Instructor Resource
Neck, Entrepreneurship
SAGE Publishing, 2018
51. The component of revenue that is addressed when a company offers a frequent
shopper award is:
a. frequency
b. selling price
c. selling process
d. customers
52. When Sally placed cookies by the side counter of her coffee shop, which revenue
component was she addressing?
a. frequency
b. selling price
c. selling process
d. customers
53. Kelly charges a premium price for her marketing services. In her sales pitch, she
makes sure that she distinguishes key elements of quality not offered by her
competitors. What key element of revenue is Kelly addressing by doing this?
a. frequency
b. selling price
c. selling process
d. customers
Instructor Resource
Neck, Entrepreneurship
SAGE Publishing, 2018
54. Mehmet’s café sells coffee for only $.50, which is less than it costs, but Mehmet
hopes customers will come for the coffee and end up buying sandwiches and pastries.
What sort of pricing strategy is Mehmet pursuing?
a. psychological pricing
b. loss leader
c. introductory offer
d. customer-led pricing
55. What are the two types of costs that should be taken into consideration when
understanding cost drivers?
a. cost of goods sold and operating expenses
b. cost of startup and cost of operations
c. cost of pre-startup and cost of operations
d. employee costs and infrastructure costs
56. The costs that include design, material, manufacturing, packaging, and other costs
before a sale can be made to the customer is referred to as:
a. customer directed costs
b. presales costs
c. cost of goods sold
d. operating costs
57. The cost of running the business, including rent, utilities, administration, salaries,
marketing, etc., is referred to as which of the following?
a. cost of goods sold
b. operating expenses
c. infrastructure costs
Instructor Resource
Neck, Entrepreneurship
SAGE Publishing, 2018
d. nonsales costs
58. Another term for an income statement is:
a. profit and loss statement
b. income tax statement
c. balance sheet
d. credit report
59. The financial report that measures the financial performance of your business on a
monthly or an annual basis is:
a. profit and loss statement
b. income tax statement
c. balance sheet
d. credit report
60. The income statement:
a. subtracts the cost of goods sold from the total revenue to get net income
b. subtracts the operating expenses from the total revenue to get net income
c. subtracts the cost of goods sold and operating expenses from the total revenue to get
net income
d. reports all income with no adjustment for cost of goods sold or operating expenses
Instructor Resource
Neck, Entrepreneurship
SAGE Publishing, 2018
61. Depreciation can be thought of as:
a. the cost of wear and tear on physical assets such as equipment
b. a discount placed on aspects of your business
c. the result of business losses
d. the value of used goods
62. In this pricing strategy, prices are guided by the price other businesses set for
similar products and services:
a. customer-led pricing
b. loss-leader pricing
c. competition-led pricing
d. skimming
63. In this pricing strategy, a product or service is offered at or below cost in order to
attract more customers:
a. skimming
b. loss leader
c. customer-led
d. competition-led
64. In this pricing strategy, customers are asked how much they would pay for the
product:
a. skimming
b. loss leader
c. customer-led
Instructor Resource
Neck, Entrepreneurship
SAGE Publishing, 2018
d. competition-led
65. In this pricing strategy, a new product is offered for a heavily discounted price (or
free) to attract more customers:
a. introductory offer
b. skimming
c. customer-led
d. competition-led
66. A form of pricing high, this strategy is used for new products that have no
competition:
a. customer-led
b. competition-led
c. skimming
d. loss-leader
67. A hardware store offers highly discounted sale items to attract people into the store.
This is an example of which kind of pricing strategy?
a. introductory offer
b. sale pricing
c. customer-led pricing
d. loss leader
Instructor Resource
Neck, Entrepreneurship
SAGE Publishing, 2018
68. In this type of pricing, customers are encouraged to believe that the product is less
expensive than it really is:
a. skimming
b. fair pricing
c. psychological pricing
d. customer led pricing
69. A grocery store offers cans of vegetables at 10 for $10. This is most likely which of
the following pricing strategies:
a. skimming
b. fair pricing
c. psychological pricing
d. customer-led pricing
70. ______ is the degree to which both businesses and customers believe that the
pricing is reasonable.
