Chapter 10

Question 1

price

Answer 1

the amount of money charged for a product or service, or the sum of values that customers exchange for the benefits of having or using the product or service

Question 2

value-based pricing

Answer 2

setting price based on buyers’ perceptions of value rather than on the seller’s cost

Question 3

good-value pricing

Answer 3

offering just the right combination of quality and good service at a fair price

Question 4

value-added pricing

Answer 4

attaching value-added features and services to differentiate a company’s offers and charging higher prices

Question 5

cost-based pricing

Answer 5

setting prices based on the costs for producing, distributing and selling the product plus a fair rate of return for effort and risk

Question 6

fixed costs (overhead)

Answer 6

costs that do not vary with production or sales level

Question 7

variable costs

Answer 7

costs that vary directly with the level of production

Question 8

total costs

Answer 8

the sum of the fixed and variable costs for any given level of production

Question 9

experience curve (learning curve)

Answer 9

the drop in average per-unit production cost that comes with accumulated production experience

Question 10

cost-plus pricing

Answer 10

adding a standard markup to the cost of the product

Question 11

break-even pricing (target profit pricing)

Answer 11

setting price to break even on the costs of making and marketing a product, or setting price to make a target profit

Question 12

target costing

Answer 12

pricing that starts with an ideal selling price, then targets costs that will ensure that the price is met

Question 13

demand curve

Answer 13

a curve that shows the number of units the market will buy in a given time period, at different prices that might be charged

Question 14

price elasticity

Answer 14

a measure of the sensitivity of demand to changes in price