Understanding business Test bank solution Chap 14 Developing and pricing goods and services

From a marketing management perspective, what is the meaning of a total product offer? What are the important elements in the total product offer of your college or university? Consumer goods and services are generally classified into four specific categories. What are the four categories, and how do they differ? Illustrate by giving examples of products that are often included in each category. Discuss the role of packaging in a firms total product offer. What is a brand? What is a brand name? What is meant by brand equity?

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Chapter 14 - Developing and Pricing Goods and Services

TEST PLANNING TABLE FOR CHAPTER 14

185,186,187,188,189,190, 191

23,24,25,26~,27~,

192,193,194~ 28,29,30,195,196,197,198,199,

200,201,202, 349,

353*

2 Identify the various

kinds of consumer and

industrial goods.

31,32,33,34,35,36,37,38, 39,40,41,42,43,44,45,46, 47,48,49,50,51,52,53,54, 55,56,

203,204,205,206,207,208, 209,210,211

57,58,59,60,

212,213,214,215,216, 217

61,62,63,64,65,66,67,

218,219,220,221,222, 223,224,225,

350, 354*

3 Summarize the

functions of packaging.

68,69,70,71,72,73,74,75, 76,77,78,

brand name, and

trademark, and show the

value of brand equity.

83,84,85,86,87,88,89,90, 91,92,93,94,95,96,97,98, 99,100,101,102,103,104, 105,106,107,108,

237,238,239,240,241,242, 243,244,245,246,247,248, 249,250,251,252,253

109,110,111~,

254,255,256,257,258, 259,260,261~

112,113,114,115,

262,263,264,265,266, 267,268,269,270,271,

352, 355*

5 Explain the steps in

the new-product

development process.

116,117,118,119,120,121, 122,123,124,125,

137,138,

291,292,293,294,295, 296,297,298

304,305,306,307,308,309, 310,311,312,313,314,315, 316,317,318,319,320,321, 322,323,324,325

174,

326,327,328,329,330, 331,332,333,334,335, 336

175,176,177,178,179, 180,181,182,183,184

337,338,339,340,341, 342,343,344,345,346, 347,348,

356*,357*

Total number of test items: 357

True/false questions are in plain text.

Multiple choice questions are in bold text

Questions on boxed material are in bold text with a tilde~.

Essay questions are in bold underlined text.

Minicase questions are in bold with an asterisk*.

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Chapter 14 Developing and Pricing Goods and Services Answer Key

True / False Questions

1 When consumers calculate the value of a product, they look at the benefits and then

subtract the cost

Answer: True

AACSB: Reflective Thinking

Bloom’s: Remember

Learning Objective: 14-01 Describe a total product offer

Level of Difficulty: 1 Easy

Topic: The Product Life Cycle and the Product Development Process

2 Successful businesses constantly monitor consumer wants and needs

Answer: True

3 To satisfy consumers managers must learn to listen better than they do now and to adapt

constantly to changing market demands

Answer: True

4 Once an organization surveys the consumer's wants and needs, has designed a group of

products to meet those needs, and begun to market them in stores, the organization is assured of success

Answer: False

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5 Fast-food organizations must constantly monitor all sources of information for

new-product ideas

Answer: True

6 McDonald's prides itself on offering precisely the same menu around the world so that

customers know exactly what to expect when they eat at a McDonald's

Answer: False

7 Product development is a key activity in any modern business, anywhere in the world

Answer: True

8 From a strategic marketing viewpoint, a total product offer includes all of the tangible

attributes of a good or service, and excludes any intangible attributes

Answer: False

9 The image created by advertising is part of the total product offer of a product

Answer: True

10 The reputation of the manufacturer and the retail store surroundings are considered part of

the value enhancers of a total product offer

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11 Price, store surroundings, service, and brand name are all elements that consumers

evaluate in a total product offer

Answer: True

12 Successful marketers attempt to think like consumers and evaluate the total product offer

as a collection of impressions created by all parts of the value package

Answer: True

13 The critical component of a total product offer is always a low price

Answer: False

14 Low prices can often help retailers create an attractive total product offer

Answer: True

15 In evaluating a total product offer, value enhancers such as service, guarantees,

reputation of the seller, etc are as important to customers as the basic product

Answer: True

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16 A firm's product line refers to all of the different geographic markets in which it sells the

