Tag Archives: exam

MKT 510 Final Exam – New

MKT 510 Final Exam – Strayer New

MKT 510 Final Exam Week 11 Solution – Perfect Score

Click On The Link Below To Purchase
Instant Download

 

http://www.budapp.net/MKT-510-Final-Exam-Strayer-New-MKT510W11E.htm

MKT 510 Week 11 Final Exam Solution

Multiple Choice Questions

1. Why is China very attractive to marketers around the world?
A) because it represents a collective approach to marketing in contrast to the traditional individualist approach used in the United States and other western cultures
B) Chinese consumers are very brand loyal
C) they are the heaviest users of the Internet
D) Chinese teens are easier to understand because they are less “trendy” than teenagers from other countries
E) because of its massive population, rising income, and emerging youth market

Answer: Page: 5 Difficulty: moderate

2. _____ is the study of individuals, groups, or organizations and the processes they use to select, secure, use, and dispose of products, services, experiences, or ideas to satisfy needs and the impacts that these processes have on the consumer and society.
A) Marketing
B) Consumer behavior
C) Psychographics
D) Demographics
E) Psychology

Answer: Page: 6 Difficulty: easy

3. One primary function of Harriet’s job is to study individuals, groups, or organizations and the processes they use to select, secure, use, and dispose of her company’s products and services to satisfy needs and the impacts that these processes have on the consumer and society. Harriet works in the field of _____.
A) social psychology
B) cognitive psychology
C) management
D) consumer behavior
E) organizational behavior

Answer: Page: 6 Difficulty: easy

4. Which of the following is NOT true regarding consumer behavior?
A) Organizations are applying theories and information about consumer behavior on a daily basis.
B) It is often necessary to conduct research.
C) Consumer behavior is a complex, multidimensional process.
D) The overall model of consumer behavior presented in the text is accurate in predicting consumer behavior.
E) Marketing practices designed to influence consumer behavior involve ethical issues that affect the firm, the individual, and society.

Answer: Page: 7 Difficulty: hard

5. Which of the following is a key aspect regarding consumer behavior?
A) Organizations are applying theories and information about consumer behavior on a daily basis.
B) It is often necessary to conduct research.
C) Consumer behavior is a complex, multidimensional process.
D) Marketing practices designed to influence consumer behavior involve ethical issues that affect the firm, the individual, and society.
E) all of the above

Answer: Page: 7 Difficulty: easy

6. Which of the following is NOT an application of consumer behavior?
A) marketing strategy
B) human resource management
C) regulatory policy
D) informed consumers
E) social marketing

Answer: Page: 9-11 Difficulty: moderate

7. Thomas wants to gain a useable understanding of consumer behavior in order to help him become a more effective marketing manager. Which application of consumer behavior does this represent?
A) marketing strategy
B) regulatory policy
C) social marketing
D) informed consumers
E) resource management

Answer: Page: 9 Difficulty: moderate

8. _____ is the application of marketing strategies and tactics to alter or create behaviors that have a positive effect on the targeted individuals or society as a whole.
A) Social marketing
B) Consumer behavior
C) Regulation
D) Proactive marketing
E) Ethical marketing

Answer: Page: 10 Difficulty: moderate

9. Mia is concerned how her marketing activities will affect individual consumers as well as society at large. Mia is implementing _____.
A) conscientious marketing
B) regulated marketing
C) ethical marketing
D) proactive marketing
E) social marketing

Answer: Page: 10 Difficulty: moderate

10. Most economically developed societies are legitimately referred to as _____ societies.
A) marketing
B) proactive
C) consumption
D) competitive
E) enhanced

Answer: Page: 11 Difficulty: moderate

11. Which of the following is used by firms to influence consumers?
A) ads
B) packages
C) store environments
D) sales pitches
E) all of the above

Answer: Page: 11 Difficulty: easy

12. To survive in a competitive environment, an organization must provide its target customers more _____ than is provided to them by its competition.
A) product
B) service
C) value
D) feedback
E) attention

Answer: Page: 11 Difficulty: moderate

13. The difference between all the benefits derived from a total product and all the costs of acquiring those benefits is known as _____.
A) price
B) position
C) consumer behavior
D) customer value
E) equity

Answer: Page: 11 Difficulty: moderate

14. Laurie saved for six months to have enough money to buy a new designer outfit to wear to a special party. She had to travel to a larger city to purchase this outfit, but it was worth it to her because it made her feel beautiful and confident. The difference between the benefits Laurie perceived from this purchase and the cost to her to acquire these benefits describes her _____.
A) consumer behavior
B) customer value
C) motivation
D) equity difference
E) perceptual field

Answer: Page: 11 Difficulty: hard

15. It is critical that a firm consider value from which perspective?
A) the competition’s
B) the firm’s
C) the customer’s
D) the government’s
E) the industry’s

Answer: Page: 11 Difficulty: easy

16. How can an organization provide superior customer value to customers?
A) by conducting market research
B) by offering their products at the lowest price
C) by offering extended warranty coverage on products
D) by doing a better job of anticipating and reacting to customer needs than the competition does
E) by offering more variations of a product

Answer: Page: 11 Difficulty: hard

17. Marketing strategy begins with _____.
A) market segmentation
B) targeting
C) conducting an outcomes assessment
D) objective setting
E) conducting a market analysis

Answer: Page: 11 Difficulty: moderate

18. Harold is tasked with developing the marketing strategy for his family’s business. What should he do first?
A) segment the market
B) conduct a market analysis
C) decide on which segments to target
D) develop the marketing mix
E) set objectives

Answer: Page: 11 Difficulty: moderate

19. Marketing strategy is formulated in terms of the marketing mix; that is, it involves determining the product, features, price, communications, distribution, and services that will provide customers with superior value. This entire set of characteristics is often referred to as the _____.
A) total product
B) customer value
C) offering
D) value proposition
E) total value

Answer: Page: 12 Difficulty: moderate

20. Disney World in Orlando, FL has several theme parks, resorts, restaurants, and stores. Each is intentionally created to offer a memorable event for visitors. For example, the Wilderness Lodge is a large resort hotel on the grounds, and everything within it is made to look like log cabins and pioneer days. Even the casual restaurant has the wait staff dressed in pioneer costumes, and they put on funny little skits when they are waiting on customers. Which of the following best describes what Disney is selling?
A) a product
B) a service
C) a bundled product
D) a bundled service
E) an experience

Answer: Page: 13 Difficulty: hard

21. _____ are small, convenient, open-air retailing complexes laid out to evoke the small-town shopping districts of previous generations.
A) Malls
B) Kiosks
C) Town centers
D) Lifestyle centers
E) Micro-malls

Answer: Page: 14 Difficulty: hard

22. Which of the following is a component of a market analysis?
A) market segmentation
B) objectives
C) conditions
D) price
E) all of the above

Answer: Page: 14-16 Difficulty: moderate

23. Darren is conducting a market analysis for his business, and he has asked your advice on what he should be analyzing. Which of the following should he consider at this step of marketing strategy development?
A) the company’s own ability to meet customer needs
B) competitors’ capabilities and strategies
C) consumers’ needs
D) conditions in the market
E) all of the above

Answer: Page: 14-16 Difficulty: moderate

24. Jamie is developing a thorough understanding of his company’s own capabilities, the capabilities of current and future competitors, the consumption process of potential customers, and the economic, physical, and technological environment in which these elements interact. Which step in the marketing strategy process is Jamie performing?
A) setting objectives
B) segmenting the market
C) conducting a market analysis
D) assessing the outcomes
E) targeting the market

Answer: Page: 14 Difficulty: moderate

25. Which of the following aspects is evaluated when determining a firm’s ability to meet customer needs?
A) financial condition
B) general managerial skills
C) production capabilities
D) technological sophistication
E) all of the above

Answer: Page: 15 Difficulty: easy

26. Which of the following is NOT evaluated when analyzing a company’s own ability to meet customer needs?
A) competitors
B) financial strengths
C) general managerial skills
D) production capabilities
E) reputation

Answer: Page: 15 Difficulty: moderate

27. As part of developing your company’s marketing strategy, you are tasked with analyzing the new-product capabilities, channel strength, advertising abilities, service capabilities, marketing research abilities, and market and consumer knowledge. Which aspect of your company’s capabilities are you assessing?
A) financial strength
B) marketing skills
C) general managerial skills
D) production capabilities
E) reputation

Answer: Page: 15 Difficulty: easy

28. A portion of a larger market whose needs differ somewhat from the larger market is referred to as a(n) _____.
A) market segment
B) niche
C) subgroup
D) ancillary market
E) secondary market

Answer: Page: 16 Difficulty: moderate

29. Smaller women like to purchase fashionable clothes just as much as any women. However, most clothes are not proportioned for their smaller size and do not fit well. As a result, several manufacturers offer “petite” sizes of clothing for this group of consumers. Women who comprise this group have needs that differ somewhat from the total market and represent a _____.
A) demographic segment
B) lifestyle segment
C) market potential
D) sub-market
E) market segment

Answer: Page: 16 Difficulty: hard

30. Tracking consumers’ online activity and delivering specific banner ads based on that activity is known as _____.
A) clickstream
B) blogging
C) spam
D) behavioral targeting
E) electronic targeting

Answer: Page: 16 Difficulty: moderate

31. Tacoda Systems tracks consumers’ online activity and delivers specific banners based on that activity. This tracking and ad delivery system has been installed on almost 3,000 Web sites, and advertisers pay on a pay-for-performance basis, which means that advertisers pay Tacoda Systems only when a consumer clicks on their ad. The tracking of online activity and delivery of ads based on that activity is called _____.
A) click-throughs
B) behavioral targeting
C) spamming
D) blogging
E) cookie targeting

Answer: Page: 16 Difficulty: hard

32. What is the first step in market segmentation?
A) describe each group
B) group customers with similar needs sets
C) identify product-related need sets
D) select an attractive segment to serve
E) set objectives for segmenting

Answer: Page: 16 Difficulty: moderate

33. describing each group
A) selecting an attractive segment(s) to serve
B) identifying product-related need sets
C) grouping customers with similar need sets
D) deciding the segmenting scheme

Answer: Page: 16 Difficulty: moderate

34. Which of the following is NOT a step in market segmentation?
A) set budget
B) identify product-related need sets
C) group customers with similar need sets
D) describe each group
E) select an attractive segment(s) to serve

Answer: Page: 16 Difficulty: hard

35. Carlos is attempting to segment the market for his company’s products. Where should he begin?
A) set objectives
B) identify product-related need sets
C) group customers with similar need sets
D) describe each group
E) selecting an attractive segment(s) to serve

Answer: Page: 16 Difficulty: hard

36. Which term reflects the fact that most products in developed economies satisfy more than one need?
A) multiplicity
B) duplicity
C) need array
D) need set
E) value proposition

Answer: Page: 17 Difficulty: moderate

37. Barry is looking for a car that is dependable yet stylish enough to let others know that he has achieved a respectable status in his life and career. He also wants it to be a high-performance automobile. Dependability, status, and performance represent Barry’s _____.
A) self-image
B) need set
C) alter ego
D) unarticulated needs
E) lifestyle

Answer: Page: 17 Difficulty: hard

38. Which of the following is used to describe a group of consumers with similar needs sets?
A) demographics
B) lifestyles
C) media usage
D) a and b
E) a, b, and c

Answer: Page: 18 Difficulty: moderate

39. Talbot’s is a women’s clothing store that offers classic fashions at a slightly premium price (i.e., a wool skirt typically costs over $100). During the process of market segmentation, Talbot’s identified a group of consumers who are larger than average women yet still want stylish clothing. Further research into this segment revealed that these women tend to be between the ages of 35 and 50, are career-oriented, have a household income over $50,000, and are married with children under the age of 18 living at home. This group is also heavy users of magazines and newspapers as well as prime-time television. Which step of market segmentation does this describe?
A) identifying product-related need sets
B) grouping customer with similar need sets
C) describing each group
D) selecting an attractive segment(s) to serve
E) profiling current customers

Answer: Page: 18 Difficulty: moderate

40. The segment(s) within the larger market on which an organization will focus its marketing effort is referred to as the _____.
A) need set
B) target market
C) customer set
D) strategic market
E) primary market

Answer: Page: 18 Difficulty: easy

41. J&J Produce is a distributor of fresh produce. They conducted a thorough analysis of its market and identified groups of consumers that had similar product-related needs. One particular market identified wanted fresh and unique produce, such as Swiss chard, radicchio, and exotic fruits, and they were willing to pay higher prices for these choices. J&J Produce decided to focus its marketing effort on this segment of the total market. This segment is J&J’s _____.
A) need set
B) primary market
C) customer set
D) target market
E) market focus

Answer: Page: 18 Difficulty: moderate

42. Which of the following is used to evaluate the attractiveness of various market segments?
A) segment size
B) distribution available
C) fit with company image
D) cost to serve
E) all of the above

Answer: Page: 18 Difficulty: easy

43. Juan has segmented the market for boats and is currently analyzing each with respect to several factors, such as size, growth rate, competitor strength, fit with company image, distribution available, cost to serve, and risk before deciding which segment to target. Which step of market segmentation is Juan conducting?
A) identifying product-related need sets
B) grouping customer with similar need sets
C) describing each group
D) selecting an attractive segment(s) to serve
E) profiling current customers

Answer: Page: 18 Difficulty: hard

44. The product, price, communications, distribution, and services provided to the target market is referred to as the _____.
A) need set
B) marketing mix
C) marketing set
D) decision set
E) value proposition

Answer: Page: 19 Difficulty: easy

45. Which of the following is part of the marketing mix?
A) product
B) price
C) communications
D) distribution
E) all of the above

Answer: Page: 19 Difficulty: easy

46. A(n) _____ is anything a consumer acquires or might acquire to meet a perceived need.
A) satisfier
B) end state
C) product
D) value proposition
E) outcome

Answer: Page: 19 Difficulty: moderate

47. To be successful, a product must _____.
A) meet the needs of the target market better than the competition does
B) be lower priced than competitors’ products
C) be of higher quality than competitors’ products
D) be advertised more than competitors’ products
E) have greater distribution than the competition does

Answer: Page: 19 Difficulty: easy

48. _____ include(s) advertising, the sales force, public relations, packaging, and any other signal that the firm provides about itself and its products.
A) Value promotions
B) Brand equity
C) Distribution
D) Market segmentation
E) Marketing communications

Answer: Page: 19 Difficulty: easy

49. Which of the following is included in marketing communications?
A) advertising
B) sales force
C) public relations
D) packaging
E) all of the above

Answer: Page: 19 Difficulty: easy

50. Which of the following is NOT a critical question for developing marketing communications?
A) Who do we want to communicate with?
B) What effect do we want to have?
C) What message will achieve the desired result?
D) What media should we use?
E) all of the above are critical questions

Answer: Page: 19-21 Difficulty: moderate

51. _____ is the amount of money one must pay to obtain the right to use the product.
A) Consumer cost
B) Total cost
C) Price
D) Value
E) Customer value

Answer: Page: 21 Difficulty: easy

52. Amy purchased a new 32″ LCD high-definition television and paid $1,999 for it. This amount of money Amy had to pay to obtain this product is known as the _____.
A) total cost
B) value
C) value proposition
D) price
E) consumer cost

Answer: Page: 21 Difficulty: moderate

53. _____ is everything the consumer must surrender in order to receive the benefits of owning/using the product.
A) Value
B) Consumer cost
C) Price
D) Opportunity cost
E) Value proposition

Answer: Page: 21 Difficulty: moderate

54. Timothy and his wife are considering the purchase of a new car. In addition to the price, they are also considering the cost of insurance, gasoline, maintenance, finance charges, and license fees. All of these factors combined represent the _____.
A) value
B) price
C) opportunity cost
D) consumer cost
E) value proposition

Answer: Page: 21 Difficulty: moderate

55. Which element of the marketing mix is concerned with having the product available where target customers can buy it?
A) product
B) price
C) distribution
D) communications
E) placement

Answer: Page: 21 Difficulty: easy

56. Tony’s job entails making sure his company’s products get to retailers so that target customers can buy them. Which element of the marketing mix is Tony involved with?
A) product
B) price
C) distribution
D) communications
E) placement

Answer: Page: 21 Difficulty: moderate

57. Auxiliary or peripheral activities that are performed to enhance the primary product or primary service is referred to as _____.
A) service
B) supplemental product
C) intangible benefits
D) secondary product
E) ancillary attributes

Answer: Page: 22 Difficulty: moderate

58. Which of the following is NOT considered one of the firm’s outcomes of the marketing strategy and consumer behavior process?
A) product position
B) customer satisfaction
C) service
D) sales
E) all of the above are considered outcomes for the firm

Answer: Page: 22-23 Difficulty: hard

59. An image of the product or brand in the consumer’s mind relative to competing products and brands is referred to as the product’s _____.
A) equity
B) extension
C) message
D) placement
E) position

Answer: Page: 22 Difficulty: moderate

60. A product’s position refers to _____.
A) its shelf location in retail stores
B) an image of the product in the consumer’s mind relative to competing products
C) its price relative to other products in the firm’s product line
D) its price relative to competitors’ products
E) its stage in the product development process

Answer: Page: 22 Difficulty: moderate

61. Rod is surveying consumers to gain a better understanding of his restaurant’s image relative to competing restaurants. Rod is concerned with his restaurant’s _____.
A) position
B) equity
C) placement
D) driver
E) satisfaction index

Answer: Page: 22 Difficulty: moderate

62. Which outcome of marketing strategy produces the revenue necessary for the firm to continue in business?
A) customer satisfaction
B) product position
C) consumption
D) social welfare
E) sales

Answer: Page: 23 Difficulty: easy

63. John purchases and is satisfied with his SUV because he believes that it provides greater crash safety than a sedan even though this is not technically true. John’s satisfaction is based on the distinction between _____.
A) primary need fulfillment and secondary need fulfillment
B) actual need fulfillment and perceived need fulfillment
C) initial need fulfillment and repeat need fulfillment
D) articulated need fulfillment and unarticulated need fulfillment
E) attribute fulfillment and benefit fulfillment

Answer: Page: 24 Difficulty: hard

64. _____ occurs when individuals or groups make consumption decisions that have negative consequence for their long-run well-being.
A) Disintermediation
B) Conspicuous consumption
C) Disenfranchisement
D) Injurious consumption
E) Demarketing

Answer: Page: 24 Difficulty: moderate

65. Bob and his friends go out every weekend and drink until they get drunk. Then they drive home in that condition. Which type of consumption does this represent?
A) injurious consumption
B) severe consumption
C) conspicuous consumption
D) unethical consumption
E) anti-social consumption

Answer: Page: 24 Difficulty: moderate

66. Which of the following is a societal outcome of marketing strategy and consumer behavior?
A) sales
B) need satisfaction
C) social welfare
D) customer satisfaction
E) product position

Answer: Page: 25 Difficulty: moderate

67. Which of the following is NOT a societal outcome of marketing strategy and consumer behavior?
A) economic outcomes
B) customer satisfaction
C) physical environment outcomes
D) social welfare
E) all of the above are societal outcomes

Answer: Page: 25 Difficulty: hard

68. Which is NOT a step in the consumer’s decision process?
A) information search
B) postpurchase processes
C) problem recognition
D) alternative evaluation and selection
E) self-concept analysis

Answer: Page: 26 Difficulty: moderate

69. Which of the following is an internal influence on consumer behavior?
A) culture
B) family
C) attitudes
D) marketing activities
E) reference groups

Answer: Page: 26 Difficulty: moderate

70. Which is NOT an external influence on consumer behavior?
A) culture
B) family
C) social status
D) perception
E) marketing activities

Answer: Page: 26 Difficulty: hard

71. Teresa is trying to understand her customers better. She is examining the external influences that shape her customers’ self-concepts and lifestyles. Which of the following is a possible external influence Teresa could examine?
A) motives
B) personality
C) perception
D) attitudes
E) culture

Answer: Page: 26 Difficulty: moderate

72. Liz Claiborne is a brand of clothing, accessories, and home products. Brand managers at this company are trying to learn which internal influences impact their customers’ needs and desires most. Which of the following is a possible internal influence these managers should examine?
A) culture
B) personality
C) demographics
D) family
E) social status

Answer: Page: 26 Difficulty: moderate

73. What is the first step in the consumer decision process?
A) problem recognition
B) budget setting
C) information search
D) outlet selection
E) alternative evaluation and selection

Answer: Page: 26 Difficulty: moderate

74. Which of the following statements is true regarding the overall model of consumer behavior?
A) It is sufficiently detailed so as to predict particular behaviors.
B) Family and culture are internal influences on consumer behavior.
C) Personality, emotions, and attitudes represent external influences on consumer behavior.
D) A consumer’s self-concept and lifestyle influence his or her needs and desires.
E) Experiences and acquisitions have little effect on the process.

Answer: Page: 26 Difficulty: moderate

75. The totality of an individual’s thoughts and feelings about him- or herself is known as _____.
A) lifestyle
B) self-concept
C) internal influences
D) external influences
E) consumption outcomes

Answer: Page: 29 Difficulty: moderate

76. _____ represents how one lives, including the products one buys, how one uses them, what one thinks about them, and how one feels about them.
A) Lifestyle
B) Self-concept
C) Position
D) Status
E) Social class

Answer: Page: 29 Difficulty: moderate

77. Which type of decisions involve very little effort or thought on the part of the consumer?
A) primary decisions
B) top-of-mind decisions
C) low-involvement decisions
D) automatic decisions
E) self-related decisions

Answer: Page: 29 Difficulty: easy

78. Karen was at the checkout at the grocery store and remembered that she was out of chewing gum that she normally likes to keep in her purse. Without much thought, she grabbed two packages of the gum she likes. What type of consumer decision does this illustration?
A) primary decision
B) top-of-mind decision
C) low-involvement decision
D) automatic decision
E) self-related decision

Answer: Page: 29 Difficulty: moderate

79. Which of the following is FALSE regarding the working poor?
A) They are forced to spend a disproportionate percentage of their income on housing, utilities, and medical care.
B) They generally rely on public transportation.
C) They spend a larger portion of their relatively small incomes on meals away from home.
D) They spend very little on their own financial security.
E) They spend the same percent of their income as do higher income consumers on apparel and accessories.

Answer: Page: 30 Difficulty: hard

80. What does the consumption of a product like Nikes mean to Andre, the working poor consumer discussed in the “Consumer Insight”?
A) that he can afford a brand that is superior in meeting his physical needs
B) his peers will now accept him
C) they serve as a visible symbol that he is back as a successful member of society
D) he peers will try to be more like him
E) they serve as a reminder of what he used to have

Answer: Page: 30 Difficulty: moderate

True/False Questions

81. Consumer behavior is a complex, multidimensional process.

Answer: Page: 7 Difficulty: easy

82. Marketing decisions and regulations are based on exact knowledge of consumer behavior.

Answer: Page: 8 Difficulty: moderate

83. Economically developed societies are often referred to as marketing societies.

Answer: Page: 11 Difficulty: moderate

84. It is critical that a firm consider value from the customer’s perspective.

Answer: Page: 11 Difficulty: easy

85. Marketing strategy begins with objective setting.

Answer: Page: 11 Difficulty: hard

86. Product features, price, communications, distribution, and services together are often referred to as customer value.

Answer: Page: 12 Difficulty: hard

87. Small, convenient, open-air retailing complexes are called town centers.

Answer: Page: 14 Difficulty: hard

88. Marketing skills include a firm’s financial expertise, general managerial skills, production capabilities, research and development capabilities, technological sophistication, and reputation.

Answer: Page: 15 Difficulty: moderate

89. Tracking consumers’ online activity and sending them specific banner ads based on that activity is known as behavioral targeting.

Answer: Page: 16 Difficulty: easy

90. The term used to reflect the fact that most products in developed economies satisfy more than one need is customer value.

Answer: Page: 17 Difficulty: moderate

91. A target market is that segment(s) of the larger market on which a company will focus its marketing effort.

Answer: Page: 18 Difficulty: easy

92. The outcomes of a firm’s marketing strategy are determined by its interaction with the consumer decision process.

Answer: Page: 22 Difficulty: moderate

93. Two key processes involved in need satisfaction are the actual need fulfillment and the perceived need fulfillment.

Answer: Page: 24 Difficulty: moderate

94. A consumer’s needs and desires are shaped by his or her self-concept and lifestyle.

Answer: Page: 26 Difficulty: moderate

95. Lifestyle is the totality of an individual’s thoughts and feelings about him- or herself.

Answer: Page: 29 Difficulty: moderate

Essay Questions

96. Describe the field of consumer behavior, and discuss the four key aspects of consumer behavior that make it an important area of study.

Page: 7 Difficulty: hard
Answer:

97. List and briefly describe applications of consumer behavior.

Page: 9-11 Difficulty: moderate
Answer:

98. List and briefly describe the four steps involved in market segmentation.

Page: 16-18 Difficulty: moderate
Answer:

99. Briefly describe the outcomes of marketing strategy for the firm, consumers, and society.

Page: 22-25 Difficulty: moderate
Answer:

100. Alex is developing the marketing strategy for a brand of men’s clothing. Before he develops his strategy, Alex will conduct research to better understand his customers. Briefly describe a conceptual model that includes the factors he should consider in his research.

Page: 26-29 Difficulty: moderate
Answer:

Multiple Choice Questions

1. What was the challenge facing FedEx in the Chapter 2 opener?
A) to influence Asian governments to allow FedEx to operate in their countries
B) to increase awareness in Africa of the benefits of FedEx
C) to increase awareness in Eastern Europe with a commercial that would work across this region with its differing cultures and languages
D) to increase awareness in Latin America and the Caribbean with a commercial that would work across this region with its differing cultures and languages
E) to influence Brazilian regulators to allow it to operate its service after normal working hours

Answer: Page: 39 Difficulty: hard

2. Which of the following is a cultural factor that affects consumer behavior and marketing strategy?
A) demographics
B) values
C) language
D) nonverbal communications
E) all of the above

Answer: Page: 40 Difficulty: easy

3. Which of the following is NOT a cultural factor that affects consumer behavior and marketing strategy?
A) demographics
B) language
C) exchange rates
D) values
E) nonverbal communications

Answer: Page: 40 Difficulty: moderate

4. Howard Industries is a computer manufacturer located in Laurel, MS. This company is interested in expanding internationally. Which of the following is a cultural factor that affects consumer behavior and marketing strategy that Howard Industries needs to be aware of?
A) nonverbal communications
B) natural resources
C) economic conditions
D) exchange rates
E) all of the above

Answer: Page: 40 Difficulty: moderate

5. Which of the following statements is FALSE regarding cross-cultural marketing?
A) Marketing across cultural boundaries is a difficult and challenging task.
B) Most categories of American products are generally prized throughout the world.
C) There are both subtle and direct ethical issues involved in international marketing.
D) While marketing strategy is heavily influenced by cultural factors, it does not influence aspects of cultures.
E) Cultures may differ in demographics, languages, nonverbal communications, and values.

Answer: Page: 40-41 Difficulty: hard

6. _____ is the complex whole that includes knowledge, belief, art, law, morals, customs, and any other capabilities and habits acquired by humans as members of society.
A) Reference group
B) Government
C) Culture
D) Authority
E) Gestalt

Answer: Page: 42 Difficulty: easy

7. Sarah’s job at a major manufacturer of consumer package goods is to learn as much as possible about the knowledge, beliefs, art, law, morals, customs, and any other capabilities and habits acquired by humans in a given country in which her company intends to expand. Her job, then, is to understand a country’s _____.
A) culture
B) society
C) government
D) way of doing things
E) economic environment

Answer: Page: 42 Difficulty: moderate

8. Which of the following statements is true regarding culture?
A) Culture is a relatively simple concept.
B) Culture is acquired.
C) Culture often provides detailed prescriptions for appropriate behavior.
D) The nature of cultural influences is such that we are consciously aware of them.
E) all of the above

Answer: Page: 42 Difficulty: hard

9. In the United States, promptness is considered a virtue. Americas are expected to be on time to an event, and they expect others to do so as well. Which aspect of culture best explains this behavior?
A) Culture is a simple concept.
B) Culture is something one is born with.
C) Culture is unique to each individual in a society.
D) Culture is time-bound.
E) Culture is acquired, that is, it is learned.

Answer: Page: 42 Difficulty: hard

10. The boundaries that culture sets on behavior are called _____.
A) rules
B) norms
C) prescriptions
D) precepts
E) sanctions

Answer: Page: 43 Difficulty: moderate

11. _____ are rules that specify or prohibit certain behaviors in specific situations.
A) Norms
B) Precepts
C) Sanctions
D) Prescriptions
E) Values

Answer: Page: 43 Difficulty: moderate

12. Karen’s father is an executive for a major international corporation and has been transferred to various countries over the years. With each move, Karen is enrolled in a new school. Even though English is spoken in the schools she attends, there are students from all over the world whose parents have jobs similar to Karen’s father. With each new school, Karen spends the first few weeks merely observing the other students to learn which behaviors are appropriate in specific situations because she’s learned that at each school the kids behave differently. Karen is attempting to learn that student body’s specific _____ regarding behavior.
A) rules
B) guidelines
C) precepts
D) norms
E) prescriptions

Answer: Page: 43 Difficulty: moderate

13. Norms are derived from _____.
A) cultural values
B) laws
C) education
D) international protocol
E) law enforcement officials

Answer: Page: 43 Difficulty: moderate

14. _____ are widely held beliefs that affirm what is desirable.
A) Laws
B) Religion
C) Edicts
D) Cultural values
E) Sanctions

Answer: Page: 43 Difficulty: moderate

15. Marketers that wish to expand internationally need to understand a culture’s widely held beliefs that affirm what is desirable. To do this, marketers should study _____.
A) laws
B) religions
C) cultural values
D) sanctions
E) edicts

Answer: Page: 43 Difficulty: moderate

16. Violation of cultural norms results in _____, or penalties ranging from mild social disapproval to banishment from the group.
A) norms
B) sanctions
C) proclamations
D) ostracization
E) sentencing

Answer: Page: 43 Difficulty: moderate

17. Robert is fifteen years old and has recently moved to a new town, and therefore, a new high school. He was trying to get accepted by a group of kids that he wanted to be friends with. When they asked him to attend a party over the weekend, he said he’d have to ask his parents for permission. This group of students laughed at him and called him a “momma’s boy” and told him he can’t be one of them because they don’t ask parents for permission, they just do what they want. This social disapproval of Robert’s behavior is an example of a(n) _____.
A) norm
B) violation
C) sanction
D) precept
E) edict

Answer: Page: 43 Difficulty: moderate

18. Which of the following is NOT a broad form of cultural values?
A) other-oriented
B) environment-oriented
C) self-oriented
D) object-oriented
E) all of the above are broad forms of cultural values

Answer: Page: 44 Difficulty: hard

19. _____ values reflect a society’s view of the appropriate relationships between individuals and groups within that society.
A) Other-oriented
B) Environment-oriented
C) Self-oriented
D) Externally-oriented
E) Internally-oriented

Answer: Page: 44 Difficulty: moderate

20. Asian societies (i.e., Japan) value collective activity. That is, consumers look toward others for guidance in purchase decisions and do not respond favorably to promotional appeals focusing on individualism. Which category of cultural values does this represent?
A) internally-oriented
B) environment-oriented
C) other-oriented
D) self-oriented
E) group-oriented

Answer: Page: 44 Difficulty: moderate

21. _____ values prescribe a society’s relationship to its economic and technological as well as its physical environment.
A) Other-oriented
B) Self-oriented
C) Externally-oriented
D) Internally-oriented
E) Environment-oriented

Answer: Page: 45 Difficulty: easy

22. Sam has learned that a country to which his company desires to expand places a high value on cleanliness and admires nature immensely. Which category of cultural values does this represent?
A) other-oriented
B) self-oriented
C) environment-oriented
D) externally-oriented
E) internally-oriented

Answer: Page: 45 Difficulty: moderate

23. _____ values reflect the objectives and approaches to life that the individual members of society find desirable.
A) Other-oriented
B) Self-oriented
C) Environment-oriented
D) Externally-oriented
E) Internally-oriented

Answer: Page: 45 Difficulty: moderate

24. Which of the following is an example of an other-oriented value?
A) problem solving/fatalistic
B) postponed gratification/immediate gratification
C) religious/secular
D) individual/collective
E) risk taking/security

Answer: Page: 45 Difficulty: hard

25. Which of the following is NOT an example of an other-oriented value?
A) youth/age
B) extended/limited family
C) tradition/change
D) masculine/feminine
E) diversity/uniformity

Answer: Page: 45 Difficulty: hard

26. Which of the following is an example of an environment-oriented value?
A) active/passive
B) tradition/change
C) extended/limited family
D) masculine/feminine
E) material/nonmaterial

Answer: Page: 45 Difficulty: hard

27. Which of the following is NOT an example of an environment-oriented value?
A) cleanliness
B) tradition/change
C) nature
D) competitive/cooperative
E) problem solving/fatalistic

Answer: Page: 45 Difficulty: hard

28. Which of the following is an example of a self-oriented value?
A) religious/secular
B) individual/collective
C) risk taking/security
D) tradition/change
E) diversity/uniformity

Answer: Page: 45 Difficulty: hard

29. Which of the following country tends to value individualism over collectivism?
A) Mexico
B) India
C) United States
D) Korea
E) Japan

Answer: Page: 46 Difficulty: moderate

30. Jake is in the market for a new car. He’s looking at brands such as Mercedes, Lexus, and BMW because he feels they tell other people that he’s successful in life. This is an illustration of which value?
A) collectivism
B) youth
C) masculine
D) individualism
E) active

Answer: Page: 46 Difficulty: moderate

31. Which culture has traditionally valued the wisdom that comes with age?
A) American
B) Australian
C) British
D) European
E) Asian

Answer: Page: 47 Difficulty: moderate

32. Which of the following statements is FALSE regarding youth and age?
A) Mature spokespersons would tend to be more successful in Asian cultures because they have traditionally valued the wisdom that comes with age.
B) Arab countries are becoming increasingly youth oriented.
C) American society is youth oriented.
D) Children in all countries have a significant influence on purchases.
E) China’s policy of limiting families to one child has produced a strong focus on the child.

Answer: Page: 47-48 Difficulty: moderate

33. What is the basis for virtually all societies?
A) family unit
B) government
C) schools
D) religion
E) workplace

Answer: Page: 48 Difficulty: moderate

34. Which of the following statements regarding the masculine/feminine value is FALSE?
A) Basically, we live in a masculine-oriented world.
B) The roles of women are changing and expanding throughout much of the world.
C) Women in Japan frequently participate in sports and exercise.
D) Many Japanese women feel guilty preparing frozen vegetables in a microwave rather than preparing fresh vegetables.
E) Traditional and modern segments with regard to this value exist simultaneously in many cultures, so marketers must adapt not only across but within cultures.

Answer: Page: 49 Difficulty: moderate

35. The United States is comprised of a culture that accepts a wide array of personal behaviors and attitudes, foods, dress, and other products and services. Thus, the United States values _____.
A) uniformity
B) collectivism
C) power
D) diversity
E) cooperation

Answer: Page: 51 Difficulty: moderate

36. _____ refers to the degree to which people accept inequality in power, authority, status, and wealth as natural or inherent in society.
A) Cooperation
B) Power distance
C) Collectivism
D) Individualism
E) Status

Answer: Page: 51 Difficulty: moderate

37. Which value relates to tolerance for ambiguity and uncertainty avoidance?
A) youth/age
B) risk taking/security
C) individual/collective
D) masculine/feminine
E) diversity/uniformity

Answer: Page: 52 Difficulty: hard

38. Which value has a strong influence on entrepreneurship and economic development as well as new-product acceptance?
A) individual/collective
B) competitive/cooperative
C) tradition/change
D) risk taking/security
E) masculine/feminine

Answer: Page: 52 Difficulty: hard

39. _____ tend to feel they don’t have control over the outcome of events.
A) Fatalists
B) Individualists
C) Collectivists
D) Females
E) Males

Answer: Page: 53 Difficulty: moderate

40. Marie has purchased a brand that she has purchased before. However, the first time she used this brand, the product failed and she was dissatisfied. Unfortunately, the second time she purchased this brand, the same thing happened. She’s frustrated and wants her money back, but she doesn’t feel as though she has any control over this situation. She’s decided that she just needs to accept this poor quality and not expect so much from the next product she purchases. Marie can be described as a(n) ______.
A) individualist
B) fatalist
C) collectivist
D) cooperativist
E) other-oriented consumer

Answer: Page: 53 Difficulty: hard

41. The fact that Americans are prone to engage in physical activities and to take an action-oriented approach to problems can be explained through which self-oriented value dichotomy?
A) sensual gratification/abstinence
B) competitive/cooperative
C) diversity/uniformity
D) active/passive
E) age/youth

Answer: Page: 53 Difficulty: moderate

42. What are the two types of materialism?
A) primary and secondary
B) internal and external
C) instrumental and terminal
D) masculine and feminine
E) individual and collective

Answer: Page: 55 Difficulty: moderate

43. Which type of materialism is the acquisition of things to enable one to do something?
A) primary
B) secondary
C) terminal
D) means-end
E) instrumental

Answer: Page: 55 Difficulty: moderate

44. James used his birthday money to buy a skateboard so that he can be out with his friends at the park skateboarding. Which type of materialism does this represent?
A) primary
B) secondary
C) terminal
D) instrumental
E) means-end

Answer: Page: 55 Difficulty: moderate

45. Which type of materialism is the acquisition of items for the sake of owning the item itself?
A) primary
B) secondary
C) terminal
D) instrumental
E) end state

Answer: Page: 55 Difficulty: moderate

46. John and his wife love art and travel the world to purchase artwork that is representative of a country’s culture. Which type of materialism does this represent?
A) terminal
B) instrumental
C) cultural
D) primary
E) secondary

Answer: Page: 55 Difficulty: moderate

47. In Germany, one concern retailers have is ensuring that cash drawers have enough money to make change when consumers make purchases. One company went so far as to use a computerized model that monitored the weight of the cash drawer and signaled a need for replenishment. This is such a concern because consumers typically use cash to make purchases, which differs from other countries, such as the U.S., where credit card use is more common. Which cultural value does this illustrate?
A) hard work/leisure
B) competitive/cooperative
C) material/nonmaterial
D) postponed gratification/immediate gratification
E) sensual gratification/abstinence

Answer: Page: 55 Difficulty: hard

48. Which of the following is most closely related to verbal communications?
A) time
B) space
C) language
D) colors
E) shapes

Answer: Page: 56 Difficulty: easy

49. Which of the following is NOT a factor that creates problems in literal translations and slang expressions?
A) differences in the direction in which written words are read
B) symbolic meanings associated with words
C) absence of some words from various languages
D) difficulty of pronouncing certain words
E) all of the above are factors that create problems in literal translations and slang expressions

Answer: Page: 56 Difficulty: hard

50. Which of the following is a factor influencing nonverbal communications?
A) things
B) relationships
C) space
D) symbols
E) all of the above

Answer: Page: 57 Difficulty: easy

51. Which of the following is NOT a factor influencing nonverbal communications?
A) etiquette
B) time
C) relationships
D) values
E) things

Answer: Page: 57 Difficulty: moderate

52. Nicholas is examining how people in India perceive time, space, symbols, relationships, agreements, things, and etiquette. He is interested in these factors because they influence _____.
A) language
B) demographics
C) nonverbal communications
D) values
E) laws

Answer: Page: 57 Difficulty: moderate

53. _____ are the arbitrary meanings a culture assigns actions, events, and things other than words.
A) Nonverbal communication systems
B) Values
C) Sub-cultures
D) Semiotics
E) Perspectives

Answer: Page: 57 Difficulty: moderate

54. What are the two major ways time varies between cultures?
A) primary and secondary
B) work and leisure
C) family and personal
D) monochronic and polychronic
E) perspective and interpretation

Answer: Page: 57 Difficulty: hard

55. A culture’s overall orientation toward time is known as its _____.
A) time perspective
B) time meaning
C) uses and gratifications
D) time symbolism
E) time relationship

Answer: Page: 57 Difficulty: moderate

56. Before a marketer can successfully launch a brand in a foreign country, several nonverbal communication factors need to be understood. One of these factors is time, and international marketers must understand a culture’s overall orientation toward time. This is known as a culture’s _____.
A) time meaning
B) time interpretation
C) time perspective
D) time relationship
E) time symbolism

Answer: Page: 57 Difficulty: moderate

57. Which time perspective views time almost as a physical object believing that a person does one thing at a time?
A) linear time perspective
B) parallel time perspective
C) sequential time perspective
D) monochronic time perspective
E) polychronic time perspective

Answer: Page: 57 Difficulty: moderate

58. Ralph is very prompt. If he says he will be there at 10:00 a.m., he will be there exactly at that time. Furthermore, he will not begin another task until he is completely done with the one he is currently working on. Which time perspective does Ralph have?
A) polychronic
B) monochronic
C) linear
D) parallel
E) priority

Answer: Page: 57-58 Difficulty: moderate

59. A culture that tends to view time as being less discrete and less subject to scheduling, views simultaneous involvement in many activities as natural, allows activities to occur at their own pace rather than according to a predetermined timetable is adhering to a _____ time perspective.
A) polychronic
B) monochronic
C) linear
D) parallel
E) simultaneous

Answer: Page: 58 Difficulty: moderate

60. Jose is from Brazil and is currently enrolled in an MBA program at a U.S. university. He routinely comes to class 30-60 minutes late and does not turn in assignments by the deadline. One of his professors pulled him aside and asked him why he’s always late for class and turns his work in late. Jose was surprised that his professor was bothered by this as this behavior is entirely acceptable in Brazil. In fact, it’s expected. Which of the following best describes Jose’s time perspective?
A) spontaneous
B) parallel
C) monochronic
D) polychronic
E) variable

Answer: Page: 58 Difficulty: moderate

61. The nearness that others can come to you in various situations without your feeling uncomfortable is known as _____.
A) intimate space
B) personal space
C) sphere of influence
D) range of interaction
E) interaction space

Answer: Page: 59 Difficulty: easy

62. Which of the following is considered a symbol that has varying meaning across cultures?
A) colors
B) animals
C) numbers
D) music
E) all of the above

Answer: Page: 59 Difficulty: easy

63. In which country is the concept of guanxi, which involves personal relationships, an important consideration?
A) United States
B) Canada
C) China
D) India
E) Saudi Arabia

Answer: Page: 61 Difficulty: moderate

64. _____ represents generally accepted ways of behaving in social situations.
A) Guanxi
B) Etiquette
C) Demographics
D) Culture
E) Monochronism

Answer: Page: 62 Difficulty: easy

65. Charmaine is a member of a junior miss organization that teaches young women how to behave in various social situations. She is learning manners, how to carry herself, and appropriate attire for specific situations. Charmaine is learning _____.
A) culture
B) time symbolism
C) symbolism
D) etiquette
E) verbal language

Answer: Page: 62

66. In Japan, the exchange of meishi is the most basic of social rituals in a nation where social ritual matters very much. The act of exchanging meishi is weighted with meaning. Once the social minuet is completed, the two know where they stand in relation to each other and their respective statures within the hierarchy of corporate or government bureaucracy. What is “meishi”?
A) shaking hands
B) exchange of business cards
C) introductions by a third party
D) formal invitation
E) bows

Answer: Page: 63 Difficulty: moderate

67. Which of the following is enabling the growth of a global culture?
A) mass media
B) work
C) education
D) travel
E) all of the above

Answer: Page: 63 Difficulty: easy

68. Which age group is the closest thing to a global culture today?
A) babies
B) young children
C) teenagers
D) middle-aged adults
E) senior citizens

Answer: Page: 64 Difficulty: moderate

69. What is the largest single influence on the movement toward uniformity in the teenage market?
A) mass media
B) education
C) work
D) travel
E) religion

Answer: Page: 64 Difficulty: moderate

70. Which country is the leading movie producer and consumer in the world?
A) United States
B) Japan
C) China
D) India
E) England

Answer: Page: 66 Difficulty: hard

71. _____ describe a population in terms of its size, structure, and distribution.
A) Economics
B) Demographics
C) Psychographics
D) Geographics
E) Lifestyles

Answer: Page: 66 Difficulty: easy

72. Dale has to write a research report about Poland in his International Marketing class. One aspect he must learn about the country is its size, structure, and distribution. What does this represent?
A) psychographics
B) geography
C) demographics
D) economics
E) lifestyles

Answer: Page: 66 Difficulty: moderate

73. With respect to demographics, which of the following refers to the number of individuals in a society?
A) distribution
B) size
C) structure
D) dispersion
E) concentration

Answer: Page: 66 Difficulty: moderate

74. The population of the United States is almost 300 million people. With respect to demographics, this number represents _____.
A) size
B) structure
C) dispersion
D) density
E) concentration

Answer: Page: 66 Difficulty: moderate

75. With respect to demographics, which of the following describes the society in terms of age, income, education, and occupation?
A) size
B) distribution
C) concentration
D) structure
E) composition

Answer: Page: 66 Difficulty: moderate

76. _____ refers to the physical location of individuals in terms of geographic region and rural, suburban, and urban location.
A) Size
B) Structure
C) Distribution
D) Dispersion
E) Concentration

Answer: Page: 66 Difficulty: moderate

77. _____ is based on the cost of a standard market basket of products bought in each country.
A) Adjusted gross income (AGI)
B) Gross domestic product (GDP)
C) Per capita income (PCI)
D) Purchasing power parity (PPP)
E) Cross-cultural purchasing power (CPP)

Answer: Page: 68 Difficulty: moderate

78. Which country has the largest percentage of its citizens older than 60 years of age?
A) Philippines
B) Canada
C) United States
D) Japan
E) Saudi Arabia

Answer: Page: 68 Difficulty: hard

79. Using one marketing strategy across various cultures is referred to as _____.
A) standardization
B) optimization
C) cross-culturalization
D) marketing imperialism
E) cross-fertilization

Answer: Page: 68 Difficulty: moderate

80. Which of the following is a key consideration for each geographic market that a firm is contemplating?
A) Is the geographic area homogenous or heterogeneous with respect to culture?
B) What needs can this product or a version of it fill in this culture?
C) What are the distribution, political, and legal structures for the product?
D) In what ways can we communicate about the product?
E) all of the above

Answer: Page: 69-71 Difficulty: easy

True/False Questions

81. FedEx was able to use a completely standardized approach in advertising to their Latin American customers given the common culture.

Answer: Page: 39 Difficulty: moderate

82. Marketing across cultural boundaries is a difficult and challenging task.

Answer: Page: 40 Difficulty: easy

83. While culture heavily influences marketing strategy, culture is not influenced by marketing strategy.

Answer: Page: 40 Difficulty: moderate

84. Culture is genetically-based.

Answer: Page: 42 Difficulty: moderate

85. Cultures are static and rarely change.

Answer: Page: 43 Difficulty: hard

86. Other-oriented values reflect a society’s view of the appropriate relationships between individuals and groups within that society.

Answer: Page: 44 Difficulty: moderate

87. Collectivism is a defining characteristic of American culture.

Answer: Page: 46 Difficulty: moderate

88. The family unit is the basis for virtually all societies.

Answer: Page: 48 Difficulty: moderate

89. The changing and expanding roles of women throughout much of the world is creating new opportunities as well as challenges for marketers.

Answer: Page: 49 Difficulty: easy

90. Power gap refers to the degree to which people accept inequality in power, authority, status, and wealth as natural or inherent in society.

Answer: Page: 51 Difficulty: moderate

91. Terminal materialism is the acquisition of things to enable one to do something.

Answer: Page: 55 Difficulty: moderate

92. The meaning of time varies between cultures in two major ways: time perspective and interpretations assigned to specific uses of time.

Answer: Page: 57 Difficulty: moderate

93. Personal space refers to the nearest that others can come to you in various situations without your feeling uncomfortable.

Answer: Page: 59 Difficulty: easy

94. The color blue connotes femininity in Holland but masculinity in Sweden and the United States.

Answer: Page: 60 Difficulty: moderate

95. The largest single influence toward uniformity among teenagers worldwide is education.

Answer: Page: 64 Difficulty: moderate

96. Psychographics describe a population in terms of its size, structure, and distribution.

Answer: Page: 66 Difficulty: moderate

Essay Questions

97. List the cultural factors that influence consumer behavior and marketing strategy.

Page: 40 Difficulty: easy
Answer:

98. Explain the concept of culture and discuss why is it important to study for understanding consumer behavior.

Page: 42 Difficulty: moderate
Answer:

99. Compare and contrast (a) other-oriented values, (b) environment-oriented values, and (c) self-oriented values.

Page: 44-45 Difficulty: moderate
Answer:

100. Jason is planning a business trip to Japan, and it is his first time doing business in that country. Discuss some value differences between Japanese culture and American culture that are most relevant to him in a business meeting situation.

Page: 46-53 Difficulty: hard
Answer:

101. Name the seven factors influencing nonverbal communications and describe four of them.

Page: 56-63 Difficulty: hard
Answer:

Multiple Choice Questions

1. The WUSA, WNBA, and LPGA have _____.
A) succeeded due to America’s increased focus on nature
B) been a response to the changing role of women in American society
C) been slow to grow due to the shift toward more traditional values
D) been slow to grow due to women’s lack of involvement in general fitness activities
E) none of the above

Answer: Page: 81-82 Difficulty: moderate

2. The percentage of U.S. women who watch sports on TV every week is _____.
A) 5 percent
B) 25 percent
C) 50 percent
D) 75 percent
E) none of the above

Answer: Page: 81 Difficulty: hard

3. ____ are widely held beliefs that affirm what is desirable.
A) Norms
B) Cultural values
C) Precepts
D) Prescriptions
E) Orientations

Answer: Page: 82 Difficulty: easy

4. Which of the following is true regarding changes in American cultural values?
A) Shifts in cultural values are not observable.
B) Changes in values tend to occur quickly.
C) Changes in values tend to occur evenly across individuals and groups.
D) There is substantial variance in values across individuals and groups.
E) Cultural values are constant.

Answer: Page: 82 Difficulty: moderate

5. When did Americans begin to place increased emphasis on leisure, immediate gratification, and sensual gratification?
A) after the end of the Civil War
B) after the end of World War I
C) during the Depression
D) after the end of World War II
E) after the Vietnam War

Answer: Page: 82 Difficulty: hard

6. Leigh is working on a research project for her marketing class, and her assignment is to study how Americans’ values with respect to consumer behavior have changed in the past 50 years. Which of the following would give her the best insight into these changes?
A) advertising
B) stock reports
C) Supreme Court cases
D) government documents
E) postage stamps

Answer: Page: 83 Difficulty: easy

7. The vegetarian market includes which group of consumers?
A) adults
B) adolescents
C) children
D) a and b
E) a, b, and c

Answer: Page: 83 Difficulty: easy

8. Which of the following has NOT been found to be a motive for choosing to become a vegetarian?
A) economics
B) moral
C) gustatory
D) health
E) ecological

Answer: Page: 83 Difficulty: moderate

9. Mitch is a vegetarian who does not eat any animal products. He based this lifestyle decision on his love of animals, and he did not want an animal to suffer for his pleasure. On which motive did Mitch base his decision?
A) economics
B) moral
C) gustatory
D) health
E) ecological

Answer: Page: 83 Difficulty: hard

10. Which of the following statements is FALSE regarding the religious/secular value in American society?
A) A religious group does not control the educational system, government, or political process.
B) Most people’s daily behaviors are not guided by strict religious guidelines.
C) America is basically a religious society.
D) Religious-based beliefs do influence decisions.
E) Many Americans for whom religion is especially important are conservative in their beliefs.

Answer: Page: 83-84 Difficulty: hard

11. Which of the following is a self-oriented value?
A) problem solving/fatalistic
B) individual/collective
C) tradition/change
D) material/nonmaterial
E) performance/status

Answer: Page: 84 Difficulty: moderate

12. Which of the following is NOT an environment-oriented value?
A) cleanliness
B) performance/status
C) tradition/change
D) risk taking/security
E) all of the above are environment-oriented values

Answer: Page: 84 Difficulty: moderate

13. Which of the following is NOT an other-oriented value?
A) diversity/uniformity
B) masculine/feminine
C) limited family/extended family
D) tradition/change
E) individual/collective

Answer: Page: 84 Difficulty: moderate

14. Which of the following is a current American value?
A) uniformity
B) active
C) religious
D) youth
E) overcome nature

Answer: Page: 84 Difficulty: hard

15. Which of the following is a traditional American value?
A) youth
B) competition
C) active
D) hard work
E) all of the above

Answer: Page: 84 Difficulty: easy

16. Which of the following is an emerging American value?
A) materialistic
B) individual
C) admiring nature
D) masculine
E) postponed gratification

Answer: Page: 84 Difficulty: hard

17. Which changing American value has been a major force in maintaining a relatively strong economy?
A) the shift toward immediate gratification
B) the shift toward a more religious society
C) the shift toward voluntary simplicity
D) the shift toward becoming more active
E) the shift away from being fatalistic

Answer: Page: 85 Difficulty: moderate

18. A shift from a focus on sensual gratification to abstinence in America would most likely affect _____.
A) the role of price in purchase decisions
B) the types of advertising themes used
C) the complexity of decision rules used in purchase decisions
D) the diffusion of Internet shopping
E) none of the above

Answer: Page: 85 Difficulty: moderate

19. A shift back to an emphasis on postponed gratification in American would most likely _____.
A) increase the use of credit
B) decrease the use of credit
C) alter the timing of television commercials
D) expand the use of Internet shopping
E) none of the above

Answer: Page: 85 Difficulty: easy

20. Which is NOT a reason why Americans work long hours?
A) minimum wage is higher the more hours worked
B) because of their material orientation
C) because they may lack skills or job opportunities to provide even a moderate lifestyle without doing so
D) work is meaningful and valuable to them
E) all of the above are reasons why Americans work long hours

Answer: Page: 85-86 Difficulty: moderate

21. _____ is consumers’ efforts to reduce their reliance on consumption and material possessions.
A) Downsizing
B) Dematerialization
C) Voluntary simplicity
D) Demarketing
E) Voluntary withdrawal

Answer: Page: 86 Difficulty: moderate

22. The voluntary simplicity movement in America represents a shift in which value?
A) active/passive
B) problem solving/fatalistic
C) masculine/feminine
D) material/nonmaterial
E) youth/age

Answer: Page: 86 Difficulty: moderate

23. Erica and her family decided that it was just too much strain on them for Erica to work outside the home. Even though she was a successful attorney and they enjoyed the good things in life, her family made a conscious decision to reduce their reliance on consumption and material possessions. This behavior has been termed _____.
A) downsizing
B) dematerialization
C) voluntary withdrawal
D) voluntary simplicity
E) demarketing

Answer: Page: 86 Difficulty: moderate

24. What percentage of American adults exercise regularly?
A) less than 50%
B) 50%
C) 60%
D) 75%
E) more than 75%

Answer: Page: 87 Difficulty: hard

25. Which of the following statements is FALSE regarding Americans’ environment-oriented values?
A) Americans have long valued cleanliness.
B) Americans traditionally have not been very receptive to change.
C) American’s risk-taking orientation seems to be moving more toward taking risks.
D) Traditionally, nature was viewed as an obstacle.
E) Americans are shifting back to a focus on performance rather than status.

Answer: Page: 88-90 Difficulty: moderate

26. Those who work in such professions as architecture, science, engineering, and health care and business who generate new ideas and technologies for a living or engage in complex problem solving are referred to as _____.
A) the creative class
B) social engineers
C) the developers
D) trend setters
E) true naturals

Answer: Page: 88-89 Difficulty: moderate

27. Lakeisha is an architect, and her husband, Timothy, is an engineer. Both are in their early 30s. They represent a growing percentage of the workforce along with others who generate new ideas and technologies for a living or engage in complex problem solving. Lakeisha and Timothy are part of the _____.
A) social reengineering movement
B) cutting edge
C) creative class
D) true naturals
E) young developers

Answer: Page: 88-89 Difficulty: moderate

28. Which of the following factors had a significant impact on Americans’ emphasis on security?
A) the Depression
B) World War II
C) the Cold War
D) a and b
E) a, b, and c

Answer: Page: 89 Difficulty: moderate

29. Which of the following is a segment used to describe consumers with respect to their environmental activism?
A) True Blues
B) New Green Mainstream
C) Ailing Recluse
D) Healthy Hermits
E) Green Earths

Answer: Page: 89 Difficulty: moderate

30. Which of the following is NOT a segment used to describe consumers with respect to their environmental activism?
A) True Naturals
B) New Green Mainstream
C) Affluent Healers
D) Concerned
E) Overwhelmed

Answer: Page: 89 Difficulty: hard

31. Which segment of environmental activists are concerned about the environment but alter their actions and purchases only when it is convenient?
A) True Naturals
B) New Green Mainstream
C) Affluent Healers
D) Young Recyclers
E) Overwhelmed

Answer: Page: 89 Difficulty: moderate

32. Gertrude expresses deeply felt environmental concerns and tailors everything she does and purchases on these beliefs. Which segment of environmental activism best describes Gertrude?
A) True Naturals
B) New Green Mainstream
C) Young Recyclers
D) Affluent Healers
E) Concerned

Answer: Page: 89 Difficulty: moderate

33. Mickey is concerned about the environment, but he is most concerned about issues that relate to his personal health. That’s why he protested when the city was considering placing a landfill near his home. Other than that, though, Mickey really does not consider environmental issues when he is shopping for products. To which environmental activism segment would Mickey belong?
A) Unconcerned
B) New Green Mainstream
C) Young Recyclers
D) Affluent Healers
E) True Naturals

Answer: Page: 89 Difficulty: moderate

34. Heather is married and has three children. While she and her family are concerned about the environment, they only alter their actions and purchases when it is convenient for them. Which environmental activism segment best describes Heather and her family?
A) True Naturals
B) Unconcerned
C) Overwhelmed
D) New Green Mainstream
E) Affluent Healers

Answer: Page: 89 Difficulty: moderate

35. Which of the following is one of the defining characteristics of American society?
A) aversion to change
B) collectivism
C) individualism
D) extended family
E) status

Answer: Page: 90 Difficulty: moderate

36. Individualism affects which of the following?
A) incentive systems for salespeople
B) advertising themes
C) product design
D) customer complaining behavior
E) all of the above

Answer: Page: 90 Difficulty: easy

37. Consumers higher in individualism are more likely to _____ when faced with poor service performance.
A) complain
B) switch
C) engage in negative word-of-mouth
D) a and b
E) a, b, and c

Answer: Page: 90 Difficulty: easy

38. Laurie purchased an entertainment armoire from a national chain furniture retailer. Unfortunately, one of the doors did not operate properly, so she called the retailer to complain. A service representative was sent out to adjust the door, but just a few weeks later, the problem reoccurred, so Laurie called again and asked for a new armoire. The store manager said that another service rep would have to come out to determine if it was due to a manufacturer’s defect before it could be replaced. Because the service representative failed to show up, the manager decided to offer Laurie a new armoire. Unfortunately the replacement had the same problem and Laurie demanded her money back. Now she tells everyone she knows the problems she’s had with this retailer. Which value most likely underlies Laurie’s complaining behavior?
A) diversity
B) uniformity
C) fatalistic
D) individualism
E) status

Answer: Page: 90 Difficulty: hard

39. According to the authors, American culture increasingly values _____.
A) diversity
B) uniformity
C) collectivity
D) fatalism
E) none of the above

Answer: Page: 91 Difficulty: moderate

40. Which of the following statements is true regarding Americans’ other-oriented values?
A) A strong emphasis on collectivism is one of the defining characteristics of American society.
B) Since World War II, Americans have increasingly valued diversity.
C) The impact that the family has on the individual is great.
D) Older people are considered wiser than young people and are looked to as models and leaders in American society.
E) America is a cooperative rather than a competitive society.

Answer: Page: 90-92 Difficulty: moderate

41. The value that Americans place on youth has _____.
A) increased dramatically in recent years
B) shown a slow reversal toward more value being placed on age in recent years
C) decreased dramatically in recent years
D) remained unchanged in recent years
E) shown a slight increase in recent years

Answer: Page: 92 Difficulty: moderate

42. A shift away from a competition oriented society would most likely affect _____.
A) sales force compensation
B) the types of decision rules used
C) the use of comparative advertising
D) the use of price as a competitive weapon
E) all of the above

Answer: Page: 92 Difficulty: moderate

43. Marketers have responded to Americans’ increasing concern for the environment with an approach called _____.
A) green marketing
B) clean marketing
C) environmental marketing
D) activist marketing
E) cause-related marketing

Answer: Page: 93 Difficulty: moderate

44. Which of the following is NOT generally involved in green marketing?
A) developing products whose production, use or disposal is less harmful to the environment than the traditional versions of the product
B) developing products that have a positive impact on the environment
C) pricing products lower than the competition
D) tying the purchase of a product to an environmental organization or event
E) all of the above are involved in green marketing

Answer: Page: 93 Difficulty: moderate

45. Health Valley is a brand of food, such as breakfast cereals, that uses all natural and organic ingredients. Moreover, they only purchase grain from organic farms. They state on their packages that “organic farming helps keep our food pure and protects our land and water from harmful substances. By supporting dozens of small organic farms, Health Valley helps protect a way of life for these family farmers, and helps ensure a safer and healthier Earth for you and your children.” This is an example of _____.
A) green marketing
B) clean marketing
C) environmental marketing
D) activist marketing
E) cause-related marketing

Answer: Page: 93 Difficulty: moderate

46. Under the Federal Trade Commission’s set of voluntary guidelines for green claims, labels promoting products as “environmentally safe” or “environmentally friendly” must _____.
A) be completely biodegradable
B) be at least photodegradable
C) be produced from completely organic methods
D) must specify what portion of the product is being referred to
E) must specify how to recycle the packaging

Answer: Page: 93 Difficulty: hard

47. The manager of a brand of trash bags that is degradable and better for the environment wants to make that claim on the package and in its advertising. According to the Federal Trade Commission’s (FTC) guidelines for green claims, what must this marketer do to be able to label the product as “environmentally safe” or “environmentally friendly”?
A) Labels making these claims must specify what portion of the product is being referred to.
B) Marketers must first get permission from the FTC.
C) In addition to getting permission from the FTC, marketers must also get permission from the Environmental Protection Agency (EPA).
D) Labels making these claims must specify in exactly what way the product is “environmentally safe” or “environmentally friendly.”
E) Reference to scientific research supporting such claims must be made available to consumers.

Answer: Page: 93 Difficulty: hard

48. Green marketing methods that are profitable for the farmer, environmentally sound, and socially responsible are said to be _____.
A) environmental
B) acceptable
C) sustainable
D) impactful
E) meaningful

Answer: Page: 94 Difficulty: moderate

49. Several coffee manufacturers are informing consumers of their fair trade practices in which farmers in less developed countries are paid a living wage for their crops. The philosophy behind this movement is to be profitable for the farmer, be environmentally sound, and to be socially responsible. This movement has been referred to as the _____.
A) environmental movement
B) fairness doctrine
C) fairness movement
D) substantial wage and environmentally sound movement
E) sustainability movement

Answer: Page: 94 Difficulty: moderate

50. Which term is used to refer to the application of marketing principles and tactics to advance a cause such as a charity, an ideology, or an activity?
A) cause marketing
B) social marketing
C) personal marketing
D) a and b
E) a, b, and c

Answer: Page: 94 Difficulty: moderate

51. _____ is done to enhance the welfare of individuals or society without direct benefit to a firm.
A) Cause-related marketing
B) Social marketing
C) Personal marketing
D) Green marketing
E) Hybrid marketing

Answer: Page: 95 Difficulty: moderate

52. Which type of marketing ties a company and its products to an issue or cause with the goal of improving sales or corporate image while providing benefits to the cause?
A) cause-related marketing
B) green marketing
C) nonprofit marketing
D) image marketing
E) corporate marketing

Answer: Page: 95 Difficulty: moderate

53. Target stores give one percent of a customer’s purchase to a school of their choice if they use a Target Visa credit card to pay for their purchases. Target will also donate one-half percent of all other purchases made on that card. This is an example of _____.
A) cause-related marketing
B) green marketing
C) nonprofit marketing
D) image marketing
E) corporate marketing

Answer: Page: 95 Difficulty: moderate

54. Which of the following is an example of cause-related marketing (CRM)?
A) A company donates $10,000 to a school to purchase computers.
B) A company recognizes alternative lifestyles among its employees and allows benefits accordingly.
C) A company donates $1 to Diabetes research for every purchase of its product by consumers.
D) A company features educational health information in its product advertising.
E) A company hires physically challenged employees.

Answer: Page: 95 Difficulty: moderate

55. Which of the following is a challenge facing marketers who implement cause-related marketing programs?
A) It does not increase consumers’ trust in the company.
B) A company’s commitment to a cause is not important to most consumers.
C) Only a small percentage of consumers are likely to switch brands based on CRM when price and quality are equal.
D) Consumer skepticism and apathy.
E) all of the above

Answer: Page: 96 Difficulty: hard

56. Which group of consumers doubts the sincerity or effectiveness of cause-related marketing programs?
A) Skeptic
B) Balancer
C) Attribution-oriented
D) Socially concerned
E) Apathetic

Answer: Page: 96 Difficulty: moderate

57. John doubts the sincerity of marketers who claim that they will donate to a cause if he purchases their product. He doesn’t believe that they will make a difference because he thinks that marketers are only concerned with profits and probably only donate a small portion of their profits to the stated cause. John is best described as belonging to which group of consumers?
A) Skeptic
B) Balancer
C) Attribution-oriented
D) Socially concerned
E) Apathetic

Answer: Page: 96 Difficulty: moderate

58. Karen believes in cause-related programs, but she doesn’t always act accordingly. That is, she likes to patronize retailers that claim to donate a portion of her purchases to charity, but she only shops there when it is convenient for her to do so. Which consumer group would Karen belong?
A) Skeptic
B) Balancer
C) Attribution-oriented
D) Socially concerned
E) Apathetic

Answer: Page: 97 Difficulty: moderate

59. Carl likes to support marketers that support causes or charities that are important to him. However, he is concerned about a marketer’s motive behind cause-related marketing programs and uses good judgment on which ones to support. Carl is best described as belonging to which group of consumers?
A) Skeptic
B) Balancer
C) Attribution-oriented
D) Socially concerned
E) Apathetic

Answer: Page: 97 Difficulty: moderate

60. Which consumer group is driven by a desire to help with respect to cause-related marketing programs?
A) Skeptic
B) Balancer
C) Attribution-oriented
D) Socially concerned
E) Apathetic

Answer: Page: 97 Difficulty: moderate

61. Maria will go out of her way to purchase a brand or patronage a store that claims to support a charity if she purchases their brand or shops in their store. Even though she knows that marketers develop these programs to help themselves as well as the cause, she doesn’t really care about that. She’s just driven by the desire to help. To which group of consumers does Maria belong?
A) Skeptic
B) Balancer
C) Attribution-oriented
D) Socially concerned
E) Apathetic

Answer: Page: 97 Difficulty: moderate

62. What has been found to improve the results of cause-related marketing programs?
A) the amount of money donated
B) the fit between the company and the cause
C) supporting causes that help children
D) supporting causes that help the environment
E) longer commitments to supporting a cause

Answer: Page: 97 Difficulty: moderate

63. Gay consumers, like heterosexuals, vary in terms of _____.
A) ethnicity
B) geographic region
C) occupations
D) age
E) all of the above

Answer: Page: 97 Difficulty: easy

64. The gay market has been estimated to comprise _____ of the adult U.S. population.
A) 1 percent
B) 5-7 percent
C) 10 percent
D) 15-20 percent
E) 25 percent

Answer: Page: 97 Difficulty: hard

65. What is typically absolutely necessary of any firm that desires to capture the loyalty of the gay community?
A) must have separate promotion efforts in gay and mainstream media
B) must have gay themes in ads placed in mainstream media
C) must offer discounts to gay consumers
D) must have internal policies that do not discriminate against gay employees
E) must use cause-related marketing programs that support causes relevant to gay consumers (i.e., AIDS research)

Answer: Page: 98 Difficulty: moderate

66. Which index is published by the Human Rights Campaign Foundation and measures how equitably a company treats its GLBT (Gay, Lesbian, Bisexual, and Transgender) employees, customers, and investors?
A) corporate equality index (CEI)
B) corporate GLBT index
C) corporate identity index (CII)
D) gay rights index (GRI)
E) green index

Answer: Page: 98 Difficulty: moderate

67. Which is a product or service that often needs modification when targeting gay consumers?
A) financial services
B) automobiles
C) furniture
D) interior decorating
E) all of the above

Answer: Page: 98 Difficulty: moderate

68. Which term is used to refer to whether a person is biologically a male or female?
A) gender
B) sex
C) gender identity
D) a and b
E) a, b, and c

Answer: Page: 100 Difficulty: hard

69. _____ refers to the traits of femininity and masculinity.
A) Gender
B) Sex
C) Gender identity
D) Gender roles
E) Gender continuum

Answer: Page: 100 Difficulty: moderate

70. The behaviors considered appropriate for males and females in a given society are known as _____.
A) Gender
B) Sex
C) Gender identity
D) Gender roles
E) Gender continuum

Answer: Page: 100 Difficulty: moderate

71. While women are vital members of the workforce in the U.S., they are still considered the primary care givers of the children in a family. This represents women’s _____ in American society.
A) gender
B) sex
C) gender identity
D) gender role
E) gender continuum

Answer: Page: 100 Difficulty: moderate

72. A(n) _____ is based on an attribute over which the individual has little or no control.
A) traditional role
B) achievement role
C) ascribed role
D) gender identity
E) gender orientation

Answer: Page: 101 Difficulty: moderate

73. _____ are based on performance criteria over which the individual has some degree of control.
A) Traditional roles
B) Achievement roles
C) Ascribed roles
D) Gender roles
E) Selective roles

Answer: Page: 101 Difficulty: moderate

74. A woman that is married with the husband assuming the responsibility for providing for the family and the wife running the house and taking care of the children would be classified as _____.
A) gender appropriate
B) gender consistent
C) traditional
D) modern
E) old-fashioned

Answer: Page: 101 Difficulty: moderate

75. Catherine is married and a mother of two children. She has decided to forego her own career to stay home with her children until they are grown and on their own. Both she and her husband have decided that it is best for their family for him to assume the responsibility for providing financial security for them while she takes care of the home and family. Catherine would be classified as which type of woman?
A) gender appropriate
B) gender consistent
C) traditional
D) modern
E) old-fashioned

Answer: Page: 101 Difficulty: moderate

76. A woman that is married where both she and her husband work and share homemaking and child care responsibilities is classified as _____ with respect to gender orientation.
A) transgender
B) gender inconsistent
C) traditional
D) modern
E) cutting-edge

Answer: Page: 101 Difficulty: moderate

77. Rayna is married and a mother of four children. Both she and her husband share homemaking and child-rearing responsibilities. Rayna would be classified as a_____ gender orientation.
A) transgender
B) gender inconsistent
C) traditional
D) modern
E) cutting-edge

Answer: Page: 101 Difficulty: moderate

78. Which of the following is a segment of female consumers?
A) Traditional housewife
B) Trapped housewife
C) Trapped working woman
D) Career working woman
E) all of the above

Answer: Page: 102-103 Difficulty: easy

79. Lisa is a single mother of two and works two jobs to provide for her family and derives little or no satisfaction from employment. To which market segment would Lisa belong?
A) Traditional housewife
B) Trapped housewife
C) Trapped working woman
D) Career working woman
E) Modern-day woman

Answer: Page: 102-103 Difficulty: moderate

80. Which of the following is a reason why women are an important target market?
A) Women-headed households are expected to represent almost 50 percent of all households in 2010.
B) Women are homogeneous as a group, which makes marketing to them easier.
C) More women work more hours outside the home today than at any time in our history.
D) Women’s purchasing power now equals men’s purchasing power.
E) all of the above

Answer: Page: 103 Difficulty: hard

81. Since women are quite diverse as a group, what other factors must marketers also consider when designing marketing communications?
A) ethnicity
B) age
C) life stage
D) employment status
E) all of the above

Answer: Page: 104 Difficulty: easy

True/False Questions

82. Observable shifts in consumer behavior are often due to underlying shifts in cultural values.

Answer: Page: 82 Difficulty: easy

83. America is basically a secular society.

Answer: Page: 83 Difficulty: moderate

84. Materialism is an emerging American self-oriented value.

Answer: Page: 84 Difficulty: moderate

85. Consumers’ efforts to reduce their reliance on consumption and material possessions have been termed dematerialization.

Answer: Page: 86 Difficulty: moderate

86. Americans continue to value an active approach to life.

Answer: Page: 97 Difficulty: easy

87. Consumers labeled as “True Greens” express deeply felt environmental concerns and tailor their actions and purchases to these beliefs.

Answer: Page: 89 Difficulty: moderate

88. Consumers higher in individualism are more likely to complain, switch, or engage in negative word-of-mouth.

Answer: Page: 90 Difficulty: moderate

89. Americans have always valued diversity.

Answer: Page: 90-91 Difficulty: hard

90. Though Americans are increasingly focusing on cooperation and teamwork, it is done so that the team or group can outperform some other team or group.

Answer: Page: 92 Difficulty: moderate

91. Green marketing, like food supplement marketing, is unregulated and marketers can make unsubstantiated claims without penalty.

Answer: Page: 93 Difficulty: moderate

92. Cause-related marketing (CRM) is marketing that ties a company and its products to an issue or cause with the goal of improving sales or corporate image while providing benefits to the cause.

Answer: Page: 95 Difficulty: easy

93. Current estimates vary, but common benchmarks put the size of the gay market at 10 to 15 percent of the adult U.S. population.

Answer: Page: 97 Difficulty: hard

94. Compared to the general population, gay consumers tend to be less tech savvy.

Answer: Page: 99 Difficulty: moderate

95. Gender roles refer to the traits of femininity and masculinity.

Answer: Page: 100 Difficulty: moderate

96. A “Trapped Housewife” is generally married and stays at home, but she prefers to work and does not enjoy household chores.

Answer: Page: 102 Difficulty: easy

Essay Questions

97. Discuss changes in three of Americans’ self-oriented values.

Page: 82-87 Difficulty: moderate
Answer:

98. Define green marketing and explain what is meant by “sustainability.”

Page: 93-94 Difficulty: moderate
Answer:

99. The company you work for wants to integrate its philanthropic charitable giving with its own corporate performance. Explain how this can be accomplished, and discuss how consumers might respond to this effort.

Page: 95-97 Difficulty: moderate
Answer:

100. What issues must companies understand and contend with when attempting to market to the gay consumer?

Page: 98 Difficulty: moderate
Answer:

101. Compare and contrast the terms gender, gender identity, and gender roles.

Page: 100-101 Difficulty: moderate
Answer:

Multiple Choice Questions

1. How did the movie “Bring It On” become a success with teens?
A) It was positioned as a movie about cheerleading.
B) It was positioned as a contest between a white cheerleading squad from the suburbs and a black squad from the inner city.
C) It was positioned as a love story.
D) It positioned the cheerleaders as humans.
E) It was positioned as a movie about football rivalry.

Answer: Page: 115 Difficulty: moderate

2. Which of the following describe a population in terms of its size, distribution, and structure?
A) geographics
B) psychographics
C) demographics
D) censographics
E) behaviorgraphics

Answer: Page: 116 Difficulty: easy

3. Harriett wants to describe the population of a new market in which her firms wishes to enter. She wants to describe the population in terms of its size, distribution, and structure. Which of the following should she use?
A) psychographics
B) behaviorgraphics
C) censographics
D) demographics
E) geographics

Answer: Page: 116 Difficulty: moderate

4. Age, gender, education, occupation, and income are examples of _____ variables.
A) demographic
B) holographic
C) geographic
D) psychographic
E) censographics

Answer: Page: 116 Difficulty: easy

5. What is the approximate population of the United States today?
A) 100 million
B) 249 million
C) 298 million
D) 350 million
E) 498 million

Answer: Page: 116 Difficulty: moderate

6. Which of the following is NOT a reason why the population of the United States has grown steadily since 1960?
A) longer life expectancies
B) increasing birth rate
C) immigration
D) baby boomers moving through child-bearing years
E) all of the above are reasons why the population of the United States has grown

Answer: Page: 116 Difficulty: hard

7. Which of the following is true regarding the size and distribution of the population of the United States?
A) The population of the United States is approximately 250 million today.
B) The population has grown steadily since 1960 due to increasing birth rates.
C) The growth has not been even throughout the United States.
D) Midwest states, such as Michigan and Illinois, are expected to grow dramatically in the next ten years.
E) The population of the United States has continued to decrease since 1960.

Answer: Page: 116 Difficulty: moderate

8. Which of the following is the most widely applied single cue we use to initially evaluate and define individuals we meet?
A) age
B) income
C) occupation
D) gender
E) education

Answer: Page: 117 Difficulty: moderate

9. Which of the following is strongly associated with occupation?
A) income
B) education
C) age
D) a and b
E) a, b, and c

Answer: Page: 117 Difficulty: moderate

10. Juan is interested in knowing occupational influences on purchases of laptop computers. Which of the following occupations are most likely to purchase this type of product?
A) administrative/managerial
B) technical/clerical/sales
C) precision/craft
D) medical
E) construction/laborer

Answer: Page: 117 Difficulty: hard

11. Jenny is interested in understanding the behavior of consumers that are classified as working in technical, clerical, or sales occupations. Which of the following products is this group LEAST likely to purchase?
A) domestic beer
B) cigarettes
C) diet colas
D) laptop/notebook computers
E) all of the above

Answer: Page: 117 Difficulty: hard

12. Approximately what percentage of the U.S. population has a high school degree?
A) 25%
B) 40%
C) 50%
D) 75%
E) 85%

Answer: Page: 117 Difficulty: hard

13. Approximately what percentage of the U.S. population has completed college?
A) 27%
B) 43%
C) 50%
D) 75%
E) 87%

Answer: Page: 117 Difficulty: hard

14. Which of the following statements regarding education is FALSE?
A) Education is increasingly critical for a “family wage” job.
B) Traditional high-paying manufacturing jobs that required relatively little education are rapidly disappearing.
C) Education clearly drives income in today’s economy.
D) Education does not influence how one thinks, makes decisions, and relate to others.
E) Education has a strong influence on one’s tastes and preferences.

Answer: Page: 117-119 Difficulty: hard

15. Taitenger is a famous champagne maker in France. Part of this company’s market research of U.S. consumers looked at education levels of champagne consumers. What education level is the likely consumer of champagne to have attained?
A) did not graduate high school
B) graduated high school
C) attended college
D) graduated college
E) none of the above

Answer: Page: 119 Difficulty: moderate

16. A household’s purchasing power is a function of which of the following?
A) income and accumulated wealth
B) age and gender
C) income and education
D) occupation and income
E) social class and education

Answer: Page: 120 Difficulty: moderate

17. What is the movement called in which companies have expanded opportunities for less affluent consumers to afford luxury?
A) mass to class
B) class to mass
C) more to all
D) one for all
E) all for one

Answer: Page: 120 Difficulty: moderate

18. An estimate by the consumer of how much money he or she has available to spend on nonessentials is known as _____.
A) objective discretionary income (ODI)
B) adjusted gross income (AGI)
C) adjusted discretionary income (ADI)
D) subjective discretionary income (SDI)
E) subjective gross income (SGI)

Answer: Page: 120 Difficulty: moderate

19. The Martin’s household income is $123,000 per year. However, this family estimates that they have $45,000 available to spend on nonessentials such as vacations and entertainment. The $45,000 represents the Martin’s _____.
A) objective discretionary income (ODI)
B) adjusted gross income (AGI)
C) adjusted discretionary income (ADI)
D) subjective discretionary income (SDI)
E) subjective gross income (SGI)

Answer: Page: 120 Difficulty: moderate

20. Which of the following statements regarding age is true?
A) Proper age positioning is critical for many products.
B) Age affects a consumer’s self-concept and lifestyle.
C) Our age shapes the media we use.
D) Analyzing age cohort groups or generations often provides more meaningful segments and marketing strategies than merely looking at census age groups.
E) all of the above

Answer: Page: 120-122 Difficulty: easy

21. Which age category is expected to experience the largest percentage increase between 2005 and 2015?
A) < 10 B) 20-29 C) 40-49 D) 60-69 E) > 69

Answer: Page: 122 Difficulty: moderate

22. Procter & Gamble is a major consumer packaged goods manufacturer. Which age category provides the greatest opportunity for P&G in terms of growth between 2005 and 2015?
A) < 10 B) 20-29 C) 40-49 D) 60-69 E) > 69

Answer: Page: 122 Difficulty: moderate

23. One’s perceived age, a part of one’s self-concept, is known as _____.
A) felt age
B) real age
C) cognitive age
D) perceptual age
E) chronological age

Answer: Page: 123 Difficulty: moderate

24. Gertrude is 93 years old, but she perceives herself to be about 65 years old. Sixty-five is Gertrude’s _____ age.
A) felt age
B) real age
C) cognitive age
D) perceptual age
E) chronological age

Answer: Page: 123 Difficulty: moderate

25. Which of the following variables is associated with cognitive age?
A) health
B) education
C) income
D) social support
E) all of the above

Answer: Page: 123 Difficulty: easy

26. Sam is a healthy 75 year old man. He is a retired attorney, has a substantial retirement income, and is a member of several social groups that travel, help others, and encourage life-long learning. Which of the following is most likely true about Sam?
A) Sam’s cognitive age is less than 75.
B) Sam’s cognitive age is 75.
C) Sam’s cognitive age is greater than 75.
D) Sam’s cognitive age is 50.
E) Sam’s cognitive age is 85.

