Final exam pool items (Chs. 9, 11, 12, 13, 14, 15 & 17 not 18)
Chapter 17—Pricing Concepts
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Chapter 17—Pricing Concepts MULTIPLE CHOICE 1. According to the text, price is best described as:
ANS: A PTS: 1 REF: 255 OBJ: 17-1 TYPE: Def TOP: AACSB Reflective Thinking | TB&E Model Pricing 2. Revenue:
ANS: E PTS: 1 REF: 255 OBJ: 17-1 TYPE: Def TOP: AACSB Reflective Thinking | TB&E Model Pricing 3. _____ pay for every activity of the company.
ANS: A
Revenue is price times units sold, or the total inflow of capital that is available to pay for the costs of manufacturing the good and running the business. PTS: 1 REF: 255 OBJ: 17-1 TYPE: Comp TOP: AACSB Reflective Thinking | TB&E Model Pricing 4. Money that is left over after paying for company activities is called:
ANS: C PTS: 1 REF: 255 OBJ: 17-1 TYPE: Def TOP: AACSB Reflective Thinking | TB&E Model Pricing 5. At Wal-Mart, Randi saw a bag of daffodil flower bulbs and a box of plant fertilizer. The items, which were sold together, retailed at $28.50, but were marked down to $19.99. The $19.99 is the:
ANS: B
Price is that which is given in exchange to acquire a product. PTS: 1 REF: 255 OBJ: 17-1 TYPE: App TOP: AACSB Reflective Thinking | TB&E Model Pricing 6. Which of the following statements about price is true?
ANS: E PTS: 1 REF: 255 OBJ: 17-1 TYPE: Comp TOP: AACSB Reflective Thinking | TB&E Model Pricing 7. Which of the following statements about price is true?
ANS: C
Price can relate to anything with perceived value, not just money. The price paid is based on the satisfaction consumers expect to receive from a product, not necessarily what they actually receive. PTS: 1 REF: 255 OBJ: 17-1 TYPE: Comp TOP: AACSB Reflective Thinking | TB&E Model Pricing
ANS: D $28.50 + ($19.99 5) PTS: 1 REF: 255 OBJ: 17-1 TYPE: App TOP: AACSB Reflective Thinking | TB&E Model Pricing | TB&E Model Product 9. Why are marketing managers finding it more difficult to set prices in today's environment?
ANS: C
With constant new-product introductions, consumers have many alternative goods to choose from, and selecting the right price becomes a very complicated task for the marketing manager. PTS: 1 REF: 256 OBJ: 17-1 TYPE: Comp TOP: AACSB Reflective Thinking | TB&E Model Pricing 10. For convenience, pricing objectives can be divided into three categories. They are:
ANS: D PTS: 1 REF: 256-258 OBJ: 17-2 TYPE: Def TOP: AACSB Reflective Thinking | TB&E Model Pricing | TB&E Model Strategy 11. An organization is using _____ when it sets its prices so that total revenue is as large as possible relative to total costs.
ANS: A PTS: 1 REF: 256 OBJ: 17-2 TYPE: Def TOP: AACSB Reflective Thinking | TB&E Model Pricing | TB&E Model Strategy 12. The pricing policy used by Middleton Industries, manufacturer of Renaissance charms for bracelets and necklaces, is to set prices so its retail prices are as high as the market will tolerate. Additionally, Middleton strives to keep its costs at an industry low by using silver and gold overlays over charms made of cheap base metal. This is an example of a _____ policy
ANS: B Profit maximization means setting prices so that total revenue is as large as possible relative to total costs. PTS: 1 REF: 256 OBJ: 17-2 TYPE: App TOP: AACSB Reflective Thinking | TB&E Model Pricing | TB&E Model Strategy 13. Hal Macini owner of Evergreen Landscaping is more interested in earning customer goodwill than striving for maximum profit. He determines his prices by maintaining the company's profitability at a level that gives him a good living but will never make him a rich man. Macini is basing his pricing policy on:
ANS: B The objective of satisfactory profits is characterized by seeking a level of profits that is satisfactory to management and owner(s). PTS: 1 REF: 256 OBJ: 17-2 TYPE: App TOP: AACSB Reflective Thinking | TB&E Model Pricing | TB&E Model Strategy 14. _____ measures the overall effectiveness of management in generating profits with its available assets.
ANS: A PTS: 1 REF: 256 OBJ: 17-2 TYPE: Def TOP: AACSB Reflective Thinking | TB&E Model Strategy 15. Pierre’s Ice Cream Company produces ultra-rich ice cream, which it sells in the Cleveland, Ohio area. Last year, it managed to exceed its target ROI for the current fiscal year. The following results were found on its financial statements:
What was the actual return on investment (ROI) for Parrish Farms?
ANS: B ROI is net profits after taxes divided by total assets: $50,000 500,000 = 10 percent. PTS: 1 REF: 256 OBJ: 17-2 TYPE: App TOP: AACSB Reflective Thinking | TB&E Model Pricing | TB&E Model Strategy 16. Franz Hall wants to open a business selling cotton candy from a mobile cart. He cannot decide whether to base his pricing objectives on market share, dollar sales, or unit sales. Regardless of which he chooses, his firm's pricing objective can be categorized as:
ANS: E Sales-oriented pricing objectives are based on either market share or dollar or unit sales. PTS: 1 REF: 257 OBJ: 17-2 TYPE: App TOP: AACSB Reflective Thinking | TB&E Model Pricing | TB&E Model Strategy 17. The Fenton Company produces memorial bricks, which veterans' organizations, Chambers of Commerce, and other service organizations sell as fund raisers. The company has a target return on investment of 13 percent. This means that the Fenton Company has a(n) _____ pricing objective.
ANS: A Targeted ROI is one of the most common types of profit-oriented pricing objectives used. PTS: 1 REF: 256 OBJ: 17-2 TYPE: App TOP: AACSB Reflective Thinking | TB&E Model Pricing | TB&E Model Strategy 18. A company using market share pricing has a _____ pricing objective.
ANS: B PTS: 1 REF: 257 OBJ: 17-2 TYPE: Def TOP: AACSB Reflective Thinking | TB&E Model Strategy 19. Under which of the following conditions will companies with low market share be most likely to fail?
ANS: D
A larger market share is required to boost economies of scale and market power. PTS: 1 REF: 257 OBJ: 17-2 TYPE: Comp TOP: AACSB Reflective Thinking | TB&E Model Strategy 20. Bernard Hinault makes the most expensive bicycles in the world. Its target market is people who willingly pay $8,000 or more for their bicycles. If Bernard Hinault were to lower prices to target customers who want a good bike but who can't or won't spend that much for one, it would most likely use a(n) _____ pricing objective.
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