Question 1

________ 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.
A) Objective; perceived
B) Perceived; objective
C) Objective; quantitative
D) Perceived; real

Accepted Answer

A

Question 2

Businesses facing rapidly rising costs should consider ________.
A) offering products in smaller sizes or quantities
B) communicating with customers about the cost increases
C) anticipating rising material costs and try to lock in prices early
D) All the above

Accepted Answer

Offering products in smaller sizes or quantities, communicating with customers about the cost increases, and anticipating rising material costs and trying to lock in prices early are all viable options for businesses facing rapidly rising costs. By offering products in smaller sizes or quantities, businesses can maintain their prices while adjusting their margins to accommodate rising costs. Communicating with customers about cost increases can help cultivate transparency and loyalty. Anticipating rising material costs and locking in prices early can help businesses avoid sudden cost increases and plan their budgets accordingly.

Question 3

Which of the following statements about price is true?
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."
D) All of the above

Accepted Answer

A) Price is defined as the amount of money, good or service that is given in exchange for something else. Therefore, Price measures what the customer must exchange to obtain goods and services in the marketplace.
B) Price is closely related to target market, business image and overall marketing strategy because of the role it plays in positioning a product or service within a marketplace. 
C) In most cases, there is an acceptable price range for goods and services, as influenced by factors such as the quality, competition, consumer demand and production costs. Though there is no single "ideal price" for any product or service, the price range is determined based on the market demand and consumer behavior. Therefore, for most goods and services, there is an acceptable price range and not a single "ideal price."

Question 4

The prices a small business charges influence its image in the marketplace.

Accepted Answer

The prices a small business charges can create a certain perception about the quality and value of its products or services. Higher prices may indicate a premium or luxury offering, while lower prices may suggest a budget or discount option. This perception can affect how consumers view the business and impact its competitiveness in the market.

Question 5

To avoid major pricing mistakes, business owners should "shop" their competitors and assess their prices, especially on identical products.

Accepted Answer

It is important for business owners to conduct competitive analysis and compare their prices with their competitors, especially on identical products, to avoid major pricing mistakes. This helps them stay competitive in the market and avoid underpricing or overpricing their products.

Question 6

An entrepreneurial company can differentiate itself by creating a distinctive image in customers' minds or by offering ________.
A) superior service and quality
B) exceptional design and convenience
C) speed and performance
D) All the above

Accepted Answer

An entrepreneurial company can differentiate itself from its competitors by offering superior service and quality, exceptional design and convenience, and speed and performance. By doing so, the company can create a distinctive image in customers' minds and develop a competitive advantage. Therefore, option D, "All the above," is the correct answer.

Question 7

The desired image for the business, the target market the owner is trying to reach, and the prices charged are all closely related to one another.

Accepted Answer

The desired image for the business and the target market determine the prices charged. For example, luxury or premium images attract high-end customers who are willing to pay higher prices, while budget or discount images attract price-sensitive customers who are looking for lower prices. Therefore, the desired image and target market are closely related to the prices charged.

Question 8

Ultimately, the "right" price for a product or service depends on one factor - ________.
A) the lowest price possible
B) premium prices
C) the value that it provides for a customer
D) the most effective advertising campaign

Accepted Answer

The "right" price for a product or service depends on the value that it provides for a customer. Customers are willing to pay a higher price if they perceive the product or service as valuable and beneficial to them. On the other hand, pricing too low can result in customers questioning the quality and value of the product or service. Thus, it is important for businesses to understand the value proposition of their offerings and price accordingly. Price should also take into account factors such as competition, production costs, and target market.

Question 9

The top business challenge that drives pricing decisions is the ________.
A) increased price transparency
B) increased price sensitivity of customers
C) need to protect the brand's image
D) increased pricing aggressiveness from competitors

Accepted Answer

The answer of The top business challenge that drives pricing...

Question 10

Which of the following statements concerning the impact of competition on a small company's prices is true?
A) When setting prices, a business owner must either match or beat competitors' prices on similar products or services.
B) Because federal laws prohibit the practice as an unfair trade practice, business owners should not monitor their rivals' prices on identical items.
C) When going up against larger, more powerful rivals, small firms should consider using nonprice competition as a way to differentiate their products or services rather than head-to-head price competition.
D) All of the above

Accepted Answer

When facing larger and more powerful competitors, small businesses should avoid head-to-head price competition and instead use nonprice competition to differentiate their products or services. This can be done by offering better quality products or services, personalized customer service, or unique features that cannot be easily replicated. Simply matching or beating competitors' prices on similar products or services may not be sustainable for a small business in the long run. Monitoring competitors' prices on identical items is not illegal or prohibited, but it should not be the sole basis for setting prices as it may lead to a race to the bottom and erode profit margins.

Question 11

A key ingredient to setting prices properly is to understand a company's ________.
A) cost structure
B) most aggressive price competitor
C) target market
D) profit expectations

Accepted Answer

The answer of A key ingredient to setting prices properly...

