(Test Bank) Psy 1310 Mkt301 Kerin-Questionbank-4Ps-Pt1/Mkt301 Kerin Book – Testbank – Pricing, Channels, Scm, Marcom

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PSY 1310 MKT301 Kerin -QuestionBank -4Ps-Pt1/MKT301 Kerin book – Testbank – Pricing, Channels, SCM, Marcom CHAPTER 13 BUILDING THE PRICE F OUNDATION MULTIPLE CHOICE QUESTIONS 13-1 CHAPTER OPENING EXAMPLE CONCEPTUAL What do Expedia, Travelocity, and Priceline have in common? a. They are three websites that use the same Internet service provider (ISP). b. They are companies that use reverse auctions to sell their merchandise. c. They are three online websites that only sell to businesses. d. They are all franchise operations that operate in the business -to-business market only. e. They are the three leading online travel websites. Answer: e Page: 335 Rationale: These three websites book airline tickets, hotel rooms, and special travel packages for travelers. 13-2 CHAPTER OPENING EXAMPLE CONCEPTUAL Online travel websites have not experienced the same problems as other dot -com companies because these websites: a. rarely attempt to establish any type of long -term relationships with customers. b. focus on market share. c. use tactical objectives instead of strategic objectives. d. allow customers to save money and time. e. create form utility for customers. Answer: d Page: 335 Rationale: Like any company, online travel sites must establish marketing relationships with customers. The online sites can create time and place utility, but not form. 13-3 CHAPTER OPENING EXAMPLE CONCEPTUAL Which of the following is true about price? a. Customers don’t have to pay the price because there are always people who will bu t the item. b. Small changes in price can have big effects on the number of units sold but not company profit. c. Small changes in price can have big effects on company profit but not on the number of units sold. d. Small changes in price can have big effects on the number of units sold and also on company profit. e. All of the above are true. Answer: d Page: 335 Rationale: Price is the place where all other business decisions come together. The price must be right in the sense that customers mu st be willing to pay it and it must generate enough sales dollars to pay for the cost of developing, producing, and marketing the product and earn a profit for the company. Small changes in price can have big effects on both the number of units sold and c ompany profit. 13-4 PRICE CONCEPTUAL Attorneys fees, entrance fees, train fares, and organization dues are all: a. premiums. b. bartering tools. c. mediums of exchange. d. synonyms for price. e. examples of liquidity. Answer: d Page: 336 Other Locations: web Learning Objective: 1 Rationale: Tuition, rent, interest, premium, fee, dues, fares, salary, commission and wage are all synonyms for price. 13-5 PRICE CONCEPTUAL Which of the following is a particular type of price? a. operating costs b. liquidity c. equitable medium d. college tuition e. stockholders' equity Answer: d Page: 336 Other Locations: SG Learning Objective: 1 Rationale: College tuition is a special kind of price, the money paid by a college student for a term of classes. 13-6 PRICE DEFINITION From a marketing viewpoint, price is __________ exchanged for the ownership or use of a good or service. a. money or other considerations (including goods but not intangibles and services) b. money or other considerations (including other goods and services) c. money exclusively earmarked for the transaction d. what is recognized as barter within a particular culture e. anything of value to the buyer but not necessarily of value to the seller Answer: b Page: 336-337 Learning Objective: 1 Rationale: Key term definition —price 13-7 PRICE DEFINITION From a marketing viewpoint, __________ is money or other considerations (including goods and services) exchanged for the ownership or use of a good or service. a. value b. price c. barter d. a contract e. a tariff Answer: b Page: 336-337 Learning Objective: 1 Rationale: Key term definition —price 13-8 BARTER DEFINITION Barter is the practice of exchanging goods and services for other goods and services rather than for: a. value. b. perceptions. c. money. d. promises. e. tariffs. Answer: c Page: 337 Learning Objective: 1 Rationale: Key term definition —barter 13-9 BARTER DEFINITION The practice of exchanging go ods and services for other goods and services rather than for money is called: a. pricing. b. pricing substitution. c. debt restructuring. d. value -pricing. e. barter. Answer: e Page: 337 Other Locations: web Learning Objective: 1 Rational e: Key term definition —barter 13-10 PRICE APPLICATION Patty O'Rourke hired an attorney to represent her in a court case involving an auto accident. The attorney charged O'Rourke a fee for his services. Terry Thomas needed a haircut --the local stylis t charged him $12 for her services. Aaron Mathison mowed his neighbor's lawn; in exchange, the neighbor roto -tilled Mathison's garden. The attorney fees paid by O'Rourke, the $12 charged by the hair stylist, and exchange of lawn mowing for garden tilling are examples of: a. price. b. barter. c. fee setting. d. unfair market exchanges. e. product fares. Answer: a Page: 336 Learning Objective: 1 Rationale: In the marketing realm, price is the money, goods, or services exchanged between two or more parties for the ownership or use of a good or service. Just as a customer pays a specific monetary price for physical product like a loaf of bread or a box of cereal, the price of a haircut service might be $12. The price of getting one's garden roto-tilled might take the form of barter --where in exchange for one service or product no money changes hands, but the parties exchange services or goods. 