kerin8e_chapter11_tb_answerkey.docx - Core Marketing 8e(Kerin Chapter 11 Pricing Products and Services 1 The largest US-based TV maker is A Sharp B

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Unformatted text preview: Core: Marketing, 8e (Kerin) Chapter 11 Pricing Products and Services 1) The largest US-based TV maker is A) Sharp. B) Panasonic. C) LG. D) Sony. E) VIZIO. Explanation: VIZIO, Inc., an entrepreneurial Irvine, California, company is the largest US-based TV company. 2) VIZIO is the market leader in the North American ________ market. A) designer eyewear B) virtual media C) smart TV D) 3-D video game E) exotic travel Explanation: VIZIO is the Smart TV market leader in North America. 3) VIZIO's HDTVs are sold through all of the following types of retailers except which? A) Amazon.com B) mass merchandisers, such as Target C) its own brick and mortar stores D) wholesale club stores such as Sam's Club E) electronics stores such as Best Buy Explanation: VIZIO flat panel HDTVs are sold through Costco, Walmart, BJ's Wholesale, Best Buy, Sam's Club, and Target stores nationwide, along with authorized online partners such as Amazon. It does not sell directly to consumers through company-owned stores like Apple does. 4) In order to deliver a product that the average consumer can afford, VIZIO A) handles product design and marketing in the United States and relies on contract manufacturers in other countries to build the product. B) uses mass customization in other countries and then ships the HDTVs to the United States. C) purchased a small company in China to distribute its products under the VIZIO name. D) purchased a small company in Japan to distribute its products under the VIZIO name. E) relies solely on recycled materials to build high-quality, no-frills products. Explanation: Vizio's ability to deliver affordable flat-panel HDTVs to the average consumer is based on a novel strategy. Instead of investing in expensive manufacturing facilities, VIZIO relies on contract manufacturers to build its products. Product development and marketing specialists in the United States handle product design and marketing. 5) The ________ paid for products and services goes by many names, like tuition for your education, rent for an apartment, interest on a bank credit card, and a premium for car insurance. A) fee B) value C) cost D) price E) exchange rate Explanation: The price paid for products and services goes by many names. You pay tuition for your education, rent for an apartment, interest on a bank credit card, and a premium for car insurance. 6) All of the following are alternate names for the price you pay on goods and services except which? A) rent B) interest C) tuition D) a premium E) profit Explanation: The price paid for products and services goes by many names. You pay tuition for your education, rent for an apartment, interest on a bank credit card, and a premium for car insurance. 7) Which of the following is an example of a price? A) tuition B) operating costs C) liquidity D) value E) brand equity Explanation: The price paid for products and services goes by many names. A student pays tuition for education. 8) Insurance premiums, entrance fees, train fares, and organization dues are all examples of A) charges. B) countertrade. C) profit. D) price. E) currency. Explanation: Tuition, rent, interest, premiums, fees, dues, fares, salaries, commissions, and wages are all synonyms for price. 9) All of the following statements about price are true except which? A) Small changes in price can have big effects on both the number of units sold and company profit. B) The price for a product or service must earn a profit for the company. C) For most products and services, there is an agreed-upon price range set by makers. D) The price must be right—in the sense that customers must be willing to pay it. E) The price must generate enough sales dollars to pay for the cost of developing, producing, and marketing the product. Explanation: A product's price must be "right"—in the sense that customers must be willing to pay it; it must generate enough sales dollars to pay for the cost of developing, producing, and marketing the product; and it must earn a profit for the company. Small changes in price can have big effects on both the number of units sold and company profit. 10) Susan hired an attorney to represent her in a court case involving an auto accident. The attorney charged her a $2,000 retainer fee for the services. Terry needed a haircut; the local stylist charged him $22 for his services. Aaron mowed his neighbor's lawn; in exchange, the neighbor repaired his gutters. The attorney fees, the $12 charged by the hair stylist, and the exchange of lawn mowing for gutter repair are all examples of A) premiums. B) barter. C) the profit motive. D) price. E) outlays. Explanation: In marketing, price is the money, products, or services exchanged for the ownership or use of a product or service and it goes by many names. 