MGMT 3850 CHAPTER 10 HOMEWORK QUESTION AND ANSWER

MGMT 3850 CHAPTER 10 HOMEWORK QUESTION AND ANSWER Essentials of Entrepreneurship & Small Business Mgmt., 7e (Scarborough) Chapter 10 Pricing Strategies 1) Setting prices for products and services requires entrepreneurs to balance a multitude of complex forces as entrepreneurs determine prices for their goods and services that will draw customers and: A) position prices lower than all competitors. B) produce a profit. C) effectively compete with online alternatives. D) have high volume/high margin sales. Answer: B Diff: 2 Page Ref: 358 AACSB: Analytic Skills Learning Obj.: 1 2) Which of the following statements about price is true? A) Price measures what the customer must exchange to obtain goods and services in the marketplace. B) Target market, business image, and price are closely related. C) For most goods and services, there is an acceptable price range and not a single "ideal price." D) All of the above Answer: D Diff: 2 Page Ref: 358 AACSB: Analytic Skills Learning Obj.: 1 3) A common pricing mistake entrepreneurs make is lowering prices because they fail to recognize the: A) extra value, convenience, service, and quality they offer their customers. B) advantages they have due to their lower cost structure. C) complexities that larger competitors have to face. D) driving need that all customers have to find the lowest price possible. Answer: A Diff: 2 Page Ref: 358-359 AACSB: Analytic Skills Learning Obj.: 1 4) The top business challenge that drives pricing decisions is the: A) increased price transparency. B) increased price sensitivity of customers. 2 C) need to protect the brand's image. D) increased pricing aggressiveness from competitors. Answer: B Diff: 2 Page Ref: 358, Figure 10.1 AACSB: Analytic Skills Learning Obj.: 1 5) ________ frequently convey the idea of quality, prestige, and uniqueness to customers. A) Effective packaging B) Low prices C) High prices D) High profile promotions Answer: C Diff: 2 Page Ref: 360-361 AACSB: Communication Learning Obj.: 1 6) A key ingredient to setting prices properly is to understand a company's: A) cost structure. B) most aggressive price competitor. C) target market. D) profit expectations. Answer: C Diff: 3 Page Ref: 359-360 AACSB: Analytic Skills Learning Obj.: 1 7) An entrepreneurial company can differentiate itself by creating a distinctive image in customers' minds or by offering: A) superior service and quality. B) exceptional design and convenience. C) speed and performance. D) All the above provide the opportunity for differentiation. Answer: D Diff: 3 Page Ref: 360-361 AACSB: Analytic Skills Learning Obj.: 1 8) In general, entrepreneurs should ________ head-to-head price competition with firms that can more easily achieve lower prices through lower cost structures. A) avoid B) take on C) meet D) exit the market when faced with Answer: A Diff: 2 Page Ref: 361-362 AACSB: Analytic Skills 3 Learning Obj.: 1 4 9) Generally, entrepreneurs should avoid head-to-head price competition with other firms that can more easily achieve lower prices through: A) offering lower value products and services. B) a better designed Web site. C) geographic advantages. D) lower cost structures. Answer: D Diff: 2 Page Ref: 362 AACSB: Analytic Skills Learning Obj.: 1 10) A business with a 25 percent gross profit margin that reduces its price by 10 percent would have to ________ its sales volume just to break even. A) double B) triple C) quadruple D) match Answer: B Diff: 2 Page Ref: 362 AACSB: Analytic Skills Learning Obj.: 1 11) Which of the following statements concerning the impact of competition on a small company's prices is true? A) When setting prices, a business owner must either match or beat competitors' prices on similar products or services. B) Because federal laws prohibit the practice as an unfair trade practice, business owners should not monitor their rivals' prices on identical items. C) When going up against larger, more powerful rivals, small firms should consider using nonprice competition as a way to differentiate their products or services rather than head-to-head price competition. D) All of the above Answer: C Diff: 2 Page Ref: 361-363 AACSB: Reflective Thinking Learning Obj.: 1 12) One key to setting prices properly is based on understanding a company's: A) buying power. B) competitive position. C) target market. D) cost structure. Answer: C Diff: 3 Page Ref: 364 AACSB: Analytic Skills Learning Obj.: 1 5 13) ________ value is the pri