same good or service

Answer: False

17 A single product line may contain several competing brands

Answer: True

18 The term product line describes the combination of product mixes offered by a

manufacturer

Answer: False

19 A product line is a group of products that are physically similar or are intended for a

similar market

Answer: True

20 The several product lines that a company offers for sale make up that organization's

product mix

Answer: True

21 While service providers offer product lines, they are unable to offer product mixes

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22 Whole grain breads, bagels, bread sticks, sandwiches, soup, and pastries are products that

would be included in the product mix of El Trovodor's Bread Company

Feedback: Different products offered by El Trovodor's make up the company's product mix

that it offers to its customers

Answer: True

Bloom’s: Understand

Level of Difficulty: 2 Medium

23 Car dealers realize that consumers focus exclusively on price and warranty

Feedback: Consumers consider the total product offer of benefits that the product provides

This may include many different attributes including factors other than the price and quality

of the product For example, the total product offer may include the image of the product created by advertising, the brand name, the atmosphere of the store, and the guarantee

Answer: False

24 A bank's product line may include safety deposit boxes, car loans, and traveler's checks

Feedback: These various services would comprise the bank's product mix, not its product

line A product line is a group of products that are physically similar

Answer: False

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25 The concepts of product lines and product mixes apply to marketers of products and

services

Feedback: Service providers have product lines and product mixes as well For example, a

bank may offer a variety of services from savings accounts, automatic teller machines, and computer banking

Answer: True

26 According to the Adapting to Change box, a social media presence isn’t needed for small

businesses to connect with customers

Feedback: Chris Dilla found out quickly that a social media presence is a valuable tool for

small business Without having the money for advertising, social media can help small businesses connect with potential customers

Answer: False

27 The Spotlight on Small Business box showed us through the example of Randy Hetrick’s

TRX Suspension Trainer that in order to remain successful, sometimes expanding the product mix is essential

Feedback: As business grew, Hetrick launched Fitness Anywhere and began providing

classes, instructional videos, and other services This growth expanded the product mix and allowed continued success for Hetrick and his TRX

Answer: True

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28 A traditional McDonald's and a McCafe are examples of the McDonald's Corporation

product mix

Feedback: A product mix is the combination of all product lines offered by a manufacturer

McDonald's Corporation has quick-service outlets that serve burgers and fries and they also have the McCafe that serves coffee and pastries, two different types of outlets Each serves a different product line to a particular market

Answer: True

AACSB: Knowledge Application

Bloom’s: Apply

Level of Difficulty: 3 Hard

29 At Isuzu's Appliance Store, all new products are offered with an extended service

contract, as well as free delivery and installation By offering these value enhancers, Isuzu's has added to their total product offer

Feedback: When people buy a product, they evaluate an entire total product offer of product

benefits, including such things as delivery, service, warranty, image, and package

Answer: True

Bloom’s: Apply

30 Miller Light Beer, Maxwell House Coffee, Jell-O brand gelatin, Kraft mayonnaise, and

Marlboro Cigarettes, were all at one time products of the Philip Morris Company These products represented a part of the product line Philip Morris offered

Feedback: A product line is a group of products that are physically similar or are intended for

a similar market These brands were part of the Philip Morris product mix

Answer: False

Bloom’s: Apply

31 In order for product differentiation to be effective, real product differences must be

identified so that one product is clearly better than others

Answer: False

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Learning Objective: 14-02 Identify the various kinds of consumer and industrial goods

Topic: Classification of Products

32 Marketers use pricing, advertising, and packaging to differentiate their products from

competitors' products even when actual differences are quite small

Answer: True

33 Creative product differentiation can enable a small business to increase market share

Answer: True

34 The most common classification of consumer goods and services is based on producer or

manufacturer behavior in the market

Answer: False

35 One common way of classifying consumer goods is based on consumer purchasing

behavior

Answer: True

36 The uniqueness of convenience goods and services stimulates consumers to make an

extra effort to purchase them

Answer: False

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37 Convenience goods are products that the consumer wants to purchase frequently and with

a minimum of effort

Answer: True

38 The characteristics of specialty goods restrict their effective sale over the Internet

Answer: False

39 Unsought goods and services fail to provide the benefits consumers expect

Answer: False

40 Unsought goods and services are products consumers do not actively seek out for

purchase on a regular basis

Answer: True

41 The marketing efforts for convenience and specialty goods are essentially the same

Answer: False

42 Shopping goods and services are purchased only after consumers compare value, quality,

style, and price of competing goods and services

Answer: True

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43 Successful marketing of convenience and specialty goods require different marketing

mixes

Answer: True

44 Most consumers view specialty goods as having a variety of acceptable substitutes

Answer: False

45 The classification of goods or services into a particular class depends on the individual

consumer

Answer: True

46 A shopping good for one consumer could be a specialty good for another consumer

Answer: True

47 Specialty goods are often marketed through specialty magazines

Answer: True

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48 Some goods can be classified as either consumer goods or as industrial goods

Answer: True

49 Industrial goods are sold in the B2B market

Answer: True

50 As a promotional strategy, advertising is more important in the marketing of industrial

goods than it is in the marketing of consumer goods

Answer: False

51 Capital items are industrial goods that are expensive and last a long time

Answer: True

52 Industrial goods and services are used to produce other products

Answer: True

53 Accessory equipment consists of capital items that cost less and are shorter lived than

installation items

Answer: True

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54 The two types of industrial goods are production goods and unsought goods

Answer: False

55 Equipment maintenance and repair of equipment used by businesses is an industrial

support good

Answer: True

56 Paper clips, stationery, and other office supplies used by businesses are types of industrial

support goods

Answer: True

57 A pickup truck can be classified as either a consumer good or an industrial good

Feedback: Some goods can be either a consumer good or an industrial good, depending on

who buys them and how they are used For example, if a construction company buys a pickup truck, it would be an industrial good, but if a household buys the same type of truck for personal use, it would be a consumer good

Answer: True

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58 Newspapers are sold daily in a wide variety of locations This widespread distribution

suggests that newspapers are classified as convenience goods

Feedback: Convenience goods are goods that consumers want to purchase frequently and

with little effort Thus, convenience goods typically are offered in a wide variety of locations

Answer: True

59 Unsought goods and services are purchased on impulse and provide no added value to

consumers

Feedback: Unsought goods and services are goods that consumers are unaware of, or haven't

necessarily thought of buying, but they do provide benefits to the consumer and hence do have value Examples of unsought goods are car towing and emergency plumbing services

Answer: False

60 Consumers are best served by providing specialty goods in convenient locations

Feedback: Consumers actually expect to make an extra effort in acquiring specialty goods

They may be disappointed to find them too readily available

Answer: False

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61 Dutch owns and operates a small pizzeria that competes with a variety of other restaurants

offering pizza on their menus His largest competitors are large nationally known

organizations The small size of Dutch's business prevents him from successfully utilizing

a product differentiation strategy

Feedback: Small firms sometimes have an advantage when it comes to differentiating their

products, because they are close to their customers and are often more flexible than their larger competitors In fact, creative product differentiation is often a key to the success of small businesses

Answer: False

Bloom’s: Apply

62 Since Kazam Cleaners offers home and office cleaning services no different from

competitors, the company cannot utilize a product differentiation strategy

Feedback: Service firms can provide real differences in the quality or type of services they

offer, and can also use advertising, pricing, and other techniques to create real and perceived differences in their products

Answer: False

Bloom’s: Apply

63 Mystic Beverages, a producer of soft drinks, wants to differentiate its products from those

of other soft drink providers To implement this strategy successfully will require Mystic

to create tangible differences in the physical product it offers

Feedback: Product differentiation can be based on either real or perceived differences in

products Thus, even if Mystic soft drinks look and taste much like competing soft drinks, Mystic could use clever advertising and distinctive packaging to create an image that stands out

Answer: False

Bloom’s: Apply

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64 Gabe intends to visit a variety of retailers of sound equipment comparing features,

quality, and prices of different brands at each store This behavior indicates that for Gabe

a sound system is a shopping good

Feedback: Shopping goods and services are those that a consumer buys only after comparing

value, quality, style, and prices from a variety of sellers

Answer: True

Bloom’s: Apply

65 Stella strongly prefers a specific brand of gourmet coffee Because there is only one store

in her area that sells this brand, she makes an extra effort to purchase this item Stella's purchasing behavior indicates for her this product is a specialty good

