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Exam 14: Developing and Pricing Goods and Services

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Question 61

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Knowledge of the product life cycle model can help firms develop marketing strategies and anticipate market changes.

A) True
B) False

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Question 62

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Mini-Case Gourmet Pets is an innovative competitor in the billion-dollar pet food industry. In fact, two of its products, Kitty Sirloin and McDog T-bone, each claim over a 30% share in their market segments. The company has done detailed research and discovered that, for a growing number of pet owners, the family pet serves as a baby substitute. These owners tend to pamper their pets, and are very discriminating in what they purchase. With this in mind, the company has put a great deal of effort into developing a new dog food: Prime Cuts. The new product is packaged in a resealable, microwaveable container and can be purchased in a variety of flavors (including Western BBQ, Teriyaki, Australian Outback, and Hickory Smoked) . Gourmet Pets promotes the product as far superior to "average" dog foods, even though the quality of meat and nutrient content of the food are virtually identical to many other brands. The company faces no competition in this market segment so it plans to charge a high price for the product. -Gourmet Pets is interested in computing the break-even point for its new product Prime Cuts. The fixed costs of adding this product to the product line amounts to $20,000. Variable costs to produce one package of Prime Cuts are $2. Prime Cuts will sell for $6 per package. The break-even point would be:

A) 900 units.
B) 2,800 units.
C) 5,000 units.
D) There is not enough information to find the correct answer.

E) A) and D)
F) A) and C)

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Question 63

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The rent a firm pays each month for office space is an example of a(n) :

As a graphic artist, Nate has just finished producing a new calendar. His calendar cost him $1.00 for the shiny paper, $2.00 for the six color production, and $.25 for the plastic wire that holds it together at the top. The labor in developing the design was 4 hours of work at $50/hour, and labor is being added to the rest of the fixed costs of $400.00. At a price of $12.00 per calendar, how many calendars will Nate need to produce and sell in order to break even (cover all his costs, but not make a profit) ?

The product life cycle consists of __________ stages.

The best product development strategy for most firms is to:

As a manager at Excitement Foods, Mark is responsible for the firm's Kool'nKreamy brand of ice cream. Recently, he approved a proposal to test market new ice cream flavors. He is also considering the possibility of lowering the price of the ice cream and initiating a new advertising campaign. Mark appears to be a:

Federal legislation requires that the brand name of a product clearly identify the manufacturer of that product.

Entice-Mint Breath Mints is a new brand of breath fresheners. The company realizes that product location is very important since consumers desire to buy this type product with a minimum of effort. Entice-Mint mints represent a:

"I Can't Believe That It's Medicine" is an advertising slogan for a new antacid. The manufacturer claims that their antacid works faster and tastes better than any competing brand. These claims are part of the firm's strategy to achieve:

The use of price discounts and coupons may erode the commitment of consumers to brand names.

During the ________ stage of the product life cycle sales reach a peak, profits are declining, and the number of competitors starts to decrease.

The combination of product lines offered by a manufacturer is called the firm's:

Consumer perceptions of product quality are affected by promotions and packaging, but not by the price of the product.

As restaurant chains that specialize in Mexican cuisine, Fernando's and Carmelita's offer similar items on their menus. However, Fernando's restaurants are positioned in the market as elegant establishments with high prices. Carmelita's restaurants, on the other hand, are located in middle-class neighborhoods, with a casual atmosphere that welcomes families with young children. The prices at Carmelita's are in the moderate range. When evaluating the marketing strategies used by these restaurants, we can conclude that:

Some goods have a product life cycle that is completed in a shorter amount of time than other goods.

An advertisement for the Xerox Corporation encourages customers to say, "Copy it" rather than "Xerox it." This indicates that Xerox is fearful that its brand name might become a(n) :

As a result of increased advertising and well-trained salespeople, packaging is less important than in the past.

Which of the following is consistent with the growth stage of the product life cycle?

When reviewing the product life cycle model, it is important to remember that: