Question 1

In which of the following service industries are you most likely to find the service provider using fee for service pricing?

Accepted Answer

Fee for service pricing is popular in the management consulting industry, where clients pay for each service provided by the consultant.

Question 2

One of the reasons used to explain why customers evaluate goods and services differently is:

Accepted Answer

Customers often have limited reference prices for services, which means they may not have a clear idea of what a fair price is and can vary in their evaluation of the service. This is unlike goods which often have standardized prices or a more established market value.

Question 3

Accountants, architects, interior decorators, marriage counselors and lawyers typically use a _____ pricing strategy.

Accepted Answer

Professionals such as accountants, architects, interior decorators, marriage counselors and lawyers typically charge a fee for their services. This fee-for-service pricing strategy is based on the amount of time, effort, expertise, and value of the service they provide to the client. This strategy is also known as 'hourly billing.'

Question 4

After moving to Orlando, Florida, Kaori opened both a savings and a checking account at Barnett Bank. Although Barnett had a higher minimum balance requirement for free checking than the other two banks she considered, Kaori chose Barnett because it was located closer to her home than the other banks. Kaori would rather expend other costs than _____ costs.

Accepted Answer

Kaori's decision to choose Barnett Bank over other banks was based on proximity or convenience, even though it had a higher minimum balance requirement for free checking. This means that she prefers to incur convenience costs rather than monetary costs.

Question 5

_____-based pricing is used when there are a small number of large service providers.

Accepted Answer

Competition-based pricing is used when there are a small number of large service providers competing for market share. This approach involves analyzing the prices charged by competitors and setting prices at a similar level, in order to stay competitive.

Question 6

The basic formula for _____ is Price = Direct costs + Overhead + Profit margin.

Accepted Answer

The formula given is commonly associated with cost-based pricing, which sets the price of a product or service based on the direct costs (such as materials and labor), overhead costs (such as rent and utilities), and desired profit margin. The other choices (contribution margin, return on investment, ABC costing, and net profit) do not directly use this formula.

Question 7

In _____ pricing, a service firm determines price by calculating component costs of the service and adding a mark-up.

Accepted Answer

Cost-plus pricing involves calculating the total cost of providing a service and adding a markup on top of it to determine the final price.

Question 8

Which of the following statements does NOT contain a reason why consumers lack accurate reference prices for services?

Accepted Answer

This statement actually contradicts the others, all of which provide reasons why consumers may lack accurate reference prices for services. Option A suggests that differences in individual needs may make it difficult to determine a standardized price; option B suggests that information overload can be a problem; option C suggests that providers may not be able to provide price estimates in advance; and option E suggests that prices may not be visible to consumers. Option D, on the other hand, suggests that there is a low degree of variability across providers, which would actually make it easier for consumers to determine a reference price.

Question 9

Pizza Hut, Uncle Sam's, Domino's and Papa John's all deliver pizza in Cartersville, Georgia, a town of about 30,000. As a result, one would expect all of the pizza delivery services to use _____-based pricing.

Accepted Answer

Since there are multiple pizza delivery services in Cartersville, Georgia, they would all use competition-based pricing in order to gain an advantage over their competitors and attract customers.

Question 10

To calculate what it charges a client, a detective agency charges $200 a day direct costs plus an additional $50 per day to pay for office expenses, licenses and other fixed costs and fifteen percent of full costs for the profit margin. What type of pricing strategy is being used by the detective agency?

Accepted Answer

The detective agency is using a cost-based pricing strategy, as it is determining the price based on the direct costs, fixed costs, and profit margin.

Question 11

_____ costs represent other sources of sacrifice perceived by consumers when buying and using a service.

Accepted Answer

Nonmonetary costs refer to the time, effort, and other sacrifices made by the consumer in order to obtain and use the service, such as transportation costs, waiting times, and other inconveniences.

Question 12

The process for installing Leo's new CD player took almost four hours, which Leo spent sitting in the Circuit City store waiting room. Leo paid _____ costs for the installation of his new CD player.

Accepted Answer

Leo paid in terms of his time, as he had to spend almost four hours waiting for the installation to be completed.

Question 13

Which of the following is an example of competition-based pricing strategy?

Accepted Answer

Going-rate pricing is a competition-based pricing strategy where businesses set their prices based on the prices set by their competitors. This approach helps businesses stay competitive by matching or slightly undercutting their competitors' prices. Cost-plus pricing (A) is a cost-based pricing strategy where businesses add a markup to their costs to set prices. Fee for service (C) is a pricing strategy commonly used in healthcare and other service industries where businesses charge customers for each service provided. Synchronized pricing (D) and simultaneous pricing (E) are not commonly used pricing strategies.

Question 14

_____-based occurs when services are standardized across providers.

Accepted Answer

The answer of _____-based occurs when services are standardized across...

Question 15

In which of the following service industries would you most likely find the service provider using competition-based pricing?

Accepted Answer

Competition-based pricing is most commonly used in retail industries, such as the retail book industry, where pricing is based on the prices of competitors. Other service industries, such as banking, hospital, legal services, and tax accounting, typically use other pricing strategies, such as cost-plus pricing or value-based pricing.

Question 16

_____ cost refers to the effort invested in identifying and selecting a service from your consideration set.

Accepted Answer

Search cost refers to the effort invested in identifying and selecting a service from your consideration set.

Question 17

All of the following examples are nonmonetary costs EXCEPT:

Accepted Answer

Utility costs are not a commonly recognized type of cost. The other four options are all types of nonmonetary costs that are frequently discussed in economics.

Question 18

Many white-collar workers have heard the story about the busy executive who billed the doctor for keeping him waiting when the patient showed up promptly at his appointment time or has dreamed of doing it themselves. This is an example of the _____ costs of services.

Accepted Answer

The story about the busy executive who billed the doctor for keeping him waiting is an example of time costs of services. This refers to the time that a customer has to spend waiting for the service they require, which can be seen as an opportunity cost because they could have been using that time for something else.

Question 19

Initial consumer resistance to online bill paying resulted from a _____ cost in using a new service.

Accepted Answer

Initial consumer resistance to online bill paying was primarily due to psychological costs, such as fear of technology, concerns about security, and the discomfort of changing established habits.

Question 20

Which of the following statements describes a problem in cost-based pricing for services?

Accepted Answer

The answer of Which of the following statements describes a...

Quiz 17: Pricing of Services