Question 1

Marketing expenses, factory equipment costs, and salaries of office personnel are considered variable costs.

Accepted Answer

A) True 
 B)False

Question 2

Match the term with its definition.
-A strategy that offers customers basic features at no cost based on the idea that they will upgrade to advanced products or services at subscription prices

Accepted Answer

A) average pricing 
B) follow-the-leader pricing strategy 
C) freemium strategy 
D) markup pricing 
E) penetration pricing strategy
F)prestige pricing
G)price lining strategy
H)price skimming strategy
I)product line pricing
J)variable pricing strategy 
A) average pricing 
B) follow-the-leader pricing strategy 
C) freemium strategy 
D) markup pricing 
E) penetration pricing strategy
F)prestige pricing
G)price lining strategy
H)price skimming strategy
I)product line pricing
J)variable pricing strategy

Question 3

Setting a price too high for the value being offered may result in lower quantities sold, reducing total revenue.

Accepted Answer

A) True 
 B)False

Question 4

Every applicant is creditworthy to some degree.

Accepted Answer

A) True 
 B)False

Question 5

With a price skimming strategy, prices are set lower than what will be the normal, long-range market price to gain more market share.

Accepted Answer

A) True 
 B)False

Question 6

In conducting a comprehensive break-even analysis, a firm must examine its cost-revenue relationships and incorporate sales forecasts into the analysis.

Accepted Answer

A) True 
 B)False

Question 7

Discuss the activities involved in managing credit in a small business.

Accepted Answer

•	Pertinent credit data can be obtained

Question 8

Hillary wants to purchase a refrigerator on credit. If she uses an installment plan, which of the following is most likely to occur?

Accepted Answer

A)  A down payment will be required. 
B)  A discounted price on her purchase will not be offered. 
C)  By law, finance charges on her account cannot exceed 20 percent of the purchase price. 
D)  Taxes will not be charged. 
A)  A down payment will be required. 
B)  A discounted price on her purchase will not be offered. 
C)  By law, finance charges on her account cannot exceed 20 percent of the purchase price. 
D)  Taxes will not be charged.

Question 9

Chocolate Concoctions, a maker of high-end chocolate candies, decided to price its boxes of candies below the long-term market price. The decision was made to increase market share and discourage other firms from entering the chocolate market. Chocolate Concoctions was implementing a

Accepted Answer

A)  penetration pricing strategy. 
B)  price lining strategy. 
C)  price skimming strategy. 
D)  variable pricing strategy. 
A)  penetration pricing strategy. 
B)  price lining strategy. 
C)  price skimming strategy. 
D)  variable pricing strategy.

Question 10

Cost analysis can identify a level below which a price should not be set under normal circumstances.

Accepted Answer

A) True 
 B)False

Question 11

Match the term with its definition.
-A line of credit that requires a down payment, with the balance paid over a specified period of time

Accepted Answer

A) consumer credit 
B) credit 
C) credit bureaus 
D) credit card 
E) installment account
F)open charge account
G)revolving charge account
H)trade credit
I)trade-credit agencies
J)value 
A) consumer credit 
B) credit 
C) credit bureaus 
D) credit card 
E) installment account
F)open charge account
G)revolving charge account
H)trade credit
I)trade-credit agencies
J)value

Question 12

Define three pricing strategies, and state when a small business would best use the strategy.

Accepted Answer

Students may choose any three of the fol

Question 13

Match the term with its definition.
-The degree to which a change in price affects the quantity demanded

Accepted Answer

A) aging schedule 
B) bad-debt ratio 
C) break-even analysis 
D) break-even point 
E) contribution margin
F)elastic demand
G)elasticity of demand
H)inelastic demand
I)price 
A) aging schedule 
B) bad-debt ratio 
C) break-even analysis 
D) break-even point 
E) contribution margin
F)elastic demand
G)elasticity of demand
H)inelastic demand
I)price

Question 14

Golf Global Company sells 1,000 shirts annually at a price of $35 each. If the company's pricing policies adhere to a 40 percent markup of selling price, the cost of each shirt is

Accepted Answer

A)  $14. 
B)  $21. 
C)  $28. 
D)  $32. 
A)  $14. 
B)  $21. 
C)  $28. 
D)  $32.

Question 15

Use product examples to illustrate elastic and inelastic demand.