11) Price is A) the value assigned to the exchange of products and services for other products and services. B) the value judgment made by both the buyer and seller regarding an item's worth. C) the money or other considerations (including other products and services) exchanged for the ownership or use of a product or service. D) the value assessed for the benefits of using a product or service. E) the highest monetary value a customer is willing to pay for a product or service. 12) From a marketing viewpoint, ________ is the money or other considerations (including other products and services) exchanged for the ownership or use of a product or service. A) value B) price C) barter D) currency E) a tariff 13) The practice of exchanging products and services for other products and services rather than for money is referred to as A) barter. B) reciprocal pricing. C) virtual pricing. D) balance of payments. E) value-pricing. 14) Barter is A) a reciprocity agreement stipulating that if company A purchases services from company B, then company B must purchase similar services from company A. B) a tying agreement stipulating that if company A purchases a product from company B, it must also purchase one of its services. C) the practice of exchanging products and services for other products and services rather than for money. D) the practice of exchanging services for products of equal or greater value. E) the practice of exchanging products and services for money. 15) Barter is the practice of exchanging products and services for other products and services rather than for A) value. B) ideas. C) promises. D) tariffs. E) money. 16) A common pricing tactic today is the use of special fees and surcharges that add to a list price, a response to consumers' zeal for ________ combined with the ease of making price comparisons on the Internet. A) readily accessible information B) low prices C) quality D) value E) warranties Explanation: One pricing tactic is to use "special fees" and "surcharges." This practice is driven by consumers' zeal for low prices combined with the ease of making price comparisons on the Internet. Buyers are more willing to pay extra fees than a higher list price, so sellers use add-on charges as a way of having the consumer pay more without raising the list price. 17) According to the price equation, final price equals list price minus ________ plus extra fees. A) profits B) commissions C) trade-ins D) taxes E) allowances 18) According to the price equation, final price equals ________ minus allowances plus extra fees. A) salaries B) the list price C) profits D) trade-ins E) taxes 19) According to the price equation, a product's or service's final price equals its list price minus allowances plus A) profits. B) commissions. C) trade-ins. D) extra fees. E) taxes. 20) A company that manages apartments decides to buy 15 new dishwashers at a list price of $550 each as replacements for old dishwashers in a small apartment complex it owns. Because the company is buying more than 10 dishwashers, it is eligible for a $150-per-unit quantity discount. Financing charges total $20 per unit. The company gets $10 per dishwasher for the 15 dishwashers traded in. What is the final price the company will pay for each dishwasher? A) $390 B) $400 C) $410 D) $430 E) $730 Explanation: Using the price equation, Final price = [List price − Allowances + Extra Fees] = [$550 − ($150 Quantity discount + $10 Trade in) + $20 Financing] = [$550 − ($150 + $10) + $20] = $410. See Figure 11-1 in the textbook. 21) Tara is enrolled for spring semester at college. The tuition is $6,000, but she has a scholarship for $1,000 as well as a work-study grant of $1,500. The health fees and student activity fees are $150 for the semester. What is the final price that Tara will pay for the spring semester? A) $2,500 B) $2,650 C) $3,150 D) $3,650 E) $6,150 Explanation: Using the price equation, Tuition = Published tuition − (Scholarship, other financial aid, discounts for number of credits taken) + Special activity fees = $6,000 − ($1,000 Scholarship + $1,500 Work study financial aid) + $150 Special activity fees = $6,000 − ($1,000 + $1,500) + $150 = $3,650. See Figure 11-1 in the textbook. 22) Suppose you want to buy a Tesla Model S, an all-electric, zero-emission car that has a 265mile range and can be recharged in three hours. The Tesla Model S Performance model has a list price of $87,500. However, you want several options (Performance Plus Package, red multicoat armor paint, Tech Package, Sound Studio Package, home charging station, performance wheels, and others) that will cost $17,500. An extended warranty will add an additional $5,000. However, if you put $50,000 down now and finance the balance over the next year, you will receive a dealer rebate of $5,000 off the list price. The dealer will give you a $7,000 trade-in allowance for your 2013 Honda Civic DX four-door sedan. In addition, you will have to pay a state sales tax of $10,000, an auto registration fee of $1,000 to the state, and a $1,000 destination charge to ship and prep the car. But because the Tesla