MGT 103: Chapter 13 Exam Questions
and Answers
Elements that make up a price - Answers --it must generate enough sales dollars to pay
for the cost of developing, producing, and marketing the product
-customers must be willing to pay it
-it must earn a profit for the company
price - Answers -the money or other considerations exchanged for the ownership or use
of a product or service.
barter - Answers -the practice of exchanging products and services for other products
and services rather than for money
price transparency - Answers -a consumer's near-instant access to competitors prices
for the same offering\
Price equation - Answers -Price= List Price-(incentives and allowances)+ extra fees
To generate profits, firms find: - Answers -1) suppliers whose inefficiencies and lower
hourly wages can reduce the prices the buying firms must pay
2) new markets to increase revenues
Value - Answers -the ratio of perceived benefits to price
(perceived benefits/price)
value pricing - Answers -the practice of simultaneously increasing product and service
benefits while maintaining or decreasing price.
profit equation - Answers -Profit=Total revenue-Total Cost
Profit=(Unit Price x Quantity sold) - (Fixed cost + Variable cost)
Six Important steps in setting prices(First) - Answers -1) Identify Pricing Objectives and
constraints
-Objective like profit, market share, and survival
-constraints like demand for product class and brand, newness, costs, and competition.
Six Important steps in setting price(Second) - Answers -2) Estimate demand and
revenue
-demand estimation
-sales revenue estimation
, -price elasticity estimation
Six Important steps in setting price(Third) - Answers -3) Determine cost, volume, and
profit relationships
-cost estimation
-marginal analysis, in relation to profit
-Break-even analysis, in relation to profit
Pricing objectives - Answers -involves specifying the role of price in an organization's
marketing and strategic plans.
Managing for long-run profits - Answers -give up immediate profit by developing quality
products to penetrate competitive markets over the long term.
Target Return - Answers -when a firm sets a profit goal
Market share - Answers -The ratio of the firm's sales revenues or unit sales to those of
the industry
unit volume - Answers -the quantity produced or sold as a pricing objective.
Step 1: Identifying Pricing Objectives - Answers --profit
-sales
-market share
-unit volume
-survival
-social responsibility
Pricing constraints - Answers -factors that limit the range of prices a firm may set
Step 1: Identifying Pricing Constraints - Answers --demand for the product class,
product, and brand.
-newness of the product:stage in the product life cycle
-cost of producing and marketing the product
-cost of changing prices and time period they apply
-single product vs a product line
-type of competitive market
-competitors prices and consumer awareness of them
-legal and ethical considerations
Pure Competition - Answers -many sellers who follow the market price for identical,
commodity products
Monopolistic Competition - Answers -Many sellers who compete on non price factors
Oligopoly - Answers -Few sellers who are sensitive to each other's prices
and Answers
Elements that make up a price - Answers --it must generate enough sales dollars to pay
for the cost of developing, producing, and marketing the product
-customers must be willing to pay it
-it must earn a profit for the company
price - Answers -the money or other considerations exchanged for the ownership or use
of a product or service.
barter - Answers -the practice of exchanging products and services for other products
and services rather than for money
price transparency - Answers -a consumer's near-instant access to competitors prices
for the same offering\
Price equation - Answers -Price= List Price-(incentives and allowances)+ extra fees
To generate profits, firms find: - Answers -1) suppliers whose inefficiencies and lower
hourly wages can reduce the prices the buying firms must pay
2) new markets to increase revenues
Value - Answers -the ratio of perceived benefits to price
(perceived benefits/price)
value pricing - Answers -the practice of simultaneously increasing product and service
benefits while maintaining or decreasing price.
profit equation - Answers -Profit=Total revenue-Total Cost
Profit=(Unit Price x Quantity sold) - (Fixed cost + Variable cost)
Six Important steps in setting prices(First) - Answers -1) Identify Pricing Objectives and
constraints
-Objective like profit, market share, and survival
-constraints like demand for product class and brand, newness, costs, and competition.
Six Important steps in setting price(Second) - Answers -2) Estimate demand and
revenue
-demand estimation
-sales revenue estimation
, -price elasticity estimation
Six Important steps in setting price(Third) - Answers -3) Determine cost, volume, and
profit relationships
-cost estimation
-marginal analysis, in relation to profit
-Break-even analysis, in relation to profit
Pricing objectives - Answers -involves specifying the role of price in an organization's
marketing and strategic plans.
Managing for long-run profits - Answers -give up immediate profit by developing quality
products to penetrate competitive markets over the long term.
Target Return - Answers -when a firm sets a profit goal
Market share - Answers -The ratio of the firm's sales revenues or unit sales to those of
the industry
unit volume - Answers -the quantity produced or sold as a pricing objective.
Step 1: Identifying Pricing Objectives - Answers --profit
-sales
-market share
-unit volume
-survival
-social responsibility
Pricing constraints - Answers -factors that limit the range of prices a firm may set
Step 1: Identifying Pricing Constraints - Answers --demand for the product class,
product, and brand.
-newness of the product:stage in the product life cycle
-cost of producing and marketing the product
-cost of changing prices and time period they apply
-single product vs a product line
-type of competitive market
-competitors prices and consumer awareness of them
-legal and ethical considerations
Pure Competition - Answers -many sellers who follow the market price for identical,
commodity products
Monopolistic Competition - Answers -Many sellers who compete on non price factors
Oligopoly - Answers -Few sellers who are sensitive to each other's prices
