

Question 20

North America's No. 1 smart TV company is

A)Samsung.
B)Panasonic.
C)LG.
D)Sony.
E)Vizio.

Question 21

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)do nothing and let the perceived value of the item increase as it matures in its life cycle.

Question 22

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

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

Question 23

Suppose you want to get "plugged in" and buy an all-electric Tesla Model S, the world's leading 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 multi-coat 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 2008 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 24

Which of the following 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 is always tied to 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 25

Value-pricing refers to

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)list price minus incentives and allowances plus extra fees.

Question 26

When Pizza Hut announced it was going to add 25 percent more toppings to its Meat Lover's line of pizzas without increasing prices, what consumer motivation was it appealing to?

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

Question 27

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. This carryout service is an example of

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

Question 28

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

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

Question 29

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 30

If a McDonald's menu board advertises Mini Meals under $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 31

Creative marketers engage in value-pricing, which is the practice of simultaneously __________ while maintaining or decreasing price.

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

Question 32

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

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 33

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 34

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

A)price
B)prestige
C)perceived quality
D)profits
E)perceived costs

Question 35

Most consumers realize that the quality of diamonds varies, and most 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 36

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 distributor.
E)intangible items.

Question 37

Many convenience stores now have mail slots where customers can pay their utility bills. The utility companies handle all the processing while the customers get the benefit of not having to use postage. The convenience store owner gets the advantage of the extra foot traffic. The mail slots are an example of

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

Question 38

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 (not the total cost)?

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

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

Creative marketers engage in value-pricing, which is the practice of simultaneously increasing product and service benefits while

A)increasing costs.
B)increasing price.
C)increasing advertising.
D)decreasing costs.
E)maintaining or decreasing price.

Question 41

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 42

The __________ equation = (Unit price × Quantity sold) - Total cost.

A)total revenue
B)variable cost
C)net present value
D)profit
E)break-even point

Question 43

Which of the following statements would most likely be spoken during Step 2 of 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 44

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

A)profit, market share, and survival
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 45

Which of the following 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 find the least expensive distributor.
C)We need to make a profit of at least $1.2 million.
D)We need to make allowances for large quantity orders.
E)We need to increase the price during the holiday shopping season.

Question 46

Which of the following 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 47

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

A)profit, market share, and survival
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 48

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)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)We're going to face some stiff competition.

Question 49

Estimating demand, sales revenue, and price elasticity are issues that would be addressed during __________ of the price-setting process.

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

Question 50

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 and the cost to distribute the product to area grocery stores. For the Renfros, Step 1 of their price-setting process consists of

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 51

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

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

Question 52

A reference value

A)is relative to the amount of time and energy a consumer puts into the purchase process.
B)is based upon the value assigned to similar items used by the consumer's peers.
C)results from performing a careful break-even analysis.
D)involves comparing the costs and benefits of substitute items.
E)is based upon the differential between customers' "needs" and "wants."

Question 53

Calculate a firm's total revenue (TR) 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

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)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.

Question 55

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

A)We need to find the least expensive distributor.
B)We need to make allowances for large quantity orders.
C)We need to increase the price during the holiday shopping season.
D)We need to forget profits right now; just make sure we break even.
E)We need to hire a professional accountant.

Question 56

If you wanted to buy a McDonald's Big Mac, medium fries, and a medium drink separately, it will cost you $8.27. However, if you purchased these three items together as part of the firm's Extra Value Meal package, you would pay only $5.69, saving $2.58. 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.

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

Question 57

A firm's profit equation demonstrates that 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 58

A buying situation can involve comparing the costs and benefits of substitute items-such as real sugar to the sugar substitute Splenda, which, although more expensive than sugar, is purchased by many consumers because it contains no calories. This situation involves the consumer considering

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

Question 59

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 60

A firm's profit equation 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 61

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 62

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 63

Three different objectives relate to a firm's profit, which is often measured in terms of return on investment. One objective, known as _________, is common in many firms because the targets can be set and performance measured quickly.

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

Question 64

Making special adjustments to the list or quoted price would occur during __________ of the price-setting process.

A)Step 2
B)Step 3
C)Step 4
D)Step 5
E)Step 6

Question 65

Managing for long-run profits 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 66

Three different objectives relate to a firm's profit, which is often measured in terms of return on investment. One objective, known as __________, is where 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 67

Three different objectives relate to a firm's profit, which is often measured in terms of return on investment. 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 68

All of the following are examples of pricing objectives except

A)market share.
B)survival.
C)unit sales.
D)social responsibility.
E)competitors' prices.

Question 69

A maximizing current profit 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 70

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 71

Setting list or quoted prices would occur during __________ of the price-setting process.

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

Question 72

Three different objectives relate to a firm's profit, which have different implications for pricing strategy. The three profit-oriented objectives include __________, managing current profit, and achieving a target return.

A)accumulating profits
B)managing for long-run profits
C)reinvesting profits
D)redistributing profits
E)maximizing gross margin

Question 73

Which of the following statements would most likely be spoken during Step 3 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 74

Pricing objectives refers to

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 75

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

A)Pricing objectives should never change.
B)Pricing objectives may change depending on the financial position of the company.
C)Pricing objectives may change depending upon the relative market share of competitors.
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 76

Which of the following are elements of Step 3 in the price-setting process?

A)profit, market share, and survival
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 77

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 78

Selecting an approximate price level would occur during __________ of the price-setting process.

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

Question 79

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

A)return on assets.
B)risk opportunity assessment.
C)return of allowances.
D)return on average equity.
E)risk opportunity analysis.

Question 80

Estimating cost, conducting a marginal analysis, and performing a break-even analysis are issues that would be addressed during __________ of the price-setting process.

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