Model S is an alternative energy vehicle, you qualify for a $2,500 state rebate and a $7,500 federal tax credit! Finally, your total finance charge is $7,000. Applying the price equation, what is your final price for the Tesla Model S? A) $57,000 B) $68,000 C) $87,500 D) $107,000 E) $151,000 Explanation: Final price = $87,500 - [($5,000 Dealer rebate + $2,500 State rebate + $7,500 Federal rebate) + $7,000 Trade-in allowance] + [$17,500 Options + $5,000 Extended warranty + $1,000 Auto registration fee + $1,000 Destination charge + $10,000 State sales tax + $7,000 Finance charge] = $107,000. NOTE: Ignore the down payment of $50,000—it is used to calculate and lower the finance charge but doesn't affect the list or quoted price of $87,500, which means that the final price of $107,000 is not reduced by $50,000 (final price is not $57,000). See Figure 11-1 in the textbook. 23) The ratio of perceived benefits to price is referred to as A) the price-quality relationship. B) customer-value pricing. C) value-added pricing. D) value analysis. E) value. 24) The ratio of ________ to price is referred to as value. A) prestige B) perceived benefits C) costs D) anticipated quality E) profits 25) The ratio of perceived benefits to ________ is referred to as value. A) price B) prestige C) anticipated quality D) profits E) discounts 26) To increase value the most, marketers should A) decrease benefits. B) decrease benefits and increase price. C) decrease price and increase benefits. D) decrease price and decrease benefits. E) hold the price steady and let the perceived value of the item increase as it matures in its life cycle. Explanation: To increase value, marketers may increase benefits, decrease price, or do both (increase benefits and decrease price) according to the value formula: Value = Perceived benefits ÷ Price. 27) To increase value, marketers may ________, decrease price, or do both. A) decrease promotion B) increase benefits C) decrease distribution D) increase advertising E) allow the perceived value of the item to increase as it matures in the life cycle Explanation: To increase value, marketers may increase benefits, decrease price, or do both, according to the value formula: Value = Perceived benefits ÷ Price. 28) Which of the following statements is most accurate? A) For some products, price influences the perception of overall quality, and ultimately value, to consumers. B) A consumer's view of a product's value depends almost entirely on external assessments of quality. C) A consumer's view of value is a function of his or her education and income. D) Price plays only a small part in a consumer's perceived value of a product or service. E) Price plays a large role in assessing value but a very minor role in assessing quality. Explanation: For some products, price influences the perception of overall quality, and ultimately value, to consumers. 29) Most consumers realize that the quality of diamonds varies, and most believe the higher the price of a diamond, the higher its quality. This is an example of price influencing the perception of overall quality and therefore ________ to consumers. A) acceptable cost B) perceptual investment C) barter potential D) return on investment E) value Explanation: For some products, price influences the perception of overall quality, and ultimately value, to consumers. 30) When Pizza Hut announced it was going to add 25 percent more toppings to its Meat Lover's line of pizzas without increasing prices, consumers benefitted from an increase in what? A) cost B) appearance C) value D) price E) quality Explanation: By offering more toppings (perceived benefits) for the same price, Pizza Hut was providing value (Perceived benefits ÷ Price). 31) Value-pricing is A) the ratio of perceived benefits to price. B) the money or other considerations exchanged for the ownership or use of a product or service. C) the practice of simultaneously increasing product and service benefits while maintaining or decreasing price. D) the ratio of price to perceived benefits. E) the list price minus incentives and allowances plus extra fees. 32) The practice of simultaneously increasing product and service benefits while maintaining or decreasing price is referred to as A) value-pricing. B) customer-value pricing. C) competitive pricing. D) cost pricing. E) demand pricing. 33) Marketers may engage in value-pricing, which is the practice of simultaneously ________ while maintaining or decreasing price. A) promoting specific product and service benefits B) increasing product and service benefits C) decreasing profit D) analyzing benefits E) decreasing cost 34) Creative marketers engage in value-pricing, which is the practice of simultaneously increasing product and service benefits while A) increasing costs. B) increasing price. C) increasing advertising. D) decreasing costs. E) maintaining or decreasing price. 