13-11 PRICE EQUATION DEFINITION The price equation formula is price equals list price minus dis counts and allowances plus: a. salaries. b. commissions. c. trade -ins. d. extra fees. e. taxes. Answer: d Page: 337 Learning Objective: 1 Rationale: The price equation is: price=list price – incentives and allowances+extra fees. 13-12 PRICE EQUATION DEFINITION The price equation formula is price equals __________ minus discounts and allowances plus extra fees. a. salaries b. commissions c. trade -ins d. list price e. taxes Answer: d Page: 337 Learning Objective: 1 Rational e: The price equation is: price=list price – incentives and allowances+extra fees. 13-13 PRICE EQUATION DEFINITION The price equation formula is price equals list price minus __________ plus extra fees. a. salaries b. commissions c. trade -ins d. discounts and allowances e. taxes Answer: d Page: 337 Learning Objective: 1 Rationale: The price equation is: price=list price – incentives and allowances+extra fees. 13-14 PRICE EQUATION APPLICATION A company that manages apartments decid es to buy 15 new dishwashers at a list price of $550 each as replacements for old dishwashers in a small apartment complex it owns. Because the company is buying more than 10 dishwashers, it is eligible for a $150 per unit quantity discount. Financing ch arges total $20 per unit. The company gets $10 per dishwasher for the 15 dishwashers traded in. What is the actual price the company will pay for each dishwasher? a. $390 b. $400 c. $410 d. $530 e. $560 Answer: c Page: 337 Learning Objectiv e: 1 Rationale: Using the price equation. Price = List price - Discounts and allowances + Extra Fees= $550 - ($150 quantity discount + $10 trade in) + $20 financing= 550 - (150 + 10) + 20= $410 13-15 PRICE EQUATION APPLICATION Tara is enrolled for spring semester at college. The tuition is $6,000 but she has a scholarship for $1,000 as well as a work study grant of $1,500. The health fees and student activity fees are $150 for the semester. What is the actual price Tara is paying for the spring semester? a. $2,500 b. $2,650 c. $3,650 d. $5,150 e. $6,150 Answer: c Page: 337; Figure 13 -2 Learning Objective: 1 Rationale: Using the price equation. Tuition = published tuition – Scholarship, Other financial aid, discounts for number of cre dits taken + Special Activity Fees= $6,000 - ($1,000 scholarship + $1,500 work study financial aid) + $150 special activity fees= 6,000 - (1,000 + 1,500) + 150= $3,650. 13-16 PRICE EQUATION CONCEPTUAL The use of ―special fees‖ and ―surcharges‖ is driv en by consumers’ zeal for __________ and the ease of making price comparisons on the Internet. a. high prices b. low prices c. extra accessories d. service contracts e. waranties Answer: b Page: 337 Learning Objective: 1 Rationale: One new p ricing tactic is to use ―special fees‖ and ―surcharges.‖ This practice is driven by consumers’ zeal for low prices combined with the ease of making price comparisons on the Internet. Buyers are more willing to pay extra fees than a higher list price, so sellers use add -on charges as a way of having the consumer pay more without raising the list price. 13-17 PRICE EQUATION CONCEPTUAL The use of ―special fees‖ and ―surcharges‖ is driven by consumers’ zeal for low prices and __________. a. high prices b. the ease of making price comparisons on the Internet. c. extra accessories d. service contracts e. waranties Answer: b Page: 337 Learning Objective: 1 Rationale: One new pricing tactic is to use ―special fees‖ and ―surcharges.‖ This practice is driven by consumers’ zeal for low prices combined with the ease of making price comparisons on the Internet. Buyers are more willing to pay extra fees than a higher list price, so sellers use add -on charges as a way of having the consumer pay more without raising the list price. 