Answer: Page: 123 Difficulty: moderate

27. A(n) _____ is a group of persons who have experienced a common social, political, historical, and economic environment.
A) census age group
B) age cohort
C) cognitive group
D) chronological group
E) demographic group

Answer: Page: 123 Difficulty: moderate

28. _____ is the process of describing and explaining the attitudes, values, and behaviors of an age group as well as predicting its future attitudes, values, and behaviors.
A) Census analysis
B) Demographic analysis
C) Generation analysis
D) Cognitive analysis
E) Cohort analysis

Answer: Page: 123 Difficulty: moderate

29. Maria is analyzing the baby boom generation by describing and explaining their attitudes, values, and behaviors as well as predicting its future, attitudes, values, and behaviors. Maria is conducting a _____ analysis.
A) cohort
B) generational
C) demographic
D) census
E) cognitive

Answer: Page: 123 Difficulty: moderate

30. _____ deals with the mature market and is based on the theory that people change their outlook on life when they experience major life events such as becoming a grandparent, retiring, losing a spouse, or developing chronic health conditions.
A) Demographics
B) Gerontographics
C) Cognitive psychology
D) Cohort analysis
E) Generational analysis

Answer: Page: 124 Difficulty: moderate

31. Which of the following is a segment of mature consumers?
A) Healthy Indulgers
B) Ailing Outgoers
C) Healthy Hermits
D) Frail Recluses
E) all of the above

Answer: Page: 124 Difficulty: easy

32. Which of the following is NOT a segment of mature consumers?
A) Healthy Indulgers
B) Ailing Indulgers
C) Ailing Outgoers
D) Frail Recluses
E) Healthy Hermits

Answer: Page: 124 Difficulty: moderate

33. Which segment of mature consumers is mentally and physically active, both spouses are generally still alive, has prepared for retirement both financially and psychologically, is basically content and set to enjoy life, has traded down to a smaller home, likes convenience, personal service, and high-tech home appliances, and is a strong market for travel?
A) Healthy Indulgers
B) Ailing Indulgers
C) Ailing Outgoers
D) Frail Recluses
E) Healthy Hermits

Answer: Page: 124 Difficulty: moderate

34. Willie and Harriet, married for over 30 years, are both in their late 60s and are healthy and physically active. They have prepared for retirement both financially and psychologically, have sold their large five bedroom home for a smaller two bedroom condominium, and take group vacations twice a year. To which segment of mature consumers would Willie and Harriet belong?
A) Healthy Indulgers
B) Ailing Indulgers
C) Ailing Outgoers
D) Frail Recluses
E) Healthy Hermits

Answer: Page: 124 Difficulty: moderate

35. _____ have experienced health problems which limit their physical abilities and frequently their financial capability. This segment is also a key market for retirement communities and assisted-living housing. While seniors in this group acknowledge their limits, they also maintain a positive self-esteem and seek to get the most out of life. Independence and socializing are important as is remaining stylish in their dress.
A) Healthy Hermits
B) Ailing Indulgers
C) Ailing Outgoers
D) Frail Recluses
E) Healthy Recluses

Answer: Page: 124 Difficulty: moderate

36. Barbara is a great grandmother with a few health problems that require her to live in assisted-living housing. However, she does not let her physical and economic limitations affect her self-esteem. She remains independent, socializes in several seniors’ groups, and still likes to remain stylish in her dress. Barbara would be classified as a(n) _____.
A) Healthy Hermit
B) Ailing Outgoer
C) Ailing Hermit
D) Frail Recluse
E) Healthy Indulger

Answer: Page: 124 Difficulty: moderate

37. People in this group retain their physical health, but life events (i.e., death of a spouse) have reduced their self-concept. They have reacted by becoming withdrawn, and many resent the isolation and the feeling that they are expected to act like old people. They prefer clothing styles that are popular with other seniors and will pay a premium for well-known brands. They tend to stay in homes in which they raised their families, and they are an important part of the do-it-yourself market. Which segment is this?
A) Healthy Indulgers
B) Ailing Outgoers
C) Healthy Hermits
D) Frail Recluses
E) Ailing Indulgers

Answer: Page: 124 Difficulty: moderate

38. James is a widower in good health that lives in the home he and his wife raised their five children. However, he has reacted to his wife’s death by becoming withdrawn and feels isolated. He spends much of his time fixing up his house. James is best described as a(n) _____.
A) Healthy Indulger
B) Ailing Outgoer
C) Healthy Hermit
D) Frail Recluse
E) Ailing Hermit

Answer: Page: 124 Difficulty: moderate

39. This segment of mature consumers has accepted their old-age status and have adjusted their lifestyles to reflect physical reduced capabilities and social roles. They focus on becoming spiritually stronger, tend to stay at home, and are a major market for health care products. Locational convenience is often a critical factor for this group. Which group is this?
A) Healthy Indulger
B) Ailing Outgoer
C) Healthy Hermit
D) Frail Recluse
E) Ailing Hermit

Answer: Page: 124-125 Difficulty: moderate

40. Myrtle has accepted her old-age status and has adjusted her lifestyle to reflect her reduced physical capabilities and social role. She focuses on becoming spiritually stronger and tends to stay at home. Which segment best describes Myrtle?
A) Healthy Indulger
B) Ailing Outgoer
C) Healthy Hermit
D) Frail Recluse
E) Ailing Hermit

Answer: Page: 124-125 Difficulty: moderate

41. For which group of mature consumers is a convenient location of their physician most important?
A) Healthy Indulger
B) Ailing Outgoer
C) Healthy Hermit
D) Frail Recluse
E) Ailing Hermit

Answer: Page: 124 Difficulty: moderate

42. Individuals born before 1930 belong to which generation?
A) pre-Depression generation
B) Depression generation
C) baby boom generation
D) Generation X
E) Generation Y

Answer: Page: 124 Difficulty: moderate

43. Harold was born in 1923. He entered young adulthood during World War II, and served in the Navy during that war. He has witnessed radical social, economic, and technological change in his lifetime. To which generation does he belong?
A) pre-Depression generation
B) Depression generation
C) baby boom generation
D) Generation X
E) Generation Y

Answer: Page: 124 Difficulty: moderate

44. Consumers 55 years of age and over constitute the _____ market.
A) baby boom
B) mature
C) generational
D) gerontological
E) aging

Answer: Page: 125 Difficulty: easy

45. Elsie and her two sisters are all in their mid- to late-sixties. They are part of the _____ market.
A) boom
B) mature
C) generational
D) gerontological
E) aging

Answer: Page: 125 Difficulty: moderate

46. Which generation is NOT part of the mature market?
A) pre-Depression
B) Depression
C) Generation X
D) baby boom
E) all of the above are part of the mature market

Answer: Page: 125 Difficulty: moderate

47. Which of the following is a segmentation approach to the mature market that incorporates aging processes and life events related to the physical health and mental outlook of older consumers?
A) Gerontographics
B) Cognitive psychology
C) Demographics
D) Ageographics
E) Censographics

Answer: Page: 125 Difficulty: moderate

48. Which cohort was born between 1930 and 1945?
A) pre-Depression generation
B) Depression generation
C) baby boom generation
D) Generation X
E) Generation Y

Answer: Page: 126 Difficulty: moderate

49. Xavier was born in 1940. He was too young to remember World War II, and he matured during the prosperous years of the 1950s and early 1960s. His favorite singer was, and still is, Elvis Presley. To which generation does he belong?
A) pre-Depression generation
B) Depression generation
C) baby boom generation
D) Generation X
E) Generation Y

Answer: Page: 126 Difficulty: moderate

50. Which generation “invented” rock and roll and grew up with music and television as important parts of their lives?
A) pre-Depression generation
B) Depression generation
C) baby boom generation
D) Generation X
E) Generation Y

Answer: Page: 126 Difficulty: moderate

51. Which generation refers to those individuals born during the dramatic increase of births (i.e., almost 80 million baby births) between the end of World War II and 1964?
A) pre-Depression generation
B) Depression generation
C) baby boom generation
D) Generation X
E) Generation Y

Answer: Page: 127 Difficulty: easy

52. John was born in 1955, and he has only known prosperity in his lifetime. He remembers when President Kennedy was assassinated, primarily because his family purchased their first color television not long after that event. While he remembers the Vietnam War, he was too young to be drafted. To which generation does he belong?
A) pre-Depression generation
B) Depression generation
C) baby boom generation
D) Generation X
E) Generation Y

Answer: Page: 127 Difficulty: moderate

53. Which generation is considered to be more self-centered, individualistic, economically optimistic, skeptical, suspicious of authority, and focused on the present than other generations?
A) pre-Depression generation
B) Depression generation
C) baby boom generation
D) Generation X
E) Generation Y

Answer: Page: 127-128 Difficulty: moderate

54. Robert and his wife, Jan, were both born in the 1950s. The last of their three children will graduate from college soon, which is leaving them with increased discretionary income and time. To which generation do Robert and Jan belong?
A) pre-Depression generation
B) Depression generation
C) baby boom generation
D) Generation X
E) Generation Y

Answer: Page: 128 Difficulty: moderate

55. Which of the following is a reason why more baby boomers continue to work longer than previous generations?
A) necessary due to a low income of some baby boomers
B) necessary due to a poor pension plan
C) due to changes in Social Security increasing the age at which full benefits can be drawn
D) increased desire to stay active in interesting and rewarding careers
E) all of the above

Answer: Page: 128 Difficulty: easy

56. Which generation was born between 1965 and 1976?
A) pre-Depression generation
B) Depression generation
C) baby boom generation
D) Generation X
E) Generation Y

Answer: Page: 129 Difficulty: moderate

57. Nick was born in 1972. As long as he can remember, his mother worked outside the home. When he was 12, his parents divorced, which was hard on him, but the same thing happened to several of his friends. When both of his parents remarried, his view of a family changed to include all of his step-sisters and brothers. To which generation does he belong?
A) pre-Depression generation
B) Depression generation
C) baby boom generation
D) Generation X
E) Generation Y

Answer: Page: 129 Difficulty: moderate

58. Generation X is also referred to as the _____ generation.
A) baby bust
B) baby boomlet
C) mini baby boom
D) echo boom
E) boomerang

Answer: Page: 129 Difficulty: moderate

59. Which generation was the first to gain a very broad view of a family, which may include parents, siblings, stepparents, half-siblings, close friends, live-in lovers, and others?
A) Depression generation
B) baby boom generation
C) Generation X
D) Generation Y
E) Millennials

Answer: Page: 129 Difficulty: moderate

60. Roger is an adult that has moved back in with his parents. He doesn’t believe in sacrificing time, energy, and relations to the extent he sees older workers do for the sake of career or economic advancement. He has a master’s degree but does not want to work for a large corporation. To which generation does Roger most likely belong?
A) pre-Depression generation
B) Depression generation
C) baby boom generation
D) Generation X
E) Generation Y

Answer: Page: 129-130 Difficulty: moderate

61. Individuals born between 1977 and 1994 belong to which generation?
A) baby boom
B) Generation X
C) Generation Y
D) Generation Z
E) Millennial generation

Answer: Page: 131 Difficulty: moderate

62. Amie was born in 1991. Her mother is a college professor, and her father is an attorney. She’s not sure what she wants to do when she grows up, but she knows she will go to college and embark on a career of her own. She was amazed when her grandmother told her that women really couldn’t do that when she was young. If a woman did work, choices were usually limited to becoming a teacher, a secretary, or a nurse. Her grandmother told her that she was a secretary, but after she started having children, she left the workforce and stayed home to raise her children, which was common for most women at that time. That concept was totally foreign to Amie. To which generation does she belong?
A) baby boom
B) Generation X
C) Generation Y
D) Generation Z
E) Millennial generation

Answer: Page: 131 Difficulty: moderate

63. The children of the original baby boomers are known as _____.
A) the baby bust generation
B) Generation X
C) Generation Y
D) Generation Z
E) the Millennial generation

Answer: Page: 131 Difficulty: moderate

64. Generation Y is sometimes referred to as the _____.
A) baby bust generation
B) echo boom
C) boomerangs
D) baby boomlet
E) step-boomers

Answer: Page: 131 Difficulty: moderate

65. Placing ads in videogames is known as _____.
A) video advertising
B) integrated advertising
C) advergaming
D) message integration
E) entertainment integration

Answer: Page: 133 Difficulty: moderate

66. The newest generation born after 1994 is referred to as _____.
A) the baby boom generation
B) Generation X
C) Generation Y
D) Generation Z
E) Millennials

Answer: Page: 134 Difficulty: moderate

67. Erin is 12 years old. While label is appropriate for Erin?
A) little kid
B) big kid
C) tween
D) teenager
E) young adult

Answer: Page: 134 Difficulty: moderate

68. One’s position relative to others on one or more dimensions valued by society is known as one’s _____.
A) societal rank
B) social status
C) social standing
D) social sphere
E) social realm

Answer: Page: 135 Difficulty: moderate

69. A hierarchical division of a society into relatively distinct and homogeneous groups with respect to attitudes, values, and lifestyles is known as a _____.
A) social stratum
B) social class system
C) caste system
D) social continuum
E) societal ranking

Answer: Page: 135 Difficulty: moderate

70. The more consistent an individual is on all status dimensions, the greater the degree of _____ for the individual.
A) status maturity
B) status permanence
C) status inflexibility
D) status crystallization
E) status flexibility

Answer: Page: 136 Difficulty: hard

71. Carl is a physician earning $200,000 per year. Using the Coleman-Rainwater system, identify the social class to which Carl belongs
A) upper-upper
B) lower-upper
C) upper-middle
D) middle
E) working

Answer: Page: 136 Difficulty: moderate

72. Which term describes consumers’ purchase and use of automobiles, homes, yachts, clothes, and so forth primarily to demonstrate their great wealth?
A) conspicuous consumption
B) outrageous consumption
C) obnoxious consumption
D) nouveaux consumption
E) “blue blood” consumption

Answer: Page: 137 Difficulty: easy

73. Nouveaux riche is most commonly associated with the _____.
A) upper-middle class
B) middle class
C) lower-upper class
D) upper-upper class
E) none of the above

Answer: Page: 138 Difficulty: moderate

74. The upper-middle class achieve their social position primarily _____.
A) through their unusually high incomes
B) by their occupation and career orientation
C) through inherited position
D) through their children’s accomplishments
E) none of the above

Answer: Page: 138 Difficulty: hard

75. Which social class consists of skilled and semiskilled factory, service, and sales workers?
A) upper-middle
B) middle class
C) working class
D) upper-lower class
E) lower-lower class

Answer: Page: 140 Difficulty: moderate

76. Buzz is a self-employed construction worker. He is proud of his ability to do “real work” and sees himself as the often-unappreciated backbone of America. He dislikes the upper-middle class and prefers products and stores positioned toward his social-class level. Which term best describes Buzz?
A) working-class stiff
B) “blue blood” class
C) white collar worker
D) working-class aristocrat
E) no-collar worker

Answer: Page: 141 Difficulty: hard

77. Which social class consists of individuals who are poorly educated, have very low incomes, and work as unskilled laborers?
A) lower-lower class
B) upper-lower class
C) working class
D) lower-middle class
E) middle class

Answer: Page: 141 Difficulty: moderate

78. Earl did not complete high school and works as a janitor at two jobs. His income is very low, and he does not possess any skills to help him get a better paying job. Which social class best describes Earl?
A) lower-lower class
B) upper-lower class
C) working class
D) lower-middle class
E) middle class

Answer: Page: 141 Difficulty: moderate

79. Which social class has low incomes and minimal education, may be unemployed for long periods of time, and is the major recipient of government support and services provided by non-profit organizations?
A) lower-lower class
B) upper-lower class
C) working class
D) lower-middle class
E) middle class

Answer: Page: 143 Difficulty: moderate

80. What two basic approaches are used to measure social status?
A) primary and secondary measures
B) single-item and multi-item indexes
C) position and status measures
D) income and occupation indexes
E) income and education measures

Answer: Page: 144 Difficulty: moderate

81. Which of the following is NOT a common single-item index of social class?
A) education
B) occupation
C) income
D) age
E) all of the above are common single-item indexes of social class

Answer: Page: 144 Difficulty: hard

82. Which is NOT a factor used in the Warner’s Index of Status Characteristics (ISC)?
A) occupation
B) source of income
C) education
D) house type
E) dwelling area

Answer: Page: 144-145 Difficulty: hard

True/False Questions

83. Demographics describe a population in terms of its size, distribution, and structure.

Answer: Page: 116 Difficulty: easy

84. Education is probably the most widely applied single cue we use to initially evaluate and define individuals we meet.

Answer: Page: 117 Difficulty: moderate

85. Over 50 percent of Americans have completed college.

Answer: Page: 117 Difficulty: moderate

86. Education provides a complete explanation for consumption patterns.

Answer: Page: 119 Difficulty: easy

87. Income enables purchases but does not generally cause or explain them.

Answer: Page: 120 Difficulty: moderate

88. Adjusted gross income (AGI) is an estimate by the consumer of how much money he or she has available to spend on nonessentials.

Answer: Page: 120 Difficulty: moderate

89. Gerontographics is one segmentation approach to the mature market that incorporates aging processes and life events to the physical health and mental outlook of older consumers.

Answer: Page: 125 Difficulty: moderate

90. The Depression generation is composed of those individuals born before 1930.

Answer: Page: 126 Difficulty: moderate

91. Baby boomers are characterized by high education levels, high incomes, and dual-career households.

Answer: Page: 128 Difficulty: easy

92. The baby boom generation is the first American generation to seriously confront the issue of “reduced expectations.”

Answer: Page: 129 Difficulty: hard

93. The children of the original baby boomers, generation Y born between 1977 and 1994, are sometimes referred to as the “baby bust” generation.

Answer: Page: 131 Difficulty: moderate

94. The newest generation born after 1994 is known as the Millennials.

Answer: Page: 134 Difficulty: easy

95. Many upper-upper class consumers exhibit “conspicuous consumption.”

Answer: Page: 137 Difficulty: moderate

96. The Hollingshead Index of Social Position (ISP) is based on four socioeconomic factors: occupation, source of income, house type, and dwelling area.

Answer: Page: 144-145 Difficulty: hard

97. The U.S. Bureau of the Census uses a three-factor social status index based on occupation, income, and education.

Answer: Page: 145 Difficulty: hard

Essay Questions

98. Define the term “demographics,” explain why it is important to understand demographics in marketing, and discuss the major demographic variables of interest to marketers.

Page: 116-122 Difficulty: moderate
Answer:

99. Name and briefly describe the six generations discussed in this chapter.

Page: 123-134 Difficulty: hard
Answer:

100. You just started your first marketing job, and your supervisor wants you to become more knowledgeable of the mature market because she sees this market as a growing opportunity. Name and describe the four segments of the mature market that have been identified through gerontographics.

Page: 124-125 Difficulty: hard
Answer:

101. Define the term “social class system” and list the social classes relevant in the United States.

Page: 135-136 Difficulty: easy

102. Discuss the two basic approaches to measuring social status.

Page: 144-146 Difficulty: hard
Answer:

Multiple Choice Questions

1. How did the Girl Scouts change to meet the needs of Hispanic families?
A) Training focused on how to address a Hispanic woman.
B) Training focused on the importance of building a relationship.
C) Brothers were encouraged to attend some events.
D) Las Posadas, a Hispanic Christmas tradition that pays homage to Mary and Joseph’s search for an inn, is being conducted by Girl Scout troops in some areas.
E) all of the above

Answer: Page: 157 Difficulty: easy

2. A segment of a larger culture whose members share distinguishing values and patterns of behavior is known as a(n) _____.
A) market segment
B) subculture
C) ethnic group
D) reference group
E) subgroup

Answer: Page: 158 Difficulty: moderate

3. Many companies develop special marketing mixes for a segment of a larger culture whose members share distinguishing values and patterns of behavior. These segments are known as _____.
A) subsegments
B) subgroups
C) secondary markets
D) subcultures
E) reference groups

Answer: Page: 158 Difficulty: moderate

4. The degree to which an individual behaves in a manner unique to a subculture depends on _____.
A) the extent to which the individual identifies with that subculture
B) how long the individual has been in this country
C) the age of the individual
D) the education of the individual
E) the extent to which others in that subculture accept that individual

Answer: Page: 158 Difficulty: moderate

5. Which of the following are bases for subcultures in the United States?
A) ethnic groups
B) religions
C) geographic areas
D) generations
E) all of the above

Answer: Page: 159 Difficulty: easy

6. Which of the following are the most commonly described subcultures?
A) ethnic groups
B) religions
C) generations
D) genders
E) geographic areas

Answer: Page: 159 Difficulty: moderate

7. Which of the following statements is FALSE regarding subcultures in the United States?
A) The degree to which an individual behaves in a manner unique to a subculture depends on the extent to which the individual identifies with that subculture.
B) Religious groups are the most commonly described subcultures.
C) We are all members of several subcultures.
D) There are very large variations within each subculture.
E) Generations also function like subcultures.

Answer: Page: 158-159 Difficulty: moderate

8. According to the 2000 Census, which choice below is considered to be Spanish/Hispanic/Latino?
A) Mexican/Mexican American/Chicano
B) Puerto Rican
C) Cuban
D) a and b
E) a, b, and c

Answer: Page: 160 Difficulty: moderate

9. The 2000 Census system has produced _____ race categories.
A) 10
B) 37
C) 57
D) 65
E) 84

Answer: Page: 160 Difficulty: hard

10. _____ subcultures are defined as those whose members’ unique shared behaviors are based on a common racial, language, or national background.
A) Ethnic
B) Racial
C) Religious
D) Gender
E) Geographic

Answer: Page: 160 Difficulty: moderate

11. Which of the following is the largest ethnic subculture in the United States?
A) African American
B) Hispanic
C) Asian/Pacific Islander
D) Native American
E) Caribbean

Answer: Page: 161 Difficulty: moderate

12. The relatively faster growth rate of non-European groups in the United States is due to their _____.
A) higher birthrates
B) greater immigration
C) lower death rates
D) a and b
E) a, b, and c

Answer: Page: 161 Difficulty: moderate

13. Which of the following was the source of the most immigrants into the United States in 2003?
A) Asia
B) Mexico
C) Europe
D) Central/South America
E) Africa

Answer: Page: 161 Difficulty: hard

14. Which of the following statements is true regarding ethnic subcultures?
A) European ethnic groups constitute a significant and growing part of the U.S. population.
B) Hispanics are the largest population group in the South and urban areas in the Northeast and Midwest.
C) The influence of one’s ethnic heritage on behavior is not influenced by situational factors.
D) All subcultures are very diverse, and general descriptions do not apply to all of the members.
E) Ethnicity is the only factor that influences an individual’s behavior.

Answer: Page: 160-161 Difficulty: moderate

15. Which of the following is predicted to be the fastest growing ethnic group in the United States between 2000 and 2020?
A) Whites
B) Blacks
C) Hispanics
D) Asian/Pacific Islander
E) South Americans

Answer: Page: 162 Difficulty: moderate

16. Which of the following ethnic group is predicted to have the youngest median age in the United States in the year 2010?
A) Whites
B) Blacks
C) Hispanics
D) Asian/Pacific Islander
E) South Americans

Answer: Page: 162 Difficulty: moderate

17. Malcolm is studying subcultures in the United States. He is trying to identify the subculture that has the highest education levels and median household incomes. Which ethnic group meets these criteria?
A) Whites
B) Blacks
C) Hispanics
D) Asian/Pacific Islander
E) South Americans

Answer: Page: 162 Difficulty: moderate

18. Toys-R-Us is examining subcultures in the United States and wants to identify the ethnic subculture that has the greatest percentage of children under the age of 18. Which ethnic group meets this criterion?
A) Whites
B) Blacks
C) Hispanics
D) Asian/Pacific Islander
E) South Americans

Answer: Page: 162 Difficulty: moderate

19. Compared to the white population, African Americans tend to _____.
A) be younger
B) be higher educated
C) have a higher household income
D) be a larger subculture
E) all of the above

Answer: Page: 163 Difficulty: moderate

20. Which of the following is a segment of the African American market identified by Market Segment Research?
A) Contented
B) Upwardly Mobile
C) Living for the Moment
D) Living Day to Day
E) all of the above

Answer: Page: 164 Difficulty: easy

21. Which segment of the African American market identified by Market Segment Research is mature and content with life, tends to be followers not leaders, and are not status conscious?
A) Contented
B) Upwardly Mobile
C) Living for the Moment
D) Living Day to Day
E) Healthy Indulger

Answer: Page: 164 Difficulty: moderate

22. Timothy is a 54 year old African American consumer that is content with his life. He prefers to be a follower rather than a leader and is not status conscious. To which segment of the African American market identified by Market Segment Research would Timothy belong?
A) Contented
B) Upwardly Mobile
C) Living for the Moment
D) Living Day to Day
E) Healthy Indulger

Answer: Page: 164 Difficulty: moderate

23. Which segment of the African American market identified by Market Segment Research is composed of active, status-conscious professionals who are financially secure and optimistic about the future?
A) Contented
B) Upwardly Mobile
C) Living for the Moment
D) Living Day to Day
E) Healthy Indulger

Answer: Page: 164 Difficulty: moderate

24. Robert is an African American active in sports. He is a status-conscious professional who is financially secure and optimistic about his and his family’s future. Which segment of the African American market identified by Market Segment Research best describes Robert?
A) Contented
B) Upwardly Mobile
C) Living for the Moment
D) Living Day to Day
E) Healthy Indulger

Answer: Page: 164 Difficulty: moderate

25. Which segment of the African American market identified by Market Segment Research is young, socially active, carefree, and image conscious?
A) Contented
B) Upwardly Mobile
C) Living for the Moment
D) Living Day to Day
E) Healthy Indulger

Answer: Page: 164 Difficulty: moderate

26. Nikki is 23 years old, socially active in several community outreach programs, carefree, and image conscious. Which African American market segment identified by Market Segment Research best describes Nikki?
A) Contented
B) Upwardly Mobile
C) Living for the Moment
D) Living Day to Day
E) Healthy Indulger

Answer: Page: 164 Difficulty: moderate

27. Which African American market segment identified by Market Segment Research has a low education and income level, is price conscious, and is pessimistic about the future?
A) Contented
B) Upwardly Mobile
C) Living for the Moment
D) Living Day to Day
E) Ailing Recluses

Answer: Page: 164 Difficulty: moderate

28. LaShonda is an African American high school drop out that works at a minimum wage job. She is very price conscious and buys mostly Wal-Mart store brands of products. Sometimes things seem hopeless for her and her family, and she is very pessimistic about their future. To which segment of the African American market identified by Market Segment Research would LaShonda and her family belong?
A) Contented
B) Upwardly Mobile
C) Living for the Moment
D) Living Day to Day
E) Ailing Recluses

Answer: Page: 164 Difficulty: moderate

29. What are the two distinct segments of African Americans identified by Yankelovich?
A) primary and secondary
B) market leaders and market followers
C) optimists and pessimists
D) yin and yang
E) trend setters and trend followers

Answer: Page: 164 Difficulty: moderate

30. Research by Yankelovich finds wide differences among African Americans represented by two distinct segments labeled “market leaders” and “market followers.” Compared to “market followers,” “market leaders” _____.
A) want to be on the cutting edge and to set trends
B) have less of a need to be seen as “hip and cool”
C) are considerably less likely to see brands as an indicator of their style and identity
D) are more conservative
E) are more price sensitive

Answer: Page: 164 Difficulty: moderate

31. Jimmy is an African American that wants to be on the cutting edge and to set trends. He has an income sufficient to allow him to buy the “latest and greatest,” and he has a strong need to be seen as “hip and cool” and uses brands to communicate his unique style and identity. He is not price sensitive and is brand loyal. In terms of Yankelovich’s segments of African Americans, which one best describes Jimmy?
A) market followers
B) Contented
C) Upwardly Mobile
D) market leaders
E) Living Day to Day

Answer: Page: 164 Difficulty: moderate

32. Shondra is an African American who does not feel the need to be seen as “hip and cool.” She doesn’t use brands to indicate to others her style and identity and tends to be less brand loyal and more price sensitive than others. In terms of Yankelovich’s segments of African Americans, which one best describes Shondra?
A) market followers
B) Contented
C) Upwardly Mobile
D) market leaders
E) Living Day to Day

Answer: Page: 164 Difficulty: moderate

33. Which of the following evening television shows is NOT in the Blacks’ Top 10?
A) Friends
B) Jamie Foxx Show
C) Malcolm and Eddie
D) 60 Minutes
E) The Simpsons

Answer: Page: 165 Difficulty: hard

34. Which of the following statements is FALSE regarding African American Internet usage?
A) African Americans who are online are more likely to use broadband connections than the general online population.
B) More African Americans read online ads and are more likely to find them informative than the general online population.
C) African Americans prefer a Black perspective on news and information.
D) African Americans are less likely to purchase clothing and apparel, listen to music, and watch videos online than the general population.
E) African Americans are more likely to search for job and career information online than Whites.

Answer: Page: 165-166 Difficulty: hard

35. _____ involves creating or sponsoring an event that has a particular appeal to a market segment.
A) Place-based marketing
B) Event marketing
C) Target marketing
D) Specific marketing
E) Zoned marketing

Answer: Page: 167 Difficulty: moderate

36. Honey Nut Cheerios sponsors the Soul Fest music event that travels to 30 urban markets each year in an attempt to reach the African American market. This marketer is using _____ to reach this market.
A) Place-based marketing
B) Event marketing
C) Targeted marketing
D) Street marketing
E) Zoned marketing

Answer: Page: 167 Difficulty: moderate

37. What is the major difference between white and black shoppers’ store selection criteria?
A) respect
B) location
C) price
D) merchandise selection
E) sponsorships

Answer: Page: 168 Difficulty: moderate

38. According to the Bureau of the Census, a person of Cuban, Mexican, Puerto Rican, South or Central American, or other Spanish culture or origin regardless of race is defined as a(n) _____.
A) African American
B) Asian American
C) Hispanic
D) Native American
E) subculture

Answer: Page: 168 Difficulty: easy

39. Juan came from Cuba in the late 1990s and is currently living in Miami, FL. According to the Bureau of the Census, Juan would be classified as a(n) _____.
A) African American
B) Asian American
C) Hispanic
D) Native American
E) subculture

Answer: Page: 168 Difficulty: easy

40. Mexican Americans tend to live in which region of the United States?
A) New York and New Jersey
B) Southwest and California
C) California, New York, and Florida
D) Midwest
E) South

Answer: Page: 168-169 Difficulty: moderate

41. Which subculture of Hispanics tends to have incomes well above the others?
A) Puerto Ricans
B) Mexican Americans
C) Latinos from Central America
D) Cubans
E) Latinos from South America

Answer: Page: 168 Difficulty: hard

42. While marketers must be sensitive to nationality-based differences, some variables create sufficient cultural homogeneity for most products and advertising campaigns targeted to the Hispanic market. Which of the following is one of those variables?
A) common language
B) common religion
C) emergence of national Spanish-language media
D) emergence of national entertainment figures
E) all of the above

Answer: Page: 169 Difficulty: easy

43. The degree to which an immigrant has adapted to his or her new culture is known as _____.
A) dispersion
B) traditionalization
C) acculturation
D) modernization
E) secularization

Answer: Page: 169 Difficulty: moderate

44. Which generation of Hispanic adults was born outside the United States, has the lowest income and education, is most likely to identify themselves as Hispanic, is most likely to have Spanish as their primary language, and is most likely to possess traditional values including a masculine view of the family decision hierarchy?
A) First generation adults
B) Second generation adults
C) Third generation adults
D) Primary generation adults
E) Secondary generation adults

Answer: Page: 169 Difficulty: moderate

45. Jose was born in Mexico and came to the United States in 1975. He still speaks primarily Spanish, has not graduated from high school and works as a day laborer in the agricultural industry in California. He and his family still possess traditional values which include him making all the decisions for his family’s welfare. The Pew Hispanic Center would identify Jose as which generation of Hispanic adults?
A) First generation adults
B) Second generation adults
C) Third generation adults
D) Primary generation adults
E) Secondary generation adults

Answer: Page: 169 Difficulty: moderate

46. According to the Pew Hispanic Center, which generation of Hispanic adults are born in the United States to immigrant parents, is more likely than the previous generation to identify themselves as Americans, is equally split between bilinguals and English as their primary language, and is somewhat less likely to ascribe to traditional values?
A) First generation adults
B) Second generation adults
C) Third generation adults
D) Primary generation adults
E) Secondary generation adults

Answer: Page: 169 Difficulty: moderate

47. Carlos was born in the United States to immigrant parents. He has a higher income and education that his father, is more likely to identify himself as an American, speaks Spanish and English fluently, and is less likely to ascribe to traditional values than his parents. According to the Pew Hispanic Center, to which generation of Hispanic adults does Carlos belong?
A) First generation adults
B) Second generation adults
C) Third generation adults
D) Primary generation adults
E) Secondary generation adults

Answer: Page: 169 Difficulty: moderate

48. According the Pew Hispanic Center, which generation of Hispanic adults is born in the United States to U.S.-born parents, has the highest education and income levels, is most likely to identify themselves as Americans, is most likely to have English as the primary language, and is somewhat less likely to ascribe to traditional values?
A) First generation adults
B) Second generation adults
C) Third generation adults
D) Primary generation adults
E) Secondary generation adults

Answer: Page: 169 Difficulty: moderate

49. Maria’s grandparents immigrated from Mexico, but her parents were both born in the United States. She has an MBA and earns the highest income in her family, she identifies herself as an American, speaks English as her primary language, and does not ascribe to the traditional values of her grandparents. In terms of the Pew Hispanic Center’s generations of Hispanic adults, to which generation does Maria belong?
A) First generation adults
B) Second generation adults
C) Third generation adults
D) Primary generation adults
E) Secondary generation adults

Answer: Page: 169 Difficulty: moderate

50. Which religion heavily influences the Hispanic culture?
A) Protestantism
B) Buddhism
C) Islam
D) Judaism
E) Roman Catholicism

Answer: Page: 169 Difficulty: moderate

51. One of the core values that differentiates Hispanic teens is familismo, or _____.
A) a strong familiarity with Hispanic cultural norms
B) a common language
C) a large family
D) a strong family orientation
E) a strong Catholic upbringing

Answer: Page: 170 Difficulty: moderate

52. Brand managers at Tommy Hilfiger, a famous brand of clothing, are increasing their efforts to reach the Hispanic teen market. Which of the following themes would have the greatest impact on this market?
A) Stress how this brand of clothing will make them appear “hip and cool.”
B) Stress how this expensive brand will communicate to others that they are “Americanized.”
C) Stress family values.
D) Stress the quality of the brand.
E) Stress how American teens will follow their sense of style.

Answer: Page: 170 Difficulty: hard

53. Which of the following statements is FALSE regarding marketing to Hispanics?
A) Hispanic consumers tend to be highly brand loyal.
B) Hispanics tend to be more receptive than the general market to store brands.
C) Serious attempts to target Hispanics will often involve Spanish-language media.
D) Hispanics have historically lagged behind the general population in terms of Internet usage.
E) The primary retailing responses to this market have been increasing the number of bilingual salespeople, the use of Spanish language signs, directions, and point-of-purchase displays, and merchandise assortments that reflect the needs of the local Hispanic community.

Answer: Page: 171-174 Difficulty: moderate

54. Which of the following is NOT a way that retailers have responded to the needs of the Hispanic market?
A) lowering prices on nationally-branded products
B) increasing the number of bilingual salespeople
C) using Spanish language signs and directions
D) using Spanish language point-of-purchase displays
E) having merchandise assortments that reflect the needs of the local Hispanic community

Answer: Page: 174 Difficulty: moderate

55. Which subculture is the most diverse group, with numerous nationalities, languages, and religions?
A) Hispanics
B) African Americans
C) Asian Americans
D) Native Americans
E) Asian-Indian Americans

Answer: Page: 175 Difficulty: moderate

56. Which of the following represents the largest national background of Asian Americans?
A) Chinese
B) Filipino
C) Japanese
D) Korean
E) Vietnamese

Answer: Page: 176 Difficulty: moderate

57. Most Asian Americans come from home cultures influenced by _____, which emphasizes subordination of the son to the father, the younger to the elder, and the wife to the husband.
A) traditionalism
B) Judaism
C) Protestant Ethics
D) Confucianism
E) Islam

Answer: Page: 176 Difficulty: moderate

58. Henry was born in the United States, but his parents were born in China. He was brought up to be subordinate to his father and his elders, and, when he marries, he will expect his wife to be subordinate to him. Henry is influenced by _____.
A) traditionalism
B) Judaism
C) Protestant Ethics
D) Confucianism
E) Islam

Answer: Page: 176 Difficulty: moderate

59. Market Segment Research found three groups of Asian Americans on the basis of their demographics and attitudes that cut across nationality groups. Which of the following is one of the segments identified?
A) Confucianists
B) Conformists
C) Traditionalists
D) Market followers
E) all of the above

Answer: Page: 176-177 Difficulty: moderate

60. In terms of the Asian American market, which segment identified by Market Segment Research is older, often retired, has strong identification with their original culture, tends to use their native language as their primary language, and is not concerned about status?
A) Traditionalists
B) Established
C) Living for the Moment
D) Market followers
E) Contented

Answer: Page: 176-177 Difficulty: moderate

61. John is an older, retired Japanese American. He has a strong identification with his Japanese culture, still speaks primarily Japanese and is not concerned about status. Which segment of the Asian American market identified by Market Segment Research best describes John?
A) Traditionalists
B) Established
C) Living for the Moment
D) Market followers
E) Contented

Answer: Page: 176-177 Difficulty: moderate

62. Frank Chen is a Chinese immigrant in his mid-50s and has a master’s degree in Engineering from MIT. He is a conservative professional with no need or desire for native-language programming. He is willing to pay premium prices for high quality products. Which segment of the Asian American market identified by Market Segment Research best describes him?
A) Traditionalists
B) Established
C) Living for the Moment
D) Market followers
E) Contented

Answer: Page: 177 Difficulty: moderate

63. Which segment of Asian Americans identified by Market Segment Research is younger, has moderate identification with their native culture, tends to be bilingual, and are spontaneous, materialistic, and impulsive shoppers who are concerned with status and quality?
A) Traditionalists
B) Established
C) Living for the Moment
D) Market leaders
E) Contented

Answer: Page: 177 Difficulty: moderate

64. Li Ming is an Asian American of Chinese dissent and is young, has a moderate identification with her native culture, is bilingual, and is spontaneous, materialistic, and an impulsive shopper. She is concerned with status and quality. Which segment of the Asian American market identified by Market Segment Research best describes her?
A) Traditionalists
B) Established
C) Living for the Moment
D) Market leaders
E) Contented

Answer: Page: 177 Difficulty: moderate

65. The generation of Asian Americans which was born in the United States to immigrant parents is sometimes referred to as _____.
A) Generation 2.0
B) the Next Generation
C) the Millenials
D) Generation American
E) Generation 3.0

Answer: Page: 177 Difficulty: moderate

66. There are several Asian American markets, based primarily on nationality and language. Each of these in turn can be further segmented on _____.
A) degree of acculturation
B) social class
C) generation
D) lifestyle
E) all of the above

Answer: Page: 177 Difficulty: easy

67. Which of the following is an important means of reaching virtually all of the native-language speakers of any nationality nationwide?
A) Broadcast television
B) Direct broadcast satellite (DBS)
C) Cable television
D) Sports Illustrated magazine
E) Satellite radio

Answer: Page: 178 Difficulty: moderate

68. Which of the following statements is true regarding marketing to Asian Americans?
A) Asian Americans are not highly tech savvy or heavy users of the Internet.
B) Effective communication is achieved by simply translating ad copy.
C) Geographic concentration is aiding marketing efficiency.
D) There are very limited options for reaching this market through television.
E) The purchasing power of this group and its various segments is not attractive enough for marketers to pursue it seriously.

Answer: Page: 177-178 Difficulty: moderate

69. The U.S. Census reports Native Americans by _____.
A) one tribe only
B) one tribe only or in combination with another tribe
C) one tribe only or in combination with another tribe plus in combination with any other race
D) a and b only
E) a, b, and c

Answer: Page: 179 Difficulty: moderate

70. Which of the following is the largest Native American tribe?
A) Cherokee
B) Navajo
C) Sioux
D) Chippewa
E) Choctaw

Answer: Page: 179 Difficulty: hard

71. Huata is a Native American from the largest tribe in the United States. Which tribe does she come from?
A) Cherokee
B) Navajo
C) Sioux
D) Chippewa
E) Choctaw

Answer: Page: 179 Difficulty: hard

72. While Asian-Indian Americans are diverse in many ways, they do share a number of important cultural traits. Which of the following is NOT one of these shared traits?
A) They place a great value on education, particularly their children’s education.
B) They are concerned with financial security and save at a rate much higher than the average American.
C) Husbands and wives tend to share an equal role in family decisions.
D) They do not have a “throw-away” mentality; they shop for value and look for quality and durability.
E) all of the above are shared traits

Answer: Page: 180 Difficulty: moderate

73. Which of the following is NOT a country from which Arab Americans come?
A) Morocco
B) Algeria
C) Egypt
D) Saudi Arabia
E) Israel

Answer: Page: 181 Difficulty: moderate

74. What percentage of Arab Americans are U.S. citizens?
A) less than 20 percent
B) 25 percent
C) 40 percent
D) 75 percent
E) more than 80 percent

Answer: Page: 181 Difficulty: hard

75. Amal immigrated from Jordan and has become a U.S. citizen. To which ethnic subculture does Amal belong?
A) Hispanic
B) Asian American
C) Asian-Indian American
D) Arab American
E) Native American

Answer: Page: 181 Difficulty: easy

76. America is basically a _____. That is, the educational system, government, and political process are not controlled by a religious group, and most people’s daily behaviors are not guided by strict religious guidelines.
A) Godless society
B) secular society
C) religious society
D) non-Christian society
E) regional society

Answer: Page: 181 Difficulty: moderate

77. The different religions in America prescribing differing values and behaviors are known as religious _____.
A) subcultures
B) sects
C) segments
D) societies
E) pacts

Answer: Page: 181 Difficulty: moderate

78. Much of the American value system and the resultant political and social institutions are derived from the _____ beliefs of the early settlers.
A) Judaic
B) Islamic
C) Confucian
D) Christian
E) Buddhist

Answer: Page: 182 Difficulty: easy

79. Which of the following groups is characterized by a strong belief in the literal truth of the Bible, a very strong commitment to their religious beliefs, having had a “born-again” experience, and encouraging others to believe in Jesus Christ?
A) Buddhists
B) Confucianists
C) Born-again Christians
D) Islamists
E) Jewish

Answer: Page: 183 Difficulty: easy

80. Which type of subculture arises as a result of climatic conditions, the natural environment and resources, the characteristics of the various immigrant groups that have settled there, and significant social and political events?
A) ethnic
B) regional
C) religious
D) generational
E) transient

Answer: Page: 186 Difficulty: moderate

True/False Questions

81. A subculture is a segment of a larger culture whose members share distinguishing values and patterns of behavior.

Answer: Page: 158 Difficulty: easy

82. Ethnic groups are the most commonly described subcultures.

Answer: Page: 159 Difficulty: easy

83. The new Census system (i.e., the 2000 Census) has produced over 100 race categories.

Answer: Page: 160 Difficulty: moderate

84. The relatively faster growth rate of non-European groups is due to a higher birthrate among some of these groups and to greater immigration.

Answer: Page: 161 Difficulty: moderate

85. Asian Americans are predicted to be the fastest growing ethnic subculture in the United States between 2000 and 2020.

Answer: Page: 162 Difficulty: moderate

86. One marketer noted that the differences in marketing to the overall market and marketing to African Americans is that the strategy does not differ, but the tactics differ.

Answer: Page: 163 Difficulty: moderate

87. The Bureau of the Census defines Hispanic as a person of Cuban, Mexican, Puerto Rican, South or Central American, or other Spanish culture or origin regardless of race.

Answer: Page: 168 Difficulty: moderate

88. Hispanics mostly speak English and prefer English-language media.

Answer: Page: 171-172 Difficulty: moderate

89. Asian Americans are the highest educated and highest income group with substantial purchasing power.

Answer: Page: 175 Difficulty: easy

90. Geographic concentration of the Asian American market enhances marketing efficiency.

Answer: Page: 177 Difficulty: easy

91. The Choctaw are the largest Native American tribe.

Answer: Page: 179 Difficulty: hard

92. India is a homogeneous country.

Answer: Page: 180 Difficulty: moderate

93. More than 80 percent of Arab Americans are U.S. citizens.

Answer: Page: 181 Difficulty: hard

94. America is basically a secular society.

Answer: Page: 181 Difficulty: moderate

95. Muslims in America are culturally diverse, including Arab Americans, African Americans, Asian Americans, and Hispanics.

Answer: Page: 184 Difficulty: moderate

Essay Questions

96. A German electronics manufacturer is expanding into the United States. This company has commissioned your company, a marketing research firm, to explain the various subcultures in this country. Explain the concept of subcultures, and briefly describe the three main subcultures discussed in this chapter.

Page: 158 -187 Difficulty: moderate
Answer:
.

97. Name and describe the four segments of African American consumers identified by Market Segment Research.

Page: 164 Difficulty: moderate
Answer:

98. Target, the national retailer, is opening several new stores in predominantly Hispanic communities. Explain how Target should modify its business to adequately serve the needs of this market.

Page: 171-174 Difficulty: moderate
Answer:

99. Discuss the emerging trends regarding the Asian American market that are worth watching.

Page: 177 Difficulty: moderate
Answer:

100. Much of the American value system and the resultant political and social institutions are derived from the Christian beliefs of the early settlers. Discuss the forms Christianity takes in this country.

Page: 182-184 Difficulty: moderate
Answer:

Multiple Choice Questions

1. Which of the following is FALSE regarding purchasing clothing for infants?
A) Gifts are a significant part of the market.
B) New mothers look to other mothers in deciding what to buy.
C) Collections and coordination are critical.
D) Comfort is important, durability less so.
E) Mothers want a special look for their baby that is different from other kids.

Answer: Page: 195 Difficulty: moderate

2. What is the basic consumption unit for most consumer goods?
A) organization
B) household
C) individual
D) husband
E) wife

Answer: Page: 196 Difficulty: moderate

3. According to the Census Bureau, all the people who occupy a housing unit is defined as a _____.
A) buying unit
B) blended family
C) family household
D) household
E) traditional family

Answer: Page: 196 Difficulty: moderate

4. Sarah and her three roommates share an apartment. According to the Census Bureau, Sarah and her roommates constitute a _____.
A) family
B) nontraditional family
C) subculture
D) blended family
E) household

Answer: Page: 196 Difficulty: moderate

5. A _____ has at least two members related by birth, marriage, or adoption, one of whom is the householder (i.e., the one who owns or rents the residence).
A) family household
B) blended family household
C) consumption unit
D) household
E) nontraditional family household

Answer: Page: 196 Difficulty: moderate

6. John and Dawn have been married for over twenty years. They have lived in their home in Northville, MI (a suburb of Detroit) with their three children for most of those years. According to the Census Bureau, which type of household do they live in?
A) suburban household
B) urban household
C) rural household
D) blended family household
E) family household

Answer: Page: 196 Difficulty: moderate

7. According to the Census Bureau, a _____ household is a householder living alone or exclusively with others to whom he or she is not related.
A) family
B) nonfamily
C) traditional
D) blended
E) consumption

Answer: Page: 196 Difficulty: moderate

8. Eric and Elizabeth live together in the same apartment but are not married. According to the Census Bureau, which type of household do they represent?
A) family household
B) blended household
C) nonfamily household
D) nontraditional household
E) nonconformist household

Answer: Page: 196 Difficulty: moderate

9. Which type of family consists of a couple, one or both of whom were previously married, their children, and the children from the previous marriage of one or both parents?
A) nontraditional family
B) traditional family
C) blended family
D) step family
E) combination family

Answer: Page: 196 Difficulty: moderate

10. Ashley and her husband just had their first child. Ashley was married previously, and her two children from that marriage also live with Ashley and her current husband. Which type of family is this?
A) nontraditional family
B) traditional family
C) blended family
D) secondary family
E) combination family

Answer: Page: 196 Difficulty: moderate

11. Which type of family consists of a married couple and their own or adopted children living at home?
A) nontraditional family
B) traditional family
C) blended family
D) step family
E) combination family

Answer: Page: 197 Difficulty: moderate

12. Barry and Laurie have been married for almost twenty years, and this is the first marriage for both of them. They have two children living at home. Which type of family is this?
A) nontraditional family
B) traditional family
C) blended family
D) step family
E) combination family

Answer: Page: 197 Difficulty: moderate

13. Which of the following is a household factor that influences purchase and consumption behavior?
A) structure of household unit
B) stage of the household life cycle
C) household decision process
D) a and b
E) a, b, and c

Answer: Page: 197 Difficulty: easy

14. Which of the following is a reason marketers rarely target unmarried couples?
A) it is illegal
B) it is not cost efficient
C) their purchasing power is minimal
D) they are not easy to identify and reach
E) they don’t have different needs than married couples

Answer: Page: 198 Difficulty: moderate

15. Which of the following is NOT a reason for the decline in traditional families?
A) an increase in single parent households as a result of divorce
B) an increase in single individuals as the median age of marriage is delayed
C) an increase in sole survivors as the percentage of the population over 65 has grown significantly
D) a change in the way the Census Bureau has defined “traditional family”
E) all of the above are reasons for the decline in traditional families

Answer: Page: 198 Difficulty: hard

16. Most families pass through an orderly progression of stages, each with its own characteristics, financial situation, and purchasing patterns, which is the basic assumption underlying the _____ approach.
A) household life cycle (HLC)
B) product life cycle (PLC)
C) brand life cycle (BLC)
D) inevitable cycle (IC)
E) predicable cycle (PC)

Answer: Page: 199 Difficulty: easy

17. Stages of the household life cycle are based on ____.
A) age of the adult members
B) marital status of the adult members
C) presence of children
D) age of children
E) all of the above

Answer: Page: 199 Difficulty: easy

18. Which of the following is considered a “Younger” (i.e., < 35) stage of the household life cycle? A) Single parent II B) Single II C) Single III D) Full nest I E) Empty nest I Answer: Page: 200 Difficulty: moderate 19. Which of the following is NOT considered a “Middle-aged” (i.e., 35-64) stage of the household life cycle? A) Single II B) Full nest II C) Delayed full nest I D) Single parent II E) Empty nest II Answer: Page: 200 Difficulty: moderate 20. Which of the following is considered an “Older” (i.e., > 64) stage of the household life cycle?
A) Single II
B) Delayed full nest I
C) Single III
D) Single parent II
E) Empty nest I

Answer: Page: 200 Difficulty: moderate

21. Which HLC group is basically the unmarried members of the younger Generation Xers and older Generation Yers?
A) Single I
B) Single II
C) Single III
D) Single X/Y
E) Empty nest

Answer: Page: 200 Difficulty: moderate

22. Half of females classified as “Single I” _____.
A) live alone
B) live with parent(s)
C) live with others
D) are divorced
E) are engaged to be married

Answer: Page: 200 Difficulty: hard

23. Mike is 23 years old recent college graduate and is starting his career as a pharmaceutical sales representative. He will be living in an extended-stay hotel in the city where he will undergo training, but once he finishes that, he plans on renting a nice apartment with a friend of his from college. He also wants to purchase a sports car and save money for a ski vacation next year. To which stage of the household life cycle does Mike belong?
A) Single I
B) Single II
C) Beginning
D) Introduction
E) Growth

Answer: Page: 201 Difficulty: moderate

24. Julie and Bart are both in their late 20s and recently married. They have no children and are learning how to make joint decisions. Recent purchase/service decisions were related to household furnishings, a washer and dryer, and insurance coverage. Which stage of the household life cycle are they experiencing?
A) young married
B) full nest
C) empty nest
D) introduction
E) growth

Answer: Page: 200-201 Difficulty: easy

25. When a couple has children, expenditures on which of the following does NOT usually decrease?
A) alcoholic beverages
B) meals out
C) health care
D) personal care products
E) adult apparel

Answer: Page: 203 Difficulty: hard

26. Stacy and Adam have just had their first child, and they hope to have two more. They can expect expenditures on which of the following to increase?
A) meals out
B) education
C) personal care products
D) food at home
E) alcoholic beverages

Answer: Page: 203 Difficulty: hard

27. Roughly what percentage of children are born to unmarried mothers, a percentage that has been relatively stable since 1995?
A) one-tenth
B) one-quarter
C) one-third
D) one-half
E) two-thirds

Answer: Page: 203-204 Difficulty: hard

28. While roughly one-third of children are born to unmarried mothers, this may not be an accurate representation of the situation. A more accurate representation of the situation may be gained by looking at the percentage of American households that are single-parent families. What is that percentage?
A) 2 percent
B) 5 percent
C) 9 percent
D) 14 percent
E) 21 percent

Answer: Page: 204 Difficulty: hard

29. Which stage of the household life cycle is made up of people between the ages of 35 and 64 who have never married and those who are divorced and have no child-rearing responsibilities?
A) middle-aged single (or single II)
B) middle-aged childless
C) empty nest I
D) empty nest II
E) single III

Answer: Page: 204 Difficulty: moderate

30. Bobbie is 47 years old and has never been married and does not have any children of her own. She lives alone and doesn’t like to cook because most recipes feed more than one person. She can only eat so many leftovers, and she usually forgets about it if she freezes to eat at a later date. So she purchases frozen dinners and canned food that come in single servings. To which stage of the household life cycle does Bobbie belong?
A) middle-aged single (or single II)
B) middle-aged empty nest
C) empty nest I
D) empty nest II
E) single III

Answer: Page: 204 Difficulty: moderate

31. Which of the following is NOT a description of the household life cycle stage known as “Empty Nest I: Middle-Aged with No Children”?
A) married couples who have never had children
B) second marriages in which children from a first marriage are not living with the parent
C) married couples whose children have left home
D) married couples who have adopted children who are still living at home
E) all of the above are characteristics of this household life cycle stage

Answer: Page: 204-205 Difficulty: hard

32. Tony and Katie are in their 50s, and both have careers that keep them very busy. However, their children are grown, so they have more free time and money than they used to have. Which type of product or service are they likely to spend LESS money on than they have in the past?
A) food at home
B) expensive vacations
C) meals out
D) house-cleaning
E) luxury cars

Answer: Page: 205 Difficulty: moderate

33. The trend toward later marriage and children has resulted in which of the following?
A) Over 80 percent of all married couples with children under 18 now fall into the middle age HLC categories of delayed full nest I and full nest II.
B) Now, 69 percent of all married couples with children under 18 fall into the middle age HLC categories of delayed full nest I and full nest II.
C) Now, the empty nest I HLC category does not begin until married couples are over 64 years old.
D) The stage of the HLC labeled empty nest I no longer exists.
E) Now, 69 percent of all married couples do not experience the empty nest II stage of the HLC.

Answer: Page: 205-206 Difficulty: hard

34. What is a major difference between delayed full nest I and younger new parents?
A) the number of children
B) income
C) education
D) commitment
E) years married

Answer: Page: 206 Difficulty: moderate

35. Sheila and Jim are both professionals in their late 30s and have two children under the age of five. Which stage of the household life cycle are they in?
A) young married
B) full nest I
C) full nest II
D) delayed full nest I
E) laggards

Answer: Page: 205-206 Difficulty: moderate

36. What is a major difference between the full nest II and delayed full nest I stages of the household life cycle?
A) income
B) age of the parents
C) age of the children
D) number of children
E) years married

Answer: Page: 206 Difficulty: moderate

37. Teresa and John are both in their 40s and have two children living at home. Their daughter, Erin, is 14 years old, and their son, Stephen, is 11 years old. To which stage of the household life cycle do they belong?
A) young married
B) full nest I
C) full nest II
D) delayed full nest I
E) laggards

Answer: Page: 206 Difficulty: moderate

38. Teri and Ed are in their 40s, are childless, and were married for 15 years but are now divorced. However, Teri has always wanted children, so she adopted a daughter, who is now two years old. To which stage of the household life cycle does Teri and her daughter belong?
A) single parent I
B) divorced parent I
C) single parent II
D) full nest I
E) delayed full nest I

Answer: Page: 206 Difficulty: moderate

39. Consumers in which stage of the household life cycle are over 64 years of age, are either fully or partially retired, are healthy, active, and often financially well-off, and are a big market for RVs, cruises, and second homes?
A) single I
B) single II
C) empty nest I
D) empty nest II
E) delayed empty nest

Answer: Page: 206-207 Difficulty: moderate

40. Ray is retired, and he and his wife are both in their late 60s. They are healthy, active, and financially well-off. They purchased an RV and plan to travel to all of the continental United States. Which stage of the household life cycle describes them?
A) childless
B) jobless
C) retired
D) empty nest I
E) empty nest II

Answer: Page: 207 Difficulty: moderate

41. Consumers who are single due to the death of a spouse are labeled _____.
A) “single by death”
B) “single by choice”
C) “single by circumstances”
D) “single again”
E) “unwillingly single”

Answer: Page: 207 Difficulty: moderate

42. Barbara is a 72 years old and has been a widow for almost three years. She would be labeled _____.
A) “single by death”
B) “single by choice”
C) “single by circumstances”
D) “single again”
E) “unwillingly single”

Answer: Page: 207 Difficulty: moderate

43. Research suggests that older singles that are single by circumstances (i.e., death of a spouse) will _____.
A) be less innovative
B) be more risk averse
C) be more price sensitive
D) engage in coping behaviors such as spending more time watching television
E) all of the above

Answer: Page: 207 Difficulty: easy

44. The vertical axis in the HLC/occupational category matrix represents _____, which determines the problems the household will likely encounter.
A) a set of occupational categories
B) the number of children in the household
C) the household income
D) stage in the household life cycle
E) current economic conditions

Answer: Page: 208-209 Difficulty: moderate

45. The horizontal axis in the HLC/occupational category matrix represents _____, which provides a range of acceptable solutions.
A) a set of occupational categories
B) the number of children in the household
C) the household income
D) stage in the household life cycle
E) current economic conditions

Answer: Page: 208-209 Difficulty: moderate

46. _____ is the process by which decisions that directly or indirectly involve two or more family members are made.
A) Household decision making
B) Consumer decision making
C) Family decision making
D) Joint decision making
E) Group decision making

Answer: Page: 209 Difficulty: easy

47. A family purchase decision differs from an organizational decision in _____.
A) the level of emotion involved
B) the involvement of multiple people in the decision
C) the absence of time pressure
D) the fact that different people play different roles in the purchase
E) all of the above

Answer: Page: 209 Difficulty: moderate

48. Which of the following is a family purchase role?
A) initiator
B) information gatherer
C) user
D) purchaser
E) all of the above

Answer: Page: 210 Difficulty: easy

49. The family member who first recognizes a need or starts the purchase process is known as the _____.
A) initiator
B) information gatherer
C) influencer
D) decision maker
E) user

Answer: Page: 210 Difficulty: moderate

50. Stan has noticed that his car is not working properly and that it is getting expensive to repair. Thus, he gathered his family together to discuss the purchase of a new automobile. In terms of family purchase roles, which one best describes Stan’s actions?
A) initiator
B) information gatherer
C) influencer
D) decision maker
E) user

Answer: Page: 210 Difficulty: moderate

51. While Katie and Matthew are the children in the family, they do influence the alternatives considered for their family’s summer vacation. What role do Katie and Matthew play in this family decision?
A) initiators
B) information gatherers
C) influencers
D) decision makers
E) purchasers

Answer: Page: 210 Difficulty: moderate

52. Which family purchase role is played by the individual(s) who makes the final decision?
A) initiator
B) information gatherer
C) influencer
D) decision maker
E) user

Answer: Page: 210 Difficulty: easy

53. Bob is in the 6th grade. His family does not own a computer, and he really needs one to do his homework. He also wants one so he can play some of the games he hears his friends talking about. His parents realize that he needs a computer, but they really have no need for one and probably will never use it. Since they don’t know much about computers, they are letting Bob do all the research and asked him to find the options that will meet his needs. However, his parents are the ones who will make the final decision on how much to spend and which computer to purchase. In terms of the family purchase roles, which role does Bob’s parents play?
A) initiator
B) information gatherer
C) influencer
D) decision maker
E) user

Answer: Page: 210 Difficulty: easy

54. What family purchase role is played by the individual who actually purchases the product the family has decided upon?
A) initiator
B) information gatherer
C) influencer
D) decision maker
E) purchaser

Answer: Page: 210 Difficulty: easy

55. While the entire family is usually involved in major purchase decisions, Lisa is the one who usually makes the actual purchase. What family purchase role does Lisa play?
A) initiator
B) information gatherer
C) influencer
D) decision maker
E) purchaser

Answer: Page: 210 Difficulty: moderate

56. Carla and John are both children, but they use their family’s electronic equipment such as TVs, DVD players, and stereo equipment. They did not play much of a role in the purchase decision on which brands to buy, but their parents did consider their needs when deciding on which products and brands to purchase. In terms of family purchase roles, what role do these children play?
A) initiator
B) information gatherer
C) influencer
D) user
E) both c and d

Answer: Page: 210 Difficulty: hard

57. Which of the following are ways to categorize family decision making?
A) husband-dominant
B) wife-dominant
C) individualized
D) child-dominant
E) all of the above

Answer: Page: 210-211 Difficulty: easy

58. Hank and Carol have been married for over 20 years, and in that time they have purchased six automobiles. Hank is the one who usually does all the research and decides what they can afford, while Carol just gets involved when it’s time to decide among a few alternatives, and she really only cares about the comfort and styling. Which of the following category of family decision making does this illustrate?
A) husband-dominant
B) wife-dominant
C) individualized
D) single role
E) dual role

Answer: Page: 210 Difficulty: easy

59. Families considering the purchase of products such as a house, furniture, or a vacation, typically use which type of family decision making?
A) husband-dominant
B) wife-dominant
C) individualized
D) joint
E) child-dominant

Answer: Page: 210 Difficulty: easy

60. Which of the following statements is true regarding the nature of family purchases and the roles played by various family members?
A) Individuals tend to play the same role for all decisions.
B) All family members tend to be involved in every stage of the decision process.
C) Over time, each spouse develops more specialized roles as a part of the family lifestyle and family responsibilities.
D) Individual family members play only a single role in a given purchase decision.
E) The stage of the decision process does not influence decision roles.

Answer: Page: 210-214 Difficulty: moderate

61. Which of the following can influence how family members interact in a purchase decision?
A) culture or subculture in which the family exists
B) role specialization of different family members
C) degree of involvement each has in the product area of concern
D) personal characteristics of the family members
E) all of the above

Answer: Page: 212 Difficulty: easy

62. Hispanics who identify most strongly with their Hispanic subcultures are most likely to engage in _____.
A) wife-dominated decisions
B) husband-dominated decisions
C) joint decisions
D) child-dominated decisions
E) none of the above

Answer: Page: 212 Difficulty: moderate

63. The teen Internet maven’s primary role is as _____.
A) initiator
B) information gatherer
C) decision maker
D) purchaser
E) user

Answer: Page: 213 Difficulty: moderate

64. Which of the following is a characteristic of teens called “Internet mavens”?
A) Greater enjoyment and interest in the Internet in general.
B) Greater knowledge about the Web-based marketplace.
C) More expertise in searching out and finding information and resources on the Web.
D) Greater enjoyment and desire to help others by providing information found on the Web.
E) all of the above

Answer: Page: 213 Difficulty: easy

65. Todd is fifteen years old and really enjoys using the Internet. Compared to his friends and family, he has greater knowledge about the Web-based marketplace, has more expertise in searching out and finding information and resources on the Web, and really enjoys helping others by providing information found on the Web. Todd is called a(n) _____.
A) techie
B) Internet maven
C) geek
D) market maven
E) Internet browser

Answer: Page: 213 Difficulty: moderate

66. Which of the following is NOT a basic approach that individuals in a family use to resolve purchase conflicts after they haven arisen?
A) bargaining
B) use of authority
C) physical force
D) playing on emotion
E) reasoning

Answer: Page: 214 Difficulty: moderate

67. Karen and her kids were hungry and were trying to decide where to eat for dinner. After several minutes of bickering, Karen decided where they were going to go. Her children balked at her decision and asked why she got to decide, and she said, “Because I’m your mother and I said so!” Which approach did Karen use to resolve this family conflict?
A) bargaining
B) use of authority
C) impression management
D) playing on emotion
E) reasoning

Answer: Page: 214 Difficulty: easy

68. Which approach to conflict resolution misrepresents the facts in order to win?
A) bargaining
B) use of authority
C) impression management
D) playing on emotion
E) reasoning

Answer: Page: 214 Difficulty: moderate

69. Which of the following is FALSE regarding conclusions on family decision making?
A) Overt conflicts in decision making are more common than agreement.
B) Different family members are often involved at different stages of the decision process.
C) Different family members often evaluate different attributes of a product or brand.
D) The direct involvement of family members in each stage of the decision process represents only a small part of the picture.
E) Who participates at each stage of the decision process and the method by which conflicts are resolved are primarily a function of the product category.

Answer: Page: 214 Difficulty: hard

70. The process in which young people acquire skills, knowledge, and attitudes relevant to their functioning as consumers in the marketplaces is known as _____.
A) consumer education
B) consumer socialization
C) consumer programming
D) consumer research
E) consumer acclimation

Answer: Page: 215 Difficulty: moderate

71. Which of the following refers to what children learn with respect to consumption?
A) the process of consumer socialization
B) the rate of consumer socialization
C) the impact of consumer socialization
D) the content of consumer socialization
E) the influence of consumer socialization

Answer: Page: 215 Difficulty: moderate

72. Which of the following refers to how children learn with respect to consumption?
A) the process of consumer socialization
B) the rate of consumer socialization
C) the impact of consumer socialization
D) the content of consumer socialization
E) the influence of consumer socialization

Answer: Page: 215 Difficulty: moderate

73. A major basis for concern about marketing to children is their inability to fully process and understand commercial messages. Much of the theory and research in this area is based on _____.
A) Asche’s diffusion theory
B) Weber’s intellect enhancement theory
C) Piaget’s stages of cognitive development
D) Pavlov’s process acquisition stages
E) none of the above

Answer: Page: 216 Difficulty: moderate

74. In children’s information processing, the period of concrete operations is characterized by _____.
A) an absence of conceptual thought
B) the development of language
C) the development of the ability to apply logical thought to concrete problems
D) the development of the ability to apply logic to all types of problems
E) none of the above

Answer: Page: 216 Difficulty: moderate

75. In children’s information processing, the period of sensorimotor intelligence is characterized by _____.
A) an absence of conceptual thought
B) the development of language
C) the development of the ability to apply logical thought to concrete problems
D) the development of the ability to apply logic to all types of problems
E) none of the above

Answer: Page: 216 Difficulty: moderate

76. In children’s information processing, the period of preoperational thought is characterized by _____.
A) an absence of conceptual thought
B) the development of language
C) the development of the ability to apply logical thought to concrete problems
D) the development of the ability to apply logic to all types of problems
E) none of the above

Answer: Page: 216 Difficulty: moderate

77. In children’s information processing, the period of formal operations is characterized by _____.
A) an absence of conceptual thought
B) the development of language
C) the development of the ability to apply logical thought to concrete problems
D) the development of the ability to apply logic to all types of problems
E) none of the above

Answer: Page: 216 Difficulty: moderate

78. Those capabilities necessary for purchases to occur such as understanding money, budgeting, product evaluation, and so forth are referred to as _____.
A) buying skills
B) consumption-related preferences
C) consumption-related attitudes
D) instrumental skills
E) consumer skills

Answer: Page: 216 Difficulty: moderate

79. Bob his teaching his son, Jack, how to handle money, count change, how to save for a desired purchase, and how to choose an appropriate product. Bob is teaching his son _____.
A) buying skills
B) consumption-related preferences
C) consumption-related attitudes
D) economic skills
E) consumer skills

Answer: Page: 216 Difficulty: moderate

80. _____ are the knowledge, attitudes, and values that cause people to attach differential evaluations to products, brands, and retail outlets.
A) Buying skills
B) Consumption-related preferences
C) Consumption-related attitudes
D) Instrumental attitudes
E) Consumer skills

Answer: Page: 216 Difficulty: moderate

81. Scott and his family have always purchased Honda automobiles because they feel that they are the best quality cars in the market. This attitude is an example of a(n) _____.
A) coping mechanism
B) consumption-related preference
C) consumption-related bias
D) economic skill
E) mediation

Answer: Page: 216 Difficulty: moderate

82. The cognitive and affective orientations toward marketplace stimuli such as advertisements, salespeople, warranties, and so forth is referred to as _____.
A) consumer skills
B) consumption-related preferences
C) consumption-related attitudes
D) instrumental attitudes
E) mediation preferences

Answer: Page: 216 Difficulty: moderate

83. Which of the following is the primary source of consumer socialization?
A) school
B) advertising
C) friends
D) family
E) government

Answer: Page: 217 Difficulty: easy

84. Which type of training occurs when a parent or sibling specifically and directly attempts to bring about certain responses through reasoning or reinforcement?
A) consumer training
B) instrumental training
C) modeling
D) mediation
E) coercion

Answer: Page: 217 Difficulty: moderate

85. _____ occurs when a child learns appropriate, or inappropriate, consumption behaviors by observing others.
A) Consumer training
B) Instrumental training
C) Modeling
D) Mediation
E) Parroting

Answer: Page: 217 Difficulty: moderate

86. _____ occurs when a parent alters a child’s initial interpretation of, or response to, a marketing or other stimulus.
A) Consumer training
B) Instrumental training
C) Modeling
D) Mediation
E) Reprogramming

Answer: Page: 217 Difficulty: moderate

87. Claire is six years old and begged her mother for a Barbie doll that she saw ice skating in a television commercial. Her mother explained to her that the doll won’t be able to ice skate and that she will have to make the doll move. She was trying to explain to Claire that the toys she sees in advertisements are probably going to look more fun than they actually are. Claire’s mother is exhibiting _____.
A) mediation
B) interpretation
C) modeling
D) terminal training
E) interference

Answer: Page: 217 Difficulty: moderate

88. Which of the following is NOT a stage of McNeal’s model of how children learn to shop?
A) Stage I: Observing
B) Stage II: Making Requests
C) Stage III: Making Selections
D) Stage IV: Making Recommendations to Other Children
E) Stage V: Making Independent Purchases

Answer: Page: 218-219 Difficulty: moderate

89. Susan gave her five year old son $10 to purchase a toy at Wal-Mart. She wanted him to learn how to select an appropriate toy and to pay for it with his “own” money, but she would help her son do this. Which stage of McNeal’s model of how children learn to shop does this illustrate.
A) Stage I
B) Stage II
C) Stage III
D) Stage IV
E) Stage V

Answer: Page: 219 Difficulty: moderate

True/False Questions

90. The Census Bureau has a classification of households that includes blended families.

Answer: Page: 196 Difficulty: moderate

91. The term traditional family refers to a married couple and their own or adopted children living at home.

Answer: Page: 197 Difficulty: easy

92. Compared to 1970, the percentage of households headed by a married couple has decreased.

Answer: Page: 197 Difficulty: moderate

93. One reason that marketers rarely target unmarried couples is that they are not easy to identify or reach.

Answer: Page: 198 Difficulty: moderate

94. Families pass through an orderly progression of stages, each with its own characteristics, financial situation, and purchasing patterns.

Answer: Page: 199 Difficulty: moderate

95. The Single I stage of the household life cycle is basically the unmarried members of the baby boom generation.

Answer: Page: 200 Difficulty: moderate

96. It isn’t until the addition of the second child to a family that many changes in lifestyle and consumption occur.

Answer: Page: 202 Difficulty: hard

97. Birth or adoption by singles is increasingly common.

Answer: Page: 203 Difficulty: moderate

98. The middle-aged single category is only made up of people who have never married and have no child-rearing responsibilities.

Answer: Page: 204 Difficulty: moderate

99. A major difference between the full nest II and the delayed full nest I stages of the household life cycle is the age of the children.

Answer: Page: 206 Difficulty: moderate

100. Consumers who are single due to the death of a spouse are labeled as “single by circumstances.”

Answer: Page: 207 Difficulty: easy

101. The initiator is the family member who first recognizes a need or starts the purchase process.

Answer: Page: 210 Difficulty: easy

102. Teens labeled “Internet gurus” have a greater knowledge about the Web-based marketplace than other teens.

Answer: Page: 213 Difficulty: moderate

103. Impression management is a conflict resolution approach that misrepresents the facts in order to win.

Answer: Page: 214 Difficulty: moderate

104. Stage 2 of Piaget’s stages of cognitive development is the period in which the child develops the ability to apply logical thoughts to concrete problems.

Answer: Page: 216 Difficulty: moderate

105. Instrumental training occurs when a child learns appropriate, or inappropriate, consumption behaviors by observing others.

Answer: Page: 217 Difficulty: moderate

Essay Questions

106. Compare and contrast the Census Bureau’s definitions of a household, a family household, and a nonfamily household.

Page: 196 Difficulty: easy
Answer:

107. Name and briefly describe the stages of the household life cycle (HLC) in terms of age of the adults, their marital status, and the age of children at home.

Page: 200 Difficulty: moderate
Answer:

108. Name and describe the six roles that frequently occur in family decision making.

Page: 210 Difficulty: moderate
Answer:

109. Given the number of decisions families make daily, disagreements are inevitable. How they are resolved is important to marketers as well as to the health of the family unit. Name and describe the six basic approaches that research has revealed that individuals use to resolve purchase conflicts after they have arisen.

Page: 214 Difficulty: moderate
Answer:

110. Monica is a new mother and reads several magazines and books to better understand how her son will develop. One book she used explained Piaget’s stages of cognitive development. Based on these stages, explain what Monica can expect as her child grows up.

Page: 216 Difficulty: moderate
Answer:

Multiple Choice Questions

1. Consumers who purchase a Harley-Davidson motorcycle can receive which of the following in addition to the purchase of the product?
A) membership in a group
B) a 20 year warrantee
C) free maintenance for five years
D) invitations to Harley Jamborees, Harley 101 safety courses, and Camp Harley
E) greater attention from the police

Answer: Page: 227 Difficulty: moderate

2. Two or more individuals who share a set of norms, values, or beliefs and have certain implicitly or explicitly defined relationships to one another such that their behaviors are interdependent is known as a(n) _____.
A) family
B) organization
C) group
D) cohort
E) generation

Answer: Page: 228 Difficulty: moderate

3. Tara is a marketing professor and is a member of the American Marketing Association. The members of this organization are associated with the discipline of marketing, either as academicians or as practitioners. The purpose of this organization is to disseminate research about marketing, to share best practices, and to foster the professional development of marketers. The American Marketing Associate is an example of a _____.
A) group
B) cohort
C) generation
D) primary group
E) consumer group

Answer: Page: 228 Difficulty: moderate

4. Which type of group’s presumed perspectives or values are being used by an individual as the basis for his or her current behavior?
A) cohort group
B) generation group
C) community group
D) reference group
E) modeling group

Answer: Page: 228 Difficulty: moderate

5. Which criterion is used to classify groups?
A) membership
B) strength of social tie
C) type of contact
D) attraction
E) all of the above

Answer: Page: 228 Difficulty: easy

6. Which of the following is NOT a criterion used to classify groups?
A) membership
B) strength of social tie
C) number of members
D) type of contact
E) attraction

Answer: Page: 228 Difficulty: moderate

7. Which group classification variable refers to the closeness and intimacy of the group linkages?
A) membership
B) strength of social tie
C) number of members
D) type of contact
E) attraction

Answer: Page: 228 Difficulty: moderate

8. Which type of group includes family and friends and involves strong ties and frequent interaction?
A) primary group
B) secondary group
C) consumer group
D) reference group
E) intimate group

Answer: Page: 228 Difficulty: moderate

9. Angie is a teenager, living at home with her parents and two brothers. Even though she wants to venture out more on her own, her parents will not allow it, and she obeys their wishes. Her family represents a(n) _____ group.
A) primary group
B) secondary group
C) consumer group
D) restrictive group
E) intimate group

Answer: Page: 228 Difficulty: moderate

10. Which type of group includes organizations such as professional associations and neighborhood associations that involve relatively weak ties and less frequent interaction among its members?
A) primary group
B) secondary group
C) tertiary group
D) cohort group
E) work group

Answer: Page: 228 Difficulty: moderate

11. As a marketing major, Stan is a collegiate member of the American Marketing Association. This association holds a collegiate conference every year, and he did attend it one year. While this is a group he belongs to, his ties to other members are relatively weak, and his interaction is infrequent. Which type of group is this?
A) primary group
B) secondary group
C) tertiary group
D) cohort group
E) work group

Answer: Page: 228 Difficulty: moderate

12. Groups with negative desirability are referred to as _____.
A) primary reference groups
B) secondary reference groups
C) dissociative reference groups
D) aspiration reference groups
E) unattractive reference groups

Answer: Page: 229 Difficulty: moderate

13. Bob is somewhat of a loner in high school. He really despises the school “jocks” that seem to be involved in every sport. He doesn’t want anything to do with them or be like them in any way. To Bob, the group of students who represent the school athletes are a(n) _____.
A) primary reference group
B) secondary reference group
C) dissociative reference group
D) aspiration reference group
E) unattractive reference group

Answer: Page: 229 Difficulty: moderate

14. Individuals frequently purchase products thought to be used by a desired group in order to achieve actual or symbolic membership in the group. This type of group is referred to as a(n) _____.
A) primary reference group
B) secondary reference group
C) dissociative reference group
D) aspiration reference group
E) attractive reference group

Answer: Page: 229 Difficulty: moderate

15. Amanda is in junior high and begged her mother to buy her a certain brand of athletic shoe that all the “cool” kids in school were wearing. She thought that if she had those shoes, she would be accepted as one of them. To Amanda, these other students in school that she wants to be associated with represent a(n) _____.
A) primary reference group
B) secondary reference group
C) dissociative reference group
D) aspiration reference group
E) attractive reference group

Answer: Page: 229 Difficulty: moderate

16. Which group of teens sees themselves and others as cool and at the center of the action?
A) influencers
B) conformers
C) market leaders
D) trend setters
E) market mavens

Answer: Page: 229 Difficulty: moderate

17. Lisa and her friends see themselves as cool and at the center of the action in their high school. Which group of teens best describes Lisa and her friends?
A) influencers
B) conformers
C) market leaders
D) trend setters
E) market mavens

Answer: Page: 229 Difficulty: moderate

18. Which group of teens has a high need for acceptance and adapts their behaviors and purchases to fit in with the group of teens that is seen as cool and at the center of the action?
A) influencers
B) conformers
C) market followers
D) trend copiers
E) market mavens

Answer: Page: 229 Difficulty: moderate

19. Carol is a little shy and has a high need for acceptance. She adapts her behavior and purchases to fit in with the group of teens that are seen as cool and at the center of the action? Which group of teens best describes Carol?
A) influencers
B) conformers
C) market followers
D) trend copiers
E) market mavens

Answer: Page: 229 Difficulty: moderate

20. A distinctive subgroup of society that self-selects on the basis of a shared commitment to a particular product class, brand, or consumption activity is known as a _____.
A) cohort group
B) clone group
C) dissociative reference group
D) consumption subculture
E) purchase consortium

Answer: Page: 229-230 Difficulty: moderate

21. Which of the following is a characteristic of a consumption subculture?
A) an identifiable, hierarchical social structure
B) a set of shared beliefs or values
C) unique jargon, rituals, and modes of symbolic expression
D) a and b
E) a, b, and c

Answer: Page: 230 Difficulty: moderate

22. Which of the following statements is FALSE regarding consumption subcultures?
A) These groups have an identifiable, hierarchical social structure.
B) These groups have a set of shared beliefs or values.
C) These groups have a unique jargon, rituals, and modes of symbolic expression.
D) They are reference groups for their members as well as those who aspire to join or avoid them.
E) Consumption must be shared physically to be a shared ritual that creates and sustains a group.

Answer: Page: 230 Difficulty: moderate

23. Harley-Davidson motorcycle owners that join a Harley group, Jeep owners that attend events sponsored by Jeep, and Star Trek “Trekkies” are all examples of _____.
A) cohort groups
B) clone groups
C) dissociative reference groups
D) consumption subcultures
E) purchase consortiums

Answer: Page: 229-230 Difficulty: moderate

24. A nongeographically bound community, based on a structured set of social relationships among owners of a brand and the psychological relationship they have with the brand itself, the product in use, and the firm is known as a _____.
A) brand community
B) cohort group
C) purchase consortium
D) clone group
E) census track

Answer: Page: 231 Difficulty: moderate

25. Todd purchased a Harley-Davidson motorcycle because he identifies himself with what he feels is the typical owner of a Harley. Many other owners of this brand also feel this way, and they get upset when they see someone riding one who they think is not the “right” kind of person to own this brand. Which characteristic of brand communities does this illustrate?
A) consciousness of kind
B) rituals and traditions
C) moral responsibility
D) similarity
E) brand fanaticism

Answer: Page: 232 Difficulty: moderate

26. Which of the following statements is true regarding brand communities?
A) Brand communities seem most relevant for low-involvement, routinely-purchased products.
B) Once a consumer becomes a member of a brand community, he or she is always a member.
C) One condition for a strong brand community appears to be a degree of uniqueness to the brand itself.
D) Brand communities can add value to the ownership of the product, but they do not build loyalty.
E) Fostering a community requires the owners of the brand to come together on their own to establish relationships.

Answer: Page: 231-232 Difficulty: hard

27. A _____ is a gathering of owners and others for the purposes of interacting with one another in the context of learning about and using the brand.
A) consumption gathering
B) convention
C) consortium
D) brand community
E) brandfest

Answer: Page: 233 Difficulty: moderate

28. Jeep Jamboree, Jeep 101, and Camp Jeep, in which owners of Jeeps gather for the purposes of interacting with one another in the context of learning about and using their Jeeps, are examples of a _____.
A) consumption gathering
B) convention
C) consortium
D) brand event
E) brandfest

Answer: Page: 233 Difficulty: moderate

29. Which type of community interacts over time around a topic of interest on the Internet?
A) brand community
B) virtual community
C) cyber community
D) techie community
E) geek squad

Answer: Page: 233 Difficulty: moderate

30. Jill is a breast cancer survivor. She posts a blog, which is her online journal, on a site that is specifically for others to share their experiences and support one another. She and others discuss products that help them deal with the side effects of their treatments as well as products that can help them maintain their self-esteem (e.g., wigs). Jill is participating in a(n) _____.
A) online consortium
B) virtual community
C) consumption subculture
D) subversive community
E) electronic community

Answer: Page: 233 Difficulty: moderate

31. Which of the following are the three types of virtual group members?
A) influencers, conformers, seekers
B) dissociative, aspiration, and participants
C) leaders, participants, and lurkers
D) informational, influencers, and lurkers
E) primary, secondary, and tertiary

Answer: Page: 234 Difficulty: moderate

32. Which type of virtual group members are a relatively small group who are highly influential and take on the most responsibility for community maintenance, and they are active members in that they both post and respond to messages?
A) influencers
B) leaders
C) coordinators
D) actives
E) Internet mavens

Answer: Page: 234 Difficulty: moderate

33. Stephen is an active member of a virtual community in that he posts and responds to messages. He is also one of the few who are highly influential and take on the most responsibility for the community’s maintenance. Which type of virtual group member is Stephen?
A) influencer
B) conformer
C) leader
D) participant
E) lurker

Answer: Page: 234 Difficulty: moderate

34. Which type of virtual group member is active but not deemed a leader?
A) conformers
B) participants
C) lurkers
D) members
E) influencers

Answer: Page: 234 Difficulty: moderate

35. Howard is a participant in a virtual community, but he and others do not see him as a leader. Which type of virtual group member is Howard?
A) conformer
B) participant
C) lurker
D) member
E) influencer

Answer: Page: 234 Difficulty: moderate

36. The largest group of virtual group members that only passively peruse the group discussions without being active participants is known as _____.
A) conformers
B) participants
C) leaders
D) lurkers
E) passives

Answer: Page: 234 Difficulty: moderate

37. Vicki likes to visit a virtual community, called Fanfiction.com, and read the stories that others post on this site. She doesn’t really visit very often, and she has never posted a story on this site. Vicki is which type of virtual group member?
A) conformer
B) participant
C) lurker
D) viewer
E) intermittent

Answer: Page: 234 Difficulty: moderate

38. Which type of influence occurs when an individual uses the behaviors and opinions of reference group members as potentially useful bits of information?
A) transient
B) informational
C) normative
D) identification
E) substantive

Answer: Page: 235 Difficulty: easy

39. Jamarcus was his collegiate chapter’s delegate at a national conference of a professional business fraternity, Phi Chi Theta, in which he is a member. When the business meeting was conducted, parliamentary procedure was used, and Jamarcus was not familiar with this. Thus, he looked to the others to learn how he should behave in this situation. What type of influence does this reference group exhibit?
A) transient
B) substantive
C) informational
D) legal
E) procedural

Answer: Page: 235 Difficulty: hard

40. Which type of reference group influence occurs when an individuals fulfills group expectations to gain a direct reward or to avoid a sanction?
A) informational
B) normative
C) identification
D) transient
E) permanent

Answer: Page: 236 Difficulty: moderate

41. Amie usually wears a uniform to her Catholic school, but on the first Friday of every month, students can wear other clothes as long as they bring in something for the church’s food bank. Amie loves to shop and has plenty of fashionable clothes, but on these free dress days, she usually wears blue jeans, a T-shirt, and athletic shoes. Her mother asked her why she doesn’t wear her nice clothes, and Amie told her that she would be made fun of at school. Which type of influence do the other students have on Amie?
A) informational
B) normative
C) identification
D) conformist
E) punitive

Answer: Page: 236 Difficulty: moderate

42. Normative influence is sometimes referred to as _____ influence.
A) utilitarian
B) coercive
C) functional
D) value-expressive
E) conformist

Answer: Page: 236 Difficulty: moderate

43. Which type of reference group influence occurs when individuals have internalized the group’s values and norms?
A) informational
B) normative
C) identification
D) utilitarian
E) affective

Answer: Page: 236 Difficulty: moderate

44. Identification influence is also called _____ influence.
A) informational
B) normative
C) value-expressive
D) affective
E) utilitarian

Answer: Page: 236 Difficulty: moderate

45. Valerie and her family are members of the Baptist church. They have accepted the Baptist church’s values as their own and behave in a manner consistent with the church’s values because their values and the church’s values are the same. Which type of influence does the church possess with respect to Valerie and her family?
A) informational
B) exemplary
C) identification
D) utilitarian
E) affective

Answer: Page: 236 Difficulty: moderate

46. Which of the following is a factor determining a reference group’s influence on a consumer?
A) whether or not the product is a necessity
B) whether the use of the product or brand is visible to the group
C) the degree of commitment the individual feels to a group
D) the individual’s confidence in the purchase situation
E) all of the above

Answer: Page: 238 Difficulty: easy

47. In which of the following consumption situations will a reference group’s influence be strongest?
A) when the use of the product or brand is visible to the group
B) when the product is a necessity
C) when the consumer is confident in the purchase situation
D) when the individual’s commitment to the group is low
E) when the reference group is large

Answer: Page: 238 Difficulty: moderate

48. For which product category would a reference group’s influence be strongest?
A) vitamins
B) toilet tissue
C) running shoes
D) insurance
E) clothes washer

Answer: Page: 238 Difficulty: hard

49. In experiments, the power of groups to influence an individual to agree with the incorrect judgment of the others is known as the _____.
A) group effect
B) Asch phenomenon
C) Skinner effect
D) Pavlov phenomenon
E) follower effect

Answer: Page: 239 Difficulty: moderate

50. Which type of reference group influence do marketers use when developing advertisements?
A) informational
B) normative
C) identification
D) a and b
E) a, b, and c

Answer: Page: 240 Difficulty: moderate

51. Which type of communication involves individuals sharing information with other individuals in a verbal form including face-to-face, phone, and the Internet?
A) mass advertising
B) word-of-mouth
C) impersonal
D) two-step
E) multistep

Answer: Page: 241 Difficulty: easy

52. Clara had an unpleasant experience at a local restaurant at lunch one day. She went back to work and told all her coworkers about this experience, and many of them said they would never go back to that restaurant. Which type of communication is this an example of?
A) negative
B) two-step flow
C) multistep flow
D) word-of-mouth
E) indirect

Answer: Page: 241 Difficulty: moderate

53. Which of the following statements is FALSE regarding word-of-mouth (WOM) communications?
A) It is estimated that two-thirds of all consumer product decisions are influenced by WOM.
B) Negative experiences are powerful motivators of WOM.
C) Going beyond satisfaction to deliver more than was expected appears to have the potential to generate substantial WOM.
D) Not all personal sources are equal in value.
E) Consumers generally trust advertising as much as they do WOM.

