Question 1

Consumer perceptions of the product's value set the ________ for prices.
A)demand curve
B)floor
C)ceiling
D)variable cost
E)image

Accepted Answer

Consumer perceptions of the product's value set an upper limit or ceiling on prices. This is because consumers will not be willing to pay more than they perceive the value of the product to be. The demand curve shows the quantity of a product that consumers are willing to buy at different prices, but it is not determined solely by consumer perceptions of value. A floor is a minimum price that is set by external factors, such as regulations or production costs. Variable costs are the costs that vary with the level of production. Image may influence consumer perceptions of value, but it does not directly set the price ceiling.

Question 2

General Motors,in order to achieve a 15 to 20 percent profit on its investment,prices its automobiles accordingly.This approach is called ________.
A)value-based pricing
B)value-added pricing
C)cost-plus pricing
D)low-price image
E)target return pricing

Accepted Answer

Target return pricing is a pricing strategy where a company sets prices to achieve a specific return on investment.

Question 3

Value-based pricing is the reverse process of ________ pricing.
A)variable cost-based
B)cost-plus
C)cost-based
D)good-value
E)equity value-based

Accepted Answer

Value-based pricing focuses on the perceived value to the customer rather than the cost of the product, which is the focus of cost-based pricing.

Question 4

________ is the amount of money charged for a product or service.
A)Payroll
B)Remuneration
C)Price
D)Wage
E)Salary

Accepted Answer

Price is the specific term used for the amount charged for a product or service. Payroll, remuneration, wage, and salary all refer to compensation for work performed, but not necessarily the cost of a product or service.

Question 5

________ pricing involves setting prices based on the costs for producing,distributing,and selling the product plus a fair rate of return for the company's efforts and risks.
A)Value-based
B)Fixed cost
C)Cost-based
D)Variable cost
E)Cost-skimming

Accepted Answer

Cost-based pricing involves setting prices based on the costs for producing, distributing, and selling the product plus a fair rate of return for the company's efforts and risks. This method of pricing is commonly used in manufacturing or production-based industries where the majority of the cost of the product is in production and distribution.

Question 6

Costs that change directly with the level of production are referred to as ________ costs.
A)fixed
B)variable
C)target
D)break-even
E)unit

Accepted Answer

Variable costs are costs that vary with the level of production, such as the cost of raw materials or labor. Fixed costs, on the other hand, are costs that do not vary with production levels, such as rent or salaries. Target costs and break-even costs are different concepts altogether, and unit costs are a measure of the average cost per unit produced.

Question 7

Rent,electricity,and executive salaries are examples of ________ costs.
A)fixed
B)variable
C)break-even
D)target
E)marketing

Accepted Answer

Fixed costs are those that do not vary with changes in production or sales levels, such as rent and executive salaries. Electricity may be considered a mixed cost, as it has a fixed component (e.g. basic service fee) and a variable component (e.g. usage-based charges), but in this context it is likely considered a fixed cost. Break-even costs and target costs are not relevant to this question, and marketing costs are generally considered variable costs.

Question 8

________ involves charging a constant low price with few or no temporary price discounts.
A)High-low pricing
B)Target return pricing
C)Cost-plus pricing
D)Everyday low pricing
E)Penetration pricing

Accepted Answer

The strategy described is Everyday Low Pricing, which involves charging a consistently low price without relying on temporary discounts or promotions.

Question 9

Which of the following is an external factor that affects pricing decisions?
A)the salaries of production management
B)competition
C)the salaries of finance management
D)overall pricing objectives
E)the company's overall marketing strategy

Accepted Answer

Competition is an external factor that affects pricing decisions as companies have to consider the prices of their competitors when setting their prices. The salaries of production management and finance management are internal factors that do not affect pricing decisions directly. Overall pricing objectives and the company's overall marketing strategy are internal factors that may influence pricing decisions but are not external factors.

Question 10

Fixed costs ________ as the number of units produced increases.
A)decrease
B)increase
C)divide in half
D)remain the same
E)increase at a diminishing rate

Accepted Answer

Fixed costs remain the same regardless of the number of units produced. They are not affected by changes in production volume.

Question 11

Underpriced products sell very well,but they produce less revenue than they would have if the price were raised to the ________ level.
A)perceived value
B)value-added
C)variable cost
D)demand curve
E)price-floor

Accepted Answer

Perceived value refers to the amount that customers believe a product is worth, and underpricing a product means that it is sold for less than its perceived value. While underpriced products may sell well, increasing the price to match the perceived value would result in higher revenue.

Option B, value-added, refers to the additional features or benefits that a product provides to customers, which can justify a higher price. Option C, variable cost, refers to the costs that are directly tied to producing a product and do not necessarily impact its price. Option D, demand curve, is a graphical representation of how much of a product consumers are willing to buy at various prices. Option E, price-floor, is a government-mandated minimum price for a product, which is not relevant to this scenario.

Question 12

Product costs set a(n)________ to a product's price.
A)demand curve
B)experience curve
C)floor
D)ceiling
E)break-even cost

Accepted Answer

Product costs set a floor to a product's price, meaning that the price cannot go below the cost of producing the product without incurring losses. The demand curve and experience curve may inform pricing decisions, but they do not directly set a limit to a product's price. The ceiling is the upper limit to which a price can be set based on factors such as competition and consumer willingness to pay. The break-even cost is the minimum revenue required to cover all costs and is not directly tied to setting a price.

Question 13

Price is the only element in the marketing mix that produces ________.
A)revenue
B)variable costs
C)expenses
D)fixed costs
E)demand

Accepted Answer

Only price directly affects revenue by influencing the amount consumers are willing to pay for a product or service. The other elements in the marketing mix may indirectly impact revenue by affecting consumer demand or the cost of producing and promoting the product, but they do not directly produce revenue on their own.