13-18 VALUE DEFINITION The ratio of perceived benefits to price is called: a. the price -quality relationship. b. prestige pricing. c. value -added pricing. d. value. e. value analysis. Answer: d Page: 338 Learning Objective: 1 Rationale: Key term definition —value 13-19 VALUE DEFINITION The ratio of __________to price is called value. a. perceived benefits b. prestige value c. value -added pricing d. value e. perceived costs Answer: a Page: 338 Learning Objective: 1 Rationale: Key term definition —value 13-20 VALUE DEFINITION The ratio of perceived benefits to __________ is called value. a. price b. prestige value c. value -added pricing d. value analysis e. perceived costs Answer: a Page: 338 Learning Objective: 1 Rationale: Key term definition —value 13-21 VALUE -PRICING DEFINITION Value -pricing is: a. the ratio of perceived benefits to price. b. the practice of simultaneously increasing product and service be nefits and maintaining or decreasing price. c. the practice of simultaneously increasing product and service benefits and increasing price. d. the ratio of price to perceived benefits. e. list price minus discounts and allowances plus extra fees. Answer: b Page: 339 Learning Objective: 1 Rationale: Key term definition —value -pricing 13-22 ETHICS AND SOCIAL RESPONSIBILITY ALERT CONCEPTUAL Financial counselors suggest that to reduce credit card debt students should: a. reduce the number of c redit cards they have and pay cash. b. increase the number of credit cards they have and pay cash. c. pay off the credit card debt with a loan against their home. d. pay for all future purchases with a new low -interest credit card. e. pay the interes t only on all the credit cards and stop purchasing new things. Answer: a Page: 338 Learning Objective: 1 Rationale: Financial counselors have two bits of advice for students: (1) reduce the number of credit cards and (2) pay cash. Paying cash forc es some hard thinking that is avoided by simply bringing out a plastic credit card. 13-23 VALUE CONCEPTUAL To increase value marketers may: a. increase price and increase benefits b. decrease benefits c. decrease price and increase benefits d. decrease price and decrease benefits e. all of the above Answer: c Page: 338 Learning Objective: 1 Rationale: To increase value, marketers may increase benefits, decrease price, or both increase benefits and decrease price according to the value f ormula: value=perceived benefits/price. 13-24 VALUE -PRICING DEFINITION Creative marketers engage in __________, the practice of simultaneously increasing product and service benefits and maintaining or decreasing price. a. revenue sharing b. diminishing returns c. quantitative analysis d. value -pricing e. cost-plusing Answer: d Page: 339 Other Locations: web Learning Objective: 1 Rationale: Key term definition —value -pricing 13-25 VALUE -PRICING DEFINITION Creative marketers engag e in value -pricing, the practice of simultaneously __________and maintaining or decreasing price. a. revenue sharing b. decreasing product and service benefits c. analyzing benefits d. increasing product and service benefits e. decreasing cost Answer: d Page: 339 Learning Objective: 1 Rationale: Key term definition —value -pricing 13-26 VALUE -PRICING DEFINITION Creative marketers engage in value -pricing, the practice of simultaneously increasing product and service benefits and__________. a. revenue sharing b. decreasing product and service benefits c. analyzing benefits d. maintaining or decreasing price e. decreasing cost Answer: d Page: 339 Learning Objective: 1 Rationale: Key term definition —value -pricing 13-27 PRICE/VA LUE APPLICATION Most consumers realize the quality of diamonds varies, and most believe the higher the price of the diamond the higher its quality. This is an example of price influencing the perception of overall quality, and __________ to consumers. a. acceptable cost b. perceptual investment c. barter potential d. return on investment e. value Answer: e Page: 339 Learning Objective: 1 Rationale: For some products, price influences the perception of overall quality, and ultimately value , to consumers. 13-28 PRICE/VALUE APPLICATION When Pizza Hut announced it was going to add 25 percent more toppings to its Lover's Line of pizzas without increasing the price, what consumer motivation was it appealing to? a. cost b. appearance c. reliability d. value e. prestige Answer: d Page: 339 Learning Objective: 1 Rationale: By offering more toppings for the same price, Pizza Hut was helping customers to compare perceived benefits to price, the ―value‖ of the pizza offering. 13-29 REFERENCE VALUE APPLICATION A buying situation can involve comparing the costs and benefits of substitute items — such as real sugar to the sugar substitute Equal which, although more expensive than sugar, is purchased by many consumers because it co ntains no calories. This situation involves the consumer considering: a. a marginal analysis. b. a profit equation. c. a break -even analysis. d. price elasticity of demand. e. a reference value. Answer: e Page: 339 Learning Objective: 1 Rationale: Reference value involves comparing the costs and benefits of substitute items. 