Answer: Page: 241-242 Difficulty: moderate

54. Individuals who filter, interpret, or provide product and brand-relevant information to their family, friends, and colleagues are known as _____.
A) opinion leaders
B) market mavens
C) interpreters
D) screeners
E) market leaders

Answer: Page: 243 Difficulty: moderate

55. John doesn’t know very much about electronic equipment, but he wanted to get his girlfriend an MP3 player for her birthday. His roommate, Hank, knows all about these types of products and made a recommendation to John. For this product category, Hank is known as a(n) _____.
A) market maven
B) opinion leader
C) interpreter
D) screener
E) market leader

Answer: Page: 243 Difficulty: moderate

56. The process of one person receiving information from the mass media or other sources and passing it on to others is known as the _____.
A) direct flow of communication
B) one-step flow of communication
C) two-step flow of communication
D) multistep flow of communication
E) impersonal/personal flow of communication

Answer: Page: 243 Difficulty: moderate

57. The _____ flow of communication involves opinion leaders for a particular product area who actively seek relevant information from the mass media as well as other sources. These opinion leaders process this information and transmit their interpretations of it to some members of their groups, and these group members also receive information from the mass media and other members who are not opinion leaders as well.
A) direct
B) two-step
C) multistep
D) dispersion
E) inoculation

Answer: Page: 243 Difficulty: moderate

58. Several consumers rely on information they obtain from others they see as knowledgeable about a specific product they are interested in purchasing (i.e., opinion leaders) as well as information they learn from marketing communications (i.e., advertisements) and other people that are not experts in the product category. Which type of communication flow does this represent?
A) direct
B) two-step
C) multistep
D) rapid
E) efficient

Answer: Page: 243 Difficulty: moderate

59. The exchange of advice and information between group members can occur _____.
A) directly in the form of WOM when one individual seeks information from another
B) directly in the form of WOM when one individual volunteers information
C) indirectly through observation as a by-product of normal group interaction
D) a and b
E) a, b, and c

Answer: Page: 243 Difficulty: moderate

60. Jamie wants to purchase a notebook computer, but she has limited product knowledge about computers other than how to turn one on and use it. She expects to pay over $1,000 for this computers, so this is an important decision for her and she wants to make the right choice. For Jamie, this represents a(n)_____.
A) enduring purchase situation
B) marketing dilemma
C) high-involvement purchase situation
D) consumer dilemma
E) Asch phenomenon

Answer: Page: 243 Difficulty: moderate

61. In which situation is the likelihood of an individual seeking an opinion leader high?
A) high product/purchase involvement and low product knowledge
B) high product/purchase involvement and high product knowledge
C) low product/purchase involvement and low product knowledge
D) low product/purchase involvement and high product knowledge
E) low product/purchase involvement and either high or low product knowledge

Answer: Page: 244 Difficulty: moderate

62. Which of the following characterizes opinion leaders?
A) younger
B) older
C) enduring involvement in the product or activity
D) highly educated
E) high income

Answer: Page: 244 Difficulty: easy

63. Mitch seems to know everything about cars – at least that’s what his friends and family think. He has been involved with cars since he was a child and even took an engine apart and put it back together again by the time he was 16 years old. He reads several publications related to cars, visits Web sites, and hangs out with others who are interested in cars as well. Due to his enduring involvement with this product category, Mitch would be considered a(n) _____.
A) product maven
B) opinion leader
C) product fanatic
D) product endorser
E) market leader

Answer: Page: 244 Difficulty: moderate

64. Some individuals have information about many different kinds of products, places to shop, and other aspects of markets. They can be considered a special type of opinion leader and are known as _____.
A) product experts
B) shopping experts
C) personal shoppers
D) market mavens
E) market leaders

Answer: Page: 245 Difficulty: moderate

65. Rayna provides a significant amount of information to others across a wide array of products, including durables and nondurables, services, and store type. She can provide information on product quality, sales, usual prices, product availability, store personnel characteristics, and other features of relevance to consumers. Rayna is best described as a(n) _____.
A) opinion leader
B) market maven
C) shopping expert
D) market leader
E) influencer

Answer: Page: 245 Difficulty: moderate

66. According to Roper Starch (a market research company), the 10 percent of the population that have broad social networks that allow them to influence the attitudes and behaviors of the other 90 percent of the population are called _____.
A) market mavens
B) opinion leaders
C) shopping experts
D) market leaders
E) influentials

Answer: Page: 245 Difficulty: hard

67. _____ represent about 10 percent of the adult online community, but their influence is extensive as they communicate, news, information, and experiences to a vast array of people both online and offline.
A) Market mavens
B) Internet mavens
C) E-fluentials
D) Opinion leaders
E) Cyber leaders

Answer: Page: 245 Difficulty: easy

68. With respect to advertising, _____ can involve themes designed to encourage current owners to talk about the brand or prospective owners to ask current owners for their impressions.
A) simulating
B) stimulating
C) parroting
D) modeling
E) slice of life

Answer: Page: 246 Difficulty: hard

69. With respect to advertising, _____ opinion leadership can involve presenting the results of surveys showing that a high percentage of either knowledgeable individuals or typical users recommend the brand.
A) simulating
B) stimulating
C) parroting
D) modeling
E) faking

Answer: Page: 246 Difficulty: hard

70. _____ is defined as the exponential expansion of word-of-mouth.
A) Dispersion
B) Buzz
C) Infection
D) Gossip
E) Dissemination

Answer: Page: 248 Difficulty: moderate

71. Which of the following is an online “pass-it-along” strategy?
A) online guides
B) dispersion
C) blogs
D) viral marketing
E) e-gossip

Answer: Page: 249 Difficulty: moderate

72. Online opinion leaders are known as _____.
A) market mavens
B) online guides
C) innovators
D) online go-toos
E) online search engineers

Answer: Page: 249 Difficulty: moderate

73. Several girls in the 9th grade class at a small private school maintained an online journal. In this journal, some negative comments about the school were made, and the principle made them discontinue this online journal. The principle was concerned because anybody can read these comments as long as they know the address. Personalized online journals where people and organizations can keep a running dialogue such as the one illustrated here are known as _____.
A) search engines
B) diaries
C) blogs
D) viral marketing sites
E) cyber diaries

Answer: Page: 249 Difficulty: moderate

74. Adoption of which type of innovation requires relatively minor changes in behavior or changes in behaviors that are unimportant to the consumer?
A) continuous innovation
B) dynamically continuous innovation
C) discontinuous innovation
D) technological innovation
E) nontechnological innovation

Answer: Page: 250 Difficulty: moderate

75. Leigh received a digital camera for her birthday. She was able to figure this product out pretty easily because it only required a moderate change in how she used to take pictures. One thing she had to get used to was printing the pictures instead of taking a role of film to a processor. This is an example of a _______ innovation.
A) continuous
B) dynamically continuous
C) discontinuous
D) technological
E) nontechnological

Answer: Page: 251 Difficulty: moderate

76. When purchasing an innovation, individual consumers presumably go through a series of distinct steps or stages known as the _____.
A) product life cycle
B) consumer life cycle
C) adoption process
D) consumption process
E) diffusion of innovations

Answer: Page: 251 Difficulty: moderate

77. The manner in which innovations spread throughout a market is referred to as the _____.
A) adoption process
B) consumer decision making process
C) innovation process
D) diffusion process
E) dissemination process

Answer: Page: 253 Difficulty: moderate

78. Which of the following is a factor affecting the spread of innovations?
A) type of group
B) type of decision
C) compatibility
D) observability
E) all of the above

Answer: Page: 254 Difficulty: easy

79. Which factor affecting the spread of innovations refers to the consistency with the individual’s and group’s values or beliefs?
A) relative advantage
B) complexity
C) compatibility
D) observability
E) type of decision

Answer: Page: 254 Difficulty: moderate

80. Which of the following is NOT an adopter category?
A) innovators
B) early adopters
C) early majority
D) late majority
E) procrastinators

Answer: Page: 256 Difficulty: moderate

81. Which adopter group represents the first 2.5 percent to adopt an innovation?
A) innovators
B) early adopters
C) early majority
D) late majority
E) laggards

Answer: Page: 256 Difficulty: easy

82. Charles was the last person on his block to purchase a color television set, and that was in the 1980s. He just couldn’t see the reason to purchase a new color television if his old one was working just fine. He finally purchased one because his old TV stopped working. In terms of adopter categories, Charles would be classified as a(n) _____.
A) innovator
B) early adopter
C) early majority
D) late majority
E) laggard

Answer: Page: 257 Difficulty: easy

83. Potential obstacles to rapid market acceptance of an innovation are known as _____.
A) diffusion delayers
B) laggards
C) diffusion inhibitors
D) diffusion detractors
E) minimizers

Answer: Page: 258 Difficulty: moderate

True/False Questions

84. A reference group is a group whose presumed perspectives or values are being used by an individual as the basis for his or her current behavior.

Answer: Page: 228 Difficulty: easy

85. Dissociative reference groups can influence behavior just as do those with positive desirability.

Answer: Page: 229 Difficulty: moderate

86. A brand community is a geographically bound community, based on a structured set of social relationships among owners of a brand and the psychological relationship they have with the brand itself, the product in use, and the firm.

Answer: Page: 231 Difficulty: hard

87. Brand communities are relevant for basically any type of products.

Answer: Page: 232 Difficulty: moderate

88. An e-community is a community that interacts over time around a topic of interest on the Internet.

Answer: Page: 233 Difficulty: moderate

89. Lurkers are the largest group of virtual group members and only passively peruse the group discussions without being active participants.

Answer: Page: 234 Difficulty: moderate

90. Reference group influence can take three forms: informative, normative, and identification.

Answer: Page: 235 Difficulty: moderate

91. Group influence is strongest when the use of the product or brand is visible to the group.

Answer: Page: 238 Difficulty: easy

92. Positive experiences are more powerful motivators of WOM than are negative experiences.

Answer: Page: 242 Difficulty: moderate

93. Enduring involvement leads to enhanced knowledge about and experience with the product category or activity.

Answer: Page: 244 Difficulty: easy

94. Generalized market influencers are referred to as opinion leaders.

Answer: Page: 245 Difficulty: moderate

95. Advertising can stimulate and simulate word-of-mouth but not opinion leadership.

Answer: Page: 246 Difficulty: moderate

96. Buzz is generally supported by large advertising budgets.

Answer: Page: 248 Difficulty: moderate

97. Adoption of a discontinuous innovation requires major changes in behavior of significant importance to the individual or group.

Answer: Page: 251 Difficulty: easy

98. The more the purchase and use of an innovation are consistent with the individual’s and group’s values or beliefs, the more rapid the diffusion.

Answer: Page: 254 Difficulty: easy

Essay Questions

99. There are several types of groups that influence individual’s beliefs, attitudes, and behaviors. Discuss three different types of groups that can influence consumers.

Page: 228-233 Difficulty: moderate
Answer:

100. You are a marketing manager and want to use the power of reference groups to influence consumers. Reference group influence can take three forms. Name and describe each, and explain how you could use each type of influence in an advertisement.

Page: 235-236 Difficulty: moderate
Answer:

101. Discuss the five determinants of the degree of reference group influence on a consumer.

Page: 237-238 Difficulty: moderate
Answer:

102. Compare and contrast the categories of innovations, and give an example of each.

Page: 250-251 Difficulty: moderate
Answer:

103. Apple recently came out with the video iPod, which allows users to download video content from the Internet. Very soon after the introduction of this innovation, television shows were made available for consumers to purchase or to obtain for free. This has brought about a rather radical change in the way viewers consume television, and some have predicted that this will create significant changes in the current business model for television networks and program producers. Discuss five of the many factors discussed in the chapter that will influence the spread of this innovation.

Page: 254-255 Difficulty: moderate
Answer:

Multiple Choice Questions

1. If it is literally false that Gardenburger’s competitor is not “mushroom in origin” then what category of misleading advertising does this fall into?
A) direct false claim
B) claim-belief discrepancy
C) inferential discrepancy
D) interpretation discrepancy
E) none of the above

Answer:Page: 281 and 306 Difficulty: moderate

2. Perception is a process that begins with consumer exposure and attention to marketing stimuli and ends with consumer _____.
A) interpretation
B) attitudes
C) action
D) acceptance
E) behavior

Answer:Page: 282 Difficulty: moderate

3. _____ is a series of activities by which stimuli are perceived, transformed into information, and stored.
A) Perception
B) Interpretation
C) Information processing
D) Perceptual exposure
E) Selective exposure

Answer: Page: 282 Difficulty: easy

4. Which of the following is NOT a step in the information-processing model?
A) exposure
B) comparison
C) attention
D) interpretation
E) memory

Answer: Page: 282 Difficulty: moderate

5. Which of the following stages of the information-processing model constitute perception?
A) exposure
B) exposure and attention
C) exposure, attention, and interpretation
D) exposure, attention, interpretation, and memory
E) exposure, attention, interpretation, memory, and action

Answer: Page: 282 Difficulty: moderate

6. The fact that all aspects of the perception process are extremely selective is referred to as _____.
A) perceptual selectivity
B) sensory screening
C) ego defenses
D) perceptual defenses
E) none of the above

Answer: Page: 283 Difficulty: moderate

7. _____ occurs when a stimulus is placed within a person’s relevant environment and comes within range of their sensory receptor nerves.
A) Perception
B) Attention
C) Interpretation
D) Perceptual offense
E) Exposure

Answer: Page: 283 Difficulty: easy

8. Carl is doing his homework and has the television on in the background. While it is on, several commercials aired. What stage of the information-processing model does this represent?
A) exposure
B) attention
C) interpretation
D) memory
E) action

Answer:Page: 283 Difficulty: moderate

9. _____ occurs when one fast-forwards through a commercial on a prerecorded program, and _____ involves switching channels when a commercial appears.
A) Zapping; muting
B) Zapping; zipping
C) Zipping; muting
D) Zipping; zapping
E) Muting; avoiding

Answer: Page: 284 Difficulty: moderate

10. John is watching a football game on TV when a commercial comes on. He doesn’t want to see it, so he grabs the remote control and changes the channel. What is John doing to avoid the advertising message?
A) zipping
B) zapping
C) muting
D) avoiding
E) grazing

Answer: Page: 284 Difficulty: moderate

11. Carla watches television shows whenever she has time because she uses a digital video recorder to record the shows. When she watches them, she fast-forwards through the commercials, which is known as _____.
A) zipping
B) zapping
C) muting
D) exposure
E) voluntary exposure

Answer:Page: 284 Difficulty: moderate

12. _____ is turning the sound off during commercial breaks.
A) Zipping
B) Zapping
C) Muting
D) Silencing
E) Voluntary exposure

Answer: Page: 284 Difficulty: easy

13. Zipping, zapping, and muting are simply mechanical ways for consumers to selectively avoid exposure to advertising messages, often referred to as _____.
A) exposure avoidance
B) selective perception
C) selective interpretation
D) exposure avoidance
E) ad avoidance

Answer: Page: 284 Difficulty: moderate

14. Which of the following is FALSE regarding ad avoidance?
A) Females are more likely to avoid ads than males.
B) High levels of advertising clutter increase ad avoidance.
C) Higher social classes avoid ads more than lower social classes.
D) Hectic lifestyles increase ad avoidance.
E) Younger consumers avoid ads more than older consumers.

Answer:Page: 284 Difficulty: hard

15. _____ involves incorporating brands into movies, television programs, and other entertainment venues in exchange for payment or promotional or other consideration, with the goal being to add realism to the scene, give subtle exposure to the brand, and influence consumers in an unobtrusive manner.
A) Ad integration
B) Product integration
C) Brand integration
D) Product placement
E) Product synergy

Answer: Page: 285 Difficulty: moderate

16. Barry decided he needs a new car, so he started looking at commercials on television and ads in magazines as well as visiting several Web sites. What type of exposure does this represent?
A) involuntary
B) non-voluntary
C) voluntary
D) selective
E) considered

Answer: Page: 285 Difficulty: moderate

17. A study by WPP Group suggests which group of consumers are the most likely to consider buying products they see in movies?
A) males
B) females
C) younger consumers
D) older consumers
E) gay consumers

Answer: Page: 286 Difficulty: moderate

18. Program-length commercials with an 800 number and/or Web address through which to order or request additional information are known as _____.
A) infomercials
B) direct-to-consumer advertisements
C) advertorials
D) infotorials
E) product placement

Answer:Page: 286 Difficulty: easy

19. The manufacturer of the Little Giant Ladder runs a commercial that is 60 minutes long. The inventor of the ladder shows the versatility and uniqueness of this ladder, and several “regular” people demonstrate how easy it is to use. In fact, this ladder is over 20 ladders in one because of the many different ways it can be configured. Viewers can call the 800 number or visit the Web site to purchase this product. This is an example of a(n) _____.
A) product placement
B) advertorial
C) advertising program
D) infomercial
E) infotorial

Answer: Page: 286 Difficulty: easy

20. The voluntary and self-selected nature of online offerings where consumers “opt in” to receive email-based promotions is often referred to as _____ .
A) voluntary marketing
B) optional marketing
C) allowable marketing
D) acceptable marketing
E) permission-based marketing

Answer: Page: 287 Difficulty: moderate

21. _____ occurs when the stimulus activates one or more sensory receptor nerves, and the resulting sensations go to the brain for processing.
A) Attention
B) Perception
C) Exposure
D) Interpretation
E) Selection

Answer:Page: 287 Difficulty: moderate

22. Attention is determined by which factor?
A) the stimulus
B) the individual
C) the situation
D) a and b
E) a, b, and c

Answer: Page: 287 Difficulty: moderate

23. Which of the following is considered a stimulus factor affecting attention?
A) clutter
B) position
C) motivation
D) ability
E) all of the above

Answer: Page: 288-294 Difficulty: moderate

24. Which of the following is NOT considered a stimulus factor affecting attention?
A) size
B) intensity
C) clutter
D) position
E) isolation

Answer: Page: 288-294 Difficulty: moderate

25. Which of the following statements is FALSE regarding stimulus factors and attention?
A) Larger stimuli are more likely to be noticed than smaller ones.
B) Stimuli with greater intensity (e.g., loudness, brightness, length) are more likely to be noticed than less intense stimuli.
C) Attention generally increases across repeated exposures, particularly when those exposures occur in a short period of time.
D) Individuals tend to be attracted to pleasant stimuli and repelled by unpleasant stimuli.
E) Consumers pay more attention to stimuli that contrast with their background than to stimuli that blend with it.

Answer: Page: 288-294 Difficulty: hard

26. Attention generally _____ across repeated exposures, and repetition often _____ recall.
A) increases; decreases
B) decreases; increases
C) remains constant; decreases
D) remains constant; increases
E) increases; increases

Answer: Page: 289 Difficulty: hard

27. Ron owns a small retail establishment and is seeking your advice regarding getting shoppers’ attention in the store. What should you recommend to Ron to help him get shoppers’ attention?
A) Ron should use cool colors, such as blues and grays, for displays.
B) Ron should not use large displays because that can overwhelm shoppers.
C) Ron should use warm colors, such as reds and yellows, because they are more arousing than cool colors.
D) Ron should use displays with as much information as possible because shoppers will be able to attend to all of it.
E) Ron should not use displays with moving parts because they will distract shoppers.

Answer: Page: 288-294 Difficulty: moderate

28. Which of the following statements is true regarding stimulus position and attention with respect to advertising?
A) Position effects in advertising are the same regardless of the medium used.
B) Ads on the left-hand page receive more attention than those on the right based on how we peruse magazines and newspapers.
C) For U.S. readers, high-impact zones in print ads and other print documents tend to be more toward the top and left of the ad.
D) In online contexts, horizontal banners attract more attention then vertical banners.
E) In television, the probability of a commercial being viewed and remembered increases as it moves from being the first to air during a break to the last to air.

Answer: Page: 290-291 Difficulty: hard

29. _____ is separating a stimulus object from other objects.
A) Positioning
B) Isolation
C) Formatting
D) Contrasting
E) Lateralization

Answer: Page: 292 Difficulty: easy

30. _____ refers to the manner in which the message is presented.
A) Position
B) Isolation
C) Format
D) Contrast
E) Lateralization

Answer: Page: 292 Difficulty: moderate

31. For a period of time, Energizer Batteries used mock commercials for seemingly boring, mundane products. A few seconds into the mock commercial, viewers heard the distinctive drumbeat of the Energizer Bunny before it marched across the screen. Several viewers said that when they heard the drums, they looked at and attended to the commercial because they liked the bunny. However, over time, viewers stopped paying attention to the commercial. What theory suggests that if a stimulus doesn’t change, over time we adapt or habituate to it and begin to notice it less?
A) Adaptation level theory
B) Dual-coding theory
C) Expectation theory
D) Wear-out theory
E) Over-exposure theory

Answer:Page: 293 Difficulty: moderate

32. _____ represents the number of cues in the stimulus field.
A) Interestingness
B) Contrast
C) Expectations
D) Information Quantity
E) Size/Intensity

Answer: Page: 293 Difficulty: easy

33. Walker was gathering information on plasma and LCD TVs because he wanted to purchase one for his household. He bought several electronic product magazines, visited several electronics stores, searched the Internet, and paid attention to the ads in the newspaper to learn more about this product. However, he was confronted with so much information that he could not attend to all of it. In fact, he it got to the point that he would not attend to it and became frustrated. This is an example of _____.
A) information overload
B) information burnout
C) shopping burnout
D) giving up
E) consumer backlash

Answer:Page: 293-294 Difficulty: easy

34. Which of the following is considered an individual factor affecting attention?
A) motivation
B) intensity
C) clutter
D) attractiveness
E) isolation

Answer:Page: 294 Difficulty: easy

35. What are the major individual factors affecting attention?
A) needs and wants
B) hemispheric lateralization and interpretation
C) motivation and needs
D) exposure and interpretation
E) motivation and ability

Answer: Page: 294 Difficulty: moderate

36. _____ is a drive state created by consumer interests and needs.
A) Ability
B) Emotion
C) Cognition
D) Motivation
E) Focused attention

Answer: Page: 294 Difficulty: moderate

37. _____ indicates motivation or interest in a specific product category, and it can be temporary or enduring.
A) Ability
B) Product involvement
C) Cognition
D) Focused attention
E) Interest

Answer: Page: 294 Difficulty: easy

38. Cameron was searching the Internet for information on digital cameras. He went to a search engine (i.e., Goggle) and searched the key words “digital camera.” Unbeknownst to him, several banner ads for brands and retailers of digital cameras appeared on the results page that were activated based on the terms he used in his search. These banner ads are known as _____.
A) product placement
B) zoned banners
C) smart banners
D) smart placements
E) behavioral ads

Answer: Page: 294 Difficulty: moderate

39. James is interested in just about any type of electronic equipment, such as digital video recorders, computers, MP3 players, and digital cameras. He subscribes to several magazines devoted to these types of products, and he visits several different Web sites to learn more about these products. Which individual factor affecting attention is influencing James to attend to information about these products?
A) ability
B) information quantity
C) interestingness
D) expectations
E) motivation

Answer: Page: 294 Difficulty: moderate

40. _____ refers to the capacity of individuals to attend to and process information.
A) Intelligence
B) IQ
C) Ability
D) Aptitude
E) Motivation

Answer: Page: 294 Difficulty: easy

41. Which of the following is an ability factor related to attention that may require less attention to the brand’s ads by an individual due to their high existing knowledge?
A) involvement
B) brand familiarity
C) brand equity
D) contrast
E) interestingness

Answer: Page: 294 Difficulty: moderate

42. Which factor affecting attention includes stimuli in the environment other than the focal stimulus (i.e., the ad or package) and temporary characteristics of the individual that are induced by the environment, such as time pressures or a crowded store?
A) individual factors
B) external factors
C) transient factors
D) situational factors
E) nonprogrammatic factors

Answer: Page: 294 Difficulty: moderate

43. Which of the following is a situational factor affecting attention?
A) program involvement
B) ability
C) motivation
D) repetition
E) isolation

Answer:Page: 294-295 Difficulty: moderate

44. _____ represents the density of stimuli in the environment.
A) Program involvement
B) Clutter
C) Repetition
D) Intensity
E) Isolation

Answer: Page: 295 Difficulty: easy

45. Which of the following statements is FALSE regarding situational factors affecting attention?
A) Motivation and ability are two major situational factors affecting attention.
B) In advertising, consumers pay less attention to a commercial in a large cluster of commercials than they do to one in a smaller set.
C) Clutter represents the density of stimuli in the environment.
D) Program involvement refers to how interested viewers are in the program or editorial content surrounding the ads.
E) Clutter and program involvement are two major situational factors affecting attention.

Answer:Page: 294-295 Difficulty: moderate

46. The idea behind _____ is that different parts of our brain are better suited for focused versus nonfocused attention.
A) right brain/left brain lateralization
B) subliminal lateralization
C) hemispheric lateralization
D) interpretation
E) affective interpretation

Answer: Page: 296 Difficulty: hard

47. Which side of the brain is primarily responsible for verbal information, symbolic representation, sequential analysis, and the ability to be conscious and report what is happening?
A) right
B) left
C) front
D) back
E) top

Answer: Page: 296 Difficulty: moderate

48. Which side of the brain deals with pictorial, geometric, timeless, and nonverbal information without the individual being able to verbally report it?
A) right
B) left
C) front
D) back
E) top

Answer:Page: 296 Difficulty: moderate

49. A message presented so fast or so softly or so masked by other messages that one is not aware of seeing or hearing it is called a(n) _____ stimulus.
A) subversive
B) sublingual
C) lateralized
D) subliminal
E) unfocused

Answer: Page: 296 Difficulty: moderate

50. Which of the following statements is true regarding subliminal stimuli?
A) Research on messages presented too rapidly to elicit awareness indicates that such messages can actually have a substantial effect.
B) There is evidence that marketers are using subliminal messages.
C) A subliminal ad is different from a “normal” ad in that it “hides” key persuasive information within the ad by making it so weak that it is difficult or impossible for an individual to physically detect.
D) Subliminal advertising has not been the focus of intense study and public concern.
E) Masked symbols, deliberate or accidental, do appear to affect standard measures of advertising effectiveness and can influence consumption behavior.

Answer: Page: 296 Difficulty: hard

51. _____ is the assignment of meaning to sensations.
A) Attention
B) Perception
C) Interpretation
D) Hemispheric lateralization
E) Information processing

Answer: Page: 296 Difficulty: moderate

52. Interpretation is generally a relative process rather than absolute, often referred to as _____.
A) perceptual lateralization
B) adaptation
C) perceptual defenses
D) selective perception
E) perceptual relativity

Answer: Page: 296 Difficulty: easy

53. _____ meaning is the conventional meaning assigned to a word such as found in the dictionary.
A) Semantic
B) Psychological
C) Cognitive
D) Affective
E) Seminal

Answer:Page: 297 Difficulty: moderate

54. _____ meaning is the specific meaning assigned a word by a given individual or group of individuals based on their experiences, expectations, and the context in which the term is used.
A) Semantic
B) Psychological
C) Cognitive
D) Affective
E) Seminal

Answer: Page: 297 Difficulty: moderate

55. When a teenager says, “It’s cool,” his friends understand that he’s not talking about the temperature. In this case, the meaning of the word, “cool,” is based on its _____ meaning.
A) semantic
B) psychological
C) cognitive
D) affective
E) seminal

Answer: Page: 297 Difficulty: moderate

56. _____ is a process whereby stimuli are placed into existing categories of meaning.
A) Affective interpretation
B) Consumer inference
C) Cognitive interpretation
D) Perceptual interpretation
E) Perceptual relativity

Answer: Page: 297 Difficulty: moderate

57. _____ is the emotional or feeling response triggered by a stimulus such as an ad.
A) Affective interpretation
B) Consumer inference
C) Cognitive interpretation
D) Perceptual interpretation
E) Perceptual relativity

Answer:Page: 297 Difficulty: moderate

58. When Joan sees an ad with a kitten or puppy, she always pays attention because seeing them makes her feel so happy. This emotional or feeling response triggered by the ads is known as _____.
A) affective interpretation
B) consumer inference
C) cognitive interpretation
D) perceptual interpretation
E) perceptual relativity

Answer:Page: 297 Difficulty: moderate

59. Which of the following is NOT an individual characteristic that influences interpretation?
A) traits
B) learning and knowledge
C) expectations
D) organization
E) all of the above are individual characteristics that influence interpretation

Answer: Page: 297-299 Difficulty: hard

60. Some people experience emotions more strongly than do others, which is a trait known as _____.
A) physiological differentiation
B) psychological differentiation
C) affect intensity
D) cognitive intensity
E) psychological intensity

Answer: Page: 298 Difficulty: moderate

61. Some people are known as “super tasters” because they have a higher concentration of taste buds compared to normal people. As a result, they tend to dislike the taste of broccoli because they claim it is too bitter. What type of trait is this?
A) affective
B) cognitive
C) psychological
D) physiological
E) mental

Answer: Page: 298 Difficulty: moderate

62. Denise tends to experience emotions more strongly than most people, so much so that there are some ads that she cannot even watch because they make her cry. This trait is known as _____.
A) physiological differentiation
B) psychological differentiation
C) affect intensity
D) cognitive intensity
E) psychological intensity

Answer: Page: 298 Difficulty: moderate

63. Which of the following is an individual characteristic that influences interpretation?
A) expectations
B) organization
C) changes
D) proximity
E) clutter

Answer:Page: 298 Difficulty: moderate

64. Individuals’ interpretation of stimuli tend to be consistent with their expectations, an effect referred to as the _____.
A) expectation response
B) affect intensity
C) individual bias
D) expectation trait
E) expectation bias

Answer: Page: 298 Difficulty: moderate

65. Which of the following characteristics influencing interpretation represents factors beyond the stimulus itself?
A) individual
B) personal
C) situational
D) stimulus
E) inferential

Answer: Page: 299 Difficulty: moderate

66. Which of the following is NOT a situational characteristic influencing interpretation?
A) time pressure
B) mood
C) number of other individuals present
D) nature of the material surrounding the message in question
E) all of the above are situational characteristics influencing interpretation

Answer: Page: 299 Difficulty: hard

67. Color and the nature of the programming surrounding the brand’s advertisement are examples of _____ present in the situation that can play a role in consumer interpretation independent of the actual stimulus.
A) stimulus characteristics
B) contextual cues
C) situational organization
D) stimulus cues
E) stimulus traits

Answer: Page: 299-300 Difficulty: moderate

68. An advertiser who formats its factual information so that it is easier to process _____.
A) is tapping into the isolation effect
B) is basing their strategy on figure-ground theory
C) is utilizing adaptation level theory
D) will increase the chances that their information is perceived to be true
E) none of the above

Answer: Page: 300 Difficulty: hard

69. The size, shape, and color are specific _____ of the stimulus that can affect interpretation.
A) cues
B) traits
C) elements
D) contextual cues
E) signals

Answer: Page: 300 Difficulty: hard

70. _____ involve(s) the use of an unexpected twist or artful deviation in how a message is communicated either visually in the ad’s picture or verbally in the ad’s text or headline.
A) Rhetorical figures
B) Proximity
C) Ambush marketing
D) Contextual figures
E) Affective interpretation

Answer:Page: 301 Difficulty: moderate

71. _____ is(are) a stimulus characteristic that refers to the physical arrangement of the stimulus objects and can affect consumer interpretation and categorization.
A) Proximity
B) Rhetorical figures
C) Contextual cues
D) Organization
E) Closure

Answer: Page: 300 Difficulty: easy

72. _____ refers to the fact that stimuli positioned close together are perceived as belonging to the same category.
A) Organization
B) Proximity
C) Closeness
D) Closure
E) Affect

Answer: Page: 301 Difficulty: easy

73. Any communication or activity that implies, or from which one could reasonably infer, that an organization is associated with an event, when in fact it is not is known as _____.
A) gorilla marketing
B) tangential marketing
C) stealth marketing
D) ambush marketing
E) product placement

Answer: Page: 301 Difficulty: moderate

74. Swiss Miss instant hot chocolate uses images of winter Olympic athletic events with athletes and fans warming up to a mug of their instant cocoa. While Swiss Miss is not an official sponsor of the winter Olympics, consumers viewing the ads might reasonably infer that they were. What type of marketing is this?
A) gorilla marketing
B) stealth marketing
C) product placement
D) unethical marketing
E) ambush marketing

Answer: Page: 301 Difficulty: moderate

75. _____ involves presenting an incomplete stimulus with the goal of getting consumers to complete it and thus become more engaged and involved.
A) Proximity
B) Ambush marketing
C) Closure
D) Inference
E) Figure-ground

Answer: Page: 301 Difficulty: moderate

76. _____ involves presenting the stimulus in such a way that it is perceived as the focal object to be attended to and all other stimuli are perceived as the background.
A) Proximity
B) Closure
C) Inference
D) Figure-ground
E) Fore-ground

Answer: Page: 303 Difficulty: moderate

77. The physiological ability of an individual to distinguish between similar stimuli is called _____.
A) just noticeable difference
B) sensory discrimination
C) consumer inference
D) closure
E) expectations

Answer: Page: 304 Difficulty: moderate

78. The minimum amount that one stimulus can differ from another with the difference still being noticed is referred to as the _____ .
A) just noticeable difference
B) perceptual difference
C) discriminatory difference
D) inferential difference
E) minimal difference

Answer:Page: 304 Difficulty: easy

79. Sam doesn’t know much about digital video recorders, so when he went shopping for one, he decided on the model that had the highest price and the best warranty as well as one he had seen a lot of advertising for. Sam used these factors as _____.
A) inferential variables
B) quality signals
C) just noticeable difference cues
D) sensory cues
E) choice determinants

Answer: Page: 304 Difficulty: easy

80. When a communication leads consumers to believe something about the product that is not true even though it doesn’t present a direct false claim, this is known as _____.
A) a direct claim
B) deceptive advertising
C) interpretation discrepancy
D) claim-belief discrepancy
E) inferential discrepancy

Answer: Page: 306 Difficulty: hard

81. Beverly went to the store to purchase instant hot chocolate mix for her family. A sign near the hot chocolate directed her to a specific aisle where she could purchase marshmallows. This is an example of a(n) _____.
A) cross-promotion
B) brand extension
C) co-brand
D) overlay
E) simultaneous promotion

Answer:Page: 307 Difficulty: moderate

82. Skippy is a well-known brand of peanut butter that recently introduced a line of snack bars bearing the Skippy name. This is an example of _____.
A) co-branding
B) a brand extension
C) a brand inference
D) repetition
E) quality signals

Answer: Page: 308 Difficulty: moderate

83. Which characteristic of a logo has been found to lead to higher levels of logo liking?
A) extremely elaborate
B) depicting unusual objects
C) symmetrically balanced
D) asymmetrically balanced
E) extremely simple

Answer: Page: 309 Difficulty: moderate

True/False Questions

84. The information processing model has four major steps or stages: exposure, attention, interpretation, and memory.

Answer: Page: 282 Difficulty: easy

85. Zipping, zapping, and muting are mechanical ways for consumers to selectively avoid exposure to advertising messages, often referred to as ad avoidance.

Answer: Page: 284 Difficulty: moderate

86. According to a recent study, roughly 50 percent of consumers with DVRs zipped through commercials while viewing pre-recorded material.

Answer: Page: 284 Difficulty: hard

87. Product placement is subliminal.

Answer: Page: 285 Difficulty: moderate

88. Attention is determined by three factors: the stimulus, the individual, and the situation.

Answer: Page: 287 Difficulty: moderate

89. High-impact zones in print ads and other print documents tend to be more toward the bottom and right of the ad.

Answer: Page: 290 Difficulty: moderate

90. Format refers to the placement of an object in physical space or time.

Answer: Page: 292 Difficulty: moderate

91. Reasoned-action theory suggests that if a stimulus doesn’t change, over time we adapt or habituate to it and begin to notice it less.

Answer: Page: 293 Difficulty: moderate

92. Consumer motivation and ability are the major individual factors affecting attention.

Answer: Page: 294 Difficulty: moderate

93. The right side of the brain is primarily responsible for verbal information, symbolic representation, sequential analysis, and the ability to be conscious and report what is happening.

Answer: Page: 296 Difficulty: moderate

94. Affective interpretation is a process whereby stimuli are placed into existing categories of meaning.

Answer: Page: 297 Difficulty: moderate

95. Individual characteristics affecting interpretation include traits, learning and knowledge, and expectations.

Answer: Page: 297-299 Difficulty: moderate

96. Stimulus characteristics affecting interpretation include traits, organization, and changes.

Answer: Page: 300-304 Difficulty: moderate

97. Sounds of letters and words can symbolize product attributes.

Answer: Page: 307 Difficulty: easy

98. A brand name like Charmin with its soft and rounded sounds (compared to the harshness of Scott) is taking advantage of brand morphemes.

Answer: Page: 307 Difficulty: moderate

99. Dual-branding is an alliance where two brands are put together on a single product.

Answer: Page: 308 Difficulty: moderate

Essay Questions

100. Briefly describe the concepts of information processing and perception.

Page: 282-283 Difficulty: moderate
Answer:

101. Your family owns an upscale jewelry store. Because you are a marketing major, your father asked you to develop an advertisement for the store. You know that it is important for consumers to pay attention to your ad or else the money you’ve spent on media exposure is wasted. Define attention, discuss how five of the several stimulus factors influence attention to a stimulus, and explain how you can use each in your advertisement.

Page: 288-294 Difficulty: moderate
Answer:

102. Discuss the individual factors that affect attention.

Page: 294 Difficulty: moderate
Answer:

103. Define interpretation and discuss individual characteristics affecting it.

Page: 296-299 Difficulty: moderate
Answer:

104. What is meant by the term inference, and how do consumers use inferences?

Page: 304-306 Difficulty: moderate
Answer:

Multiple Choice Questions

1. How did Johnson & Johnson hope to reposition St. Joseph’s Aspirin?
A) as the best source of arthritis pain relief in adults
B) as the best source of pain relief in children
C) as the best source for a low-dosage aspirin regime to reduce the risk of heart attacks and strokes in adults
D) as the best source of fever reduction in children
E) as the best source of pain relief in adult migraine headache sufferers

Answer: Page: 321 Difficulty: moderate

2. Which of the following provides learning experiences that affect the type of lifestyle people seek and the products they consume?
A) culture
B) family
C) friends
D) mass media
E) all of the above

Answer: Page: 322 Difficulty: easy

3. Any change in the content or organization of long-term memory or behavior is known as _____.
A) marketing
B) learning
C) cognition
D) information processing
E) repositioning

Answer: Page: 322 Difficulty: easy

4. A series of activities by which stimuli are perceived, transformed into information, and stored is called _____.
A) marketing
B) interpretation
C) learning
D) information processing
E) positioning

Answer: Page: 322 Difficulty: moderate

5. _____ is the total accumulation of prior learning experiences.
A) Memory
B) Brand image
C) Brand equity
D) Information processing
E) Positioning

Answer: Page: 323 Difficulty: easy

6. Which of the following are the two interrelated components of memory?
A) primary and secondary memory
B) conditioned and unconditioned memory
C) operant and classical memory
D) short-term and long-term memory
E) implied and explicit memory

Answer: Page: 323 Difficulty: moderate

7. Which component of memory is also referred to as working memory and is that portion of total memory that is currently activated or in use?
A) short-term memory
B) long-term memory
C) primary memory
D) secondary memory
E) transient memory

Answer: Page: 323 Difficulty: moderate

8. Which portion of total memory is devoted to permanent information storage?
A) short-term memory
B) long-term memory
C) primary memory
D) secondary memory
E) established memory

Answer: Page: 323 Difficulty: moderate

9. Which of the following statements is FALSE regarding short-term memory (STM)?
A) STM is short-lived.
B) STM has limited capacity.
C) STM is a static structure.
D) Elaborative activities occur in STM
E) STM is also called working memory.

Answer: Page: 323-324 Difficulty: moderate

10. Which of the following refers to the continual repetition of a piece of information in order to hold it in current memory for use in problem solving or transferal to long-term memory?
A) schema
B) scripts
C) imagery
D) maintenance rehearsal
E) chunking

Answer: Page: 323 Difficulty: moderate

11. Nick looked up a phone number in the telephone directory, and instead of writing it down, he kept repeating it to himself over and over until he could punch the numbers and make the call. Which of the following describes what Nick was doing?
A) developing a schema
B) developing a script
C) employing imagery
D) maintenance rehearsal
E) chunking information

Answer: Page: 323 Difficulty: moderate

12. The capacity of STM is thought to be in the range of _____ bits of information.
A) 1 to 2
B) 3 to 5
C) 5 to 9
D) 10 to 14
E) 15 to 20

Answer: Page: 323 Difficulty: hard

13. Organizing individual items into groups of related items that can be processed as a single unit is called _____.
A) chunking
B) maintenance rehearsal
C) zipping
D) minimizing
E) conditioning

Answer: Page: 323 Difficulty: moderate

14. Robert was studying for an exam and organized lists of things into words that he could remember. For example, he needed to know five creative advertising strategies, and used the first letter of each strategy to form the acronym, AIIEE. He knew what word each letter stood for and then only had to remember this acronym for the exam. What is Robert doing?
A) chunking
B) maintenance rehearsal
C) zipping
D) minimizing
E) conditioning

Answer: Page: 323 Difficulty: moderate

15. Using the toll-free number 1-800-FLOWERS to help consumers remember the phone number is an example of _____.
A) chunking
B) maintenance rehearsal
C) zipping
D) minimizing
E) conditioning

Answer: Page: 323 Difficulty: moderate

16. Which group of consumers are better able to chunk product information?
A) younger consumers
B) older consumers
C) males
D) females
E) product experts

Answer: Page: 324 Difficulty: easy

17. _____ are(is) the use of previously stored experiences, values, attitudes, beliefs, and feelings to interpret and evaluate information in working memory as well as to add relevant previously stored information.
A) Maintenance rehearsal
B) Chunking
C) Elaborative activities
D) Conceptualization
E) Conditioning

Answer: Page: 324 Difficulty: moderate

18. A television commercial for Senseo brand of coffee maker that can make coffee similar to what consumers purchase at coffee shops (e.g., Starbucks) encourages viewers to remember the experience of drinking their favorite coffee drinks at these types of shops. This coffee maker allows consumers to experience that sensation at home. What is this marketer trying to encourage?
A) maintenance rehearsal
B) chunking
C) elaborative activities
D) conceptualization
E) conditioning

Answer: Page: 324 Difficulty: hard

19. Which of the following are abstractions of reality that capture the meaning of an item in terms of other concepts?
A) imagery
B) concepts
C) episodes
D) semantics
E) schema

Answer: Page: 325 Difficulty: hard

20. Which type of processing involves the recall and mental manipulation of sensory images, including sight, smell, taste, and tactile (touch) sensations?
A) imagery processing
B) mental processing
C) episodic processing
D) transient processing
E) conditioned processing

Answer: Page: 325 Difficulty: moderate

21. Which type of memory is viewed as an unlimited, permanent storage that can store numerous types of information such as concepts, decision rules, processes, affective (emotional) states, and so forth?
A) short-term memory
B) long-term memory
C) primary memory
D) secondary memory
E) episodic memory

Answer: Page: 325 Difficulty: easy

22. The basic knowledge and feelings an individuals has about a concept is known as _____.
A) episodic memory
B) primary memory
C) accessible memory
D) semantic memory
E) conditioned memory

Answer: Page: 325 Difficulty: moderate

23. When asked what the concept “New Year’s” meant to Holly, she mentioned the following: party, holiday, new beginning, football, fun, resolution, and winter. Holly’s basic knowledge and feelings she has about this concept comprises her _____.
A) episodic memory
B) primary memory
C) accessible memory
D) semantic memory
E) conditioned memory

Answer: Page: 325 Difficulty: moderate

24. The memory of a sequence of events in which a person participated is called _____.
A) episodic memory
B) primary memory
C) accessible memory
D) semantic memory
E) conditioned memory

Answer: Page: 325 Difficulty: moderate

25. Shirley and Bud have been married for almost 50 years, but Shirley can remember their wedding day so clearly. She remembers how happy she felt that day and how wonderful it was to celebrate their marriage with all of their family and friends. She even remembers walking down the aisle, seeing her future husband waiting for her, and her father kissing her as her placed her hand in Bud’s. Which type of memory does this represent?
A) episodic memory
B) primary memory
C) accessible memory
D) semantic memory
E) conditioned memory

Answer: Page: 325 Difficulty: moderate

26. What are two important long-term memory structures?
A) primary and secondary
B) schema and scripts
C) semantic and conceptual
D) conceptual and imagery
E) iconic and vicarious

Answer: Page: 325 Difficulty: moderate

27. Which type of memory structure is a complex web of associations?
A) schema
B) image
C) script
D) iconic
E) conceptual

Answer: Page: 325 Difficulty: moderate

28. Which of the following statements is FALSE regarding schemas?
A) A schema is also known as a knowledge structure.
B) Concepts, events, and feelings are stored in nodes within memory.
C) Associative links vary in terms of how strongly and how directly they are associated with a node.
D) Once an associative link is formed, it is permanent.
E) Marketers expend substantial effort to influence the schema consumers have for their brands.

Answer: Page: 325-327 Difficulty: hard

29. Brands in the schematic memory that come to mind (are recalled) for a specific problem or situation are known as the _____.
A) preferred set
B) evoked set
C) priority set
D) accessible set
E) primary set

Answer: Page: 327 Difficulty: moderate

30. Leslie was participating in a market research study, and she was asked to list all of the brands of computer printers that come to her mind. She listed HP, Epson, and Lexmark. These brands represent Leslie’s _____.
A) preferred set
B) evoked set
C) priority set
D) accessible set
E) primary set

Answer: Page: 327 Difficulty: moderate

31. Memory of how an action should occur is a special type of schema known as a(n) _____.
A) directive
B) episode
C) concept
D) operant
E) script

Answer: Page: 327 Difficulty: moderate

32. Maria was raised as a Catholic, but she has not been attending church regularly since she moved out of her parents’ home into her own apartment. However, when she does attend mass, she remembers the sequence of events and what she must do (e.g., sit, kneel, stand, which prayer to say, etc.). Her memory of how an action sequence should occur is known as a(n) _____.
A) directive
B) episode
C) concept
D) operant
E) script

Answer: Page: 327 Difficulty: moderate

33. The likelihood and ease with which information can be recalled from long-term memory is termed _____.
A) retrieval
B) elaboration
C) maintenance
D) accessibility
E) learning

Answer: Page: 327 Difficulty: moderate

34. How can accessibility of information stored in long-term memory be enhanced?
A) repetition
B) rehearsal
C) elaboration
D) a and b
E) a, b, and c

Answer: Page: 327 Difficulty: moderate

35. The accessibility effect for brands is called _____.
A) episodic awareness
B) conceptual awareness
C) top-of-mind awareness
D) operant learning
E) conditioned response

Answer: Page: 327 Difficulty: moderate

36. Accessibility is related to which of the following?
A) strength of incoming linkages
B) number of incoming linkages
C) strength of links to nodes
D) directness of links to nodes
E) all of the above

Answer: Page: 327 Difficulty: easy

37. Which type of memory is characterized by the conscious recollection of an exposure event?
A) explicit memory
B) schematic memory
C) implicit memory
D) constructed memory
E) concrete memory

Answer: Page: 328 Difficulty: moderate

38. Which type of memory involves the nonconscious retrieval of previously encountered stimuli?
A) explicit memory
B) schematic memory
C) implicit memory
D) constructed memory
E) concrete memory

Answer: Page: 328 Difficulty: moderate

39. A market researcher asked Carl about his recollection of a specific exposure event, such as seeing an advertisement, or experience, such as driving or riding in an Acura automobile, which was the brand the researcher was interested in. While Carl could not recall a specific ad and has never traveled in an Acura, he seemed to “know” quite a bit about this brand. Carl described the brand as “reliable,” “high-performance,” “luxury,” and “expensive.” Which type of memory does this represent?
A) explicit memory
B) implicit memory
C) scripted memory
D) suppressed memory
E) subliminal memory

Answer: Page: 328 Difficulty: moderate

40. Which type of learning situation is one in which the consumer is motivated to process or learn the material?
A) explicit learning
B) implicit learning
C) primary learning
D) low-involvement learning
E) high-involvement learning

Answer: Page: 329 Difficulty: moderate

41. Pat is purchasing new tires for his car. Since he expected to spend $400 or more for these tires, he started researching on the Internet. He spent several days learning about this product and studied several consumer magazines (e.g., Consumer Reports). He decided to purchase Yokohama tires because they were rated the best tire value. Which type of learning situation does this illustrate?
A) explicit learning
B) implicit learning
C) primary learning
D) low-involvement learning
E) high-involvement learning

Answer: Page: 329 Difficulty: moderate

42. In which type of learning situation does the consumer have little or no motivation to process or learn the material?
A) explicit learning
B) implicit learning
C) primary learning
D) low-involvement learning
E) high-involvement learning

Answer: Page: 329 Difficulty: moderate

43. Kay was watching American Idol on television when a commercial for toilet tissue came on. She was not motivated at all to process the information provided in the ad. Which type of learning situation does this represent?
A) explicit learning
B) implicit learning
C) primary learning
D) low-involvement learning
E) high-involvement learning

Answer: Page: 329 Difficulty: moderate

44. Which of the following is the primary determinant of how material is learned?
A) education level
B) age
C) level of involvement
D) occupation
E) gender

Answer: Page: 330 Difficulty: moderate

45. High-involvement learning often involves _____.
A) classical conditioning
B) analytical reasoning
C) iconic rote learning
D) all of the above
E) none of the above

Answer: Page: 330 Difficulty: moderate

46. High-involvement learning often involves _____.
A) classical conditioning
B) iconic rote learning
C) operant conditioning
D) all of the above
E) none of the above

Answer: Page: 330 Difficulty: hard

47. Low-involvement learning often involves _____.
A) classical conditioning
B) iconic rote learning
C) modeling
D) all of the above
E) none of the above

Answer: Page: 330 Difficulty: hard

48. Which of the following is NOT a specific learning theory?
A) schematic
B) operant
C) iconic rote
D) vicarious/modeling
E) reasoning/analogy

Answer: Page: 330 Difficulty: moderate

49. Which of the following involves presenting two stimuli in close proximity so that eventually the two are perceived to be related or associated?
A) pairing
B) combining
C) conditioning
D) operating
E) shaping

Answer: Page: 330-331 Difficulty: moderate

50. What are the two basic forms of conditioned learning?
A) classical and operant
B) classical and iconic
C) iconic rote and modeling
D) analogy and metaphor
E) positive and negative

Answer: Page: 331 Difficulty: moderate

51. _____ attempts to create an association between a stimulus (e.g., brand name) and some response (e.g., behavior or feeling).
A) Analogous conditioning
B) Iconic rote conditioning
C) Classical conditioning
D) Modeled conditioning
E) Vicarious conditioning

Answer: Page: 331 Difficulty: moderate

52. _____ attempts to create an association between a response (e.g., buying a brand) and some outcome (e.g., satisfaction) that serves to reinforce the response.
A) Operant conditioning
B) Iconic rote conditioning
C) Classical conditioning
D) Modeled conditioning
E) Vicarious conditioning

Answer: Page: 331 Difficulty: moderate

53. Coca-Cola does not advertise during the evening news because the marketer does not want the often negative information reported on the news to create a negative feeling toward the brand. Which type of learning creates an association between the brand and some response?
A) classical conditioning
B) operant conditioning
C) iconic learning
D) vicarious learning
E) reinforced learning

Answer: Page: 331 Difficulty: moderate

54. The more often a response is reinforced, the more likely it will be repeated in the future as consumers learn that the response is associated with a positive outcome is the basic premise of which type of learning?
A) classical conditioning
B) operant conditioning
C) iconic learning
D) vicarious learning
E) reinforced learning

Answer: Page: 332 Difficulty: moderate

55. Which type of conditioning requires that consumers first engage in a deliberate behavior (i.e., trying the product) and come to understand its power in predicting positive outcomes that serve as reinforcement?
A) classical conditioning
B) operant conditioning
C) iconic conditioning
D) vicarious conditioning
E) reinforced conditioning

Answer: Page: 332 Difficulty: moderate

56. The process of encouraging partial responses leading to the final desired response is known as _____.
A) step learning
B) staging
C) stepping
D) shaping
E) modeling

Answer: Page: 332 Difficulty: moderate

57. Procter & Gamble, the maker of Crest brand toothpaste, has modified this brand to include whiteners. To encourage consumers to adopt this brand, P&G gave away free samples along with a high value coupon on the purchase of a tube. The hope was that consumers would try the brand, purchase it at a discount, and finally buy it at full price. This is an example of _____.
A) step learning
B) staging
C) stepping
D) shaping
E) modeling

Answer: Page: 332 Difficulty: moderate

58. Which type of learning encompasses all the mental activities of humans as they work to solve problems or cope with situations?
A) conditioning
B) cognitive learning
C) affective learning
D) shaping
E) conscious learning

Answer: Page: 334 Difficulty: moderate

59. Which of the following is NOT a type of cognitive learning?
A) iconic rote
B) vicarious
C) reasoning/analogy
D) operant
E) all of the above are types of cognitive learning

Answer: Page: 334-335 Difficulty: hard

60. Learning a concept or the association between two or more concepts in the absence of conditioning is known as _____.
A) operant learning
B) iconic rote learning
C) vicarious learning
D) modeling
E) analytical reasoning

Answer: Page: 334 Difficulty: moderate

61. Thomas is studying for vocabulary exam by merely repeating the words and their definitions over and over. Which type of cognitive learning is this?
A) operant learning
B) vicarious learning
C) modeling
D) analytical reasoning
E) iconic rote learning

Answer: Page: 334 Difficulty: moderate

62. When consumers do not directly experience a reward or punishment to learn but instead observe the outcomes of others’ behaviors and adjust their own accordingly, which type of learning has occurred?
A) operant learning
B) vicarious learning
C) shaping
D) analytical reasoning
E) iconic rote learning

Answer: Page: 334 Difficulty: moderate

63. The most complex form of cognitive learning is _____.
A) operant learning
B) vicarious learning
C) iconic rote learning
D) analytical reasoning
E) modeling

Answer: Page: 335 Difficulty: moderate

64. Which type of reasoning allows consumers to use an existing knowledge base to understand a new situation or object?
A) operant reasoning
B) analogical reasoning
C) cognitive reasoning
D) affective reasoning
E) conscious reasoning

Answer: Page: 335 Difficulty: moderate

65. _____ refers to the process of learning to respond differently to similar but distinct stimuli.
A) Stimulus generalization
B) Stimulus reasoning
C) Stimulus discrimination
D) Stimulus contrasting
E) Stimulus identification

Answer: Page: 336 Difficulty: easy

66. _____ occurs when a response to one stimulus is elicited by a similar but distinct stimulus.
A) Stimulus generalization
B) Stimulus reasoning
C) Stimulus discrimination
D) Stimulus contrasting
E) Stimulus identification

Answer: Page: 336 Difficulty: moderate

67. Many store brands use packaging and labeling that is similar to the more expensive national brand. The hope is that the look-alike package will elicit a similar response in consumers that encourages them to purchase the cheaper store brand. This is an example of _____.
A) stimulus discrimination
B) stimulus generalization
C) stimulus confusion
D) stimulus similarity
E) stimulus deception

Answer: Page: 336 Difficulty: moderate

68. In conditioned learning, forgetting is often referred to as _____.
A) decay
B) deconditioning
C) extinction
D) failure
E) retrieval failure

Answer: Page: 337 Difficulty: moderate

69. Which of the following enhances the strength of learning?
A) importance
B) message involvement
C) mood
D) repetition
E) all of the above

Answer: Page: 338 Difficulty: easy

70. Donald has just learned that he has Type II diabetes, so he wants to learn as much as he can to manage his health. He reads health magazines, visits health-related Web sites, and reads product nutrition and ingredient information on packages. Donald’s strength of learning is most likely to be strong due to which factor that affects the strength of learning?
A) mood
B) punishment
C) importance
D) repetition
E) dual coding

Answer: Page: 339 Difficulty: moderate

71. Ads that encourage consumers to remember past personal experiences and use language such as “you” and “your” in the copy are using the strategy of _____ to enhance message involvement.
A) importance
B) personalization
C) dual coding
D) mood enhancement
E) self-referencing

Answer: Page: 339 Difficulty: moderate

72. Anything that increases the likelihood that a given response will be repeated in the future is considered _____.
A) punishment
B) a reward
C) reinforcement
D) a conditioned stimulus
E) an operant

Answer: Page: 340 Difficulty: moderate

73. A local car dealership advertises quite frequently on local broadcast and cable television, and it seems as though the man in the ad is always yelling for consumers to “Come on down, you’ll be glad you did!” This car dealership uses the same type of ad over and over even though the specific information changes, and consumers tend to shut out the message, evaluate it negatively, or disregard it. John is so sick of these ads that he instantly changes the channel when one comes on. This is an example of _____.
A) zipping
B) advertising wearout
C) interference
D) pulsing
E) poor positioning

Answer: Page: 342 Difficulty: moderate

74. Sometimes consumers have difficulty retrieving a specific piece of information because other related information in memory gets in the way, which is an effect referred to as _____.
A) noise
B) echoic memory
C) interference
D) clutter
E) memory failure

Answer: Page: 344 Difficulty: moderate

75. Which of the following is a strategy to reduce competitive interference?
A) create a semantic memory of a brand
B) create a episodic memory of a brand
C) use pulsing
D) provide external retrieval cues
E) provide an incentive for trial

Answer: Page: 345 Difficulty: moderate

76. _____ refers to the schematic memory of a brand.
A) Brand image
B) Brand equity
C) Brand leverage
D) Brand position
E) Brand benefit

Answer: Page: 346 Difficulty: moderate

77. Many consumers associate Mercedes automobiles with status, luxury, quality engineering, and high price. This is an example of Mercedes’ _____.
A) brand equity
B) brand image
C) brand leverage
D) brand position
E) brand identity

Answer: Page: 346 Difficulty: moderate

78. The decision by a marketer to try to achieve a defined brand image relative to competition within a market segment is called _____.
A) product extension
B) brand extension
C) brand leveraging
D) product positioning
E) product equity

Answer: Page: 347 Difficulty: moderate

79. Which of the following offers marketing managers a useful technique for measuring and developing a product’s position by taking consumers’ perceptions of how similar various brands or products are to each other and relates these perceptions to product attributes?
A) regression analysis
B) conjoint analysis
C) analytical mapping
D) perceptual mapping
E) laddering

Answer: Page: 349 Difficulty: moderate

80. Vanity Fair, the makers of Lee jeans, learned from market research that young men perceived the brand as for women. As a result, they developed an advertising campaign targeted to young men and used Buddy Lee, which is a little doll in dungarees that is portrayed as “cool,” to alter this market’s perception of this brand. Vanity Fair’s deliberate decision to significantly alter the way the market views its brand is an example of _____.
A) product positioning
B) product repositioning
C) brand extension
D) brand leveraging
E) brand revival

Answer: Page: 350 Difficulty: moderate

81. The value consumers assign to a brand above and beyond the functional characteristics of the product is known as _____.
A) brand solvency
B) brand liquidation
C) brand image
D) brand equity
E) brand leverage

Answer: Page: 351 Difficulty: moderate

82. When Honda introduced its Odyssey mini-van, its advertising merely claimed, “It’s the Honda of mini-vans.” This is an example of _____.
A) brand leverage
B) brand generalization
C) brand discrimination
D) brand substitute
E) brand complement

Answer: Page: 351 Difficulty: moderate

83. When consumers see the new product (i.e., brand extension) as requiring the same manufacturing skills as the original, successful brand leverage is more likely. Which dimension is this referring to?
A) complement
B) substitute
C) transfer
D) image
E) extension

Answer: Page: 351-352 Difficulty: moderate

True/False Questions

84. Long-term memory (LTM) is also called working memory.

Answer: Page: 323 Difficulty: easy

85. Elaborative activities occur in short-term memory.

Answer: Page: 324 Difficulty: moderate

86. Semantic memory is the memory of a sequence of events in which a person participated.

Answer: Page: 325 Difficulty: moderate

87. In general, multiple memory nodes are activated simultaneously.

Answer: Page: 326 Difficulty: moderate

88. Explicit memory is characterized by the conscious recollection of an exposure event.

Answer: Page: 328 Difficulty: moderate

89. Level of involvement is the primary determinant of how material is learned.

Answer: Page: 330 Difficulty: moderate

90. The process of encouraging partial responses leading to the final desired response is known as classical conditioning.

Answer: Page: 332 Difficulty: moderate

91. Consumers must directly experience a reward or punishment to learn.

Answer: Page: 334 Difficulty: moderate

92. Stimulus discrimination refers to the process of learning to respond differently to similar but distinct stimuli.

Answer: Page: 336 Difficulty: moderate

93. In conditioned learning, forgetting is often referred to as extinction.

Answer: Page: 337 Difficulty: moderate

94. Self-concept indicates that consumers are relating brand information to themselves.

Answer: Page: 339 Difficulty: moderate

95. Learning cannot occur in the absence of reinforcement.

Answer: Page: 340 Difficulty: hard

96. Echoic memory is the memory of sounds, including words.

Answer: Page: 343 Difficulty: moderate

97. Brand image refers to the semantic memory of a brand.

Answer: Page: 346 Difficulty: moderate

98. Successful brand leverage generally requires that the original brand have a strong positive image and that the new product fit with the original product on the each of the following four dimensions: complement, substitute, transfer, and image.

Answer: Page: 351-352 Difficulty: hard

Essay Questions

99. Name and describe the two components of memory.

Page: 323-327 Difficulty: moderate
Answer:

100. Bryan is the brand manager for a brand of paper towels and knows that consumers’ involvement with this product is low. Name and briefly describe learning theories that are appropriate for this situation, and provide an example of how Bryan can use each to influence consumers to purchase his brand.

Page: 330-335 Difficulty: hard
Answer:

101. Strength of learning is one factor that determines how long-lasting a learned response will be. That is, the stronger the original learning (e.g., of nodes and links between nodes), the more likely relevant information will be retrieved when required. Discuss three of the six factors enhancing the strength of learning.

Page: 338-342 Difficulty: moderate
Answer:

102. Explain the concept of memory interference, and discuss four strategies for reducing it.

Page: 344-345 Difficulty: moderate
Answer:

103. Compare and contrast the terms brand image, brand equity, product positioning, and brand leverage.

Page: 346-351 Difficulty: moderate
Answer:

Multiple Choice Questions

1. How did Johnson & Johnson hope to reposition St. Joseph’s Aspirin?
A) as the best source of arthritis pain relief in adults
B) as the best source of pain relief in children
C) as the best source for a low-dosage aspirin regime to reduce the risk of heart attacks and strokes in adults
D) as the best source of fever reduction in children
E) as the best source of pain relief in adult migraine headache sufferers

Answer: Page: 321 Difficulty: moderate

2. Which of the following provides learning experiences that affect the type of lifestyle people seek and the products they consume?
A) culture
B) family
C) friends
D) mass media
E) all of the above

Answer: Page: 322 Difficulty: easy

3. Any change in the content or organization of long-term memory or behavior is known as _____.
A) marketing
B) learning
C) cognition
D) information processing
E) repositioning

Answer: Page: 322 Difficulty: easy

4. A series of activities by which stimuli are perceived, transformed into information, and stored is called _____.
A) marketing
B) interpretation
C) learning
D) information processing
E) positioning

Answer: Page: 322 Difficulty: moderate

5. _____ is the total accumulation of prior learning experiences.
A) Memory
B) Brand image
C) Brand equity
D) Information processing
E) Positioning

Answer: Page: 323 Difficulty: easy

6. Which of the following are the two interrelated components of memory?
A) primary and secondary memory
B) conditioned and unconditioned memory
C) operant and classical memory
D) short-term and long-term memory
E) implied and explicit memory

Answer: Page: 323 Difficulty: moderate

7. Which component of memory is also referred to as working memory and is that portion of total memory that is currently activated or in use?
A) short-term memory
B) long-term memory
C) primary memory
D) secondary memory
E) transient memory

Answer: Page: 323 Difficulty: moderate

8. Which portion of total memory is devoted to permanent information storage?
A) short-term memory
B) long-term memory
C) primary memory
D) secondary memory
E) established memory

Answer: Page: 323 Difficulty: moderate

9. Which of the following statements is FALSE regarding short-term memory (STM)?
A) STM is short-lived.
B) STM has limited capacity.
C) STM is a static structure.
D) Elaborative activities occur in STM
E) STM is also called working memory.

Answer: Page: 323-324 Difficulty: moderate

10. Which of the following refers to the continual repetition of a piece of information in order to hold it in current memory for use in problem solving or transferal to long-term memory?
A) schema
B) scripts
C) imagery
D) maintenance rehearsal
E) chunking

Answer: Page: 323 Difficulty: moderate

11. Nick looked up a phone number in the telephone directory, and instead of writing it down, he kept repeating it to himself over and over until he could punch the numbers and make the call. Which of the following describes what Nick was doing?
A) developing a schema
B) developing a script
C) employing imagery
D) maintenance rehearsal
E) chunking information

Answer: Page: 323 Difficulty: moderate

12. The capacity of STM is thought to be in the range of _____ bits of information.
A) 1 to 2
B) 3 to 5
C) 5 to 9
D) 10 to 14
E) 15 to 20

Answer: Page: 323 Difficulty: hard

13. Organizing individual items into groups of related items that can be processed as a single unit is called _____.
A) chunking
B) maintenance rehearsal
C) zipping
D) minimizing
E) conditioning

Answer: Page: 323 Difficulty: moderate

14. Robert was studying for an exam and organized lists of things into words that he could remember. For example, he needed to know five creative advertising strategies, and used the first letter of each strategy to form the acronym, AIIEE. He knew what word each letter stood for and then only had to remember this acronym for the exam. What is Robert doing?
A) chunking
B) maintenance rehearsal
C) zipping
D) minimizing
E) conditioning

Answer: Page: 323 Difficulty: moderate

15. Using the toll-free number 1-800-FLOWERS to help consumers remember the phone number is an example of _____.
A) chunking
B) maintenance rehearsal
C) zipping
D) minimizing
E) conditioning

Answer: Page: 323 Difficulty: moderate

16. Which group of consumers are better able to chunk product information?
A) younger consumers
B) older consumers
C) males
D) females
E) product experts

Answer: Page: 324 Difficulty: easy

17. _____ are(is) the use of previously stored experiences, values, attitudes, beliefs, and feelings to interpret and evaluate information in working memory as well as to add relevant previously stored information.
A) Maintenance rehearsal
B) Chunking
C) Elaborative activities
D) Conceptualization
E) Conditioning

Answer: Page: 324 Difficulty: moderate

18. A television commercial for Senseo brand of coffee maker that can make coffee similar to what consumers purchase at coffee shops (e.g., Starbucks) encourages viewers to remember the experience of drinking their favorite coffee drinks at these types of shops. This coffee maker allows consumers to experience that sensation at home. What is this marketer trying to encourage?
A) maintenance rehearsal
B) chunking
C) elaborative activities
D) conceptualization
E) conditioning

Answer: Page: 324 Difficulty: hard

19. Which of the following are abstractions of reality that capture the meaning of an item in terms of other concepts?
A) imagery
B) concepts
C) episodes
D) semantics
E) schema

Answer: Page: 325 Difficulty: hard

20. Which type of processing involves the recall and mental manipulation of sensory images, including sight, smell, taste, and tactile (touch) sensations?
A) imagery processing
B) mental processing
C) episodic processing
D) transient processing
E) conditioned processing

Answer: Page: 325 Difficulty: moderate

21. Which type of memory is viewed as an unlimited, permanent storage that can store numerous types of information such as concepts, decision rules, processes, affective (emotional) states, and so forth?
A) short-term memory
B) long-term memory
C) primary memory
D) secondary memory
E) episodic memory

Answer: Page: 325 Difficulty: easy

22. The basic knowledge and feelings an individuals has about a concept is known as _____.
A) episodic memory
B) primary memory
C) accessible memory
D) semantic memory
E) conditioned memory

Answer: Page: 325 Difficulty: moderate

23. When asked what the concept “New Year’s” meant to Holly, she mentioned the following: party, holiday, new beginning, football, fun, resolution, and winter. Holly’s basic knowledge and feelings she has about this concept comprises her _____.
A) episodic memory
B) primary memory
C) accessible memory
D) semantic memory
E) conditioned memory

Answer: Page: 325 Difficulty: moderate

24. The memory of a sequence of events in which a person participated is called _____.
A) episodic memory
B) primary memory
C) accessible memory
D) semantic memory
E) conditioned memory

Answer: Page: 325 Difficulty: moderate

25. Shirley and Bud have been married for almost 50 years, but Shirley can remember their wedding day so clearly. She remembers how happy she felt that day and how wonderful it was to celebrate their marriage with all of their family and friends. She even remembers walking down the aisle, seeing her future husband waiting for her, and her father kissing her as her placed her hand in Bud’s. Which type of memory does this represent?
A) episodic memory
B) primary memory
C) accessible memory
D) semantic memory
E) conditioned memory

Answer: Page: 325 Difficulty: moderate

26. What are two important long-term memory structures?
A) primary and secondary
B) schema and scripts
C) semantic and conceptual
D) conceptual and imagery
E) iconic and vicarious

Answer: Page: 325 Difficulty: moderate

27. Which type of memory structure is a complex web of associations?
A) schema
B) image
C) script
D) iconic
E) conceptual

Answer: Page: 325 Difficulty: moderate

28. Which of the following statements is FALSE regarding schemas?
A) A schema is also known as a knowledge structure.
B) Concepts, events, and feelings are stored in nodes within memory.
C) Associative links vary in terms of how strongly and how directly they are associated with a node.
D) Once an associative link is formed, it is permanent.
E) Marketers expend substantial effort to influence the schema consumers have for their brands.

Answer: Page: 325-327 Difficulty: hard

29. Brands in the schematic memory that come to mind (are recalled) for a specific problem or situation are known as the _____.
A) preferred set
B) evoked set
C) priority set
D) accessible set
E) primary set

Answer: Page: 327 Difficulty: moderate

30. Leslie was participating in a market research study, and she was asked to list all of the brands of computer printers that come to her mind. She listed HP, Epson, and Lexmark. These brands represent Leslie’s _____.
A) preferred set
B) evoked set
C) priority set
D) accessible set
E) primary set

Answer: Page: 327 Difficulty: moderate

31. Memory of how an action should occur is a special type of schema known as a(n) _____.
A) directive
B) episode
C) concept
D) operant
E) script

Answer: Page: 327 Difficulty: moderate

32. Maria was raised as a Catholic, but she has not been attending church regularly since she moved out of her parents’ home into her own apartment. However, when she does attend mass, she remembers the sequence of events and what she must do (e.g., sit, kneel, stand, which prayer to say, etc.). Her memory of how an action sequence should occur is known as a(n) _____.
A) directive
B) episode
C) concept
D) operant
E) script

Answer: Page: 327 Difficulty: moderate

33. The likelihood and ease with which information can be recalled from long-term memory is termed _____.
A) retrieval
B) elaboration
C) maintenance
D) accessibility
E) learning

Answer: Page: 327 Difficulty: moderate

34. How can accessibility of information stored in long-term memory be enhanced?
A) repetition
B) rehearsal
C) elaboration
D) a and b
E) a, b, and c

Answer: Page: 327 Difficulty: moderate

35. The accessibility effect for brands is called _____.
A) episodic awareness
B) conceptual awareness
C) top-of-mind awareness
D) operant learning
E) conditioned response

Answer: Page: 327 Difficulty: moderate

36. Accessibility is related to which of the following?
A) strength of incoming linkages
B) number of incoming linkages
C) strength of links to nodes
D) directness of links to nodes
E) all of the above

Answer: Page: 327 Difficulty: easy

37. Which type of memory is characterized by the conscious recollection of an exposure event?
A) explicit memory
B) schematic memory
C) implicit memory
D) constructed memory
E) concrete memory

Answer: Page: 328 Difficulty: moderate

38. Which type of memory involves the nonconscious retrieval of previously encountered stimuli?
A) explicit memory
B) schematic memory
C) implicit memory
D) constructed memory
E) concrete memory

Answer: Page: 328 Difficulty: moderate

39. A market researcher asked Carl about his recollection of a specific exposure event, such as seeing an advertisement, or experience, such as driving or riding in an Acura automobile, which was the brand the researcher was interested in. While Carl could not recall a specific ad and has never traveled in an Acura, he seemed to “know” quite a bit about this brand. Carl described the brand as “reliable,” “high-performance,” “luxury,” and “expensive.” Which type of memory does this represent?
A) explicit memory
B) implicit memory
C) scripted memory
D) suppressed memory
E) subliminal memory

Answer: Page: 328 Difficulty: moderate

40. Which type of learning situation is one in which the consumer is motivated to process or learn the material?
A) explicit learning
B) implicit learning
C) primary learning
D) low-involvement learning
E) high-involvement learning

Answer: Page: 329 Difficulty: moderate

41. Pat is purchasing new tires for his car. Since he expected to spend $400 or more for these tires, he started researching on the Internet. He spent several days learning about this product and studied several consumer magazines (e.g., Consumer Reports). He decided to purchase Yokohama tires because they were rated the best tire value. Which type of learning situation does this illustrate?
A) explicit learning
B) implicit learning
C) primary learning
D) low-involvement learning
E) high-involvement learning

Answer: Page: 329 Difficulty: moderate

42. In which type of learning situation does the consumer have little or no motivation to process or learn the material?
A) explicit learning
B) implicit learning
C) primary learning
D) low-involvement learning
E) high-involvement learning

Answer: Page: 329 Difficulty: moderate

43. Kay was watching American Idol on television when a commercial for toilet tissue came on. She was not motivated at all to process the information provided in the ad. Which type of learning situation does this represent?
A) explicit learning
B) implicit learning
C) primary learning
D) low-involvement learning
E) high-involvement learning

Answer: Page: 329 Difficulty: moderate

44. Which of the following is the primary determinant of how material is learned?
A) education level
B) age
C) level of involvement
D) occupation
E) gender

Answer: Page: 330 Difficulty: moderate

45. High-involvement learning often involves _____.
A) classical conditioning
B) analytical reasoning
C) iconic rote learning
D) all of the above
E) none of the above

Answer: Page: 330 Difficulty: moderate

46. High-involvement learning often involves _____.
A) classical conditioning
B) iconic rote learning
C) operant conditioning
D) all of the above
E) none of the above

Answer: Page: 330 Difficulty: hard

47. Low-involvement learning often involves _____.
A) classical conditioning
B) iconic rote learning
C) modeling
D) all of the above
E) none of the above

Answer: Page: 330 Difficulty: hard

48. Which of the following is NOT a specific learning theory?
A) schematic
B) operant
C) iconic rote
D) vicarious/modeling
E) reasoning/analogy

Answer: Page: 330 Difficulty: moderate

49. Which of the following involves presenting two stimuli in close proximity so that eventually the two are perceived to be related or associated?
A) pairing
B) combining
C) conditioning
D) operating
E) shaping

Answer: Page: 330-331 Difficulty: moderate

50. What are the two basic forms of conditioned learning?
A) classical and operant
B) classical and iconic
C) iconic rote and modeling
D) analogy and metaphor
E) positive and negative

Answer: Page: 331 Difficulty: moderate

51. _____ attempts to create an association between a stimulus (e.g., brand name) and some response (e.g., behavior or feeling).
A) Analogous conditioning
B) Iconic rote conditioning
C) Classical conditioning
D) Modeled conditioning
E) Vicarious conditioning

Answer: Page: 331 Difficulty: moderate

52. _____ attempts to create an association between a response (e.g., buying a brand) and some outcome (e.g., satisfaction) that serves to reinforce the response.
A) Operant conditioning
B) Iconic rote conditioning
C) Classical conditioning
D) Modeled conditioning
E) Vicarious conditioning

Answer: Page: 331 Difficulty: moderate

53. Coca-Cola does not advertise during the evening news because the marketer does not want the often negative information reported on the news to create a negative feeling toward the brand. Which type of learning creates an association between the brand and some response?
A) classical conditioning
B) operant conditioning
C) iconic learning
D) vicarious learning
E) reinforced learning

Answer: Page: 331 Difficulty: moderate

54. The more often a response is reinforced, the more likely it will be repeated in the future as consumers learn that the response is associated with a positive outcome is the basic premise of which type of learning?
A) classical conditioning
B) operant conditioning
C) iconic learning
D) vicarious learning
E) reinforced learning

Answer: Page: 332 Difficulty: moderate

55. Which type of conditioning requires that consumers first engage in a deliberate behavior (i.e., trying the product) and come to understand its power in predicting positive outcomes that serve as reinforcement?
A) classical conditioning
B) operant conditioning
C) iconic conditioning
D) vicarious conditioning
E) reinforced conditioning

Answer: Page: 332 Difficulty: moderate

56. The process of encouraging partial responses leading to the final desired response is known as _____.
A) step learning
B) staging
C) stepping
D) shaping
E) modeling

Answer: Page: 332 Difficulty: moderate

57. Procter & Gamble, the maker of Crest brand toothpaste, has modified this brand to include whiteners. To encourage consumers to adopt this brand, P&G gave away free samples along with a high value coupon on the purchase of a tube. The hope was that consumers would try the brand, purchase it at a discount, and finally buy it at full price. This is an example of _____.
A) step learning
B) staging
C) stepping
D) shaping
E) modeling

Answer: Page: 332 Difficulty: moderate

58. Which type of learning encompasses all the mental activities of humans as they work to solve problems or cope with situations?
A) conditioning
B) cognitive learning
C) affective learning
D) shaping
E) conscious learning

Answer: Page: 334 Difficulty: moderate

59. Which of the following is NOT a type of cognitive learning?
A) iconic rote
B) vicarious
C) reasoning/analogy
D) operant
E) all of the above are types of cognitive learning

Answer: Page: 334-335 Difficulty: hard

60. Learning a concept or the association between two or more concepts in the absence of conditioning is known as _____.
A) operant learning
B) iconic rote learning
C) vicarious learning
D) modeling
E) analytical reasoning

Answer: Page: 334 Difficulty: moderate

61. Thomas is studying for vocabulary exam by merely repeating the words and their definitions over and over. Which type of cognitive learning is this?
A) operant learning
B) vicarious learning
C) modeling
D) analytical reasoning
E) iconic rote learning

Answer: Page: 334 Difficulty: moderate

62. When consumers do not directly experience a reward or punishment to learn but instead observe the outcomes of others’ behaviors and adjust their own accordingly, which type of learning has occurred?
A) operant learning
B) vicarious learning
C) shaping
D) analytical reasoning
E) iconic rote learning

Answer: Page: 334 Difficulty: moderate

63. The most complex form of cognitive learning is _____.
A) operant learning
B) vicarious learning
C) iconic rote learning
D) analytical reasoning
E) modeling

Answer: Page: 335 Difficulty: moderate

64. Which type of reasoning allows consumers to use an existing knowledge base to understand a new situation or object?
A) operant reasoning
B) analogical reasoning
C) cognitive reasoning
D) affective reasoning
E) conscious reasoning

Answer: Page: 335 Difficulty: moderate

65. _____ refers to the process of learning to respond differently to similar but distinct stimuli.
A) Stimulus generalization
B) Stimulus reasoning
C) Stimulus discrimination
D) Stimulus contrasting
E) Stimulus identification

Answer: Page: 336 Difficulty: easy

66. _____ occurs when a response to one stimulus is elicited by a similar but distinct stimulus.
A) Stimulus generalization
B) Stimulus reasoning
C) Stimulus discrimination
D) Stimulus contrasting
E) Stimulus identification

Answer: Page: 336 Difficulty: moderate

67. Many store brands use packaging and labeling that is similar to the more expensive national brand. The hope is that the look-alike package will elicit a similar response in consumers that encourages them to purchase the cheaper store brand. This is an example of _____.
A) stimulus discrimination
B) stimulus generalization
C) stimulus confusion
D) stimulus similarity
E) stimulus deception

Answer: Page: 336 Difficulty: moderate

68. In conditioned learning, forgetting is often referred to as _____.
A) decay
B) deconditioning
C) extinction
D) failure
E) retrieval failure

Answer: Page: 337 Difficulty: moderate

69. Which of the following enhances the strength of learning?
A) importance
B) message involvement
C) mood
D) repetition
E) all of the above

Answer: Page: 338 Difficulty: easy

70. Donald has just learned that he has Type II diabetes, so he wants to learn as much as he can to manage his health. He reads health magazines, visits health-related Web sites, and reads product nutrition and ingredient information on packages. Donald’s strength of learning is most likely to be strong due to which factor that affects the strength of learning?
A) mood
B) punishment
C) importance
D) repetition
E) dual coding

Answer: Page: 339 Difficulty: moderate

71. Ads that encourage consumers to remember past personal experiences and use language such as “you” and “your” in the copy are using the strategy of _____ to enhance message involvement.
A) importance
B) personalization
C) dual coding
D) mood enhancement
E) self-referencing

Answer: Page: 339 Difficulty: moderate

72. Anything that increases the likelihood that a given response will be repeated in the future is considered _____.
A) punishment
B) a reward
C) reinforcement
D) a conditioned stimulus
E) an operant

Answer: Page: 340 Difficulty: moderate

73. A local car dealership advertises quite frequently on local broadcast and cable television, and it seems as though the man in the ad is always yelling for consumers to “Come on down, you’ll be glad you did!” This car dealership uses the same type of ad over and over even though the specific information changes, and consumers tend to shut out the message, evaluate it negatively, or disregard it. John is so sick of these ads that he instantly changes the channel when one comes on. This is an example of _____.
A) zipping
B) advertising wearout
C) interference
D) pulsing
E) poor positioning

Answer: Page: 342 Difficulty: moderate

74. Sometimes consumers have difficulty retrieving a specific piece of information because other related information in memory gets in the way, which is an effect referred to as _____.
A) noise
B) echoic memory
C) interference
D) clutter
E) memory failure

Answer: Page: 344 Difficulty: moderate

75. Which of the following is a strategy to reduce competitive interference?
A) create a semantic memory of a brand
B) create a episodic memory of a brand
C) use pulsing
D) provide external retrieval cues
E) provide an incentive for trial

Answer: Page: 345 Difficulty: moderate

76. _____ refers to the schematic memory of a brand.
A) Brand image
B) Brand equity
C) Brand leverage
D) Brand position
E) Brand benefit

Answer: Page: 346 Difficulty: moderate

77. Many consumers associate Mercedes automobiles with status, luxury, quality engineering, and high price. This is an example of Mercedes’ _____.
A) brand equity
B) brand image
C) brand leverage
D) brand position
E) brand identity

Answer: Page: 346 Difficulty: moderate

78. The decision by a marketer to try to achieve a defined brand image relative to competition within a market segment is called _____.
A) product extension
B) brand extension
C) brand leveraging
D) product positioning
E) product equity

Answer: Page: 347 Difficulty: moderate

79. Which of the following offers marketing managers a useful technique for measuring and developing a product’s position by taking consumers’ perceptions of how similar various brands or products are to each other and relates these perceptions to product attributes?
A) regression analysis
B) conjoint analysis
C) analytical mapping
D) perceptual mapping
E) laddering

Answer: Page: 349 Difficulty: moderate

80. Vanity Fair, the makers of Lee jeans, learned from market research that young men perceived the brand as for women. As a result, they developed an advertising campaign targeted to young men and used Buddy Lee, which is a little doll in dungarees that is portrayed as “cool,” to alter this market’s perception of this brand. Vanity Fair’s deliberate decision to significantly alter the way the market views its brand is an example of _____.
A) product positioning
B) product repositioning
C) brand extension
D) brand leveraging
E) brand revival

Answer: Page: 350 Difficulty: moderate

81. The value consumers assign to a brand above and beyond the functional characteristics of the product is known as _____.
A) brand solvency
B) brand liquidation
C) brand image
D) brand equity
E) brand leverage

Answer: Page: 351 Difficulty: moderate

82. When Honda introduced its Odyssey mini-van, its advertising merely claimed, “It’s the Honda of mini-vans.” This is an example of _____.
A) brand leverage
B) brand generalization
C) brand discrimination
D) brand substitute
E) brand complement

Answer: Page: 351 Difficulty: moderate

83. When consumers see the new product (i.e., brand extension) as requiring the same manufacturing skills as the original, successful brand leverage is more likely. Which dimension is this referring to?
A) complement
B) substitute
C) transfer
D) image
E) extension

Answer: Page: 351-352 Difficulty: moderate

True/False Questions

84. Long-term memory (LTM) is also called working memory.

Answer: Page: 323 Difficulty: easy

85. Elaborative activities occur in short-term memory.

Answer: Page: 324 Difficulty: moderate

86. Semantic memory is the memory of a sequence of events in which a person participated.

Answer: Page: 325 Difficulty: moderate

87. In general, multiple memory nodes are activated simultaneously.

Answer: Page: 326 Difficulty: moderate

88. Explicit memory is characterized by the conscious recollection of an exposure event.

Answer: Page: 328 Difficulty: moderate

89. Level of involvement is the primary determinant of how material is learned.

Answer: Page: 330 Difficulty: moderate

90. The process of encouraging partial responses leading to the final desired response is known as classical conditioning.

