Chapter 14 – Developing and Pricing Goods and Services
Which of the following is a popular pricing objective?
A. increasing sales
B. increasing brand awareness
C. fixing prices among competitors
D. achieving less market share
306. Pricing is:
A. one of the 4 Ps of the marketing mix.
B. considered to be a part of promotion.
C. normally a government regulated variable.
D. totally based on the cost of products.
307. Producers often use ________ as a primary basis for setting prices on the goods and
services they offer the public.
A. tariffs
B. costs
C. market share
D. quotas
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326. One of the reasons marketers emphasize non-price differences in their competitive
strategies is because:
A. consumers aren’t concerned about prices.
B. these methods have no impact on the cost of production.
C. non-price differences are tax deductible.
D. relatively similar products can be enhanced.
327. Phil asks you to calculate the break-even point for his firm. You respond that you will
need the following information:
A. the values for all assets and liabilities.
B. total fixed costs, selling price per unit, and variable costs per unit.
C. forecasted sales volume, operating expenses, and asset values.
D. sales revenue and total liabilities.
Feedback: The break-even point is found by dividing total fixed costs by the difference
between selling price minus variable costs per unit.
328.
Chapter 14 – Developing and Pricing Goods and Services
As firms develop their marketing mix, it is important to remember that:
A. prices must be linked directly to the cost of production.
B. instincts and past history are the best guides in determining price.
C. regardless of the strategy used, prices ultimately reflect the forces of supply and
demand.
D. firms are often restricted in creating pricing strategies by relevant government rules
and guidelines.
Feedback: Ultimately the forces of supply and demand will set the price, as first pointed out
in Chapter 2.
329. The cost of raw materials used to produce a good or service represent the firm’s
________ costs.
A. fixed
B. variable
C. mixed
D. uncontrollable
Feedback: Variable costs are those costs that change according to the level of production.
Since a firm will typically need to buy more raw materials and component parts when it
increases its production levels, it will find these costs are variable.
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332. The formula for break-even analysis includes which of the following components?
A. depreciation
B. forecasted sales
C. forecasted cash requirements
D. variable cost per unit of output
Feedback: Break-even analysis finds the level of sales at which total revenue is equal to total
cost. The break-even point is found by dividing total fixed cost by the difference between
price and variable cost per unit.
333. The rent a firm pays each month for office space is an example of a(n):
A. fixed cost.
B. variable cost.
C. mixed cost.
D. uncontrollable cost.
Feedback: Fixed costs are the costs that do not vary with the level of production or sales.
334.
Chapter 14 – Developing and Pricing Goods and Services
Which of the following is a potential problem with a high-low pricing strategy?
A. It confuses and frustrates customers.
B. It places too much emphasis on non-price competition.
C. It teaches customers to wait for sales, and therefore reduces profits.
D. It is difficult to implement.
Feedback: Firms that use a high-low pricing strategy set regular prices relatively high, but
have many special sales where prices are lowered below those of the competition. This is a
strategy used by many department stores. One problem with this approach is that customers
soon learn not to buy anything at the “regular” price, but to wait instead for a sale.
335. American Building Products is the largest cement company in the Midwest. When the
firm raised its prices by 8 percent, all of its competitors soon announced they too were
raising their prices by 8 percent. It appears this industry is influenced by a ________
strategy.
A. price skimming
B. price leadership
C. market pricing
D. price discrimination
Feedback: Price leadership is an industry practice in which all the firms in a specific industry
follow the pricing leadership of one or more dominant firms.
