Question 1

Which of the following is the difference between the variable costs to the seller and the price charged to the purchaser?
A)Institutional overhead
B)Semi-variable cost
C)Contribution margin
D)Break-even point
E)Total benefits

Accepted Answer

The difference between the variable costs to the seller and the price charged to the purchaser is the contribution margin. The contribution margin is the amount of money that is left over from the sale after the variable costs have been deducted. It represents the amount of revenue that contributes towards covering the fixed costs and generating profits. The contribution margin can be calculated as the price charged to the purchaser minus the variable costs per unit. Options A, B, D, and E do not represent the difference between variable costs to the seller and price charged to the purchaser.

Question 2

In terms of the 'building the service model and creating customer value' model, which of the following services could be classified as having the most fixed and predictable duration of customer use?
A)Movies
B)Hotels
C)Restaurants
D)Golf courses
E)Rental cars

Accepted Answer

Movies typically have a fixed and predictable duration as they are a set length of time, unlike the variability seen in the usage of hotels, restaurants, golf courses, and rental cars.

Question 3

To provide a simple and effective way for consumers to pay for the service they require it is possible to use intermediaries such as:
A)travel agents for booking hotels
B)banks for accepting deposits
C)ticket agents for selling concert hall seats
D)all of the above
E)a and c

Accepted Answer

Travel agents can provide a convenient way for consumers to book hotels, while ticket agents can simplify the process of purchasing concert hall seats. Both of these intermediaries can help consumers pay for services in a simple and effective way. Banks, while also an intermediary, are not always necessary for paying for travel or entertainment services. Therefore, the best choice would be option E - travel agents and ticket agents.

Question 4

Pricing information is less important for services _______ in _______ as customers evaluation is likely made with reference to quality concerns.
A)low; value
B)high; value
C)high; criticality
D)low; criticality
E)high; cost

Accepted Answer

When services are considered critical by customers, pricing information becomes less important as customers are more likely to evaluate the service based on quality concerns rather than price. Therefore, the best choice is high criticality. The other options (low or high value, low criticality, high cost) do not necessarily indicate a reduced importance of pricing information.

Question 5

Which of the following does NOT demonstrate the principle of the use of physical rate fences to support revenue management?
A)Seat location
B)Size of a hotel room
C)Furnishing of a hotel room
D)Product bundle
E)Having to pay cancellation fees

Accepted Answer

Physical rate fences are tangible or physical differences in products or services that allow companies to segment the market and charge different prices. Examples include seat location, size and furnishing of hotel rooms, and product bundles. Cancellation fees, however, are an example of a non-physical rate fence, as they are based on the terms of service rather than a physical attribute of the product or service.

Question 6

Services often invite performance and pricing abuses for which of the following reasons?
A)Customers may not be present when the work is being performed.
B)Customers may not have the technical skills necessary to evaluate performance.
C)Quality and benefits may be difficult to evaluate even after delivery.
D)Customers may not be able to assess the amount, if any, of work done.
E)All of the above

Accepted Answer

All of the given reasons can contribute to performance and pricing abuses in services. The lack of customer presence during the service delivery can make it difficult to ensure that the work has been done as per the agreed standards. Customers may lack the necessary technical skills to evaluate the quality of work, which can be exploited by service providers who may provide subpar services. Even after delivery, it can be difficult to assess the quality and benefits of a service, especially if they are intangible. Finally, customers may not be able to assess the amount of work done, making it easier for providers to overcharge or under-deliver.

Question 7

When deciding on the basis for pricing, marketers may use which of the following units of consumption?
A)admission
B)time taken
C)completion of a task
D)a and b
E)all of the above

Accepted Answer

Marketers may use any of the mentioned units of consumption as a basis for pricing. The choice depends on the nature of the product or service and the target audience. For example, admission may be a suitable unit of consumption for a cinema or theme park, time taken may be relevant for consultancy services, and completion of a task may be appropriate for software development services. Therefore, all of the options are valid choices for pricing.

Question 8

For a passenger railroad company, the cost incurred to sell an additional ticket for a seat in a train is an example of:
A)variable cost
B)semi-variable cost
C)fixed cost
D)marginal cost
E)none of the above

Accepted Answer

The cost incurred to sell an additional ticket for a seat in a train is an example of marginal cost, which is the cost of producing one additional unit. It is not a fixed cost because it varies with the number of tickets sold, and it is not a semi-variable cost because it is not partially fixed and partially variable.

Question 9

Marketing's task in helping maximise ARGE involves all of the following except:
A)providing the sales force with specific sales target on specific dates for each segment
B)providing guidelines for what prices to charge each segment at specific points in time
C)identifying the principal market segments that might be attracted to service facilities
D)forecasting the volumes of business that might be obtained from each segment at specific price levels
E)monitoring price over time

Accepted Answer

Monitoring price over time is not a task of marketing in helping maximize ARGE.

Question 10

Which of the following best describes semi-variable costs?
A)Costs that fluctuate with what is consumed but may not be linked directly to customer demand and the volume of services provided
B)Costs that do not fluctuate with what is consumed but may be linked directly to customer demand and the volume of services provided
C)Costs that fluctuate even if no services are provided and may be linked directly to economic environment
D)Costs that fluctuate with what is consumed and may be linked directly to customer demand and the volume of services provided
E)Costs that do not fluctuate with what is consumed and may not be linked directly to customer demand and the volume of services provided

Accepted Answer

Semi-variable costs have both fixed and variable components, meaning they fluctuate with consumption and can be linked to customer demand and service volume.