Answer: Page: 332 Difficulty: moderate

91. Consumers must directly experience a reward or punishment to learn.

Answer: Page: 334 Difficulty: moderate

92. Stimulus discrimination refers to the process of learning to respond differently to similar but distinct stimuli.

Answer: Page: 336 Difficulty: moderate

93. In conditioned learning, forgetting is often referred to as extinction.

Answer: Page: 337 Difficulty: moderate

94. Self-concept indicates that consumers are relating brand information to themselves.

Answer: Page: 339 Difficulty: moderate

95. Learning cannot occur in the absence of reinforcement.

Answer: Page: 340 Difficulty: hard

96. Echoic memory is the memory of sounds, including words.

Answer: Page: 343 Difficulty: moderate

97. Brand image refers to the semantic memory of a brand.

Answer: Page: 346 Difficulty: moderate

98. Successful brand leverage generally requires that the original brand have a strong positive image and that the new product fit with the original product on the each of the following four dimensions: complement, substitute, transfer, and image.

Answer: Page: 351-352 Difficulty: hard

Essay Questions

99. Name and describe the two components of memory.

Page: 323-327 Difficulty: moderate
Answer:

100. Bryan is the brand manager for a brand of paper towels and knows that consumers’ involvement with this product is low. Name and briefly describe learning theories that are appropriate for this situation, and provide an example of how Bryan can use each to influence consumers to purchase his brand.

Page: 330-335 Difficulty: hard
Answer:

101. Strength of learning is one factor that determines how long-lasting a learned response will be. That is, the stronger the original learning (e.g., of nodes and links between nodes), the more likely relevant information will be retrieved when required. Discuss three of the six factors enhancing the strength of learning.

Page: 338-342 Difficulty: moderate
Answer:

102. Explain the concept of memory interference, and discuss four strategies for reducing it.

Page: 344-345 Difficulty: moderate
Answer:

103. Compare and contrast the terms brand image, brand equity, product positioning, and brand leverage.

Page: 346-351 Difficulty: moderate
Answer:

Multiple Choice Questions

1. One factor motivating U.K. travelers is status. Which of Maslow’s needs is this most related to?
A) physiological
B) safety
C) belongingness
D) esteem
E) self-actualization

Answer: Page: 364-365 Difficulty: hard

2. One factor motivating U.K. travelers is learning. Which of Maslow’s needs is this most related to?
A) physiological
B) safety
C) belongingness
D) esteem
E) self-actualization

Answer: Page: 364-365 Difficulty: hard

3. The energizing force that activates behavior and provides purpose and direction to that behavior is known as _____.
A) motivation
B) personality
C) emotion
D) perception
E) needs

Answer: Page: 364 Difficulty: moderate

4. Which of the following reflects the relatively stable behavioral tendencies that individuals display across a variety of situations?
A) motivation
B) personality
C) emotion
D) perception
E) needs

Answer: Page: 364 Difficulty: moderate

5. Strong, relatively uncontrollable feelings that affect our behavior are known as _____.
A) motivations
B) personality
C) emotions
D) perceptions
E) needs

Answer: Page: 364 Difficulty: moderate

6. Which construct represents an unobservable inner force that stimulates and compels a behavioral response and provides specific direction to that response?
A) motive
B) personality
C) emotion
D) perception
E) feeling

Answer: Page: 364 Difficulty: moderate

7. Kelly is hungry, and this inner force is making him search for the type of food he wants to eat. He decides that an Arby’s roast beef sandwich will satisfy his hunger. This inner force that is compelling him to search for food is known as a(n) _____.
A) motive
B) personality trait
C) emotion
D) perception
E) feeling

Answer: Page: 364 Difficulty: moderate

8. Which term is often used interchangeably with the term “motivation”?
A) personality
B) emotion
C) need
D) perception
E) feeling

Answer: Page: 364 Difficulty: moderate

9. Maslow’s hierarchy of needs is based on which premise?
A) All humans acquire a similar set of motives through genetic endowment and social interaction.
B) Some motives are more basic or critical than others.
C) The more basic motives must be satisfied to a minimum level before other motives are activated.
D) As the basic motives become satisfied, more advanced motives come into play.
E) all of the above

Answer: Page: 364-365 Difficulty: easy

10. Maslow’s hierarchy of needs includes all EXCEPT which of the following?
A) cognition
B) physiological
C) safety
D) belongingness
E) esteem

Answer: Page: 365 Difficulty: moderate

11. In Maslow’s hierarchy of needs, food, water, sleep, and to an extent, sex, are considered _____ motives.
A) safety
B) self-actualization
C) physiological
D) belongingness
E) esteem

Answer: Page: 365 Difficulty: easy

12. Many victims of hurricane Katrina were left without their homes, food, and water–basic necessities for living. Based on Maslow’s hierarchy of needs, which motives were activated for these individuals?
A) security
B) self-actualization
C) physiological
D) belongingness
E) esteem

Answer: Page: 365 Difficulty: easy

13. Smoke detectors, preventive medicines, insurance, retirement investments, seat belts, burglar alarms, and sunscreen are all examples of products to satisfy consumers’ _____ needs.
A) safety
B) self-actualization
C) physiological
D) belongingness
E) esteem

Answer: Page: 365 Difficulty: easy

14. Which need in Maslow’s hierarchy reflects a desire for love, friendship, affiliation, and group acceptance?
A) safety
B) self-actualization
C) physiological
D) belongingness
E) esteem

Answer: Page: 365 Difficulty: easy

15. Which of Maslow’s needs reflects individuals’ desires for status, superiority, self-respect, and prestige?
A) safety
B) self-actualization
C) physiological
D) belongingness
E) esteem

Answer: Page: 365 Difficulty: easy

16. Which of Maslow’s needs involves the desire for self-fulfillment, to become all that one is capable of becoming?
A) safety
B) self-actualization
C) physiological
D) belongingness
E) esteem

Answer: Page: 365 Difficulty: easy

17. For years, the U.S. Army ran an advertising campaign with the tagline, “Be all you can be.” To which of Maslow’s needs is this appealing?
A) safety
B) self-actualization
C) physiological
D) belongingness
E) esteem

Answer: Page: 365 Difficulty: easy

18. In McGuire’s classification of motives, which ones focus on the person’s need for being adaptively oriented toward the environment and achieving a sense of meaning?
A) affective
B) preservation
C) growth
D) cognitive
E) self-actualization

Answer: Page: 366 Difficulty: moderate

19. _____ motives deal with the need to reach satisfying feeling states and to obtain personal goals.
A) Cognitive
B) Affective
C) Preservation-oriented
D) Advancement-oriented
E) Safety-oriented

Answer: Page: 366 Difficulty: moderate

20. ____ motives emphasize the individual as striving to maintain equilibrium.
A) Cognitive
B) Affective
C) Preservation-oriented
D) Growth
E) Leveling

Answer: Page: 366 Difficulty: moderate

21. Which motives emphasize development?
A) cognitive
B) affective
C) preservation-oriented
D) growth
E) advancement

Answer: Page: 366 Difficulty: moderate

22. Which of the following is NOT used to classify McGuire’s psychological motives?
A) Is the mode of motivation cognitive or affective?
B) Is the motive focused on preservation of the status quo or on growth?
C) Is this behavior actively initiated or in response to the environment?
D) Is the outcome of the behavior temporary or permanent?
E) Does this behavior help the individual achieve a new internal or a new external relationship to the environment?

Answer: Page: 366 Difficulty: moderate

23. Which of the following is a type of cognitive preservation motive?
A) need for tension reduction
B) teleological need
C) need for objectification
D) need for stimulation
E) need for ego defense

Answer: Page: 367 Difficulty: moderate

24. Which set of motives deals with our need to determine who or what causes the things that happen to us?
A) need for consistency
B) need for attribution
C) need to categorize
D) need for objectification
E) need for autonomy

Answer: Page: 367 Difficulty: moderate

25. The tendency of many consumers to discount claims made by sales people and ads is related to the need _____.
A) for ego defense
B) for focus
C) for assertion
D) to attribute causation
E) none of the above

Answer: Page: 367 Difficulty: moderate

26. The tendency of many consumers to discount claims made by sales people can be explained in part by _____.
A) contrast theory
B) assimilation theory
C) classical conditioning
D) attribution theory
E) none of the above

Answer: Page: 367 Difficulty: moderate

27. A consumer’s tendency to initially react to a new product as though it were the same as similar existing products is most likely to be based on a need _____.
A) for modeling
B) for assertion
C) for consistency
D) to categorize
E) none of the above

Answer: Page: 367 Difficulty: moderate

28. Adam was working on a term paper and was exposed to so much information that he devised a classification system to organize the different sources of information he was using. This reflects which cognitive preservation motive?
A) need for consistency
B) need for attribution
C) need to categorize
D) need for objectification
E) need for autonomy

Answer: Page: 367 Difficulty: moderate

29. Which motives reflect needs for observable cues or symbols that enable people to infer what they feel and know?
A) need for consistency
B) need for attribution
C) need to categorize
D) need for objectification
E) need for autonomy

Answer: Page: 367 Difficulty: moderate

30. Elizabeth is 15 years old and is asking her parents for more freedom. She wants to make more of the decisions that affect her, such as the clothes she wears, how late she can stay out, and what school she attends. This is an example of Elizabeth’s need for _____.
A) objectification
B) ego defense
C) expression
D) autonomy
E) assertion

Answer: Page: 368 Difficulty: moderate

31. An advertisement theme of “do your own thing” is most likely to be based on a need for _____.
A) affiliation
B) modeling
C) consistency
D) independence
E) none of the above

Answer: Page: 368 Difficulty: easy

32. A substantial amount of brand switching when the current brand is satisfactory may be explained by the _____ motive.
A) expression
B) reinforcement
C) stimulation
D) affiliation
E) none of the above

Answer: Page: 368 Difficulty: moderate

33. Karen went to a movie and was disappointed because the main character died. She prefers happy endings to movies, and this one really put her in a bad mood for the rest of the day. This movie was in contrast with which need of Karen’s?
A) need for stimulation
B) teleological need
C) utilitarian need
D) need for tension reduction
E) need for objectification

Answer: Page: 369 Difficulty: hard

34. Theories based on which need view the consumer as a problem solver who approaches situations as opportunities to acquire useful information or new skills?
A) teleological need
B) need for tension reduction
C) utilitarian need
D) need for autonomy
E) need for identification

Answer: Page: 369 Difficulty: moderate

35. Stephanie is a working mother of two children. She has a stressful job, so she makes a point of walking two miles on her treadmill each day to help her unwind. By doing this, Stephanie is satisfying her _____.
A) need for attribution
B) need for autonomy
C) need for tension reduction
D) need for reinforcement
E) need for modeling

Answer: Page: 369-370 Difficulty: easy

36. A consumer who purchases a certain style of clothes to establish and reinforce a unique identity is most likely fulfilling a need for _____.
A) ego-defense
B) affiliation
C) modeling
D) expression
E) cues

Answer: Page: 370 Difficulty: moderate

37. Shelby wears Tommy Hilfiger clothing and drives an expensive automobile. He likes these types of brands because he feels they communicate his image to others. These brands are satisfying Shelby’s _____.
A) need for attribution
B) need for autonomy
C) need for tension reduction
D) need for reinforcement
E) need for expression

Answer: Page: 370 Difficulty: moderate

38. Which need is activated when one’s identity is threatened, motivating the person to protect his or her self-concept and utilize defensive behaviors and attitudes?
A) need for cognition
B) need for expression
C) need for reinforcement
D) need for ego defense
E) need for identity preservation

Answer: Page: 370 Difficulty: moderate

39. Consumers who purchase only popular brands because of insecurity, are most likely influenced by the _____ motive.
A) causation
B) assertion
C) consistency
D) ego-defense
E) none of the above

Answer: Page: 370 Difficulty: moderate

40. A consumer’s need for reinforcement is _____.
A) active and internal
B) active and external
C) passive and internal
D) passive and external
E) active and passive

Answer: Page: 370 Difficulty: moderate

41. Consumers who actively complain when a product is not satisfactory are probably fulfilling _____ need.
A) a modeling
B) a consistency
C) an affiliation
D) an assertion
E) attribution of causality

Answer: Page: 371 Difficulty: moderate

42. An advertising theme such as “Serve Pepsi to your friends, they’ll love you for it” is most likely based on _____ motivation.
A) tension reduction
B) affiliation
C) modeling
D) expression
E) none of the above

Answer: Page: 371 Difficulty: moderate

43. Kevin is shy and doesn’t really like to be around others. Most of the others from his high school that went to the same college he did got involved in student organizations, such as fraternities and sororities, business organizations, and religious groups, but Kevin didn’t join anything. Kevin has a low need for _____.
A) categorization
B) consistency
C) autonomy
D) affiliation
E) modeling

Answer: Page: 371 Difficulty: moderate

44. Which need results in the consumer playing various roles and gaining pleasure from adding new, satisfying roles and by increasing the significance of roles already adopted?
A) need for stimulation
B) need for identification
C) need or objectification
D) teleological need
E) need for expression

Answer: Page: 371 Difficulty: moderate

45. A consumer who buys a product because a close friend bought one may be fulfilling a _____ motivation.
A) modeling
B) independence
C) causation
D) ego-defense
E) none of the above

Answer: Page: 371 Difficulty: moderate

46. The willingness to buy a particular product or service is known as _____.
A) a need
B) a want
C) demand
D) motivation
E) an attitude

Answer: Page: 372 Difficulty: moderate

47. Motives that are known and freely admitted are called _____.
A) manifest motives
B) latent motives
C) objective motives
D) acceptable motives
E) primary motives

Answer: Page: 373 Difficulty: moderate

48. When asked why he bought a specific automobile, Jeremy replied that is has good gas mileage, is rated one the best cars in terms of safety, and was in a moderate price range. These reasons reflect Jeremy’s _____ motives.
A) latent
B) manifest
C) acceptable
D) primary
E) identifiable

Answer: Page: 373 Difficulty: moderate

49. Motives that are either unknown to the consumer or are such that he or she is reluctant to admit them are referred to as _____ motives.
A) manifest
B) hidden
C) secondary
D) latent
E) unacceptable

Answer: Page: 373 Difficulty: moderate

50. James begged his mother to buy him some high-top Converse shoes. When asked why he wanted these shoes, he said that he wanted them because they are comfortable. He really wanted them because his two best friends have them, and if he had them, he would be considered
“cool,” but he didn’t want to tell his mother that. Wanting to appear “cool” to his friends represents which type of motive?
A) manifest
B) hidden
C) secondary
D) latent
E) social

Answer: Page: 373 Difficulty: moderate

51. Which of the following is(are) designed to provide information on latent motives?
A) perceptual mapping
B) regression analysis
C) projective techniques
D) conjoint analysis
E) multivariate analyses

Answer: Page: 373 Difficulty: moderate

52. Which of the following is a motivation research technique?
A) story completion
B) picture response
C) analysis and use
D) word association
E) all of the above

Answer: Page: 374 Difficulty: easy

53. Raymond is conducting motivation research. He gives consumers a list of words, and they are asked to respond to the list with the first word that comes to mind. This is an example of _____.
A) analysis and use
B) a construction technique
C) an association technique
D) story completion
E) a third-person technique

Answer: Page: 374 Difficulty: moderate

54. Which of the following is NOT a construction technique of motivate research?
A) cartoon techniques
B) analysis and use
C) story completion
D) picture response
E) third-person techniques

Answer: Page: 374 Difficulty: moderate

55. One motivation research technique known as the cartoon technique has consumers fill in the words or thoughts of one of the characters in a cartoon drawing. Which type of technique is this?
A) association technique
B) completion technique
C) construction technique
D) third-person technique
E) animated technique

Answer: Page: 374 Difficulty: moderate

56. Nicholas is examining consumers’ responses for themes and key concepts, which is referred to as content analysis. Which type of motivation research technique is Nicholas using?
A) word association
B) analysis and use
C) picture response
D) story completion
E) successive word association

Answer: Page: 374 Difficulty: hard

57. Angie was participating in a market research study. The researcher gave her a shopping list and asked Angie to describe the type of person who would go shopping with this list. This is an example of which motivation research technique?
A) word association
B) story completion
C) picture response
D) analysis and use
E) third-person technique

Answer: Page: 374 Difficulty: moderate

58. One type of motivation research involves showing consumers a product or brand and asking them to name all the benefits that possession or use of that product might provide. Then for each benefit mentioned, the respondent is asked to identify further benefits that the named benefit provides, and this is repeated for each round of benefits until the consumer can no longer identify additional benefits. This technique is known as _____.
A) laddering
B) probing
C) questioning
D) third-party techniques
E) story completion

Answer: Page: 374 Difficulty: moderate

59. Which of the following is a hedonic shopping motive related to McGuire’s typology?
A) adventure shopping
B) social shopping
C) gratification shopping
D) idea shopping
E) all of the above

Answer: Page: 376 Difficulty: easy

60. When asked why she likes to shop, Melanie replied that it relaxes her, and she looks at is as a personal reward. This is an example of which hedonic shopping motive?
A) adventure shopping
B) social shopping
C) gratification shopping
D) value shopping
E) role shopping

Answer: Page: 376 Difficulty: moderate

61. In which type of motivational conflict must a consumer choose between two attractive alternatives?
A) approach-approach
B) positive-positive
C) win-win
D) avoidance-avoidance
E) primary-primary

Answer: Page: 377 Difficulty: moderate

62. Nikki likes to attend the movies, but she is concerned with how expensive ticket prices are getting and the cost of concessions. She wants to have fun, but she also knows that she needs to save money for college. Which type of motivational conflict is Nikki experiencing?
A) approach-approach
B) approach-avoidance
C) avoidance-avoidance
D) acceptable-unacceptable
E) unacceptable-acceptable

Answer: Page: 377 Difficulty: moderate

63. Which of the following is a motivational state caused by consumer perceptions that a product, brand, or advertisement is relevant or interesting?
A) involvement
B) need
C) want
D) desire
E) action

Answer: Page: 377 Difficulty: moderate

64. Which of the following is true regarding consumers who are highly involved in a specific product category?
A) They are more likely to pay attention to relevant marketing messages.
B) They are more likely to engage in analytical reasoning to process and learn new information.
C) They are more likely to seek out information from numerous sources prior to a decision.
D) They are more likely to act as opinion leaders.
E) all of the above

Answer: Page: 377 Difficulty: easy

65. _____ is an individual’s characteristic response tendencies across similar situations.
A) Motivation
B) Emotion
C) Empathy
D) Personality
E) Involvement

Answer: Page: 378 Difficulty: moderate

66. Which of the following is NOT a core trait in the Five-Factor Model of personality?
A) extroversion
B) instability
C) reliability
D) openness to experience
E) conscientiousness

Answer: Page: 378 Difficulty: moderate

67. Dolly prefers to be in a large group rather than alone. She is talkative when with others and is very bold. Which personality trait best describes Dolly?
A) extroversion
B) instability
C) agreeableness
D) openness to experience
E) conscientiousness

Answer: Page: 378 Difficulty: easy

68. Which core trait in the Five-Factor Model of personality is manifested by an individual being moody, temperamental, and touchy?
A) introversion
B) instability
C) sulkiness
D) conscientiousness
E) agreeableness

Answer: Page: 378 Difficulty: moderate

69. Erin is very imaginative and appreciative of all types of art. She is very creatively talented, and others come to her for novel solutions to problems because she tends to “think outside the box.” Which core trait best describes Erin?
A) extroversion
B) introversion
C) instability
D) agreeableness
E) openness to experience

Answer: Page: 378 Difficulty: hard

70. Which trait reflects an individual difference in consumers’ propensity to be biased against the purchase of foreign products?
A) need for affiliation
B) need for uniqueness
C) consumer ethnocentrism
D) agreeableness
E) introversion

Answer: Page: 379 Difficulty: moderate

71. Gwen lives in Dijon, France. To her, French wine is the only wine worth drinking, and she would never consider drinking wine from California. Gwen is exhibiting _____.
A) stubbornness
B) consumer ethnocentrism
C) sincerity
D) consumer culturalism
E) patriotism

Answer: Page: 379 Difficulty: moderate

72. Lori reads three newspapers a day and is always reading a book in the evening. She has a high need to engage in thinking, and she actually enjoys it. She likes to complete crossword puzzles and do other types of word games. Lori has a high need for _____.
A) cognition
B) affection
C) ethnocentrism
D) uniqueness
E) acceptance

Answer: Page: 379 Difficulty: moderate

73. A consumer’s propensity to pursue differentness relative to others through the acquisition, utilization, and disposition of consumer goods is exhibiting _____.
A) consumer ethnocentrism
B) a need for cognition
C) a need for uniqueness
D) extroversion
E) agreeableness

Answer: Page: 379 Difficulty: moderate

74. A set of human characteristics that become associated with a brand is referred to as _____.
A) brand image
B) brand equity
C) brand leverage
D) brand personality
E) brand positioning

Answer: Page: 380 Difficulty: moderate

75. Which of the following is considered a dimension of brand personality?
A) ruggedness
B) excitement
C) sincerity
D) competence
E) all of the above

Answer: Page: 380 Difficulty: easy

76. Whole Foods Supermarkets have been described as down-to-earth, honest, wholesome, and cheerful. Which dimension of brand personality does this represent?
A) sincerity
B) excitement
C) competence
D) sophistication
E) ruggedness

Answer: Page: 380 Difficulty: easy

77. Consumers have described Apple’s iPod products, such as the MP3 music player and the new video player, as imaginative and up-to-date. The brand is also considered to be daring, changing the traditional media models. Based on this description, which dimension of brand personality best describes the iPod?
A) sincerity
B) excitement
C) competence
D) sophistication
E) ruggedness

Answer: Page: 380 Difficulty: moderate

78. Which of the following is NOT an advertising tactic used to communicate brand personality?
A) celebrity endorsers
B) user imagery
C) length of the ad
D) tone of the ad
E) type of media outlet

Answer: Page: 381 Difficulty: hard

79. Advertisements for BC Headache Powders usually show blue-collar workers using this product to obtain fast pain relief caused by their job (e.g., heavy lifting). Which advertising tactic is BC using to communicate its brand personality?
A) celebrity endorsers
B) user imagery
C) pace of the ad
D) media outlet
E) all of the above

Answer: Page: 381 Difficulty: moderate

80. Which of the following is a characteristic associated with emotions?
A) Emotions occur independently from physiological changes.
B) Emotions are not associated with behaviors.
C) Emotions involve objective feelings.
D) Emotions are often triggered by environmental events.
E) all of the above

Answer: Page: 382 Difficulty: hard

81. Which term is used to refer to the liking/disliking aspect of a specific feeling?
A) emotion
B) affect
C) hedonic
D) cognition
E) valence

Answer: Page: 383 Difficulty: hard

82. Which of the following is NOT considered an emotional dimension?
A) pleasure
B) arousal
C) dominance
D) feeling
E) all of the above are emotional dimensions

Answer: Page: 384 Difficulty: hard

83. Barbara is an individual that usually feels restful, serene, comfortable, and soothed. Which emotion is Barbara experiencing?
A) faith
B) desire
C) joy
D) gratitude
E) serenity

Answer: Page: 384 Difficulty: moderate

84. Which emotion would be classified under the “arousal” dimension of emotion?
A) duty
B) distraction
C) guilt
D) shame
E) disgust

Answer: Page: 384 Difficulty: moderate

85. After experiencing a major earthquake in California, Tina often felt powerless and helpless. This caused her to be fearful and anxious, which sometimes made her panicked. Which dimension of emotions is Tina experiencing?
A) arousal
B) dominance
C) negative
D) uncontrollable
E) destructive

Answer: Page: 384 Difficulty: moderate

86. Which of the following is FALSE regarding how emotional responses to advertising influence consumer behavior?
A) Emotional advertisements that trigger a positively evaluated emotion will enhance liking of the ad itself.
B) Emotional content in advertisements enhances their attention, attraction, and maintenance capabilities.
C) While emotional content in advertisements may increase attention, emotional messages have not been found to be processed more thoroughly than neutral messages.
D) Repeated exposure to positive-emotion-eliciting ads may increase brand preference through classical conditioning.
E) Repeated exposure to positive-emotion-eliciting ads may result in brand preference occurring in a direct, high-involvement way.

Answer: Page: 386 Difficulty: hard

True/False Questions

87. According to Maslow, all humans acquire a similar set of motives through genetic endowment and social interaction.

Answer: Page: 364 Difficulty: moderate

88. Affective motives focus on the person’s need for being adaptively oriented toward the environment and achieving a sense of meaning.

Answer: Page: 366 Difficulty: moderate

89. The fact that consumers need to attribute cause underlies an area of research known as cognitive theory.

Answer: Page: 367 Difficulty: moderate

90. Need for stimulation is an active, external motive.

Answer: Page: 368 Difficulty: moderate

91. Affective preservation motives include the need for tension reduction, teleological needs, need for expression, and need for ego defense.

Answer: Page: 369-370 Difficulty: hard

92. Marketers create needs.

Answer: Page: 372 Difficulty: moderate

93. Motives that are known and freely admitted are called primary motives.

Answer: Page: 373 Difficulty: moderate

94. Picture response is a construction technique of motivation research.

Answer: Page: 374 Difficulty: moderate

95. Conflicts between motives are rare.

Answer: Page: 376 Difficulty: easy

96. Personality is an individual’s characteristic response tendencies across similar situations.

Answer: Page: 378 Difficulty: easy

97. Need for uniqueness reflects an individual difference in consumers’ propensity to engage in and enjoy thinking.

Answer: Page: 379 Difficulty: moderate

98. Extroversion, instability, agreeableness, openness to experience, and conscientiousness are dimensions of brand personality.

Answer: Page: 380 Difficulty: moderate

99. Celebrity endorsers are often a useful way to personify a brand since the characteristics and meanings of the celebrity can be transferred to the brand.

Answer: Page: 381 Difficulty: easy

100. Emotions are rarely accompanied by cognitive thought.

Answer: Page: 382 Difficulty: moderate

101. Emotional advertisements that trigger a positively evaluated emotion will enhance the liking of the ad itself.

Answer: Page: 386 Difficulty: easy

Essay Questions

102. List Maslow’s hierarchy of needs, in order from lowest to highest, and the four premises on which the hierarchy is based.

Page: 364-365 Difficulty: hard
Answer:

103. Name and describe McGuire’s cognitive preservation motives.

Page: 367 Difficulty: hard
Answer:

104. Motivation Research, Inc. is a consumer research firm that specializes in motivation research techniques. Name and describe the three broad categories of motivation research techniques that this company most likely uses, and discuss an example of a specific technique used in each.

Page: 374 Difficulty: moderate
Answer:

105. Tish owns a home decor store and has asked your assistance in helping her understand shoppers’ motives. You know that research has uncovered six hedonic shopping motives related to McGuire’s typology. Explain these to Tish, and discuss how she can use them to enhance her business.

Page: 376 Difficulty: moderate
Answer:

106. The Five-Factor Model of personality identifies five core traits. Name each trait, and explain the manifestation of each.

Page: 378 Difficulty: moderate
Answer:

Multiple Choice Questions

1. When the SPCA presents facts to counter untrue myths, they are dealing most closely with the _____ component of attitudes.
A) classically conditioned
B) operantly conditioned
C) affective
D) cognitive
E) behavioral

Answer: Page: 395 and 397 Difficulty: moderate

2. A learned predisposition to respond in a consistently favorable or unfavorable manner with respect to a given object is known as a(n) _____.
A) belief
B) emotion
C) attitude
D) cognition
E) attribute

Answer: Page: 396 Difficulty: moderate

3. Caleb learned from his parents that littering was bad, so when he sees someone doing it, he forms an unfavorable impression of that person. Caleb’s learned predisposition to dislike someone who litters represents his _____.
A) emotion
B) personality
C) attitude
D) orientation
E) intelligence

Answer: Page: 396 Difficulty: moderate

4. Which of the following is a function served by attitudes?
A) knowledge function
B) value-expressive function
C) utilitarian function
D) ego-defensive function
E) all of the above

Answer: Page: 396 Difficulty: easy

5. Some attitudes serve primarily as a means of organizing beliefs about objects or activities such as brands and shopping, which serves a(n) _____ function.
A) knowledge
B) value-expressive
C) utilitarian
D) ego-defensive
E) orientation

Answer: Page: 396 Difficulty: moderate

6. Which function of attitudes serves to express an individual’s central values and self-concept?
A) knowledge function
B) value-expressive function
C) utilitarian function
D) ego-defensive function
E) orientation function

Answer: Page: 396 Difficulty: moderate

7. Josh is in elementary school, and he has learned that when he gets good grades and behavior reports, his parents are really proud of him and reward him. So he has developed a favorable attitude toward behaving and doing well in school. This attitude is serving which function?
A) knowledge function
B) value-expressive function
C) utilitarian function
D) ego-defensive function
E) orientation function

Answer: Page: 396 Difficulty: hard

8. Margaret only wants to buy her clothes at American Eagle Outfitter because she knows that they are considered acceptable by her peers, and she wants to be accepted by her peers. This attitude toward this brand of clothing is serving which function for Margaret?
A) knowledge function
B) value-expressive function
C) utilitarian function
D) ego-defensive function
E) orientation function

Answer: Page: 396 Difficulty: moderate

9. Which of the following represent the three components of attitudes?
A) primary, secondary, and tertiary
B) knowledge, value-expressive, and utilitarian
C) cognitive, affective, and behavioral
D) cognitive, value-expressive, and behavioral
E) ego, personality, behavioral

Answer: Page: 397 Difficulty: moderate

10. Which component of attitudes consists of a consumer’s beliefs about an object?
A) affective
B) cognitive
C) factual
D) behavioral
E) utilitarian

Answer: Page: 397 Difficulty: moderate

11. Mitch likes Toyota automobiles because he thinks they have the highest reliability of all automobiles. His belief about Toyota’s reliability represents which component of Mitch’s attitude?
A) affective
B) cognitive
C) factual
D) behavioral
E) utilitarian

Answer: Page: 397 Difficulty: moderate

12. Which of the following is used to understand a consumer’s cognitive component of attitude?
A) attribution theory
B) cognitive dissonance theory
C) multiattribute attitude model
D) attitude consistency theory
E) attitude perception model

Answer: Page: 397-399 Difficulty: moderate

13. Which of the following can be a component of a multiattribute model?
A) a consumer’s attitude toward a particular brand
B) a consumer’s belief about how a brand performs on a given attribute
C) the importance the consumer attaches to an attribute
D) a consumer’s ideal level of performance on an attribute
E) all of the above

Answer: Page: 398 Difficulty: easy

14. Duane is attempting to determine consumers’ attitudes toward his restaurant by asking them their beliefs about how his restaurant performs on several attributes, such as price, ambience, quality of the food, and friendliness of service. Consumers can rate his restaurant with a score of 1 to 7 for each of these attributes, with 7 being the highest. Duane adds up the scores to see how he performs, using the assumption that a higher total is better. At a basic level, which type of model is Duane using?
A) multiattribute attitude model
B) cognitive assessment model
C) belief assessment model
D) summation model
E) attribute heuristic model

Answer: Page: 398 Difficulty: moderate

15. An approach to measuring the importance of attitude components that requires consumers to allocate 100 points among the components such that the distribution of the points reflects the relative importance of the component is _____.
A) perceptual mapping
B) the Likert scale
C) the semantic differential scale
D) the rank-order scale
E) none of the above

Answer: Page: 399 Difficulty: moderate

16. When considering consumers’ ideal levels of performance on attributes when using a multiattribute attitude model, which attitude index is best?
A) 0
B) 25
C) 50
D) 100
E) over 100

Answer: Page: 399 Difficulty: hard

17. Feelings or emotional reactions to an object reflect the _____ component of an attitude.
A) knowledge
B) cognitive
C) affective
D) behavioral
E) orientation

Answer: Page: 399 Difficulty: moderate

18. Kimberly-Clark is interested in mothers’ emotional reactions to their Huggies brand of disposable diapers, which usually have popular characters or cute designs printed on them. Which component of attitude is Kimberly-Clark interested in?
A) knowledge
B) cognitive
C) affective
D) behavioral
E) orientation

Answer: Page: 399 Difficulty: moderate

19. Janice and her mother were visiting an art gallery, and they were looking at modern art. When they came to one painting, Janice said, “I like that.” When her mother asked her why she liked it, all she could say was, “I don’t know, I just like it.” Which component of attitude does this represent?
A) cognitive
B) affective
C) behavioral
D) latent
E) manifest

Answer: Page: 399 Difficulty: moderate

20. Nike has several models of athletic shoes, and most have high functionality. However, several models are also sleek looking and can actually make a fashion statement for the wearer as well as performing the functional aspects of the product. By going beyond the cognitive associations of functionality and attempting to tap consumers’ affective reactions, Nike and other marketers are developing products with _____.
A) aesthetic appeal
B) aspirational appeal
C) benefit appeal
D) social appeal
E) personality appeal

Answer: Page: 400 Difficulty: moderate

21. SAM (Self-Assessment Manikin) is used to assess which component of attitude?
A) cognitive
B) affective
C) behavioral
D) orientation
E) personality

Answer: Page: 401-402 Difficulty: moderate

22. Why are the SAM and adSAM measures effective across cultures?
A) because the pictorial representations don’t require translation or alteration
B) because the numerical representations don’t require translation or alteration
C) because they are based on emotions
D) because they are based on attitudes
E) because the musical representations do not include lyrics

Answer: Page: 401-402 Difficulty: moderate

23. Which component of attitude represents one’s tendency to respond in a certain manner toward an object or activity?
A) cognitive
B) affective
C) behavioral
D) orientation
E) personality

Answer: Page: 402 Difficulty: easy

24. How are actual behaviors and response tendencies most often measured?
A) physiological measures
B) multiattribute models
C) SAM and adSAM
D) direct questioning
E) 100-point constant-sum scales

Answer: Page: 402 Difficulty: moderate

25. Which of the following statements adequately reflects the concept of attitude component consistency?
A) All three attitude components do not change over time.
B) A change in one attitude component tends to produce related changes in the other components.
C) The three attitude components operate independently from each other, so a change in one component does not necessarily mean the others will change.
D) All three attitude components are equal in their influence on one’s attitude.
E) Each component is equally important regardless of the situation.

Answer: Page: 403 Difficulty: moderate

26. Which of the following is a factor that may account for inconsistencies between measures of beliefs and feelings and observations of behavior?
A) lack of need
B) failure to consider relative attitudes
C) failure to consider interpersonal influence
D) failure to consider situational factors
E) all of the above

Answer: Page: 403-404 Difficulty: easy

27. Which of the following is NOT a factor accounting for inconsistencies between measures of beliefs and feelings and observations of behavior?
A) lack of need
B) lack of ability
C) weakly held beliefs and affect
D) failure to consider negative reactions
E) failure to consider interpersonal influence

Answer: Page: 403-404 Difficulty: hard

28. Which theory holds that behavioral intentions are based on a combination of the attitude toward a specific behavior, the social or normative beliefs about the appropriateness of the behavior, and the motivation to comply with the normative beliefs?
A) cognitive dissonance theory
B) theory of reasoned action
C) elaboration likelihood model
D) attribution theory
E) noncompensatory theory

Answer: Page: 404 Difficulty: moderate

29. Eric is 25 years old and has a favorable attitude toward drinking alcohol. However, he knows that he should not drink and drive, so he always makes sure that someone in his group is the designated driver. Which theory can explain his behavior?
A) cognitive dissonance theory
B) theory of reasoned action
C) elaboration likelihood model
D) attribution theory
E) noncompensatory theory

Answer: Page: 404 Difficulty: moderate

30. Which of the following is a strategy for altering the cognitive component of a consumer’s attitude?
A) change beliefs
B) shift importance
C) add beliefs
D) change ideal
E) all of the above

Answer: Page: 406 Difficulty: easy

31. For years, American automobiles did not have the level of quality that foreign, particularly Japanese, automobiles had. However, that has changed, and most automobiles built in the United States have comparable or superior quality than imports. Consumers’ attitudes are slow to change, however, and marketers must use which strategy to change the cognitive component of consumers’ attitudes?
A) change beliefs
B) shift importance
C) add beliefs
D) change ideal
E) change feelings

Answer: Page: 406 Difficulty: moderate

32. In an attempt to alter consumers’ cognitive component of their attitude toward Pepsi brand of cola, a freshness date was added on the cans. Pepsi wanted consumers to consider this attribute that was never a consideration before. Pepsi was using which strategy to alter the cognitive structure of a consumer’s attitude?
A) change beliefs
B) shift importance
C) add beliefs
D) change ideal
E) change feelings

Answer: Page: 406 Difficulty: moderate

33. Which of the following is an approach used by marketers to increase consumers’ affect toward their brand?
A) classical conditioning
B) create a positive affect toward the ad or Web site
C) mere exposure
D) a and b
E) a, b, and c

Answer: Page: 406-408 Difficulty: moderate

34. The owner of a local restaurant wants to enhance consumers’ attitudes toward his restaurant by changing the affective component of their attitude. Which of the following is an appropriate approach to achieve this objective?
A) Change consumers’ beliefs about attributes of his restaurant.
B) Use positive music in their advertisements so that over time consumers will transfer the positive affect associated with the music to the restaurant.
C) Convince consumers that an attribute for which this restaurant is strong is more important than other attributes consumers consider for this product category.
D) Inform consumers that delivery is now available.
E) Offer coupons to get consumers to visit the restaurant.

Answer: Page: 406-407 Difficulty: moderate

35. Simply presenting a brand to an individual on a large number of occasions might make the individual’s attitude toward the brand more positive is known as _____.
A) mere exposure
B) the familiarity effect
C) positive exposure
D) repetitive exposure
E) the saturation effect

Answer: Page: 408 Difficulty: moderate

36. How does mere exposure enhance attitudes?
A) by changing beliefs
B) by adding beliefs
C) through enhanced familiarity
D) through shifting importance
E) by changing perceptions of the ideal

Answer: Page: 408 Difficulty: moderate

37. For which type of products can affect, emotions, and Aad play a role in more conscious, high-involvement settings?
A) durable products
B) hedonic products
C) services
D) high–price products
E) nondurable products

Answer: Page: 409 Difficulty: hard

38. Changing behavior prior to changing affect or cognition is based primarily on _____.
A) classical conditioning
B) operant conditioning
C) iconic rote learning
D) analytical reasoning
E) mere exposure

Answer: Page: 409 Difficulty: moderate

39. Which of the following is a common technique for inducing trial behavior?
A) coupons
B) free samples
C) point-of-purchase displays
D) tie-in purchases
E) all of the above

Answer: Page: 409 Difficulty: easy

40. Which of the following is an individual factor that can influence attitude change?
A) program context
B) level of viewer distraction
C) buying occasion
D) consumer knowledge
E) all of the above

Answer: Page: 409 Difficulty: hard

41. Which of the following is a theory about how attitudes are formed and changed under varying conditions of involvement?
A) cognitive dissonance theory
B) theory of reasoned action
C) elaboration likelihood model
D) attribution theory
E) noncompensatory theory

Answer: Page: 409 Difficulty: moderate

42. The elaboration likelihood model posits two routes to persuasion, which are the _____.
A) primary route and secondary route
B) temporary route and permanent route
C) central route and peripheral route
D) manifest route and latent route
E) direct route and indirect route

Answer: Page: 410 Difficulty: easy

43. Carissa is highly involved is a purchase decision for a new car. She has searched the Internet, visited car dealerships, talked to friends and family, and paid attention to advertisements. According to the elaboration likelihood model, by which route is Carissa likely to be persuaded?
A) primary route
B) secondary route
C) central route
D) peripheral route
E) direct route

Answer: Page: 410 Difficulty: moderate

44. Which of the following is FALSE regarding the central route to persuasion in the elaboration likelihood model?
A) Consumers exhibit high involvement with the product, message, or decision.
B) Consumers exhibit strong attention focused on central, product-related features and factual information.
C) Consumers experience conscious thoughts about product attributes and use outcomes.
D) Persuasion operates through classical conditioning.
E) Persuasion generally alters product beliefs.

Answer: Page: 410 Difficulty: hard

45. Dana is watching television when a commercial for a brand of bathroom cleaner comes on. She is not very interested in the product category, but the ad was entertaining and made her laugh. As a result, she had a positive attitude toward the brand of cleaner advertised. According to the elaboration likelihood model, which route to persuasion influenced Dana?
A) primary route
B) secondary route
C) central route
D) peripheral route
E) indirect route

Answer: Page: 410 Difficulty: moderate

46. Generally speaking, compared to attitudes formed under the peripheral route, attitudes formed under the central route tend to be _____.
A) stronger
B) more resistant to counterpersuasion attempts
C) more accessible from memory
D) more predictive of behavior
E) all of the above

Answer: Page: 411 Difficulty: easy

47. Addison is a brand manager and wants consumers to form attitudes that are strong, resistant to counterpersuasion attempts, more accessible from memory, and more predictive of behavior. Which route of the elaboration likelihood model should he encourage consumers to take?
A) primary route
B) secondary route
C) central route
D) peripheral route
E) direct route

Answer: Page: 411 Difficulty: moderate

48. The source of a communication represents _____.
A) “how” a message is communicated
B) “who” delivers the message
C) the “what” of the message
D) the “when” of the message
E) the “where” of the message

Answer: Page: 412 Difficulty: easy

49. _____ consists of trustworthiness and expertise.
A) A two-sided message
B) The two routes to persuasion
C) Message appeal
D) Source credibility
E) Message structure

Answer: Page: 412 Difficulty: easy

50. Dr. Rosenfeld is the doctor on Sunday House Call, a Sunday morning health program on the Fox News channel. Dr. Rosenfeld is highly esteemed in his field and provides up-to-date medical information for viewers. Sometimes he recommends specific products, and Valerie, a regular viewer of the program, trusts what he says or recommends because he doesn’t seem to have an apparent motive to mislead viewers. Which characteristic does Dr. Rosenfeld possess?
A) source credibility
B) source derogation
C) source experience
D) source likeability
E) source attractiveness

Answer: Page: 412 Difficulty: moderate

51. In which type of ad does a person, generally a typical member of the target market, recount his or her successful use of the product, service, or idea?
A) single message
B) two-sided message
C) comparative ad
D) testimonial ad
E) demonstration

Answer: Page: 412 Difficulty: moderate

52. Anne appears in a television commercial for a local chiropractor. She tells the audience how she suffered from migraine headaches several times a month. However, once she started treatment at this particular chiropractor, her headaches disappeared. She claimed, “I kept expecting them to come back, but they didn’t. I have a whole new lease on life, thanks to Peavy Chiropractic!” Which type of ad is this?
A) single message
B) two-sided message
C) comparative ad
D) testimonial ad
E) demonstration

Answer: Page: 412 Difficulty: moderate

53. Advertisements and packages for Kellogg’s Smart Start breakfast cereal include the seal of the American Heart Association, indicating that it is a hearty-healthy choice. This seal can influence consumers to purchase this brand because the American Heart Association has a reputation of trustworthiness and expertise. The seal appearing on packages and in advertisements represents a _____.
A) third-party endorsement
B) testimonial
C) two-sided message
D) sponsorship
E) message frame

Answer: Page: 412 Difficulty: moderate

54. Which of the following is NOT a reason why celebrity sources are effective?
A) Celebrities may attract attention to the advertisement.
B) A celebrity’s likeability and popularity often translate into higher Aad which can enhance brand attitudes.
C) Some celebrities are also experts.
D) Celebrities are physically attractive, and research has shown that individuals will agree with a physically attractive person regardless of the message or their own initial attitude.
E) Consumers may identify with or desire to emulate the celebrity.

Answer: Page: 413-414 Difficulty: moderate

55. Which of the following do marketers need to be concerned about with respect to using celebrities as company spokespersons?
A) overexposure of the celebrity
B) negative behavior involving the spokesperson
C) image of the celebrity does not match the image of the product or brand
D) a and b
E) a, b, and c

Answer: Page: 414 Difficulty: easy

56. Tony the Tiger, the Jolly Green Giant, and the Aflac duck are examples of _____.
A) celebrity spokespersons
B) sponsors
C) spokescharacters
D) two-sided messages
E) inanimate celebrity characters

Answer: Page: 415 Difficulty: easy

57. Spokescharacters can be _____.
A) animated animals
B) animated people
C) animated products
D) animated objects
E) all of the above

Answer: Page: 415 Difficulty: easy

58. Which of the following occurs when a company provides financial support for an event such as the Olympics or a concert?
A) third-party endorsement
B) sponsorship
C) celebrity endorsement
D) source credibility
E) two-sided message

Answer: Page: 415 Difficulty: moderate

59. Appeal characteristics represent _____ a message is communicated.
A) by whom
B) when
C) where
D) how
E) the timing by which

Answer: Page: 416 Difficulty: moderate

60. Which type of appeal uses the threat of negative (unpleasant) consequence if attitudes or behaviors are not altered?
A) one-sided message
B) two-sided message
C) fear appeals
D) humorous appeals
E) comparative ads

Answer: Page: 416 Difficulty: easy

61. A long-running television commercial for Dial soap would show an individual in various situations with other people (e.g., car pool or elevator). This individual would join the others and look around, appearing to be in discomfort. Then a voice over would say, “Aren’t you glad you used Dial…don’t you wish everyone did?” Which type of appeal does this illustrate?
A) one-sided message
B) two-sided message
C) fear appeal
D) third-party endorsement
E) comparative ad

Answer: Page: 416 Difficulty: easy

62. Which of the following statements is FALSE regarding humorous appeals?
A) Ads built around humor appear to increase attention to the ad.
B) The overall effectiveness of humor is generally increased when the humor relates to the product or brand in a meaningful way.
C) Humorous ads are low risk because they tend to translate well across situations and cultures.
D) Companies have been successful using humor that is only loosely tied to the product.
E) Ads built around humor appear to increase liking of the ad.

Answer: Page: 416-417 Difficulty: moderate

63. Which type of ad directly compares the features or benefits of two or more brands?
A) one-sided message
B) two-sided message
C) fear appeal
D) third-party endorsement
E) comparative ad

Answer: Page: 417 Difficulty: easy

64. An advertisement for AT&T long distance telephone service split the screen in two and showed a person on each screen talking on the telephone. Below each person, there was a running total of the cost of the call. At the end of the commercial, the total cost on the AT&T side was lower than that for the Sprint side. This is an example of which type of ad?
A) one-sided message
B) two-sided message
C) fear appeal
D) third-party endorsement
E) comparative ad

Answer: Page: 417 Difficulty: moderate

65. Which of the following statement is true regarding comparative advertising?
A) Comparative advertising is more effective regardless of the source.
B) Comparative advertising is particularly effective for promoting established, market-share leader brands.
C) Audience characteristics, especially brand loyalty associated with the sponsoring brand, are important.
D) Broadcast media, particularly radio, appear to be better vehicles for comparative advertisements.
E) A partially comparative ad is one in which a specific competitor is not named.

Answer: Page: 418-419 Difficulty: hard

66. Which type of ad is designed primarily to elicit a positive affective response rather than to provide information or arguments?
A) one-sided message
B) two-sided message
C) fear appeal
D) emotional ad
E) comparative ad

Answer: Page: 419 Difficulty: easy

67. Which of the following is NOT a way emotional ads may enhance persuasion?
A) by increasing attention of the ad and, therefore, ad recall
B) by increasing liking of the ad
C) by increasing product liking through classical conditioning
D) by increasing product liking through high-involvement processes
E) all of the above are ways emotional ads may enhance persuasion

Answer: Page: 419 Difficulty: moderate

68. Which type of appeal attempts to build a personality for the product or create an image of the product user?
A) humorous appeal
B) utilitarian appeal
C) value-expressive appeal
D) hedonic appeal
E) emotional appeal

Answer: Page: 420 Difficulty: moderate

69. Instead of featuring any functional benefits of the product or brand in ads for the iPod, this product was introduced by showing a silhouette of a person dancing with the white earbuds and holding a white iPod MP3 player. Which type of advertising appeal does this illustrate?
A) one-sided message
B) two-sided message
C) testimony
D) value-expressive appeal
E) utilitarian appeal

Answer: Page: 420 Difficulty: hard

70. Which type of appeal involves informing the consumer of one or more functional benefits that are important to the target market?
A) multi-sided message
B) value-expressive appeal
C) utilitarian appeal
D) factual appeal
E) supportive appeal

Answer: Page: 420 Difficulty: moderate

71. An advertisement for the Honda Civic Hybrid featured gas mileage in the subheading (49 city/51 highway). The copy also noted that owners of this automobile may be eligible for a clean-fuel tax deduction. At the time this ad appeared, gas was over $3.00 per gallon, which made the information important to consumers. This is an example of which type of appeal?
A) value-expressive appeal
B) comparative ad
C) two-sided message
D) utilitarian appeal
E) supportive appeal

Answer: Page: 420 Difficulty: moderate

72. Which of the following is true regarding value-expressive versus utilitarian appeals?
A) Utilitarian appeals attempt to build a personality for the product or create an image of the product user.
B) Utilitarian appeals are most effective for functional products.
C) Products serve either a utilitarian purpose or a value-expressive purpose but not both.
D) For value-expressive products, banner ads on Web sites serve primarily to transport consumers to the more detailed target ads or sites.
E) all of the above

Answer: Page: 420-421 Difficulty: moderate

73. Advertisements or sales messages in which only one point of view is expressed are referred to as _____.
A) biased messages
B) one-sided messages
C) two-sided messages
D) utilitarian appeals
E) noncomparative ads

Answer: Page: 421 Difficulty: moderate

74. Toyota offers a hybrid version of its popular Highlander mid-sized SUV. The advertising for this car features the positive benefits of owning a hybrid, but it fails to mention that the Hybrid is considerably more expensive than the conventional version of the model. This is an example of a(n) _____.
A) biased message
B) one-sided message
C) two-sided message
D) positive appeal
E) comparative ad

Answer: Page: 421 Difficulty: moderate

75. Which type of advertisement or sales presentation presents both good and bad points?
A) unbiased message
B) one-sided message
C) two-sided message
D) positive/negative message
E) balanced message

Answer: Page: 421 Difficulty: moderate

76. For years, L’Oreal hair color would say in their ad that L’Oreal is “expensive, but you’re worth it.” This is an example of which type of advertisement?
A) truthful message
B) one-sided message
C) two-sided message
D) negative/positive message
E) balanced message

Answer: Page: 421 Difficulty: moderate

77. _____ refers to presenting one of two equivalent value outcomes either in positive or gain terms or in negative or loss terms.
A) Message sidedness
B) Message framing
C) Benefit segmentation
D) Positive/negative message
E) Priming

Answer: Page: 422 Difficulty: moderate

78. The simplest form of message framing where only a single attribute is the focus of the frame is known as _____.
A) priming
B) a one-sided message
C) goal framing
D) simple framing
E) attribute framing

Answer: Page: 422 Difficulty: moderate

79. Which type of message framing stresses either the positive outcomes of performing a behavior or the negative outcomes of not performing a behavior?
A) attribute framing
B) two-sided framing
C) goal framing
D) end-state framing
E) benefit/loss framing

Answer: Page: 422 Difficulty: moderate

80. Segmenting consumers on the basis of their most important attribute or attributes is called _____.
A) benefit segmentation
B) demographic segmentation
C) psychographic segmentation
D) attribute segmentation
E) utilitarian segmentation

Answer: Page: 422 Difficulty: easy

True/False Questions

81. Attitudes serve four key functions for individuals: knowledge function, value-expressive function, utilitarian function, and a heuristic function.

Answer: Page: 396 Difficulty: moderate

82. The cognitive component of attitude consists of a consumer’s beliefs about an object.

Answer: Page: 397 Difficulty: easy

83. The affective component of an attitude is one’s tendency to respond in a certain manner toward an object or activity.

Answer: Page: 399 Difficulty: moderate

84. One critical aspect of attitudes is that all three components tend to be consistent.

Answer: Page: 403 Difficulty: moderate

85. Four basic marketing strategies used for altering the cognitive structure of a consumer’s attitude are: change beliefs, shift importance, add beliefs, and change ideal.

Answer: Page: 406 Difficulty: moderate

86. There is evidence that affect or brand preference may be increased by mere exposure.

Answer: Page: 408 Difficulty: easy

87. The elaboration likelihood model (ELM) of persuasion posits two routes to persuasion: direct route and indirect route.

Answer: Page: 409-410 Difficulty: moderate

88. If competing brands are comparable in terms of product features (central cues), then consistent with the elaboration likelihood model, under high involvement, peripheral cues like pleasant music will have no influence on brand preferences.

Answer: Page: 411 Difficulty: hard

89. A credible source can enhance message processing and acceptance.

Answer: Page: 412 Difficulty: easy

90. Sponsorship occurs when a company provides financial support for an event.

Answer: Page: 415 Difficulty: easy

91. Research has shown that using high levels of fear in advertising such that consumers feel threatened are the most effective.

Answer: Page: 416 Difficulty: hard

92. Broadcast media, particularly television, appear to be better vehicles for comparative advertisements, because broadcast lends itself to more thorough comparisons.

Answer: Page: 419 Difficulty: moderate

93. Value-expressive appeals involve informing the consumers of one or more functional benefits that are important to the target market.

Answer: Page: 420 Difficulty: moderate

94. A two-sided message presents both good and bad points.

Answer: Page: 421 Difficulty: moderate

95. The simplest form of message framing is Attribute Framing, where only a single attribute is the focus of the frame.

Answer: Page: 422 Difficulty: moderate

96. In a goal framing setting, a positive frame is generally the most effective.

Answer: Page: 422 Difficulty: hard

97. Segmenting consumers on the basis of the most important attribute or attributes is called benefit segmentation.

Answer: Page: 422 Difficulty: moderate

Essay Questions

98. Name and describe the four functions attitudes serve for individuals.

Page: 396 Difficulty: moderate
Answer:

99. A local Kia automobile dealership owner conducted some informal market research and found that many consumers had negative attitudes toward this brand. Explain what can be done to change the cognitive component of consumers’ attitudes.

Page: 405-406 Difficulty: moderate
Answer:

100. Harrison is very involved with any type of electronic product, such as televisions, sound systems, cellular phones, and computers. According to the elaboration likelihood model (ELM), explain how marketers of these types of products can succeed in influencing Harrison.

Page: 409-410 Difficulty: moderate
Answer:

101. Companies spend millions of dollars each year for celebrities to appear in their marketing communications. Explain why this might be a good investment. That is, discuss the reasons why celebrity endorsers are effective.

Page: 413-414 Difficulty: moderate
Answer:

102. Compare and contrast one-sided and two-sided messages, and explain why marketers would use a two-sided message.

Page: 421-422 Difficulty: moderate
Answer:

Multiple Choice Questions

1. American Sports Data, Inc., which examines trends in sports, found that _____.
A) traditional sports are becoming more popular
B) team sports are rooted in “fierce individualism”
C) the values underlying extreme sports are very different from those of traditional team sports
D) extreme sports were experiencing a growing fan base particularly among young women
E) extreme sports are just a fad

Answer: Page: 433-434 Difficulty: moderate

2. Which of the following is considered an outward expression of one’s self-concept?
A) demographics
B) geographics
C) lifestyle
D) attitudes
E) aspirations

Answer: Page: 434 Difficulty: moderate

3. The totality of the individual’s thoughts and feelings having reference to himself or herself as an object is known as _____.
A) self-concept
B) lifestyle
C) self-profile
D) personal space
E) ideal-self

Answer: Page: 434 Difficulty: easy

4. Jennifer sees herself as a loving, caring mother and wife. She also sees herself as an accomplished professional. Finally, she sees herself as a good citizen and devoutly religious person who takes the concerns of others seriously and tries to make the world a better place for those less fortunate than she and her family. This totality of Jennifer’s thoughts and feelings about herself is known as her _____.
A) inner peace
B) inner self
C) self-concept
D) personal identity
E) self-identity

Answer: Page: 434 Difficulty: moderate

5. Which of the following is a dimension of a consumer’s self-concept?
A) actual self-concept
B) ideal self-concept
C) private self-concept
D) social self-concept
E) all of the above

Answer: Page: 434 Difficulty: easy

6. Which dimension of self-concept refers to the individual’s perception of who I am now?
A) actual self-concept
B) ideal self-concept
C) private self-concept
D) social self-concept
E) present self-concept

Answer: Page: 434 Difficulty: moderate

7. Renee sat down and did some serious soul searching. She wanted to understand her perception of her self-concept of who she is now. Renee is searching for her _____.
A) actual self-concept
B) ideal self-concept
C) private self-concept
D) social self-concept
E) present self-concept

Answer: Page: 434 Difficulty: moderate

8. Which dimension of self-concept refers to the individual’s perception of who I would like to be?
A) actual self-concept
B) ideal self-concept
C) private self-concept
D) social self-concept
E) future self-concept

Answer: Page: 434 Difficulty: moderate

9. Charles was examining his perception of himself as whom he would like to be. Charles is examining his _____.
A) actual self-concept
B) ideal self-concept
C) private self-concept
D) social self-concept
E) present self-concept

Answer: Page: 434 Difficulty: moderate

10. Which dimension of self refers to how I am or would like to be to myself?
A) actual self-concept
B) ideal self-concept
C) private self-concept
D) social self-concept
E) present self-concept

Answer: Page: 434 Difficulty: moderate

11. Kerri is searching within herself and trying to determine how she would like to be to herself. Kerri is seeking her _____.
A) actual self-concept
B) ideal self-concept
C) private self-concept
D) social self-concept
E) present self-concept

Answer: Page: 434 Difficulty: moderate

12. One of the major distinctions of self-concept is between _____ and _____ – which is also related to an important value dimension in the U.S. and abroad.
A) private self-concept; public self-concept
B) personal self-concept; interpersonal self-concept
C) actual self-concept; ideal self-concept
D) independent self-concept; interdependent self-concept
E) present self-concept; future self-concept

Answer: Page: 434 Difficulty: moderate

13. Richard is reassessing his life and asking himself, “How am I seen by others?” He is also asking himself, “How would I like to be seen by others?” Richard is seeking his _____.
A) actual self-concept
B) ideal self-concept
C) private self-concept
D) social self-concept
E) real self-concept

Answer: Page: 434 Difficulty: moderate

14. Self-concepts have been categorized into two types, which are _____.
A) primary and secondary
B) manifest and latent
C) independent and interdependent
D) yin and yang
E) direct and indirect

Answer: Page: 434 Difficulty: moderate

15. Which type of self-concept emphasizes personal goals, characteristics, achievements, and desires?
A) primary self-concept
B) individual self-concept
C) interdependent self-concept
D) independent self-concept
E) connected self-concept

Answer: Page: 434-435 Difficulty: moderate

16. Individuals with independent self-concepts tend to be _____.
A) autonomous
B) holistic
C) connected
D) obedient
E) all of the above

Answer: Page: 435 Difficulty: moderate

17. Amber tends to be individualistic and prefers to do things her own way. She lives on her own and decides for herself what she wants to do or how to do things. Which type of self-concept describes Amber?
A) primary self-concept
B) individual self-concept
C) interdependent self-concept
D) independent self-concept
E) connected self-concept

Answer: Page: 434-435 Difficulty: moderate

18. Which type of self-concept emphasizes family, cultural, professional, and social relationships?
A) group self-concept
B) individual self-concept
C) interdependent self-concept
D) independent self-concept
E) connected self-concept

Answer: Page: 435 Difficulty: moderate

19. Individuals with which type of self-concept tend to be obedient, sociocentric, holistic, connected, and relation oriented?
A) group self-concept
B) individual self-concept
C) interdependent self-concept
D) independent self-concept
E) connected self-concept

Answer: Page: 435 Difficulty: moderate

20. Barbara derives the meaning of herself from her relationships with her family. She has never sought a career of her own, and she is most happy when she is “taking care of someone.” If her grandchildren do not like what is prepared for dinner, she will make them something else. Which type of self-concept does Barbara have?
A) role-based self-concept
B) individual self-concept
C) interdependent self-concept
D) independent self-concept
E) connected self-concept

Answer: Page: 435 Difficulty: moderate

21. Which of the following statements is FALSE regarding self-concept and culture?
A) The self-concept is important in all cultures.
B) Those aspects of the self that are most valued and most influence consumption and other behaviors do not vary across cultures.
C) An independent construal of the self is based on the predominant Western cultural belief that individuals are inherently separate.
D) An interdependent construal of the self is based on the common Asian cultural belief in the fundamental connectedness of human beings.
E) all of the above are true

Answer: Page: 434-435 Difficulty: moderate

22. The extended self consists of the self plus _____.
A) all others
B) family members
C) friends
D) possessions
E) the ideal self

Answer: Page: 436 Difficulty: moderate

23. Carla and her family lost their home and everything in it in to a fire. People would console her by saying that at least her family was not harmed and that everything else can be replaced. She would reply, “I know it was just stuff, but it was our stuff and was special to us.” This is reflecting Carla’s _____.
A) self-concept
B) extended self
C) past self
D) ideal self
E) personal self

Answer: Page: 436 Difficulty: moderate

24. An experience that surpasses the usual level of intensity, meaningfulness, and richness and produces feelings of joy and self-fulfillment is known as a(n) _____.
A) peak experience
B) defining moment
C) ultimate experience
D) ideal experience
E) intense experience

Answer: Page: 436 Difficulty: moderate

25. In recent years, body piercing and tattooing have become additional ways to alter both the extended self and the physical self. In what way do tattoos have meaning?
A) There is the meaning associated with having a tattoo, which makes a statement about the person.
B) The location of the tattoo has meaning, with more visible tattoos conveying more rebelliousness or nonconformity.
C) The nature of the tattoo is a source of meaning, both private and symbolic.
D) a and b
E) a, b, and c

Answer: Page: 437 Difficulty: moderate

26. The tendency of an owner to evaluate an object more favorably than a nonowner is called the _____.
A) personal bias effect
B) personal relevance effect
C) mere ownership effect
D) possessive effect
E) mere exposure effect

Answer: Page: 437 Difficulty: moderate

27. What is the most common measurement approach to measuring self-concept?
A) semantic differential
B) Likert items
C) 100-point constant-sum scale
D) nominal variables
E) open-ended questions

Answer: Page: 438 Difficulty: moderate

28. A market researcher asked Adam to place an “X” on one of the seven spaces that are placed between several sets of adjectives that best represents how he sees himself on those two opposite adjectives. This is the most common approach to measuring self-concept and is known as _____.
A) semantic differentials
B) Likert items
C) a 100-point constant-sum scale
D) nominal variables
E) open-ended questions

Answer: Page: 438 Difficulty: moderate

29. Self-image congruity influences on brand preference and choice depend on which of the following?
A) individual factors
B) product factors
C) situational factors
D) a and b
E) a, b, and c

Answer: Page: 439 Difficulty: moderate

30. For which type of product is self-image congruity likely to matter more?
A) vacuum
B) laundry detergent
C) perfume
D) paper towel
E) lawn mower

Answer: Page: 439 Difficulty: moderate

31. Consumers who place heavy weight on the opinions and feelings of others are called _____.
A) independents
B) interdependents
C) high self-monitors
D) low self-monitors
E) conspicuous consumers

Answer: Page: 439 Difficulty: hard

32. Before doing most things, Erin considers what others will think of her actions and how her behavior will affect them. Others’ opinions and feelings really matter to her, more so than most people she knows. Erin is an example of a(n) _____.
A) independent
B) thinker
C) high self-monitor
D) low self-monitor
E) conspicuous consumer

Answer: Page: 439 Difficulty: hard

33. Consumers who do not place heavy weight on the opinions and feelings of others are called _____.
A) independents
B) interdependents
C) high self-monitors
D) low self-monitors
E) conspicuous consumers

Answer: Page: 439 Difficulty: hard

34. Self-image congruity really doesn’t matter much to Sam, particularly because he doesn’t usually consider the opinions of others or their feelings when he acts. Sam would be described as a(n) _____.
A) independent
B) thinker
C) high self-monitor
D) low self-monitor
E) conspicuous consumer

Answer: Page: 439 Difficulty: hard

35. _____ is how a person lives.
A) Personality
B) Self-concept
C) Lifestyle
D) Subculture
E) Consumption

Answer: Page: 441 Difficulty: easy

36. Individuals with which type of self-concept are more likely to seek adventure and excitement through travel, sports, and entertainment, to be opinion leaders, and to prefer magazines over TV?
A) independents
B) interdependents
C) self-monitors
D) idealists
E) doers

Answer: Page: 441 Difficulty: hard

37. Individuals with which type of self-concept are more likely to engage in home and domestic-related activities and entertainment including cooking at home and from scratch?
A) independents
B) interdependents
C) self-monitors
D) idealists
E) doers

Answer: Page: 441 Difficulty: hard

38. Attempts to develop quantitative measures of lifestyle were initially referred to as _____, and is a term that is frequently used interchangeably with lifestyle.
A) demographics
B) lifeographics
C) household life cycle
D) psychographics
E) personality

Answer: Page: 442 Difficulty: moderate

39. Which of the following is typically included in a psychographic or lifestyle study?
A) attitudes
B) values
C) activities and interests
D) demographics
E) all of the above

Answer: Page: 442 Difficulty: easy

40. Carmen was participating in a psychographic study, and several questions pertained to activities and interests. Questions regarding this aspect of lifestyle include which of the following?
A) evaluative statements about other people, places, ideas, products, and so forth
B) widely held beliefs about what is acceptable or desirable
C) nonoccupational behaviors to which consumers devote time and effort, such as hobbies, sports, public service, and church
D) age, education, income, occupation, family structure, ethnic background, gender, and geographic location
E) specific media the consumers utilize

Answer: Page: 442 Difficulty: moderate

41. Which of the following is a lifestyle segment of Porsche owners?
A) Enthusiasts
B) Fast Forwards
C) Traditionalists
D) Bon Vivants
E) all of the above

Answer: Page: 443 Difficulty: hard

42. With respect to the specific lifestyle scheme developed by Porsche, which segment of consumers is ambitious and driven, values power and control, and expects to be noticed?
A) Top Guns
B) Elitists
C) Proud Patrons
D) Bon Vivants
E) Fantasists

Answer: Page: 443 Difficulty: hard

43. Rod purchased Porsche to satisfy himself, not to impress others. He sees this car as a reward for his hard work. To which segment of Porsche owners does Rod belong?
A) Top Guns
B) Elitists
C) Proud Patrons
D) Bon Vivants
E) Fantasists

Answer: Page: 443 Difficulty: hard

44. Which of the following is one of the shopping lifestyle segments based on consumer shopping motives?
A) Enthusiasts
B) Junkies
C) Proud Patrons
D) Fantasists
E) all of the above

Answer: Page: 443-444 Difficulty: hard

45. Which of the following is NOT one of the shopping lifestyle segments based on consumer shopping motives?
A) Minimalists
B) Gatherers
C) Providers
D) Enthusiasts
E) Proud Patrons

Answer: Page: 443-444 Difficulty: hard

46. Which segment of shoppers is primarily motivated by value, not fun and adventure?
A) Minimalists
B) Enthusiasts
C) Traditionalists
D) Gatherers
E) Providers

Answer: Page: 443 Difficulty: hard

47. Veronica is a shopper primarily motivated by enjoyment of shopping for her family and finding the best value. She’s not motivated by fun and adventure. To which shopping lifestyle segment does Veronica belong?
A) Minimalists
B) Gatherers
C) Providers
D) Enthusiasts
E) Traditionalists

Answer: Page: 443-444 Difficulty: moderate

48. Which shopping lifestyle segment based on hedonic shopping motives is the youngest and most likely to be female?
A) Minimalists
B) Gatherers
C) Enthusiasts
D) Bon Vivants
E) Traditionalists

Answer: Page: 443-444 Difficulty: hard

49. Technographics is a technology segmentation scheme that examines lifestyle segments across such technologies and activities as online access, PC ownership, instant messaging, and shopping online. Which of the following is one of these segments?
A) Achievers
B) Innovators
C) Handshakers
D) Minimalists
E) Enthusiasts

Answer: Page: 444 Difficulty: hard

50. Consumers in which technology segment are optimistic, have a high income, are motivated by entertainment, and are the most likely to shop online, have a mobile phone, and bank online?
A) Fast Forwards
B) Techno-Strivers
C) Gadget Grabbers
D) Mouse Potatoes
E) Media Junkies

Answer: Page: 444 Difficulty: hard

51. Thomas is an optimistic individual, earns a high income, and is motivated by his family. He believes strongly in the value of technology for his family and his children’s education, so much so, that each of his children have their own computers with online access. To which technology lifestyle segment does Thomas belong?
A) Fast Forwards
B) Handshakers
C) Mouse Potatoes
D) Gadget Grabbers
E) New Age Nurturers

Answer: Page: 444 Difficulty: hard

52. What are the two dimensions of the VALS typology of consumers?
A) age and gender
B) age and stage of family life cycle
C) stage of family life cycle and resources
D) primary motivation and resources
E) primary motivation and age

Answer: Page: 445 Difficulty: moderate

53. Which of the following is NOT a primary motivation on which the VALS typology is based?
A) ideals motivation
B) achievement motivation
C) self-expression motivation
D) realist motivation
E) all of the are primary motivations in the VALS typology

Answer: Page: 445 Difficulty: hard

54. In the VALS typology, which primary motivation is characteristic of consumers guided in their choices by their beliefs and principles rather than by feelings or desire for social approval?
A) ideals motivation
B) achievement motivation
C) self-expression motivation
D) realist motivation
E) focused motivation

Answer: Page: 445 Difficulty: moderate

55. Pamela is a consumer that is guided in her choices by her beliefs and principles rather than by feelings or desire for social approval. She tends to purchase products based on functionality and reliability. Which primary motive is guiding Pamela’s behavior?
A) ideals motivation
B) achievement motivation
C) self-expression motivation
D) realist motivation
E) focused motivation

Answer: Page: 445 Difficulty: moderate

56. Consumers driven by which primary motivation strive for a clear social position, are strongly influenced by the actions, approval, and opinions of others, and tend to purchase status symbols?
A) ideals motivation
B) achievement motivation
C) self-expression motivation
D) realist motivation
E) focused motivation

Answer: Page: 445 Difficulty: moderate

57. Bob is a consumer that strives for a clear social position and is strongly influenced by the actions, approval, and opinions of others. He drives an expensive automobile, and only buys brands of clothing that are considered “status symbols.” Which primary motivation is driving Bob’s behavior?
A) ideals motivation
B) achievement motivation
C) self-expression motivation
D) realist motivation
E) focused motivation

Answer: Page: 445 Difficulty: moderate

58. Action-oriented consumers that strive to express their individuality through their choices and purchase experiences are driven by which primary motivation?
A) ideals motivation
B) achievement motivation
C) self-expression motivation
D) realist motivation
E) focused motivation

Answer: Page: 445 Difficulty: moderate

59. Marty is an action-oriented consumer, and he strives to express his individuality through his choices. He purchases products and services for the experience they can provide him rather than what they might say about him to others. Which primary motivation is guiding Marty’s behavior?
A) ideals motivation
B) achievement motivation
C) self-expression motivation
D) realist motivation
E) focused motivation

Answer: Page: 445 Difficulty: moderate

60. Which of the following is a VALS segment of consumers?
A) Traditionalists
B) Minimalists
C) Blue Blood Estates
D) Believers
E) Enthusiasts

Answer: Page: 446-449 Difficulty: moderate

61. Which VALS segment of consumers is comprised of successful, sophisticated, active, take-charge people with high self-esteem and abundant resources and are driven by a mix of motivations?
A) Achievers
B) Makers
C) Innovators
D) Thinkers
E) Experiencers

Answer: Page: 446 Difficulty: moderate

62. David is a retired attorney who is satisfied and comfortable with his life. He keeps informed about the world by reading three newspapers a day and attends lectures at the senior activity center near his home. He is very content with his life, and he tends to center his leisure activities around his home. He plans his purchases carefully and looks for functionality, value, and durability in the products he buys. Which VALS segment best describes David?
A) Achievers
B) Makers
C) Innovators
D) Thinkers
E) Experiencers

Answer: Page: 447 Difficulty: moderate

63. Which VALS segment consists of consumers that are conservative, conventional people with concrete beliefs based on traditional, established codes of family, church, community, and the nation, and are motivated by ideals?
A) Achievers
B) Makers
C) Believers
D) Experiencers
E) Innovators

Answer: Page: 448 Difficulty: moderate

64. Jonathon is a career-oriented person who feels in control of his life. He values consensus, predictability, and stability over risk, intimacy, and self-discovery. Convenience and time-saving products and services are important to him and his family due to their hectic lifestyle. To which VALS segment does Jonathon belong?
A) Achievers
B) Makers
C) Believers
D) Experiencers
E) Innovators

Answer: Page: 448 Difficulty: moderate

65. Which VALS segment of consumers is style conscious and trendy, has limited education, narrow interests, and money defines success for them?
A) Experiencers
B) Strivers
C) Survivors
D) Makers
E) Believers

Answer: Page: 449 Difficulty: moderate

66. Graham is a college student who is impulsive and somewhat rebellious. He seeks out variety and excitement, usually looking for something new, offbeat, and risky. Even though he was old enough, he didn’t vote in the last presidential election and is not very interested in world events. To which VALS segment does Graham belong?
A) Experiencers
B) Strivers
C) Survivors
D) Makers
E) Believers

Answer: Page: 449 Difficulty: moderate

67. Leonard is a hardworking individual who works for himself and can do just about any construction or carpentry job around. He builds cabinets primarily, but he has also done masonry work. His idea of fun is fixing his truck, and several of his friends and family have him work on their cars as well. He is unimpressed by material possessions other than those with a practical or functional purpose. To which VALS segment does Leonard belong?
A) Experiencers
B) Strivers
C) Survivors
D) Makers
E) Believers

Answer: Page: 449 Difficulty: moderate

68. Which VALS segment of consumers lead the most constricted lives, living simply on limited incomes but are relatively satisfied?
A) Experiencers
B) Strivers
C) Survivors
D) Makers
E) Believers

Answer: Page: 449 Difficulty: moderate

69. What is the premise underlying geo-demographic analyses?
A) Age is the primary factor influencing lifestyle.
B) Lifestyle, and thus consumption, is largely driven by demographic factors.
C) Lifestyle, and thus consumption, is largely driven by education.
D) Lifestyle cannot be measured, that is why geographic and demographic variables are analyzed.
E) Lifestyle, and thus consumption, is based on primary motivations and resources.

Answer: Page: 450 Difficulty: moderate

70. How many PRIZM segments are there?
A) 8
B) 10
C) 38
D) 54
E) 66

Answer: Page: 451 Difficulty: hard

71. Which following PRIZM factor is determined by population density, relates to where people live and is strongly related to the lifestyles people lead?
A) ethnicity
B) geodemographics
C) urbanicity
D) lifestage
E) consensus

Answer: Page: 451 Difficulty: hard

72. Which of the following is a major PRIZM social group?
A) urban
B) family life
C) mature years
D) younger years
E) all of the above

Answer: Page: 451 Difficulty: moderate

73. Which PRIZM social group is characterized by smaller, less densely populated cities or satellites to major cities?
A) Urban
B) Suburban
C) Second City
D) Town & Country
E) Rural

Answer: Page: 451 Difficulty: moderate

74. Which of the following is a major PRIZM lifestage group?
A) Urban
B) Town & Country
C) Second City
D) Strivers
E) Family Life

Answer: Page: 451 Difficulty: moderate

75. Which PRIZM segment consists of consumers that are evolving into older “empty-nester” couples as their children grow up and leave home, live in older, stable neighborhoods with pools and patios in their backyard, are college-educated, and are typically Caucasian?
A) Urban Achievers
B) Blue Blood Estates
C) Bohemian Mix
D) Pools and Patios
E) Town & Country

Answer: Page: 452 Difficulty: moderate

76. Carl is young and single. He has a high school education and works at a construction job. He lives in a tiny apartment. Even though he doesn’t have a high income, he tries to live an active life attending sporting events, and sometimes he brings a date with him. He eats fast food almost every day and likes to go fishing on his days off. To which PRIZM group does Carl belong?
A) Young Digerati
B) Bohemian Mix
C) Young & Rustic
D) Big Fish, Small Pond
E) Minimalists

Answer: Page: 452 Difficulty: hard

77. Which of the following is a global lifestyle segment identified by Roper Starch Worldwide?
A) Experiencers
B) Young & Rustic
C) Young Digerati
D) Altruists
E) Innovators

Answer: Page: 455 Difficulty: hard

78. Which of the following is NOT a global lifestyle segment identified by Roper Starch Worldwide?
A) Strivers
B) Devouts
C) Intimates
D) Creatives
E) Rustics

Answer: Page: 455 Difficulty: hard

79. Which global lifestyle segment values duty, tradition, faith, obedience, and respect for elders?
A) Strivers
B) Devouts
C) Altruists
D) Intimates
E) Creatives

Answer: Page: 455 Difficulty: moderate

80. Christina lives in Japan, and she and her friends value adventure, pleasure, and excitement. They are heavy users of electronic media, are fashion conscious, and like going to restaurants, bars, and clubs. To which global lifestyle segment identified by Roper Starch Worldwide do Christina and her friends belong?
A) Strivers
B) Altruists
C) Intimates
D) Fun Seekers
E) Creatives

Answer: Page: 455 Difficulty: moderate

True/False Questions

81. Self-concept is the totality of the individual’s thoughts and feelings having reference to himself or herself as an object.

Answer: Page: 434 Difficulty: easy

82. The independent self-concept emphasizes personal goals, characteristics, achievement, and desires.

Answer: Page: 434-435 Difficulty: easy

83. The extended self consists of self plus others.

Answer: Page: 436 Difficulty: moderate

84. The tendency of an owner to evaluate an object more favorably than a nonowner is known as the mere ownership effect.

Answer: Page: 437 Difficulty: moderate

85. Self-image congruity is likely to matter more when the situation involves public or conspicuous consumption.

Answer: Page: 439 Difficulty: easy

86. Consumers are usually explicitly aware of the role lifestyle plays in their purchase decisions.

Answer: Page: 441 Difficulty: moderate

87. The terms psychographics and lifestyles are frequently used interchangeably.

Answer: Page: 442 Difficulty: moderate

88. The shopping segment labeled Providers consists of consumers primarily motivated by enjoyment of shopping for others and value.

Answer: Page: 443 Difficulty: moderate

89. The technology segment of consumers labeled Fast Forwards are optimistic, high income, and motivated by family.

Answer: Page: 444 Difficulty: hard

90. In the VALS typology, individuals are classified according to their primary motivations, which are ideals motivation, achievement motivation, or self-expression motivation.

Answer: Page: 445 Difficulty: moderate

91. The VALS segment known as Survivors has the oldest median age (i.e., 70).

Answer: Page: 446 Difficulty: moderate

92. The VALS segment known as Achievers has the highest medium income (i.e., over $100,000).

Answer: Page: 446 Difficulty: hard

93. PRIZM organizes its 66 individual segments into broader social and lifestage groups.

Answer: Page: 451 Difficulty: moderate

94. Young Digerati, Blue Blood Estates, and Urban Achievers are examples of PRIZM segments.

Answer: Page: 452 Difficulty: moderate

95. Altruists is a global lifestyle segment interested in social issues and the welfare of society.

Answer: Page: 455 Difficulty: moderate

Essay Questions

96. Compare and contrast the independent self-concept and the interdependent self-concept.

Page: 434-435 Difficulty: moderate
Answer:

97. In general, consumers prefer brands that match their self-concepts. However, the degree to which such “self-image congruity” influences brand preference and choice depends on various factors. Explain these factors.

Page: 439 Difficulty: hard
Answer:

98. You are a marketing manager and want to measure the lifestyles of the various market segments served by your company. Discuss typical variables you should include in your studies.

Page: 442 Difficulty: moderate
Answer:

99. Discuss the two dimensions on which the VALS typology is based.

Page: 445 Difficulty: moderate
Answer:

100. You’ve just started working at a company, and your supervisor wants to use the PRIZM lifestyle segmentation scheme but is a bit confused because there are so many segments (i.e., 66 individual segments). While it does seem like a lot to understand, you are also aware that these segments are organized into broader social and lifestage groups. Explain these broader groups.

