24) Which of the following statements are not true regarding credit cards?
A) They can be issued directly by a merchant.
B) They can be issued through a third party.
C) Cardholders may be eligible for special discounts.
D) Cardholders may be eligible for special store events.
E) Cardholders are usually not driven to return to the store.
Learning Obj.: LO 3
AACSB: Analytical thinking
25) A wholesaler usually marks up the selling price by about ________ percent.
A) 20
B) 10
C) 5
D) 15
E) 25
Learning Obj.: LO 3
AACSB: Analytical thinking
26) It is common for ________ businesses to use a meet-or-beat-the-competition pricing strategy,
which entails constantly matching or undercutting the pricing of your competition.
A) Service
B) Manufacturing
C) Distribution
D) All of the above
E) None of the above
Learning Obj.: LO 3
AACSB: Analytical thinking
27) A penetration pricing strategy uses a ________ price during the early stages of a product’s
life cycle to gain market share.
A) Low
B) High
C) Competitive
D) Mid-range
E) Fixed
Learning Obj.: LO 2
AACSB: Analytical thinking
7
28) If prices are too low, there may be ________ of products.
A) Shortages
B) Surplus
C) Excess
D) Less demand
E) All of the above
Learning Obj.: LO 3
AACSB: Analytical thinking
29) Tracking receivables helps to manage ________.
A) Cash flow
B) Assets
C) Owner’s equity
D) COGS
E) Fixed costs
Learning Obj.: LO 4
AACSB: Analytical thinking
30) The primary cost of production in a service business is which of the following?
A) Labor
B) Land
C) Building
D) Capital goods
E) All of the above
Learning Obj.: LO 3
AACSB: Analytical thinking
31) Retailers who buy goods wholesale and resell them in stores sometimes keystone, or triple,
the cost of goods sold, as a rule of thumb for estimating what price to charge.
Learning Obj.: LO 3
AACSB: Analytical thinking
32) Price lining is the process of creating distinctive pricing levels.
Learning Obj.: LO 2
AACSB: Analytical thinking
8
33) Inelastic demand is demand that does not change in a significant way when prices change.
Learning Obj.: LO 3
AACSB: Analytical thinking
34) Cost-plus pricing is rarely used.
Learning Obj.: LO 2
AACSB: Analytical thinking
35) Extending credit has costs and benefits to few types of organizations.
Learning Obj.: LO 3
AACSB: Analytical thinking
36) The supply of products and/or services exceeds the demand for them at market clearing
prices.
Learning Obj.: LO 3
AACSB: Analytical thinking
37) Cash-in-advance (CIA) terms require prepayment from the customer before either shipping
or production.
Learning Obj.: LO 3
AACSB: Analytical thinking
38) A firm that sets high prices on their products or services to send a message of uniqueness or
premium quality is using a prestige pricing strategy.
Learning Obj.: LO 3
AACSB: Analytical thinking
39) Many firms use a variable pricing strategy, often without conscious recognition of it.
Learning Obj.: LO 2
AACSB: Analytical thinking
9
40) Value pricing is just price cutting.
Learning Obj.: LO 2
AACSB: Analytical thinking
41) Consumers may assume that a low price indicates low quality.
Learning Obj.: LO 1
AACSB: Analytical thinking
42) Service businesses need to have reliable and accurate costing information to set even
approximate prices.
Learning Obj.: LO 3
AACSB: Analytical thinking
43) Price is simply the amount that a seller requires in exchange for the use of a product or
service or for transferring its ownership.
Learning Obj.: LO 1
AACSB: Analytical thinking
44) Entrepreneurs should always sell their products at the lowest price they can afford.
Learning Obj.: LO 1
AACSB: Analytical thinking
45) Pay Pal requires sellers to obtain merchant status prior to offering their services.
Learning Obj.: LO 3
AACSB: Application of knowledge
46) Apply cost-plus pricing to your business idea. How much would your price be, based on your
desired profit? Is it affordable?
Learning Obj.: LO 2
AACSB: Application of knowledge
10
47) Would you use credit in your business? Why or why not?
Learning Obj.: LO 3
AACSB: Reflective thinking
48) How would you price your item based on the price and quality dimensions in Figure 8-1?
Why?
Learning Obj.: LO 2
AACSB: Analytical thinking
49) If you were to use credit, how would you deal with aging receivables?
Learning Obj.: LO 5
AACSB: Analytical thinking
50) Discuss how you would apply the eight steps to better pricing.
Learning Obj.: LO 2
AACSB: Analytical thinking
11