Question 11

When deciding on a price to charge for the service which is being offered, it is important to consider:
A)customer price sensitivity
B)the right customer
C)the right time
D)the right place
E)the right inventory unit

Accepted Answer

Customer price sensitivity is important to consider when pricing a service. If the price is too high, customers may not be willing to pay for it, and if it is too low, the business may not make a profit. By understanding customer price sensitivity, businesses can find the sweet spot that balances profit and customer willingness to pay. The other choices may also be important considerations in pricing, but customer price sensitivity is the most vital.

Question 12

Which of the following sectors of service marketing use the concept of revenue management?
A)Travel industry
B)Hotel industry
C)Airline industry
D)Restaurant industry
E)All of the above

Accepted Answer

All of the above sectors of service marketing use the concept of revenue management. Revenue management is a pricing strategy that involves setting different prices for goods or services, based on the customer's perceived value, demand, and available inventory. The travel, hotel, airline, and restaurant industries all rely heavily on revenue management to optimize sales and profitability.

Question 13

Which of the following are conditions that could encourage the use of revenue management?
A)Capacities are relatively fixed
B)Service is sold in advance
C)Variable and uncertain demand
D)All of the above
E)a and b

Accepted Answer

Revenue management is most effective when capacities are fixed, service is sold in advance, and demand is variable and uncertain. All of these conditions can encourage the use of revenue management because they allow companies to strategically adjust prices and availability to maximize revenue. For example, an airline may use revenue management to vary prices based on time of day, day of week, and season to account for fluctuations in demand for flights.

Question 14

Which of the following is NOT an example of a prepaid method of payment for services?
A)e-tag
B)Telephone cards
C)Debit cards
D)Credit cards
E)c and d

Accepted Answer

Prepaid methods involve paying for services before using them. Debit cards and credit cards are not prepaid; they either deduct money directly from a bank account or allow for borrowing against a credit line, respectively.

Question 15

Which of the following is an amenities rate fence?
A)Personal butler
B)Free golf cart
C)Size of rental car
D)Theatre seat location
E)Class of travel

Accepted Answer

An amenities rate fence is a fee charged for additional amenities or services, such as free golf cart.

Question 16

Which of the following will assist in reconciling yield management with customer satisfaction and good will?
A)Using bundling to 'hide' discounts
B)Using service recovery to compensate for overbooking
C)Building in 'loyalty multipliers' for regular customers
D)Designing price schedules that are clear and fair
E)All of the above

Accepted Answer

All of the options listed can assist in reconciling yield management with customer satisfaction and good will. Using bundling to 'hide' discounts can help customers feel like they are getting a good deal without feeling like they are being gouged on the base price. Service recovery can help retain customers who may have had a negative experience due to overbooking. Building in 'loyalty multipliers' for regular customers can encourage customers to continue patronizing the business even if prices fluctuate based on demand. Designing price schedules that are clear and fair ensures that customers feel they are being treated fairly and can make informed decisions about their purchases.

Question 17

__________ costs often vary widely from one situation to another, depending on the type of service and the number of people involved.
A)Variable
B)Semi-variable
C)Fixed
D)Marginal
E)None of the above

Accepted Answer

The answer of __________ costs often vary widely from one...

Question 18

Building rent is an example of:
A)variable cost
B)semi-variable cost
C)fixed cost
D)marginal cost
E)none of the above

Accepted Answer

Building rent is a fixed cost as it does not change with the level of production or sales. It remains the same regardless of the number of units produced or sold.

Question 19

A service organisation may take into consideration all of the following costs when using the cost-based pricing, except:
A)semi-variable costs
B)marginal costs
C)fixed costs
D)opportunity costs
E)variable costs

Accepted Answer

Opportunity Costs are not included in cost-based pricing as they represent the cost of forgoing an alternative opportunity, and do not relate to actual production or operational costs incurred by the service organization. The other options (A, B, C, E) are all types of costs that can be taken into consideration when using cost-based pricing.

Question 20

When can a service be said to be price-elastic?
A)Where a large increase in price has the effect of a large increase in sales.
B)Where a large decrease in price has the effect of a small increase in sales.
C)Where a small decrease in price has the effect of a large increase in sales.
D)Where a small increase in price has the effect of a small increase in sales.
E)Where a small increase in price has the effect of a small decrease in sales.

Accepted Answer

A service can be said to be price-elastic if a small decrease in price has the effect of a large increase in sales. This means that consumers are highly responsive to price changes and are willing to purchase more of the service when the price is lower.

Quiz 6: Understanding costs and developing pricing strategy

Which of the following is the difference between the variable costs to the seller and the price charged to the purchaser?

In terms of the 'building the service model and creating customer value' model, which of the following services could be classified as having the most fixed and predictable duration of customer use?

To provide a simple and effective way for consumers to pay for the service they require it is possible to use intermediaries such as:

Pricing information is less important for services _ in _ as customers evaluation is likely made with reference to quality concerns.

Which of the following does NOT demonstrate the principle of the use of physical rate fences to support revenue management?

Services often invite performance and pricing abuses for which of the following reasons?

When deciding on the basis for pricing, marketers may use which of the following units of consumption?

For a passenger railroad company, the cost incurred to sell an additional ticket for a seat in a train is an example of:

Marketing's task in helping maximise ARGE involves all of the following except:

Which of the following best describes semi-variable costs?

When deciding on a price to charge for the service which is being offered, it is important to consider:

Which of the following sectors of service marketing use the concept of revenue management?

Which of the following are conditions that could encourage the use of revenue management?

Which of the following is NOT an example of a prepaid method of payment for services?

Which of the following is an amenities rate fence?

Which of the following will assist in reconciling yield management with customer satisfaction and good will?

__________ costs often vary widely from one situation to another, depending on the type of service and the number of people involved.

Building rent is an example of:

A service organisation may take into consideration all of the following costs when using the cost-based pricing, except:

When can a service be said to be price-elastic?