Page: 451 Difficulty: moderate
Answer:

Multiple Choice Questions

1. What do Hispanic girls celebrate when they are fifteen years old?
A) ritual situation
B) bat mitzvah
C) quinceanera
D) Cinco De Mayo
E) a and c

Answer:Page: 483 Difficulty: hard

2. Which of the following is an ancient solemn event marketing the coming of age of a Jewish male?
A) bar mitzvah
B) bat mitzvah
C) Chanukah
D) Passover
E) Yom Kippur

Answer:Page: 483 Difficulty: moderate

3. The purchase decision and consumption process always occur in the context of _____.
A) others
B) a specific situation
C) marketing communications
D) an extended decision-making process
E) a social surrounding

Answer: Page: 484 Difficulty: moderate

4. To understand a consumer’s behavior, we must know about the _____.
A) consumer
B) situation
C) stimulus object
D) a and b
E) a, b, and c

Answer:Page: 484 Difficulty: moderate

5. All those factors particular to a time and place that do not follow from knowledge of the stable attributes of the consumer and the stimulus and that have an effect on current behavior are known as _____.
A) situational influence
B) motivators
C) consumption triggers
D) consumption influencers
E) motivational influence

Answer:Page: 484 Difficulty: easy

6. Which of the following also includes a situation-specific component?
A) personality
B) self-concept
C) involvement
D) demographics
E) brand image

Answer: Page: 484 Difficulty: moderate

7. Which of the following is a situation in which consumer behavior occurs?
A) communications situation
B) purchase situation
C) usage situation
D) disposition situation
E) all of the above

Answer:Page: 484 Difficulty: easy

8. Which of the following is NOT a situation in which consumer behavior occurs?
A) communications situation
B) purchase situation
C) usage situation
D) disposition situation
E) all of the above are situations in which consumer behavior occurs

Answer:Page: 484 Difficulty: moderate

9. Which of the following is a situation characteristic?
A) product
B) package
C) temporal perspective
D) demographics
E) social class

Answer: Page: 485 Difficulty: moderate

10. Sharon has to purchase a gift for her mother and only has this afternoon to do so because her birthday party is that evening. She’s wondering how she will be able get to the mall in time to pick out the perfect gift. This is an illustration of which situation characteristic?
A) physical features
B) social surroundings
C) temporal perspective
D) task definition
E) antecedent state

Answer: Page: 485 Difficulty: moderate

11. Which of the following is NOT an individual characteristic influencing consumer behavior?
A) culture
B) attitudes
C) task definition
D) social class
E) motivation

Answer: Page: 485 Difficulty: moderate

12. Which of the following is NOT a consumption response?
A) task definition
B) problem recognition
C) purchase
D) disposition
E) alternative evaluation

Answer:Page: 485 Difficulty: moderate

13. The situation interacts with the marketing activity and the individual to determine behavior. Which of the following is a marketing activity?
A) lifestyle
B) temporal perspective
C) package
D) purchase
E) task definition

Answer: Page: 485 Difficulty: moderate

14. Mark is developing the marketing strategy for his business, which is a retail store. He knows that situation characteristics will interact with his marketing activity. Which of the following is a situation characteristic he needs to consider?
A) social class
B) attitudes
C) lifestyle
D) task definition
E) all of the above

Answer: Page: 485 Difficulty: moderate

15. The situation in which consumers receive information has an impact on their behavior and is referred to as the _____ situation.
A) communications
B) purchase
C) usage
D) disposition
E) preliminary

Answer:Page: 485 Difficulty: easy

16. In which situation do marketers attempt to place their ads in appropriate media contexts to enhance their effectiveness?
A) communications
B) purchase
C) usage
D) disposition
E) preliminary

Answer:Page: 485 Difficulty: easy

17. When orange juice attempted to expand the various times of day when consumers would see orange juice as an appropriate beverage to consume, they were trying to influence which situation?
A) communication
B) usage
C) purchase
D) disposition
E) all of the above

Answer: Page: 486 Difficulty: hard

18. Arm & Hammer baking soda has been very successful promoting other uses for this product. Advertisements provide several uses other than baking, such as removing odors from carpeting, the laundry, and kitty litter boxes. Finding more uses for a product is known as _____.
A) disposition situation
B) purchase situation
C) communications situation
D) expanded usage situation
E) alternative usage situation

Answer: Page: 486-487 Difficulty: hard

19. In the United States, a man usually gives a woman a diamond ring for her to wear on her left-hand ring finger when they become engaged to be married. However, one diamond distributor has developed the idea that women should wear diamonds on their right hands as well. Marketing communications regarding the Diamond Right Hand Ring stress the independence of women and their ability to buy a diamond for themselves. One ad claims that a diamond on a left hand says “we,” while a diamond on the right hand says “me.” This diamond distributor is attempting to _____.
A) influence the competitive situation
B) expand the usage situation
C) reduce the disposition situation
D) influence the social surroundings
E) influence the temporal perspective

Answer: Page: 486-487 Difficulty: moderate

20. Which situation involves consumers disposing of products or product packages after or before product use?
A) communications situation
B) purchase situation
C) usage situation
D) disposition situation
E) task situation

Answer: Page: 487 Difficulty: easy

21. Decisions made by consumers regarding the _____ situation can create significant social problems as well as opportunities for marketers.
A) disposition
B) purchase
C) communication
D) expanded usage
E) usage

Answer:Page: 487 Difficulty: moderate

22. Which group needs to understand how situational influences affect consumers’ disposition decisions?
A) marketers
B) government
C) environmental organizations
D) a and b
E) a, b, and c

Answer:Page: 487 Difficulty: moderate

23. Walker and his wife have two children. They have purchased a new computer for their household every four years or so for almost twenty years. When Walker purchases a new one, usually for him to be able to work at home, one of his children will get the old one. However, they have a few old computers sitting in the attic and garage because Walker doesn’t really know how to get rid of them. This is an example of which type of situation?
A) disposition situation
B) purchase situation
C) communications situation
D) expanded usage situation
E) replacement situation

Answer:Page: 487 Difficulty: moderate

24. Gertrude is very environmentally-conscious, so she only uses paper bags at the grocery store and tries to purchase items in packages that are recyclable. Her behavior concerns which type of situation?
A) socially sensitive situation
B) disposition situation
C) usage situation
D) purchase situation
E) communications situation

Answer: Page: 487 Difficulty: moderate

25. Which of the following is NOT a key situational dimension or characteristic that influences consumer behavior?
A) physical surroundings
B) social surroundings
C) alternative evaluation
D) temporal perspectives
E) task definition

Answer: Page: 488 Difficulty: moderate

26. Decor, sounds, aromas, lighting, weather, and configurations of merchandise or other materials surrounding the stimulus object are included in which situational characteristic?
A) physical surroundings
B) social surroundings
C) temporal perspectives
D) task definition
E) antecedent states

Answer:Page: 488 Difficulty: easy

27. Melanie lives in a small city that does not have a lot of the interesting retail stores. She and her two best friends take a trip twice a year to places such as Atlanta, Dallas, and Chicago to go shopping. It’s so exciting for them to go in some of the stores because they are so unique, and they have only seen them online or in catalogs. Also, several cities now have lifestyle centers or town centers that are reminiscent of downtown in bygone days. All of the factors such as decor, sounds, aromas, lighting, weather, and configurations of merchandise or other materials surrounding the merchandise that Melanie and her friends make a special trip to experience comprise which situation characteristic?
A) physical surroundings
B) social surroundings
C) temporal perspectives
D) task definition
E) antecedent states

Answer:Page: 488 Difficulty: easy

28. The sum of all the physical features of a retail environment is referred to as the _____.
A) store situation
B) retail ambiance
C) retail surroundings
D) store atmosphere
E) merchandising mix

Answer: Page: 488 Difficulty: moderate

29. Many of you have probably heard of Banana Republic retail stores and perhaps have shopped there. Many of you may not know that the store used to look much different than it does today. It used to be more like an adventure, and the merchandise assortment was more appropriate for a safari. If you’ve ever seen an Indiana Jones movie, you can get a pretty good idea of what Banana Republic used to look like. The stores would have a jeep in the store, camouflage netting, and music from the 1940s playing. The inside had wooden beams and maps hung on the wall that looked like treasure maps. Much of the merchandise was accompanied by a sign that had a tale of some adventure associated with it. These physical features of the retail environment are referred to as the _____.
A) store situation
B) retail ambiance
C) retail surroundings
D) store atmosphere
E) merchandising mix

Answer: Page: 488 Difficulty: moderate

30. A store’s atmosphere can influence which of the following?
A) consumers’ judgments of the quality of the store
B) store’s image
C) shoppers’ moods
D) shoppers’ willingness to visit and linger
E) all of the above

Answer:Page: 488 Difficulty: easy

31. _____ is the process managers use to manipulate the physical retail environment to create specific mood responses in shoppers.
A) Servicescape
B) Psychographics
C) Atmospherics
D) Environmentalism
E) Landscaping

Answer: Page: 488-489 Difficulty: moderate

32. Carmen is double majoring in fashion merchandising and graphic design in college. When she graduates, she wants to design the physical environment of retail stores, particularly those in women’s fashions. She wants to create environments that create specific mood responses in shoppers. Which field best describes what Carmen wants to do?
A) architecture
B) retail atmospherics
C) art
D) graphic design
E) marketing

Answer: Page: 488-489 Difficulty: hard

33. Atmosphere is referred to as _____ when describing a service business such as a hospital, bank, or restaurant.
A) landscape
B) servicescape
C) ambiance
D) environment
E) servqual

Answer: Page: 489 Difficulty: easy

34. With respect to the typology of service environments, a bank would be categorized as _____.
A) utilitarian
B) personal
C) hedonic
D) tangible
E) moderate

Answer:Page: 489 Difficulty: hard

35. Marcie will soon be 50 years old, so to pamper herself, she decided to get a massage. With respect to the typology of service environments, this type of service would be categorized as _____.
A) utilitarian
B) personal
C) hedonic
D) intangible
E) moderate

Answer: Page: 489 Difficulty: hard

36. Which of the following services would be classified as having an extended hedonic consumption purpose?
A) bank
B) cruise
C) business dinner
D) exercise class
E) theater

Answer: Page: 489 Difficulty: moderate

37. Which of the following are components of the physical environment?
A) colors, aromas, music, and crowding
B) normal and expanded usage
C) utilitarian and hedonic product characteristics
D) moods and momentary conditions
E) internal and external influences

Answer:Page: 490 Difficulty: moderate

38. Which color is arousing?
A) red
B) yellow
C) blue
D) a and b
E) a, b, and c

Answer: Page: 490 Difficulty: moderate

39. Which type of industry has developed around the use of ambient scents?
A) professional scenting
B) environmental fragrancing
C) scent motivation
D) environmental creationism
E) environmental construction

Answer: Page: 490 Difficulty: moderate

40. How does music influence consumer behavior?
A) subliminally
B) reduces consumers’ perception of overcrowding
C) changes temporal perspective
D) influences mood
E) changes cognitive structures

Answer: Page: 490 Difficulty: moderate

41. Mike is the owner of a restaurant that also has a bar. Based on research that studied the impact of background music on restaurant patrons, what can Mike expect if he uses slow music in his establishment?
A) faster service time
B) customers spend less time at a table
C) larger amount of bar purchases
D) significantly more (i.e., 50% or more) spent on food purchases
E) greater number of customer groups leaving before seated

Answer: Page: 490-491 Difficulty: hard

42. Crowding generally produces which outcome for the retail outlet and the consumer?
A) generally positive outcomes for the retailer, but negative outcomes for the consumer
B) generally negative outcomes for the consumer, but positive outcomes for the retailer
C) generally positive outcomes for both
D) generally negative outcomes for both
E) none of the above

Answer: Page: 491 Difficulty: moderate

43. Which of the following statements is FALSE regarding crowding as a situational characteristic?
A) Crowding generally produces negative outcomes for both the retail outlet and the consumer.
B) Most consumers find crowded feelings to be unpleasant.
C) Crowding is unpleasant regardless of a consumers’ culture.
D) Most consumers find feelings of crowding to be unpleasant and will spend less time in the store.
E) Crowding causes most consumers to spend more money.

Answer: Page: 491 Difficulty: moderate

44. Under conditions of crowding, consumers tend to _____.
A) buy less
B) make faster decisions
C) use less information
D) be less satisfied
E) all of the above

Answer:Page: 491 Difficulty: moderate

45. Under conditions of crowding, consumers tend do to all of the following EXCEPT _____.
A) buy less
B) make faster decisions
C) make more demands on the sales personnel
D) be less satisfied
E) all of the above

Answer: Page: 491 Difficulty: moderate

46. A closed-in feeling created by a crowded store will result in adaptive strategies that could _____.
A) lengthen shopping time, shorten purchases, and increase the use of in-store information
B) shorten shopping time, increase purchases, and decrease the use of in-store information
C) reduce shopping time, reduce purchases, and alter the use of in-store information
D) reduce shopping time, reduce purchases, and greatly increase the use of in-store information
E) none of the above

Answer: Page: 491 Difficulty: moderate

47. The other individuals present in the particular situation are referred to as the _____.
A) servicescape
B) social surroundings
C) physical surroundings
D) store atmosphere
E) temporal perspective

Answer: Page: 492 Difficulty: moderate

48. Jessica and her friends are 16 years old like to shop at Aeropostale, which is a clothing store targeted to teens and young adults. They like to go in that store because there are usually some pretty cute guys working and shopping there. Even though there are some parents shopping with their teens, the other customers are usually teens like themselves. The other individuals present in this store represent the _____.
A) servicescape
B) social surroundings
C) physical surroundings
D) store atmosphere
E) temporal perspective

Answer: Page: 492 Difficulty: moderate

49. Some consumers are highly susceptible to interpersonal influence, which is a _____.
A) norm
B) situation factor
C) product factor
D) personality trait
E) cultural factor

Answer: Page: 492 Difficulty: moderate

50. Mimi is a teenager and wants to be accepted by her friends. In fact, she might act a certain way not because she really wants to, but rather, she does it because others around her are doing it. The influence these others have on Mimi represent which situational characteristic?
A) temporal perspective
B) physical surroundings
C) task definition
D) antecedent states
E) social surroundings

Answer:Page: 492 Difficulty: moderate

51. Which of the following is a negative emotion influenced by both the product (e.g., hearing aids, feminine hygiene products) and the situation?
A) embarrassment
B) shame
C) fear
D) anger
E) disappointment

Answer:Page: 493 Difficulty: moderate

52. Clara is shopping with her friend, Jane, when they both went into a drug store. Clara needed to buy medication for hemorrhoids, but she was reluctant to do so in front of Jane. Which emotion was Clara probably experiencing in this situation?
A) embarrassment
B) shame
C) fear
D) anger
E) disappointment

Answer:Page: 493 Difficulty: moderate

53. Which situational characteristic deals with the effect of time on consumer behavior?
A) physical surroundings
B) social surroundings
C) temporal perspective
D) task definition
E) antecedent states

Answer: Page: 493 Difficulty: moderate

54. One aspect of purchasing from QVC, one of the cable shopping channels on television, is that the “offer” will expire within a certain amount of time, creating a sense of urgency among consumers. Teresa watches this channel frequently, and admitted that this aspect of the situation does influence her decision to buy something. Which characteristic of the situation is influencing Teresa and others’ behavior?
A) physical surroundings
B) social surroundings
C) temporal perspective
D) task definition
E) antecedent states

Answer: Page: 493 Difficulty: moderate

55. Shopping on the Internet provides which important time-related dimension?
A) It has the potential to reduce the amount of time required to make a specific purchase.
B) It provides the consumer with almost total control over when the purchase is made.
C) It eliminates the uneasiness of crowding experienced in many retail outlets.
D) a and b
E) a, b, and c

Answer: Page: 493-494 Difficulty: hard

56. The reason the consumption activity is occurring is the situation characteristic of _____.
A) physical surroundings
B) social surroundings
C) temporal perspective
D) task definition
E) antecedent states

Answer: Page: 494 Difficulty: easy

57. Stacy is shopping to purchase new linens for her guest room. Which situational characteristic is influencing her behavior?
A) physical surroundings
B) social surroundings
C) temporal perspective
D) task definition
E) antecedent states

Answer: Page: 494 Difficulty: moderate

58. Which of the following is a reason consumers give gifts?
A) social expectations
B) ritualized consumption experiences
C) to elicit return favors
D) as an expression of love and caring
E) all of the above

Answer:Page: 494 Difficulty: easy

59. James is giving his cousin, Conor, a new video game for his birthday. Which of the following is the most likely reason James is giving this gift?
A) he is required to do so
B) it is a ritualized consumption experience
C) to elicit return favors
D) as a return favor
E) because he hopes the receiver will share the gift

Answer: Page: 494 Difficulty: hard

60. John is a salesman and gave one of his customers an expensive watch. Which of the following is the most likely reason John gave this gift?
A) social expectations
B) it is a ritualized consumption experience
C) to elicit a return favor
D) it is a business requirement
E) as an expression of loving and caring

Answer: Page: 494 Difficulty: hard

61. One study found that wedding gifts tend to be _____ while birthday gifts tend to be _____.
A) expensive; inexpensive
B) inexpensive; expensive
C) fun; utilitarian
D) utilitarian; fun
E) large; small

Answer: Page: 494 Difficulty: hard

62. Rachel is going to the mall to purchase a wedding gift for a co-worker. Based on research, which type of product is she likely to buy?
A) expensive
B) inexpensive
C) expressive
D) utilitarian
E) hedonic

Answer: Page: 494 Difficulty: hard

63. Which of the following is a way that gifts communicate symbolic meaning?
A) In many cases price can be known and can be interpreted as a measure of the esteem the giver has for the receiver.
B) The image and functionality of the gift implies the giver’s impression of the image and personality of the receiver.
C) It reflects on the image and thoughtfulness of the giver.
D) It can signify the type of relationship the giver has or desires with the receiver.
E) all of the above

Answer:Page: 494 Difficulty: moderate

64. A person who shops a nicer store than normal because he or she is buying a gift is influenced by the _____ characteristic of the situation.
A) physical surroundings
B) antecedent state
C) task definition
D) temporal perspective
E) none of the above

Answer: Page: 494 Difficulty: easy

65. Features of the individual person that are not lasting characteristics, such as momentary moods or conditions, are called _____.
A) personality
B) antecedent states
C) context effects
D) task definition
E) self-concept

Answer: Page: 495 Difficulty: moderate

66. Transient feeling states that are generally not tied to a specific event or object are known as _____.
A) noncontextual effects
B) traits
C) temporal effects
D) social surroundings
E) moods

Answer:Page: 495 Difficulty: moderate

67. Which of the following are antecedent states?
A) colors, aromas, music, and crowding
B) normal and expanded usage
C) utilitarian and hedonic
D) moods and momentary conditions
E) internal and external influences

Answer: Page: 495-496 Difficulty: moderate

68. A market research study asked consumers to rate themselves with respect to several adjectives, such as happy, cheerful, peaceful, sad, blue, and depressed. What is this research trying to assess?
A) noncontextual effects
B) traits
C) temporal effects
D) social surroundings
E) mood

Answer:Page: 495 Difficulty: moderate

69. Which of the following statements is true regarding moods?
A) Mood are relatively stable states that are tied to a specific event or object.
B) Moods affect the consumption process, but they are not affected by the consumption process.
C) Positive moods have not been shown to affect shopping behavior.
D) Consumers do not actively try to manage their mood states.
E) Ad and brand attitudes are often influenced in a mood-congruent manner.

Answer:Page: 495 Difficulty: hard

70. Which of the following reflects temporary states of being rather than temporary states of mind?
A) moods
B) momentary conditions
C) task definition
D) personality traits
E) self-concept

Answer: Page: 496 Difficulty: moderate

71. Clark and his family normally live paycheck to paycheck. However, this month, they found themselves with a little extra money, so they decided to go out to a nice restaurant and to a movie. This is an example of the antecedent state of _____.
A) positive mood
B) good luck
C) momentary conditions
D) optimism
E) hedonism

Answer: Page: 496 Difficulty: moderate

72. Stan was feeling very tired and hungry in the mid-afternoon, so he ate a Snickers candy bar. Stan is attempting to manage his _____.
A) personality traits
B) momentary condition
C) mood
D) self-concept
E) daily ritual

Answer: Page: 496 Difficulty: moderate

73. A socially defined occasion that triggers a set of interrelated behaviors that occur in a structured format and that have symbolic meaning is referred to as a _____.
A) ritual situation
B) momentary condition
C) prescriptive
D) schema
E) holiday

Answer:Page: 497 Difficulty: moderate

74. Every year around the 4th of July, families get together and celebrate a family reunion as well as Independence Day. The Normans, one such family, does this every year, and the party is pretty much the same every year. A cookout is held at one family member’s home, and games for the children are played, such as a three-legged race and an egg toss competition. The family that wins the overall competition gets to take home a hideous, but meaningful trophy for that year. This is an example of a _____.
A) ritual situation
B) momentary condition
C) prescriptive
D) schema
E) social schema

Answer:Page: 497 Difficulty: moderate

75. Giving out candy to children on Halloween, giving chocolate and roses to sweethearts on Valentine’s Day, and wearing green and drinking green beer on St. Patrick’s Day are all examples of _____.
A) ritual situations
B) momentary conditions
C) prescriptives
D) schemas
E) social surroundings

Answer:Page: 497 Difficulty: moderate

76. Which of the following statements is FALSE regarding ritual situations?
A) Rituals are receiving increasing attention by marketing scholars and practitioners.
B) Ritual situations are of major importance to marketers because they often involve prescribed consumption behaviors.
C) There is enough shared behavior across individuals and households that marketers can develop products and promotions around the common ritual situations that arise each year.
D) Ritual situations can also result in injurious consumption.
E) Marketers cannot change or create consumption patterns associated with ritual situations.

Answer:Page: 497-498 Difficulty: hard

77. Binge drinking among college students can be described as a(n) _____.
A) ritual behavior
B) socially desirable behavior
C) task accomplishing behavior
D) antecedent behavior
E) value-expressive behavior

Answer:Page: 499 Difficulty: moderate

78. Which of the following is a step in the approach for developing situation-based marketing strategies that was given in the textbook?
A) Use observational studies, focus group discussions, depth interviews, and secondary data to discover the various usage situations that influence the consumption of the product.
B) Survey a large sample of consumers to better understand and quantify how the product is used and the benefits sought in the usage situation by the market segment.
C) Construct a person-situation segmentation matrix.
D) Evaluate each cell in terms of potential.
E) all of the above

Answer:Page: 500 Difficulty: easy

79. Which of the following is the FIRST step in the approach for developing situation-based marketing strategies?
A) Use observational studies, focus group discussions, depth interviews, and secondary data to discover the various usage situations that influence the consumption of the product.
B) Survey a large sample of consumers to better understand and quantify how the product is used and the benefits sought in the usage situation by the market segment.
C) Construct a person-situation segmentation matrix.
D) Evaluate each cell in terms of potential.
E) Develop and implement a marketing strategy for cells that offer sufficient profit potential given your capabilities

Answer:Page: 500 Difficulty: easy

80. Richard is studying how various usage situations influence the consumption of his company’s products. He conducted qualitative analyses (i.e., focus group discussions and depth interviews) as well as surveyed a larger sample of consumers to better understand and quantify how products are used and the benefits sought in the usage situation by the market segment. Richard is performing the first two steps in an approach to develop _____.
A) demographically-based marketing strategies
B) geographically-based marketing strategies
C) situation-based marketing strategies
D) momentary conditions
E) hedonic purchase situations

Answer: Page: 500 Difficulty: moderate

True/False Questions

81. To better understand a consumer’s behavior, we must know about the consumer, about the primary stimulus object, and about the situation.

Answer: Page: 484 Difficulty: easy

82. Consumer behavior occurs within four broad categories or types of situations: the communications situation, the purchase situation, the usage situation, and the social situation.

Answer: Page: 484 Difficulty: hard

83. Expanded usage situation strategies can produce major sales gains for established products.

Answer: Page: 486 Difficulty: easy

84. The disposition situation can create significant social problems as well as opportunities for marketers.

Answer: Page: 487 Difficulty: moderate

85. Physical surroundings represent the situational characteristic that has the greatest impact on consumption behavior.

Answer: Page: 488-491 Difficulty: hard

86. Psychographics is the process managers use to manipulate the physical retail environment to create specific mood responses in shoppers.

Answer: Page: 488-489 Difficulty: moderate

87. Consumers typically attend the theater for utilitarian purposes.

Answer: Page: 489 Difficulty: easy

88. The only aspect of music that influences consumer behavior is tempo.

Answer: Page: 490-491 Difficulty: moderate

89. Personal space and resulting crowding perceptions can vary from culture to culture.

Answer: Page: 491 Difficulty: moderate

90. Individuals tend to comply with group expectations, particularly when the behavior is visible.

Answer: Page: 492 Difficulty: easy

91. The major task dichotomy used by marketers is between purchases for self-use versus gift-giving.

Answer: Page: 494 Difficulty: moderate

92. Mood is an example of a momentary condition reflecting a temporary state of being.

Answer: Page: 495-496 Difficulty: hard

93. Marketers do not attempt to change or create consumption patterns associated with rituals.

Answer: Page: 497 Difficulty: moderate

94. Individuals cannot “create” the situations they face.

Answer: Page: 498 Difficulty: moderate

95. Determining how products are currently used across situations can help the marketer develop appropriate advertising and positioning strategies.

Answer: Page: 499 Difficulty: easy

Essay Questions

96. Describe the nature of situational influence on consumer behavior, and briefly discuss the four broad categories or types of situations.

Page: 484-487 Difficulty: moderate
Answer:

97. Pablo is planning on opening a Mexican restaurant in the town where he lives. He is considering how to design the physical environment of the restaurant. Discuss the components of the physical surroundings that can influence consumption behavior and make some recommendations to Pablo regarding each component.

Page: 490-491 Difficulty: moderate
Answer:

98. Tim is looking for a give for his relatively new girlfriend that he likes a lot but is not sure if she’s “the one.” He’s facing somewhat of a dilemma with this gift because he doesn’t want to send the wrong message to her, but he doesn’t want to appear cheap, either. Moreover, he’s not sure how she really feels about him. Explain the types of symbolic meaning the gift he selects might hold.

Page: 494 Difficulty: moderate
Answer:

99. Explain why ritual situations are important to marketers.

Page: 497-498 Difficulty: moderate
Answer:

100. You are tasked with the responsibility of developing a situation-based marketing strategy. Explain how you would go about doing that.

Page: 499-500 Difficulty: moderate
Answer:

Multiple Choice Questions

1. Beiersdorf is working to have their Nivea for Men brand introduced and publicized in America in order to _____.
A) fulfill a governmental mandate
B) have men recognize a problem with respect to facial care
C) market its new home hair coloring system
D) increase brand awareness
E) none of the above

Answer: Page: 509 Difficulty: moderate

2. What is the first stage of the consumer decision process?
A) information search
B) problem recognition
C) alternative evaluation
D) purchase
E) postpurchase behavior

Answer: Page: 510 Difficulty: easy

3. Which of the following statements is FALSE regarding consumer decisions and the consumer decision process?
A) The decision process model provides useful insight into all types of consumer purchases.
B) Consumer decisions are frequently the result of a single problem.
C) Consumer decisions are rational and functional; otherwise they do not involve decisions per se.
D) Some consumer decisions result from the convergence of several problems.
E) Once the decision process begins, it may evolve and become more complex with multiple goals.

Answer: Page: 510 Difficulty: hard

4. Which of the following is a type of consumer decision making discussed in your text?
A) nominal decision making
B) limited decision making
C) extended decision making
D) b and c
E) a, b, and c

Answer: Page: 511 Difficulty: moderate

5. Which of the following is NOT a type of consumer decision making discussed in your text?
A) nominal decision making
B) extended decision making
C) complex decision making
D) limited decision making
E) all of the above are types of decision making

Answer: Page: 511 Difficulty: moderate

6. The level of concern for, or interest in, the purchase process triggered by the need to consider a particular purchase is known as _____.
A) personal involvement
B) product involvement
C) purchase involvement
D) enduring involvement
E) activated involvement

Answer: Page: 511 Difficulty: moderate

7. Blake doesn’t much care about cars but is engaging in a substantial amount of information search about cars since he is about to buy a new car. In terms of involvement, Blake is _____.
A) high in product involvement; low in purchase involvement
B) high in value-expressive involvement; low in product involvement
C) high in product involvement; high in purchase involvement
D) low in product involvement; low in purchase involvement
E) low in product involvement; high in purchase involvement

Answer: Page: 511 Difficulty: moderate

8. Very high levels of purchase involvement tend to produce _____.
A) extended decision making
B) nominal decision making
C) affective decision making
D) limited decision making
E) none of the above

Answer: Page: 511 Difficulty: moderate

9. Emma noticed that she was almost out of gas, so she pulled into the nearest gas station and filled up her tank. Emma’s decision on which gas to purchase is characterized by _____.
A) a high level of cognitive processing
B) a low level of purchase involvement
C) limited decision making
D) extended decision making
E) a high level of affective processing

Answer: Page: 511 Difficulty: moderate

10. Which type of consumer decision making only includes the stages of problem recognition, limited internal information search, purchase, and limited postpurchase behavior?
A) nominal decision making
B) normal decision making
C) limited decision making
D) extended decision making
E) simple decision making

Answer: Page: 511 Difficulty: moderate

11. Which type of consumer decision making does NOT include alternative evaluation?
A) routine decision making
B) nominal decision making
C) extended decision making
D) simple decision making
E) limited decision making

Answer: Page: 511 Difficulty: moderate

12. Which type of consumer decision making includes only a limited internal information search and no external search for information?
A) routine decision making
B) nominal decision making
C) extended decision making
D) simple decision making
E) limited decision making

Answer: Page: 511 Difficulty: moderate

13. Which type of consumer decision making includes the evaluation of only a few attributes, simple decision rules, and few alternatives?
A) routine decision making
B) nominal decision making
C) extended decision making
D) simple decision making
E) limited decision making

Answer: Page: 511 Difficulty: moderate

14. Which type of consumer decision making involves the evaluation of many attributes and alternatives and employs complex decision rules?
A) routine decision making
B) nominal decision making
C) extended decision making
D) simple decision making
E) limited decision making

Answer: Page: 511 Difficulty: moderate

15. Which type of decision making process in effect involves no decision per se?
A) simple decision making
B) nominal decision making
C) extended decision making
D) automatic decision making
E) default decision making

Answer: Page: 512 Difficulty: moderate

16. Nominal decision making is sometimes referred to as _____.
A) habitual decision making
B) routine decision making
C) simple decision making
D) automatic decision making
E) default decision making

Answer: Page: 512 Difficulty: moderate

17. A completely nominal decision does not even include consideration of _____.
A) information
B) problem recognition
C) the “do not purchase” alternative
D) purchase evaluation
E) all of the above

Answer: Page: 512 Difficulty: moderate

18. Nominal decisions can be broken into which two distinct categories?
A) brand loyal decisions and repeat purchase decisions
B) primary decisions and secondary decisions
C) high involvement decisions and low involvement decisions
D) expensive decisions and inexpensive decisions
E) first purchase decisions and repeat purchase decisions

Answer: Page: 512 Difficulty: moderate

19. Which type of nominal decision is characterized by a fairly high degree of product involvement but a low degree of purchase involvement?
A) routine decision
B) inexpensive decision
C) primary decision
D) brand loyal decision
E) low visibility decision

Answer: Page: 512 Difficulty: moderate

20. Brad was out of soft drinks in his dorm room, so he went to the store and purchased Coke. This is the brand he always buys, and he would not even consider purchasing another brand. Which type of nominal decision does this illustrate?
A) routine decision
B) repeat purchase decision
C) primary decision
D) brand loyal decision
E) low visibility decision

Answer: Page: 512 Difficulty: moderate

21. Which type of nominal decision is characterized by a consumer believing that all brands within a given product category are about the same and not attaching much importance to the product category or purchase?
A) routine decision
B) repeat purchase decision
C) secondary decision
D) inconsequential decision
E) indifferent decision

Answer: Page: 512 Difficulty: moderate

22. Rita is doing her family’s grocery shopping and purchases ice cream. She’s purchased Blue Bell ice cream before and purchases it again. She’s not committed to this brand; it’s just that she and her family like it. Which type of nominal decision is this?
A) inconsequential decision
B) indifferent decision
C) automatic decision
D) repeat purchase decision
E) secondary decision

Answer: Page: 512 Difficulty: moderate

23. Which type of decision making involves internal and external search, few alternatives, simple decision rules on a few attributes, and little postpurchase evaluation?
A) nominal decision making
B) routine decision making
C) limited decision making
D) partial decision making
E) extended decision making

Answer: Page: 513 Difficulty: moderate

24. Which type of decision making covers the middle ground between nominal and extended decision making?
A) limited decision making
B) partial decision making
C) mid-range decision making
D) modified decision making
E) internal decision making

Answer: Page: 513 Difficulty: moderate

25. Marla is bored with her cell phone. She wants to purchase a new one that has cool ring tones and can take a picture. She’s not going to conduct a big search for a new phone as she’s just going to consider a few others. Which type of decision making is this?
A) nominal decision making
B) limited decision making
C) extensive decision making
D) extended decision making
E) truncated decision making

Answer: Page: 513 Difficulty: moderate

26. Which type of decision making involves an extensive internal and external information search followed by a complex evaluation of multiple alternatives and significant postpurchase evaluation?
A) limited decision making
B) nominal decision making
C) extended decision making
D) complex decision making
E) complete decision making

Answer: Page: 513 Difficulty: moderate

27. The Smith’s oldest daughter, Olivia, is a senior in high school. She has all “A’s” and scored a 34 on the ACT. She is president of the debate team and the national honor society as well as a member of the cheerleading squad. Olivia wants to attend medical school, so both she and her parents are very concerned about which undergraduate school she attends. They have spent countless hours on the Internet examining universities, and they have already visited five campuses. For Olivia and her parents, which type of decision making does this represent?
A) limited decision making
B) nominal decision making
C) extended decision making
D) complex decision making
E) complete decision making

Answer: Page: 513 Difficulty: moderate

28. _____ is the result of a discrepancy between a desired state and an actual state that is sufficient to arouse and activate the decision process?
A) Alternative evaluation
B) Problem recognition
C) Information search
D) Purchase
E) Postpurchase evaluation

Answer: Page: 514 Difficulty: moderate

29. Tess noticed that she was almost out of shampoo. Which stage of the decision process will this observation activate?
A) problem recognition
B) information search
C) alternative evaluation
D) postpurchase evaluation
E) dissonance

Answer: Page: 514 Difficulty: easy

30. A(n) _____ is the way an individual perceives his or her feelings and situation to be at the present time.
A) current state
B) actual state
C) desired state
D) self-concept
E) self-assessment

Answer: Page: 514 Difficulty: moderate

31. Bessie is at the grocery store and is trying to remember some of the things she needs to buy. She is in the cleaning products aisle looking at the floor cleaning products. She’s pretty sure she has another bottle left at home, so she doesn’t purchase another. Bessie’s perception of her current situation regarding this product reflects her ____.
A) current state
B) desired state
C) actual state
D) self-concept
E) self-assessment

Answer: Page: 514 Difficulty: moderate

32. A(n) _____ is the way an individual wants to feel or be at the present time.
A) current state
B) desired state
C) actual state
D) ideal state
E) idolized state

Answer: Page: 514 Difficulty: moderate

33. Candice is on a diet and wants to lose 10 pounds. She wants to be thin right now, which represents her _____.
A) actual state
B) ideal state
C) healthy state
D) desired state
E) future state

Answer: Page: 514 Difficulty: moderate

34. Which of the following statements is FALSE regarding problem recognition?
A) Problem recognition is the first stage in the consumer decision process.
B) Only when the desired state is greater than the actual state will a problem exist.
C) Problem recognition is the result of a discrepancy between a desired state and an actual state that is sufficient to arouse and activate the decision process.
D) Without recognition of a problem, there is no need for a decision.
E) all of the above are true regarding problem recognition

Answer: Page: 514-515 Difficulty: hard

35. Which of the following drives problem recognition?
A) the consumer’s perception of the actual state
B) objective reality of the consumer’s actual state
C) the amount of information available
D) the number of alternatives from which to choice
E) others’ perception of an individual’s actual state

Answer: Page: 515 Difficulty: moderate

36. The level of one’s desire to resolve a particular problem depends on which factors?
A) the consumer’s perception of his or her actual state and the desired state
B) the length of time required to make a decision and the level of purchase involvement
C) the magnitude of the discrepancy between the desired and actual states and the relative importance of the problem
D) the degree of brand loyalty and the amount of time required to make a decision
E) the direction of the discrepancy between the desired and actual states and the relative importance of the purchase

Answer: Page: 516 Difficulty: hard

37. Relative importance of a problem is determined by which of the following?
A) how critical the problem is to the maintenance of the consumer’s desired lifestyle
B) how critical the problem is to others
C) the magnitude of the discrepancy between the desired and actual states
D) the magnitude of the discrepancy between the actual self-concept and the ideal self-concept
E) the level of risk associated with the decision process

Answer: Page: 516-517 Difficulty: moderate

38. What are the types of consumer problems?
A) latent and manifest
B) primary and secondary
C) low involvement and high involvement
D) active and inactive
E) actual and perceived

Answer: Page: 517 Difficulty: moderate

39. Which type of consumer problem is one the consumer is aware of or will become aware of in the normal course of events?
A) latent
B) manifest
C) active
D) inactive
E) blatant

Answer: Page: 517 Difficulty: moderate

40. Many elderly consumers have problems with arthritis. This painful condition makes it almost impossible for them to open jars or medicine containers because the joints in their fingers are so stiff. Which type of consumer problem is this?
A) latent
B) manifest
C) active
D) inactive
E) blatant

Answer: Page: 517 Difficulty: moderate

41. Which type of consumer problem is one on which the consumer is not aware?
A) latent
B) manifest
C) active
D) inactive
E) blatant

Answer: Page: 517 Difficulty: moderate

42. The Martin’s home has potentially unsafe levels of radon, but they have no idea because it is odorless and they have not been feeling any ill effects from it. In fact, several homes have this problem and the owners are not aware of it, and they may never become aware of it unless testing is done. What type of consumer problem is this?
A) latent
B) manifest
C) active
D) inactive
E) dangerous

Answer: Page: 517 Difficulty: moderate

43. Which of the following statements is true regarding active and inactive consumer problems?
A) Active problems require the marketer only to convince consumers that its brand is the superior solution.
B) Active and inactive problems do not require different marketing strategies.
C) An active problem is one of which the consumer is not aware.
D) Even though a consumer is aware of it, an inactive problem is one that he or she has no desire to rectify.
E) Active problems are more serious than inactive ones.

Answer: Page: 517 Difficulty: hard

44. What has research revealed regarding consumers’ variety-seeking behavior?
A) Once a consumer tries another brand, there is a high probably that he or she will not return to the previous brand.
B) Consumers usually switch to options within the same brand.
C) Consumers are unwilling to switch to options within the brand.
D) Consumers are more likely to become bored on sensory attributes such as taste.
E) Consumers are more likely to become bored with non-sensory attributes such as brand name.

Answer: Page: 519 Difficulty: moderate

45. James likes to eat a strawberry Pop-Tart for breakfast before school. After about two weeks of this, he starts to get bored with that and switches to waffles. James is displaying which type of behavior?
A) variety-seeking
B) brand-switching
C) entertainment
D) limited search
E) extended search

Answer: Page: 519 Difficulty: easy

46. Which of the following is a nonmarketing factor affecting problem recognition?
A) social status
B) past decisions
C) motives
D) situation
E) all of the above

Answer: Page: 519 Difficulty: easy

47. Which nonmarketing factor affects a consumer’s desired state?
A) culture/subculture
B) normal depletion
C) product/brand performance
D) availability of products
E) all of the above

Answer: Page: 519 Difficulty: hard

48. All EXCEPT which of the following nonmarketing factor affects consumers’ desired state?
A) reference group
B) household characteristics
C) normal depletion
D) financial status/expectations
E) culture

Answer: Page: 519 Difficulty: hard

49. Which of the following is a nonmarketing factor affecting consumers’ actual state?
A) social status
B) household characteristics
C) product/brand performance
D) motives
E) culture

Answer: Page: 519 Difficulty: hard

50. All EXCEPT which of the following nonmarketing factors affect a consumer’s actual state?
A) past decisions
B) normal depletion
C) product/brand performance
D) reference group
E) availability of products

Answer: Page: 519 Difficulty: hard

51. Which of the following is a concern marketing managers have related to problem recognition?
A) discovering consumer problems
B) developing the marketing mix to solve consumer problems
C) helping consumers recognize problems
D) suppressing problem recognition among consumers
E) all of the above

Answer: Page: 520 Difficulty: easy

52. What is the most common approach to discovering consumer problems?
A) activity analysis
B) intuition
C) product analysis
D) problem analysis
E) qualitative research

Answer: Page: 520 Difficulty: moderate

53. Rudy is a product category manager for a major consumer packaged goods manufacturer. Part of his job requires that he analyze a given product category and logically determine where improvements could be made. Rudy has determined several consumer problems this way. Which of the following best describes how Rudy uncovers consumer problems?
A) activity analysis
B) intuition
C) product analysis
D) problem analysis
E) qualitative research

Answer: Page: 520 Difficulty: moderate

54. Which research technique asks relatively large numbers of individuals about the problems they are facing?
A) survey
B) focus group
C) content analysis
D) laddering
E) perceptual mapping

Answer: Page: 520 Difficulty: easy

55. Which type of research technique gathers 8 to 12 similar individuals (e.g., working mothers) brought together to discuss a particular topic?
A) survey
B) focus group
C) content analysis
D) laddering
E) perceptual mapping

Answer: Page: 520 Difficulty: easy

56. Mickey and his three roommates were asked to participate in a research study. They arrived and were seated in a room with about 8 other guys their age. Then the researcher started asking them questions about their sporting activities, but he let them talk pretty freely. Mickey and the others participated in which type of research technique?
A) survey
B) focus group
C) content analysis
D) laddering
E) perceptual mapping

Answer: Page: 520 Difficulty: easy

57. The person present during a focus group discussion that keeps the discussion moving and focused on the topic is called a(n) _____.
A) coordinator
B) director
C) moderator
D) initiator
E) interpreter

Answer: Page: 520 Difficulty: moderate

58. Which of the following is an approach to problem identification?
A) activity analysis
B) product analysis
C) problem analysis
D) emotion research
E) all of the above

Answer: Page: 520 Difficulty: easy

59. Which approach to problem identification focuses on a particular activity such as lawn maintenance?
A) activity analysis
B) product analysis
C) problem analysis
D) human factors research
E) emotion research

Answer: Page: 520 Difficulty: easy

60. Kim was participating in a focus group in which the discussion centered around the participants’ problems encountered while taking care of their hair. Which approach to problem identification is this?
A) activity analysis
B) product analysis
C) problem analysis
D) human factors research
E) emotion research

Answer: Page: 520 Difficulty: moderate

61. Which approach to problem recognition examines the purchase or use of a particular product or brand?
A) activity analysis
B) product analysis
C) problem analysis
D) human factors research
E) emotion research

Answer: Page: 521 Difficulty: easy

62. A manufacturer of a digital music player asked several consumers the problems associated with using these types of products. Several consumers said that they had trouble downloading music onto their computers and then onto their music players. Which approach to problem recognition is this marketer using?
A) activity analysis
B) product analysis
C) problem analysis
D) human factors research
E) emotion research

Answer: Page: 521 Difficulty: moderate

63. Which approach to problem recognition starts with a problem and asks respondents to indicate which activities, products, or brands are associated with (or perhaps could eliminate) those problems?
A) activity analysis
B) product analysis
C) problem analysis
D) human factors research
E) emotion research

Answer: Page: 521 Difficulty: moderate

64. A food manufacturer asked a group of working mothers to think about the problem of serving nutritious meals to their families given their time constraints and to indicate what activities, products, or brands are associated with or perhaps could eliminate those problems. This manufacturer is using which approach to problem recognition?
A) activity analysis
B) product analysis
C) problem analysis
D) human factors research
E) emotion research

Answer: Page: 521 Difficulty: moderate

65. Which approach to problem recognition attempts to determine human capabilities in areas such as vision, strength, response time, flexibility, and fatigue and the effect on these capabilities of lighting, temperature, and sound?
A) activity analysis
B) product analysis
C) problem analysis
D) human factors research
E) emotion research

Answer: Page: 521 Difficulty: easy

66. The manager of a bank branch is concerned about the number of mistakes the tellers were making, so he started manipulating different aspects of the environment in the bank to see what effect each has on the tellers’ performance. He examined factors such as the lighting, temperature, and the volume of the music playing in the bank. Which approach to problem recognition is this manager using?
A) activity analysis
B) product analysis
C) problem analysis
D) human factors research
E) emotion research

Answer: Page: 521 Difficulty: moderate

67. Which approach to problem recognition examines emotions associated with certain problems?
A) activity analysis
B) product analysis
C) problem analysis
D) human factors research
E) emotion research

Answer: Page: 521 Difficulty: easy

68. One retailer asked a group of consumers the types of emotions they experience in both positive and negative retail situations. The purpose of this research was to uncover consumer reactions to various situations so that clerks could be trained to respond appropriately. Which approach to problem recognition is this?
A) activity analysis
B) product analysis
C) problem analysis
D) human factors research
E) emotion research

Answer: Page: 521 Difficulty: moderate

69. Two basic approaches to causing problem recognition are _____.
A) generic problem recognition and selective problem recognition
B) active problem recognition and inactive problem recognition
C) actual problem recognition and desired problem recognition
D) perceived problem recognition and objective problem recognition
E) primary problem recognition and secondary problem recognition

Answer: Page: 522 Difficulty: moderate

70. Which problem recognition involves a discrepancy that a variety of brands within a product category can reduce?
A) generic problem recognition
B) selective problem recognition
C) active problem recognition
D) inactive problem recognition
E) primary problem recognition

Answer: Page: 522 Difficulty: moderate

71. Campbell’s soup used several advertising campaigns that stressed the benefits of soup in general. For example, one tagline used was “Soup is good food,” and another was “Never underestimate the power of soup.” Which type of problem recognition was Campbell’s attempting to stimulate?
A) generic problem recognition
B) selective problem recognition
C) active problem recognition
D) inactive problem recognition
E) primary problem recognition

Answer: Page: 522 Difficulty: moderate

72. Which condition is appropriate to attempt to influence generic problem recognition?
A) It is early in the product life cycle.
B) The firm has a high percentage of the market.
C) External search after problem recognition is apt to be limited.
D) It is an industry-wide cooperative effort.
E) all of the above

Answer: Page: 522 Difficulty: easy

73. Which of the following is NOT an appropriate condition to attempt to influence generic problem recognition?
A) It is early in the product life cycle.
B) The firm has a small percentage of the market.
C) External search after problem recognition is apt to be limited.
D) It is an industry-wide cooperative effort.
E) all of the above are appropriate conditions to attempt to influence generic problem recognition

Answer: Page: 522 Difficulty: moderate

74. Which problem recognition involves a discrepancy that only one brand can solve?
A) generic problem recognition
B) selective problem recognition
C) active problem recognition
D) inactive problem recognition
E) primary problem recognition

Answer: Page: 523 Difficulty: moderate

75. An advertisement for Topol toothpaste, which is targeted at smokers and coffee and wine drinkers, stresses how this is the only brand that can remove the stains associated with these consumption behaviors. Which type of problem recognition is this marketer attempting to stimulate?
A) generic problem recognition
B) selective problem recognition
C) active problem recognition
D) inactive problem recognition
E) primary problem recognition

Answer: Page: 523 Difficulty: moderate

76. A firm that introduces a new line of non-fat snack food due to increasing consumer concern with health is _____.
A) activating problem recognition
B) reacting to problem recognition
C) suppressing problem recognition
D) triggering problem recognition
E) none of the above

Answer: Page: 522 Difficulty: easy

77. Effective quality control and distribution and package inserts that assure the consumer of the wisdom of their purchase are attempts at _____.
A) responding to consumer problems
B) helping consumers recognize problems
C) discovering consumer problems
D) diverting consumers’ attention away from problems
E) suppressing problem recognition

Answer: Page: 526 Difficulty: moderate

True/False Questions

78. Problem recognition is the first stage of the consumer decision process.

Answer: Page: 510 Difficulty: easy

79. If purchase involvement is high, then enduring product involvement will also be high.

Answer: Page: 511 Difficulty: moderate

80. The three types of decision making are rebuy, limited, and extended.

Answer: Page: 511 Difficulty: moderate

81. Nominal decision making is sometimes referred to as habitual decision making.

Answer: Page: 512 Difficulty: moderate

82. Two distinct categories of nominal decision making are brand loyal decisions and repeat purchase decisions.

Answer: Page: 512 Difficulty: moderate

83. Problem recognition is the result of a discrepancy between a desired state and an actual state that is sufficient to arouse and activate the decision process.

Answer: Page: 514 Difficulty: moderate

84. When a consumer’s actual state is perceived as being greater than the desired state, recognition of a problem does not occur.

Answer: Page: 515 Difficulty: hard

85. The level of one’s desire to resolve a particular problem depends on two factors: the actual state and the desired state.

Answer: Page: 516 Difficulty: hard

86. An latent problem is one of which the consumer is not aware.

Answer: Page: 517 Difficulty: moderate

87. A consumer’s desired state can be influenced by previous decisions.

Answer: Page: 518-519 Difficulty: moderate

88. Variety-seeking behavior is a challenge to marketers because it means the consumers switch brands for reasons beyond a company’s control.

Answer: Page: 519 Difficulty: moderate

89. One difficulty with using intuition alone to identify consumer problems is that it is a complex research technique that requires extensive training.

Answer: Page: 520 Difficulty: moderate

90. Approaches to discovering consumer problems include activity analysis, product analysis, problem analysis, human factors research, and emotion research.

Answer: Page: 520-521 Difficulty: moderate

91. Universal problem recognition involves a discrepancy that a variety of brands within a product category can reduce.

Answer: Page: 522 Difficulty: moderate

92. Attempts to influence generic problem recognition are appropriate for brands that have a high market share.

Answer: Page: 522 Difficulty: moderate

93. Firms attempt to cause selective problem recognition to gain or maintain market share.

Answer: Page: 523 Difficulty: moderate

Essay Questions

94. Name and describe the three types of consumer decision making, and discuss the factor that influences the type consumers will use.

Page: 510-513 Difficulty: moderate
Answer:

95. Explain what is meant by the term “problem recognition.”

Page: 514-515 Difficulty: moderate
Answer:

96. Joan currently drives a Toyota automobile, and it’s been a very reliable car. However, she desires to own a BMW, but her finances cannot support such a purchase as she has to pay her mortgage, utilities, and her son’s college tuition. Explain the two factors that affect one’s desire to resolve a particular problem, and specify which one most likely is influencing Joan’s inaction to resolve this discrepancy between her actual state and her desired state.

Page: 516-517 Difficulty: moderate
Answer:

97. List the four concerns marketing managers have related to problem recognition.

Page: 520 Difficulty: easy
Answer:

98. Alex is a brand manager tasked with discovering consumer problems related to the several products and brands his company manufactures. Name and describe three of the several approaches discussed in the chapter that he could use to identify consumer problems.

Page: 520-521 Difficulty: moderate
Answer:

Multiple Choice Questions

1. How has the Internet changed consumers’ ability to search for information?
A) allows easy access to manufacturers’ Web sites
B) allows easy access to other consumers
C) allows easy access to government agencies
D) expands the ability of marketers to provide information to consumers
E) all of the above

Answer:Page: 531 Difficulty: easy

2. Which of the following statements is FALSE regarding information search?
A) Consumers continually recognize problems and opportunities, so internal and external searches for information to solve these problems are ongoing processes.
B) Searching for information is free.
C) Information search involves mental as well as physical activities that consumers must perform.
D) The benefits of information search often outweigh the cost of search.
E) Consumers acquire a substantial amount of relevant information without deliberate search.

Answer: Page: 532 Difficulty: moderate

3. Once a problem is recognized, relevant information from long-term memory is used to determine if a satisfactory solution is known, what the characteristics of potential solutions are, what are appropriate ways to compare solutions, and so forth. This is referred to as _____.
A) internal search
B) external search
C) primary search
D) ongoing search
E) evoked search

Answer:Page: 532 Difficulty: easy

4. Nakeisha wants to purchase some new make-up, but she wants something different from what she is currently using. Since she has experience with this product, she just thinks of the other products she has tried and decides to purchase one of those. Which type of information search has Nakeisha performed?
A) internal search
B) external search
C) primary search
D) secondary search
E) evoked search

Answer:Page: 532 Difficulty: easy

5. Which type of search can involve independent sources, personal sources, marketer-based information, and product experience?
A) internal search
B) external search
C) primary search
D) secondary search
E) evoked search

Answer: Page: 532 Difficulty: easy

6. Nathan is purchasing a new computer, so he asks his friends and family for help in selecting one. He also has searched the Internet and visited the Dell, Gateway, and IBM Web sites and has consulted Consumer Reports. Nathan is conducting which type of information search?
A) internal search
B) external search
C) primary search
D) secondary search
E) evoked search

Answer: Page: 532 Difficulty: easy

7. If, in response to a problem, a consumer recalls a single, satisfactory solution, no further information search or evaluation may occur. The consumer purchases the recalled brand and _____ has occurred.
A) automatic decision making
B) limited decision making
C) nominal decision making
D) extended decision making
E) truncated decision making

Answer: Page: 533 Difficulty: moderate

8. Every winter, Laurie’s skin becomes very dry and results in painful cracks in her skin on her fingers. Once this happens, Laurie remembers that Zim’s Crack Cream works really well for this problem, so she stops at the store to pick some up. Which type of decision making has occurred?
A) automatic decision making
B) limited decision making
C) nominal decision making
D) extended decision making
E) truncated decision making

Answer: Page: 533 Difficulty: moderate

9. When a consumer notices a new product in a store because of the point-of-purchase display, reads about the attributes of the product and recalls an unresolved problem that this product will solve, and then purchases the product, _____ has occurred.
A) automatic decision making
B) limited decision making
C) nominal decision making
D) extended decision making
E) truncated decision making

Answer: Page: 533 Difficulty: moderate

10. Wendy was in Wal-Mart and noticed a display with baking items collected together and a little pad with recipes to tear off. She looked at the recipe and decided that this would make a nice dessert for Thanksgiving, so she purchased the products that were conveniently located on the display. Which type of decision making did Wendy undertake?
A) automatic decision making
B) limited decision making
C) nominal decision making
D) extended decision making
E) truncated decision making

Answer: Page: 533 Difficulty: moderate

11. For which type of decision making is external information search relatively important?
A) automatic decision making
B) limited decision making
C) nominal decision making
D) extended decision making
E) truncated decision making

Answer: Page: 533 Difficulty: moderate

12. Eric was in the store and started looking at riding lawn mowers. He didn’t come to this store for the purpose of purchasing one, but he started considering it once he was there. However, he did not purchase one on that trip. Instead he went to other stores to look at their mowers, he asked his neighbor and his brother-in-law about their mowers, and he searched the Internet before he decided on the brand to purchase. Which type of decision making did Eric undertake?
A) automatic decision making
B) limited decision making
C) nominal decision making
D) extended decision making
E) truncated decision making

Answer: Page: 533 Difficulty: moderate

13. Deliberate external search that occurs in the absence of problem recognition and is done both to acquire information for possible later use and because the process itself is pleasurable is known as _____.
A) internal search
B) ongoing search
C) eternal search
D) continuous search
E) perpetual search

Answer: Page: 533 Difficulty: moderate

14. Barry is always searching information about wine. He reads Wine Spectator every month, has several books related to wine, visits wine-related Web sites frequently, and has visited several wine regions throughout the world. While he purchases wine frequently, he does not conduct this information search for just that reason. He just enjoys learning about wine. For Barry, his search for information about wine is a(n) _____.
A) internal search
B) ongoing search
C) eternal search
D) continuous search
E) perpetual search

Answer: Page: 533 Difficulty: moderate

15. A consumer decision requires information on which of the following?
A) The appropriate evaluative criteria for the solution of a problem.
B) The existence of various alternative solutions.
C) The performance level or characteristic of each alternative solution on each evaluative criterion.
D) a and b
E) a, b, and c

Answer:Page: 533 Difficulty: moderate

16. The desired features or characteristics required to meet a consumer’s needs are his or her _____.
A) evoked set
B) evoked criteria
C) consideration criteria
D) evaluative criteria
E) evaluative set

Answer: Page: 533-534 Difficulty: moderate

17. Freddy is purchasing a new car, and he has decided that gas mileage, price, reliability, and styling are important to him. These attributes represent Freddy’s _____.
A) evoked set
B) evoked criteria
C) consideration criteria
D) evaluative criteria
E) evaluative set

Answer: Page: 533-534 Difficulty: moderate

18. All of the brands that a consumer thinks of as potential solutions are known as the _____.
A) awareness set
B) evaluative criteria
C) alternative set
D) preferred set
E) consideration set

Answer:Page: 534 Difficulty: moderate

19. Karl and his wife are considering putting a built-in pool in their backyard. They were discussing who they could get to do it for them, and they realized they knew of five pool contractors in their city. These five pool contractors that they thought of as potential contractors for them represent their _____.
A) awareness set
B) evaluative criteria
C) alternative set
D) preferred set
E) consideration set

Answer:Page: 534 Difficulty: moderate

20. Which of the following is NOT a subcategory of the awareness set?
A) evoked set
B) purchase set
C) inert set
D) inept set
E) all of the above are subcategories of the awareness set

Answer: Page: 534-536 Difficulty: moderate

21. The brands or products one will evaluate for the solution of a particular consumer problem are called the _____.
A) evoked set
B) evaluative criteria
C) alternative set
D) preferred set
E) awareness set

Answer:Page: 534 Difficulty: moderate

22. Thomas is aware of several different brands of electric shavers, but he is only considering seriously three different brands. These three brands that Thomas is evaluating represent his _____.
A) evoked set
B) evaluative criteria
C) alternative set
D) preferred set
E) awareness set

Answer:Page: 534 Difficulty: moderate

23. The evoked set is also called the _____.
A) evaluative set
B) alternative set
C) awareness set
D) preferred set
E) consideration set

Answer:Page: 534 Difficulty: moderate

24. Brands that are found completely unworthy of further consideration are members of the _____.
A) evoked set
B) inept set
C) excluded set
D) inert set
E) discarded set

Answer: Page: 535 Difficulty: moderate

25. Darcy is considering the purchase of living room furniture. While there are several national-chain furniture stores in her city, she is not considering Haverty’s because she’s purchased furniture from this store before and has been dissatisfied. For Darcy, this furniture retailer is included in her _____.
A) evoked set
B) consideration set
C) inept set
D) excluded set
E) inert set

Answer: Page: 535 Difficulty: moderate

26. Brands for which a consumer is aware but basically indifferent toward compose his or her _____.
A) evoked set
B) consideration set
C) inept set
D) excluded set
E) inert set

Answer:Page: 535 Difficulty: moderate

27. Elaine is considering the purchase of a computer and is aware that Toshiba and HP are brands in this product category. However, she is basically indifferent toward them. These two brands represent Elaine’s _____.
A) evoked set
B) consideration set
C) inept set
D) excluded set
E) inert set

Answer:Page: 535 Difficulty: moderate

28. To which set do alternatives the consumer does not know about belong?
A) inert set
B) inept set
C) unawareness set
D) unknown set
E) evoked set

Answer: Page: 536 Difficulty: moderate

29. Which of the following statements is FALSE regarding appropriate alternatives?
A) An evoked set is those brands or products one will evaluate for the solution of a particular consumer problem.
B) The brand found completely unworthy of further consideration is a member of the inept set.
C) Marketing strategy that focuses only on creating awareness is adequate.
D) Brands for which a consumer is aware of but basically indifferent toward compose that consumer’s inert set.
E) Alternatives the consumer does not know about compose the unawareness set.

Answer: Page: 534-537 Difficulty: hard

30. Which of the following is a primary source of information available to consumers?
A) memory
B) personal sources
C) independent sources
D) marketing sources
E) all of the above

Answer:Page: 538 Difficulty: easy

31. Past searches, prior personal experiences, and prior low-involvement learning are examples of which source of information?
A) memory
B) personal sources
C) independent sources
D) marketing sources
E) experiential sources

Answer:Page: 538 Difficulty: moderate

32. Karen is going to the mall to purchase new shoes. Based on her prior experience with Nine West and her positive attitude toward them, she plans on looking at the Nine West store first. Her decision to visit the Nine West store is based on which source of information?
A) memory
B) personal sources
C) independent sources
D) marketing sources
E) experiential sources

Answer:Page: 538 Difficulty: moderate

33. Friends, family, and others are examples of which source of information?
A) memory
B) personal sources
C) independent sources
D) marketing sources
E) experiential sources

Answer: Page: 538 Difficulty: moderate

34. Kasi is seeking the advice of her parents in her decision on which college to attend. Which source of information is Kasi using?
A) memory
B) personal sources
C) independent sources
D) marketing sources
E) experiential sources

Answer: Page: 538 Difficulty: moderate

35. Magazines, consumer groups, and government agencies represent which source of information?
A) memory
B) personal sources
C) independent sources
D) marketing sources
E) experiential sources

Answer: Page: 538 Difficulty: moderate

36. Jon needed to purchase new tires for his SUV. He consulted Consumer Reports to see how the various brands were rated. Jon consulted which type of information source?
A) memory
B) personal sources
C) independent sources
D) marketing sources
E) experiential sources

Answer: Page: 538 Difficulty: moderate

37. Sales personnel, Web sites, and advertising represent which type of information source?
A) memory
B) personal sources
C) independent sources
D) marketing sources
E) experiential sources

Answer: Page: 538 Difficulty: moderate

38. Stephanie and her husband are considering the purchase of a 52″ plasma television. They have visited several manufacturers’ Web sites, looked at the ads in the Sunday newspaper, and have spoken with sales people at several electronics stores. Which source of information are they using?
A) memory
B) personal sources
C) independent sources
D) marketing sources
E) experiential sources

Answer: Page: 538 Difficulty: moderate

39. Which source of information includes inspection or product trial?
A) memory
B) personal sources
C) independent sources
D) marketing sources
E) experiential sources

Answer: Page: 538 Difficulty: moderate

40. Lane is test driving several models of automobiles to help him decide which one to purchase. Which source of information does this represent?
A) memory
B) personal sources
C) independent sources
D) marketing sources
E) experiential sources

Answer: Page: 538 Difficulty: moderate

41. Which information source is NOT actively acquired by consumers?
A) past searches
B) personal experience
C) low-involvement learning
D) independent groups
E) marketer information

Answer: Page: 539 Difficulty: hard

42. Susan actually knows quite a bit about some product categories that she doesn’t actively seek out information concerning and doesn’t even own. Which of the following is the most likely means by which she obtained this information?
A) past searches
B) personal experience
C) low-involvement learning
D) experiential sources
E) high-involvement learning

Answer: Page: 539 Difficulty: moderate

43. Research shows that the most common use of the Internet is _____.
A) searching for a map or driving directions
B) getting news
C) buying a product
D) using e-mail
E) checking the weather

Answer: Page: 540 Difficulty: hard

44. Which of the following is true regarding the Internet as a source of information?
A) Online information is expected.
B) Online information boosts offline sales.
C) Online sources are viewed as valuable.
D) Online sources reduce a salesperson’s role.
E) all of the above

Answer:Page: 540 Difficulty: easy

45. Which of the following is NOT a research finding regarding the Internet as an information source?
A) Online information is expected.
B) Online information boosts offline sales.
C) Online sources are viewed as valuable.
D) Online sources reduce a salesperson’s role.
E) Over 90% of Americans use the Internet to research a product/service before buying it.

Answer:Page: 540 Difficulty: moderate

46. Which demographic characteristic describes the greatest percentage of U.S. adult Internet users?
A) Women
B) Black, non-Hispanic
C) 65+ years of age
D) Household income of $75,000+
E) Rural

Answer: Page: 541 Difficulty: hard

47. Research has shown that most of the online search leading up to a purchase was _____.
A) brand only
B) generic
C) brand-item
D) retail
E) price-related

Answer: Page: 542-543 Difficulty: hard

48. Consumers conducting a generic search in an Internet search engine use which type of terms?
A) retailer-related terms
B) brand-related terms
C) general product-related terms
D) brand- plus product-related terms
E) price-related terms

Answer: Page: 542 Difficulty: hard

49. Bob is searching the Internet for information on digital cameras, so he types in the words “digital camera” in Google. Which type of search is Bob conducting?
A) brand only
B) generic
C) brand-item
D) retail
E) price-related

Answer: Page: 542 Difficulty: moderate

50. Services that aid consumers in their search and decision making on the Internet are known as _____.
A) bots
B) worms
C) viruses
D) seekers
E) minimizers

Answer:Page: 542 Difficulty: moderate

51. Amelia wanted to purchase a nice watch for her husband, but she was overwhelmed by the amount of information available on the Internet for this product. She visited one Web site that offered a service that would do the searching and comparisons for her, so she decided to use it. The service Amelia used is referred to as a(n) _____.
A) minimizer
B) shopping bot
C) search engine
D) personal data assistant
E) Internet organizer

Answer: Page: 542 Difficulty: moderate

52. Which of the following is NOT a major issue marketers must deal with concerning the Internet’s role in information search and decision making?
A) How can they get more consumers to use the Internet instead of seeking information from salespeople?
B) How can they drive their information to consumers?
C) How can they drive consumers to their information?
D) How (if at all) can online selling be utilized or integrated with existing channels?
E) all of the above are major issues marketers must deal with

Answer:Page: 544 Difficulty: hard

53. Unsolicited e-mail that is a major concern and irritant and is known as _____.
A) spit
B) spam
C) blog
D) junk mail
E) banner mail

Answer: Page: 544 Difficulty: easy

54. Lisa has to check her e-mail frequently to delete the unsolicited messages she gets, typically for loans and prescription drugs. If she doesn’t delete them, her inbox will fill up and e-mails that she wants to receive won’t get through. This unsolicited e-mail is known as _____.
A) spit
B) spam
C) blog
D) junk mail
E) banner mail

Answer: Page: 544 Difficulty: easy

55. The percentage who clicks through a banner ad to the corporate Web site is known as _____.
A) response rate
B) turnover rate
C) clickthrough rate
D) rating
E) hits

Answer: Page: 545 Difficulty: moderate

56. _____ involves tracking consumer click patterns on a Web site and using that information to decide on banner ad placement.
A) Clickthrough targeting
B) Search engine optimization
C) Bot software
D) Behavioral targeting
E) Spam

Answer: Page: 545 Difficulty: moderate

57. Ben is interested in golf, so he visits several golf-related Web sites, such as the USGA and the PGA. Unbeknownst to him, his surfing behavior is being tracked, and it’s no accident that he receives several banner ads for golf products and destinations. This is called _____.
A) market segmentation
B) search engine optimization
C) spam
D) blogging
E) behavioral targeting

Answer:Page: 545 Difficulty: moderate

58. Which of the following involves techniques designed to ensure that a company’s Web pages appear high on an Internet search result list?
A) market segmentation
B) search engine optimization
C) spam
D) blogging
E) behavioral targeting

Answer: Page: 545 Difficulty: moderate

59. Kodak markets digital cameras and is aware that consumers search for information concerning this product on the Internet using one of the several search engines (e.g., Google). To ensure that Kodak appears on the first page of results, this company pays the search engine to become a sponsored link when consumers search the key words “digital camera.” This is an illustration of _____.
A) market segmentation
B) search engine optimization
C) spam
D) blogging
E) behavioral targeting

Answer: Page: 545 Difficulty: moderate

60. Which of the following factors influences the expected benefits and perceived costs of search?
A) market characteristics
B) product characteristics
C) consumer characteristics
D) situation characteristics
E) all of the above

Answer:Page: 547 Difficulty: easy

61. The number of alternatives, price range, store distribution, and information availability are examples of which factor that influences the expected benefits and perceived costs of search?
A) market characteristics
B) product characteristics
C) consumer characteristics
D) situation characteristics
E) technological characteristics

Answer:Page: 547 Difficulty: moderate

62. Feature and quality variations across brands are referred to as _____.
A) product positioning
B) brand leverage
C) product differentiation
D) market segmentation
E) market characteristics

Answer: Page: 549 Difficulty: moderate

63. Experience, familiarity, social status, shopping orientation and product involvement are examples of which factor that influences the expected benefits and perceived costs of search?
A) market characteristics
B) product characteristics
C) consumer characteristics
D) situation characteristics
E) personality traits

Answer: Page: 547 Difficulty: moderate

64. Consumers’ general approaches or patterns of external search are termed _____.
A) social status
B) shopping orientations
C) involvement
D) motives
E) differentials

Answer: Page: 549 Difficulty: moderate

65. Which of the following is NOT a type of knowledge where a low level of calibration frequently occurs to the detriment of consumers and firms?
A) memory of facts
B) memory of events
C) belief polarization
D) personal forecasts
E) all of the above

Answer:Page: 550 Difficulty: easy

66. Perceived risk is a function of the _____.
A) individual
B) product
C) situation
D) a and b
E) a, b, and c

Answer:Page: 550 Difficulty: moderate

67. Perceived risk is high for products whose failure to perform as expected would result in a high _____.
A) social cost
B) financial cost
C) time cost
D) physical cost
E) all of the above

Answer:Page: 551 Difficulty: easy

68. Which of the following is probably the most important situational variable with respect to search behavior?
A) temporal perspective
B) task definition
C) physical surroundings
D) antecedent state
E) social surrounding

Answer:Page: 551 Difficulty: hard

69. Which marketing strategies are appropriate for nominal decision making?
A) maintenance strategy and disrupt strategy
B) capture strategy and intercept strategy
C) preference strategy and acceptance strategy
D) maintenance strategy and intercept strategy
E) capture strategy and acceptance strategy

Answer:Page: 551 Difficulty: hard

70. Which marketing strategies are appropriate for limited decision making?
A) maintenance strategy and disrupt strategy
B) capture strategy and intercept strategy
C) preference strategy and acceptance strategy
D) maintenance strategy and intercept strategy
E) capture strategy and acceptance strategy

Answer: Page: 551 Difficulty: hard

71. Which marketing strategies are appropriate for extended decision making?
A) maintenance strategy and disrupt strategy
B) capture strategy and intercept strategy
C) preference strategy and acceptance strategy
D) maintenance strategy and intercept strategy
E) capture strategy and acceptance strategy

Answer: Page: 551 Difficulty: hard

72. If a brand is included in a consumer’s evoked set, which marketing strategy is NOT appropriate?
A) maintenance strategy
B) intercept strategy
C) capture strategy
D) preference strategy
E) all of the above are appropriate

Answer: Page: 551 Difficulty: hard

73. Which marketing strategy is appropriate if the brand is not part of consumers’ evoked sets?
A) disrupt strategy
B) maintenance strategy
C) capture strategy
D) preference strategy
E) all of the above

Answer:Page: 551 Difficulty: hard

74. Which marketing strategy requires consistent attention to product quality, distribution, and a reinforcement advertising strategy because the brand is purchased habitually by the target market?
A) capture strategy
B) acceptance strategy
C) maintenance strategy
D) preference strategy
E) disrupt strategy

Answer: Page: 552 Difficulty: moderate

75. Coca-Cola has a large brand-loyal purchaser segment. Which marketing strategy is appropriate for this brand?
A) capture strategy
B) acceptance strategy
C) maintenance strategy
D) preference strategy
E) disrupt strategy

Answer: Page: 552 Difficulty: moderate

76. Which marketing strategy is appropriate if the brand is not part of the evoked set and the target market engages in nominal decision making?
A) capture strategy
B) acceptance strategy
C) maintenance strategy
D) preference strategy
E) disrupt strategy

Answer:Page: 553 Difficulty: moderate

77. If the target market engages in limited decision making and the brand is not part of their evoked set, the objective will be to _____.
A) disrupt the existing decision patterns
B) capture as large a share of the purchases as practical
C) intercept the consumer during the search for information on the brands in the evoked set
D) develop a strong position on those attributes important to the target market
E) defend against the disruptive tactics of competitors

Answer: Page: 554 Difficulty: hard

78. One marketer for a brand of shampoo learned through research that consumers in the target market engage in limited decision making but that this marketer’s brand is not part of their evoked set. Which marketing strategy is appropriate for this company?
A) capture strategy
B) acceptance strategy
C) maintenance strategy
D) preference strategy
E) intercept strategy

Answer:Page: 554 Difficulty: moderate

79. Extended decision making with the brand in the evoked set requires which marketing strategy?
A) capture strategy
B) preference strategy
C) intercept strategy
D) maintenance strategy
E) disrupt strategy

Answer: Page: 554 Difficulty: moderate

80. Which marketing strategy is similar to preference strategy but is complicated by the fact that the target market is not seeking information about the brand?
A) capture strategy
B) acceptance strategy
C) maintenance strategy
D) intercept strategy
E) disrupt strategy

Answer: Page: 555 Difficulty: moderate

True/False Questions

81. Consumers continually recognize problems and opportunities, so internal and external searches for information to solve these problems are ongoing processes.

Answer: Page: 532 Difficulty: moderate

82. One reason a consumer does an ongoing search is because the process itself is pleasurable to him or her.

Answer: Page: 533 Difficulty: moderate

83. All of the brands thought of as potential solutions are known as the consideration set.

Answer: Page: 534 Difficulty: hard

84. The brands found to be completely unworthy of further consideration comprise the excluded set.

Answer: Page: 535 Difficulty: moderate

85. Marketing strategy that focuses only on creating awareness may be inadequate.

Answer: Page: 537 Difficulty: moderate

86. The awareness set has generally been found to be smaller than the evoked set.

Answer: Page: 537 Difficulty: moderate

87. The five primary sources of information available to consumers are memory, personal sources, independent sources, marketing sources, and experiential sources.

Answer: Page: 538 Difficulty: easy

88. Research has shown that the Internet is used equally by all segments of the adult U.S. population.

Answer: Page: 540-541 Difficulty: moderate

89. Online services use bots, which are software “robots” that do the shopping/searching for users, and are therefore often referred to as shopping bots.

Answer: Page: 542 Difficulty: moderate

90. Banner ads are one way to drive a firm’s information to consumers.

Answer: Page: 544 Difficulty: easy

91. Search engine optimization involves tracking consumer click patterns on a Web site and using that information to decide on banner ad placement.

Answer: Page: 545 Difficulty: moderate

92. Most purchases are the result of extended decision making and therefore involve considerable external search prior to purchase.

Answer: Page: 546 Difficulty: hard

93. Market characteristics that influence the expected benefits and perceived costs of search include the number of alternatives, price range, store distribution, and information availability.

Answer: Page: 547 Difficulty: moderate

94. A recent study found that a low level of calibration frequently occurs to the detriment of consumers and firms in the areas of memory of facts and events, belief polarization and validity, and personal forecasts.

Answer: Page: 550 Difficulty: hard

95. The perceived risk associated with unsatisfactory product performance increases information search prior to purchase.

Answer: Page: 550 Difficulty: easy

96. The maintenance marketing strategy is appropriate if consumers use extended decision making and the brand is in the evoked set.

Answer: Page: 551 Difficulty: moderate

Essay Questions

97. Discuss the types of information sought by consumers.

Page: 533-537 Difficulty: moderate
Answer:

98. Kerri is purchasing a new washer and dryer. Name and describe all the primary sources of information available to her.

Page: 538 Difficulty: easy
Answer:

99. With respect to the Internet’s role in information search and decision making, marketers have at least three major strategic issues to deal with. Identify all three issues, and discuss the first two.

Page: 544-545 Difficulty: moderate
Answer:

100. Discuss the market characteristics that influence the expected benefits and perceived costs of search.

Page: 547-548 Difficulty: moderate
Answer:

101. Grant is the marketing manager for a consumer package goods manufacturer. He realizes that consumers use nominal decision making when purchasing his products. Explain how the marketing strategies and tactics he should use would differ if his company’s brand is in the consumers’ evoked set compared to when it is not.

Page: 551-553 Difficulty: hard
Answer:

Multiple Choice Questions

1. Which of the following was used by Sunbeam Appliance Company to assist in redesigning its many lines of small kitchen appliances?
A) consumer usage and attitude survey
B) consumer attribute and benefit survey
C) conjoint analysis
D) product line sales and market share simulations
E) all of the above

Answer: Page: 565 Difficulty: easy

2. How did Sunbeam Appliance Company use conjoint analysis to help them redesign its many lines of small kitchen appliances?
A) It was used to determine how and for what purpose products in the product category are used, frequency of use, brand ownership, brand awareness, and attitudes toward the product.
B) It was used to provide importance ratings of product attributes and benefits desired from the product category, along with perceptions of the degree to which each brand provides the various attributes and benefits.
C) It was used to provide data on the structure of consumers’ preferences for product features and their willingness to trade one feature for more of another feature.
D) It was used to determine emotional dimensions of food processors.
E) It was used to determine consumers’ evoked sets with respect to small kitchen appliances.

Answer: Page: 565 Difficulty: hard

3. Which of the following does NOT influence the evaluation of alternatives on each criterion?
A) decision rules applied
B) evaluative criteria
C) importance of criteria
D) alternatives considered
E) all of the above influence the evaluation of alternatives on each criterion

Answer: Page: 566 Difficulty: hard

4. Which theory assumes that the consumer is a rational decision maker with well-defined, stable preferences, and has sufficient skills to calculate which option will maximize his or her value and will choose on this basis?
A) attribution theory
B) rational choice theory
C) dual coding theory
D) affect theory
E) calculated theory

Answer: Page: 566 Difficulty: moderate

5. What is the task in the rational choice theory?
A) to identify a consumer’s evoked set
B) to identify the feelings and emotions influencing consumers’ decisions
C) to identify the trade offs consumers are willing to accept with respect to product attributes
D) to identify or discover the one optimal choice for the decision confronting the decision maker
E) to identify the cognitive structure of consumers when making a choice

Answer: Page: 566 Difficulty: moderate

6. A metagoal refers to _____.
A) the overall amount of energy devoted to any given purchase
B) the general nature of the outcome being sought
C) the conscious thinking of all decision processes
D) using nonfinancial criteria to make purchase decisions
E) none of the above

Answer: Page: 567 Difficulty: moderate

7. Which of the following is an example of a metagoal?
A) maximizing the accuracy of the decision
B) minimize the cognitive effort required for the decision
C) minimize the experience of negative emotion while making the decision
D) maximize the ease with which a decision can be justified
E) all of the above

Answer: Page: 567 Difficulty: easy

8. Maximizing the accuracy of the decision or minimizing the experience of negative emotion while making the decision are examples of consumer _____.
A) metagoals
B) rational goals
C) evoked goals
D) affective goals
E) primary goals

Answer: Page: 567 Difficulty: moderate

9. A limited capacity for processing information is known as _____.
A) working memory
B) bounded memory
C) bounded rationality
D) bounded processing
E) finite processing

Answer: Page: 567 Difficulty: moderate

10. Duane is of average intelligence, and like most consumers, he cannot compare too many alternatives at one time. This limited capacity for processing information is known as _____.
A) working memory
B) bounded memory
C) bounded rationality
D) bounded processing
E) finite processing

Answer: Page: 567 Difficulty: moderate

11. Which of the following is a type of consumer choice process?
A) affective choice
B) attitude-based choice
C) attribute-based choice
D) a and b
E) a, b, and c

Answer: Page: 567 Difficulty: easy

12. Which of the following is NOT a type of consumer choice process?
A) affective choice
B) attitude-based choice
C) rational choice
D) metachoice
E) all of the above are types of consumer choice processes

Answer: Page: 567 Difficulty: hard

13. Which of the following tends to be more holistic in nature, and the brand is not decomposed into distinct components that are evaluated separately from the whole?
A) affective choice
B) attitude-based choice
C) rational choice
D) attribute-based choice
E) instrumental choice

Answer: Page: 568 Difficulty: moderate

14. Amy is shopping for a dress to wear to a formal dance. She tried on several dresses, not even noticing the price of each. After about two hours of this, she tried one on and exclaimed, “This is it!” That particular dress was the one that she thought made her look fabulous, so she bought it. Which type of choice did Amy use to select this dress?
A) affective choice
B) attitude-based choice
C) rational choice
D) attribute-based choice
E) instrumental choice

Answer: Page: 568 Difficulty: moderate

15. Which of the following motives are most likely in affective choices?
A) consummatory motives
B) primary motives
C) affective motives
D) immediate motives
E) instrumental motives

Answer: Page: 568 Difficulty: moderate

16. Which type of motives underlie behaviors that are intrinsically rewarding to the individual involved?
A) instrumental motives
B) affective motives
C) cognitive motives
D) consummatory motives
E) personal motives

Answer: Page: 568 Difficulty: moderate

17. Pamela likes to sew because it relaxes her. To her, it’s like therapy. For Pamela, sewing represents which type of motive?
A) instrumental motive
B) affective motive
C) cognitive motive
D) consummatory motive
E) personal motive

Answer: Page: 568 Difficulty: moderate

18. Which type of motives activates behaviors designed to achieve a second goal?
A) instrumental motives
B) affective motives
C) cognitive motives
D) consummatory motives
E) personal motives

Answer: Page: 568 Difficulty: moderate

19. Hannah asked her mother to buy her a certain brand of athletic shoes because that’s what all the other kids are wearing at school. For Hannah, which type of motive is most likely underlying her request for that specific brand?
A) instrumental motive
B) affective motive
C) cognitive motive
D) consummatory motive
E) personal motive

Answer: Page: 568 Difficulty: moderate

20. Which type of consumer choice process requires the knowledge of specific attributes at the time the choice is made, and it involves attribute-by-attribute comparisons across brands?
A) affective choice
B) attitude-based choice
C) rational choice
D) attribute-based choice
E) instrumental choice

Answer: Page: 570 Difficulty: easy

21. Joseph is considering the purchase of a computer, and he is comparing brands on the basis of price, memory, speed, and reliability. He mentally ranks each alternative on these attributes and makes a selection based on these rankings. Joseph is using which type of choice process?
A) affective choice
B) attitude-based choice
C) rational choice
D) attribute-based choice
E) instrumental choice

Answer: Page: 570 Difficulty: moderate

22. Which type of consumer choice process involves the use of general attitudes, summary impressions, intuitions, or heuristics, and no attribute-by-attribute comparisons are made at the time of choice?
A) affective choice
B) attitude-based choice
C) rational choice
D) attribute-based choice
E) instrumental choice

Answer: Page: 570 Difficulty: moderate

23. Bobbie bought a Dell computer because her brother has one, and he seems to be satisfied with it. She did not compare any other computers when making this choice. Which type of choice process did Bobbie use?
A) affective choice
B) attitude-based choice
C) rational choice
D) attribute-based choice
E) instrumental choice

Answer: Page: 570 Difficulty: moderate

24. Which of the following statements is true regarding consumer choice processes?
A) Attitude-based choices require the knowledge of specific attributes at the time the choice is made.
B) The greater the motivation to make an optimal decision, the more likely an attitude-based choice will be made.
C) Motivation, information availability, and situational factors interact to determine which choice process will be used.
D) Consumers do not use attitude-based choices for important decisions.
E) Attitude-based choices require the comparison of each specific attribute across all brands considered.