35) A major grocery chain pays its baggers a regular hourly wage. The baggers not only pack the groceries, but they also will take customers' groceries to their car, regardless of the weather. The baggers are not permitted to accept tips, even if they are offered. The consumer will experience this shopping experience as A) pricing enhancement. B) societal pricing. C) revenue sharing. D) value-pricing. E) cost-plus pricing. Explanation: Creative marketers engage in value-pricing, the practice of simultaneously increasing product and service benefits and maintaining or decreasing price. The carryout service provided by the baggers is the extra value customers receive without it costing them any extra money. 36) Many cosmetology schools allow their advanced students to style hair for "real-world" clients for a reduced fee. The students benefit from the experience, the clients get a less expensive haircut, and the school is able to provide students with additional training without costing it anything; in fact, they even profit from it. This is an example of A) value-pricing. B) societal pricing. C) revenue sharing. D) barter. E) cost-assist pricing. Explanation: Offering hair styling at a reduced fee that adds extra value to the customer without costing the school any additional money is an example of value-pricing. 37) If a McDonald's menu board advertises Mini Meals under $3, McDonald's is most likely using which type of pricing strategy? A) predatory pricing B) value-pricing C) loss-leader pricing D) odd-even pricing E) barter Explanation: Creative marketers engage in value-pricing, the practice of simultaneously increasing product and service benefits while maintaining or decreasing price. For $3, McDonald's offers consumers three Mini Meals options that include a sandwich, small drink, and small fries. Here, a reduced price versus buying the items separately increases the value. 38) A reference value involves comparing the costs and benefits of A) substitute items. B) items of equal or greater value. C) products with which a consumer is familiar and items the consumer has not seen or used before. D) items from one particular manufacturer or distributor. E) intangible items. 39) A reference value is developed by the consumer through A) considering the amount of time and energy a consumer puts into the purchase process. B) judging similar items used by the consumer's peers. C) performing a careful break-even analysis. D) comparing the costs and benefits of substitute items. E) examining the true difference between customers' "needs" and "wants." 40) In the purchase of the sugar substitute Splenda, you may compare it to something you know about like real sugar. Although Splenda is more expensive than sugar, it is purchased by many consumers because it sweetens with no calories. This situation involves the consumer considering A) a marginal analysis. B) a profit equation. C) a break-even analysis. D) price elasticity of demand. E) a reference value. Explanation: Value involves the judgment by a consumer of the worth and desirability of a product or service relative to substitutes that satisfy the same need. In this instance a reference value emerges from comparing the costs and benefits of substitute items. Here sugar's benefits and costs are known, so it can be a reference value when buying other sweeteners. 41) If you know the contents and price of a McDonald's Extra Value Meal, it may serve as ________ to you when you visit other fast food restaurants and consider the purchase of a meal option there. A) a marginal analysis B) a profit equation C) a reference value D) a break-even analysis E) price elasticity of demand Explanation: Value involves the judgment by a consumer of the worth and desirability of a product or service relative to substitutes that satisfy the same need. In this instance a reference value emerges, which involves comparing the costs and benefits of substitute items. 42) ________ = (Unit price × Quantity sold) − Total cost. A) Total revenue B) Variable cost C) Net present value D) Profit E) Break-even point 43) According to the profit equation, profit equals A) Total cost + Total revenue. B) Total revenue − Total cost. C) Marginal revenue − Marginal cost. D) Price × Quantity. E) Total revenue + Marginal cost. 44) The formula Total revenue − Total cost, or [(Unit price × Quantity sold) − (Fixed cost + Variable cost)], represents A) the value equation. B) the sales ratio. C) average revenue. D) the break-even point. E) the profit equation. 45) A firm's profit equation equals A) Total cost + Total revenue or [(Fixed cost + Variable cost) + (Unit price × Quantity sold)]. B) Total revenue − Total cost or [(Unit price × Quantity sold) − (Fixed cost + Variable cost)]. C) Total cost − Marginal cost or [(Fixed cost + Variable cost) − (Unit price × Quantity sold)]. D) Total cost − Variable cost or [(Fixed cost + Variable cost) − (Unit price × Quantity sold)]. E) Total revenue ÷ Total cost or [(Unit price × Quantity sold) ÷ (Fixed cost + Variable cost)]. 46) Calculate a firm's profit using the following information: the unit price (P) for a product is $40; the quanti...
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