Question 1

An analysis of a prospective product shows that sales for it are expected to grow by at least 10 percent each year over the next five years before it enters the maturity phase of its product life cycle. This type of analysis would provide useful information in which step of the price-setting process?
A)identifying pricing objectives and constraints
B)determining cost, volume, and profit relationships
C)estimating demand and revenue
D)selecting an appropriate (approximate) price lining strategy
E)making special adjustments to list or quoted price

Accepted Answer

The answer of An analysis of a prospective product shows...

Question 2

The __________ equation = (Unit price × Quantity sold) - Total cost.
A)total revenue
B)variable cost
C)net present value
D)profit
E)break-even point

Accepted Answer

The given equation is used to calculate profit. The formula subtracts the total cost from the total revenue, which is calculated by multiplying the unit price by the quantity sold. Therefore, the correct answer is D) profit.

Question 3

Which of the following statements would most likely be spoken during Step 2 of the price-setting process?
A)"It's important to offer discounts to seniors."
B)"We have to try to achieve an 8 percent profit share."
C)"The starting price should be $4.99 and we can raise the price again in six months."
D)"But, if we increase the price even by $1, how many customers will we lose?"
E)"We should probably price the extra-large version somewhere between $600 and $650."

Accepted Answer

Step 2 of the price-setting process involves conducting market research and analyzing the results to determine how customers will likely respond to certain price points. Statement D reflects this by considering the potential impact of a price increase on customer behavior. The other statements in the question focus more on pricing strategy and profit goals, which are typically addressed in later steps of the process.

Question 4

Which of the following are examples of elements involved in Step 1 of the price-setting process?
A)profit, market share, and survival
B)estimation of demand, sales revenue, and price elasticity
C)cost estimation, marginal analysis, and break-even analysis
D)demand for the product class and brand, newness of the product, and competition
E)market segmentation targeting, and positioning

Accepted Answer

Step 1 of the price-setting process involves identifying pricing objectives, which include profit, market share, and survival.

Question 5

Which of the following would be an example of an objective in Step 1 of the price-setting process?
A)We need to set an initial price of $259 per unit.
B)We need to find the least expensive distributor.
C)We need to make a profit of at least $1.2 million.
D)We need to make allowances for large quantity orders.
E)We need to increase the price during the holiday shopping season.

Accepted Answer

Pricing objectives would include concerns such as profit,market share,and survival.

Question 6

Which of the following would be an example of an objective in Step 1 of the price-setting process?
A)We need to set an initial price of $259 per unit.
B)We need to obtain a 10 percent market share.
C)We need to find the least expensive distributor.
D)We need to make allowances for large quantity orders.
E)We need to increase the price during the holiday shopping season.

Accepted Answer

Pricing objectives would include concerns such as profit,market share,and survival.

Question 7

Which of the following represent elements of Step 2 of the price-setting process?
A)profit, market share, and survival
B)estimation of demand, sales revenue, and price elasticity
C)cost estimation, marginal analysis, and break-even analysis
D)demand for the product class and brand, newness of the product, and competition
E)market segmentation, targeting, and positioning

Accepted Answer

Estimation of demand, sales revenue, and price elasticity are all elements of Step 2, which involves gathering and analyzing data to understand the market and the potential impact of different pricing strategies. The other options either don't directly relate to this step (A, C) or refer to elements of other steps in the price-setting process (D, E).

Question 8

Which of the following would be an example of a constraint in Step 1 of the price-setting process?
A)We can rely on our reputation for our other products in the line.
B)Experts are predicting a surge in global demand.
C)We need to make allowances for large quantity orders.
D)We should increase the price during the holiday shopping season.
E)We're going to face some stiff competition.

Accepted Answer

We're going to face some stiff competition.

Question 9

Estimating demand, sales revenue, and price elasticity are issues that would be addressed during __________ of the price-setting process.
A)Step 1
B)Step 2
C)Step 3
D)Step 4
E)Step 5

Accepted Answer

Estimating demand, sales revenue, and price elasticity are issues addressed during Step 2 of the price-setting process, which involves gathering and analyzing market and cost data. This step is crucial in determining the optimal price point for a product or service based on market conditions and production costs.

Question 10

George and Alice Renfro decided to start a family business in 1990 to produce chowchow, a Southern regional food. To determine how they would price the chowchow, the Renfros had to examine (1) the demand for the product and the cost to distribute the product to area grocery stores. For the Renfros, Step 1 of their price-setting process consists of
A)identifying pricing constraints.
B)estimating break-even points and revenue points.
C)setting the list price.
D)selecting an approximate price level.
E)determining cost, volume, and profit relationships.

Accepted Answer

Identifying pricing constraints is the first step in the price-setting process, as it involves understanding the factors that limit how a product can be priced, such as demand and distribution costs.

Question 11

Objectives such as profit, market share, and survival, as well as constraints such as demand for product class and brand, newness, costs, and competition are issues that would be addressed during __________ of the price-setting process.
A)Step 1
B)Step 2
C)Step 3
D)Step 4
E)Step 5

Accepted Answer

Step 1 of the price-setting process involves identifying pricing objectives and constraints, which includes considerations like profit, market share, survival, demand, costs, and competition.

Question 12

A reference value
A)is relative to the amount of time and energy a consumer puts into the purchase process.
B)is based upon the value assigned to similar items used by the consumer's peers.
C)results from performing a careful break-even analysis.
D)involves comparing the costs and benefits of substitute items.
E)is based upon the differential between customers' "needs" and "wants."

Accepted Answer

The answer of A reference value
A)is relative to the amount...