Feedback: Specialty goods are goods that appeal to a relatively small market segment, but

have a special attraction to consumers who are willing to go out of their way to obtain them

Answer: True

Bloom’s: Apply

66 Thigpen Equipment Company sells used heavy construction equipment such as

bulldozers and cranes Thigpen's products represent examples of an accessory equipment industrial good

Feedback: Accessory equipment consists of capital items that are not quite as long lasting or

as expensive as installations Installations consist of major capital equipment such as new factories and heavy machinery

Answer: False

Bloom’s: Apply

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67 Beyonce Financial Services purchased several new computers and a sophisticated printer

for office use These items would be correctly classified as accessory equipment

Feedback: Accessory equipment refers to capital items that are not quite as expensive and do

not last quite as long as installations Computers, printers, and copy machines are common examples of accessory equipment

Answer: True

Bloom’s: Apply

68 Packaging is an important part of the total product offer

Answer: True

Learning Objective: 14-03 Summarize the functions of packaging

Topic: The Importance of Branding, Packaging, and Labeling

69 One function of effective packaging is to attract the attention of consumers

Answer: True

70 One function of effective packaging is to protect the goods inside during handling and

storage, as well as deter product tampering and theft

Answer: True

71 One function of effective packaging is to provide information regarding warranties,

benefits, and uses of the good inside the package

Answer: True

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72 More than any other component of a total product offer, technology has reduced the

importance of packaging

Answer: False

73 Changes in packaging can transform the product in the minds of consumers and open

larger market opportunities

Answer: True

74 While packaging innovations benefit the consumer, they have vastly increased the

workload of retailers

Answer: False

75 While the packaging of services has not yet captured the attention of businesses,

technological improvements will likely create new opportunities

Answer: False

76 The exclusive goal companies expect of packaging is to protect the product from damage

in transit

Answer: False

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77 In recent years, the packaging of products has been given a greater role in product

promotion

Answer: True

78 The trend toward self-service retailers has increased the importance of packaging

Answer: True

79 As a result of increased advertising and well-trained salespeople, packaging is less

important than in the past

Feedback: Many goods that were once sold by salespersons are now being sold in self-service

outlets, and the package has therefore been given a greater role in the promotional message

Answer: False

80 Regardless of changes in packaging, the total product offer remains unchanged

Feedback: Packaging can change a product by changing its visibility, usefulness, and/or

attractiveness

Answer: False

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81 While the UPC improves efficiency at the retail checkout counter, it has increased

problems in controlling inventory

Feedback: One purpose of packaging is to help make the product more attractive to retailers

The UPC can help a firm trace the flow of goods from the warehouse to the cash register

Answer: False

82 Healthy Pick designed a new type of packaging that significantly improves taste and

texture of food when defrosted Unfortunately, firms seldom find that improvements in packaging impact market share and profits

Feedback: Packaging has become a critical part of product design by performing many

promotional functions The text cites many examples of how improvements in packaging havechanged consumer perceptions and opened up large markets

Answer: False

Bloom’s: Apply

83 A brand includes practically all means of identifying a product

Answer: True

Learning Objective: 14-04 Contrast brand, brand name, and trademark, and show the value of brand equity

84 The purpose of a brand name is to establish an image of generic goods or services

Answer: False

85 Brand names can significantly impact consumer perceptions of a product

Answer: True

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86 A trademark is a brand that has been given exclusive legal protection for both the brand

name and the pictorial design

Answer: True

87 The benefits provided by a brand name for a buyer include reduced search time, prestige,

and quality assurance

Answer: True

88 The U.S legal system does not offer trademark protection

Answer: False

89 Brand names help sellers with new-product introductions and create an opportunity for

higher prices

Answer: True

90 Dealer (private) brands are products that do not carry the manufacturer's name, but rather

carry the name of a distributor or retailer

Answer: True

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91 Chevrolet is an example of a generic name in the automobile market