Question 12

________ frequently convey the idea of quality, prestige, and uniqueness to customers.
A) Effective packaging
B) Low prices
C) High prices
D) High profile promotions

Accepted Answer

High prices often convey the idea of quality, prestige, and uniqueness to customers. Customers may perceive a higher price as a sign of higher quality or exclusivity, which can make them more willing to pay the premium price.

Question 13

Generally, entrepreneurs should avoid head-to-head price competition with other firms that can more easily achieve lower prices through ________.
A) offering lower value products and services
B) a better designed Web site
C) geographic advantages
D) lower cost structures

Accepted Answer

Other firms may have lower cost structures due to numerous factors such as economies of scale, more efficient production methods, or access to cheaper resources. Competing solely on price can lead to a race to the bottom and may not be sustainable for the business in the long run. Instead, entrepreneurs should focus on creating unique value propositions that differentiate their products or services from competitors.

Question 14

A study by Rafi Mohammed, author of The Art of Pricing, found that companies that raised prices by 1 percent saw profits increase by 11 percent and those that raised prices by 10 percent realized profit increases of 100 percent.

Accepted Answer

The statement is true according to the study by Rafi Mohammed.

Question 15

One key to setting prices properly is based on understanding a company's ________.
A) buying power
B) competitive position
C) target market
D) cost structure

Accepted Answer

The answer of One key to setting prices properly is...

Question 16

Without the advantage of a unique business image, a small business must match local competitors' prices or risk losing sales and customers.

Accepted Answer

Without a unique business image, a small business will have a harder time standing out from local competitors, making price matching necessary to stay competitive and retain customers.

Question 17

A common pricing mistake entrepreneurs make is lowering prices because they fail to recognize the ________.
A) extra value, convenience, service, and quality they offer their customers
B) advantages they have due to their lower cost structure
C) complexities that larger competitors have to face
D) driving need that all customers have to find the lowest price possible

Accepted Answer

Lowering prices assumes that customers only care about price and not other factors such as convenience, service, and quality. By recognizing the extra value and benefits they offer, entrepreneurs can justify higher prices and differentiate themselves from competitors who may only compete on price.

Question 18

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 ________.
A) position prices lower than all competitors
B) produce a profit
C) effectively compete with online alternatives
D) have high volume/high margin sales

Accepted Answer

The ultimate goal of setting prices is to generate a profit for the business, so the best choice is B. While the other options may play a role in pricing decisions, none are as important as ensuring a profitable price point.

Question 19

One of the most important determinants of customers' response to a price is whether they perceive the price to be a fair exchange ________.
A) compared to what they have paid in the past
B) regardless of their actual experience with the product
C) based on their expectation, not reality
D) for the value they receive from the product or service

Accepted Answer

Customers are more likely to respond positively to a price if they perceive it as a fair exchange for the value they receive from a product or service. This means that they are considering whether the price is reasonable based on what they are getting in return, rather than simply comparing it to past prices or their expectations. Therefore, Choice D is the best option.

Question 20

The final price a business owner sets within the acceptable price range depends on ________.
A) the cost of the product or service
B) the desired "image" he wants to create in the customer's mind
C) the maximum price customers are willing to pay
D) All of the above

Accepted Answer

The final price a business owner sets within the acceptable price range depends on all of the listed factors - the cost of the product or service, the desired "image" he wants to create in the customer's mind, and the maximum price customers are willing to pay. All of these factors must be considered in order to set the most effective and profitable price for the product or service.

Quiz 10: Pricing and Credit Strategies

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.

Businesses facing rapidly rising costs should consider ________.

Which of the following statements about price is true?

The prices a small business charges influence its image in the marketplace.

To avoid major pricing mistakes, business owners should "shop" their competitors and assess their prices, especially on identical products.

An entrepreneurial company can differentiate itself by creating a distinctive image in customers' minds or by offering ________.

The desired image for the business, the target market the owner is trying to reach, and the prices charged are all closely related to one another.

Ultimately, the "right" price for a product or service depends on one factor - ________.

The top business challenge that drives pricing decisions is the ________.

Which of the following statements concerning the impact of competition on a small company's prices is true?

A key ingredient to setting prices properly is to understand a company's ________.

________ frequently convey the idea of quality, prestige, and uniqueness to customers.

Generally, entrepreneurs should avoid head-to-head price competition with other firms that can more easily achieve lower prices through ________.

A study by Rafi Mohammed, author of The Art of Pricing, found that companies that raised prices by 1 percent saw profits increase by 11 percent and those that raised prices by 10 percent realized profit increases of 100 percent.

One key to setting prices properly is based on understanding a company's ________.

Without the advantage of a unique business image, a small business must match local competitors' prices or risk losing sales and customers.

A common pricing mistake entrepreneurs make is lowering prices because they fail to recognize the ________.

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 ________.

One of the most important determinants of customers' response to a price is whether they perceive the price to be a fair exchange ________.

The final price a business owner sets within the acceptable price range depends on ________.