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MGMT 3850 Ch. 10 Test With
Solution
Setting prices for products and services requires entrepreneurs to balance a multitude of complex forces as entrepreneurs determine prices for their goods and services that will draw customers and: - ANSWER produce a profit
Which of the following statements about price is true? - ANSWER A) Price measures what the customer must exchange to obtain goods and services in the marketplace.
B) Target market, business image, and price are closely related.
C) For most goods and services, there is an acceptable price range and not a single "ideal price."
A common pricing mistake entrepreneurs make is lowering prices because they fail to recognize the - ANSWER extra value, convenience, service, and quality they offer their customers
The top business challenge that drives pricing decisions is the: - ANSWER increased price sensitivity of customers
________ frequently convey the idea of quality, prestige, and uniqueness to customers - ANSWER high prices
A key ingredient to setting prices properly is to understand a company's: - ANSWER target market
An entrepreneurial company can differentiate itself by creating a distinctive
image in customers' minds or by offering: - ANSWER A) superior service and quality.
B) exceptional design and convenience.
C) speed and performance.
In general, entrepreneurs should ________ head-to-head price competition with firms that can more easily achieve lower prices through lower cost structures. - ANSWER avoid
Generally, entrepreneurs should avoid head-to-head price competition with other firms that can more easily achieve lower prices through: - ANSWER lower cost structure
A business with a 25 percent gross profit margin that reduces its price by 10 percent would have to ________ its sales volume just to break even. - ANSWER triple
Which of the following statements concerning the impact of competition on a small company's prices is true? - ANSWER When going up against larger, more powerful rivals, small firms should consider using non-price competition as a way to differentiate their products or services rather than head-to-head price competition.
One key to setting prices properly is based on understanding a company's: - ANSWER target market
________ value is the price customers would be willing to pay if they perfectly understood the benefits offered, while ________ value is what determines the price they are willing to pay. - ANSWER Objective; perceived
C) today may be different from the "ideal price" tomorrow.
Management consulting firm McKinsey and Company states that more than ________ percent of the pricing problems on new products are the result of companies setting prices that are too low. - ANSWER 80
When pricing a new product, a small business owner should strive to always satisfy which three objectives? - ANSWER Product acceptance, maintaining market share, and earning a profit
A pricing technique that sets different prices on the same products and services for different customers using the information that a company collects about its customers is called: - ANSWER customized or dynamic pricing
________ pricing strategies work best in markets where no "elite" segments exist or in highly competitive markets where similar products are trying to gain a foothold. - ANSWER penetration
Once a company has invested time and money developing a unique new product, in order to recoup some of the high R&D costs, they will likely use a:
- ANSWER skimming pricing strategy
________ is a short-term strategy that assumes that competition will eventually emerge. - ANSWER life cycle pricing
A pricing technique that sets prices that always end in numbers like "99" for prices such as $9.99 and $19.99 is an example of: - ANSWER odd pricing
CD Connection sells popular CDs at three price levels: $11, $14, and $17. This illustrates which of the following pricing techniques? - ANSWER price lining
________ pricing is a technique that involves marking down the normal price of a popular item in an attempt to attract more customers who make incidental purchases of other items at regular prices. - ANSWER leader
Your local grocery store uses a pricing technique known as ________ on a weekly basis, in which they mark down the price of several popular items, sometimes well below their normal price, in an effort to increase customer traffic and to boost sales of other items. - ANSWER leader pricing
Although many retailers must match competitors' prices on identical items, maintaining a ________ pricing policy may not be healthy for a small business because it robs the company of the opportunity to create a distinctive image in its customers' eyes. - ANSWER follow-the-leader
Which of the following is/are true regarding cost-plus pricing? - ANSWER It fails to consider competitors' prices appropriately
A reliable cost accounting system is necessary for accurate pricing. The traditional method of product costing, where the costs of direct materials, direct labor, and factory overhead are included in a finished product's total cost is called ________. - ANSWER absorption costing
________ tells what portion of the total revenue remains, after covering variable costs, to contribute toward meeting fixed expenses and earning a profit. - ANSWER the contribution percentage
Which of the following is/are not true regarding pricing for service firms? - ANSWER For most service firms, labor and profit comprise the largest portion of the cost of the service.
It has been reported that the use of credit cards increases the ________ of customer spending - ANSWER A) probability
B) speed
C) magnitude
Small companies have three options for selling to customers on credit: - ANSWER credit cards, installment credit, and trade credit
The fee that banks collect from retailers whenever customers use a credit or a debit card to pay for a purchase is known as the: - ANSWER interchange fee
The use of credit cards by consumers: - ANSWER broadens a small company's customer base.
A customer who purchases a television from Ace Appliance Store and pays for it in 36 monthly payments is most likely using: - ANSWER installment credit
One of the requirements to be able to offer ________ is to make certain that the firms' cash position is ________. - ANSWER trade credit; strong enough to support the additional pressure
Which of the following businesses would be most likely to offer installment credit to its customers? - ANSWER a retailer of major appliances