Answer: Page: 570-571 Difficulty: moderate

25. The various dimensions, features, or benefits consumers look for in response to a specific problem are called _____.
A) alternatives
B) choices
C) heuristics
D) evaluative criteria
E) motives

Answer: Page: 572 Difficulty: moderate

26. Nancy usually considers price and quality when she has to make a major purchase, such as an appliance or an automobile. These two features represent Nancy’s _____.
A) alternatives
B) choices
C) heuristics
D) evaluative criteria
E) motives

Answer: Page: 572 Difficulty: moderate

27. Evaluative criteria can differ on which of the following?
A) type
B) number
C) importance
D) a and b
E) a, b, and c

Answer: Page: 573 Difficulty: moderate

28. Evaluative criteria differ on all EXCEPT which of the following?
A) type
B) number
C) quality
D) importance
E) evaluative criteria can differ on all of the above

Answer: Page: 573 Difficulty: hard

29. The two types of evaluative criteria are _____.
A) primary and secondary
B) tangible and intangible
C) manifest and latent
D) direct and indirect
E) consummatory and instrumental

Answer: Page: 573 Difficulty: moderate

30. Cost and performance features are examples of which type of evaluative criteria?
A) tangible
B) intangible
C) primary
D) secondary
E) instrumental

Answer: Page: 573 Difficulty: moderate

31. Andrew is considering the purchase of a portable DVD player. He is comparing alternatives on the basis of screen size, battery life, and price. Andrew is using which type of evaluative criteria?
A) tangible
B) intangible
C) primary
D) secondary
E) instrumental

Answer: Page: 573 Difficulty: moderate

32. Style, taste, prestige, feelings generated, and brand image are examples of which type of evaluative criteria?
A) tangible
B) intangible
C) primary
D) secondary
E) instrumental

Answer: Page: 573 Difficulty: moderate

33. Samantha is purchasing a new car. She knows she should compare alternatives on the basis of cost and performance features, but she can’t help but consider the styling and the color. She also wants a car that will make her look “cool” and feel special when she’s driving it. Styling, color, and how the car will make her feel are examples of _____ evaluative criteria.
A) tangible
B) intangible
C) primary
D) secondary
E) consummatory

Answer: Page: 573 Difficulty: moderate

34. Before a marketing manager or public policy decision maker can develop a sound strategy to affect consumer decisions, he or she must determine _____.
A) which evaluative criteria are used by the consumer
B) how the consumer perceives the various alternatives on each criterion
C) the relative importance of each criterion
D) a and b
E) a, b, and c

Answer: Page: 574 Difficulty: moderate

35. Before a marketing manager or a public policy decision maker can develop a sound strategy to affect consumer decisions, her or she must determine all EXCEPT which of the following?
A) which evaluative criteria are used by the consumer
B) how the consumer perceives the various alternatives on each criterion
C) the relative importance of each criterion
D) all of the above must be determined
E) none of the above

Answer: Page: 574 Difficulty: easy

36. To determine which criteria are used by consumers in a specific product decision, the marketing researcher can utilize which two methods of measurement?
A) primary and secondary
B) manifest and latent
C) direct and indirect
D) immediate and delayed
E) nominal and interval

Answer: Page: 575 Difficulty: moderate

37. Which measurement method involves asking consumers what criteria they use in a particular purchase or, in a focus group setting, noting what consumers say about products and their attributes?
A) direct
B) indirect
C) projective
D) perceptual mapping
E) word association

Answer: Page: 575 Difficulty: easy

38. Chaz was asked by a market researcher which criteria he uses when purchasing beer. He told the researcher that taste and price are important to him. Which method did the researcher use to obtain this information from Chaz?
A) direct
B) indirect
C) projective
D) perceptual mapping
E) word association

Answer: Page: 575 Difficulty: easy

39. Which measurement technique used to assess consumers’ evaluative criteria assumes consumers will not or cannot state their evaluative criteria?
A) direct
B) indirect
C) primary
D) secondary
E) differential

Answer: Page: 575 Difficulty: easy

40. Which of the following are indirect measurement techniques used to determine consumers’ evaluative criteria?
A) conjoint analysis and factor analysis
B) factor analysis and regression analysis
C) regression analysis and perceptual mapping
D) projective techniques and perceptual mapping
E) projective techniques and regression analysis

Answer: Page: 575 Difficulty: moderate

41. Which indirect measurement techniques used to determine consumers’ evaluative criteria allow the respondent to indicate the criteria someone else might use?
A) tangible
B) intangible
C) projective techniques
D) perceptual mapping
E) conjoint analysis

Answer: Page: 575 Difficulty: moderate

42. Gwen is an elderly lady and is participating in a market research study. The researcher asked her to describe the criteria someone who needs adult diapers might use to evaluate alternatives. The researcher was not asking Gwen what criteria she would use, but rather, the criteria Gwen thinks someone else would use. Which type of technique is this known as?
A) tangible technique
B) intangible technique
C) projective technique
D) perceptual mapping
E) conjoint analysis

Answer: Page: 575 Difficulty: moderate

43. A technique that requires consumers to judge the similarity of alternative brands is _____.
A) conjoint analysis
B) attitude survey
C) semantic differential scale
D) perceptual mapping
E) none of the above

Answer: Page: 575 Difficulty: moderate

44. Gail was participating in a market research study, and she was given 20 pairs of brands of shampoo and asked to indicate which pair is most similar, which is second most similar, and so forth until all pairs were ranked. Which type of indirect measurement technique used to assess Gail’s evaluative criteria does this represent?
A) perceptual mapping
B) conjoint analysis
C) evaluative mapping
D) regression analysis
E) factor analysis

Answer: Page: 575 Difficulty: moderate

45. With the information provided by perceptual mapping the marketer can determine all of the following EXCEPT _____.
A) how the position of brands changes in response to marketing efforts
B) how different brands are positioned according to evaluative criteria
C) how to position new brands using evaluative criteria
D) how consumers will trade one evaluative criteria for another
E) all of the above

Answer: Page: 575 Difficulty: hard

46. Which of the following is the most widely used technique for measuring consumers’ judgments of brand performance on specific attributes?
A) rank ordering scales
B) semantic differential scales
C) constant sum scales
D) Likert scales
E) nominal scales

Answer: Page: 575 Difficulty: hard

47. Which of the following is the most common method of direct measurement of the relative importance of consumers’ evaluative criteria?
A) rank ordering scales
B) semantic differential scales
C) constant sum scales
D) Likert scales
E) nominal scales

Answer: Page: 576 Difficulty: hard

48. Which of the following is the most popular indirect measurement approach to measuring the relative importance of consumers’ evaluative criteria?
A) perceptual mapping
B) regression analysis
C) factor analysis
D) conjoint analysis
E) cluster analysis

Answer: Page: 576 Difficulty: moderate

49. In which type of indirect measurement approach to measuring the relative importance of consumers’ evaluative criteria are consumers presented with several descriptions of alternatives and asked to rank all of them in terms of his or her preference for those combinations of features?
A) perceptual mapping
B) regression analysis
C) factor analysis
D) conjoint analysis
E) cluster analysis

Answer: Page: 576 Difficulty: moderate

50. Jamie was participating in a market research study regarding computers when he was presented with 24 different computers that varied on four criteria. He was asked to rank all 24 descriptions in terms of his preference for those combinations of features. Which approach to assess the relative importance Jamie places on evaluative criteria was this research using?
A) perceptual mapping
B) regression analysis
C) factor analysis
D) conjoint analysis
E) cluster analysis

Answer: Page: 576 Difficulty: moderate

51. Which of the following is an example of a federal law passed to facilitate direct comparisons among alternatives?
A) Telephone Consumer Protection Act
B) Truth-in-Lending law
C) Federal Trade Commission Act
D) Wheeler-Lea Amendment
E) Just Noticeable Difference law

Answer: Page: 577 Difficulty: hard

52. The ability of an individual to distinguish between similar stimuli is called _____.
A) stimulus generalization
B) perceptual generalization
C) perceptual discrimination
D) sensory perception
E) sensory discrimination

Answer: Page: 577 Difficulty: moderate

53. Sensory discrimination is _____.
A) the minimum amount that one brand can differ from another with the difference still being noticed
B) the maximum amount that one brand can differ from another without it being perceived as unreasonable by consumers
C) the ability of an individual to distinguish between distinctly different stimuli
D) the ability of an individual to distinguish between similar stimuli
E) the relative importance consumers place on evaluative criteria

Answer: Page: 577 Difficulty: moderate

54. The minimum amount that one brand can differ from another with the difference still being noticed is referred to as the ______.
A) discriminatory difference
B) sensory difference
C) just noticeable difference
D) recognition difference
E) obvious difference

Answer: Page: 577 Difficulty: easy

55. Procter & Gamble is the manufacturer of Pampers diapers. At one time, the price of a typical package of diapers was relatively high (i.e., over $12 a package). Due to the threat of store brands stealing market share because of their lower price, P&G decided to lower the price for Pampers. While most consumers noticed the price reduction because P&G promoted that fact, what most of them did not notice was that the number of diapers per package also decreased. However, the reduction was only one or two diapers per package. Which of the following best explains why consumers did not notice the reduction in the quantity?
A) Number of diapers per package was not important to consumers.
B) The reduction in the quantity did not reach the level of a just noticeable difference.
C) Price is more important than quantity to consumers.
D) Consumers are price conscious for this product category.
E) Consumers are brand loyal.

Answer: Page: 577 Difficulty: hard

56. An attribute used to stand for or indicate another attribute is known as a _____.
A) determinant attribute
B) substitute indicator
C) surrogate indicator
D) secondary indicator
E) proxy

Answer: Page: 578 Difficulty: moderate

57. Which of the following is often used as a surrogate indicator of quality?
A) price
B) advertising intensity
C) warranties
D) country of origin
E) all of the above

Answer: Page: 578 Difficulty: easy

58. Sam is a retiree with considerable resources, so he doesn’t really spend much time on purchase decisions. His belief is that the most expensive brand is probably also the best in terms of quality. Sam uses price as a _____ indicator of quality.
A) surrogate
B) proxy
C) primary
D) substitute
E) secondary

Answer: Page: 578 Difficulty: moderate

59. Which of the following does NOT affect how important various criteria are for consumers?
A) usage situation
B) competitive context
C) advertising effects
D) all of the above
E) none of the above

Answer: Page: 579 Difficulty: easy

60. John drinks Schwepps Ginger Ale for dinner as a beverage, while Jack uses it only as a mixer in his cocktails. Which factor that influences the importance of evaluative criteria is this?
A) usage situation
B) competitive context
C) advertising effects
D) quantity of criteria
E) temporal perspective

Answer: Page: 579 Difficulty: easy

61. Speed of service and convenient location are criteria Jake considers when deciding at which restaurant to eat lunch during a work day. However, when he and his wife go out for a romantic dinner, the ambiance and quality of the food are more important. Which factor is influencing the importance he places of various criteria?
A) usage situation
B) competitive context
C) advertising effects
D) experience
E) social influences

Answer: Page: 579 Difficulty: moderate

62. Which type of test is one in which the consumer is not aware of the product’s brand name?
A) surrogate tests
B) generic tests
C) blind tests
D) primary tests
E) perceptual tests

Answer: Page: 579-580 Difficulty: moderate

63. The famous Pepsi challenge had consumers taste two brands of cola without letting them know the brand name of either. Which type of test is this?
A) surrogate tests
B) generic tests
C) blind tests
D) primary tests
E) perceptual tests

Answer: Page: 579-580 Difficulty: moderate

64. Which type of test enables the marketer to evaluate the functional characteristics of the product and to determine if an advantage over a particular competitor has been obtained without the contaminating, or halo, effects of the brand name or the firm’s reputation?
A) surrogate tests
B) generic tests
C) blind tests
D) primary tests
E) perceptual tests

Answer: Page: 580 Difficulty: moderate

65. Firms with a limited reputation sometimes do which of the following with a reputable firm so as to gain from the quality associated with the known brand?
A) conduct blind tests
B) form brand alliances
C) use two-sided messages
D) form conjoint alliances
E) form conjunctive alliances

Answer: Page: 580 Difficulty: hard

66. A new brand of peanut butter cookies includes Hershey’s Kisses chocolates on top. Which of the following is this new brand using in an attempt to gain from the quality associated with Hershey’s chocolate?
A) blind test
B) brand alliance
C) two-sided message
D) conjoint alliance
E) conjunctive alliance

Answer: Page: 580 Difficulty: hard

67. Which of the following is a decision rule used by consumers?
A) conjunctive
B) disjunctive
C) lexicographic
D) compensatory
E) all of the above

Answer: Page: 581 Difficulty: easy

68. Which of the following is NOT a decision rule used by consumers?
A) conjunctive
B) disjunctive
C) lexicographic
D) compensatory
E) conjoint

Answer: Page: 581 Difficulty: moderate

69. Which of the following is a noncompensatory decision rule?
A) conjunctive
B) disjunctive
C) lexicographic
D) elimination-by-aspects
E) all of the above

Answer: Page: 581 Difficulty: moderate

70. Which decision rule establishes minimum required performance standards for each evaluative criterion and selects the first or all brands that meet or exceed these minimum standards?
A) conjunctive
B) disjunctive
C) lexicographic
D) elimination-by-aspects
E) compensatory

Answer: Page: 581 Difficulty: moderate

71. Conrad is considering the purchase of a laptop computer. He has decided that he will not spend more that $1200, the computer must weigh no more that 4 pounds, and battery life must last at least 4 hours. He has similar minimum requirements for a few other criteria he is using to evaluate alternatives. If an alternative does not meet ALL of these minimum requirements, he will not consider it further. Which decision rule is Conrad using?
A) conjunctive
B) disjunctive
C) lexicographic
D) elimination-by-aspects
E) compensatory

Answer: Page: 581 Difficulty: moderate

72. Given the following minimum standards (cutoff points) Price = 3, Quality = 4, and Ease of use = 3, which of the following computers would be chosen using the conjunctive decision rule?

A) IBM
B) NEC
C) Compaq
D) There’s not enough information to decide.
E) None of the above computers would be chosen.

Answer: Page: 581-582 Difficulty: moderate

73. Given attribute cutoffs of Price = 5, Quality = 5, and Weight = 4, which of the following would be chosen using the disjunctive decision rule?

A) NEC
B) Compaq
C) IBM
D) Compaq and IBM would be considered further.
E) Compaq and NEC would be considered further.

Answer: Page: 583 Difficulty: moderate

74. Which decision rule establishes a minimum level of performance for each important attribute (often a fairly high level), and all brands that meet or exceed the performance level for any key attribute are considered acceptable?
A) conjunctive
B) disjunctive
C) lexicographic
D) elimination-by-aspects
E) compensatory

Answer: Page: 583 Difficulty: moderate

75. Which decision rule requires the consumer to rank the evaluative criteria in terms of their importance and to establish a cutoff point for each criterion, and all brands are first considered on the most important criterion, the second most important, and so on until only one brand remains?
A) conjunctive
B) disjunctive
C) lexicographic
D) elimination-by-aspects
E) compensatory

Answer: Page: 583 Difficulty: moderate

76. Miles is considering the purchase of a new car. Price is the most important criterion for him, and he will only consider those models that do not exceed $20,000. Since several models satisfy this criterion, he then considers how each alternative performs with respect to gas mileage, and he will not consider any that get less than 20 miles per gallon in the city. Which decision rule is Miles using?
A) conjunctive
B) disjunctive
C) lexicographic
D) elimination-by-aspects
E) compensatory

Answer: Page: 583 Difficulty: moderate

77. Given the following information, which of the following compact disc players would be chosen using the elimination-by-aspects decision rule?

A) Sony
B) Sanyo
C) Pioneer
D) Sony and Pioneer would be considered further.
E) none of the above

Answer: Page: 583 Difficulty: moderate

78. Given the following information, which of the following compact disc players would be chosen using the lexicographic decision rule?

A) Sony
B) Sanyo
C) Pioneer
D) Sony and Pioneer would be considered further.
E) none of the above compact disc players would be chosen

Answer: Page: 584 Difficulty: moderate

79. Which decision rule requires the consumer to rank the criteria in order of importance, and then the consumer selects the brand that performs best on the most important attribute?
A) conjunctive
B) disjunctive
C) lexicographic
D) elimination-by-aspects
E) compensatory

Answer: Page: 584 Difficulty: moderate

80. Given the following importance weights Price = 50, Quality = 40, and Ease of use = 10, which of the following computers would be chosen using a compensatory decision rule?

A) IBM
B) A tie between Compaq and IBM.
C) NEC
D) Compaq
E) A tie between NEC and IBM.

Answer: Page: 586-587 Difficulty: moderate

81. Which decision rule states that the brand that rates highest on the sum of the consumer’s judgments of the relevant criteria will be chosen?
A) conjunctive
B) disjunctive
C) lexicographic
D) elimination-by-aspects
E) compensatory

Answer: Page: 587 Difficulty: moderate

82. The multiattribute model is which type of decision rule?
A) compensatory
B) noncompensatory
C) disjunctive
D) lexicographic
E) elimination-by-aspects

Answer: Page: 587 Difficulty: moderate

83. Joanne is considering the purchase of a microwave oven and has four evaluative criteria. For each criterion, she has attached an importance weight (“W”), and each brand is evaluated on its performance on that criterion (“B”). Then a rating is calculated by summing the product of the B’s and W’s on a criterion for each brand, and the brand with the highest overall rating is chosen. Which type of decision rule is Joanne using?
A) conjunctive
B) disjunctive
C) lexicographic
D) elimination-by-aspects
E) compensatory

Answer: Page: 587 Difficulty: moderate

True/False Questions

84. All consumers have a bounded rationality.

Answer: Page: 567 Difficulty: easy

85. Affective choices tend to be holistic in nature.

Answer: Page: 568 Difficulty: moderate

86. Attribute-based choices involve the use of general attitudes, summary impressions, intuitions, or heuristics.

Answer: Page: 570 Difficulty: moderate

87. Attitude-based choices are not used for important decisions.

Answer: Page: 571 Difficulty: moderate

88. Evaluative criteria can differ in type, number, and importance.

Answer: Page: 573 Difficulty: moderate

89. Indirect measurement techniques used to determine consumers’ evaluative criteria differ from direct measurements in that they assume consumers will not or cannot state their evaluative criteria.

Answer: Page: 575 Difficulty: moderate

90. The most common method of direct measurement to determine the relative importance of evaluative criteria is the semantic differential.

Answer: Page: 576 Difficulty: hard

91. An attribute used to stand for or indicate another attribute is known as a proxy indicator.

Answer: Page: 578 Difficulty: moderate

92. Factors affecting the relative importance and influence of evaluative criteria include usage situation, competitive context, and advertising effects.

Answer: Page: 579 Difficulty: easy

93. Conjunctive, disjunctive, elimination-by-aspects, and lexicographic are noncompensatory decision rules.

Answer: Page: 581 Difficulty: moderate

94. The conjunctive decision rule establishes minimum required performance standards for each evaluative criterion and selects the first or all brands that meet or exceed these minimum standards.

Answer: Page: 581 Difficulty: moderate

95. The disjunctive decision rule establishes an optimum level of performance for each evaluative criterion.

Answer: Page: 583 Difficulty: moderate

96. For a target market using the elimination-by-aspects rule, it is critical to meet or surpass the consumers’ requirements on one more (in order) of the criteria used than the competition.

Answer: Page: 584 Difficulty: moderate

97. In a compensatory decision, a brand’s weakness on one attribute cannot be overcome by it’s strength on another attribute.

Answer: Page: 586-587 Difficulty: moderate

Essay Questions

98. Compare and contrast the three types of consumer choice processes.

Page: 566-570 Difficulty: moderate
Answer:

99. Define evaluative criteria, and discuss the two types.

Page: 572-573 Difficulty: easy
Answer:

100. Amelia is a marketing researcher and conducts studies to determine which evaluative criteria consumers use in a given purchase situation, their judgments of brand performance on specific criteria, and the relative importance they place on evaluative criteria. Explain how Amelia does this.

Page: 575-576 Difficulty: hard
Answer:
.

101. Explain the difference between a compensatory decision rule and a noncompensatory decision rule.

Page: 581 Difficulty: easy
Answer:

102. Think of a major purchase decision you (or your family) have made. Identify from the decision rules discussed in the text the specific rule you used (or combination of rules), define that rule, and describe how you used that rule to select the alternative that you purchased. If you cannot think of a recent major purchase in your life, explain the decision rule you would use to make a major purchase decision (e.g., purchasing a car, computer, home, etc.).

Page: 580-587 Difficulty: hard
Answer:

Multiple Choice Questions

1. IBM has developed the Shopping Buddy, which is a _____.
A) full-body scanner that collects full body measurements in 10 seconds
B) computerized touchscreen PC that can be attached to shopping carts
C) system in which consumers register their fingerprint and then pay by having their finger scanned at checkout
D) a shopping “bot” that searches the Internet for the lowest prices for consumers
E) computerized shopping list of favorite and frequently purchased items

Answer: Page: 597 Difficulty: moderate

2. Which of the following is a recommended strategy for retailers when consumers select the outlet first and the brand second?
A) appropriate pricing
B) brand availability advertising
C) brand image management
D) price special on brands
E) co-op ads featuring brands

Answer: Page: 599 Difficulty: hard

3. Which of the following is a recommended strategy for manufacturers when consumers select the outlet first and the brand second?
A) retailer image advertising
B) more exclusive distribution
C) point-of-purchase displays
D) price special on brands
E) brand availability advertising

Answer: Page: 599 Difficulty: hard

4. Any source of products or services for consumers is referred to as a _____.
A) retail outlet
B) contact point
C) transaction point
D) distribution outlet
E) channel outlet

Answer: Page: 600 Difficulty: moderate

5. Consumers acquiring product through mail, telephone, or computer orders is referred to as _____.
A) outsourcing
B) outlet shopping
C) non-traditional shopping
D) in-home shopping
E) all of the above

Answer: Page: 600 Difficulty: moderate

6. Jane was looking through the Pottery Barn catalog and saw some lamps she liked. Instead of calling the toll-free number to purchase the lamps, she went to Pottery Barn’s Web site and ordered them. This is an example of _____.
A) alternative shopping
B) outsourcing
C) multi-level marketing
D) non-traditional shopping
E) in-home shopping

Answer: Page: 600 Difficulty: moderate

7. It is predicted that total US retail expenditures online will be _____ in 2008
A) $130 million
B) $38 billion
C) $1.2 billion
D) $94 billion
E) $232 billion

Answer: Page: 600 Difficulty: hard

8. Which of the following is a category of products and services based on their purchase characteristics relative to Internet shopping identified by Forrester Research?
A) “high-touch” goods
B) search goods
C) replenishment goods
D) adventurous goods
E) tangible goods

Answer: Page: 601 Difficulty: moderate

9. Which of the following category of products and services identified by Forrester Research based on their purchase characteristics relative to Internet shopping consists of moderate cost, high-frequency purchases?
A) replenishment goods
B) researched items
C) convenience items
D) shopping goods
E) selective items

Answer: Page: 601 Difficulty: moderate

10. Shelly orders her disposable contact lenses online, and she is sent two boxes every six weeks. Based on Forrester Research’s categories of products and services, which does this represent?
A) replenishment goods
B) researched items
C) convenience items
D) shopping goods
E) selective items

Answer: Page: 601 Difficulty: easy

11. Paul was searching the Internet for information regarding the purchase of a digital video recorder (DVR). Based on Forrester Research’s categories of products and services relative to Internet shopping, which category does this represent?
A) replenishment goods
B) researched items
C) convenience items
D) shopping goods
E) selective items

Answer: Page: 601 Difficulty: moderate

12. Which of the following category of products and services identified by Forrester Research based on their purchase characteristics relative to Internet shopping consists of low-risk discretionary items?
A) replenishment goods
B) researched items
C) convenience items
D) shopping goods
E) selective items

Answer: Page: 601 Difficulty: moderate

13. Which of the following statements is FALSE regarding Internet retailing?
A) Internet retailing is a booming and increasingly competitive business.
B) Apparel is one of the largest sales categories on the Internet and one of the fastest growing.
C) Research has shown that consumers shop online for reasons different to those for shopping from catalogs.
D) Catalogs and the Internet appear to work in a complementary fashion.
E) With respect to apparel, lack of touch can be a major barrier for nonstore retailers.

Answer: Page: 600-601 Difficulty: hard

14. Which of the following is the major reason consumers give for shopping online?
A) want product delivered
B) unique merchandise
C) price
D) impulse
E) convenience

Answer: Page: 601 Difficulty: moderate

15. Sales for which product or service classified as “researched items” are the highest?
A) food & beverage
B) travel
C) automotive parts
D) computer hard/software
E) event tickets

Answer: Page: 602 Difficulty: hard

16. The major reason people give for not shopping on the Internet is _____.
A) lack of “touch”
B) security concerns
C) too difficult
D) unfamiliar merchants
E) none of the above

Answer: Page: 603 Difficulty: moderate

17. Which of the following barriers to online purchasing is related to consumer fears regarding how personal information about them that is gathered online might be used?
A) lack of “touch”
B) online privacy concerns
C) economic costs
D) opportunity costs
E) dispersion concerns

Answer: Page: 603 Difficulty: easy

18. How can firms enhance consumers’ control with regard to online privacy concerns?
A) don’t ask for information
B) use bots
C) use blogs
D) use “opt in” approach
E) use search engine optimization approaches

Answer: Page: 603 Difficulty: moderate

19. Sarah just purchased some casual twill pants from L.L.Bean. When she was checking out, she was asked for her e-mail address. Below that box was a box that was checked that indicated she would like to receive promotion messages and have her information shared with similar marketers. She unchecked that box because she did not want to receive these promotional offers and did not want her information shared. This is an example of which approach online retailers are using to enhance consumers’ control?
A) “opt-in” approach
B) behavioral targeting
C) search engine optimization
D) bots
E) blogs

Answer: Page: 603 Difficulty: moderate

20. MVM (My Virtual Model) helps consumers shopping online overcome which barrier?
A) security
B) information quantity
C) lack of touch
D) flow
E) difficulty

Answer: Page: 603 Difficulty: moderate

21. Which of the following is an online shopper segment?
A) Shopping Lovers
B) Adventurous Explorers
C) Suspicious Learners
D) Fun Seekers
E) all of the above

Answer: Page: 604-605 Difficulty: easy

22. Which of the following is NOT an online shopper segment?
A) Technocrats
B) Adventurous Explorers
C) Suspicious Learners
D) Fun Seekers
E) all of the above are online shopper segments

Answer: Page: 604-605 Difficulty: moderate

23. Cindy did almost all of her Christmas shopping on the Internet last year. She enjoys buying online and does so frequently. She’ll tell anybody who will listen how wonderful it is to shop online, especially since she lives in a small city that does not have all the wonderful retail stores she likes. Cindy would be categorized as which segment of online shopper?
A) Retailer’s Dream
B) Shopping Lovers
C) Fun Seekers
D) Adventurous Explorers
E) Cyber Shopper

Answer: Page: 604 Difficulty: moderate

24. Hank is seen by others as the guy to go to if they have questions related to the Internet. He recently helped his friend download music from iTunes for his new iPod MP3 player. Hank also likes to shop online because, to him, it’s more fun than going to a store. To which segment of online shoppers does Hank belong?
A) Retailer’s Dream
B) Shopping Lovers
C) Fun Seekers
D) Adventurous Explorers
E) Cyber Shopper

Answer: Page: 604 Difficulty: moderate

25. Which segment of online shoppers, while open to new ways of doing things, are reluctant to purchase online because of their lack of computer training?
A) Suspicious Learners
B) Business Users
C) Fearful Browsers
D) Technology Muddlers
E) Shopping Avoiders

Answer: Page: 604-605 Difficulty: moderate

26. While John is open to new ways of doing things and he’s not afraid of giving a computer his credit card number, he is reluctant to purchase online due to his lack of confidence in using a computer. He has never had any training on using a computer. To which segment of online shoppers does John belong?
A) Suspicious Learners
B) Business Users
C) Fearful Browsers
D) Technology Muddlers
E) Shopping Avoiders

Answer: Page: 604-605 Difficulty: moderate

27. Which online shopper segment is the most computer literate, does not view online shopping as novel, and aren’t usually champions of the practice?
A) Suspicious Learners
B) Business Users
C) Fearful Browsers
D) Technology Muddlers
E) Shopping Avoiders

Answer: Page: 605 Difficulty: moderate

28. Barry is considerably computer literate, and he uses it all the time in his profession. He’s a free-lance writer and uses the Internet to search for information, and most of his work is sent back and forth to his editors via the Internet. While Barry does shop online, it’s nothing novel to him. To which segment of online shoppers does Barry belong?
A) Suspicious Learners
B) Business Users
C) Fearful Browsers
D) Technology Muddlers
E) Shopping Avoiders

Answer: Page: 605 Difficulty: moderate

29. Christine has never purchased anything from the Internet. She likes to look at items on the Internet, but she doesn’t want to give her credit card number or pay shipping charges. To which segment of online shoppers does Christine belong?
A) Suspicious Learners
B) Business Users
C) Fearful Browsers
D) Technology Muddlers
E) Shopping Avoiders

Answer: Page: 605 Difficulty: moderate

30. Which segment of online shoppers has an appealing income, but they don’t purchase from the Internet because they don’t like to wait for products to be shipped to them, and they like seeing merchandise in person before buying?
A) Suspicious Learners
B) Business Users
C) Fearful Browsers
D) Technology Muddlers
E) Shopping Avoiders

Answer: Page: 605 Difficulty: moderate

31. Tasha doesn’t understand all the hype about Internet shopping. When she shops, she wants to personally see the item, and she wants it right then, not 5-9 business days latter. Tasha belongs to which segment of online shoppers?
A) Suspicious Learners
B) Business Users
C) Fearful Browsers
D) Technology Muddlers
E) Shopping Avoiders

Answer: Page: 605 Difficulty: moderate

32. Even though Sam has a computer and online access, he doesn’t spend much time using it. He hears how his friends purchase items online, but he really has no interest in that area. Sam belongs to which segment of online shoppers?
A) Suspicious Learners
B) Business Users
C) Fearful Browsers
D) Technology Muddlers
E) Shopping Avoiders

Answer: Page: 605 Difficulty: moderate

33. Which segment of online consumers are the least wealthy and least educated, sees entertainment value in the Internet, but buying things online frightens them?
A) Suspicious Learners
B) Fun Seekers
C) Fearful Browsers
D) Technology Muddlers
E) Shopping Avoiders

Answer: Page: 605 Difficulty: moderate

34. Scott is twenty years old and has a high school education. He likes to go on the Internet to play games, but he’s afraid to buy things online. Even if this was not so, he doesn’t make enough money for him to be able to buy much anyway. Scott belongs to which segment of online shoppers?
A) Suspicious Learners
B) Fun Seekers
C) Fearful Browsers
D) Technology Muddlers
E) Shopping Avoiders

Answer: Page: 605 Difficulty: moderate

35. Which of the following is NOT a reason consumers gave for why they don’t like shopping in stores?
A) don’t like shopping
B) dealing with crowds
C) salespeople are poorly informed
D) parking and traffic
E) all of the above were reasons why consumers don’t like shopping in stores

Answer: Page: 605 Difficulty: hard

36. What was the MAIN reason consumers gave in a survey for why they don’t like shopping in stores?
A) don’t like shopping
B) dealing with crowds
C) salespeople are poorly informed
D) parking and traffic
E) the time it takes to shop

Answer: Page: 605 Difficulty: hard

37. Suzy is having her 6th birthday party at Club Libby Lu at a department store in the mall. She and six of her friends will get a complete “make-over” with glittery makeup and shiny extensions added to their hair. This is an example of which approach retailers are taking to improve the shopping experience?
A) kiosks
B) mini-stores
C) lifestyle centers
D) brand stores
E) “destination areas” within stores

Answer: Page: 606 Difficulty: moderate

38. Consumers who browse and/or purchase in more than one channel are known as _____.
A) cosmopolitan
B) multi-channel shoppers
C) multi-taskers
D) market mavens
E) opinion leaders

Answer: Page: 608 Difficulty: moderate

39. Which of the following affects consumers’ retail outlet selection?
A) outlet image
B) retailer brands
C) retail advertising
D) outlet location and size
E) all of the above

Answer: Page: 608-614 Difficulty: easy

40. Which of the following is NOT a factor affecting consumers’ retail outlet selection?
A) outlet image
B) retailer brands
C) retail advertising
D) outlet location and size
E) number of levels of distribution

Answer: Page: 608-614 Difficulty: moderate

41. A given consumer’s or target market’s perception of all the attributes associated with a retail outlet is generally referred to as the _____.
A) store atmosphere
B) servicescape
C) store image
D) store ambiance
E) store personality

Answer: Page: 609 Difficulty: moderate

42. The “Merchandise” dimension of store image includes _____.
A) quality
B) selection
C) price
D) style
E) all of the above

Answer: Page: 609 Difficulty: hard

43. The “Service” dimension of store image includes all of the following EXCEPT _____.
A) easy return
B) sales personnel
C) delivery
D) credit
E) all of the above are included

Answer: Page: 609 Difficulty: hard

44. Which dimension of store image consists of quality, selection, style, and price components?
A) merchandise
B) service
C) physical facilities
D) store atmosphere
E) institutional

Answer: Page: 609 Difficulty: moderate

45. Rebecca is opening a women’s shoe store. She is carefully considering the quality, selection, style, and price that she wants for her store. Which dimension of store image is she concerned with?
A) merchandise
B) service
C) physical facilities
D) store atmosphere
E) institutional

Answer: Page: 609 Difficulty: moderate

46. Which of the following components represent the service dimension of a store’s image?
A) quality, selection, style, and price
B) layaway plan, sales personnel, easy return, credit, and delivery
C) location and parking
D) congeniality, fun, excitement, and comfort
E) store reputation

Answer: Page: 609 Difficulty: moderate

47. Wendy was describing to her friend what the American Girl store is Chicago is like. She was telling her about all the different rooms that were in the store, such as a room for each doll (e.g., Bitty Baby, Felicity, Kit, etc.), a room for furniture, a room for girl-sized clothing that matched the dolls’ clothing, the tea room, and the auditorium where she saw a stage show. Which dimension of store image was Wendy describing?
A) merchandise
B) service
C) physical facilities
D) convenience
E) institutional

Answer: Page: 609 Difficulty: moderate

48. Good product offers and information, value, and alignment with consumers’ interests are components of which dimension of online retailer image?
A) usefulness
B) enjoyment
C) trustworthiness
D) style
E) familiarity

Answer: Page: 609 Difficulty: moderate

49. The trustworthiness dimension of an online retailer’s image is represented by which components?
A) good product offers and information, value, aligned with interests
B) fun, attractive, pleasant to browse
C) easy to use and navigate, flexible site
D) reputation, information safety and security
E) fast and flexible delivery and transactions

Answer: Page: 609 Difficulty: moderate

50. Brands owned and sold by a specific retail outlet are known as _____.
A) primary brands
B) secondary brands
C) store brands
D) internal brands
E) limited distribution brands

Answer: Page: 610 Difficulty: easy

51. Kelly likes to shop at Target. She really likes the Archer Farms brands with the rooster on the label, which is one of Target’s own brands and can only be purchased there. These types of brands are known as _____.
A) primary brands
B) secondary brands
C) store brands
D) internal brands
E) limited distribution brands

Answer: Page: 610 Difficulty: easy

52. What is the key to success of store brands?
A) low price
B) low quality, but at a low price
C) high quality at a high price
D) high quality at a reasonable price
E) attractive packaging

Answer: Page: 611 Difficulty: moderate

53. Sales of additional items to customers who came to purchase an advertised item are referred to as _____.
A) incremental sales
B) spillover sales
C) marginal sales
D) sales plus
E) impulse sales

Answer: Page: 611 Difficulty: moderate

54. Harriet is very frugal, so she regularly combs the grocery ads looking for bargains. Usually she’ll go to a particular store just to buy an advertised item, but sometimes she purchases other items that were not advertised as well. The purchase of the unadvertised items represent which type of sales?
A) incremental sales
B) spillover sales
C) marginal sales
D) sales plus
E) impulse sales

Answer: Page: 611 Difficulty: moderate

55. Which of the following is NOT a key decision for retailers considering price advertising?
A) How large a discount to use?
B) Should a reference price be used?
C) What verbal statements should be used?
D) What is the cost of the item compared to the total media cost?
E) None of the above are key decisions.

Answer: Page: 612 Difficulty: moderate

56. A price with which other prices are compared is known as a(n) _____.
A) reference price
B) comparison price
C) base price
D) starting price
E) internal price

Answer: Page: 613 Difficulty: moderate

57. When a retailer represents a price as “regularly $15.99, now $9.99,” the $15.99 is called the _____.
A) starting price
B) base price
C) reference price
D) comparison price
E) markup

Answer: Page: 613 Difficulty: moderate

58. Leslie loves to shop at T.J. Maxx and feels she is saving a lot of money because the price tags usually have the manufacturer’s suggested retail price (MSRP) listed and crossed off and the T.J. Maxx price below much lower. The MSRP is being used as a _____.
A) markup
B) base price
C) reference price
D) deceptive price
E) perceptual price

Answer: Page: 613 Difficulty: moderate

59. Which of the following are types of reference prices?
A) primary and secondary
B) direct and indirect
C) latent and manifest
D) internal and external
E) high and low

Answer: Page: 613 Difficulty: moderate

60. Which type of reference price is presented by a marketer for the consumer to use to compare with the current price?
A) base reference price
B) external reference price
C) private reference price
D) outlet reference price
E) public reference price

Answer: Page: 613 Difficulty: moderate

61. Todd owns a discount sporting goods store, and several of the items in his store have a manufacturer’s suggested retail price (MSRP) above Todd’s lower price. Todd is using the MSRP as a(n) _____.
A) base reference price
B) external reference price
C) perceptual reference price
D) internal reference price
E) disclosed reference price

Answer: Page: 613 Difficulty: moderate

62. Which type of reference price or price range does a consumer retrieve from memory to compare with a price in the market?
A) base reference price
B) historical reference price
C) private reference price
D) internal reference price
E) repeat reference price

Answer: Page: 613 Difficulty: moderate

63. Neil is considering the purchase of a 4-wheeler ATV. He visited a distributor to look at different models, and when he looked at prices he compared them with a price his brother told him he paid for an ATV. The price Neil retrieves from memory is known as a(n) _____.
A) base reference price
B) external reference price
C) internal reference price
D) private reference price
E) personal reference price

Answer: Page: 613 Difficulty: moderate

64. A $10 savings on a $200 item should _____.
A) not show the regular price
B) show the dollar savings but not the percentage savings
C) show the percentage savings but not the dollar savings
D) show both the dollar savings and the percentage savings
E) show neither the dollar savings nor the percentage savings

Answer: Page: 613 Difficulty: hard

65. All other things being equal, consumers tend to prefer _____.
A) external reference prices over internal reference prices
B) dollar savings over percentage savings
C) percentage savings over dollar savings
D) larger retail outlets over smaller outlets
E) smaller retail outlets over larger outlets

Answer: Page: 613 Difficulty: hard

66. The retail attraction model is also called the _____.
A) retail gravitation model
B) retail dispersion model
C) retail composition model
D) retail network model
E) retail concentration model

Answer: Page: 613 Difficulty: moderate

67. Which model is used to calculate the level of store attraction based on store size and distance from the consumer?
A) retail multiattribute model
B) retail attraction model
C) retail attribution model
D) retail geographic model
E) retail distribution model

Answer: Page: 613 Difficulty: moderate

68. Jim is trying to determine the level of his store’s attraction by using the square footage as a measure of breadth of merchandise and the distance to the store from different geographic areas. Which model is he using?
A) retail multiattribute model
B) retail gravitation model
C) retail attribution model
D) retail geographic model
E) retail distribution model

Answer: Page: 613 Difficulty: moderate

69. For which product are consumers more willing to travel longer distances to shop for?
A) toothpaste
B) wedding dress
C) beer
D) laundry detergent
E) soft drinks

Answer: Page: 614 Difficulty: easy

70. The purchase of products involves the risk that they may not perform as expected, causing which of the following to be high?
A) social cost
B) time cost
C) effort cost
D) physical cost
E) all of the above

Answer: Page: 614 Difficulty: easy

71. Which of the following is NOT a type of cost associated with perceived risk?
A) social cost
B) time cost
C) effort cost
D) physical cost
E) spatial cost

Answer: Page: 614 Difficulty: moderate

72. Tylenol, which is an analgesic known as acetaminophen, warns in some of its advertising that consumers should read labels carefully because several other types of medications include acetaminophen (e.g., Tylenol Sinus) and consumers could overdose on this medicine and potentially suffer liver damage. Which type of cost is associated with this risk?
A) social cost
B) time cost
C) effort cost
D) physical cost
E) mental cost

Answer: Page: 614 Difficulty: moderate

73. Lori purchased new tires for her car, and she can bring it back every 5,000 miles to have the tires rotated for free. However, Lori doesn’t do it because that would require that she take her car to the shop and either leave it and have someone get her and take her back later or sit and wait for the tires to be rotated. Which type of cost does this represent?
A) social cost
B) time cost
C) effort cost
D) physical cost
E) mental cost

Answer: Page: 614 Difficulty: moderate

74. Purchase of which product typically represents low social risk and low economic risk for consumers?
A) deodorant
B) automobile
C) socks
D) auto repairs
E) hair cut/style

Answer: Page: 615 Difficulty: moderate

75. A shopping style that puts particular emphasis on certain activities or shopping motivations is called a _____.
A) shopping segment
B) shopping typology
C) shopping orientation
D) shopping perspective
E) store atmosphere

Answer: Page: 616 Difficulty: moderate

76. Which of the following is a segment of consumers based on shopping orientation?
A) Chameleons
B) Shopping Lovers
C) Adventurous Explorers
D) Shopping Avoiders
E) Fun Seekers

Answer: Page: 616-617 Difficulty: moderate

77. Kim likes to go to Sam’s Warehouse because she can purchase large quantities of products such as paper and cleaning products. She likes to buy large quantities because she doesn’t like to buy these things, so she figures she won’t have to buy them that often if she purchases large quantities. Which shopping orientation best describes Kim?
A) Chameleons
B) Scavengers
C) Foragers
D) Collectors/Gatherers
E) Predators

Answer: Page: 616 Difficulty: moderate

78. Which of the following is a description of the shopping orientation known as Predators?
A) Their shopping styles are situation-specific or constantly changing.
B) They are purposive and speed oriented in their shopping.
C) They shop both to make purchases and as an activity.
D) They like to shop.
E) They have a propensity to stockpile items and to purchase large quantities to either save money or alleviate the need for shopping.

Answer: Page: 617 Difficulty: moderate

79. Which of the following is a variable that influences brand decisions inside a retail outlet?
A) point-of-purchase materials
B) price reductions
C) outlet atmosphere
D) stockout situations
E) all of the above

Answer: Page: 617 Difficulty: easy

80. Purchases made in a retail outlet that are different from those the consumer planned to make prior to entering that retail outlet are called _____.
A) incremental purchases
B) irrational purchases
C) unplanned purchases
D) emotional purchases
E) deviant purchases

Answer: Page: 617 Difficulty: moderate

81. Unplanned purchases are further subdivided into which two categories?
A) primary and secondary
B) direct and indirect
C) reminder and impulse
D) generally planned and substitute
E) latent and manifest

Answer: Page: 618 Difficulty: moderate

82. Which of the following is a theory proposed to explain why so many retail prices end just below a round number (i.e., 99)?
A) “left-to-right” theory
B) sale-association theory
C) multiattribute theory
D) a and b
E) a, b, and c

Answer: Page: 621 Difficulty: moderate

83. A retailer being temporarily out of a particular brand is called _____.
A) whiteouts
B) blackouts
C) stockouts
D) shortage
E) shrinkage

Answer: Page: 623 Difficulty: moderate

84. Which of the following is an ambient condition related to store atmosphere?
A) customer characteristics
B) symbols
C) layout
D) temperature
E) furnishings

Answer: Page: 624 Difficulty: hard

True/False Questions

85. Selecting a retail outlet involves a different type of process as selecting a brand.

Answer: Page: 598 Difficulty: moderate

86. Catalogs have appeared to suffer due to the growth of the Internet.

Answer: Page: 601 Difficulty: moderate

87. Concern regarding credit card security is the major reason given among those who are online but have never made a purchase online.

Answer: Page: 603 Difficulty: easy

88. Online marketers of apparel will never be able to overcome the lack of “touch” issue with consumers and as a consequence, apparel is having little sales success online.

Answer: Page: 603 Difficulty: hard

89. For many people in-store shopping is perceived as neither fun nor an efficient use of time.

Answer: Page: 605 Difficulty: moderate

90. Multi-channel shoppers often browse/search in one channel and use that information to make a purchase in another channel.

Answer: Page: 608 Difficulty: easy

91. Multi-channel shoppers generally spend less than single-channel shoppers.

Answer: Page: 608 Difficulty: moderate

92. Brand image and store image are similar concepts.

Answer: Page: 609 Difficulty: moderate

93. Sales of additional items to customers who come to purchase an advertised item are referred to as spillover sales.

Answer: Page: 611 Difficulty: moderate

94. Studies continue to show that price is frequently the prime reason consumers select a retail outlet.

Answer: Page: 612 Difficulty: hard

95. Perceived risk is considered a consumer characteristic as well as a product characteristic.

Answer: Page: 615 Difficulty: moderate

96. Foragers are particular and are motivated to purchase only the desired items.

Answer: Page: 617 Difficulty: hard

97. Most purchases in supermarkets are planned.

Answer: Page: 618 Difficulty: moderate

98. Unplanned purchases can be further subdivided into substitute and impulse purchases.

Answer: Page: 618 Difficulty: hard

99. Sales increases generated by the addition of various types of P-O-P materials in supermarkets are called “lift.”

Answer: Page: 619 Difficulty: moderate

100. One source of sales increases in response to price reductions comes from consumer stockpiling.

Answer: Page: 621 Difficulty: easy

101. A major component of store atmosphere is the number, characteristic, and behavior of other customers.

Answer: Page: 622 Difficulty: moderate

102. Physical conditions of store atmosphere include layout, equipment, colors, furnishings, and space.

Answer: Page: 624 Difficulty: easy

103. A study by DoubleClick found that the number one reason consumers abandoned their online shopping carts was due to changing their mind.

Answer: Page: 625 Difficulty: hard

104. Recent research finds that roughly 20 percent of online consumers abandon their shopping carts without making a purchase.

Answer: Page: 625 Difficulty: hard

Essay Questions

105. Discuss the strategy implications for both retailers and manufacturers if consumers’ decision sequence is outlet first, brand second.

Page: 598-599 Difficulty: easy
Answer:

106. Define store image, and discuss five of the several dimensions of store image.

Page: 609 Difficulty: moderate
Answer:

107. Stacy owns a retail store specializing in home decor products. She is considering using price advertising but is not sure what all she needs to consider before doing so. She knows you are a marketing major and has asked your advice. Discuss three decisions she needs to consider when using price advertising.

Page: 612-613 Difficulty: hard
Answer:

108. Name and describe three of the shopping orientations.

Page: 616-617 Difficulty: hard
Answer:

109. Jacqueline went to Walgreens to purchase some cold medicine, but the brand she wanted was not on the shelf. There was an empty space on the shelf where it should have been. Explain the variable that most likely will influence Jacqueline’s brand decision right now and the impact of this situation.

Page: 623-624 Difficulty: moderate
Answer:

Multiple Choice Questions

1. The NFL is able to customize their newsletter by _____.
A) tracking what pieces are clicked on
B) providing news about the individual fan’s favorite team
C) matching the individual fan’s specific interests
D) enabling fans to update their profile
E) all of the above

Answer: Page: 637 Difficulty: moderate

2. Which of the following is NOT a possible outcome once a consumer is satisfied?
A) committed customer
B) discontinued use
C) repeat purchases
D) increased use
E) all of the above are possible outcomes

Answer: Page: 638 Difficulty: hard

3. Doubt or anxiety regarding a purchase a consumer has made is known as _____.
A) postpurchase worry
B) postpurchase guilt
C) postpurchase dissonance
D) postpurchase shame
E) postpurchase fear

Answer: Page: 638 Difficulty: moderate

4. Which of the following is true regarding postpurchase dissonance?
A) All consumer purchase decisions are followed by postpurchase dissonance of some sort.
B) The importance of the decision to the consumer is one factor that influences the probability and magnitude of postpurchase dissonance.
C) The individual’s tendency to experience anxiety is not related to postpurchase dissonance.
D) The easier it is to alter the decision, the more likely postpurchase dissonance will be.
E) Nominal decision making usually results in the greatest magnitude of postpurchase dissonance.

Answer: Page: 639 Difficulty: moderate

5. The probability of a consumer experiencing postpurchase dissonance, as well as the magnitude of such dissonance, is a function of which of the following?
A) The degree of commitment or irrevocability of the decision.
B) The importance of the decision to the consumer.
C) The difficulty of choosing among the alternatives.
D) The individual’s tendency to experience anxiety.
E) all of the above

Answer: Page: 639 Difficulty: easy

6. Connie just purchased her first new car, and she’s actually feeling a little bad about it. She’s concerned about how much money she spent and how long she will be making car payments. She’s not sure she made the right choice, either. She liked another car a little better, but ended up purchasing another model. Connie is experiencing _____.
A) postpurchase worry
B) postpurchase guilt
C) postpurchase dissonance
D) postpurchase shame
E) postpurchase fear

Answer: Page: 639 Difficulty: moderate

7. Which of the following is NOT an action a consumer may utilize to reduce dissonance?
A) Increase the desirability of the brand purchased.
B) Decrease the desirability of rejected alternatives.
C) Decrease the importance of the purchase decision.
D) Reverse the purchase decision (return the product before use).
E) Increase the importance of alternatives that were not considered in the purchase initially.

Answer: Page: 639-640 Difficulty: moderate

8. Carla continued to search for information on cars even after she purchased one. She would go over her decision in her head, and pay attention to ads that featured the car she bought. She was also noticing how many other people drove her model of car, which made her feel more confident that she made a wise decision. Carla is attempting to reduce _____.
A) consumption guilt
B) postpurchase dissonance
C) postpurchase shame
D) postpurchase fear
E) consumption anxiety

Answer: Page: 640 Difficulty: moderate

9. Hailey purchased furniture for her living room and spent quite a bit of money. After she purchased it, she started regretting that she spent so much and she wasn’t sure she liked the furniture. To make herself feel better, she told herself that the other furniture she was considering really wasn’t that good and probably would not last as long as the furniture she ended up purchasing. Which of the following is Hailey using to reduce her postpurchase dissonance?
A) Increasing the desirability of the brand purchased.
B) Decreasing the desirability of rejected alternatives.
C) Decreasing the importance of the purchase decision.
D) Reversing the purchase decision.
E) Increasing the importance of the purchase decision.

Answer: Page: 639-640 Difficulty: moderate

10. Negative emotions or guilt feelings aroused by the use of a product or a service are referred to as _____.
A) postpurchase anxiety
B) consumption guilt
C) consumption anxiety
D) postpurchase dissonance
E) consumption dissonance

Answer: Page: 640 Difficulty: moderate

11. Rebecca is a single woman in her 40s. She sold her Honda Civic and bought an Acura CSX, which is considerably more expensive. She was going to her brother’s house with her mother, and she asked her mother to drive in her car instead of Rebecca’s new one. She didn’t want her brother to see that she had purchased an expensive car for herself. Rebecca was experiencing _____.
A) postpurchase anxiety
B) consumption guilt
C) consumption anxiety
D) postpurchase dissonance
E) consumption dissonance

Answer: Page: 640 Difficulty: moderate

12. Which of the following refers to imagining the outcome if a different decision had been made in the past?
A) postpurchase dissonance
B) consumption guilt
C) counterfactual thinking
D) prefactual thinking
E) innovative thinking

Answer: Page: 641 Difficulty: moderate

13. Which of the following statements is true regarding counterfactual thinking?
A) It occurs before a decision is made.
B) Marketers try to avoid consumers from thinking this way.
C) It is the same as prefactual thinking, but it is more severe.
D) Marketers always try to reduce the likelihood that consumer think this way.
E) It can be removed by price guarantees.

Answer: Page: 641 Difficulty: hard

14. Hunter purchased a new computer, and he started thinking about what it would be like if he had purchased the other brand that he was considering seriously. He purchased a Dell, but he kept thinking that if he had only spent a little more and purchased the IBM, he might not be experiencing some of the problems that he is (i.e., computer “freezing up”). Which of the following is Hunter engaging in?
A) postpurchase anxiety
B) consumption guilt
C) counterfactual thinking
D) prefactual thinking
E) innovative thinking

Answer: Page: 641 Difficulty: moderate

15. Which of the following refers to imagining different outcomes before a decision is made?
A) prepurchase dissonance
B) consumption guilt
C) counterfactual thinking
D) prefactual thinking
E) innovative thinking

Answer: Page: 641 Difficulty: moderate

16. Bob wants to purchase a big screen television, but he’s reluctant because he tells himself that “If I buy it now, then the price will drop and I’ll regret not waiting longer.” Bob is engaging in _____.
A) prepurchase dissonance
B) consumption guilt
C) counterfactual thinking
D) prefactual thinking
E) purchase anxiety

Answer: Page: 641 Difficulty: moderate

17. A consumer using a product in a new way is referred to as _____.
A) counterfactual thinking
B) prefactual thinking
C) use innovativeness
D) usage expansion
E) extended use thinking

Answer: Page: 641 Difficulty: moderate

18. The external ice cube shoot on Cade’s refrigerator door was not working properly. She could hear the ice falling into the shoot, but nothing would come out. She looked inside and realized there was a solid block of ice clogging the shoot, and she couldn’t get it loose. Cade decided to use a hair dryer to melt the ice, and it worked. Cade’s using a hair dryer in a new way represents _____.
A) counterfactual thinking
B) prefactual thinking
C) use innovativeness
D) usage expansion
E) extended use thinking

Answer: Page: 641 Difficulty: moderate

19. Why must manufacturers design products with both the primary purpose and other potential uses in mind?
A) consumers demand it
B) competition requires it
C) to be able to promote secondary uses
D) stringent product liability laws
E) to save on research and development costs

Answer: Page: 642 Difficulty: hard

20. Which of the following occurs when a consumer actively acquires a product that is not used or used only sparingly relative to its potential use?
A) consumption guilt
B) nonconsumption guilt
C) product nonuse
D) counterfactual thinking
E) prefactual thinking

Answer: Page: 643 Difficulty: easy

21. Disposition of the product or the product’s container may occur _____ product use.
A) during
B) after
C) before
D) a and b
E) a, b, and c

Answer: Page: 644 Difficulty: moderate

22. For which product is no disposition involved?
A) ice cream cone
B) laundry detergent
C) soft drink
D) clothing
E) electronics

Answer: Page: 644 Difficulty: moderate

23. Carl and his family purchased a new home, and the builder left half empty paint cans in the garage. Carl doesn’t know what to do with them because he cannot put them out in the regular trash. Carl is concerned with which of the following with regard to the paint?
A) purchase
B) use
C) disposition
D) consumption
E) product nonuse

Answer: Page: 644 Difficulty: moderate

24. Exploding demand and short product life-spans for high-tech gadgets such as cell phones, personal computers, and various other personal electronic devices is creating growing concerns over _____.
A) e-waste
B) poisonous waste
C) hazardous waste
D) reusable waste
E) recyclable waste

Answer: Page: 645 Difficulty: moderate

25. Which disposition alternative is the most widely used by consumers?
A) trade in
B) recycle
C) throw away
D) give away
E) sell

Answer: Page: 645 Difficulty: moderate

26. Which of the following is NOT an alternative if a consumer decides to retain a product’s package?
A) store it
B) use it for original purpose
C) recycle it
D) use it for a new purpose
E) all of the above are alternatives in this situation

Answer: Page: 646 Difficulty: hard

27. Which of the following is an alternative once a consumer has decided to get rid of a product?
A) sell it
B) give it away
C) loan it to someone
D) throw it away
E) all of the above

Answer: Page: 646 Difficulty: easy

28. Which of the following is FALSE regarding the way in which disposition decisions can affect a firm’s marketing strategy?
A) For most durable goods, consumers are reluctant to purchase a new item until they have “gotten their money’s worth” from the old one.
B) Disposition sometimes must occur before acquisition of a replacement because of space or financial limitations.
C) Frequent decisions by consumer to sell, trade, or give away used products results in a large used-product market that can reduce the market for new products.
D) The United States is a completely throw away society, and consumers are willing to purchase new products without concern for waste.
E) Environmentally sound disposition decisions benefit society as a whole and thus the firms that are part of that society.

Answer: Page: 646-648 Difficulty: moderate

29. Which type of sale occurs when one consumer sells a product directly to another with or without the assistance of a commercial intermediary?
A) direct-to-consumer sale
B) consumer-to-consumer sale
C) personal sale
D) private sale
E) direct marketing

Answer: Page: 647 Difficulty: moderate

30. Jon purchased an antique watch on eBay from another consumer. Which type of sale is this known as?
A) direct-to-consumer sale
B) consumer-to-consumer sale
C) personal sale
D) private sale
E) electronically-mediated sale

Answer: Page: 647 Difficulty: moderate

31. An outlet or brand whose performance confirms a low-performance expectation generally will result in _____.
A) satisfaction
B) dissatisfaction
C) nonsatisfaction
D) elation
E) anger

Answer: Page: 648 Difficulty: moderate

32. Rod wasn’t expecting much from the painters that came to his house. True to form, they did not do a good job and confirmed his low-performance expectations. Rod is most likely experiencing _____.
A) satisfaction
B) dissatisfaction
C) nonsatisfaction
D) elation
E) anger

Answer: Page: 648 Difficulty: moderate

33. A brand whose perceived performance falls below expectations generally produces _____.
A) satisfaction
B) dissatisfaction
C) nonsatisfaction
D) elation
E) fear

Answer: Page: 648 Difficulty: moderate

34. Kristen purchased a chair and ottoman from a national chain furniture store. After only six months, the fabric started to fade and tear in some spots. While she didn’t spend much money on this chair, she did expect it to last longer than that. Kristen most likely experienced _____.
A) satisfaction
B) dissatisfaction
C) nonsatisfaction
D) elation
E) guilt

Answer: Page: 648 Difficulty: moderate

35. When perceptions of product performance match expectations that are at or above the minimum performance level, _____ generally results.
A) satisfaction
B) dissatisfaction
C) nonsatisfaction
D) elation
E) surprise

Answer: Page: 648 Difficulty: moderate

36. Jose and his family, all Mexican by birth, went to dine at a new Mexican restaurant in Houston, which is home to many outstanding Mexican restaurants. They were expecting authentic Mexican food, and they got it. They most likely experienced _____.
A) satisfaction
B) dissatisfaction
C) amazement
D) nonsatisfaction
E) surprise

Answer: Page: 649 Difficulty: moderate

37. Which of the following means that the consumer is enthusiastic about a particular brand and is somewhat immune to actions by competitors?
A) satisfaction
B) commitment
C) market maven
D) brand leverage
E) brand fanatic

Answer: Page: 649 Difficulty: moderate

38. Pam and her friends ate at a new Italian restaurant, and the food, service, and ambiance exceeded their expectations. They all decided that this was the only Italian restaurant they will ever go to again in their town. This is an illustration of _____.
A) nonsatisfaction
B) extended decision making
C) commitment
D) relationship marketing
E) customer value

Answer: Page: 649 Difficulty: moderate

39. Which of the following factors is the MOST likely reason consumers change providers of a service?
A) core service failure
B) service encounter failure
C) pricing
D) attraction by competitors
E) ethical problems

Answer: Page: 649-650 Difficulty: hard

40. Eric booked a hotel through hotels.com. However, when he arrived at the hotel, they had no record of his reservation, and he was unable to get a room. He decided then that he would never use this service again. Which reason for changing providers does this represent?
A) core service failure
B) service encounter failure
C) pricing
D) attraction by competitors
E) ethical problems

Answer: Page: 649-650 Difficulty: moderate

41. Service employees that are uncaring, impolite, unresponsive, or unknowledgeable will cause consumers to switch providers for which reason?
A) core service failure
B) service encounter failure
C) pricing
D) attraction by competitors
E) ethical problems

Answer: Page: 650 Difficulty: moderate

42. Kimberly loves the ham and turkey from the Heavenly Ham store. There is only one store in her town, though, and it is pretty far away. She goes that direction on Saturdays for her daughter’s music lesson, but by the time it’s over and she’s heading home, the store is already closed. Sometimes she brings a cooler and stops there before her daughter’s lesson, but most of the time she forgets to bring the cooler. She usually ends up buying lunch meat at the grocery deli. Which reason for changing providers does this represent?
A) involuntary switching
B) responses to service failures
C) pricing
D) inconvenience
E) ethical problems

Answer: Page: 650 Difficulty: moderate

43. Simon was dissatisfied with the meal and service he received at a restaurant, so he complained. The manager came out and was arrogant to Simon, and Simon felt like he was trying to blame him for the bad experience he had by saying he was too picky. Simon vowed never to eat at that restaurant again. Which reason for changing providers does this represent?
A) involuntary switching
B) responses to service failures
C) pricing
D) attraction by competitors
E) ethical problems

Answer: Page: 650 Difficulty: moderate

44. Renee has been going to the same dentist for years. However, her employer changed her dental insurance plan, and her dentist was not part of the plan. She had to switch to an approved dentist. Which reason for changing providers does this represent?
A) involuntary switching
B) responses to service failures
C) pricing
D) attraction by competitors
E) ethical problems

Answer: Page: 650 Difficulty: moderate

45. Sherri pulled up to the drive-up ATM at her bank. She put her card in, and it came right back out. On the screen was a message that the machine was not operational. Sherri was not happy. Which incident type with respect to self-service technologies does this represent?
A) technology failure
B) service design flaw
C) technology design flaw
D) customer failure
E) financial failure

Answer: Page: 650 Difficulty: hard

46. What are the two dimensions to performance for products?
A) instrumental and symbolic
B) latent and manifest
C) immediate and delayed
D) direct and indirect
E) consummatory and instrumental

Answer: Page: 650 Difficulty: moderate

47. Which dimension of product performance relates to the physical functioning of the product?
A) affective
B) direct
C) instrumental
D) attributional
E) consummatory

Answer: Page: 650 Difficulty: moderate

48. Leon is concerned with the reliability and durability of laptop computers he is considering purchasing. This represents which dimension of product performance?
A) affective
B) direct
C) instrumental
D) symbolic
E) consummatory

Answer: Page: 650 Difficulty: moderate

49. Which dimension of product performance relates to aesthetic or image-enhancement performance?
A) affective
B) direct
C) instrumental
D) symbolic
E) consummatory

Answer: Page: 650 Difficulty: moderate

50. Monique is buying a new coat for the winter. While she is concerned with how well the coat will keep her warm, she is also concerned with how stylish it will make her look. Her concern for stylishness represents which dimension of product performance?
A) affective
B) direct
C) instrumental
D) symbolic
E) consummatory

Answer: Page: 650 Difficulty: moderate

51. The emotional response that owning or using the product or outlet provides is known as _____.
A) affective performance
B) direct performance
C) instrumental performance
D) symbolic performance
E) consummatory performance

Answer: Page: 650 Difficulty: moderate

52. Dawn and her two daughters went to see Pride & Prejudice at the movie theater. They all loved the movie and came out saying “we’re so glad she married Mr. Darcy!” This movie provided them with _____.
A) affective performance
B) direct performance
C) instrumental performance
D) symbolic performance
E) consummatory performance

Answer: Page: 650 Difficulty: moderate

53. What is the first decision a dissatisfied customer will make?
A) whether to complain to the store or to the manufacturer
B) whether or not to stop buying that brand
C) whether or not to take any external action
D) whether or not to initiate legal action
E) whether or not to complain to a government agency

Answer: Page: 651 Difficulty: moderate

54. Ronald is dissatisfied with a product he has bought. What is the first decision Ronald will make with regard to his dissatisfying situation?
A) whether to complain to the store or to the manufacturer
B) whether or not to stop buying that brand
C) whether or not to take any external action
D) whether or not to initiate legal action
E) whether or not to complain to a government agency

Answer: Page: 651 Difficulty: moderate

55. A consumer’s decision of whether or not to take action when he or she is dissatisfied is a function of which of the following?
A) importance of the purchase to the consumer
B) ease of taking action
C) consumer’s existing level of overall satisfaction with the brand or outlet
D) characteristics of the consumer involved
E) all of the above

Answer: Page: 651 Difficulty: easy

56. Even if a dissatisfied consumer takes no external action, which of the following is likely?
A) will engage in negative work-of-mouth
B) will stop buying that brand
C) will have a less favorable attitude toward the store or brand
D) will stop buying at that store
E) all of the above

Answer: Page: 651-652 Difficulty: moderate

57. Which of the following is true regarding word-of-mouth (WOM)?
A) WOM is a minor factor in consumer behavior.
B) Consumers trust WOM more than many other sources.
C) Satisfaction yields more WOM than does dissatisfaction.
D) Consumers do not give WOM much merit, especially negative WOM.
E) Marketers are not concerned about WOM.

Answer: Page: 652 Difficulty: moderate

58. Employees who deal directly with consumers are known as _____.
A) foot soldiers
B) clerks
C) consumer-level employees
D) front-line employees
E) primary employees

Answer: Page: 654 Difficulty: moderate

59. Savannah works at the front desk at a Marriott Hotel. If a guest has a complaint, she is empowered to make amends up to a certain amount without her supervisor’s approval. Savannah is known as a _____.
A) decision maker
B) key employee
C) consumer-level employee
D) front-line employee
E) primary employee

Answer: Page: 654 Difficulty: moderate

60. _____ continue to buy the same brand though they do not have an emotional attachment to it.
A) Repeat purchasers
B) Brand loyals
C) Committed customers
D) Satisfied buyers
E) Referred buyers

Answer: Page: 656 Difficulty: moderate

61. Kevin buys the same brand of clothing all the time. He continues to buy it because it fits him well and the price is right, but he does not have an emotional attachment to it. Kevin is an example of a(n) _____.
A) trapped purchaser
B) committed customer
C) repeat purchaser
D) nonsatisfied customer
E) indifferent purchaser

Answer: Page: 656 Difficulty: hard

62. The costs of finding, evaluating, and adopting another solution are known as _____.
A) incurred costs
B) switching costs
C) effort costs
D) balancing costs
E) committed costs

Answer: Page: 656 Difficulty: moderate

63. Sandy uses online banking, and her bank charges her $4.99 per month. However, she has seen ads for a competing bank offering free online banking services. She’d like to switch, but she realized that it might be difficult to do since she has several of her bill payments set up as automatic debits. The cost of changing to another bank represent Sandy’s _____.
A) incurred costs
B) switching costs
C) effort costs
D) balancing costs
E) committed costs

Answer: Page: 656 Difficulty: moderate

64. Consumers that exhibit a positively biased behavior toward a specific brand are exhibiting _____.
A) brand loyalty
B) brand leverage
C) brand image
D) brand equity
E) brand bias

Answer: Page: 656 Difficulty: easy

65. Jason will only drink Pepsi cola, and he feels an emotional attachment to it. That is the brand he was brought up on and is the one he continues to drink every day. Jason is exhibiting _____.
A) brand loyalty
B) brand leverage
C) brand image
D) brand equity
E) brand bias

Answer: Page: 656 Difficulty: easy

66. Which type of customer has an emotional attachment to the brand or firm?
A) repeat purchaser
B) satisfied buyer
C) total buyer
D) committed customer
E) affective customer

Answer: Page: 656 Difficulty: moderate

67. George has used the same company for his car and home insurance for over 20 years. Any claim he has made has been handled fairly and quickly. A major hurricane came through his area causing many individuals, including George, and business owners to lose everything. While he was hearing about so many insurance claim nightmares, he knew his company would come through because he trusts this company. George is an example of a _____.
A) repeat purchaser
B) satisfied buyer
C) total buyer
D) committed customer
E) affective customer

Answer: Page: 656 Difficulty: moderate

68. Which of the following is FALSE regarding committed customers?
A) They are unlikely to consider additional information when making a purchase.
B) They are resistant to competitors’ marketing efforts.
C) They are less likely to forgive an occasional product or service failure.
D) They are likely to be a source of positive word-of-mouth.
E) They are more profitable to the firm than mere repeat purchasers.

Answer: Page: 657 Difficulty: moderate

69. The term used to refer to turnover in a firm’s customer base is _____.
A) turnover
B) churn
C) attrition rate
D) turn ratio
E) defection rate

Answer: Page: 657 Difficulty: moderate

70. Expenses associated with advertising, establishing a new account, and mailing catalogs are examples of _____.
A) churn
B) opportunity costs
C) switching costs
D) contribution costs
E) acquisition costs

Answer: Page: 658 Difficulty: moderate

71. Which of the following is a source of increased customer profitability over time?
A) increased sales volume
B) lower costs
C) referrals
D) price premium
E) all of the above

Answer: Page: 658 Difficulty: easy

72. Which of the following is NOT a source of increased customer profitability over time?
A) increased sales volume
B) lower costs
C) referrals
D) increased churn
E) price premium

Answer: Page: 658 Difficulty: moderate

73. _____ refers to the fact that repeat and particularly committed customers tend to buy the brand consistently rather than waiting for a sale or continually negotiating price.
A) Acquisition cost
B) Referral
C) Price premium
D) Price indifferent
E) Price insensitive

Answer: Page: 658 Difficulty: hard

74. For which type of firm has research shown that reducing the number of customers who leave by 5 percent resulted in the highest percentage increase in average profits per customer?
A) auto services
B) branch banks
C) insurance brokerage
D) industrial laundry
E) credit insurance

Answer: Page: 659 Difficulty: hard

75. Marketing efforts focused on a firm’s current customers are generally termed _____.
A) relationship marketing
B) internal marketing
C) personal marketing
D) formal marketing
E) acquisition marketing

Answer: Page: 660 Difficulty: moderate

76. An attempt to develop an ongoing, expanding exchange relationship with a firm’s customers is called _____.
A) relationship marketing
B) internal marketing
C) personal marketing
D) formal marketing
E) acquisition marketing

Answer: Page: 660 Difficulty: moderate

77. Marriott Rewards customers earn points whenever they stay at any Marriott property. Louis is in this program, and he travels quite a bit because he works in sales. He usually stays at a Courtyard by Marriott, and when he walks into the lobby there is a sign by the desk welcoming him by name as well as other Marriott Rewards customers who might be staying there. This ongoing relationship between Louis and Marriott is an example of _____.
A) relationship marketing
B) internal marketing
C) personal marketing
D) formal marketing
E) acquisition marketing

Answer: Page: 660 Difficulty: moderate

78. Which of the following is a key element of relationship marketing?
A) Customizing the relationship to the individual customer.
B) Pricing in a manner to encourage loyalty.
C) Augmenting the core service or product with extra benefits.
D) Marketing to employees so that they will perform well for customers.
E) all of the above

Answer: Page: 661 Difficulty: easy

79. Which of the following is NOT a key element of relationship marketing?
A) Developing a core service or product around which to build a customer relationship.
B) Pricing in a manner to encourage loyalty.
C) Augmenting the core service or product with extra benefits.
D) Marketing to employees so that they will perform well for customers.
E) Standardize the relationship across customers.

Answer: Page: 661 Difficulty: moderate

80. Every time Hannah buys a sandwich at Subway, she gets a stamp on a card. Once she has 10 stamps, she’ll get a free sandwich. This is an example of a(n) _____.
A) food stamp program
B) acquisition program
C) customer loyalty program
D) tie-in program
E) overlay program

Answer: Page: 661 Difficulty: easy

True/False Questions

81. Nominal and most limited decision making will not produce postpurchase dissonance.

Answer: Page: 639 Difficulty: moderate

82. Consumers might experience guilt by the use of a product or a service.

Answer: Page: 640 Difficulty: easy

83. Counterintuitive thinking refers to imagining the outcome if a different decision had been made in the past.

Answer: Page: 641 Difficulty: hard

84. Sometimes consumers purchase products and do not use them.

Answer: Page: 643 Difficulty: easy

85. Disposition of the product or the product’s container may occur before, during, or after product use.

Answer: Page: 644 Difficulty: moderate

86. A consumer selling something to another individual through an online intermediary (i.e., eBay) is known as a consumer-to-consumer sale.

Answer: Page: 647 Difficulty: moderate

87. A consumer can be neither satisfied nor dissatisfied.

Answer: Page: 648 Difficulty: hard

88. Functional performance relates to the physical functioning of the product.

Answer: Page: 650 Difficulty: moderate

89. If a customer is dissatisfied with a company’s product, the company would prefer that he or she complains to the company.

Answer: Page: 651 Difficulty: hard

90. Affective performance can arise from only the symbolic dimension of product performance.

Answer: Page: 651 Difficulty: moderate

91. Firms need to satisfy consumer expectations by creating reasonable expectations through promotional efforts and maintaining consistent quality so those expectations are fulfilled.

Answer: Page: 653 Difficulty: moderate

92. Repeat purchasers continue to buy the same brand because of their emotional attachment to it.

Answer: Page: 656 Difficulty: moderate

93. Committed customers are less likely to forgive a product or service failure.

Answer: Page: 657 Difficulty: moderate

94. Churn is a term used to refer to turnover in a firm’s customer base.

Answer: Page: 657 Difficulty: moderate

95. For many products and services, there are wide variations in profitability across customers.

Answer: Page: 660 Difficulty: easy

96. Many customer loyalty programs are designed to generate repeat purchases rather than committed customers.

Answer: Page: 661 Difficulty: moderate

Essay Questions

97. Define the concept of postpurchase dissonance, and discuss the factors that influence the probability and magnitude of a consumer experiencing it.

Page: 638-639 Difficulty: moderate
Answer:

98. Bob and Stephanie purchased a new high definition television, and they spend over $3,000. After they got it home, Stephanie started feeling anxious about this purchase and wondered if they should have shopped a little more and become more informed about these types of TVs and looked at a few more alternatives than just the ones they did before purchasing this one. Stephanie is experiencing postpurchase dissonance. Explain what she can do to reduce it.

Page: 639-640 Difficulty: moderate
Answer:

99. If a consumer decides to get rid of a product and/or its package, what are his or her options?

Page: 646 Difficulty: moderate
Answer:

100. Explain how disposition decisions can affect a firm’s marketing strategy.

Page: 646-648 Difficulty: moderate
Answer:

101. Define relationship marketing, and list its five key elements.

Page: 661 Difficulty: moderate
Answer:

Multiple Choice Questions

1. Which of the following have marketers learned with respect to segmenting business customers?
A) The segment of small and moderate-sized businesses has a lot of potential.
B) The segment of small and moderate-sized businesses has limited potential.
C) The segment of large businesses is the most attractive.
D) The segment of large businesses is the least attractive.
E) Tapping the potential of the small and moderate-sized business segment does not require adapting the marketing strategy from that used to target larger businesses.

Answer: Page: 685 Difficulty: moderate

2. Which of the following is FALSE regarding the similarities and differences between organization buying decisions and family purchases?
A) Organizations generally have relatively objective and clearly articulated criteria (i.e., profit maximization) that guide purchases; families lack such explicit, overarching goals.
B) Most organizational purchases are made by individuals unknown to other organizational members and most purchases have little effect on most other members of the organization; many family purchases are inherently emotional and strongly affect the relationships between family members.
C) Businesses often engage in reciprocal purchases, which is not common for households.
D) Many of the general factors that affect consumer buying also influence organizational buying.
E) The extent to which emotions influence organizational purchasing is at least as strong as it is for family decision making.

Answer: Page: 686-687 Difficulty: moderate

3. The individuals (representing functional areas and management) within an organization who participate in making a given purchase decision make up the _____.
A) strategic business unit (SBU)
B) decision center (DC)
C) decision-making unit (DMU)
D) strategic decision unit (SDU)
E) functional decision unit (FDU)

Answer: Page: 687 Difficulty: moderate

4. Sinclair is from accounting and is a member of a committee to purchase a new mainframe computer system for his company. Sinclair is a member of the _____.
A) strategic business unit (SBU)
B) decision center (DC)
C) decision-making unit (DMU)
D) strategic decision unit (SDU)
E) functional decision unit (FDU)

Answer: Page: 687 Difficulty: moderate

5. Decision-making units often function as _____ when they consist of individuals from various areas of the firm, such as accounting, engineering, manufacturing, and marketing, who meet specifically to make a purchase decision.
A) buying centers
B) purchasing agents
C) consultants
D) intermediaries
E) opinion leaders

Answer: Page: 687 Difficulty: moderate

6. Which of the following is a characteristic of a decision-making unit?
A) They are often relatively permanent for nonroutine decisions.
B) Even less important decisions are likely to involve individuals form a wide variety of functional areas.
C) Large, highly structured organizations ordinarily involve more individuals in a purchase decision than do small, less formal organizations.
D) Decision-making units are typically a separate permanent organizational department in large organizations.
E) Small organizations do not use formalized decision-making units.

Answer: Page: 687 Difficulty: moderate

7. A difference between large and small organizations when making a purchase decision is _____.
A) small organizations generally involve more individuals in the decision-making process
B) large organizations generally involve more individuals in the decision-making process
C) large organizations typically have less specialization
D) small organizations typically have more specialized purchasing tools
E) all of the above

Answer: Page: 687 and 698 Difficulty: easy

8. Which of the following influences organizational culture and, thus, organizational buyer behavior?
A) culture
B) marketing activities
C) organizational values
D) motives
E) all of the above

Answer: Page: 688 Difficulty: easy

9. Which of the following is an external influence on organizational buyer behavior?
A) organizational values
B) motives
C) emotions
D) reference groups
E) learning

Answer: Page: 688 Difficulty: moderate

10. Which of the following is NOT an external influence on organization buyer behavior?
A) firmographics
B) culture
C) perception
D) government
E) marketing activities

Answer: Page: 688 Difficulty: moderate

11. Carlos is trying to understand the organizational buyer behavior of firms in his sales territory. Which of the following is an external influence on an organization’s culture that he should examine?
A) organizational values
B) needs
C) desires
D) firmographics
E) motives

Answer: Page: 688 Difficulty: moderate

12. Firmographics, culture, government, reference groups, and marketing activities are _____ influences on organizational buyer behavior.
A) internal
B) external
C) insignificant
D) primary
E) secondary

Answer: Page: 688 Difficulty: moderate

13. Matt is currently undergoing sales training and is trying to understand the external influences on organizational buyer behavior. Which of the following is an external influence?
A) firmographics
B) culture
C) government
D) marketing activities
E) all of the above

Answer: Page: 688 Difficulty: easy

14. Which of the following is an internal influence on organizational buyer behavior?
A) motives
B) firmographics
C) culture
D) reference groups
E) all of the above

Answer: Page: 688 Difficulty: moderate

15. Which of the following is NOT an internal influence on organizational buyer behavior?
A) firmographics
B) organizational values
C) perception
D) motives
E) memory

Answer: Page: 688 Difficulty: moderate

16. Maria is a pharmaceutical sales representative that calls on hospitals. She is taking on a new territory, and she is trying to learn the internal influences on each hospital’s culture. Which of the following is something that she should consider with respect to internal influences?
A) firmographics
B) organizational values
C) reference groups
D) lead users
E) competitors’ marketing activity

Answer: Page: 688 Difficulty: moderate

17. Which of the following is a stage in the organizational decision process?
A) problem recognition
B) information search
C) alternative evaluation
D) outlet selection and purchase
E) all of the above

Answer: Page: 688 Difficulty: easy

18. Which of the following is NOT a stage in the organizational buying decision process?
A) vendor support programs
B) problem recognition
C) information search
D) postpurchase processes
E) alternative evaluation and selection

Answer: Page: 688 Difficulty: moderate

19. Problem recognition, information search, alternative evaluation and selection, outlet selection and purchase, and postpurchase processes represent _____.
A) external influences
B) internal influences
C) organizational culture
D) the decision process
E) types of buying decisions

Answer: Page: 688 Difficulty: easy

20. Different functional areas of an organization often do all of the following EXCEPT _____.
A) play different roles in the purchase process
B) utilize different information sources
C) use different evaluative criteria
D) assign different weights to evaluative criteria
E) all of the above are done by different functional areas

Answer: Page: 689-694 Difficulty: moderate

21. Members of the decision-making unit play which of the following roles?
A) information gatherer
B) key influencer
C) decision maker
D) purchaser
E) all of the above

Answer: Page: 689 Difficulty: easy

22. Which of the following is NOT a role played by members of the decision-making unit?
A) information gatherer
B) key influencer
C) regulator
D) user
E) purchaser

Answer: Page: 689 Difficulty: moderate

23. For which stage of the product life cycle is the size of the decision-making unit typically large?
A) introduction
B) growth
C) maturity
D) decline
E) fortification

Answer: Page: 689 Difficulty: moderate

24. Bob is an engineer. For which stage of the product life cycle is he likely to be a member of a key function influencing purchase decisions?
A) introduction
B) growth
C) maturity
D) decline
E) fortification

Answer: Page: 689 Difficulty: moderate

25. For products in which stage of the product life cycle are the engineering and R&D likely to be key functions influencing the purchase decision?
A) introduction
B) growth
C) maturity
D) decline
E) fortification

Answer: Page: 689 Difficulty: moderate

26. For which stage of the product life cycle is the size of the decision-making unit likely to be neither small nor large, but medium?
A) introduction
B) growth
C) maturity
D) decline
E) fortification

Answer: Page: 689 Difficulty: moderate

27. For which stage of the product life cycle is the decision-making unit likely to be small?
A) introduction
B) growth
C) maturity
D) decline
E) fortification

Answer: Page: 689 Difficulty: moderate

28. For products in which stage of the product life cycle is the purchasing function of an organization likely to be the key function influencing the purchase decision?
A) introduction
B) growth
C) maturity
D) decline
E) fortification

Answer: Page: 689 Difficulty: moderate

29. Madeline works in purchasing for a major corporation. For purchase of products in which stage of the product life cycle is she likely to perform a key function influencing purchase decisions?
A) introduction
B) growth
C) maturity
D) decline
E) fortification

Answer: Page: 689 Difficulty: moderate

30. Which of the following is an organizational purchase situation?
A) nominal
B) modified rebuy
C) limited
D) extended
E) routine

Answer: Page: 690 Difficulty: moderate

31. Which type of organizational purchase situation occurs when the purchase is of minor importance and is not complex?
A) nominal
B) modified rebuy
C) limited
D) straight rebuy
E) routine

Answer: Page: 690 Difficulty: moderate

32. Which type of organizational purchase situation is characterized by low purchase importance, low choice complexity, level of decision-making unit (DMU) at low levels of the organization, a very small DMU, very brief time to decision, and very limited decision search?
A) nominal
B) straight rebuy
C) modified rebuy
D) new task
E) limited

Answer: Page: 690 Difficulty: moderate

33. Which type of organizational purchase situation is characterized by high purchase importance and complexity, a large and evolving decision-making unit that includes the top of the organization, a long time to decision, extensive information search and analysis techniques, and a dominant strategic focus?
A) nominal
B) straight rebuy
C) modified rebuy
D) new task
E) limited

Answer: Page: 690 Difficulty: moderate

34. Juan’s job as a purchasing agent consists mostly of reordering basic supplies and component parts. Which type of organizational purchase situation does this represent?
A) nominal
B) straight rebuy
C) modified rebuy
D) new task
E) limited

Answer: Page: 690 Difficulty: moderate

35. The College of Business at a major university is considering the purchase of technology necessary to enable them put their curriculum online. This decision is very important and includes a very large and evolving decision-making unit. Which type of organizational purchase situation does this represent?
A) nominal
B) straight rebuy
C) modified rebuy
D) new task
E) limited

Answer: Page: 690 Difficulty: moderate

36. In high-tech markets, who is most likely to recognize a problem or need to purchase?
A) CEO
B) accounting personnel
C) purchasing manager
D) head of a department
E) consumer

Answer: Page: 691-692 Difficulty: hard

37. Which of the following can possibly be part of the informal information search process for organizational buyers?
A) site visits to evaluate a potential vendor
B) laboratory test of a new product or prototype
C) investigation of possible product specifications
D) discussions with sales representatives
E) all of the above are part of informal information search

Answer: Page: 691 Difficulty: moderate

38. Darryl is a chemist at a pharmaceutical company, and he was asked by the decision-making unit at his company to visit and evaluate potential vendors that will supply his company with the chemicals required to manufacture their products and to conduct laboratory tests of a new product that can be used in the manufacture of their products. Darryl is assisting the company with which type of information search?
A) formal
B) informal
C) priority
D) secondary
E) direct

Answer: Page: 691 Difficulty: moderate

39. Shawn tries to obtain information that might assist his company whenever he talks with sales representatives, attends trade shows, or when he reads the journals related to his industry. Shawn is conducting _____.
A) formal information search
B) informal information search
C) direct information search
D) indirect information search
E) secondary information search

Answer: Page: 691 Difficulty: moderate

40. Which type of decision rule is very common in the first step of a two-stage decision for an organizational purchase?
A) conjunctive
B) disjunctive
C) lexicographic
D) compensatory
E) elimination-by-aspects

Answer: Page: 692 Difficulty: hard

41. Marcus works in operations. Which of the following evaluative criteria is NOT important to him?
A) ease of maintenance of equipment
B) competence of service technicians
C) vendor offers a broad line
D) time needed to install equipment
E) product warranty

Answer: Page: 694 Difficulty: hard

42. Payments, warranties, delivery dates, and so forth represent _____.
A) purchase specifications
B) product specifications
C) terms and conditions
D) postpurchase evaluation
E) relationship marketing

Answer: Page: 695 Difficulty: moderate

43. Laura’s job is to negotiate the payment schedule, warranties, and delivery dates for major purchases made by her company. Laura deals with the _____ of the purchase.
A) evaluative criteria
B) product specifications
C) terms and conditions
D) postpurchase evaluation
E) relationship marketing aspect

Answer: Page: 695 Difficulty: moderate

44. Which of the following sources is rated as the most important information source for purchasers and purchase influencers within organization?
A) online database services
B) B-go-B magazines
C) salespeople
D) television business networks
E) general business press

Answer: Page: 697 Difficulty: hard

45. The beliefs and attitudes an organization’s members have about the organization and how it operates is known as _____.
A) policy and procedure
B) firmographics
C) lifestyle
D) organizational style
E) organizational culture

Answer: Page: 698 Difficulty: moderate

46. Organizations have a type of self-concept and lifestyles that the text refers to as _____.
A) organizational ethos
B) organizational culture
C) organizational demeanor
D) organizations structure
E) none of the above

Answer: Page: 698 Difficulty: moderate

47. Which term is often used to refer to the organizational culture of a business firm?
A) firmographics
B) lifestyle
C) corporate culture
D) corporate style
E) internal style

Answer: Page: 698 Difficulty: moderate

48. _____ involve both organization characteristics (e.g., size, activities, and location) and characteristics of the composition of the organization (e.g., gender, age, education).
A) Firmographics
B) Psychographics
C) Demographics
D) Geographics
E) Behaviorgraphics

Answer: Page: 698 Difficulty: moderate

49. Which of the following variables represents an organization’s firmographics?
A) size
B) activities and objectives
C) location
D) industry category
E) all of the above

Answer: Page: 698-701 Difficulty: easy

50. Which of the following is NOT a component of firmographics?
A) company size
B) reference groups
C) company objective
D) company location
E) all of the above are components

Answer: Page: 698 Difficulty: easy

51. Which of the following statements is FALSE regarding a firm’s size?
A) Large organizations are more likely than smaller ones to have a variety of specialists who attend to purchasing, finance, marketing, and general management.
B) The same promotional message needs to be targeted to all of the various functions in the firm.
C) Larger organizations are generally more complex than smaller ones because more individuals participate in managing the organization’s operations.
D) The purchase decision in a smaller firm might involve only the owner or manager.
E) One message would need to address all the key purchase issues when targeting a smaller firm.