a. lowest cost pricing
b. loss-leader pricing
c. customer-led pricing
d. fair pricing
Instructor Resource
Neck, Entrepreneurship
SAGE Publishing, 2018
71. This pricing strategy packages goods together at a lower price than if they were sold
separately:
a. bundled pricing
b. discount pricing
c. fair pricing
d. introductory offer
72. Cost-led pricing refers to which of the following pricing calculations:
a. calculating the cost of manufacturing and delivering the product and adding a profit
margin
b. calculating the cost based on how much profit you have targeted in your business
plan
c. calculating the price based on the maximum price a customer will pay
d. calculating the price based on competitive products
73. In target-return pricing, the cost is determined by which of the following:
a. the maximum amount that your customers will pay
b. the cost of creating the product and adding a profit margin
c. pricing is based on how much you have invested in your business
d. the price you need to charge to meet your company goals
74. This method of pricing involves pricing the product based on how it benefits the
customers:
a. target-return pricing
b. customer-led pricing
c. value-based pricing
Instructor Resource
Neck, Entrepreneurship
SAGE Publishing, 2018
d. benefit pricing
75. A specialty tour company markets its service as offering “an experience of a
lifetime.” Which of the following would be the most likely pricing strategy?
a. customer-led pricing
b. psychological pricing
c. value-based pricing
d. bundled pricing
76. A company prices a product at market levels but packages the product to read
“introductory pricing.” This would indicate which of the following pricing strategies?
a. customer-led pricing
b. psychological pricing
c. freemium pricing
d. bundled pricing
77. A local hardware store offers flashlights at “3 for a dollar.” This action would indicate
which of the following strategies?
a. psychological pricing
b. skimming
c. value-based pricing
d. fair pricing
Instructor Resource
Neck, Entrepreneurship
SAGE Publishing, 2018
78. A Las Vegas theater offers a free performance. There is a two-drink minimum. This
is an example of what strategy?
a. value-based pricing
b. direct cross subsidies
c. multiparty
d. utility and usage
True/False
1. A revenue model explains how an entrepreneur will make money from the customer
value proposition.
2. A business model and a revenue model mean the same thing.
3. The razor-and-razor-blade model is an example of an intermediation revenue model.
Instructor Resource
Neck, Entrepreneurship
SAGE Publishing, 2018
4. An advertising revenue model gets revenue through advertising products and service.
5. Real estate brokers represent an intermediation revenue model because they help
manage the transaction between the home seller and the home buyer.
6. In general, reducing operating costs is the most effective way of yielding long-term
gains.
7. The income statement is a report that measures the financial performance of your
business on an annual or monthly basis.
8. An introductory offer is a form of high pricing, generally used for new products or
services that face very little or even no competition.
Instructor Resource
Neck, Entrepreneurship
SAGE Publishing, 2018
9. In an income statement, taxes are the last expense item before net income.
10. Regardless of the type of business, all businesses need to generate revenue.
11. The operating profit represents the amount left over from revenue once all costs and
operating expenses are subtracted
Essay
1. Identify a product that uses a razor-and-razor-blade revenue model. Describe why it
demonstrates this model.
2. Find an example of sponsored or suggested content. Describe how the revenue
model works.
Instructor Resource
Neck, Entrepreneurship
SAGE Publishing, 2018
3. Identify a company that sells database information. Describe how the data is
protected for privacy and how the data results in sales. Discuss what revenue streams
might be associated with the sale.
4. Imagine that you help organize a car pool organization that helps connect riders with
passengers. Describe the revenue stream from this business and identify the revenue
model associated with it.
5. Assume that you want to study the cost of goods sold for your business, a company
that produces customer T-shirts for school sports teams. Discuss what should be
considered in this study.
6. Imagine that you are trying to determine the price for your new product, an ergonomic
chair that reduces back strain. How would you go about pricing the chair?
7. Consider that you have designed an ergonomic chair that reduces back strain. You
want the top price for your high-quality product. Discuss what can be done to ensure
that customers will buy at the higher-end price.
8. Imagine that you are offering an Internet-based software service that helps people
plan group projects and calendar events. Design a freemium program to attract
customers.
Instructor Resource
Neck, Entrepreneurship
SAGE Publishing, 2018
9. Imagine that you have started a freemium strategy and want to monitor it. Discuss
how you will do this and what potential corrective actions you can take.
10. Explain the advantages of bundled pricing and give an example.