Entrepreneurship and Small Business Management, 2e (Mariotti)
Chapter 8 Pricing and Credit Strategies
1) Which of the following is not included in the eight steps to better pricing in the text?
A) Assess what value your customers place on the product or service.
B) Assess customers’ price sensitivity.
C) Consider competitors’ reactions.
D) Assess customers’ emotional response.
E) Adjust prices based on the consumer price index.
Learning Obj.: LO 2
AACSB: Analytical thinking
2) If a product is retail priced at $20 and the wholesale markup is 50%, what was the cost that the
wholesaler charged?
A) $10
B) $12
C) $15
D) $16
E) $20
Learning Obj.: LO 3
AACSB: Application of knowledge
3) Which of the following types of businesses do not typically use a follow-the-leader pricing
strategy?
A) Wholesale
B) Manufacturing
C) Retail
D) Service
E) All of the above typically use a follow-the-leader pricing strategy.
Learning Obj.: LO 3
AACSB: Analytical thinking
1
4) The ________ price is what remains after all pricing factors, such as discounts and
allowances, are deducted from list or invoice to reach final prices.
A) Pocket
B) Concise
C) Abridged
D) Portable
E) Mini
Learning Obj.: LO 5
AACSB: Analytical thinking
5) Manufacturers must control ________ to create sustainable profits.
A) Raw material costs
B) Raw material supplies
C) Raw material storage
D) Raw material usage
E) All of the above
Learning Obj.: LO 3
AACSB: Analytical thinking
6) Which of the following are examples of price adjustments?
A) Order size discounts
B) Dealer and distributor discounts
C) Merchandising discounts
D) Promotion discounts and bonuses
E) All of the above
Learning Obj.: LO 5
AACSB: Analytical thinking
7) As you define the marketing strategy for your company, including ________, the range of
appropriate pricing strategies emerges.
A) Your target market(s)
B) Competitive advantages
C) Overall marketing mix
D) All of the above
E) None of the above
Learning Obj.: LO 2
AACSB: Analytical thinking
2
8) Which of the following is not a typical discounting method for manufacturers?
A) Volume discounts
B) Credit terms
C) Seasonal sales
D) All of the above
E) None of the above
Learning Obj.: LO 3
AACSB: Analytical thinking
9) In order to price objectively, the ________ of extending credit must be fully incorporated into
the pricing decision.
A) Costs
B) Benefits
C) Rate
D) Value
E) None of the above
Learning Obj.: LO 3
AACSB: Analytical thinking
10) Which of the following is not a type of credit?
A) Credit cards
B) Merchant credit cards
C) Installment credit
D) Trade credit
E) Good-will credit
Learning Obj.: LO 3
AACSB: Analytical thinking
11) The manufacturer and retailer typically ________ their costs to determine a selling price.
A) Double
B) Triple
C) Quadruple
D) All of the above
E) None of the above
Learning Obj.: LO 3
AACSB: Analytical thinking
3
12) Markup pricing is commonly used as a form of ________ pricing.
A) Cost plus
B) Cost positive
C) Cost favorable
D) Cost and more
E) All of the above
Learning Obj.: LO 3
AACSB: Analytical thinking
13) An incentive for early payment, a discount, can be added. A 2 percent discount for payment
within 10 days or full payment within 30 days is an example and is denoted as which of the
following?
A) 2/10, net 30
B) 2/30, net 10
C) 10/30, net 2
D) 30/2, net 10
E) 10/2, net 30
Learning Obj.: LO 3
AACSB: Application of knowledge
14) An industry that has traditionally used the skimming price strategy is ________.
A) Technology
B) Clothing
C) Grocery stores
D) Household cleaners
E) Restaurants
Learning Obj.: LO 2
AACSB: Analytical thinking
15) Value pricing means finding the balance between ________ and ________ that will give
your target customers the value they seek.
A) Quality, price
B) Quality, quantity
C) Quantity, price
D) Price, features
E) Cost, price
Learning Obj.: LO 2
AACSB: Analytical thinking
4
16) Which of the following is not a factor to consider in pricing strategy for your business?
A) Desired profitability
B) Market positioning
C) Psychology of pricing
D) The message you are sending customers
E) The lowest sale price you can afford
Learning Obj.: LO 1
AACSB: Analytical thinking
17) Wholesalers often operate on ________ profit margins.
A) Small
B) Medium
C) Large
D) Enormous
E) Tiny
Learning Obj.: LO 3
AACSB: Analytical thinking
18) A service business may use which of the following types of pricing strategies?
A) Competition
B) Penetration
C) Personalized
D) All of the above
E) None of the above
Learning Obj.: LO 3
AACSB: Analytical thinking
19) Which of the following products is likely to have the most elastic demand?
A) Gas
B) Milk
C) Bread
D) Digital cameras
E) Toothpaste
Learning Obj.: LO 3
AACSB: Application of knowledge
5
20) If prices are too ________, the supply will ________ demand.
A) High, exceed
B) High, be less than
C) Low, exceed
D) Low, be more than
E) None of the above
Learning Obj.: LO 3
AACSB: Analytical thinking
21) The retailer’s rule of thumb is to keystone, meaning to increase the price by ________.
A) 50%
B) Double
C) Triple
D) 80%
E) 75%
Learning Obj.: LO 3
AACSB: Analytical thinking
22) Calculate the price per hour for a service business based on 75% profit with cost per hour of
$30.
A) $120
B) $130
C) $100
D) $140
E) $90
Learning Obj.: LO 3
AACSB: Analytical thinking
23) Which of the following is not a dimension of price and quality?
A) Penetration Pricing
B) Value Pricing
C) Prestige Pricing
D) Skimming Pricing
E) Feasibility Pricing
Learning Obj.: LO 2
AACSB: Analytical thinking
6