Chapter_16 Test Bank - Chapter 16Pricing and Credit Decisions TRUE\/FALSE 1 Prestige pricing(setting a high price to convey an image of high quality or

Chapter_16 Test Bank - Chapter 16Pricing and Credit...

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Chapter 16—Pricing and Credit DecisionsTRUE/FALSE1.Prestige pricing (setting a high price to convey an image of high quality or uniqueness) is a pricing tactic that reflects competitive advantage.PTS:1REF:p. 478OBJ:16-1 TYPE: DNAT:Analytic | Finance2.Because small businesses are small by definition, pricing and credit considerations are relatively unimportant to their overall performance.PTS:1REF:p. 473OBJ:16-1 TYPE: CNAT:Analytic | Finance3.Sound pricing practices recognize that product costs are more important than selling costs and overhead costs.PTS:1REF:p. 474OBJ:16-1 TYPE: CNAT:Analytic | Finance4.Average pricing is an appropriate pricing approach for small businesses because the method takes into consideration both fixed and variable costs.PTS:1REF:p. 475OBJ:16-1 TYPE: CNAT:Analytic | Finance5.Under certain conditions, pricing at less than total costs makes sense as a long-term strategy.PTS:1REF:p. 476OBJ:16-1 TYPE: CNAT:Analytic | Finance6.The competitive advantage of a firm will affect consumers' demand for its product.PTS:1REF:p. 477OBJ:16-1 TYPE: CNAT:Analytic | Value Creation
7.Markup rates should be high enough to cover a product’s cost, cover expenses, any price reductions, and profit.PTS:1REF:p. 481OBJ:16-2 TYPE: DNAT:Analytic | Finance8.In conducting a comprehensive break-even analysis, a firm must examine both its revenue-cost relationships and sales forecasts.PTS:1REF:p. 478OBJ:16-2 TYPE: CNAT:Analytic | Finance9.Break-even analysis begins by determining what sales level is needed to generate a profit.PTS:1REF:p. 478OBJ:16-2 TYPE: CNAT:Analytic | Finance10.The demand for a product always decreases as its price increases in a break-even analysis.PTS:1REF:p. 480OBJ:16-2 TYPE: CNAT:Analytic | Finance11.Markups may be expressed as a percentage of either the firm's cost or the industry-standard cost.PTS:1REF:p. 481OBJ:16-2 TYPE: CNAT:Analytic | Finance12.Sellers using dynamic pricing set prices based on prices of market leaders.

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