chapter 11

____ products are so new and unique that they transform existing markets.

revolutionary

In reality, ____ rarely increases enough to offset the lower profit margins of a lower price.

sales volume

Most ____ firms base their prices on an hourly rate.

service

Entrepreneurs have three basic strategies to choose from when establishing a new product's price: penetration, ____, and life cycle pricing.

skimming

A key ingredient in setting prices properly is to understand a company's _______.

target market

If I use price anchoring and put a $2,000 watch next to a $10,000 watch, which is the anchor?

the 10,000 watch

A business with a 25 percent gross profit margin that cuts its price by 10 would have to ___ its sales volume just to break even.

triple

Contribution margin is the difference between total revenues and ___ costs.

variable

Economies of scale comes from the ability of a business to spreads its ____ costs across a large number of units.

fixed

An interchange fee is the fee banks collect from retailers whenever customers use _____ to pay for purchases.

a credit or debit card

Cost-plus pricing includes components such as factory overhead, direct materials, and direct____.

labor

If a shirt costs $14, and a retailer plans to sell it for $30, the percentage (of retail price) markup is ___ %.

53.3

Pat Bondy's Shoes sells a single line of yoga shoes online. It sets a uniform price for its product and lets each customer cover the shipping costs. What is the pricing strategy used by Pat Bondy's Shoes called?

F.O.B. factory

Smyth Shoes sells its merchandise (ordered online) on the condition that they pay all shipping costs. Smyth Shoes is using ______.

F.O.B. factory

What is the key question entrepreneurs should ask when it comes to pricing?

How much are my target customers willing to pay?

Which of the following is NOT a way for an entrepreneur to create a low-cost advantage?

Not offering self-service

Which of the following is NOT a component used in cost-plus pricing?

Owner's drawings

Which of the following statements is true about entrepreneurs and pricing?

Too often, entrepreneurs underprice their goods and services, believing that low prices are the only way they can achieve a competitive advantage.

What is the name of the traditional method of product costing?

absorption costing

Entrepreneurs can achieve a low-cost advantage by, among others, choosing a low-cost location, selling basic products, and _____.

achieving high sales volume

In pricing, the question "what will the market bear?" refers to price ___.

ceiling

When variable costs are subtracted from total revenues, the result is the manufacturer's _______.

contribution margin

In the ____ method of pricing, a manufacturer establishes a price that is composed of direct materials, direct labor, factory overhead, selling and administrative costs, plus a desired profit margin.

cost-plus

The difference between the cost of a product or service and its selling price is called ____.

markup

While competitors' products were priced at $18 or $22, Tom Michaels decided to price his product at $19.95. Tom is using ___ pricing.

odd

Few if any customers can see a product's or a service's true objective value; instead they see only its ___ value.

perceived