Answer: False

92 Manufacturers' brands carry the brand name of the producers that distribute the products

nationally

Answer: True

93 Most manufacturers hope that their brand names will become a generic name

Answer: False

94 Sales of generic products are decreasing because consumers prefer the higher quality of

the nationally known brands

Answer: False

95 The legal protection offered to an established brand name prevents that name from being

used as a generic name for a product

Answer: False

96 The use of price discounts and coupons may erode the commitment of consumers to

brand names

Answer: True

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97 The best strategy for brand name manufacturers to respond to the challenge of generic

goods is to use price discounts and coupons to price their products more aggressively

Answer: False

98 A knockoff brand is a brand name that has lost its exclusive legal protection

Answer: False

99 Brand equity refers to those factors that people associate with a specific brand name, such

as awareness, perceived quality, and loyalty

Answer: True

100. Brand loyalty refers to the degree to which customers are satisfied with a brand and are committed to further purchases

Answer: True

101. Although their names are similar, brand loyalty and brand equity are unrelated

Answer: False

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102. When consumer loyalty reaches the point of brand insistence, the product becomes a specialty good

Answer: True

103. Event sponsorship like the Tostito’s Fiesta Bowl football game helps improve brand awareness

Answer: True

104. Price, appearance, and reputation can influence a consumer's perceptions of quality

Answer: True

105. Endorsements by sports or movie celebrities can help create a favorable brand association

Answer: True

106. Brand association is the linking of a brand to other favorable images such as a celebrity or geographic location

Answer: True

107. Brand managers have direct responsibility for all the elements of the marketing mix for a particular brand or product line

Answer: True

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108. Firms use brand managers or brand teams to give them greater control over both product development and product promotion

new-Answer: True

109. Federal legislation requires that the brand name of a product clearly identify the manufacturer of that product

Feedback: Private or dealer brands do not carry the name of the manufacturer They carry the

name of a distributor or retailer instead

Answer: False

110. Brand managers are responsible for the marketing of a product after it has been developed and a clear promotional message has been identified

Feedback: One reason why many companies have utilized product management is to gain

greater control over product development and product promotion

Answer: False

meaning or customers will not acknowledge them

Feedback: Some of the world’s most profitable and well-known brand names are made up

(e.x Häagen-Dazs, Oreo, Google)

Answer: False

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112. Papa's Market offers customers tissues, canned vegetables, napkins, and dishwashing detergent in basic packaging with no identified brand These goods are popular with Papa's cost-conscious shoppers because they are significantly less expensive than

nationally known brand names These types of goods are examples of generic goods

Feedback: Generic goods are nonbranded products that usually sell at a sizable discount from

national or private brands, have very basic packaging, and are backed with little or no

advertising

Answer: True

Bloom’s: Apply

113. Nailerman's Hardware is a large chain of hardware stores that sells a line of tools under the Nailerman brand even though they were actually produced by another firm Since the products are actually produced by another firm, the Nailerman brand is an example of a knockoff brand

Feedback: Knockoff brands are illegal copies of brand-name goods However, there is

nothing illegal about a firm (such as Nailerman's) putting its brand on a good produced by another firm This is an example of a dealer (or private) brand Many retailers (the text cites the example of Sears) use this type of brand

Answer: False

Bloom’s: Apply

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114. Travelwell manufactures and sells luggage and briefcases Their marketing research indicates that durability is the attribute that consumers most desire in their luggage and briefcases Travelwell now emphasizes durability in all of their promotional efforts This strategy is intended to build brand equity

Feedback: Perceived quality is an important part of brand equity The key to creating the

perception of quality is to identify what consumers look for in a high-quality product and thenmake sure that the company uses this information when it sends messages about its product The intended goal of brand equity is to establish the firm's brand name as the generic name for the product

Answer: True

Bloom’s: Apply

115. Beth works for Champion Industries overseeing the marketing mix for the firm's line

of calculators Beth serves as a brand manager for Champion Industries

Feedback: A brand manager has direct responsibility for a specific brand or product line at a

company This responsibility includes all elements of the marketing mix

Answer: True

Bloom’s: Apply

116. New-product failures are most often caused by excessively high prices

Answer: False

Learning Objective: 14-05 Explain the steps in the new-product development process

117. New products often fail because they don't deliver to consumers their promised benefits

Answer: True

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118. Firms should listen to their suppliers for new-product ideas

Answer: True

119. Employees, not the firm's research and development department, are the number one source of ideas for new industrial products