Answer: Page: 698 Difficulty: hard

52. Organizational objectives can be categorized as _____.
A) commercial
B) governmental
C) nonprofit
D) cooperative
E) all of the above

Answer: Page: 699 Difficulty: easy

53. Which of the following is NOT a category of organizational objectives?
A) commercial
B) governmental
C) nonprofit
D) cooperative
E) temporal

Answer: Page: 699 Difficulty: moderate

54. Organizational activities can be categorized as _____.
A) routine
B) complex
C) technical
D) a and b
E) a, b, and c

Answer: Page: 699 Difficulty: moderate

55. The American Red Cross participates in fund raising activities all throughout the year. How would this be classified with respect to general organizational objectives and the nature of the organizational activity?
A) commercial objective, routine activity
B) governmental objective, routine activity
C) nonprofit objective, routine activity
D) cooperative objective, routine activity
E) nonprofit objective, complex activity

Answer: Page: 699 Difficulty: moderate

56. General Electric commits millions of dollars a year to research and development to develop new products. How would this be classified with respect to general organizational objectives and the nature of the organizational activity?
A) commercial objective, routine activity
B) commercial objective, complex activity
C) commercial objective, technical activity
D) cooperative objective, technical activity
E) nonprofit objective, complex activity

Answer: Page: 699 Difficulty: moderate

57. A commercial firm in which stock is widely traded is known as a(n) _____.
A) public firm
B) cooperative firm
C) private firm
D) open firm
E) trade firm

Answer: Page: 699 Difficulty: moderate

58. Roger owns 200 shares of stock in Home Depot. Which type of commercial firm is Home Depot?
A) public firm
B) cooperative firm
C) private firm
D) open firm
E) trade firm

Answer: Page: 699 Difficulty: moderate

59. A commercial firm in which one or a few individuals owns a controlling share of the firm is known as a(n) _____.
A) public firm
B) cooperative firm
C) private firm
D) open firm
E) nontrade firm

Answer: Page: 699 Difficulty: moderate

60. Robert Mondovi is a well-known winery in Napa Valley, CA. It is a family-owned business and is not traded on any stock exchange. Which type of commercial firm is this known as?
A) public firm
B) cooperative firm
C) private firm
D) open firm
E) nontrade firm

Answer: Page: 699 Difficulty: moderate

61. Which of the following is NOT an objective uncovered through research that drives the management of privately held firms?
A) building a place for the entire family to work and be involved
B) becoming wealthy
C) avoiding corporations and working for others
D) build a lasting “empire”
E) change governmental regulations

Answer: Page: 699 Difficulty: hard

62. The types of individuals who work in the organization represent the organization’s _____.
A) size
B) composition
C) macrosegment
D) reference group
E) demographic group

Answer: Page: 701 Difficulty: moderate

63. The culture of most organizations is influenced most heavily by which of the following?
A) government
B) overall membership
C) founder and top management
D) competition
E) customers

Answer: Page: 701 Difficulty: hard

64. Organizations with distinguishing firmographics can be grouped into market segments through a process called _____.
A) industry identification
B) infrastructure segmentation
C) conjoint analysis
D) macrosegmentation
E) factor analysis

Answer: Page: 701 Difficulty: moderate

65. Which of the following statements regarding culture and government is true?
A) Variations in values and behaviors across cultures affect organizations as well as individuals.
B) In Europe, bribery and similar approaches for making sales are acceptable.
C) In the United States, there is a close working relationship between businesses and government.
D) Worker welfare is more important than corporate profit in most U.S. companies.
E) Plant closure laws, layoff regulations, and worker benefits tend to be much higher in the U.S. than in European countries.

Answer: Page: 701 Difficulty: hard

66. Perhaps the most powerful type of reference group in industrial markets is that of _____.
A) innovators
B) lead users
C) government regulators
D) market mavens
E) business press

Answer: Page: 701 Difficulty: moderate

67. Innovative organizations that derive a great deal of their success from leading change are referred to as _____.
A) innovators
B) lead users
C) government regulators
D) market mavens
E) opinion leaders

Answer: Page: 701-702 Difficulty: moderate

68. Which of the following is NOT considered a user reference group in organizational buying?
A) lead user
B) trade press
C) early adopters
D) followers
E) all of the above are considered a user reference group

Answer: Page: 702 Difficulty: hard

69. Microsoft is a company that has derived a great deal of success from leading change, and other computer-related companies look to Microsoft for cues as to where technology will be heading in the future. Microsoft would be classified as which type of user reference group?
A) lead user
B) industry leader
C) early adopters
D) followers
E) supportive firm

Answer: Page: 702 Difficulty: moderate

70. Lead users tend to accelerate market adoption, which is labeled as _____.
A) market pull
B) primary demand
C) market push
D) secondary demand
E) leading indicator

Answer: Page: 702 Difficulty: hard

71. Which of the following is an infrastructure reference group?
A) business press
B) followers
C) early adopters
D) lead firms
E) government regulators

Answer: Page: 702 Difficulty: moderate

72. _____ refers to the flow of purchase influence within an industry.
A) User reference groups
B) Reference group infrastructure
C) Diffusion of innovations
D) Two-stage decision process
E) Buying centers

Answer: Page: 702 Difficulty: moderate

73. Which of the following can influence an organization’s decision to buy or not buy a given product, or to buy or not buy from a given supplier?
A) trade associations
B) financial analysts
C) dealer organizations
D) business press
E) all of the above

Answer: Page: 702 Difficulty: easy

74. Lead users tend to accelerate diffusion of information through infrastructure, which is labeled as _____.
A) market pull
B) primary demand
C) market push
D) secondary demand
E) leading indicator

Answer: Page: 702 Difficulty: hard

75. Which of the following is a value representative of an innovative organization that seeks to change, views problems as opportunities, and rewards individual efforts?
A) Risk taking is discouraged.
B) Cooperation is more important than competition.
C) Change is negative and actively avoided.
D) Hard work comes first, leisure second.
E) Rank or status is more important than performance.

Answer: Page: 703 Difficulty: hard

76. Which of the following is the most important element of the communications mix in most industrial markets?
A) advertising
B) sales promotion
C) sales calls
D) public relations
E) pricing

Answer: Page: 705 Difficulty: moderate

77. For which type of industry are average costs per sales call the highest?
A) manufacturing
B) service
C) retail
D) wholesale distribution
E) nonprofit

Answer: Page: 705 Difficulty: hard

78. Which of the following is a reason for the significant role of salespeople in industrial markets?
A) Because it is the least expensive form of communication for the selling organization.
B) Business buyers prefer to do business with firms they know, like, and trust, and sales personnel are the most common representative of the selling organization.
C) Because advertising has been shown to not have any positive impact on awareness and sales.
D) Business buyers usually are not allowed to purchase without the assistance of a sales representative.
E) none of the above

Answer: Page: 705-706 Difficulty: hard

True/False Questions

79. Various factors beyond functional utility influence organizational decisions.

Answer: Page: 686 Difficulty: easy

80. Buying units (BU) are the individuals within an organization who participate in making a given purchase decision.

Answer: Page: 687 Difficulty: moderate

81. Individual power and expertise have virtually no influence on organizational decisions since it is a group process involving DMUs.

Answer: Page: 688 Difficulty: moderate

82. Decision-making units are likely to vary over the product life cycle.

Answer: Page: 689 Difficulty: moderate

83. Organizational purchase situations are known as straight rebuy, modified rebuy, and new task.

Answer: Page: 690 Difficulty: moderate

84. Limited rebuy is the approach used in an organizational buying situation when the purchase is moderately important to the firm or the choice is somewhat complex.

Answer: Page: 690 Difficulty: moderate

85. Site visits to potential vendors, laboratory tests of a new product, and investigation of possible product specifications are part of formal information search.

Answer: Page: 691 Difficulty: easy

86. A conjunctive decision rule is very common in the first stage of a two-stage decision process with respect to evaluation and search in an organizational buying situation.

Answer: Page: 692 Difficulty: moderate

87. Power, prestige, security, and similar noneconomic criteria have no role in business purchase decisions.

Answer: Page: 693 Difficulty: moderate

88. People from different functional areas of an organization in a DMU will always use the same evaluative criteria.

Answer: Page: 604 Difficulty: moderate

89. Payments, warranties, delivery dates, as so forth are examples of a purchase’s terms and conditions.

Answer: Page: 695 Difficulty: easy

90. Organizational culture is a concept that is similar to consumer self-concept and lifestyle.

Answer: Page: 698 Difficulty: moderate

91. Organizational objectives can be categorized as commercial, governmental, nonprofit, and cooperative.

Answer: Page: 699 Difficulty: moderate

92. In Japan and most of Europe, bribery and similar approaches for making sales are considered acceptable.

Answer: Page: 701 Difficulty: moderate

93. Early adopters are innovative organizations that derive a great deal of their success from leading change.

Answer: Page: 701-702 Difficulty: moderate

94. To process information, a firm must go through the same sequential stages of exposure, attention, and interpretation as consumers.

Answer: Page: 703 Difficulty: moderate

95. Emotion plays no role in organizational buying.

Answer: Page: 706 Difficulty: moderate

Essay Questions

96. Identify the internal and external influences on organizational buyer behavior.

Page: 688 Difficulty: easy
Answer:

97. Compare and contrast the organizational purchase situations of straight rebuy, modified rebuy, and new task with respect to situational and purchasing characteristics.

Page: 690 Difficulty: hard
Answer:

98. Harry is a sales representative for a provider of computer network systems. Part of his job entails that he understand the firmographics of companies he tries to sell his company’s products and services to. Explain the concept of firmographics, and discuss the different factors that make up a firm’s firmographics and implications for marketers.

Page: 698-701 Difficulty: moderate
Answer:

99. Name and describe the various reference groups that influence organizational behavior and purchasing decisions.

Page: 701-702 Difficulty: moderate
Answer:

100. List five of the eight common business values representative of an innovative organization that seeks change, views problems as opportunities, and rewards individual efforts.

Page: 703 Difficulty: hard
Answer:

Multiple Choice Questions

1. Which of the following is a conclusion reached regarding childhood obesity?
A) Food advertising has not been found to influence children’s food choices.
B) The FTC has determined that it is primarily marketers’ fault that childhood obesity has increased.
C) Over the decades that childhood obesity has increased, so too has the amount of advertising.
D) Marketers are doing nothing to curb this problem.
E) all of the above

Answer: Page: 717 Difficulty: moderate

2. Which of the following statements is FALSE regarding marketing practices?
A) Marketing practices are sometimes controversial.
B) Regulating marketing activities requires a higher level of understanding of consumer behavior than does managing marketing programs.
C) There are many issues where the appropriate ethical action for marketers is not clear-cut.
D) Society has declared that some marketing actions are clearly inappropriate.
E) There are laws and regulations that prohibit or require specific marketing actions.

Answer: Page: 718 Difficulty: moderate

3. The regulation of marketing activities aimed at children focuses primarily on which of the following?
A) product safety
B) advertising
C) promotion
D) privacy protection
E) all of the above

Answer: Page: 718 Difficulty: easy

4. One basis for the concern over marketing to children is based on _____.
A) attribution theory
B) Piaget’s stages of cognitive development
C) the multiattribute model of cognitive development
D) dissonance theory
E) mental development theory

Answer: Page: 719 Difficulty: moderate

5. According to Piaget’s stages of cognitive development, children lack the ability to fully process and understand information, including marketing messages, until around age _____.
A) 5
B) 8
C) 10
D) 12
E) 15

Answer: Page: 719 Difficulty: hard

6. What is the oldest age of a child that most regulation attempts to protect with respect to marketing practices?
A) 2
B) 5
C) 8
D) 10
E) 12

Answer: Page: 719 Difficulty: hard

7. Conor is 15 years old. Which of the following statements is true regarding him and other children his age?
A) He most likely still lacks the ability to fully process and understand information, including marketing messages.
B) Most marketing programs aimed at him deliberately attempt to exploit him.
C) He most likely has the ability to fully process and understand information, including marketing messages.
D) While he has the ability to process information, he does not yet have the ability to understand the information.
E) Most regulation regarding marketing to children includes him.

Answer: Page: 719 Difficulty: hard

8. Which of the following is the American advertising industry’s primary self-regulatory body?
A) Federal Trade Commission
B) National Advertising Division of the Council of Better Business Bureaus
C) Food and Drug Administration
D) Congress
E) media

Answer: Page: 719 Difficulty: moderate

9. Which of the following is a special unit of the National Advertising Division of the Council of Better Business Bureaus that specifically reviews advertising aimed at children?
A) Children’s Advertising Review Unit (CARU)
B) National Advertising Review Board (NARB)
C) National Children’s Advertising Division (NCAD)
D) National Children’s Advertising Review Board (NCARB)
E) Federal Trade Commission (FTC)

Answer: Page: 719 Difficulty: moderate

10. Margaret wants to complain about an advertisement targeting children that she saw on a program her children were watching. Which self-regulatory organization should she contact?
A) Children’s Advertising Review Unit (CARU)
B) National Advertising Review Board (NARB)
C) National Children’s Advertising Division (NCAD)
D) National Children’s Advertising Review Board (NCARB)
E) Federal Trade Commission (FTC)

Answer: Page: 719 Difficulty: moderate

11. How many of the CARU’s general guiding principles relate to a child’s ability to comprehend commercial messages?
A) 1
B) 2
C) 5
D) 6
E) all of them

Answer: Page: 719 Difficulty: moderate

12. Which of the following is NOT an information-processing related guideline of the CARU?
A) Care should be taken not to exploit a child’s imagination.
B) The performance and use of a product should be demonstrated in a way that can be duplicated by the child for whom the product is intended.
C) Representation of food products should be made so as to encourage sound use of the product with a view toward healthy development of the child and development of good nutritional practices.
D) Program personalities, live or animated, should not be used to sell products, premiums, or services in or adjacent to programs primarily directed to children in which the same personality or character appears.
E) If product advertising contains a premium message, care should be taken that the child’s attention is focused primarily on the product.

Answer: Page: 719, 722 Difficulty: hard

13. CARU and others are interested in the impact that the _____ of children’s advertising has, as well as the ability of children to process advertising messages.
A) content
B) quantity
C) quality
D) tone
E) all of the above

Answer: Page: 719 Difficulty: moderate

14. Piaget’s theory of cognitive development holds that _____.
A) children must be taught how to be consumers
B) marketing stimuli play a critical role in child socialization
C) intellectual capabilities can continue to expand throughout the lifecycle
D) intellectual capabilities continue to expand until late middle age
E) none of the above

Answer: Page: 719 Difficulty: moderate

15. When the FTC applied sanctions to Lewis Galoob Toys for portraying a doll dancing and a plane flying unassisted when actual assistance was required, this was related to _____.
A) CARU’s guidelines linked to possible processing deficits of children
B) CARU’s guidelines linked to concerns about the health/safety/value effects of commercial messages on children.
C) COPPA’s guidelines regarding processing deficits of children.
D) all of the above
E) none of the above

Answer: Page: 719-721 Difficulty: moderate

16. What is the concern regarding the limited ability of children to comprehend advertising messages?
A) Do children understand the selling intend of commercials?
B) Can children understand specific aspects of commercials?
C) Do children like commercials?
D) a and b
E) a, b, and c

Answer: Page: 720 Difficulty: moderate

17. Cathy was babysitter her two nieces on a Saturday morning, and they were watching cartoons together. She noticed that every time a commercial pod came on, there was a little jingle telling the kids that “after these messages, we’ll be right back.” This is an example of _____.
A) a discriminator
B) a warning
C) a separator
D) a primer
E) corrective advertising

Answer: Page: 720 Difficulty: moderate

18. “Part of a nutritious breakfast,” “Each sold separately,” and “Batteries not included” are examples of _____.
A) disclaimers
B) primers
C) warning labels
D) deception
E) corrective advertising

Answer: Page: 720 Difficulty: easy

19. Which of the following is a major area of concern regarding the large amount of time children devote to watching television?
A) The impact of commercial messages on children’s values.
B) The impact of commercial messages on children’s health and safety.
C) The impact of commercial messages on children’s education.
D) a and b
E) a, b, and c

Answer: Page: 721 Difficulty: moderate

20. How many of CARU’s basic principles focus on the concern regarding the impact of commercial messages on children’s values and their health and safety?
A) 1
B) 2
C) 3
D) 4
E) 5

Answer: Page: 721 Difficulty: hard

21. Which of the following CARU principle addresses the impact of commercial messages on children’s values and their health and safety?
A) Recognizing that advertising may play an important role in educating the child, advertisers should communicate information in a truthful and accurate manner and in language understandable to young children with full recognition that the child may learn practices from advertising which can affect his or her health and well-being.
B) Advertisers are urged to capitalize on the potential of advertising to influence behavior by developing advertising that, whenever possible, addresses itself to positive and beneficial social behavior.
C) Care should be taken to incorporate minority and other groups in advertisements in order to present positive and pro-social roles and role models wherever possible.
D) Products and content which are inappropriate for children should not be advertised or promoted directly to children.
E) all of the above

Answer: Page: 721 Difficulty: moderate

22. Which of the following statements regarding marketing and children’s health and safety is FALSE?
A) Ensuring that advertisements portray only safe uses of products is sometimes difficult, and it is a controversial area.
B) Even ads clearly not targeting children can have potentially harmful consequences.
C) In many instances, children and teenagers are exposed to advertising directed at adults.
D) Advertising of health-related products, particularly snack foods and cereals, is controversial.
E) Advertising sugared products such as presweetened breakfast cereals does increase their consumption.

Answer: Page: 722 Difficulty: hard

23. Lynette is concerned about her children’s health, and she is very bothered with the amount of advertising they see for sugared snack foods and breakfast cereals. Which major area of concern is Lynette concerned about regarding advertising to children?
A) the impact of commercial messages on children’s values
B) the impact of commercial messages on children’s health and safety
C) the impact of commercial messages on the economy
D) the impact of commercial messages on her children’s cognitive development
E) the impact of commercial messages on her budget

Answer: Page: 722 Difficulty: moderate

24. Hale noticed in a commercial that his children were watching that children riding bikes were shown not wearing a helmet. He always makes his children wear helmets while riding their bikes, but he’s concerned about other children seeing this ad and thinking it’s ok to not wear one. Which major area of concern is Hale concerned about regarding advertising to children?
A) the impact of commercial messages on children’s values
B) the impact of commercial messages on children’s health and safety
C) the impact of commercial messages on the economy
D) the impact of commercial messages on children’s cognitive development
E) the impact of commercial messages on family’s budgets

Answer: Page: 722 Difficulty: moderate

25. Advertising is frequently criticized for fostering which type of values in children?
A) overly materialistic
B) self-focused
C) short-term
D) a and b
E) a, b, and c

Answer: Page: 723 Difficulty: moderate

26. Estimates of the number of TV ads that children are exposed to per year range from _____.
A) 1,000 to 5,000
B) 8,500 to 15,000
C) 18,000 to 40,000
D) 48,000 to 60,000
E) 73,000 to 100,000

Answer: Page: 723 Difficulty: hard

27. CARU reviews thousands of ads every year and has _____ success rate in resolving issues related to children’s advertising.
A) a 10 percent
B) a 25 percent
C) a 50 percent
D) an 80 percent
E) over a 95 percent

Answer: Page: 723 Difficulty: hard

28. Which of the following is a marketing activity targeted at children that is considered controversial?
A) violent entertainment products
B) kids’ clubs
C) mobile marketing
D) commercialization in schools
E) all of the above

Answer: Page: 724-725 Difficulty: easy

29. Which of the following is referred to as the “Third Screen”?
A) television
B) computer
C) video games
D) cell phone
E) iPod

Answer: Page: 724 Difficulty: moderate

30. Ringtones, mobile games, and text-in contests are various types of promotional efforts regarding which controversial marketing activity aimed at children?
A) violent entertainment products
B) kids’ clubs
C) mobile marketing
D) commercialization of schools
E) Internet marketing

Answer: Page: 724 Difficulty: moderate

31. A soft drink manufacturer is running a promotion in which consumers text message from their cell phone a code that they can find under the bottle cap. Consumers entering can win various prizes. This is an example of which type of marketing activity aimed at children that is considered controversial?
A) violent entertainment products
B) kids’ clubs
C) mobile marketing
D) commercialization in schools
E) Internet marketing

Answer: Page: 724 Difficulty: moderate

32. If consumers call a specific number, they can access games on their cell phones. The games usually involve a branded product or an event, such as the release of a movie. This is an example of which type of marketing activity aimed at children that is considered controversial?
A) violent entertainment products
B) kids’ clubs
C) mobile marketing
D) commercialization in schools
E) Internet marketing

Answer: Page: 724 Difficulty: moderate

33. Scott participated in a promotion that allowed him to download a ringtone for his cell phone that played the Stars Wars theme song. This is an example of which type of marketing activity aimed at children that is considered controversial?
A) violent entertainment products
B) kids’ clubs
C) mobile marketing
D) commercialization in schools
E) Internet marketing

Answer: Page: 724 Difficulty: moderate

34. Which of the following is a classification of commercialization of schools?
A) in-school ads
B) ads in classrooms
C) corporate-sponsored educational materials and programs
D) corporate-sponsored contests and incentive programs
E) all of the above

Answer: Page: 725 Difficulty: easy

35. Which of the following is NOT a classification of commercialization of schools?
A) in-school ads
B) ads in classrooms
C) corporate-sponsored educational materials and programs
D) corporate-sponsored contests and incentive programs
E) mobile games

Answer: Page: 725 Difficulty: moderate

36. Ads in such places as school buses, scoreboards, bulletin boards, as well as coupons and free samples represent which of the following?
A) in-school ads
B) ads in classrooms
C) corporate-sponsored educational materials and programs
D) corporate-sponsored contests and incentive programs
E) mobile games

Answer: Page: 725 Difficulty: moderate

37. At Marci’s school, there are logos for McDonald’s, Coca-Cola, and Sprint around the football stadium’s scoreboard. She was also given pencils that had Gap written on them and a notebook with the Nike swoosh. These are examples of _____.
A) in-school ads
B) ads in classrooms
C) corporate-sponsored educational materials and programs
D) corporate-sponsored contests and incentive programs
E) mobile games

Answer: Page: 725 Difficulty: moderate

38. Channel One is an example of _____.
A) in-school ads
B) ads in classrooms
C) corporate-sponsored educational materials and programs
D) corporate-sponsored contests and incentive programs
E) mobile games

Answer: Page: 725 Difficulty: moderate

39. Corporate-sponsored educational materials and programs are also called _____.
A) propaganda programs (PPs)
B) biased educational materials (BEMs)
C) sponsored educational materials (SEMs)
D) commercial educational materials (CEMs)
E) marketing educational materials (MEMs)

Answer: Page: 725 Difficulty: moderate

40. Which of the following are teaching materials provided by corporations, usually for free, and come in various forms including posters, activity sheets, and multimedia teaching aids?
A) in-school ads
B) ads in classrooms
C) corporate-sponsored educational materials and programs
D) corporate-sponsored contests and incentive programs
E) mobile games

Answer: Page: 725 Difficulty: easy

41. Marilyn is a recent college graduate teaching junior high school science. She has several courses she has to prepare, so she was very pleased when Alcoa Corporation provided her with a teaching unit on recycling. This teaching unit is an example of _____.
A) in-school ads
B) ads in classrooms
C) corporate-sponsored educational materials and programs
D) corporate-sponsored contests and incentive programs
E) mobile games

Answer: Page: 725 Difficulty: easy

42. The fourth grade class at Westview elementary school won $10,000 for their school’s music program because they entered a contest sponsored by Oscar Mayer bologna in which they sang the famous jingle for that brand (i.e. “my bologna has a first name, it’s O-S-C-A-R….”) and won it for their state. This is an example of _____.
A) in-school ads
B) ads in classrooms
C) corporate-sponsored educational materials and programs
D) corporate-sponsored contests and incentive programs
E) mobile games

Answer: Page: 725 Difficulty: easy

43. What is a major concern that has emerged regarding Internet marketing and children?
A) invading children’s privacy
B) exploitation of children through manipulative sales techniques
C) inappropriate pop-up ads
D) a and b
E) a, b, and c

Answer: Page: 726 Difficulty: moderate

44. James is 12 years old and likes to play games on the Internet, and several of these games can be found on marketers’ Web sites that feature characters related to their brands. Some sites require that he gives information such as his name and address, and his mother is very concerned about this. Which major concern regarding Internet marketing and children does this highlight?
A) invading children’s privacy
B) exploitation of children through manipulative sales techniques
C) inappropriate pop-up ads
D) inappropriate site content
E) child pornography

Answer: Page: 726 Difficulty: moderate

45. Customized games which are placed on a company’s Web site and prominently feature or integrate the company’s brands and products as part of the game itself are known as _____.
A) brand games
B) adver-games
C) promo-games
D) interactive games
E) convergent games

Answer: Page: 726 Difficulty: moderate

46. Which of the following is NOT a guideline set forth by The Center for Media Education for the development of online commercial services?
A) Personal information should not be collected from children, nor should personal profiles of children be sold to third parties.
B) Advertising and promotions targeted at children should be clearly labeled and separated from content.
C) Children’s content areas should not be directly linked to advertising sites.
D) There should be no direct interaction between children and product spokespersons.
E) Care should be taken not to exploit a child’s imagination.

Answer: Page: 726 Difficulty: moderate

47. _____ relates to the collection and use of information from Web sites.
A) Online privacy
B) Online security
C) Online research
D) Online commerce
E) Online marketing

Answer: Page: 726 Difficulty: moderate

48. Which of the following is the result over concern regarding the invasion of children’s privacy?
A) Telephone Consumer Protection Act
B) Children’s Online Privacy Protection Act
C) Federal Do Not Call Registry
D) Children’s Internet Protection Act
E) Children’s Internet Act

Answer: Page: 727 Difficulty: moderate

49. Which of the following statements is true regarding the Children’s Online Privacy Protection Act (COPPA)?
A) It does not apply to nonprofits.
B) Information cannot be collected from children, used or disclosed unless the Web site operator has obtained verifiable parental consent through “exhaustive effort.”
C) The majority of children’s commercial Web sites still had not modified their data collection practices a year after the law became effective.
D) It authorizes CARU to develop specific rules to implement the provisions of the act.
E) all of the above

Answer: Page: 727 Difficulty: hard

50. What year did the rules based on the guidelines in the Children’s Online Privacy Protection Act go in to effect?
A) 1990
B) 1995
C) 1998
D) 2000
E) 2002

Answer: Page: 727 Difficulty: hard

51. Rita has noticed when she goes to children-oriented Web sites with her daughter, that there are clear and prominent links to privacy policies, and whenever an attempt to request information appeared, it required her consent. These things that Rita has noticed are the result of which law?
A) Telephone Consumer Protection Act
B) Children’s Online Privacy Protection Act
C) Federal Do Not Call Registry
D) Children’s Internet Protection Act
E) Children’s Internet Act

Answer: Page: 727 Difficulty: moderate

52. Regulation of marketing activities aimed at adults has focused on _____.
A) product features
B) marketing communications
C) pricing practices
D) a and b
E) a, b, and c

Answer: Page: 728 Difficulty: moderate

53. Why is concern about Internet privacy so strong?
A) because it’s illegal to gather information on consumers
B) because the government is using it to develop dossiers of consumers
C) because there are no codes of practice for marketers to follow
D) because data are often collected without the consumer explicitly providing it
E) because there is no remedy for consumers whose information has been collected

Answer: Page: 729 Difficulty: moderate

54. Which of the following is a requirement of the Better Business Bureau’s Code of Online Business Practices?
A) Parents have the right to be notified about data collection and use practices.
B) Parents of children under 13 have the right to access and review a description of the specific types of personal identifying information collects from the child.
C) Provide adequate security for the type of information collected, maintained, or transferred to third parties.
D) Requires that commercial Web sites that collect personal information from children under 13 obtain prior parental consent before they collect that information.
E) all of the above

Answer: Page: 729 Difficulty: hard

55. Don is developing a Web site for his business, and he wants to collect information from visitors to and purchasers from his Web site. He wants to abide by the Better Business Bureau’s Code of Online Business Practices. He should be doing all EXCEPT which of the following to be in compliance with this code?
A) Post and adhere to a privacy policy that is open, transparent, and meets generally accepted fair information principles.
B) Provide adequate security for the type of information collected, maintained, or transferred to third parties.
C) Respect customers’ preferences regarding unsolicited e-mail.
D) Allow consumers complete access to the information a Web site has collected about them.
E) all of the above are part of the BBB’s Code of Online Business Practices

Answer: Page: 729 Difficulty: hard

56. Which of the following is a major concern regarding the legal and ethical behavior with respect to marketing communications?
A) the tastefulness of the ad
B) the accuracy of the information provided
C) the media used to deliver the ad
D) the creativity of the ad
E) the effectiveness of the ad

Answer: Page: 729 Difficulty: moderate

57. What are the three major concerns regarding legal and ethical behavior with respect to marketing communications?
A) the accuracy of the information provided, the adequacy of the information provided, and the cumulative impact of marketing information on society’s values
B) the accuracy of the information provided, the tastefulness of the ad, and the creativity of the ad
C) the media used, the prevalence of advertising, and the tastefulness of the ad
D) the amount of information provided, the tastefulness of the ad, and the cumulative impact of marketing information on society’s values
E) the media used, the accuracy of the information provided, and the manner in which the information is provided

Answer: Page: 729 Difficulty: moderate

58. In May 2000, the FTC issued a report that concluded that _____.
A) self-regulation was providing adequate privacy regulation and recommended no further action
B) it is impossible to protect consumers’ privacy
C) self-regulation was not providing adequate privacy regulation and recommended national legislation
D) foreign-based companies were far more advanced in protecting consumers’ privacy than U.S.-based companies
E) U.S.-based companies were far more advanced in protecting consumers’ privacy than foreign-based companies

Answer: Page: 730 Difficulty: moderate

59. Which of the following is a recommendation for consumer-oriented Web sites that collect personal identifying information from or about consumers issued by the FTC in its May 2000 report on online privacy issued to Congress?
A) Notice–Web sites would be required to provide consumers clear and conspicuous notice of their information practices.
B) Choice–Web sites would be required to offer consumers choices as to how their personal identifying information is used beyond the use for which the information was provided.
C) Access–Web sites would be required to offer consumers reasonable access to the information a Web site has collected about them.
D) Security–Web sites would be required to take reasonable steps to protect the security of the information they collect from consumers.
E) all of the above

Answer: Page: 730 Difficulty: easy

60. Nat wants to comply with the FTC’s recommendations regarding consumer-oriented commercial Web sites that collect personal identifying information from or about consumers. Which of the following is NOT one of the recommendations made by the FTC in its 2000 report to Congress?
A) provide notice to consumers regarding the site’s information practices
B) allow consumers to choose how information concerning them will be used
C) require parental consent when collecting information from children under the age of 18
D) offer consumers reasonable access to the information a Web site has collected about them
E) take reasonable steps to protect the security of the information collected

Answer: Page: 730 Difficulty: moderate

61. What authority does the FTC possess that enables it to deal with online privacy regarding marketing practices aimed at adults?
A) Online Privacy Protection Act (OPPA)
B) ability to prohibit unfair or deceptive practices and unfairness authority
C) Internet Protection Act (IPA)
D) Electronic Media Consumer Protection Act (EMCPA)
E) Consumer Exclusion Act (CEA)

Answer: Page: 730 Difficulty: moderate

62. Critics of ads that emphasize beauty or sex appeal as major benefits feel that the harmful effects may be most severe for which consumers?
A) young men
B) young women
C) minorities
D) older men
E) older women

Answer: Page: 730-731 Difficulty: moderate

63. Which law protects the value of registered trademarks?
A) Federal Trademark Dilution Act
B) Lanham Act
C) Wheeler-Lea Amendment
D) Federal Trade Commission Act
E) Internet Protection Act

Answer: Page: 732 Difficulty: easy

64. Which of the following is the most difficult to regulate?
A) the explicit verbal content of ads
B) the subtle meanings implied by the visual content of ads
C) the adequacy of the information provided in ads
D) a Web site’s privacy policy with respect to children
E) the use of corrective advertising

Answer: Page: 733 Difficulty: moderate

65. Advertising run by a firm to cause consumers to unlearn inaccurate information they acquired as a result of the firm’s earlier advertising is called _____.
A) controvertible advertising
B) redundant advertising
C) conforming advertising
D) corrective advertising
E) retractive advertising

Answer: Page: 734 Difficulty: moderate

66. For years, Doan’s Pills advertised that this medication is superior for relieving back pain. The FTC found this claim to be deceptive and ordered Doan’s to run advertising that informed consumers of this deception in an attempt to cause consumers to unlearn the inaccurate information. What type of advertising is this known as?
A) controvertible advertising
B) redundant advertising
C) conforming advertising
D) corrective advertising
E) retractive advertising

Answer: Page: 734 Difficulty: moderate

67. Which of the following statements is FALSE regarding corrective advertising?
A) Firms injured by false claims of competitors can request it as a remedy from the FTC.
B) It has been shown to be a useful tool in protecting the public.
C) It is run by a firm to cause consumers to unlearn inaccurate information they acquired as a result of the firm’s earlier advertising.
D) A court ruling has challenged the conditions under which the FTC can require it.
E) The effectiveness of it has been debated.

Answer: Page: 734 Difficulty: hard

68. In several ads for Listerine over a period of more than a year, the company made statements that previous ads were not true in that Listerine cannot kill the germs that cause a cold. Which type of advertising does this illustrate?
A) controvertible advertising
B) redundant advertising
C) conforming advertising
D) corrective advertising
E) retractive advertising

Answer: Page: 734 Difficulty: moderate

69. Which of the following has the purpose of ensuring that consumers are provided with adequate information?
A) Telephone Consumer Protection Act
B) truth-in-lending legislation
C) FTC Corrective Advertising Act
D) Internet Protection Act
E) FTC’s unfairness authority

Answer: Page: 734 Difficulty: moderate

70. Which of the following consumers are least likely to be able to use the information provided by marketers?
A) men
B) women
C) those who are relatively disadvantaged in terms of education and income
D) baby boomers
E) professionals who are too busy to attend to the information

Answer: Page: 734-735 Difficulty: moderate

71. Which law deals with nutrition labeling on products’ packages?
A) Truth-in-Labeling Law
B) Nutritional Labeling and Education Act
C) Trans Fat Labeling Act
D) Fair Packaging and Labeling Act
E) U.S. Packaging and Labeling Law

Answer: Page: 735 Difficulty: moderate

72. A new rule that requires marketers to list the number of grams of trans fat on a product’s package is an amendment of which law?
A) Truth-in-Labeling Law
B) Nutritional Labeling and Education Act
C) Fat Labeling Act
D) Fair Packaging and Labeling Act
E) U.S. Packaging and Labeling Law

Answer: Page: 735 Difficulty: moderate

73. What are trans fats?
A) hydrogenated oils
B) fats found in animal fat
C) healthy fats
D) fats found in olive and other plant oils
E) synthetic fats

Answer: Page: 735 Difficulty: hard

74. Susan picked of a package of potato chips and noticed on the front of the package the words, “0 grams of trans fat.” She looked at the nutrition label and noticed that listed beneath the number of total grams of fat was the number of grams of trans fat, which was zero in this case. She has noticed that just this year, food packages with nutrition labels now contain this information. What year did this begin?
A) 1990
B) 1995
C) 2000
D) 2002
E) 2006

Answer: Page: 735 Difficulty: moderate

75. What is the health risk of trans fat that prompted to government to require that the number of grams of trans fat be provided in nutrition labels on packages?
A) it raises the level of LDL (bad) cholesterol
B) it lowers the level of HDL (good) cholesterol
C) it raises blood sugar levels
D) a and b
E) a, b, and c

Answer: Page: 735 Difficulty: hard

76. While government and businesses want consumers to have full disclosure, which of the following might result for consumers?
A) information overload
B) increased time to make a decision
C) inability to make a decision
D) all purchases become high-involvement situations
E) inferior choices will be made

Answer: Page: 736 Difficulty: moderate

77. Which of the following is a major issue consumer groups have concerning products?
A) Are they safe?
B) Are they environmentally sound?
C) Do they meet consumers’ needs?
D) a and b
E) a, b, and c

Answer: Page: 736 Difficulty: moderate

True/False Questions

78. Marketing practices are sometimes controversial.

Answer: Page: 718 Difficulty: easy

79. The regulation of marketing activities aimed at children focuses primarily on product safety, advertising and promotions, and child pornography.

Answer: Page: 718 Difficulty: moderate

80. CARU guidelines allow for the use of price minimizations such as “only $19.99.”

Answer: Page: 718 Difficulty: moderate

81. CARU guidelines which prohibit price minimizations such as “only $19.99” are related to concerns regarding advertising effects on health/safety/values.

Answer: Page: 718 Difficulty: moderate

82. Piaget’s stages of cognitive development indicate that children lack the ability to fully process and understand information, including marketing messages, until around 12 years of age.

Answer: Page: 719 Difficulty: moderate

83. The Children’s Advertising Review Unit (CARU) is part of the FTC’s regulation of marketing practices aimed at children.

Answer: Page: 719 Difficulty: moderate

84. Research indicates that disclaimers such as “Part of a nutritious breakfast” or “Each sold separately” are fully understood even by children as young as 3 years old.

Answer: Page: 720 Difficulty: moderate

85. Five of the basic principles that underlie the CARU’s guidelines for advertising directed at children focus on the concerns over the impact of commercial messages on children’s health and safety and on their values.

Answer: Page: 721 Difficulty: moderate

86. Even ads clearly not targeting children can have potentially harmful consequences for them.

Answer: Page: 722 Difficulty: easy

87. Advertising is frequently criticized as fostering overly materialistic, self-focused, and short-term values in children.

Answer: Page: 723 Difficulty: easy

88. Ads in such places as school buses, scoreboards, bulletin boards are classified by Consumers Union as in-school ads.

Answer: Page: 725 Difficulty: moderate

89. Concern over the invasion of children’s privacy prompted Congress to pass the Children’s Internet Protection Act in October 1998.

Answer: Page: 727 Difficulty: hard

90. Regulation of marketing activities aimed at adults focuses on marketing communications, product features, pricing practices, and consumer privacy protection.

Answer: Page: 728 Difficulty: hard

91. There are three major concerns focused on the information that marketers provide to consumers, generally in the form of advertisements–the accuracy of the information provided, the adequacy of the information provided, and the cumulative impact of marketing information on society’s values.

Answer: Page: 729 Difficulty: moderate

92. Determining the exact meaning of a marketing message is a simple process.

Answer: Page: 732 Difficulty: moderate

93. Gillette’s advertising for the M3 Power razor which claimed that “gentle micropulses stimulate hair up and away from skin,” was deemed to be literally false by the court hearing the case.

Answer: Page: 732 Difficulty: hard

94. Corrective advertising is advertising run by the government to cause consumers to unlearn inaccurate information they acquired as a result of a firm’s earlier advertising.

Answer: Page: 734 Difficulty: moderate

95. Perhaps the most controversial pricing area today is the use of reference prices.

Answer: Page: 738 Difficulty: moderate

Essay Questions

96. Discuss the concerns about the ability of children to comprehend commercial messages.

Page: 719-720 Difficulty: moderate
Answer:

97. You just graduated from college and started a new job at a consumer packaged goods manufacturer. You will be involved with marketing activities aimed at children. Briefly describe the controversial marketing activities aimed at children that you should be aware of.

Page: 724-725 Difficulty: moderate
Answer:

98. List the key provisions of the Children’s Online Privacy Protection Act (COPPA).

Page: 727 Difficulty: hard
Answer:

99. List the three broad requirements of the Better Business Bureau’s Code of Online Business Practices.

Page: 729 Difficulty: moderate
Answer:

100. What are the issues regarding pricing practices, and which federal agency regulates pricing activities?

Page: 738 Difficulty: moderate
Answer:

ACC 562 Final Exam – New

ACC 562 Final Exam – Strayer New

ACC 562 Week 11 Final Exam Solved

Click On The Link Below To Purchase
Instant Download

http://www.budapp.net/ACC-562-Final-Exam-Strayer-New-ACC562W11E.htm

 

1.Developing an understanding of the client’s business and industry is essential to proficiency as discussed in the general standards of GAAS. (Points: 4)
True
False

2. Ratio analysis only involves a year-to-year comparison of account balances. (Points: 4)
True
False

3. Control is considered to be part of corporate governance. (Points: 4)
True
False

4. When control risk is assessed at a maximum level, the auditor assumes that the internal controls are reliable in preventing or detecting material misstatements. (Points: 4)
True
False

5. Accounting subsystems are accounting cycles composed of one or more accounting applications. (Points: 4)
True
False

6. Presentation and disclosure assertions imply that all transactions and balances are properly presented, disclosures represent what actually happened, and the footnote disclosures are appropriate and adequate. (Points: 4)
True
False

7. Vouching recorded transactions involves taking a sample from the journal and tracing them back to the source documents to ensure they occurred. (Points: 4)
True
False

8. Audit documentation serves as support for the financial statements. (Points: 4)
True
False

9. In analysis of the results of audit sampling, an auditor may determine that the sample size must be increased. (Points: 4)
True
False

10. The revenue cycle considered by auditors includes the sales process but not collections. (Points: 4)
True
False

11. Inventory is complex and typically considered a high-risk area in audits of service firms. (Points: 4)
True
False

12. An auditor can utilize a cross-sectional analysis for a client operating in multiple locations to identify areas of further inventory testing. (Points: 4)
True
False

13. Legal expenses are reviewed by auditors for possible litigation and related FAS 5 treatment. (Points: 4)
True
False

14. An imprest payroll account will never reach a zero balance. (Points: 4)
True
False

15. A turnaround document is an effective completeness control because they list essential information for further processing of the collection on account. (Points: 4)
True
False

16. Auditors will perform an analysis of leases using SFAS 13 criteria and other EITF statements to substantiate the accounting treatment. (Points: 4)
True
False

17. Contingencies are considered by the auditor in relation to the SFAS No. 5 criteria to determine whether material contingencies exist with the client and, if so, that they are properly accrued or disclosed. (Points: 4)
True
False

18. An example of a Type II Subsequent Event includes the settlement two months after year-end of a liability for an amount well in excess of the amount that was accrued at year-end. (Points: 4)
True
False

19. A report on agreed-upon procedures issued by accountants provides the lowest form of attestation assurance. (Points: 4)
True
False

20. The need for assurance services arises for all of the following reasons EXCEPT: (Points: 4)
potential bias in providing information.
closeness between a user and the organization.
complexity of the processing systems.
remoteness between a user and the organization.

21. Which one of the following is not part of the attest process? (Points: 4)
evaluating evidence against objective criteria
gathering evidence about assertions
proving the accuracy of the books and records
communicating the conclusions reached

22. Users can reasonably expect audited financial statements to be (Points: 4)
complete and contain all important financial disclosures, be free from material misstatements and be presented fairly.
complete and contain all-important financial disclosures, be free from material misstatements and be presented fairly according to GAAP.
complete, be accurate and be presented fairly according to GAAP.
complete and contain all-important financial disclosures, be free from all misstatements and be presented fairly according to the substance of GAAP.

23. Which one of the following is not a provider of assurance services? (Points: 4)
CPAs
internal auditors
governmental auditors
AICPA

24. The primary governing board that performs quality reviews on registered CPA firms that audit public companies is the (Points: 4)
PCAOB
GAO
AICPA
FASB

25. Management of an organization has the responsibility for all of the following except: (Points: 4)
accounting principles used in financial reporting
engagement of a qualified auditor
internal control over financial reporting
financial statements and disclosures

26. The financial statement auditor must understand the client’s internal control as a component of the fieldwork standards. The one of the reason for this understanding is so that the auditor may (Points: 4)
provide individual comments on internal control non-compliance.
become comfortable that the client will pay its audit bills.
assess materiality.
assess the risk of possible misstatements in the financial statements.

27. For an auditor to be independent, he or she must be independent in (Points: 4)
fact.
appearance.
fact and appearance.
either fact or appearance.

28. An auditor is concerned with materiality for which of the following reasons? (Points: 4)
to assess internal control
to comply with the quality assurance standards of GAAS
to determine the effects of misstatements on the users of financial information
to cut down on audit procedures and testing

29. A proper system of corporate governance is one that demands (Points: 4)
decision making by auditors in place of management.
internal audit representation on the board of directors.
audit planning to obtain competent and sufficient audit evidence.
accountability back through the system to the shareholders.

30. In determining the types of activities, engagements and interactions an auditor should have with a client, the CPA and the audit firm must (select the best answer) (Points: 4)
follow the rules exactly as they are written.
assess all of their relationships with every client to ensure that independence is intact.
focus on client satisfaction above all other considerations
realize that ethics are only guidelines and a matter of personal judgment.

31. The AICPA Principles of Professional Conduct include (Points: 4)
due professional care and supervision.
scope and nature of services and adequate training.
integrity and independence
public interest, integrity and objectivity.

32. A public client is required to report material changes in internal control (Points: 4)
monthly.
quarterly.
annually.
never.

33. Programs written to accomplish specific processing tasks, such as computing payroll, are (Points: 4)
application programs.
operating system programs.
Java scripts.
access control programs.

34. The combination of which functions in an information technology environment are not necessarily a control weakness? (Points: 4)
user and programming functions
database administrator and data input functions
programmers and authorization of changes
users and certain data access

35. Backup controls, used to prevent data and software loss would include procedures to: (Points: 4)
load balance in the event of heavy traffic across the network.
constantly monitor the network for intrusion and attack.
provide an alternate form of electricity to the corporate facilities.
fail-over to a mirrored storage device in the event of interruption or loss.

36. Which one of the following is an example of an edit test for limits? (Points: 4)
Only numbers are allowed to be input into the social security number field and dashes are pre-formatted.
Each sales order is given an identifier that is also tagged to the receipt of goods record, the customer invoice record and the cash receipts record
The purchasing department may order materials up to $5,000 in total before a second electronic authorization is required.
Supplies may not be purchased from any vendor not authorized and existing in the vendor table.

37. The control totals used to ensure the completeness of processing in a batch processing environment include (Points: 4)
record count.
control totals.
hash totals.
all of the above.

38. The type of test used to check that no hourly employee is paid more than $400.00 in one week is: (Points: 4)
an edit test.
a batch control test.
an output control test.
none of the above.

39. Tagging and tracing might best be used to test which of the following? (Points: 4)
The number of confirmations returned compared to the number of confirmations sent out.
The corporate credit card is only being used for business transactions.
All customer orders shipped were also invoiced and that cash was received.
Quantities of product F411029 have been accurately counted in the warehouse.

40. Which one of the following would be the least persuasive type of evidence? (Points: 4)
Confirmations returned by bank directly to the auditor.
Letters of communication from the Securities Exchange Commission.
Physical examination of perpetual inventory.
General ledger in a newly developed information system.

41. The primary support of an audit is (are) (Points: 4)
the financial statements.
the audit working papers.
the audit report.
the confirmation documentation.

42. The primary assertion that is satisfied by physically observing the client’s count of inventory is (Points: 4)
existence.
rights.
valuation.
completeness.

43. The audit team asks the client to pull a sample vendor files and examines the invoices supporting the purchases of inventory items during the year. What is the most probable reason for the use of this evidence? (Points: 4)
Confirmation of vendors supplying inventory for existence.
Analytical procedures to determine completeness of inventory.
Testing for the valuation of inventory using the FIFO cost flow assumption.
Reading the terms of the arrangements with vendors for disclosure.

44. The extent of procedures is affected mostly by: (Points: 4)
the sheer volume of procedures to be applied by the auditor.
the time of year in which the client takes a physical inventory in the warehouse.
the auditor’s judgment that misstatements are probable in certain balances.
the availability of the client’s staff at or near the balance sheet date.

45. An audit program is created to specify: (Points: 4)
the type of audit opinion to be rendered based upon procedures performed.
the audit procedures that will be performed each year for the client.
how an auditor should think while performing audit procedures.
objectives and procedures to be followed during the audit process.

46. Which one of the following is primary reason for documenting audit work? (Points: 4)
to prevent litigation by other parties that question the audit performance.
to provide a stand-alone medium that gives audit conclusions and supports the opinion.
to supply a point of reference for all auditors performing the work subsequently.
to supply a point of reference for all auditors performing the work subsequently.

47. Which of the following would most likely be considered intentional misapplication of accounting principles on financial statements? (Points: 4)
A capital lease is presented as periodic rent expense rather than interest and depreciation.
A deferred tax asset is reduced to zero with a valuation allowance.
A stock option is expensed even though the fair value of the underlying stock on the date of grant was the same as the option’s exercise price.
Revenues for up-front fees are deferred rather than recognized immediately.

48. The audit of financial statements includes the initial approach of addressing fraud. How must an auditor address fraud in the planning stage? (Points: 4)
The auditor must test for fraud in the planning stage by sampling accounts.
The auditor must consider the likelihood of fraud existing in the company in the planning stage.
The auditor must realize that most people are honest and not automatically assume that fraud exists when planning the audit.
The auditor must not be aggressive in its initial approach to fraud as trust may be lost by the client.

49. Which of the following creates an opportunity for fraud to be committed in an organization? (Points: 4)
Management demands financial success.
Poor internal control.
Commitments tied to debt covenants.
Management is aggressive in its application of accounting rules.

50. Sam Jones, controller of Mitnikco, spends three days researching the accounting statements to find loopholes in the “rules” and to make a case for recognizing revenue earlier, rather than in later years. In the end, Sam and the other members of management determine that they will reduce the company’s deferred revenue accounts and begin accounting for all revenues as agreements are signed. What are the motivations of Mitnikco management based solely on the information above? (Points: 4)
Pressures
Opportunity
Rationalization
Skepticism

51. Sampling risk is the risk that (Points: 4)
the sample will not contain characteristics representative of the population such that inferences made about that population will be incorrect.
the population will not contain characteristics representative of the sample such that inferences made about that sample will be incorrect.
Neither A nor B is correct.
Both A and B are correct.

52. The sample size varies directly with (Points: 4)
the expected failure rate.
the tolerable error rate.
the allowable risk of assessing control risk too low.
the nonsampling risk

53. The steps used in sampling during substantive testing includes the determination of each of the following except (Points: 4)
the audit objective.
the method of selecting a sample.
expected misstatement conditions
control failure risk.

54. The design of a PPS sample requires the auditor to determine all of the following except (Points: 4)
detection risk.
inherent risk.
tolerable misstatement.
expected misstatement in the account balance.

55. Which of the following is the best example of the control objective in the revenue cycle that all transactions are recorded accurately? (Points: 4)
Sales are recorded at the invoice price expected to be collected from customers.
Sales orders have sequential numbering.
Recorded sales transactions are evidenced by valid invoices and shipping documents.
Credits to customer accounts are classified as liabilities.

56. In an audit of financial statements, the risk of the high rate of return of products sold includes that of (Points: 4)
sales that are recorded improperly.
an estimate of accrued returns that reduces net income.
a reduction of net sales for an increase to the sales returns and allowance account.
consignment goods that are returned and forwarded to third parties.

57. Confirmations that are sent to select customers asking them to review the current balance due the client as shown on the client’s statement and return the letters directly to the auditor indicating whether they agree with the indicated balance, are known as (Points: 4)
direct confirmations.
indirect confirmations.
positive confirmations.
negative confirmations.

58. Which of the following is an example of the type of analytics that an auditor would use for inventory? (Points: 4)
Number of day’s sales in receivables compared to industry averages.
Inventory turnover for the previous five years.
Number of obsolete units this period compared to last.
Salaries of marketing personnel as a percent of total inventory.

59. Which one of the following accounts would an auditor most likely test by performing analytical procedures? (Points: 4)
Sales commissions expense.
Legal expenses.
Repairs and maintenance expense.
Travel expense.

60. Operational audits of cash management seek to identify areas in which cash management may be improved to contribute to the overall profitability and effectiveness of the organization. The internal auditor would use which of the following procedures on an operational audit of cash? (Points: 4)
determine the compliance of treasury activities with company policy
review procedures for identifying and investing excess funds
review procedures for handling cash receipts
all of the above

61. Which represents the most significant risk associated with restructuring liabilities on the financial statements? (Points: 4)
Future smoothing of income by releasing the reserves.
Related party transactions that are not recorded at arms-length.
Understatement of assets in the period of recording the liabilities.
Payroll liabilities that are not disclosed in the notes.

62. All of the following are significant issues for consideration when auditing for the impairment of goodwill, except (Points: 4)
timing of the assessment by management.
amortization in years of the goodwill.
clear objective evidence supporting the assessment.
understanding the client’s business and its risks.

63. Simco’s shaving products division was acquired over ten years ago in a purchase transaction by BlizzardCraft. The related goodwill was amortized until 2002 and $4.5 million remained on the books thereafter. In 2008, Simco’s production machinery was assessed for impairment as a long-lived asset because of obsolescence issues. What relationship will the auditors most likely make between the facts stated above? (Points: 4)
BlizzardCraft erroneously treated the acquisition of Simco as a purchase transaction when it should have been a pooling of interests.
Simco should not have amortized goodwill previous to 2002.
Simco’s goodwill should have been written off when purchased by BlizzardCraft in a one-time transaction.
The goodwill related to Simco may have been impaired during 2008.

64. All of the following represent a related entity to an organization except (Points: 4)
the president’s son.
an affiliate with common ownership.
customers.
primary owners.

65. All of the following represent equity issuance requiring prominent accounting, presentation and disclosure treatment, except (Points: 4)
stock with beneficial conversion features.
Warrants issued to a consultant for services performed.
Preferred stock that is cumulative and par value is $0.50 per share.
Dividends have not been paid on common stock since inception.

66. The auditor will examine proceeds and trace them to recorded amounts of the par value of common stock to determine that (Points: 4)
shares exist and have valid stock certificates.
proceeds have been properly distributed between common stock and additional paid-in capital.
dividends have been issued in accordance with the stock indenture agreement as approved by the board.
shareholders actually have the rights to shares issued by the company in exchange for subscribed funds.

67. Which of the following is a tool that is best used by the audit team to determine if the client has included all disclosures? (Points: 4)
Management representation letter.
GAAS.
Inquiry of the CFO.
Checklists.

68. The auditor is responsible for evaluating the likelihood of a client continuing as a going concern for a reasonable period of time. A reasonable period of time is (Points: 4)
one year from the audit report date.
one year from the last day of field work.
one year from the balance sheet date.
two years from the balance sheet date.

69. Rock School, Inc. has a matter of material litigation that is threatened, but that has not gone to trial. The auditor’s consideration of such a matter will most likely include all of the following except (Points: 4)
sending a letter to the client’s attorneys for more information
discussions of the matter with the client and the client’s insurance adjuster.
confirmation with the harmed party regarding the amount that will be claimed.
assessment of proper accrual or disclosure by the client in accordance with SFAS No. 5.

70. When the financial statements contain a material departure from GAAP that the auditor believes is justified, justification (Points: 4)
should appear in a footnote.
should appear in a paragraph added before the scope paragraph.
should appear in the opening paragraph.
should appear in a paragraph added before the opinion paragraph.

ACC/557 Midterm Exam – New

ACC 557 Midterm Exam – Strayer New

Click On The Link Below To Purchase
Instant Download

http://budapp.net/ACC-557-Midterm-Exam-New-ACC557W5E.htm

 

Chapter 1 Through 8

CHAPTER 1

ACCOUNTING IN ACTION

CHAPTER LEARNING OBJECTIVES
1. Explain what accounting is.
2. Identify the users and uses of accounting.
3. Understand why ethics is a fundamental business concept.
4. Explain generally accepted accounting principles.
5. Explain the monetary unit assumption and the economic entity assumption.
6. State the accounting equation, and define its components
7. Analyze the effects of business transactions on the accounting equation.
8. Understand the four financial statements and how they are prepared.
a9. Explain the career opportunities in accounting.

TRUE-FALSE STATEMENTS
1. Owners of business firms are the only people who need accounting information.

2. Transactions that can be measured in dollars and cents are recorded in the financial information system.

3. The hiring of a new company president is an economic event recorded by the financial information system.

4. Management of a business enterprise is the major external user of information.

5. Accounting communicates financial information about a business enterprise to both internal and external users.

6. Accounting information is used only by external users with a financial interest in a business enterprise.

7. Financial statements are the major means of communicating accounting information to interested parties.

8. Bookkeeping and accounting are one and the same because the bookkeeping function includes the accounting process.

9. The origins of accounting are attributed to Luca Pacioli, a famous mathematician.

10. The study of accounting will be useful only if a student is interested in working for a profit-oriented business firm.

11. Private accountants are accountants who are not employees of business enterprises.

12. The study of accounting is not useful for a business career unless your career objective is to become an accountant.

13. A working knowledge of accounting is not relevant to a lawyer or an architect.

14. Expressing an opinion as to the fairness of the information presented in financial statements is a service performed by CPAs.

15. Accountants rely on a fundamental business concept—ethical behavior—in reporting financial information.

16. The primary accounting standard-setting body in the United States is the International Accounting Standards Board.

17. The Financial Accounting Standards Board is a part of the Securities and Exchange Commission.

18. The Securities and Exchange Commission oversees U.S. financial markets and accounting standard-setting bodies.

19. The cost and fair value of an asset are the same at the time of acquisition and in all subsequent periods.

20. Even though a partnership is not a separate legal entity, for accounting purposes the partnership affairs should be kept separate from the personal activities of the owners.

21. A partnership must have more than one owner.

22. The economic entity assumption requires that the activities of an entity be kept separate and distinct from the activities of its owner and all other economic entities.

23. The monetary unit assumption states that transactions that can be measured in terms of money should be recorded in the accounting records.

24. In order to possess future service potential, an asset must have physical substance.

25. Owners’ claims to total business assets take precedence over the claims of creditors because owners invest assets in the business and are liable for losses.

26. The basic accounting equation states that Assets = Liabilities.

27. Accountants record both internal and external transactions.

28. Internal transactions do not affect the basic accounting equation because they are economic events that occur entirely within one company.

29. The purchase of store equipment for cash reduces stockholders’ equity by an equal amount.

30. The purchase of office equipment on credit increases total assets and total liabilities.

31. The primary purpose of the statement of cash flows is to provide information about the cash receipts and cash payments of a company during a period.

32. Net income for the period is determined by subtracting total expenses and drawings from total revenues.

33. The income statement is sometimes referred to as the statement of operations.

34. A balance sheet reports the assets and liabilities of a company for a specific period of time.

35. The ending retained earnings balance is reported on both the retained earnings statement and the balance sheet.

36. Identifying is the process of keeping a chronological diary of events measured in dollars and cents.

37. Management consulting includes examining the financial statements of companies and expressing an opinion as to the fairness of their presentation.

38. Accountants do not have to worry about issues of ethics.

39. At the time an asset is acquired, cost and fair value should be the same.

40. The monetary unit assumption requires that all dollar amounts be rounded to the nearest dollar.

41. The basic accounting equation is in balance when the creditor and ownership claims against the business equal the assets.

42. External transactions involve economic events between the company and some other enterprise or party.

43. In the retained earnings statement, revenues are listed first, followed by expenses, and net income (or net loss).

MULTIPLE CHOICE QUESTIONS
44. Accountants refer to an economic event as a
a. purchase.
b. sale.
c. transaction.
d. change in ownership.

45. The process of recording transactions has become more efficient because
a. fewer events can be quantified in financial terms.
b. computers are used in processing business events.
c. more people have been hired to record business transactions.
d. business events are recorded only at the end of the year.

46. Communication of economic events is the part of the accounting process that involves
a. identifying economic events.
b. quantifying transactions into dollars and cents.
c. preparing accounting reports.
d. recording and classifying information.

47. Which of the following events cannot be quantified into dollars and cents and recorded as an accounting transaction?
a. The appointment of a new CPA firm to perform an audit.
b. The purchase of a new computer.
c. The sale of store equipment.
d. Payment of income taxes.

48. The use of computers in recording business events
a. has made the recording process more efficient.
b. does not use the same principles as manual accounting systems.
c. has greatly impacted the identification stage of the accounting process.
d. is economical only for large businesses.

49. The accounting process involves all of the following except
a. identifying economic transactions that are relevant to the business.
b. communicating financial information to users by preparing financial reports.
c. recording nonquantifiable economic events.
d. analyzing and interpreting financial reports.

50. The accounting process is correctly sequenced as
a. identification, communication, recording.
b. recording, communication, identification.
c. identification, recording, communication.
d. communication, recording, identification.

51. Which of the following techniques are not used by accountants to interpret and report financial information?
a. Graphs.
b. Special memos for each class of external users.
c. Charts.
d. Ratios.

52. Accounting consists of three basic activities which are related to economic events of an organization. These include
a. identifying, recording, and communicating
b. identifying, calculating, and responding
c. classifying, numbering, and reporting
d. issuing, reporting, and classifying

53. All of the following statements are correct except
a. Good decision-making depends on good information.
b. A vital element in communicating economic events is the accountant’s ability to analyze and interpret reported information.
c. The origins of accounting are generally attributed to Socrates, a classical Greek philosopher, who promoted accounting as a social contract.
d. The information that a user of financial information needs depends upon the kinds of decisions the user makes.

54. Which of the following would not be considered an internal user of accounting data for the GHI Company?
a. President of the company.
b. Production manager.
c. Merchandise inventory clerk.
d. President of the employees’ labor union.

55. Which of the following would not be considered an external user of accounting data for the GHI Company?
a. Internal Revenue Service Agent.
b. Management.
c. Creditors.
d. Customers.

56. Which of the following would not be considered internal users of accounting data for a company?
a. The president of a company.
b. The controller of a company.
c. Creditors of a company.
d. Salesmen of the company.

57. Which of the following is an external user of accounting information?
a. Labor unions.
b. Finance directors.
c. Company officers.
d. Managers.

58. Which one of the following is not an external user of accounting information?
a. Regulatory agencies.
b. Customers.
c. Investors.
d. All of these are external users.

59. Bookkeeping differs from accounting in that bookkeeping primarily involves which part of the accounting process?
a. Identification.
b. Communication.
c. Recording.
d. Analysis.

60. The origins of accounting are generally attributed to the work of
a. Christopher Columbus.
b. Abner Doubleday.
c. Luca Pacioli.
d. Leonardo da Vinci.

61. Financial accounting provides economic and financial information for all of the following except
a. creditors.
b. investors.
c. managers.
d. other external users.

62. The final step in solving an ethical dilemma is to
a. identify and analyze the principal elements in the situation.
b. recognize an ethical situation.
c. identify the alternatives and weigh the impact of each alternative on stakeholders.
d. recognize the ethical issues involved.

63. The first step in solving an ethical dilemma is to
a. identify and analyze the principal elements in the situation.
b. identify the alternatives.
c. recognize an ethical situation and the ethical issues involved.
d. weigh the impact of each alternative on various stakeholders.

64. Ethics are the standards of conduct by which one’s actions are judged as
a. right or wrong.
b. honest or dishonest.
c. fair or unfair.
d. All of these answers are correct.

65. All of the following are steps in analyzing ethics cases in financial reporting except
a. identify and analyze the principle elements in the situation.
b. contact law enforcement regarding any violations of corporate ethics codes
c. identify the alternatives and weigh the impact of each alternative on various stakeholders.
d. recognize an ethical situation and the ethical issues involved.

66. In order to increase comparability, in recent years, the FASB and IASB have made efforts to reduce the differences between U.S.GAAP and IFRS through a process known as
a. convergence
b. monetary unit assumption
c. the cost principle
d. the fair value principle

67. Martin Corporation purchased land in 2007 for $290,000. In 2015, it purchased a nearly identical parcel of land for $460,000. In its 2015 balance sheet, Martin valued these two parcels of land at a combined value of $920,000. By reporting the land in this manner, Martin Corp. has violated the
a. historical cost principle
b. convergence
c. economic entity assumption
d. monetary unit assumption

68. Andre Dickinson, owner of Andre’s Fine Wines, also owns a personal residence that costs $475,000. The market value of his residence is $625,000. During preparation of the financial statements for Andre’s Fine Wines, the accounting concept most relevant to the presentation of Andre’s home is
a. the economic entity assumption.
b. the fair value principle.
c. the monetary unit assumption.
d. convergence.

69. Generally accepted accounting principles are
a. income tax regulations of the Internal Revenue Service.
b. standards that indicate how to report economic events.
c. theories that are based on physical laws of the universe.
d. principles that have been proven correct by academic researchers.

70. The historical cost principle requires that when assets are acquired, they be recorded at
a. appraisal value.
b. cost.
c. market price.
d. book value.

71. The cost of an asset and its fair value are
a. never the same.
b. the same when the asset is sold.
c. irrelevant when the asset is used by the business in its operations.
d. the same on the date of acquisition.

72. The body of theory underlying accounting is not based on
a. physical laws of nature.
b. concepts.
c. principles.
d. definitions.

73. The private sector organization involved in developing accounting principles is the
a. Feasible Accounting Standards Body.
b. Financial Accounting Studies Board.
c. Financial Accounting Standards Board.
d. Financial Auditors’ Standards Body.

74. The SEC and FASB are two organizations that are primarily responsible for establishing generally accepted accounting principles. It is true that
a. they are both governmental agencies.
b. the SEC is a private organization of accountants.
c. the SEC often mandates guidelines when no accounting principles exist.
d. the SEC and FASB rarely cooperate in developing accounting standards.

75. GAAP stands for
a. Generally Accepted Auditing Procedures.
b. Generally Accepted Accounting Principles.
c. Generally Accepted Auditing Principles.
d. Generally Accepted Accounting Procedures.

76. Financial information that is capable of making a difference in a decision is
a. faithfully representative.
b. relevant.
c. convergent.
d. generally accepted.

77. The Duce Company has five plants nationwide that cost a total of $100 million. The current fair value of the plants is $500 million. The plants will be recorded and reported as assets at
a. $100 million.
b. $600 million.
c. $400 million.
d. $500 million.

78. The fair value principle is applied for
a. all assets.
b. current assets.
c. buildings.
d. investment securities.

79. The proprietorship form of business organization
a. must have at least three owners in most states.
b. represents the largest number of businesses in the United States.
c. combines the records of the business with the personal records of the owner.
d. is characterized by a legal distinction between the business as an economic unit and the owner.

80. The economic entity assumption requires that the activities
a. of different entities can be combined if all the entities are corporations.
b. must be reported to the Securities and Exchange Commission.
c. of a sole proprietorship cannot be distinguished from the personal economic events of its owners.
d. of an entity be kept separate from the activities of its owner.

81. A business organized as a corporation
a. is not a separate legal entity in most states.
b. requires that stockholders be personally liable for the debts of the business.
c. is owned by its stockholders.
d. terminates when one of its original stockholders dies.

82. The partnership form of business organization
a. is a separate legal entity.
b. is a common form of organization for service-type businesses.
c. enjoys an unlimited life.
d. has limited liability.

83. Which of the following is not an advantage of the corporate form of business organization?
a. Limited liability of stockholders
b. Transferability of ownership
c. Unlimited personal liability for stockholders
d. Unlimited life

84. A small neighborhood barber shop that is operated by its owner would likely be organized as a
a. joint venture.
b. partnership.
c. corporation.
d. proprietorship.

85. John and Sam met at law school and decide to start a small law practice after graduation. They agree to split revenues and expenses evenly. The most common form of business organization for a business such as this would be a
a. joint venture.
b. partnership.
c. corporation.
d. proprietorship.

86. Which of the following is true regarding the corporate form of business organization?
a. Corporations are the most prevalent form of business organization.
b. Corporate businesses are generally smaller in size than partnerships and proprietor-ships.
c. The revenues of corporations are greater than the combined revenues of partnerships and proprietorships.
d. Corporations are separate legal entities organized exclusively under federal law.

87. A basic assumption of accounting that requires activities of an entity be kept separate from the activities of its owner is referred to as the
a. stand alone concept.
b. monetary unit assumption.
c. corporate form of ownership.
d. economic entity assumption.

88. Ted Leo is the proprietor (owner) of Ted’s, a retailer of golf apparel. When recording the financial transactions of Ted’s, Ted does not record an entry for a car he purchased for personal use. Ted took out a personal loan to pay for the car. What accounting concept guides Ted’s behavior in this situation?
a. Pay back concept
b. Economic entity assumption
c. Cash basis concept
d. Monetary unit assumption

89. A basic assumption of accounting assumes that the dollar is
a. unrelated to business transactions.
b. a poor measure of economic activities.
c. the common unit of measure for all business transactions.
d. useless in measuring an economic event.

90. The assumption that the unit of measure remains sufficiently constant over time is part of the
a. economic entity assumption.
b. cost principle.
c. historical cost principle.
d. monetary unit assumption.

91. Owners enjoy limited liability in a
a. proprietorship.
b. partnership.
c. corporation.
d. sole proprietorship.

92. A problem with the monetary unit assumption is that
a. the dollar has not been stable over time.
b. the dollar has been stable over time.
c. the dollar is a common medium of exchange.
d. it is impossible to account for international transactions.

93. The common characteristic possessed by all assets is
a. long life.
b. great monetary value.
c. tangible nature.
d. future economic benefit.

94. Owner’s equity is best depicted by the following:
a. Assets = Liabilities.
b. Liabilities + Assets.
c. Residual equity + Assets.
d. Assets – Liabilities.

95. The basic accounting equation may be expressed as
a. Assets = Equities.
b. Assets – Liabilities = Stockholders’ Equity.
c. Assets = Liabilities + Stockholders’ Equity.
d. All of these answers are correct.

96. Liabilities
a. are future economic benefits.
b. are existing debts and obligations.
c. possess service potential.
d. are things of value used by the business in its operation.

97. Liabilities of a company would not include
a. notes payable.
b. accounts payable.
c. salaries and wages payable.
d. cash.

98. Liabilities of a company are owed to
a. debtors.
b. benefactors.
c. creditors.
d. underwriters.

99. Stockholders’ equity can be described as
a. creditorship claim on total assets.
b. ownership claim on total assets.
c. benefactor’s claim on total assets.
d. debtor claim on total assets.

100. Stockholders’ equity is often referred to as
a. residual equity.
b. leftovers.
c. spoils.
d. second equity.

101. When assets are distributed to the owners of a corporation, these distributions are termed
a. depletions.
b. consumptions.
c. dividends.
d. a credit line.

102. A dividend is
a. a distribution of the company’s earnings to its stockholders.
b. equal to liabilities minus stockholders’ equity.
c. equal to assets minus stockholders’ equity.
d. equal to revenues less expenses

103. Revenues would not result from
a. sale of merchandise.
b. issuance of common stock.
c. performance of services.
d. rental of property.

104. Sources of increases to stockholder’s equity are
a. additional investments by owners.
b. purchases of merchandise.
c. dividends.
d. expenses.

105. The basic accounting equation cannot be restated as
a. Assets – Liabilities = Stockholders’ Equity.
b. Assets – Stockholders’ Equity = Liabilities.
c. Stockholders’ Equity + Liabilities = Assets.
d. Assets + Liabilities = Stockholders’ Equity.

106. Stockholders’ equity is decreased by all of the following except
a. sales of stock.
b. net losses.
c. expenses.
d. dividends.

107. A net loss will result during a time period when
a. liabilities exceed assets.
b. dividends exceed investments.
c. expenses exceed revenues.
d. revenues exceed expenses.

108. If total liabilities increased by $30,000 and stockholders’ equity increased by $20,000 during a period of time, then total assets must change by what amount and direction during that same period?
a. $50,000 decrease
b. $10,000 decrease
c. $10,000 increase
d. $50,000 increase

109. If total liabilities decreased by $30,000 and stockholders’ equity increased by $20,000 during a period of time, then total assets must change by what amount and direction during that same period?
a. $50,000 decrease
b. $10,000 decrease
c. $10,000 increase
d. $50,000 increase

110. If total liabilities decreased by $50,000 and stockholders’ equity increased by $30,000 during a period of time, then total assets must change by what amount and direction during that same period?
a. $80,000 decrease
b. $20,000 decrease
c. $20,000 increase
d. $80,000 increase

111. If total liabilities decreased by $30,000 and stockholders’ equity decreased by $20,000 during a period of time, then total assets must change by what amount and direction during that same period?
a. $50,000 decrease
b. $10,000 decrease
c. $10,000 increase
d. $50,000 increase

112. If total liabilities increased by $25,000 during a period of time and stockholders’ equity decreased by $9,000 during the same period, then the amount and direction (increase or decrease) of the period’s change in total assets is a(n)
a. $34,000 decrease.
b. $16,000 decrease.
c. $16,000 increase.
d. $34,000 increase.

113. If total assets equal $345,000 and total stockholders’ equity equal $140,000, then total liabilities must equal
a. $485,000.
b. $205,000.
c. $140,000.
d. There is not enough information given to determine this.

114. Which of the following will not cause a change in the stockholders’ equity of a business?
a. An increase in prepaid expenses.
b. An increase in retained earnings.
c. The sale of common stock.
d. The declaration and payment of dividends.

115. The amount of stockholders’ equity in a business is not affected by
a. The percentage of total assets held in cash.
b. Assets consumed in the process of earning revenues.
c. The profitability of the business.
d. The amount of dividends declared and paid to stockholders.

116. If the transaction causes an asset account to decrease, which of the following related effects may occur?
a. An increase of equal amount in the common stock account.
b. An increase in a liability account.
c. An increase of equal amount in another asset account.
d. An increase in the combined total of liabilities and stockholders’ equity.

117. The accounting equation for Quattro Enterprises is as follows:
Assets Liabilities Stockholders’ Equity
$120,000 = $60,000 + $60,000
If Quattro purchases office equipment on account for $25,000, the accounting equation will change to
Assets Liabilties Stockholders’ Equity
a. $120,000 = $60,000 + $60,000
b. $145,000 = $60,000 + $85,000
c. $145,000 = $72,500 + $72,500
d. $145,000 = $85,000 + $60,000

118. As of June 30, 2015, Actual Tigers Company has assets of $100,000 and stockholders’ equity of $40,000. What are the liabilities for Actual Tigers Company as of June 30, 2015?
a. $40,000
b. $60,000
c. $100,000
d. $140,000

119. Stockholders’ equity is increased by
a. dividends.
b. revenues.
c. expenses.
d. liabilities.

120. Stockholders’ equity is decreased by
a. assets.
b. revenues.
c. expenses.
d. liabilities.

121. If total liabilities increased by $8,000, then
a. assets must have decreased by $8,000.
b. stockholders’ equity must have increased by $8,000.
c. assets must have increased by $8,000, or stockholders’ equity must have decreased by $8,000.
d. assets and stockholders’ equity each increased by $4,000.

122. Collection of a $1,000 Accounts Receivable
a. increases an asset $1,000; decreases an asset $1,000.
b. increases an asset $1,000; decreases a liability $1,000.
c. decreases a liability $1,000; increases stockholders’ equity $1,000.
d. decreases an asset $1,000; decreases a liability $1,000.

123. Revenues are
a. the cost of assets consumed during the period.
b. gross increases in stockholders’ equity resulting from business activities.
c. the cost of services used during the period.
d. actual or expected cash outflows.

124. If an individual asset is increased, then
a. there must be an equal decrease in a specific liability.
b. there must be an equal decrease in stockholders’ equity.
c. there must be an equal decrease in another asset.
d. All of these answers are possible.

125. If services are rendered for credit, then
a. assets will decrease.
b. liabilities will increase.
c. stockholders’ equity will increase.
d. liabilities will decrease.

126. If expenses are paid in cash, then
a. assets will increase.
b. liabilities will decrease.
c. stockholders’ equity will increase.
d. assets will decrease.

127. If a corporation distributes cash to its stockholders, then
a. there has been a violation of accounting principles.
b. stockholders’ equity will increase.
c. stockholders’ equity will decrease.
d. there will be a new liability showing the stockholders owes money to the business.

128. If supplies that have been purchased are used in the course of business, then
a. a liability will increase.
b. an asset will increase.
c. stockholders’ equity will decrease.
d. stockholders’ equity will increase.

129. As of December 31, 2015, Calexico Company has assets of $42,000 and stockholders’ equity of $20,000. What are the liabilities for Calexico Company as of December 31, 2015?
a. $22,000.
b. $20,000.
c. $42,000.
d. $62,000.

130. Which of the following events is not a business transaction?
a. Issuance of stock in exchange for cash.
b. Hired employees.
c. Incurred utility expenses for the month.
d. Earned revenue for services provided.

131. Net income results when
a. Assets > Liabilities.
b. Revenues = Expenses.
c. Revenues > Expenses.
d. Revenues < Expenses.

132. Retained earnings at the end of the period is equal to
a. retained earnings at the beginning of the period plus net income minus liabilities.
b. retained earnings at the beginning of the period plus net income minus dividends.
c. net income.
d. assets plus liabilities.

133. A balance sheet shows
a. revenues, liabilities, and stockholders’ equity.
b. expenses, dividends, and stockholders’ equity.
c. revenues, expenses, and dividends.
d. assets, liabilities, and stockholders’ equity.

134. An income statement
a. summarizes the changes in retained earnings for a specific period of time.
b. reports the changes in assets, liabilities, and stockholders’ equity over a period of time.
c. reports the assets, liabilities, and stockholders’ equity at a specific date.
d. presents the revenues and expenses for a specific period of time.

135. If the retained earnings account increases from the beginning of the year to the end of the year, then
a. net income is less than dividends.
b. a net loss is less than dividends.
c. the company must have sold stock.
d. net income is greater than dividends.

136. Mofro’s Computer Repair Shop started the year with total assets of $300,000 and total liabilities of $200,000. During the year, the business recorded $500,000 in computer repair revenues, $300,000 in expenses, and Mofro paid dividends of $50,000. Stockholders’ equity at the end of the year was
a. $200,000.
b. $100,000.
c. $250,000.
d. $300,000.

137. Mofro’s Computer Repair Shop started the year with total assets of $300,000 and total liabilities of $200,000. During the year, the business recorded $500,000 in computer repair revenues, $300,000 in expenses, and Mofro paid dividends of $50,000. The net income reported by Mofro’s Computer Repair Shop for the year was
a. $100,000.
b. $150,000.
c. $200,000.
d. $250,000.

138. Mofro’s Computer Repair Shop started the year with total assets of $300,000 and total liabilities of $200,000. During the year, the business recorded $500,000 in computer repair revenues, $300,000 in expenses, and Mofro paid dividends of $50,000. Mofro’s stockholders’ equity changed by what amount from the beginning of the year to the end of the year?
a. $100,000.
b. $150,000.
c. $200,000.
d. $250,000.

139. The balance sheet is frequently referred to as
a. an operating statement.
b. the statement of financial position.
c. the statement of cash flows.
d. the statement of retained earnings.

140. The primary purpose of the statement of cash flows is to report
a. a company’s investing transactions.
b. a company’s financing transactions.
c. information about cash receipts and cash payments of a company.
d. the net increase or decrease in cash.

141. All of the financial statements are for a period of time except the
a. income statement.
b. retained earnings statement.
c. balance sheet.
d. statement of cash flows.

142. The ending retained earnings amount is shown on
a. the balance sheet only.
b. the retained earnings statement only.
c. both the income statement and the retained earnings statement.
d. both the balance sheet and the retained earnings statement.

143. Black Keys Company began the year with stockholders’ equity of $280,000. During the year, the company recorded revenues of $375,000, expenses of $285,000, and paid dividends of $30,000. What was Black Keys’ stockholders’ equity at the end of the year?
a. $280,000.
b. $340,000.
c. $370,000.
d. $400,000.

144. Kennedy Company issued stock to Ed Kennedy in exchange for his investment of $75,000 cash in the business. The company recorded revenues of $555,000, expenses of $420,000, and had paid dividends of $30,000. What was Kennedy’s net income for the year?
a. $105,000.
b. $135,000.
c. $165,000.
d. $180,000.

145. Centro-matic Company began the year with stockholders’ equity of $30,000. During the year, Centro-matic issued additional shares of stock in exchange for cash of $42,000, recorded expenses of $120,000, and paid dividends of $8,000. If Centro-matic’s ending stockholders’ equity was $112,000, what was the company’s revenue for the year?
a. $160,000.
b. $168,000.
c. $202,000.
d. $210,000.

146. Barsuk Company began the year with stockholders’ equity of $108,000. During the year, Barsuk issued stock for $147,000, recorded expenses of $420,000, and paid dividends of $28,000. If Barsuk’s ending stockholders’ equity was $290,000, what was the company’s revenue for the year?
a. $455,000.
b. $483,000.
c. $602,000.
d. $630,000.

147. Fat Possum’s Service Shop started the year with total assets of $330,000 and total liabilities of $240,000. During the year, the business recorded $630,000 in revenues, $420,000 in expenses, and paid dividends of $60,000.
Stockholders’ equity at the end of the year was
a. $90,000.
b. $240,000.
c. $300,000.
d. $360,000.

148. Fat Possum’s Service Shop started the year with total assets of $330,000 and total liabilities of $2400,000. During the year, the business recorded $630,000 in revenues, $420,000 in expenses, and paid dividends of $60,000.
The net income reported by Fat Possum’s Service Shop for the year was
a. $150,000.
b. $210,000.
c. $240,000.
d. $270,000.

149. Misra Company compiled the following financial information as of December 31, 2015:
Revenues $340,000
Retained earnings (1/1/15) 60,000
Equipment 80,000
Expenses 250,000
Cash 90,000
Dividends 20,000
Supplies 10,000
Accounts payable 40,000
Accounts receivable 70,000
Common stock 80,000

Misra’s assets on December 31, 2015 are
a. $180,000.
b. $250,000.
c. $360,000.
d $490,000.

150. Misra Company compiled the following financial information as of December 31, 2015:
Revenues $340,000
Retained earnings (1/1/15) 60,000
Equipment 80,000
Expenses 250,000
Cash 90,000
Dividends 20,000
Supplies 10,000
Accounts payable 40,000
Accounts receivable 70,000
Common stock 80,000

Misra’s stockholders’ equity on December 31, 2015 is
a. $90,000.
b. $140,000.
c. $210,000.
d. $250,000.

151. Teamboo Company’s stockholders’ equity at the beginning of August 2015 was $750,000. During the month, the company earned net income of $175,000 and paid dividends of $75,000. At the end of August 2015, what is the amount of stockholders’ equity?
a. $675,000
b. $750,000
c. $825,000
d. $850,000

152. On January 1, 2015, Cat Power Company reported stockholders’ equity of $705,000. During the year, the company paid dividends of $30,000. At December 31, 2015, the amount of stockholders’ equity was $825,000. What amount of net income or net loss would the company report for 2015?
a. Net loss of $30,000
b. Net income of $90,000
c. Net income of $120,000
d. Net income of $150,000

153. Stahl Consulting started the year with total assets of $60,000 and total liabilities of $15,000. During the year, the business recorded $48,000 in catering revenues and $30,000 in expenses. Stahl issued stock of $9,000 and paid dividends of $15,000 during the year. The stockholders’ equity at the end of the year was
a. $33,000.
b. $54,000.
c. $57,000.
d. $63,000.

154. Stahl Consulting started the year with total assets of $60,000 and total liabilities of $15,000. During the year, the business recorded $48,000 in catering revenues and $30,000 in expenses. Stahl issued stock of $9,000 and paid dividends of $15,000 during the year. The net income reported by Stahl Consulting for the year was:
a. $3,000.
b. $12,000.
c. $18,000.
d. $27,000.

155. Stahl Consulting started the year with total assets of $60,000 and total liabilities of $15,000. During the year, the business recorded $48,000 in catering revenues and $30,000 in expenses. Stahl issued stock of $9,000 and paid dividends of $15,000 during the year. Stockholders’ equity changed by what amount from the beginning of the year to the end of the year?
a. $3,000.
b. $9,000.
c. $12,000.
d. $45,000.

156. During the year 2015, Dilego Company earned revenues of $90,000, had expenses of $56,000, purchased assets with a cost of $10,000 and paid dividends of $6,000. Net income for the year is
a. $18,000.
b. $24,000.
c. $28,000.
d. $34,000.