13-30 PROFIT EQUATION DEFINITION To calculate __________, you would compute: (unit price x quantity sold) - total cost. a. total revenue b. profit c. margina l revenue d. average revenue e. break -even point Answer: b Page: Page: 339 Learning Objective: 1 Rationale: Key term definition —profit equation 13-31 PROFIT EQUATION DEFINITION A firm's profit equation demonstrates that its profit equals: a. total cost + total revenue. b. total revenue - total cost. c. total cost - marginal cost. d. total cost - variable cost. e. total revenue x total cost. Answer: b Page: 339 Learning Objective: 1 Rationale: Key term definition —profit equati on 13-32 PROFIT EQUATION DEFINITION According to the profit equation, profit equals total revenue minus: a. marginal cost. b. discounts and allowances. c. total cost. d. variable cost. e. fixed cost. Answer: c Page: 339 Other Locations: web Learning Objective: 1 Rationale: Key term definition —profit equation 13-33 PROFIT EQUATION APPLICATION Forever Quilting is a small company that makes quilting kits priced at $120 each. (There is no quantity discount.) The costs of the materia ls that go into each kit are $45. It costs $5 in labor to assemble a kit. The company has monthly expenses of $1,000 for rent and insurance, $200 for heat and electricity, $500 for advertising in quilting magazines, and $4,500 for the monthly salary of i ts owner. If Forever Quilting sells 150 kits in a given month, its monthly profit will be: a. $4,300. b. $10,500. c. $13,700. d. $11,800. e. $18,000. Answer: a Page: 339 Learning Objective: 1 Rationale: Profit = total revenue - total cost = (unit price x quantity sold) - (fixed cost + variable cost) = $18,000 - ($6200 + $7,500) = $4,300. The variable cost is the labor and materials for each kit ($5 + $45) times the number of kits sold (150 kits) or $50 x 150 = $7,500. The fixed costs are $1,000, $200, $500, and $4500=$6200. The profit is $4,300 for the month. 13-34 PRICE -SETTING PROCESS CONCEPTUAL According to your text, which of the following is NOT one of the steps included in the six-step process for setting price? a. Set list or quoted price. b. Estimate the break -even point. c. Identify pricing constraints and objectives. d. Select an approximate price level. e. Make special adjustments to list or quoted price. Answer: b Page: 339 Learning Objective: 1 Rationale : The six steps provided in the text are identify pricing constraints and objectives; estimate demand and revenue; determine cost, volume, and profit relationships; select an approximate price level; set list or quoted price; and make special adjustments t o list or quoted price. 13-35 PRICE -SETTING PROCESS CONCEPTUAL Which of the following are (is an) example(s) of elements of Step 1, pricing objectives and constraints? a. profit, market share and newness of product b. demand estimation, sales reve nue c. cost estimation, break -even analysis d. marginal analysis e. price elasticity estimation Answer: a Page: 339; Fig. 13 -3 Learning Objective: 2 Rationale: The following are examples of pricing objectives and constraints: objectives like pr ofit, market share, and survival, constraints like demand for product class and brand, newness, costs, and competition. The following are elements of Step 2, estimate demand and revenue: demand estimation, sales revenue estimation, price elasticity estim ation. The following are elements of Step 3, determine cost, volume, and profit relationships: cost estimation, marginal analysis, relation to profit, break -even analysis, relation to profit. 13-36 PRICE -SETTING PROCESS CONCEPTUAL Which of the foll owing are (is an) example(s) of elements of Step 2, estimate demand and revenue? a. profit, market share and newness of product b. demand estimation, sales revenue c. cost estimation, break -even analysis d. marginal analysis e. demand for product c lass and brand Answer: b Page: 339; Fig. 13 -3 Learning Objective: 3 Rationale: The following are examples of pricing objectives and constraints: objectives like profit, market share, and survival, constraints like demand for product class and brand , newness, costs, and competition. The following are elements of Step 2, estimate demand and revenue: demand estimation, sales revenue estimation, price elasticity estimation. The following are elements of Step 3, determine cost, volume, and profit relationships: cost estimation, marginal analysis, relation to profit, break -even analysis, relation to profit. 13-37 PRICE -SETTING PROCESS CONCEPTUAL Which of the following are (is an) example(s) of elements of Step 3, determine cost, volume, and profit relationships? a. profit, market share and newness of product b. demand estimation, sales revenue c. cost estimation, break -even analysis d. sales revenue estimation e. demand for product class and brand Answer: c Page: 339; Fig. 13 -3 Learning Objective: 5 Rationale: The following are examples of pricing objectives and constraints: objectives like profit, market share, and survival, constraints like demand for product class and brand, newness, costs, and competition. The following are eleme nts of Step 2, estimate demand and revenue: demand estimation, sales revenue estimation, price elasticity estimation. The following are elements of Step 3, determine cost, volume, and profit relationships: cost estimation, marginal analysis, relation to profit, break -even analysis, relation to profit. 13-38 PRICING OBJECTIVES DEFINITION Expectations that specify the role of price in an organization's marketing and strategic plans are called: a. a business mission. b. pricing constraints. c. pricing objectives. d. a pricing plan. e. list or quoted prices. Answer: c Page: 340 Learning