Accepted Answer

Elasticity of demand is the degree to wh

Question 16

Tanya would like to gain market share rapidly so she has priced her product at a lower than normal, long-range market price. Which of the following strategies is Tanya using?

Accepted Answer

A)  Variable pricing 
B)  Price skimming 
C)  Price lining 
D)  Penetration pricing 
A)  Variable pricing 
B)  Price skimming 
C)  Price lining 
D)  Penetration pricing

Question 17

A primary purpose of the federal Consumer Credit Protection Act is to

Accepted Answer

A)  require creditors to specify how finance charges are computed. 
B)  grant certain rights to credit applicants regarding credit reports. 
C)  inform consumers about all the forms of credit available to them. 
D)  specify what information a customer's employer can release about him or her. 
A)  require creditors to specify how finance charges are computed. 
B)  grant certain rights to credit applicants regarding credit reports. 
C)  inform consumers about all the forms of credit available to them. 
D)  specify what information a customer's employer can release about him or her.

Question 18

A JCPenney card is an example of a retailer credit card.

Accepted Answer

A) True 
 B)False

Question 19

Information Express is a privately owned and operated organization that collects credit information on business firms. After the organization analyzes and evaluates the data, it makes credit ratings available to client companies for a fee. Information Express is a

Accepted Answer

A)  trade-credit agency. 
B)  financial credit agency. 
C)  credit collection agency. 
D)  credit bureau. 
A)  trade-credit agency. 
B)  financial credit agency. 
C)  credit collection agency. 
D)  credit bureau.

Question 20

Credit bureaus maintain credit histories on individuals, based on reports from banks, mortgage companies, department stores, and other creditors.

Accepted Answer

A) True 
 B)False

Exam 16: Pricing and Credit Decisions

Marketing expenses, factory equipment costs, and salaries of office personnel are considered variable costs.

Match the term with its definition. -A strategy that offers customers basic features at no cost based on the idea that they will upgrade to advanced products or services at subscription prices

Setting a price too high for the value being offered may result in lower quantities sold, reducing total revenue.

Every applicant is creditworthy to some degree.

With a price skimming strategy, prices are set lower than what will be the normal, long-range market price to gain more market share.

In conducting a comprehensive break-even analysis, a firm must examine its cost-revenue relationships and incorporate sales forecasts into the analysis.

Discuss the activities involved in managing credit in a small business.

Hillary wants to purchase a refrigerator on credit. If she uses an installment plan, which of the following is most likely to occur?

Chocolate Concoctions, a maker of high-end chocolate candies, decided to price its boxes of candies below the long-term market price. The decision was made to increase market share and discourage other firms from entering the chocolate market. Chocolate Concoctions was implementing a

Cost analysis can identify a level below which a price should not be set under normal circumstances.

Match the term with its definition. -A line of credit that requires a down payment, with the balance paid over a specified period of time

Define three pricing strategies, and state when a small business would best use the strategy.

Match the term with its definition. -The degree to which a change in price affects the quantity demanded

Golf Global Company sells 1,000 shirts annually at a price of $35 each. If the company's pricing policies adhere to a 40 percent markup of selling price, the cost of each shirt is

Use product examples to illustrate elastic and inelastic demand.

Tanya would like to gain market share rapidly so she has priced her product at a lower than normal, long-range market price. Which of the following strategies is Tanya using?

A primary purpose of the federal Consumer Credit Protection Act is to

A JCPenney card is an example of a retailer credit card.

Information Express is a privately owned and operated organization that collects credit information on business firms. After the organization analyzes and evaluates the data, it makes credit ratings available to client companies for a fee. Information Express is a

Credit bureaus maintain credit histories on individuals, based on reports from banks, mortgage companies, department stores, and other creditors.

The Entrepreneurial Lifethe Entrepreneurial Life

Integrity, Ethics, and Social Entrepreneurship

Starting a Small Business

Franchises and Buyouts

The Family Business

The Business Plan: Visualizing the Dream

The Marketing Plan

The Organizational Plan: Teams, Legal Structures, Alliances, and Directors

The Location Plan

Understanding a Firms Financial Statements

Forecasting Financial Requirements

A Firms Sources of Financing

Planning for the Harvest

Building Customer Relationships

Product Development and Supply Chain Management

Promotional Planning

Global Opportunities for Small Businesses

Professional Management and the Small Business

Managing Human Resources

Managing Small Business Operations

Managing the Firms Assets

Managing Risk

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