Answer: True

120. Product testing is designed to reduce the number of new-product ideas that a firm works on at any one time

Answer: False

121. In the new-product development process, product analysis is completed prior to the product screening stage

Answer: False

122. The product analysis stage of the new-product development process considers the sales forecasts and cost estimates of a new-product idea

Answer: True

123. Concept testing involves taking a product idea to consumers to test their reactions

Answer: True

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124. Interactive websites are useful in the commercialization process for new products

Answer: True

125. New-product commercialization includes promoting the product to distributors and retailers as well as developing strong advertising and sales campaigns

Answer: True

126. "Create a better mousetrap and the world will beat a path to your door." This statement

is consistent with the idea behind the commercialization of products

Feedback: The statement suggests that all that is needed to generate sales is a better product

Commercialization recognizes that even good products that meet the needs of consumers may not succeed without additional marketing effort Specifically, commercialization involves (1) promoting the product to distributors and retailers to get wide distribution and (2) developing strong advertising and sales campaigns to generate and maintain interest in the product amongdistributors and consumers

Answer: False

127. At the concept testing stage, factors such as packaging, branding, ingredients, etc should be tested to ensure that a product is acceptable to potential consumers

Feedback: Concept testing involves taking the product to consumers to test their reactions Answer: True

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128. SnackAttack has found that an effective technique to generate ideas for new consumer products is to carefully listen to employees and suppliers

Feedback: Employees and suppliers are major sources of new ideas for new consumer goods.

Answer: True

Bloom’s: Apply

129. The product life cycle presents a theoretical model describing what happens to sales and profits for a class of products over time

Answer: True

Learning Objective: 14-06 Describe the product life cycle

130. While the time in each stage may vary, all products progress through each stage of the product life cycle

Answer: False

131. The four stages in the product life cycle are introduction, market, exchange, and disposal

Answer: False

132. While some products remain in the introductory stage of the product life cycle for years, other products may go through the entire cycle in a few months

Answer: True

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133. Knowledge of the product life cycle model can help firms develop marketing

strategies and anticipate market changes

Answer: True

134. Successful firms maintain consistency in their marketing mix strategies throughout theproduct life cycle

Answer: False

135. Profits peak during the maturity stage of the product life cycle

Answer: False

136. While the product life cycle is a good theory, it's not important for marketers to recognize what life cycle stage a product is in

Answer: False

137. Successful businesses develop a mix of price, product, place, and promotion that is consistently applied throughout a product's life cycle

Feedback: Different stages in the product life cycle call for different strategies.

Answer: False

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138. Some goods have a product life cycle that is completed in a shorter amount of time than other goods

Feedback: Some products, such as items based on fads, may go through the entire cycle in a

few months, while other products may have product life cycles that last for years

Answer: True

139. After several years as a brand manager for an established product, Pete has taken a jobwith a microbrewery He is responsible for managing the marketing mix for a new productintroduction In his new job, Pete will find that while the products may be at different stages of the product life cycle, the marketing strategies will be essentially the same

Feedback: Products in different stages of the product life cycle call for different strategies.

Answer: False

Bloom’s: Apply

140. As consumers evaluate a product, price plays a small role

Answer: False

Learning Objective: 14-07 Identify various pricing objectives and strategies

Topic: Pricing Objectives and Strategies

141. A long-run pricing objective of almost all firms is to optimize profit

Answer: True

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142. Sometimes a firm will lower prices below their costs in order to build a customer base

Answer: True

143. In order to achieve a social objective, firms use low prices to enable people with low incomes to buy their product

Answer: True

144. Consumer perceptions of product quality are affected by promotions and packaging, but not by the price of the product

Answer: False

145. Successful firms coordinate pricing objective strategies with decisions regarding product design, packaging, branding, distribution, and promotion

Answer: True

146. Successful firms always try to maintain consistency in their short-run and long-run pricing objectives

Answer: False

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147. Cost-based pricing adds a desired profit margin to the cost of producing a product

Answer: True

148. In the long run the market determines what the price will be

Answer: True

149. Target costing adds a profit margin to estimated cost of production to determine the optimal price

Answer: False

150. Demand-based pricing is another name for cost-based pricing

Answer: False

151. Target costing is a cost-based pricing strategy

Answer: False

152. The target costing strategy establishes a selling price that consumers are willing to payfor a product, and then subtracts a desired profit margin to determine a target cost of production