Question 14

________ uses buyers' perceptions of what a product is worth,not the seller's cost,as the key to pricing.
A)Customer value-based pricing
B)Target return pricing
C)Cost-based pricing
D)Equity-based pricing
E)Competition-based pricing

Accepted Answer

Customer value-based pricing is a pricing strategy where the price of a product is based on the perceived value of the product to the customer, rather than the cost of producing the product. It takes into consideration the benefits that customers receive from the product and sets the price accordingly.

Question 15

Break-even pricing,or a variation called ________ pricing,is when the firm tries to determine the price at which it will break even or make the profit it is seeking.
A)competition-based
B)target return
C)fixed cost
D)value-based
E)customer-based

Accepted Answer

Target return pricing is the variation of break-even pricing which enables the company to set a price that will allow them to earn the desired amount of profit. It takes into account the fixed costs, variable costs, and the desired profit of the firm. Hence, option B is the correct answer. A is incorrect as competition-based pricing is when the firm considers the prices of its competitors while setting the price. C is incorrect as fixed cost pricing is not a variation of break-even pricing. D is incorrect as value-based pricing is when the firm sets the price based on the perceived value of the product by customers. E is incorrect as customer-based pricing is when the firm sets the price based on the perceived value of the product by customers.

Question 16

Xbox 360 decides to add a free subscription to XBOX magazine with every game bought in an effort to differentiate its offering from PS3 games.This is an example of ________.
A)good-value pricing
B)add-on pricing
C)product-support pricing
D)value-added pricing
E)cost-based pricing

Accepted Answer

This is an example of value-added pricing because Xbox 360 is increasing the value of their offering by adding a free subscription to XBOX magazine with every game purchase.

Question 17

Which of the following statements about a break-even analysis is true?
A)A break-even analysis is used to determine how the customer-perceived value changes with value-added pricing.
B)A break-even analysis is a tool used to calculate fixed costs.
C)A break-even analysis shows the level of earnings a company has during an accounting period.
D)A break-even analysis is a tool marketers use to examine the relationship between supply and demand.
E)A break-even analysis does not consider customer value and the relationship between price and demand.

Accepted Answer

A break-even analysis only considers the fixed and variable costs of producing and selling a product or service and at what point those costs are covered by revenue. It does not take into account the customer's perceived value or the relationship between price and demand.

Question 18

When there is price competition,many companies adopt ________ rather than cutting prices to match competitors.
A)high-low pricing strategies
B)value-added pricing strategies
C)target return pricing strategies
D)EDLP strategies
E)image pricing strategies

Accepted Answer

Value-added pricing strategies involve adding extra value to a product or service to differentiate it from competitors rather than simply cutting prices. This approach can help companies maintain profitability despite price competition.

Question 19

________ costs are the sum of the fixed and variable costs for any given level of production.
A)Target
B)Skimming
C)Value-based
D)Total
E)Break-even

Accepted Answer

Total costs refer to the overall expenses involved in producing a certain level of output. This includes both fixed costs (such as rent, salaries, and equipment) and variable costs (such as materials, utilities, and direct labor). Knowing the total costs is crucial in determining the break-even point, which is the level of sales needed to cover all costs and begin to generate a profit. The other options (A) Target costs, (B) Skimming costs, (C) Value-based costs, and (E) Break-even costs all refer to specific pricing strategies or cost concepts, but do not encompass the full range of costs associated with production.

Question 20

The company designs what it considers to be a good product,totals the expenses of making the product,and sets a price that adds a standard markup to the cost of the product.This approach to pricing is called ________ pricing.
A)value-based
B)fixed cost
C)cost-plus
D)cost-based
E)skimming

Accepted Answer

The approach described is cost-plus pricing, where the company calculates the cost of making the product and then adds a standard markup to determine the selling price. This differs from value-based pricing, which focuses on what the customer is willing to pay, and skimming pricing, which sets a high initial price for a new product. Fixed cost and cost-based are not accurate descriptions of this approach to pricing.

Quiz 9: Pricing: Understanding and Capturing Customer Value

Consumer perceptions of the product's value set the ________ for prices.

General Motors,in order to achieve a 15 to 20 percent profit on its investment,prices its automobiles accordingly.This approach is called ________.

Value-based pricing is the reverse process of ________ pricing.

________ is the amount of money charged for a product or service.

________ pricing involves setting prices based on the costs for producing,distributing,and selling the product plus a fair rate of return for the company's efforts and risks.

Costs that change directly with the level of production are referred to as ________ costs.

Rent,electricity,and executive salaries are examples of ________ costs.

________ involves charging a constant low price with few or no temporary price discounts.

Which of the following is an external factor that affects pricing decisions?

Fixed costs ________ as the number of units produced increases.

Underpriced products sell very well,but they produce less revenue than they would have if the price were raised to the ________ level.

Product costs set a(n) ________ to a product's price.

Price is the only element in the marketing mix that produces ________.

________ uses buyers' perceptions of what a product is worth,not the seller's cost,as the key to pricing.

Break-even pricing,or a variation called ________ pricing,is when the firm tries to determine the price at which it will break even or make the profit it is seeking.

Xbox 360 decides to add a free subscription to XBOX magazine with every game bought in an effort to differentiate its offering from PS3 games.This is an example of ________.

Which of the following statements about a break-even analysis is true?

When there is price competition,many companies adopt ________ rather than cutting prices to match competitors.

________ costs are the sum of the fixed and variable costs for any given level of production.

The company designs what it considers to be a good product,totals the expenses of making the product,and sets a price that adds a standard markup to the cost of the product.This approach to pricing is called ________ pricing.