Question 13

Calculate a firm's total revenue (TR) using the following information: the unit price (P) for a product is $40; the quantity sold (Q) is 2,000; the fixed cost (FC) is $50,000; and the variable cost (VC) is $20,000.
A)$10,000
B)$50,000
C)$110,000
D)$150,000
E)cannot be determined with the information provided

Accepted Answer

The answer of Calculate a firm's total revenue (TR) using...

Question 14

Which of the following would be an example of a constraint in Step 1 of the price-setting process?
A)We can rely on our reputation for our other products in the line.
B)Experts are predicting a surge in global demand.
C)We need to make allowances for large quantity orders.
D)We should increase the price during the holiday shopping season.
E)Remember, we don't know what the selective demand for this new product will be.

Accepted Answer

A constraint in Step 1 of the price-setting process refers to any limiting factor that influences the pricing decision. In this case, the constraint is the lack of knowledge about the selective demand for the new product, which means the company cannot set a price based on consumer demand. The other options describe factors that could affect pricing decisions, but they do not represent constraints.

Question 15

Which of the following would be an example of an objective in Step 1 of the price-setting process?
A)We need to find the least expensive distributor.
B)We need to make allowances for large quantity orders.
C)We need to increase the price during the holiday shopping season.
D)We need to forget profits right now; just make sure we break even.
E)We need to hire a professional accountant.

Accepted Answer

Pricing objectives would include concerns such as profit,market share,and survival.

Question 16

If you wanted to buy a McDonald's Big Mac, medium fries, and a medium drink separately, it will cost you $8.27. However, if you purchased these three items together as part of the firm's Extra Value Meal package, you would pay only $5.69, saving $2.58. This Extra Value Meal price serves as __________ to you and other consumers, who compare the costs and benefits of substitute items to a bundle containing those items.
A)a marginal analysis
B)a profit equation
C)a reference value
D)a break-even analysis
E)price elasticity of demand

Accepted Answer

The Extra Value Meal price serves as a reference value to consumers who compare the costs and benefits of substitute items to a bundle containing those items. This means that consumers perceive the Extra Value Meal price as a benchmark or standard price, against which they evaluate the relative value of other options. Therefore, the Extra Value Meal price acts as a reference point that influences consumers' perceptions of value and affects their decision-making process. The other options listed do not accurately describe the role of the Extra Value Meal price in this context.

Question 17

A firm's profit equation demonstrates that profit equals
A)Total cost + Total revenue.
B)Total revenue - Total cost.
C)Marginal revenue - Marginal cost.
D)Price × Quantity.
E)Total revenue + Marginal cost.

Accepted Answer

Profit is the difference between total revenue and total cost. Therefore, the correct equation is Profit = Total revenue - Total cost.

Question 18

A buying situation can involve comparing the costs and benefits of substitute items-such as real sugar to the sugar substitute Splenda, which, although more expensive than sugar, is purchased by many consumers because it contains 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.

Accepted Answer

The answer of A buying situation can involve comparing the...

Question 19

The formula Total revenue - Total cost or [(Unit price × Quantity sold) - (Fixed cost + Variable cost)] represents
A)the value equation.
B)the sales ratio.
C)average revenue.
D)the break-even point.
E)the profit equation.

Accepted Answer

The formula for Total Revenue - Total Cost represents the profit equation, which calculates the profit of a business. It takes into account the revenue generated from sales (unit price x quantity sold) and deducts the total cost (fixed cost + variable cost) incurred to produce and sell those units, giving the profit earned by the business.

Question 20

A firm's profit equation equals
A)Total cost + Total revenue or [(Fixed cost + Variable cost) + (Unit price × Quantity sold)].
B)Total revenue - Total cost or [(Unit price × Quantity sold) - (Fixed cost + Variable cost)].
C)Total cost - Marginal cost or [(Fixed cost + Variable cost) - (Unit price × Quantity sold)].
D)Total cost - Variable cost or [(Fixed cost + Variable cost) - (Unit price × Quantity sold)].
E)Total revenue/Total cost or [(Unit price × Quantity sold) ÷ (Fixed cost + Variable cost)].

Accepted Answer

The profit equation is the difference between the total revenue and total cost. Option B, Total revenue - Total cost, is the only equation that matches this definition.

Quiz 13: Building the Price Foundation

The __________ equation = (Unit price × Quantity sold) - Total cost.

Which of the following statements would most likely be spoken during Step 2 of the price-setting process?

Which of the following are examples of elements involved in Step 1 of the price-setting process?

Which of the following would be an example of an objective in Step 1 of the price-setting process?

Which of the following would be an example of an objective in Step 1 of the price-setting process?

Which of the following represent elements of Step 2 of the price-setting process?

Which of the following would be an example of a constraint in Step 1 of the price-setting process?

Estimating demand, sales revenue, and price elasticity are issues that would be addressed during __________ of the price-setting process.

Objectives such as profit, market share, and survival, as well as constraints such as demand for product class and brand, newness, costs, and competition are issues that would be addressed during __________ of the price-setting process.

A reference value

Calculate a firm's total revenue (TR) using the following information: the unit price (P) for a product is $40; the quantity sold (Q) is 2,000; the fixed cost (FC) is $50,000; and the variable cost (VC) is $20,000.

Which of the following would be an example of a constraint in Step 1 of the price-setting process?

Which of the following would be an example of an objective in Step 1 of the price-setting process?

A firm's profit equation demonstrates that profit equals

A buying situation can involve comparing the costs and benefits of substitute items-such as real sugar to the sugar substitute Splenda, which, although more expensive than sugar, is purchased by many consumers because it contains no calories. This situation involves the consumer considering

The formula Total revenue - Total cost or [(Unit price × Quantity sold) - (Fixed cost + Variable cost) ] represents

A firm's profit equation equals