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Chapter 19 - Chapter 19Pricing Concepts TRUE/FALSE 1 Price...

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Chapter 19—Pricing Concepts TRUE/FALSE 1. Price is defined as the perceived value of a good or service that is exchanged for a certain dollar amount. ANS: F Price is not necessarily measured in terms of money. In bartering, other items of value may be ex- changed. PTS: 1 REF: 295 OBJ: 19-1 TYPE: Def TOP: AACSB Reflective Thinking | TB&E Model Pricing 2. Profit is equal to the price charged to customers multiplied by the number of units sold. ANS: F This is revenue. Profit is revenue minus expenses. PTS: 1 REF: 296 OBJ: 19-1 TYPE: Def TOP: AACSB Reflective Thinking | TB&E Model Pricing 3. Today's firms must develop specific, measurable, and attainable pricing objectives if they hope to sur- vive in highly competitive markets. ANS: T PTS: 1 REF: 296 OBJ: 19-2 TYPE: Comp TOP: AACSB Reflective Thinking | TB&E Model Pricing 4. A marketer using a profit maximization strategy will charge the highest prices the market will bear. ANS: F Profit maximization means setting prices so that total revenue is as large as possible relative to costs. PTS: 1 REF: 296 OBJ: 19-2 TYPE: Def TOP: AACSB Reflective Thinking | TB&E Model Pricing 5. Target return on investment (ROI) is the most common profit objective used by firms. ANS: T PTS: 1 REF: 297 OBJ: 19-2 TYPE: Comp TOP: AACSB Reflective Thinking | TB&E Model Pricing 6. Sales-oriented pricing objectives are either based on market share or dollar or unit sales. ANS: T PTS: 1 REF: 297 OBJ: 19-2 TYPE: Def TOP: AACSB Reflective Thinking | TB&E Model Pricing 7. Maximization of cash should be a long-term objective. ANS: F Maximization of cash should never be a long-run objective because cash maximization may mean little or no profitability. Without profits, a company cannot survive.
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PTS: 1 REF: 298 OBJ: 19-2 TYPE: Comp TOP: AACSB Reflective Thinking | TB&E Model Pricing 8. Status quo pricing objectives suggest that the firm should try to keep its price consistent regardless of what competition does with its prices. ANS: F Status quo pricing seeks to maintain existing prices or to meet the competition’s prices. PTS: 1 REF: 298 OBJ: 19-2 TYPE: Def TOP: AACSB Reflective Thinking | TB&E Model Pricing 9. When pricing goals are mainly sales oriented, cost considerations usually dominate. ANS: F When pricing goals are mainly sales oriented, demand considerations usually dominate. PTS: 1 REF: 299 OBJ: 19-3 TYPE: Comp TOP: AACSB Reflective Thinking | TB&E Model Pricing 10. Profit maximization is the price at which supply and demand are equal, and there is no inclination for prices to rise or fall. ANS: F Price equilibrium is the price at which supply and demand are equal, and there is no inclination for prices to rise or fall. PTS: 1 REF: 300 OBJ: 19-3 TYPE: Def TOP: AACSB Reflective Thinking | TB&E Model Pricing 11. If demand for milk is inelastic, consumers will not change their purchasing habits greatly when the price of milk changes.
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