Answer: True

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153. In the long run, the cost of production and the length of the firm’s supply chain determine the price of a product

Answer: False

154. Competition-based pricing is a strategy based on what all the other competitors are doing

Answer: True

155. Price leadership is a demand-based pricing strategy

Answer: False

156. Price leadership occurs when one or more dominant firms set pricing practices that other firms in the market follow

Answer: True

157. The purpose of break-even analysis is to determine the lowest price a firm can charge and still be able to cover its costs of production

Answer: False

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158. Break-even analysis determines profitability of a firm at various levels of sales

Answer: True

159. The break-even point is that level of sales where total revenues equals total costs

Answer: True

160. Total fixed costs are those costs that change when the volume of production changes

Answer: False

161. Variable costs are costs that change with the level of production

Answer: True

162. A skimming price strategy involves a low pricing policy intended to attract sensitive customers from competitors

price-Answer: False

163. A penetration strategy calls for a firm to charge low prices with the intent of attracting

a large number of customers and discouraging competition

Answer: True

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164. Firms utilizing an everyday low pricing (EDLP) strategy establish a policy of special sales on a regular basis

Answer: False

165. A high-low pricing strategy may condition consumers to avoid paying the regular prices by waiting for sale prices

Answer: True

166. As the Internet has grown in popularity, it is likely that more firms will adopt a low pricing strategy

high-Answer: False

167. Psychological pricing utilizes high prices to create the image of a high-quality

product

Answer: False

168. Ultimately, the price of a good is determined by the interaction of supply and demand

in the marketplace

Answer: True

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169. The key to demand-oriented pricing is the recognition that not all producers face the same costs of production

Answer: False

170. Despite the fact that microeconomic theory places a great deal of emphasis on price, marketers often try to find ways to compete on product attributes other than price

Answer: True

171. For most firms, price competition is the most important way to gain a competitive advantage over rivals

Answer: False

172. Small firms often rely on nonprice competition when competing against larger firms

Answer: True

173. One way firms can gain a competitive advantage without relying on low prices is by developing close, friendly relationships with their customers

Answer: True

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174. The pricing objectives of a firm should be set independently of the other elements of their marketing mix

Feedback: Pricing objectives should be influenced by other marketing decisions regarding

product design, packaging, branding, and promotion

Answer: False

175. Gill's Gadgets establishes the price it charges for its products by determining the cost

of production and then adding on a desired profit margin Gill's strategy is known as targetcosting

Feedback: When firms set prices by adding a desired profit margin to production costs, they

are using a pricing approach known as cost-based pricing

Answer: False

Bloom’s: Apply

176. Rather than having frequent special sales, Walt's Warehouse has a pricing strategy thatmaintains lower prices than competitors all the time Walt's pricing strategy is known as everyday low prices (EDLP)

Feedback: EDLP stands for everyday low prices Firms that use this approach have a strategy

of charging prices lower than competitors on a regular basis, and not having any special sales

Answer: True

Bloom’s: Apply

Trang 40

177. Carlotta owns and manages the Carlite Car Wash She charges $8 per car wash Her fixed costs are $600 per month, while her variable costs per car wash amount to $2 Carlotta must wash 60 cars to break even

Feedback: The formula to determine a firm's break-even point in sales volume is as follows:

BEP = total fixed costs/(price of one unit minus variable cost per unit) Using the information provided, BEP = $600/($8 – $2) The resulting answer is 100 cars

Answer: False

Bloom’s: Apply

178. Shuichi owns and operates his own sushi bar His fixed costs would include rent, insurance, and property taxes

Feedback: Fixed costs are those costs that do not vary with changes to the level of production.

Rent, insurance, and property taxes will certainly change from one time period to the next However, these changes are not driven by changes to the level of production

Answer: True

Bloom’s: Apply

179. Pattie Bunz operates the Zestee Burgers restaurant The cost of pickles, onions, buns, catsup, and meat patties would all be considered variable costs for her type of business

Feedback: Variable costs are those costs that vary with the level of production As the number

of burgers sold increases, the amount of pickles, onions, catsup, buns, and meat Pattie must buy will increase

Answer: True

Bloom’s: Apply

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