157. At October 1, Arcade Fire Enterprises reported stockholders’ equity of $70,000. During October, no stock was issued and the company earned net income of $18,000. If stockholders’ equity at October 31 totals $78,000, what amount of dividends were paid during the month?
a. $0
b. $8,000
c. $10,000
d. $26,000

158. At October 1, Arcade Fire Enterprises reported stockholders’ equity of $72,000. During October, no stock was issued and the company posted a net loss of $8,000. If stockholders’ equity at October 31 totals $64,000, what amount of dividends were paid during the month?
a. $0
b. $4,000
c. $8,000
d. $16,000

159. At October 1, Arcade Fire Enterprises reported stockholders’ equity of $70,000. During October, common stock of $4,000 was issued and the company earned net income of $14,000. If stockholders’ equity at October 31 totals $80,000, what amount of dividends were paid during the month?
a. $0
b. $4,000
c. $8,000
d. $10,000

160. At October 1, Arcade Fire Enterprises reported stockholders’ equity of $70,000. During October, common stock of $10,000 was issued and the company posted a net loss of $4,000. If stockholders’ equity at October 31 totals $70,000, what amount of dividends were paid during the month?
a. $0
b. $4,000
c. $6,000
d. $10,000

a161. All of the following are services offered by public accountants except
a. budgeting.
b. auditing.
c. tax planning.
d. consulting.

a162. Which list below best describes the major services performed by public accountants?
a. Bookkeeping, mergers, budgets.
b. Employee training, auditing, bookkeeping.
c. Auditing, taxation, management consulting.
d. Cost accounting, production scheduling, recruiting.

a163. Preparing tax returns and engaging in tax planning is performed by
a. public accountants only.
b. private accountants only.
c. both public and private accountants.
d. IRS accountants only.

a164. A private accountant can perform many activities in a business organization but would not work in
a. budgeting.
b. accounting information systems.
c. external auditing.
d. tax accounting.

165. Which of the following is not part of the accounting process?
a. Recording
b. Identifying
c. Financial decision making
d. Communicating

166. The first part of the accounting process is
a. communicating.
b. identifying.
c. processing.
d. recording.

167. Keeping a systematic, chronological diary of events that are measured in dollars and cents is called
a. communicating.
b. identifying.
c. processing.
d. recording.

168. Auditing is
a. the examination of financial statements by a CPA in order to express an opinion on their fairness.
b. a part of accounting that involves only recording of economic events.
c. an area of accounting that involves such activities as cost accounting, budgeting, and accounting information systems.
d. conducted by the Securities and Exchange Commission to ensure that registered financial statements are presented fairly.

169. Internal users of accounting information include all of the following except
a. company officers.
b. investors.
c. marketing managers.
d. production supervisors.

170. The organization(s) primarily responsible for establishing generally accepted accounting principles is(are) the
FASB SEC
a. no no
b. yes no
c. no yes
d. yes yes

171. The primary accounting standard-setting body in the United States is the
a. Financial Accounting Standards Board.
b. International Accounting Standards Board.
c. Internal Revenue Service.
d. Securities and Exchange Commission.

172. A proprietorship is a business
a. owned by one person.
b. owned by two or more persons.
c. organized as a separate legal entity under state corporation law.
d. owned by a governmental agency.

173. A net loss will result during a time period when
a. assets exceed liabilities.
b. assets exceed stockholders’ equity.
c. expenses exceed revenues.
d. revenues exceed expenses.

174. Bright Eyes Downtown Diner received a bill of $600 from the Jronand Wine Advertising Agency. The owner, A. A. Bondy, is postponing payment of the bill until a later date. The effect on specific items in the basic accounting equation is
a. a decrease in Cash and an increase in Accounts Payable.
b. a decrease in Cash and an increase in Retained Earnings.
c. an increase in Accounts Payable and a decrease in Retained Earnings.
d. a decrease in Accounts Payable and an increase in Retained Earnings.

175. Matador Company purchases $1,300 of equipment from Danger Mouse Inc. for cash. The effect on the components of the basic accounting equation of Matador Company is
a. an increase in assets and liabilities.
b. a decrease in assets and liabilities.
c. no change in total assets.
d. an increase in assets and a decrease in liabilities.

176. Druganaut Company buys a $21,000 van on credit. The transaction will affect the
a. income statement only.
b. balance sheet only.
c. income statement and retained earnings statement only.
d. income statement, retained earnings statement, and balance sheet.

177. The financial statement that summarizes the financial position of a company is the
a. income statement.
b. balance sheet.
c. operating statement.
d. retained earnings statement.

178. Which of the following is not a reason one set of international accounting standards are needed?
a. multinational corporations.
b. mergers and acquisitions.
c. information technology.
d. all of these answer choices are correct.

179. Which of the following is not a reason one set of international accounting standards are needed?
a. multinational corporations.
b. financial markets.
c. information technology.
d. all of the above are reasons one set of international accounting standards are needed.

180. International standards are referred to as
a. IFRS.
b. GAAP.
c. IASB.
d. FASB.

181. U.S. standards are referred to as
a. IFRS.
b. GAAP.
c. IASB.
d. FASB.

182. International standards are developed by the
a. IFRS.
b. GAAP.
c. IASB.
d. FASB.

183. U.S. standards are developed by the
a. IFRS.
b. GAAP.
c. IASB.
d. FASB.

184. The United States and the international standard-setting environment are primarily driven by meeting the needs of
a. investors and creditors.
b. tax authorities.
c. central government planners.
d. academic researchers.

185. The internal control standards applicable to Sarbanes-Oxley apply to
a. all U.S. and international companies.
b. U.S. and international companies listed on U.S. exchanges.
c. International companies listed on U.S. exchanges.
d. U.S. companies listed on U.S. exchanges.

186. The concern about international companies adopting SOX-type standards centers on
a. cost-benefit analysis.
b. ethics issues.
c. the governing authorities.
d. comparability.

187. Financial accounting ethics violations are
a. not a problem in the U.S. or internationally.
b. much more common in the U.S. than internationally.
c. much more common internationally than in the U.S.
d. a major problem both in the U.S. and internationally.

188. IFRS, compared to GAAP, tends to be more
a. detailed.
b. rules-based.
c. principles-based.
d. full of disclosure requirements.

189. GAAP, compared to IFRS, tends to be more
a. simple in accounting requirements.
b. rules-based.
c. principles-based.
d. simple in disclosure requirements.

190. Proprietorships, partnerships, and corporations
a. are the three most common forms of business organizations in the U.S.
b. are the three most common forms of business organizations internationally.
c. are used in different proportions in different countries.
d. all of these answers are correct.

191. The conceptual framework that underlies IFRS
a. is very similar to that used to develop GAAP.
b. does not define assets or liabilities.
c. does not define equity.
d. does not define income or expenses.

BRIEF EXERCISES

BE 192
Match the following external users of financial accounting information with the type of decision that user will make with the information.

a. Creditor
b. Investor
c. Regulatory Agency
d Internal Revenue Service

_______ (1) Is the company operating within prescribed guidelines?

_______ (2) Is the company complying with tax laws?

_______ (3) Is the company able to pay its debts?

_______ (4) Is the company a good investment?

BE 193
Match the following terms and definitions.

a. Accounts receivable c. Accounts payable
b. Creditor d. Note payable

_______ (1) Amounts due from customers
_______ (2) Amounts owed to suppliers for goods and services purchased
_______ (3) Amounts owed to bank
_______ (4) Party to whom money is owed

BE 194
Indicate which of these items is an asset (A), liability (L) or stockholders’ equity (SE) account.
_______ (1) Supplies
_______ (2) Dividends
_______ (3) Buildings
_______ (4) Notes Payable
_______ (5) Salaries and Wages Payable

BE 195
Use the accounting equation to answer the following questions.
1. Picaresque Sails Co. has total assets of $140,000 and total liabilities of $45,000. What is stockholders’ equity?
2. The Natenal Fun Center has total assets of $225,000 and stockholders’ equity of $100,000. What are total liabilities?
3. Okkervil River Restaurant has total liabilities of $50,000 and stockholders’ equity of $100,000. What are total assets?

BE 196
Determine the missing items.

Assets = Liabilities + Stockholders’ Equity
$85,000 $52,000 (a)
(b) $28,000 $34,000
$84,000 (c) $50,000

BE 197
Classify each of these items as an asset (A), liability (L), or stockholders’ equity (SE).

_____ 1. Accounts receivable
_____ 2. Accounts payable
_____ 3. Common stock
_____ 4. Supplies
_____ 5. Utilities expense
_____ 6. Cash
_____ 7. Notes payable
_____ 8. Equipment

BE 198
Identify the impact on the accounting equation of each of the following transactions.
1. Purchase office supplies on account.
2. Paid secretary weekly salary.
3. Purchased office furniture for cash.
4. Received monthly utility bill to be paid at later time.

BE 199
Balance sheet amounts as of December 31, 2015 for Matt Pond’s Tutoring Service are listed below. Prepare a balance sheet in good form.
Accounts Payable $ 400
Accounts Receivable 1,000
Cash 300
Common Stock ?

BE 200
Identify whether the following items would be reported on the income statement (IS) or balance sheet (BS).
1. Cash
2. Service Revenue
3. Notes Payable
4. Interest Expense
5. Accounts Receivable

BE 201
Use the following information to calculate for the year ended December 31, 2015 (a) net income, (b) ending retained earnings, and (c) total assets.

Supplies $ 3,000 Revenues $25,000
Operating expenses 12,000 Cash 15,000
Accounts payable 9,000 Dividends 1,000
Accounts receivable 3,000 Notes payable 1,000
Beginning retained earnings 5,000 Equipment 6,000

BE 202
Listed below in alphabetical order are the balance sheet items of Madjack Company at December 31, 2015. Prepare a balance sheet and include a complete heading.
Accounts payable $ 21,000
Accounts receivable 15,000
Buildings 91,000
Cash 6,000
Common stock 108,000
Equipment 17,000

EXERCISES
Ex. 203
Below is a list of important abbreviations widely used in business. For each abbreviation give the full designation.

1. CPA

2. IRS

3. FBI

4. FASB

5. GAAP

6. SEC

Ex. 204
Determine the missing amount for each of the following. Assets = Liabilities + Stockholders’ Equity
1. (a) $55,000 $95,000 2. $125,000 (b) $85,000 3. $160,000 $65,000 (c)

Ex. 205
For the items listed below, fill in the appropriate code letter to indicate whether the item is an asset, liability, or stockholders’ equity item.
Code
Asset A
Liability L
Stockholders’ Equity SE

1. Rent Expense 6. Cash

2. Equipment 7. Accounts Receivable

3. Accounts Payable 8. Dividends

4. Common Stock 9. Service Revenue

5. Insurance Expense 10. Notes Payable

Ex. 206
At the beginning of the year, Shaolin Company had total assets of $520,000 and total liabilities of $210,000. Answer the following questions viewing each situation as being independent of the others.
(1) If total assets increased $200,000 during the year, and total liabilities decreased $75,000, what is the amount of stockholders’ equity at the end of the year?
(2) During the year, total liabilities increased $230,000 and stockholders’ equity decreased $90,000. What is the amount of total assets at the end of the year?
(3) If total assets decreased $40,000 and stockholders’ equity increased $130,000 during the year, what is the amount of total liabilities at the end of the year?

Ex. 207
Magnolia Electric Car Cleaning has the following accounts:
Equipment Notes Payable
Accounts Payable Common Stock
Cash Dividends
Supplies
Accounts Receivable

Identify which items are (1) Assets
(2) Liabilities
(3) Stockholders Equity

Ex. 208
On June 1, 2015, Secretly Canadian Company prepared a balance sheet that shows the following:
Assets (no cash) $100,000
Liabilities 45,000
Stockholders’ Equity 55,000

Ex. 208 (cont.)
Shortly thereafter, all of the assets were sold for cash. How would the balance sheet appear immediately after the sale of the assets for cash for each of the following cases?

Cash Received for Balances Immediately After Sale
the Assets Assets – Liabilities = Stockholders’ Equity
Cash A $110,000 $________ $________ $________

Cash B 100,000 ________ ________ ________

Cash C 90,000 ________ ________ ________

Ex. 209
At the beginning of 2015, Hold Steady Company had total assets of $520,000 and total liabilities of $250,000. Answer each of the following questions.
1. If total assets increased $60,000 and stockholders’ equity decreased $90,000 during the year, determine the amount of total liabilities at the end of the year.
2. During the year, total liabilities decreased $75,000 and stockholders’ equity increased $50,000. Compute the amount of total assets at the end of the year.
3. If total assets decreased $100,000 and total liabilities increased $55,000 during the year, determine the amount of stockholders’ equity at the end of the year.

Ex. 210
Compute the missing amount in each category of the accounting equation.
Assets Liabilities Stockholders’ Equity
(a) $319,000 $ ? $143,000
(b) $223,000 $ 79,000 $ ?
(c) $ ? $233,000 $325,000

Ex. 211
From the following list of selected accounts taken from the records of Ward Homeopathic Center, identify those that would appear on the balance sheet.
a. Common Stock f. Accounts Payable
b. Service Revenue g. Cash
c. Land h. Rent Expense
d. Salaries and Wages Expense i. Supplies
e. Notes Payable j. Utilities Expense

Ex. 212
Selected transactions for Mountain Goats Tree Service are listed below.
1. Sold common stock for cash to start business.
2. Paid for monthly advertising.
3. Purchased supplies on account.
4. Billed customers for services performed.
5. Paid cash dividends.
6. Received cash from customers billed in (4).
7. Incurred utilities expense on account.
8. Purchased additional supplies for cash.
9. Received cash from customers when service was performed.

Instructions
List the numbers of the above transactions and describe the effect of each transaction on assets,
liabilities, and stockholders’ equity. For example, the first answer is: (1) Increase in assets and increase in stockholders’ equity.

Ex. 213
Wilco Legal Eagles Company entered into the following transactions during
March 2015.
1. Purchased office equipment for $23,000 from Business Equipment, Inc. on account.
2. Paid $3,000 cash for March rent on office furniture.
3. Received $15,000 cash from customers for legal work billed in February.
4. Provided legal services to Amy Construction Company for $3,500 cash.
5. Paid Northern States Power Co. $2,700 cash for electric usage in March.
6. Stockholders’ invested an additional $32,000 in the business.
7. Paid Business Equipment, Inc. for the office equipment purchased in (1) above.
8. Incurred advertising expense for March of $1,900 on account.

Instructions
Indicate with the appropriate letter whether each of the transactions above results in:
(a) an increase in assets and a decrease in assets.
(b) an increase in assets and an increase in stockholders’ equity.
(c) an increase in assets and an increase in liabilities.
(d) a decrease in assets and a decrease in stockholders’ equity.
(e) a decrease in assets and a decrease in liabilities.
(f) an increase in liabilities and a decrease in stockholders’ equity.
(g) an increase in stockholders’ equity and a decrease in liabilities.

Ex. 214
Two items are omitted from each of the following summaries of balance sheet and income
statement data for two proprietorships for the year 2015, Holly Enterprises and Cat Stevens.

Holly Enterprises Cat Stevens
Beginning of year:
Total assets $ 98,000 $129,000
Total liabilities 60,000 (c)
Total stockholders’ equity (a) 85,000
End of year:
Total assets 160,000 180,000
Total liabilities 100,000 50,000
Total stockholders’ equity 60,000 130,000
Changes during year in stockholders’ equity:
Additional investment (b) 25,000
Dividends 25,000 (d)
Total revenues 215,000 100,000
Total expenses 185,000 65,000

Instructions
Determine the missing amounts.

Ex. 215
An analysis of the transactions made by White Stripes & Co., a law firm, for the month of July is shown below. Each increase and decrease in stockholders’ equity is explained.

Assets = Liab + Stockholders’ Equity
Retained Earnings
Cash + Accounts Receivable + Supplies + Equipment = Accounts Payable + Com Stock + Rev. -Exp -Div.
1. +$15,000 +$15,000
2. – 2,000 +$5,000 +$3,000
3. – 750 +$750
4. + 2,500 +$6,600 +$9,100 Rev.
5. – 1,500 – 1,500
6. – 2,500 -$2,500 Div.
7. – 750 -$750 Rent.
8. + 550 -550
9. – 3,500 -$4,500 Sal.
10. + 500 + 500 -500 Util.

Instructions
(a) Determine how much stockholders’ equity increased for the month.
(b) Compute the amount of net income for the month.

Ex. 216
The Constantine Company had the following assets and liabilities on the dates indicated.
December 31 Total Assets Total Liabilities
2014 $480,000 $250,000
2015 $460,000 $220,000
2016 $590,000 $300,000
Constantine began business on January 1, 2014, with an investment of $100,000.

Instructions
From an analysis of the change in stockholders’ equity during the year, compute the net income (or loss) for:
(a) 2014, assuming Constantine’s dividends were $45,000 for the year.
(b) 2015, assuming Constantine made an additional investment of $50,000 and paid no dividends in 2015.
(c) 2016, assuming Constantine made an additional investment of $15,000 and paid dividends of $40,000 in 2016.

Ex. 217
For each of the following, indicate whether the transaction affects revenue (R), expense (E), dividends (D), common stock (CS), or no effect on stockholders’ equity (NOE).
1. Made an investment to start the business.
2. Billed customers for services performed.
3. Purchased equipment on account.
4. Paid monthly rent.
5. Paid dividends.

Ex. 218
Presented below is a balance sheet for Jim Henson Yard Service at December 31, 2015.
JIM HENSON YARD SERVICE
Balance Sheet
December 31, 2015

Assets Liabilities and Stockholders’ Equity
Cash $13,000 Liabilities
Accounts receivable 6,000 Accounts payable $ 8,000
Supplies 9,000 Notes payable 15,000
Equipment 11,000 Stockholders’ equity
Common stock 16,000
Total assets $39,000 Total liabilities & stockholders’ equity $39,000

The following additional data are available for the year which began on January 1: All expenses (excluding supplies expense) total $6,000. Supplies on January 1, were $11,000 and $7,000 of supplies were purchased during the year. Net income for the year was $8,000 and dividends paid were $9,000.

Instructions
Determine the following: (Show all computations.)
1. Supplies used during the year.
2. Total expenses for the year.
3. Service revenues for the year.
4. Stockholders’ equity on January 1.

Ex. 219
Analyze the transactions of a business organized as a corporation described below and indicate their effect on the basic accounting equation. Use a plus sign (+) to indicate an increase and a minus sign (–) to indicate a decrease.

Assets = Liabilities + Stockholders’ Equity

1. Received cash for services provided.
2. Purchased office equipment on credit.
3. Paid employees’ salaries.
4. Received cash from customer in payment
on account.
5. Paid telephone bill for the month.
6. Paid for office equipment purchased in
transaction 2.
7. Purchased office supplies on credit.
8. Paid dividends.
9. Obtained a loan from the bank.
10. Billed customers for services rendered.

Ex. 220
For each of the following, indicate whether the transaction increased (+), decreased (-), or had no effect (NE) on assets, liabilities, and stockholders’ equity using the following format.
Assets = Liabilities + Stockholders’ Equity
1. Issued stock in exchange for cash. 2. Billed customers for services performed. 3. Purchased equipment on account. 4. Paid dividends.
5. Paid for equipment purchased in 3. above.

Ex. 221
Neko Case decides to open a cleaning and laundry service near the local college campus that will operate as a corporation. Analyze the following transactions for the month of June in terms of their effect on the basic accounting equation. Record each transaction by increasing (+) or decreasing (–) the dollar amount of each item affected. Indicate the new balance of each item after a transaction is recorded. It is not necessary to identify the cause of changes in stockholders’ equity.

Transactions
(1) Issued stock in exchange for $20,000 cash on June 1.
(2) Purchased equipment for $5,000 paying $3,000 in cash and the remainder due in 30 days.
(3) Purchased supplies for $1,200 cash.
(4) Received a bill from College News for $300 for advertising in the campus newspaper.
(5) Cash receipts from customers for cleaning and laundry amounted to $2,400.
(6) Paid salaries of $600 to student workers.
(7) Billed the Lion Soccer Team $450 for cleaning and laundry services.
(8) Paid $300 to College News for advertising that was previously billed in Transaction 4.
(9) Paid dividends of $1,200.
(10) Incurred utility expenses for month on account, $500.

Trans- Accounts Accounts Common Retained
action Cash + Receivable + Supplies + Equipment = Payable + Stock + Earnings
(1)
——————————————————————————————————————————
Balance
(2)
——————————————————————————————————————————
Balance
(3)
——————————————————————————————————————————
Balance
(4)
——————————————————————————————————————————
Balance
(5)
——————————————————————————————————————————
Balance
(6)
——————————————————————————————————————————
Balance
(7)
——————————————————————————————————————————
Balance
(8)
——————————————————————————————————————————

Ex. 221 (cont.)
Balance
(9)
——————————————————————————————————————————
Balance
(10)
——————————————————————————————————————————
Totals

Ex. 222
For each of the following, describe a transaction that will have the stated effect on the elements of the accounting equation.
(a) Increase one asset and decrease another asset.
(b) Increase an asset and increase a liability.
(c) Decrease an asset and decrease a liability.
(d) Increase an asset and increase stockholders’ equity.
(e) Increase one asset, decrease one asset, and increase a liability.

Ex. 223
The following transactions represent part of the activities of Bloc Party Company for the first month of its existence. Indicate the effect of each transaction upon the total assets of the business by one of the following phrases: increased total assets, decreased total assets, or no change in total assets.
(a) Issued stock in exchange for cash.
(b) Purchased a computer for cash.
(c) Purchased office equipment with money borrowed from the bank.
(d) Paid the first month’s utility bill.
(e) Collected an accounts receivable.
(f) Paid dividends.

Ex. 224
Selected transactions for Parton Company are listed below. List the number of the transaction and then describe the effect of each transaction on assets, liabilities, and stockholders’ equity.
Sample: Issued common stock in exchange for cash investment.
The answer would be—Increase in assets and increase in stockholders’ equity.
1. Paid monthly utility bill.
2. Purchased new display case for cash.
3. Paid cash for repair work on security system.
4. Billed customers for services performed.
5. Received cash from customers billed in 4.
6. Paid dividends.
7. Incurred advertising expenses on account.
8. Paid monthly rent.
9. Received cash from customers when service was rendered.

Ex. 225
A service company shows five transactions summarized below. The effect of each transaction on the accounting equation is shown, and also the new balance of each item in the equation. For each transaction (a) to (e) write an explanation of the nature of the transaction.
Accounts Equip- Accounts Stockholders’
Cash + Rec. + ment + Land + Building = Payable + Equity
——————————————————————————————————————————
$5,000 $6,500 $10,000 $7,500 $50,000 $3,000 $76,000
a) –2,000 –2,000
3,000 6,500 10,000 7,500 50,000 1,000 76,000
b) +1,000 – 1,000
4,000 5,500 10,000 7,500 50,000 1,000 76,000
Ex. 225 (cont.)
c) + 5,000 +5,000
4,000 5,500 15,000 7,500 50,000 6,000 76,000
d) +2,500 + 2,500
6,500 5,500 15,000 7,500 50,000 6,000 78,500
e) +3,000 + 3,000
$6,500 $8,500 $15,000 $7,500 $50,000 $6,000 $81,500

Ex. 226
There are ten transactions listed below. Match the transactions that have the identical effect on the accounting equation. You should end up with 5 matches.

a. Receive cash from customers on account.
b. Issued stock in exchange for cash.
c. Pay cash to reduce an accounts payable.
d. Purchase supplies for cash.
e. Pay cash to reduce a notes payable.
f. Purchase supplies on account.
g. Additional investment by a stockholder.
h. Purchase equipment with a note payable.
i. Pay utilities with cash.
j. Pay dividends.

Ex. 227
An analysis of the transactions made by Cookie Mountain Legal, a law firm, for the month of July is shown below. Each increase and decrease in stockholders’ equity is explained.

Assets = Liab + Stockholders’ Equity
Retained Earnings
Cash + Accounts Receivable + Supplies + Equipment = Accounts Payable + Com Stock + Rev. -Exp -Div.
1. +$15,000 +$15,000
2. – 2,000 +$5,000 +$3,000
3. – 750 +$750
4. + 2,500 +$6,600 +$9,100 Rev.
5. – 1,500 – 1,500
6. – 2,500 -$2,500 Div.
7. – 750 -$750 Rent.
8. + 550 -550
9. – 4,500 -$4,500 Sal.
10. + 500 -500 Util.

Instructions
(a) Prepare an income statement for the month ending July 31, 2015.
(b) Prepare a retained earnings statement for the month ending July 31, 2015.

Ex. 228
An analysis of the transactions made by Cookie Mountain Legal, a law firm, for the month of July is shown below. Each increase and decrease in retained earnings is explained.

Assets = Liab + Stockholders’ Equity
Retained Earnings
Cash + Accounts Receivable + Supplies + Equipment = Accounts Payable + Com Stock + Rev. -Exp -Div.
1. +$15,000 +$15,000
2. – 2,000 +$5,000 +$3,000
3. – 750 +$750
4. + 2,500 +$6,600 +$9,100 Rev.
5. – 1,500 – 1,500
6. – 2,500 -$2,500 Div.
7. – 750 -$750 Rent.
8. + 550 -550
9. – 4,500 -$4,500 Sal.
10. + 500 -500 Util.

Instructions
Prepare a balance sheet at July 31, 2015.

Ex. 229

The following information relates to Bonnie Billy Co. for the year 2015.

Retained earnings, January 1, 2015 $ 67,000 Advertising expense $6,500
Dividends 6,000 Rent expense 9,500
Service revenue 65,500 Utilities expense 1,400
Salaries and wages expense 29,000

Instructions
After analyzing the data, prepare an income statement and a retained earnings statement for the year ending December 31, 2015

Ex. 230

Van Occupanther is the bookkeeper for Roscoe Company. Van has been trying to get the balance sheet of Roscoe Company to balance. Roscoe’s balance sheet is as follows.

ROSCOE COMPANY
Balance Sheet
December 31, 2015

Assets Liabilities
Cash $9,400 Accounts payable $25,000
Supplies 7,100 Accounts receivable (19,500)
Equipment 45,000 Common stock 40,000
Dividends 9,200 Retained earnings 25,200
Total assets $70,700 Total liabilities and
stockholders’ equity $70,700

Instructions
Prepare a correct balance sheet.

Ex. 231
Presented below is information related to Anthony Scalici Company.

Retained earnings, January 1, 2015 $ 21,000
Service revenue—2015 320,000
Total expenses—2015 213,000
Assets, January 1, 2015 85,000
Liabilities, January 1, 2015 64,000
Assets, December 31, 2015 165,000
Liabilities, December 31, 2015 90,000
Dividends—2015 ?

Instructions
Prepare the 2015 retained earnings statement for Anthony Scalici Company.

Ex. 232
Prepare an income statement, a retained earnings statement, and a balance sheet for the accupuncture practice of Golda Bear, from the items listed below for the month of September, 2015.

Retained earnings, September 1 $17,000
Common stock 30,000
Accounts payable 7,000
Equipment 35,000
Service revenue 28,000
Dividends 6,000
Supplies expense 4,500
Cash 3,000
Utilities expense 700
Supplies 4,800
Salaries and wages expense 9,000
Accounts receivable 14,000
Rent expense 5,000
GOLDA BEAR, ACCUPUNCTURIST
Income Statement
For the Month Ended September 30, 2015
——————————————————————————————————————————
Revenues $

Expenses $ $

Total expenses $

Net income $

GOLDA BEAR, ACCUPUNCTURIST
Retained Earnings Statement
For the Month Ended September 30, 2015
——————————————————————————————————————————
Retained Earnings, September 1 $
Add:

$

Less:

$

Ex. 232 (cont.)
GOLDA BEAR, ACCUPUNCTURIST
Balance Sheet
September 30, 2015
——————————————————————————————————————————
Assets
$

Total assets
$

Liabilities and Stockholder’ Equity

Liabilities
$

Stockholders’ Equity $

Total liabilities and stockholders’ equity $

Ex. 233
Indicate whether the following items would appear on the balance sheet (BS), income statement (IS), or retained earnings statement (RE).
1. Advertising expense 2. Accounts receivable 3. Dividends 4. Rent revenue 5. Salaries and wages payable 6. Supplies

Ex. 234
Listed below in alphabetical order are the balance sheet items of Rock Plaza Company at December 31, 2015. Prepare a balance sheet and include a complete heading.
Accounts Payable $ 24,000
Accounts Receivable 15,000
Buildings 51,000
Cash 7,000
Common Stock 102,000
Land 42,000
Equipment 11,000

LO8 BT: AP Difficulty: Medium TOT: 5 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting

Ex. 235
One item is omitted in each of the following summaries of balance sheet and income statement data for three different sole corporations, X, Y, and Z. Determine the amounts of the missing items, identifying each corporation by letter.
Corporation
X Y Z
Beginning of the Year:
Assets $390,000 $150,000 $219,000
Liabilities 250,000 105,000 168,000
End of the Year:
Assets 450,000 175,000 195,000
Liabilities 280,000 95,000 169,000
During the Year:
Issued additional shares of stock ? 79,000 80,000
Dividends 90,000 83,000 ?
Revenue 195,000 ? 187,000
Expenses 170,000 113,000 175,000

Ex. 236
Indicate in the space provided by each item whether it would appear on the Income Statement (IS), Balance Sheet (BS), or Retained Earnings Statement (RE):

a. Service Revenue g. Accounts Receivable

b. Utilities Expense h. Retained Earnings (ending)

c. Cash i. Equipment

d. Accounts Payable j. Advertising Expense

e. Office Supplies k. Dividends

f. Salaries Expense l. Notes Payable

Ex. 237
Maria Queen was reviewing her business activities at the end of the year (2015) and decided to prepare a Retained Earnings Statement. At the beginning of the year her assets were $700,000 and her liabilities were $210,000. At the end of the year the assets had grown to $930,000 but liabilities had also increased to $340,000. Common Stock was $200,000 in both years. The net income for the year was $220,000. The company paid dividends of $120,000 during the year.

Prepare a Retained Earnings statement in good form.

Ex. 238
At September 1, the balance sheet accounts for Stanley’s Restaurant were as follows:

Accounts Payable $ 3,800 Land $33,000
Accounts Receivable 9,600 Common Stock ?
Buildings 68,000 Notes Payable 48,000
Cash 10,000 Supplies 6,600
Equipment 18,700

The following transactions occurred during the next two days:

The company issued additional shares of stock for $22,000 cash in the business. The accounts payable were paid in full. (No payment was made on the notes payable.)

Instructions
Prepare a balance sheet at September 1, 2015.

Ex. 239
Presented below are balance sheet items for Black Angel Company at December 31, 2015.
Accounts payable $35,000 Accounts receivable 36,000 Cash 17,000 Equipment 77,000 Common stock 45,000 Notes payable 50,000
Compute each of the following: 1. Total assets. 2. Total liabilities.

COMPLETION STATEMENTS

240. Accounting is an information system that identifies, _____________, and _____________ the economic events of an organization.

241. The mere recording of economic events is called ______________, and is just one part of the _______________ process.

242. The three major services rendered by a certified public accountant are ______________, ________________, and management ________________.

243. Accountants who are employees of business enterprises are referred to as ________________ accountants.

244. A common set of standards that provides guidelines to accountants and indicates how to report economic events is called _________________.

245. The ________________ principle states that assets should be recorded at the value exchanged at the time the asset is acquired.

246. The _________________ assumption requires that the activities of an entity be kept separate from the activities of its owner.

247. The residual claim on total assets of a business is known as ________________ and is equal to total assets minus total liabilities.

248. Dividends ________________ stockholders’ equity but are not expenses.

249. The ________________ reports the assets, liabilities, and stockholders’ equity of a business enterprise at a specific date.

MATCHING
250. Match the items below by entering the appropriate code letter in the space provided.

A. CPA F. Corporation
B. Budgeting G. Assets
C. SEC H. Equities
D. Proprietorship I. Expenses
E. Economic Entity Assumption J. Transaction

1. Activities of an entity must be kept separate from its owner’s activities.
2. Consumed assets or services.
3. Ownership is limited to one person.
4. Offers expert accounting service to the general public.
5. Creditor and ownership claims against the assets of the business.
6. A separate legal entity under state laws.
7. Government agency that can mandate accounting rules.
8. Quantifying goals and objectives.
9. Future economic benefits.
10. Economic events recorded by accountants.

SHORT-ANSWER ESSAY QUESTIONS

*S-A E 251
The accounting profession provides many career opportunities for individuals. Identify the major fields that exist in accounting and comment on the major functions performed by individuals in each of these areas.

S-A E 252
The framework used to record and summarize the economic activities of a business enterprise is referred to as the accounting equation. State the basic accounting equation and define its major components. How are business transactions and financial statements related to the accounting equation?

S-A E 253
Your friend, Angela, made this comment:
My major is biology and I plan to research for cures for major illnesses. Thus, I have no need to study accounting.

What is your response to Angela?

S-A E 254
The information needs of a specific user of financial accounting information depends upon the kinds of decisions that user makes. Identify the major users of accounting information and discuss what questions financial accounting information answers for each group of users.

S-A E 255 (Ethics)
Joanna Newsom owns and operates Joanna’s Burgers, a small fast food store, located at the edge of City College campus in Newton, Ohio. After several very profitable years, Joanna’s Burgers began to have problems. Most of the problems were related to Joanna’s expansion of the eating area in the restaurant without corresponding increases in the food preparation area. Joanna does not have the cash or financial backing to expand further. She has therefore decided to sell her business.

Vivian Girls is interested in purchasing the business. However, she is located in another city and is unfamiliar with Newton. She has asked Joanna why she is selling Joanna’s Burgers. Joanna replies that her elderly mother requires extra care, and that her brother needs help in his manufacturing business. Both are true, but neither is her primary reason for selling. Joanna reasons that Vivian should not have asked her anyway, since profitable businesses don’t come up for sale.

Required:
1. Identify the stakeholders in this situation.
2. Did Joanna act ethically in not revealing fully her reasons for selling the business? Why or why not?

S-A E 256 (Communication)
Rachel Bells Havens is a friend of yours from high school. She decided to become a beautician after leaving high school, rather than to attend college. She recently opened her own shop, and has contracted her services to a local hospital. She is paid a monthly fee for her services, and receives a small gratuity from each of the patients.

She has just received her first set of financial statements from her accountant. She is quite upset. The statements show a cash balance of $3,600 at the end of the month, but a net income of only $500. She has written you a letter, asking you whether such a situation is possible, or whether she should find another accountant.

Required:
Write a short letter to your friend. Use proper form. Answer her question completely, but briefly.

CHALLENGE EXERCISES

CE 1
The total assets and liabilities of Company at January 1 and December 31, 2015 are presented below.
January 1 December 31
Assets $95,000 $140,000
Liabilities 30,000 36,000

Instructions:
1. Assume dividends of $10,800 were paid and no additional stock was issued during the year. Revenues were $110,000. Compute (a) net income, and (b) expenses.
2. Assume additional stock was issued for $4,800 and no dividends were paid during the year. Expenses were $42,000. Compute (a) net income, and (b) revenues.
3. Assume additional stock was issued for $62,000 and dividends of $15,600 were paid during the year. Compute net income.
4. Assume additional stock was issued for $6,000 and net income was $51,000. Compute dividends paid.

CE 2
Windsor Service had the following financial information at the end of 2015.

1/1/15 2015 12/31/15
Accounts payable $19,000
Accounts Receivable 25,000
Advertising Expense $1,000
Cash 16,000
Common Stock 15,000
Dividends 9,000
Equipment 38,000
Notes Payable 20,000
Rent Expense 3,500
Retained Earnings $6,000
Salaries and Wages Expense 20,000
Service Revenue 55,000
Utilities Expense 2,500

Instructions:
Prepare a 2015 income statement, 2015 retained earnings statement, and a 12/31/15 balance sheet for Windsor Service.

CE 3
This information is for Downing Company for the year ended December 31, 2015.
Cash received from revenues from customers $930,000 Cash received for issuance of common stock 420,000 Cash paid for new equipment 150,000 Cash dividends paid 30,000 Cash paid for expenses 640,000 Cash balance 1/1/15 50,000
Instructions
Prepare the 2015 statement of cash flows for Downing Company.

CHAPTER 2

THE RECORDING PROCESS

CHAPTER LEARNING OBJECTIVES

1. Explain what an account is and how it helps in the recording process.
2. Define debits and credits and explain their use in recording business transactions.
3. Identify the basic steps in the recording process.
4. Explain what a journal is and how it helps in the recording process.
5. Explain what a ledger is and how it helps in the recording process.
6. Explain what posting is and how it helps in the recording process.
7. Prepare a trial balance and explain its purposes.

TRUE-FALSE STATEMENTS
1. A new account is opened for each transaction entered into by a business firm.

2. The recording process becomes more efficient and informative if all transactions are recorded in one account.

3. When the volume of transactions is large, recording them in tabular form is more efficient than using journals and ledgers.

4. An account is often referred to as a T-account because of the way it is constructed.

5. A debit to an account indicates an increase in that account.

6. If a revenue account is credited, the revenue account is increased.

7. The normal balance of all accounts is a debit.

8. Debit and credit can be interpreted to mean increase and decrease, respectively.

9. The double-entry system of accounting refers to the placement of a double line at the end of a column of figures.

10. A credit balance in a liability account indicates that an error in recording has occurred.

11. The dividends account is a subdivision of the retained earnings account and appears as an expense on the income statement.

12. Revenues are a subdivision of retained earnings.

13. Under the double-entry system, revenues must always equal expenses.

14. Transactions are entered in the ledger first and then they are analyzed in terms of their effect on the accounts.

15. Business documents can provide evidence that a transaction has occurred.

16. Each transaction must be analyzed in terms of its effect on the accounts before it can be recorded in a journal.

17. Transactions are entered in the ledger accounts and then transferred to journals.

18. All business transactions must be entered first in the general ledger.

19. A simple journal entry requires only one debit to an account and one credit to an account.

20. A compound journal entry requires several debits to one account and several credits to one account.

21. Transactions are recorded in alphabetic order in a journal.

22. A journal is also known as a book of original entry.

23. The complete effect of a transaction on the accounts is disclosed in the journal.

24. The account titles used in journalizing transactions need not be identical to the account titles in the ledger.

25. The chart of accounts is a special ledger used in accounting systems.

26. A general ledger should be arranged in the order in which accounts are presented in the financial statements, beginning with the balance sheet accounts.

27. The number and types of accounts used by different business enterprises are the same if generally accepted accounting principles are being followed by the enterprises.

28. Posting is the process of proving the equality of debits and credits in the trial balance.

29. After a transaction has been posted, the reference column in the journal should not be blank.

30. A trial balance does not prove that all transactions have been recorded or that the ledger is correct.

31. The double-entry system is a logical method for recording transactions and results in equal debits and credits for each transaction.

32. The normal balance of an expense is a credit.

33. The journal provides a chronological record of transactions.

34. The ledger is merely a bookkeeping device and therefore does not provide much useful data for management.

35. The chart of accounts is a listing of the accounts and the account numbers which identify their location in the ledger.

36. The primary purpose of a trial balance is to prove the mathematical equality of the debits and credits after posting.

37. The trial balance will not balance when incorrect account titles are used in journalizing or posting.

MULTIPLE CHOICE QUESTIONS

38. An account consists of
a. one part.
b. two parts.
c. three parts.
d. four parts.

39. The left side of an account is
a. blank.
b. a description of the account.
c. the debit side.
d. the balance of the account.

40. Which one of the following is not a part of an account?
a. Credit side
b. Trial balance
c. Debit side
d. Title

41. An account is a part of the financial information system and is described by all except which one of the following?
a. An account has a debit and credit side.
b. An account is a source document.
c. An account may be part of a manual or a computerized accounting system.
d. An account has a title.

42. The right side of an account
a. is the correct side.
b. reflects all transactions for the accounting period.
c. shows all the balances of the accounts in the system.
d. is the credit side.

43. An account consists of
a. a title, a debit balance, and a credit balance.
b. a title, a left side, and a debit balance.
c. a title, a debit side, and a credit side.
d. a title, a right side, and a debit balance.

44. A T-account is
a. a way of depicting the basic form of an account.
b. what the computer uses to organize bytes of information.
c. a special account used instead of a trial balance.
d. used for accounts that have both a debit and credit balance.

45. Credits
a. decrease both assets and liabilities.
b. decrease assets and increase liabilities.
c. increase both assets and liabilities.
d. increase assets and decrease liabilities.

46. A debit to an asset account indicates
a. an error.
b. a credit was made to a liability account.
c. a decrease in the asset.
d. an increase in the asset.

47. The normal balance of any account is the
a. left side.
b. right side.
c. side which increases that account.
d. side which decreases that account.

48. The double-entry system requires that each transaction must be recorded
a. in at least two different accounts.
b. in two sets of books.
c. in a journal and in a ledger.
d. first as a revenue and then as an expense.

49. A credit is not the normal balance for which account listed below?
a. Common stock account
b. Revenue account
c. Liability account
d. Dividends account

50. Which one of the following represents the expanded basic accounting equation?
a. Assets = Liabilities + Common stock + Retained Earnings + Dividends – Revenues – Expenses.
b. Assets + Dividends + Expenses = Liabilities + Common stock + Retained Earnings + Revenues.
c. Assets – Liabilities – Dividends = Common stock + Retained Earnings + Revenues – Expenses.
d. Assets = Revenues + Expenses – Liabilities.

51. Which of the following correctly identifies normal balances of accounts?
a. Assets Debit
Liabilities Credit
Stockholders’ Equity Credit
Revenues Debit
Expenses Credit
b. Assets Debit
Liabilities Credit
Stockholders’ Equity Credit
Revenues Credit
Expenses Credit
c. Assets Credit
Liabilities Debit
Stockholders’ Equity Debit
Revenues Credit
Expenses Debit
d. Assets Debit
Liabilities Credit
Stockholders’ Equity Credit
Revenues Credit
Expenses Debit

52. The best interpretation of the word credit is the
a. offset side of an account.
b. increase side of an account.
c. right side of an account.
d. decrease side of an account.

53. In recording an accounting transaction in a double-entry system
a. the number of debit accounts must equal the number of credit accounts.
b. there must always be entries made on both sides of the accounting equation.
c. the amount of the debits must equal the amount of the credits.
d. there must only be two accounts affected by any transaction.

54. An accounting convention is best described as
a. an absolute truth.
b. an accounting custom.
c. an optional rule.
d. something that cannot be changed.

55. A debit is not the normal balance for which account listed below?
a. Dividends
b. Cash
c. Accounts Receivable
d. Service Revenue

56. An accountant has debited an asset account for $1,200 and credited a liability account for $500. What can be done to complete the recording of the transaction?
a. Nothing further must be done.
b. Debit a Stockholders’ equity account for $700.
c. Debit another asset account for $700.
d. Credit a different asset account for $700.

57. An accountant has debited an asset account for $1,300 and credited a liability account for $500. Which of the following would be an incorrect way to complete the recording of the transaction?
a. Credit an asset account for $800.
b. Credit another liability account for $800.
c. Credit a Stockholders’ account for $800.
d. Debit a Stockholders’ account for $800.

58. Which of the following is not true of the terms debit and credit?
a. They can be abbreviated as Dr. and Cr.
b. They can be interpreted to mean increase and decrease.
c. They can be used to describe the balance of an account.
d. They can be interpreted to mean left and right.

59. An account will have a credit balance if the
a. credits exceed the debits.
b. first transaction entered was a credit.
c. debits exceed the credits.
d. last transaction entered was a credit.

60. For the basic accounting equation to stay in balance, each transaction recorded must
a. affect two or less accounts.
b. affect two or more accounts.
c. always affect exactly two accounts.
d. affect the same number of asset and liability accounts.

61. Which of the following statements is true?
a. Debits increase assets and increase liabilities.
b. Credits decrease assets and decrease liabilities.
c. Credits decrease assets and increase liabilities.
d. Debits decrease liabilities and decrease assets.

62. Assets normally show
a. credit balances.
b. debit balances.
c. debit and credit balances.
d. debit or credit balances.

63. An awareness of the normal balances of accounts would help you spot which of the following as an error in recording?
a. A debit balance in the dividends account
b. A credit balance in an expense account
c. A credit balance in a liabilities account
d. A credit balance in a revenue account

64. If a company has overdrawn its bank balance, then
a. its cash account will show a debit balance.
b. its cash account will show a credit balance.
c. the cash account debits will exceed the cash account credits.
d. it cannot be detected by observing the balance of the cash account.

65. Which account below is not a subdivision of retained earnings?
a. Dividends
b. Revenues
c. Expenses
d. Common stock

66. When a company pays dividends
a. it doesn’t have to be cash, it could be another asset.
b. the dividends account will be increased with a credit.
c. the retained earnings account will be directly increased with a debit.
d. the dividends account will be decreased with a debit.

67. The Dividends account
a. appears on the income statement along with the expenses of the business.
b. must show transactions every accounting period.
c. is increased with debits and decreased with credits.
d. is not a proper subdivision of retained earnings.

68. Which of the following statements is incorrect?
a. Expenses increase stockholders’ equity.
b. Expenses have normal debit balances.
c. Expenses decrease stockholders’ equity.
d. Expenses are a negative factor in the computation of net income.

69. A credit to a liability account
a. indicates an increase in the amount owed to creditors.
b. indicates a decrease in the amount owed to creditors.
c. is an error.
d. must be accompanied by a debit to an asset account.

70. In the first month of operations, the total of the debit entries to the cash account amounted to $1,200 and the total of the credit entries to the cash account amounted to $800. The cash account has a(n)
a. $800 credit balance.
b. $1,200 debit balance.
c. $400 debit balance.
d. $400 credit balance.

71. TransAm Mail Service purchased equipment for $2,500. TransAm paid $400 in cash and signed a note for the balance. TransAm debited the Equipment account, credited Cash and
a. nothing further must be done.
b. debited the retained earnings account for $2,100.
c. credited another asset account for $400.
d. credited a liability account for $2,100.

72. Radio Moscow Industries purchased supplies for $1,000. They paid $400 in cash and agreed to pay the balance in 30 days. The journal entry to record this transaction would include a debit to an asset account for $1,000, a credit to a liability account for $600. Which of the following would be the correct way to complete the recording of the transaction?
a. Credit an asset account for $400.
b. Credit another liability account for $400.
c. Credit the retained earnings account for $400.
d. Debit the retained earnings account for $400.

73. On January 14, Edamame Industries purchased supplies of $700 on account. The entry to record the purchase will include
a. a debit to Supplies and a credit to Accounts Payable.
b. a debit to Supplies Expense and a credit to Accounts Receivable.
c. a debit to Supplies and a credit to Cash.
d. a debit to Accounts Receivable and a credit to Supplies.

74. On June 1, 2015, Portugal Inc. reported a cash balance of $12,000. During June, Portugal made deposits of $5,000 and made disbursements totalling $14,000. What is the cash balance at the end of June?
a. $3,000 debit balance
b. $17,000 debit balance
c. $3,000 credit balance
d. $2,000 credit balance

75. At January 1, 2015, Alligator Industries reported retained earnings of $150,000. During 2015, Alligator had a net loss of $30,000 and paid dividends of $15,000. At December 31, 2015, the amount of retained earnings is
a. $105,000.
b. $120,000.
c. $135,000.
d. $165,000.

76. Mt. Zion Inc. pays its employees twice a month, on the 7th and the 21st. On June 21, Mt. Zion Inc. paid employee salaries of $5,000. This transaction would
a. increase stockholders’ equity by $5,000.
b. decrease the balance in Salaries and Wages Expense by $5,000.
c. decrease net income for the month by $5,000.
d. be recorded by a $5,000 debit to Salaries and Wages Payable and a $4,000 credit to Salaries and Wages Expense.

77. In the first month of operations for Gallowsbird Industries, the total of the debit entries to the cash account amounted to $36,000 ($16,000 investment by stockholders and revenues of $20,000). The total of the credit entries to the cash account amounted to $22,000 (purchase of equipment $8,000 and payment of expenses $14,000). At the end of the month, the cash account has a(n)
a. $6,000 credit balance.
b. $6,000 debit balance.
c. $14,000 debit balance.
d. $14,000 credit balance.

78 Chik Chik Company showed the following balances at the end of its first year:
Cash $ 6,000
Prepaid insurance 9,400
Accounts receivable 7,000
Accounts payable 5,600
Notes payable 8,400
Common stock 2,800
Dividends 1,400
Revenues 44,000
Expenses 35,000
What did Chik Chik Company show as total credits on its trial balance?
a. $51,400
b. $60,800
c. $62,200
d. $70,200

79. Electrelane Company showed the following balances at the end of its first year:
Cash $ 4,000
Prepaid insurance 7,000
Accounts receivable 5,000
Accounts payable 4,000
Notes payable 6,000
Common stock 2,000
Dividends 1,000
Revenues 32,000
Expenses 25,000

What did Electrelene Company show as total credits on its trial balance?
a. $9,000
b. $44,000
c. $45,000
d. $49,000

80. During February 2015 its first month of operations, the stockholders of Ariel Pink Enterprises invested cash of $50,000. Ariel had cash revenues of $10,000 and paid expenses of $14,000. Assuming no other transactions impacted the cash account, what is the balance in Cash at February 28?
a. $4,000 credit
b. $4,000 debit
c. $46,000 debit
d. $54,000 debit

81. At January 31, 2015, the balance in Aislers Inc.’s supplies account was $750. During February, Aislers purchased supplies of $900 and used supplies of $1,125. At the end of February, the balance in the supplies account should be
a. $525 debit.
b. $975 debit.
c. $525 credit.
d. $775 debit.

82. At December 1, 2015, Cursive Company’s accounts receivable balance was $1,800. During December, Cursive had credit revenues of $7,200 and collected accounts receivable of $6,000. At December 31, 2015, the accounts receivable balance is
a. $600 debit.
b. $3,000 debit.
c. $600 credit.
d. $3,000 credit.

83. At October 1, 2015, Padilla Industries had an accounts payable balance of $40,000. During the month, the company made purchases on account of $33,000 and made payments on account of $48,000. At October 31, 2015, the accounts payable balance is
a. $25,000.
b. $41,000.
c. $55,000.
d. $121,000.

84. During 2015, its first year of operations, Neko’s Bakery had revenues of $60,000 and expenses of $35,000. The business paid dividends of $20,000. What is the amount of stockholders’ equity at December 31, 2015?
a. $0
b. $5,000 credit
c. $25,000 credit
d. $20,000 debit

85. On July 7, 2015, Hidden Camera Enterprises performed cash services of $1,700. The entry to record this transaction would include
a. a debit to Service Revenue of $1,700.
b. a credit to Accounts Receivable of $1,700.
c. a debit to Cash of $1,700.
d. a credit to Accounts Payable of $1,700.

86. At September 1, 2015, Promise Ring Co. reported stockholders’ equity of $156,000. During the month, Promise Ring generated revenues of $38,000, incurred expenses of $21,000, purchased equipment for $5,000 and paid dividends of $2,000. What is the amount of stockholders’ equity at September 30, 2015?
a. $166,000
b. $171,000
c. $173,000
d. $176,000

87. The final step in the recording process is to
a. analyze each transaction.
b. enter the transaction in a journal.
c. prepare a trial balance.
d. transfer journal information to ledger accounts.

88. The usual sequence of steps in the transaction recording process is:
a. journal  analyze  ledger.
b. analyze  journal  ledger.
c. journal  ledger  analyze.
d. ledger  journal  analyze.

89. In recording business transactions, evidence that an accounting transaction has taken place is obtained from
a. business documents.
b. the Internal Revenue Service.
c. the public relations department.
d. the SEC.

90. After a business transaction has been analyzed and entered in the book of original entry, the next step in the recording process is to transfer the information to
a. the company’s bank.
b. stockholders’ equity.
c. ledger accounts.
d. financial statements.

91. The first step in the recording process is to
a. prepare financial statements.
b. analyze each transaction for its effect on the accounts.
c. post to a journal.
d. prepare a trial balance.

92. Evidence that would not help with determining the effects of a transaction on the accounts would be a(n)
a. cash register sales tape.
b. bill.
c. advertising brochure.
d. check.

93. After transaction information has been recorded in the journal, it is transferred to the
a. trial balance.
b. income statement.
c. book of original entry.
d. ledger.

94. The usual sequence of steps in the recording process is to analyze each transaction, enter the transaction in the
a. journal, and transfer the information to the ledger accounts.
b. ledger, and transfer the information to the journal.
c. book of accounts, and transfer the information to the journal.
d. book of original entry, and transfer the information to the journal.

95. The final step in the recording process is to transfer the journal information to the
a. trial balance.
b. financial statements.
c. ledger.
d. file cabinets.

96. The recording process occurs
a. once a year.
b. once a month.
c. repeatedly during the accounting period.
d. infrequently in a manual accounting system.

97. A compound journal entry involves
a. two accounts.
b. three accounts.
c. three or more accounts.
d. four or more accounts.

98. A journal provides
a. the balances for each account.
b. information about a transaction in several different places.
c. a list of all accounts used in the business.
d. a chronological record of transactions.

99. When three or more accounts are required in one journal entry, the entry is referred to as a
a. compound entry.
b. triple entry.
c. multiple entry.
d. simple entry.

100. When two accounts are required in one journal entry, the entry is referred to as a
a. balanced entry.
b. simple entry.
c. posting.
d. nominal entry.

101. Another name for journal is
a. listing.
b. book of original entry.
c. book of accounts.
d. book of source documents.

102. The standard format of a journal would not include
a. a reference column.
b. an account title column.
c. a T-account.
d. a date column.

103 Transactions in a journal are recorded in
a. account number order.
b. dollar amount order.
c. alphabetical order.
d. chronological order.

104 A journal is not useful for
a. disclosing in one place the complete effect of a transaction.
b. preparing financial statements.
c. providing a record of transactions.
d. locating and preventing errors.

105 A complete journal entry does not show
a. the date of the transaction.
b. the new balance in the accounts affected by the transaction.
c. a brief explanation of the transaction.
d. the accounts and amounts to be debited and credited.

106. The name given to entering transaction data in the journal is
a. chronicling.
b. listing.
c. posting.
d. journalizing.

107. The standard form of a journal entry has the
a. debit account entered first and indented.
b. credit account entered first and indented.
c. debit account entered first at the extreme left margin.
d. credit account entered first at the extreme left margin.

108. When journalizing, the reference column is
a. left blank.
b. used to reference the source document.
c. used to reference the journal page.
d. used to reference the financial statements.

109. On June 1, 2015 Ted Leo buys a copier machine for his business and finances this purchase with cash and a note. When journalizing this transaction, he will
a. use two journal entries.
b. make a compound entry.
c. make a simple entry.
d. list the credit entries first, which is proper form for this type of transaction.

110. Which of the following journal entries is recorded correctly and in the standard format?
a. Salaries and Wages Expense 500
Cash 1,500
Advertising Expense . 1,000

b. Salaries and Wages Expense . 500
Advertising Expense . 1,000
Cash 1,500

c. Cash 1,500
Salaries and Wages Expense 500
Advertising Expense 1,000

d. Salaries and Wages Expense 500
Advertising Expense 1,000
Cash . 1,500

111. The ledger should be arranged in
a. alphabetical order.
b. chronological order.
c. dollar amount order.
d. financial statement order.

112. The entire group of accounts maintained by a company is called the
a. chart of accounts.
b. general journal.
c. general ledger.
d. trial balance.

113. An accounting record of the balances of all assets, liabilities, and stockholders’ equity accounts is called a
a. compound entry.
b. general journal.
c. general ledger.
d. chart of accounts.

114. The usual order of accounts in the general ledger is
a. assets, liabilities, common stock, retained earnings, dividends, revenues, and expenses.
b. assets, liabilities, dividends, common stock, retained earnings, expenses, and revenues.
c. liabilities, assets, common stock, retained earnings, revenues, expenses, and dividends.
d. common stock, retained earnings, assets, liabilities, dividends, expenses, and revenues.

115. Management could determine the amounts due from customers by examining which ledger account?
a. Service Revenue
b. Accounts Payable
c. Accounts Receivable
d. Supplies

116. The ledger accounts should be arranged in
a. chronological order.
b. alphabetical order.
c. financial statement order.
d. order of appearance in the journal.

117. A three column form of account is so named because it has columns for
a. debit, credit, and account name.
b. debit, credit, and reference.
c. debit, credit, and balance.
d. debit, credit, and date.

118. On August 13, 2015, Swell Maps Enterprises purchased equipment for $1,300 and supplies of $200 on account. Which of the following journal entries is recorded correctly and in the standard format?
a. Equipment 1,300
Account Payable 1,500
Supplies 200

b. Equipment 1,300
Supplies 200
Accounts Payable 1,500

c. Accounts Payable 1,500
Equipment 1,300
Supplies 200

d. Equipment 1,300
Supplies 200
Accounts Payable. 1,500

119. Delta72 Company received a cash advance of $700 from a customer. As a result of this event,
a. assets increased by $700.
b. stockholders’ equity increased by $700.
c. liabilities decreased by $700.
d. assets and stockholders’ equity increased by $700.

120. Camper Van Company purchased equipment for $2,600 cash. As a result of this event,
a. stockholders’ equity decreased by $2,600.
b. total assets increased by $2,600.
c. total assets remained unchanged.
d. stockholders’ equity decreased and total assets increased by $2,600.

121. Beethoven Company provided consulting services and billed the client $3,100. As a result of this event,
a. assets remained unchanged.
b. assets increased by $3,100.
c. stockholders’ equity increased by $3,100.
d. assets and stockholders’ equity both increased by $3,100.

122. The first step in posting involves
a. entering in the appropriate ledger account the date, journal page, and debit amount shown in the journal.
b. writing in the journal the account number to which the debit amount was posted.
c. writing in the journal the account number to which the credit amount was posted.
d. entering in the appropriate ledger account the date, journal page, and credit amount shown in the journal.

123. A chart of accounts usually starts with
a. asset accounts.
b. expense accounts.
c. liability accounts.
d. revenue accounts.

124. The procedure of transferring journal entries to the ledger accounts is called
a. journalizing.
b. analyzing.
c. reporting.
d. posting.

125. A number in the reference column in a general journal indicates
a. that the entry has been posted to a particular account.
b. the page number of the journal.
c. the dollar amount of the transaction.
d. the date of the transaction.

126. A chart of accounts for a business firm
a. is a graph.
b. indicates the amount of profit or loss for the period.
c. lists the accounts and account numbers that identify their location in the ledger.
d. shows the balance of each account in the general ledger.

127. Posting
a. should be performed in account number order.
b. accumulates the effects of journalized transactions in the individual accounts.
c. involves transferring all debits and credits on a journal page to the trial balance.
d. is accomplished by examining ledger accounts and seeing which ones need updating.

128. After journal entries are posted, the reference column
a. of the general journal will be blank.
b. of the general ledger will show journal page numbers.
c. of the general journal will show “Dr” or “Cr”.
d. of the general ledger will show account numbers.

129. The explanation column of the general ledger
a. is completed without exception.
b. is nonexistent.
c. is used infrequently.
d. shows account titles.

130. A numbering system for a chart of accounts
a. is prescribed by GAAP.
b. is uniform for all businesses.
c. usually starts with income statement accounts.
d. usually starts with balance sheet accounts.

131. The first step in designing a computerized accounting system is the creation of the
a. general ledger.
b. general journal.
c. trial balance.
d. chart of accounts.

132. The steps in preparing a trial balance include all of the following except
a. listing the account titles and their balances.
b. totaling the debit and credit columns.
c. proving the equality of the two columns.
d. transferring journal amounts to ledger accounts.

133. A trial balance may balance even when each of the following occurs except when
a. a transaction is not journalized.
b. a journal entry is posted twice.
c. incorrect accounts are used in journalizing.
d. a transposition error is made.

134. A list of accounts and their balances at a given time is called a(n)
a. journal.
b. posting.
c. trial balance.
d. income statement.

135. If the sum of the debit column equals the sum of the credit column in a trial balance, it indicates
a. no errors have been made.
b. no errors can be discovered.
c. that all accounts reflect correct balances.
d. the mathematical equality of the accounting equation.

136. A trial balance is a listing of
a. transactions in a journal.
b. the chart of accounts.
c. general ledger accounts and balances.
d. the totals from the journal pages.

137. Customarily, a trial balance is prepared
a. at the end of each day.
b. after each journal entry is posted.
c. at the end of an accounting period.
d. only at the inception of the business.

138. A trial balance would only help in detecting which one of the following errors?
a. A transaction that is not journalized
b. A journal entry that is posted twice
c. Offsetting errors are made in recording the transaction
d. A transposition error when transferring the debit side of journal entry to the ledger

139. An account is an individual accounting record of increases and decreases in specific
a. liabilities.
b. assets.
c. expenses.
d. assets, liabilities, and stockholders’ equity items.

140. A debit is not the normal balance for which of the following?
a. Asset account
b. Dividends account
c. Expense account
d. Common stock account

141. Which of the following rules is incorrect?
a. Credits decrease the dividends account.
b. Debits increase the common stock account.
c. Credits increase revenue accounts.
d. Debits decrease liability accounts.

142. Which of the following statements is false?
a. Revenues increase stockholders’ equity.
b. Revenues have normal credit balances.
c. Revenues are a positive factor in the computation of net income.
d. Revenues are increased by debits.

143. Which of the following is the correct sequence of steps in the recording process?
a. Posting, journalizing, analyzing
b. Journalizing, analyzing, posting
c. Analyzing, posting, journalizing
d. Analyzing, journalizing, posting

144. Which of the following is false about a journal?
a. It discloses in one place the complete effects of a transaction.
b. It provides a chronological record of transactions.
c. It helps to prevent or locate errors because debit and credit amounts for each entry can be readily compared.
d. It keeps in one place all the information about changes in specific account balances.

145. Deerhoof Company purchases equipment for $2,700 and supplies for $400 from Milkman Co. for $3,100 cash. The entry for this transaction will include a
a. debit to Equipment $2,700 and a debit to Supplies Expense $400 for Milkman.
b. credit to Cash for Milkman.
c. credit to Accounts Payable for Deerhoof.
d. debit to Equipment $2,700 and a debit to Supplies $400 for Deerhoof.

146. Devendra Company pays cash dividends of $600. The entry for this transaction will include a debit of $600 to
a. Dividends
b. Retained Earnings.
c. Owner’s Salaries Expense.
d. Salaries and Wages Expense.

147. On October 3, Karl Schickele, a carpenter, received a cash payment for services previously billed to a client. Karl paid his telephone bill, and he also bought equipment on credit. For the three transactions, at least one of the entries will include a
a. credit to Retained Earnings.
b. credit to Notes Payable.
c. debit to Accounts Receivable.
d. credit to Accounts Payable.

148. Posting of journal entries should be done in
a. account number order.
b. alphabetical order.
c. chronological order.
d. dollar amount order.

149. The chart of accounts is a
a. list of accounts and their balances at a given time.
b. device used to prove the mathematical accuracy of the ledger.
c. listing of the accounts and the account numbers which identify their location in the ledger.
d. required step in the recording process.

150. Which of the following is incorrect regarding a trial balance?
a. It proves that the debits equal the credits after posting.
b. It proves that the company has recorded all transactions.
c. A trial balance uncovers errors in journalizing and posting.
d. A trial balance is useful in the preparation of financial statements.

151. A trial balance will not balance if
a. a journal entry is posted twice.
b. a wrong amount is used in journalizing.
c. incorrect account titles are used in journalizing.
d. a journal entry is only partially posted.

152. Which of the following are the same under both GAAP and IFRS?
a. The account.
b. Debit and credit rules.
c. Steps in the recording process.
d. All of these answers are correct.

153. Which of the following are the same under both GAAP and IFRS?
a. The journal.
b. The ledger.
c. The chart of accounts.
d. All of these answers are correct.

154. Which of the following is true?
a. Transaction analysis is completely different under IFRS and GAAP.
b. Most transactions are recorded differently under IFRS and GAAP.
c. Transaction analysis is the same under IFRS and GAAP, but some transactions are recorded differently.
d. All transactions are recorded the same under IFRS and GAAP.

155. European companies rely
a. less on historical cost and more on fair values than U.S. companies.
b. less on fair values and more on historical cost than U.S. companies.
c. completely on fair values for financial reporting.
d. completely on historical cost for financial reporting.

156. The double–entry accounting system is the basis of accounting systems
a. worldwide.
b. worldwide, except for the U.S.
c. in the U.S. only
d. neither internationally nor in the U.S.

157. Under IFRS, the trial balance
a. follows the same format as under GAAP.
b. shows credits on the left and debits on the right.
c. includes less accounts than under GAAP.
d. includes more accounts than under GAAP.

158. In deciding whether the U.S. should adopt IFRS, the issue the SEC said should be considered is
a. whether IFRS is sufficiently developed and consistent in application.
b. whether the IFRS is established for the benefit of investors.
c. the impact of a switch to IFRS on U.S. laws and regulations.
d. all of these answers are correct.

BRIEF EXERCISES

BE 159
At June 1, 2015, Coquehcot Industries had an accounts receivable balance of $12,000. During the month, the company performed credit services of $30,000 and collected accounts receivable of $22,000. What is the balance in accounts receivable at June 30, 2015?

BE 160

TNT has the following transactions during April of the current year. Indicate
(a) the effect on the accounting equation and (b) the debit-credit analysis.

Apr. 1 Opens a law office, investing $25,000 in cash.
4 Pays rent in advance for 6 months, $9,000 cash.
16 Receives $8,000 from clients for services provided.
27 Pays secretary $2,800 salary.

BE 161
For each of the following accounts indicate the effect of a debit or a credit on the account and the normal balance. Increase (+), Decrease (–).
Debit_ _Credit_ Normal Balance
1. Salaries and wages expense.
2. Accounts receivable.
3. Service revenue.
4. Common stock.
5. Dividends.

BE 162
For each of the following transactions of Neon Garden, identify the account to be debited and the account to be credited.
1. Purchased 18-month insurance policy for cash.
2. Paid weekly payroll.
3. Purchased supplies on account.
4. Received utility bill to be paid at later date.

BE 163
Journalize the following business transactions in general journal form. Identify each transaction by number. You may omit explanations of the transaction.
1. Andrew Bird invested $35,000 cash in exchange for stock.
2. Hired an employee to be paid $400 per week, starting tomorrow.
3. Paid two years’ rent in advance, $7,440.
4. Paid the worker’s weekly wage.
5. Recorded revenue earned and received for the week, $1,900.

BE 164
Identify the impact on the accounting equation of the following transactions.
1. Purchased 36-month insurance policy for cash.
2. Purchased supplies on account.
3. Received utility bill to be paid at later date.
4. Paid utility bill previously accrued.

BE 165
Journalize the following transactions for Xiu Xiu Company for June 2015, the company’s first month of operations. You may omit explanations for the transactions.
1. Purchased equipment on account for $9,000.
2. Billed customers $5,000 for services performed.
3. Made payment of $2,300 on account for equipment purchased earlier in month.
4. Collected $2,900 on customer accounts.

BE 166
The following transactions took place for Xiu Xiu Company:
(a) Purchased equipment on account for $9,000.
(b) Billed customers $5,000 for services performed.
(c) Made payment of $2,300 on account for equipment purchased earlier in month.
(d) Collected $2,900 on customer accounts.

1. What is the balance in Accounts Payable at June 30, 2015?
2. What is the balance in Accounts Receivable at June 30, 2015?

BE 167
The transactions of the Liberty Belle Store are recorded in the general journal below. You are to post the journal entries to T-accounts.

General Journal

Date Account Titles Debit Credit

2015
Aug. 5 Accounts Receivable 4,400
Service Revenue 4,400

10 Cash 3,000
Service Revenue 3,000

19 Rent Expense 1,100
Cash 1,100

25 Cash 1,400
Accounts Receivable 1,400

BE 167 (cont.)
General Ledger
Cash Accounts Receivable

Service Revenue Rent Expense

BE 168
Prepare a trial balance from the ledger accounts of Black Diamond Express as of January 31, 2015.

Accounts Payable $1,100 Rent Expense $ 500
Accounts Receivable 1,700 Service Revenue 3,000
Cash 1,400 Supplies 200
Common stock 2,000 Salaries and Wages Expense 1,300
Dividends 1,000

BE 169
Prepare a corrected trial balance for Stereolab Company. All accounts should have a normal balance.

STEROELAB COMPANY
Trial Balance
For the Quarter Ended 3/31/15

Debit Credit
Cash $14,000
Accounts Receivable $ 23,000
Prepaid Insurance 2,500
Equipment 60,000
Accounts Payable 15,000
Unearned Service Revenue 10,000
Notes Payable 25,000
Common stock 38,000
Dividends 1,500
Service Revenue 43,000
Salaries and Wages Expense 15,000
Utilities Expense 5,000
Rent Expense 10,000
$116,500 $145,500

EXERCISES

Ex. 170
The chart of accounts used by Notwist Copy Company is listed below. You are to indicate the proper accounts to be debited and credited for the following transactions by writing the account number(s) in the appropriate boxes.
CHART OF ACCOUNTS
101 Cash 209 Unearned Service Revenue
112 Accounts Receivable 311 Common Stock
125 Supplies 332 Dividends
157 Equipment 400 Service Revenue
200 Notes Payable 610 Advertising Expense
201 Accounts Payable 729 Rent Expense
———————————————————————————————————————————
Number(s) Number(s)
of account(s) of account(s)
debited credited
1. The company issues stock in exchange for $70,000 cash.
———————————————————————————————————————————
2. Purchased three pieces of equipment for $160,000, paying $50,000 cash and signing a 5-year, 10% note for the remainder.
———————————————————————————————————————————
3. Purchased $5,000 supplies on credit.
———————————————————————————————————————————
4. Cash revenue amounted to $7,000.
———————————————————————————————————————————
5. Paid $500 cash for radio advertising.
———————————————————————————————————————————
6. Paid $800 on account for supplies purchased in transaction 3.
———————————————————————————————————————————
7. The company paid dividends of $2,100.
———————————————————————————————————————————
8. Paid $1,200 cash for rent for the current month.
———————————————————————————————————————————
9. Received $2,000 cash advance from a customer for future copying.
———————————————————————————————————————————
10. Billed a customer for $575 for photocopy work done.
———————————————————————————————————————————

Ex. 171
Under a double-entry system, show how the entry in each statement is entered in the ledger by using debit or credit to indicate the increase or decrease in the affected account.

Debit or Credit

1. An increase in Salaries and Wages Expense.

2. A decrease in Accounts Payable.

3. An increase in Prepaid Insurance.

4. An increase in Common Stock.

5. A decrease in Supplies.

6. An increase in Dividends.

7. An increase in Service Revenue.

8. A decrease in Accounts Receivable.

9. An increase in Rent Expense.

10. A decrease in Equipment.

Ex. 172
Selected transactions for Good Home, a property management company, in its first month of business, are as follows:

Jan. 2 Issued stock to investors for $15,000 cash.
3 Purchased used car for $5,200 cash for use in business.
9 Purchased supplies on account for $500.
11 Billed customers $2,100 for services performed.
16 Paid $450 cash for advertising.
20 Received $1,300 cash from customers billed on January 11.
23 Paid creditor $300 cash on balance owed.
28 Paid dividends of $2,000.

Instructions
For each transaction indicate the following.
(a) The basic type of account debited and credited (asset (A), liability (L), stockholders’ equity (SE)).
(b) The specific account debited and credited (cash, rent expense, service revenue, etc.).
(c) Whether the specific account is increased (incr.) or decreased (decr).
(d) The normal balance of the specific account.

Use the following format, in which the January 2 transaction is given as an example.

Account Debited Account Credited
(a) (b) (c) (d) (a) (b) (c) (d)
Basic Specific Normal Basic Specific Normal
Date Type Account Effect Balance Type Account Effect Balance
Jan. 2 A Cash Incr. Debit SE Common Incr. Credit
Stock

Ex. 173
For the accounts listed below, indicate if the normal balance of the account is a debit or credit.
Normal Balance
Accounts Debit or Credit

1. Service Revenue

2. Rent Expense

3. Accounts Receivable

4. Accounts Payable

5. Retained Earnings

6. Supplies

7. Insurance Expense

8. Dividends

9. Buildings

10. Notes Payable

Ex. 174
For each of the following accounts, indicate the effects of (a) a debit and (b) the normal account balance. 1. Notes Payable 2. Prepaid Insurance 3. Salaries and Wages Expense 4. Service Revenue 5. Equipment 6. Common Stock

Ex. 175
During an accounting period, a business has numerous transactions affecting each of the following accounts. State for each account whether it is likely to have (a) debit entries only, (b) credit entries only, or (c) both debit and credit entries.

(1) Advertising Expense (6) Dividends
(2) Service Revenue (7) Cash
(3) Accounts Payable (8) Salaries and Wages Expense
(4) Accounts Receivable (9) Notes Payable
(5) Common Stock (10) Insurance Expense

Ex. 176
Eight transactions are recorded in the following T-accounts:
CASH ACCOUNTS RECEIVABLE
(1) 25,000 (2) 3,500 (5) 27,500 (7) 22,500
(7) 22,500 (3) 1,950
(4) 5,100
(6) 8,000
(8) 3,300

SUPPLIES EQUIPMENT
(3) 1,950 (2) 13,500

COMMON STOCK SERVICE REVENUE
(1) 25,000 (5) 27,500

ACCOUNTS PAYABLE DIVIDENDS
(6) 8,000 (2) 10,000 (8) 3,300

SALARIES AND WAGES EXPENSE
(4) 5,100

Ex. 176 (cont.)
Indicate for each debit and each credit: (a) whether an asset, liability, stockholders’ equity, revenue, or expense account was affected and (b) whether the account was increased (+) or (–) decreased. Answers should be presented in the following chart form:
Account Debited Account Credited
Transaction (a) (b) (a) (b)
No. Type Effect Type Effect
———————————————————————————————————————————
(1) (Example) Asset + Stockholders’
equity +
———————————————————————————————————————————
(2)
———————————————————————————————————————————
(3)
———————————————————————————————————————————
(4)
———————————————————————————————————————————
(5)
———————————————————————————————————————————
(6)
———————————————————————————————————————————
(7)
———————————————————————————————————————————
(8)
———————————————————————————————————————————

Ex. 177
For each of the following accounts indicate (a) the type of account (Asset, Liability, Stockholders’ Equity, Revenue, Expense), (b) the debit and credit effects, and (c) the normal account balance.

Example
0. Cash a. Asset account
b. Debit increases, credit decreases
c. Normal balance – debit

Accounts
1. Accounts Payable 5. Service Revenue
2. Accounts Receivable 6. Insurance Expense
3. Common Stock 7. Notes Payable
4. Dividends 8. Equipment

Ex. 178
For each transaction given, enter in the tabulation given below a “D” for debit and a “C” for credit to reflect the increases and decreases of the assets, liabilities, and stockholders’ equity accounts. In some cases there may be a “D” and a “C” in the same box.

Transactions:
1. Invests cash in exchange for stock.
2. Pays insurance in advance for six months.
3. Pays secretary’s salary.
4. Purchases supplies on account.
5. Pays electricity bill.
6. Borrows money from local bank.
7. Makes payment on account.
8. Receives cash due from customers.
Ex. 178 (cont.)
9. Provides services on account.
10. The company pays a dividends.

Transaction #
1 2 3 4 5 6 7 8 9 10
Assets
Liabilities
Common stock
Dividends
Revenues
Expenses

Ex. 179
Journalize the following business transactions in general journal form. Identify each transaction by number. You may omit explanations of the transactions.
1. The company issues stock in exchange for $40,000 cash
2. Purchased $400 of supplies on credit.
3. Purchased equipment for $8,000, paying $2,000 in cash and signed a 30-day, $6,000, note payable.
4. Real estate commissions billed to clients amount to $4,000.
5. Paid $700 in cash for the current month’s rent.
6. Paid $200 cash on account for supplies purchased in transaction 2.
7. Received a bill for $600 for advertising for the current month.
8. Paid $2,200 cash for office salaries and wages.
9. The company paid dividends of $1,500.
10. Received a check for $3,000 from a client in payment on account for commissions billed in transaction 4.

Ex. 180
Identify the accounts to be debited and credited for each of the following transactions.
1. Invested $8,000 cash in the business in exchange for stock. 2. Purchased supplies on account for $1,000. 3. Billed customers $2,000 for services performed. 4. Paid salaries of $1,200.

Ex. 181
Transactions for Tom Petty Company for the month of October are presented below. Journalize each transaction and identify each transaction by number. You may omit journal explanations.
1. Invested $40,000 cash in the business in exchange for stock.
2. Purchased land costing $28,000 for cash.
3. Purchased equipment costing $15,000 for $3,000 cash and the remainder on credit.
4. Purchased supplies on account for $800.
5. Paid $1,000 for a one-year insurance policy.
6. Received $3,000 cash for services performed.
7. Received $4,000 for services previously performed on account.
8. Paid wages to employees for $2,500.
9. Paid dividends of $2,000.

Ex. 182
Match the basic step in the recording process described by each of the following statements.

A. Analyze each transaction B. Enter each transaction in a journal C. Transfer journal information to ledger accounts

____ 1. This step is called posting.
____ 2. Business documents are examined to determine the effects of transactions on the accounts.
____ 3. This step is called journalizing.

Ex. 183
Prepare journal entries for each of the following transactions.
1. Performed services for customers on account $8,000.
2. Purchased $20,000 of equipment on account.
3. Received $3,000 from customers in transaction 1.
4. The company paid dividends of $2,000.

Ex. 184
Sigur Ros Company is a newly organized business. The list of accounts to be opened in the general ledger is as follows:
Accounts Payable Prepaid Insurance
Accounts Receivable Prepaid Rent
Accumulated Depreciation Rent Expense
Cash Salaries and Wages Expense
Common Stock Salaries and Wages Payable
Depreciation Expense Service Revenue
Dividends Supplies
Equipment Utilities Expense
Insurance Expense
Instructions
Organize the accounts into the order in which they should appear in the ledger of Sigur Ros Company and assign account numbers. Use the following system to assign account numbers.
1—199 Assets
200—299 Liabilities
300—399 Stockholders’ Equity
400—499 Revenues
500—599 Expenses

Ex. 185
The transactions of Medina Information Service are recorded in the general journal below. You are to post the journal entries to the accounts in the general ledger. After all entries have been posted, you are to prepare a trial balance on the form provided.

General Journal J1
———————————————————————————————————————————
Date Account Titles and Explanation Ref. Debit Credit
———————————————————————————————————————————
2015
Sept. 1 Cash 25,000
Common Stock 25,000
(Issued stock for cash)

4 Equipment 30,000
Cash 10,000
Notes Payable 20,000
(Paid cash and issued 2-year, 9%, note for
equipment)

8 Rent Expense 1,000
Cash 1,000
(Paid September rent)

15 Prepaid Insurance 400
Cash 400
(Paid one-year liability insurance)

18 Cash 2,500
Service Revenue 2,500
(Received cash for delivery services)

20 Salaries and Wages Expense 500
Cash 500
(Paid salaries for current period)

25 Utilities Expense 100
Accounts Payable 100
(Received a bill for September utilities)

30 Dividends 1,500
Cash 1,500
(Paid dividends)

30 Accounts Receivable 4,000
Service Revenue 4,000
(Billed customer for delivery service)

Ex. 185 (cont.)
General Ledger

Cash Account No. 101
———————————————————————————————————————————
Date Explanation Ref. Debit Credit Balance
———————————————————————————————————————————

Accounts Receivable Account No. 112
———————————————————————————————————————————
Date Explanation Ref. Debit Credit Balance
———————————————————————————————————————————

Prepaid Insurance Account No. 130
———————————————————————————————————————————
Date Explanation Ref. Debit Credit Balance
———————————————————————————————————————————

Equipment Account No. 155
———————————————————————————————————————————
Date Explanation Ref. Debit Credit Balance
———————————————————————————————————————————

Accounts Payable Account No. 201
———————————————————————————————————————————
Date Explanation Ref. Debit Credit Balance
———————————————————————————————————————————

Ex. 185 (cont.)
Notes Payable Account No. 205
———————————————————————————————————————————
Date Explanation Ref. Debit Credit Balance
———————————————————————————————————————————

Common Stock Account No. 311
———————————————————————————————————————————
Date Explanation Ref. Debit Credit Balance
———————————————————————————————————————————

Dividends Account No. 332
———————————————————————————————————————————
Date Explanation Ref. Debit Credit Balance
———————————————————————————————————————————

Service Revenue Account No. 400
———————————————————————————————————————————
Date Explanation Ref. Debit Credit Balance
———————————————————————————————————————————

Rent Expense Account No. 719
———————————————————————————————————————————
Date Explanation Ref. Debit Credit Balance
———————————————————————————————————————————

Ex. 185 (cont.)
Salaries and Wages Expense Account No. 726
———————————————————————————————————————————
Date Explanation Ref. Debit Credit Balance
———————————————————————————————————————————

Utilities Expense Account No. 735
———————————————————————————————————————————
Date Explanation Ref. Debit Credit Balance
———————————————————————————————————————————

MEDINA INFORMATION SERVICE
Trial Balance
September 30, 2015
———————————————————————————————————————————
Accounts Debit Credit
———————————————————————————————————————————

———————————————————————————————————————————

Ex. 186
The bookkeeper for Panda Bear Yard Service made a number of errors in journalizing and posting as described below:
1. A debit posting to accounts receivable for $500 was omitted.
2. A payment of accounts payable for $600 was credited to cash and debited to accounts receivable.
3. A credit to accounts receivable for $950 was posted as $95.
4. A cash purchase of equipment for $893 was journalized as a debit to equipment and a credit to notes payable. The credit posting was made for $839 while the debit posting was made for $893.
5. A debit posting of $400 for purchase of supplies was credited to supplies.
6. A debit to maintenance and repairs expense for $451 was posted as $415.
7. A debit posting for salaries and wages expense for $900 was made twice.
8. A cash purchase of supplies for $700 was journalized and posted as a debit to supplies for $70 and a credit to cash for $70.
Ex. 186 (cont.)
Instructions
For each error, indicate (a) whether the trial balance will balance; if the trial balance will not balance, indicate (b) the amount of the difference, and (c) the trial balance column that will have the larger total. Consider each error separately. Use the following form, in which error (1) is given as an example.
(A) (B) (C)
Error In Balance Difference Larger Column
1 No $500 Credit

Ex. 187
Post the following transactions to T-accounts and determine each account’s ending balance. 1. Supplies 2,800 Accounts Payable 2,800 2. Accounts Receivable 4,000 Service Revenue 4,000
3. Cash 3,000 Accounts Receivable 3,000 4. Accounts Payable 1,000 Cash 1,000

Ex. 188
The trial balance of Red House Painters shown below does not balance.
RED HOUSE PAINTERS
Trial Balance
June 30, 2015
———————————————————————————————————————————
Debit Credit
Cash $ 2,780
Accounts Receivable 7,420
Supplies 600
Equipment 8,300
Accounts Payable $ 9,777
Common Stock 1,952
Dividends 1,300
Service Revenue 15,200
Salaries and Wages Expense 3,800
Maintenance and Repairs Expense 1,600
Totals $25,800 $26,929

An examination of the ledger and journal reveals the following errors:
1. Each of the above listed accounts has a normal balance per the general ledger.
2. Cash of $270 received from a customer on account was debited to Cash $720 and credited to Accounts Receivable $720.
3. A dividend of $400 was posted as a credit to Dividends $400 and credit to Cash $400.
4. A debit of $300 was not posted to Salaries and Wages Expense.
5. The purchase of equipment on account for $700 was recorded as a debit to Maintenance and Repairs Expense and a credit to Accounts Payable for $700.
6. Services were performed on account for a customer, $510, for which Accounts Receivable was debited $510 and Service Revenue was credited $51.
7. A payment on account for $235 was credited to Cash for $235 and credited to Accounts Payable for $253.

Instructions
Prepare a correct trial balance.

Ex. 189
Some of the following errors would cause the debit and credit columns of the trial balance to have unequal totals. For each of the four cases, state whether the error would cause unequal totals in the trial balance. If the error causes unequal totals, indicate the amount of difference between the columns and state whether the debit or credit is larger. Each case is to be considered independently of the others.
1. A payment of $500 to a creditor was recorded by a debit to Accounts Payable of $50 and a credit to Cash of $500.
2. A $480 payment for a printer was recorded by a debit to Equipment of $48 and a credit to Cash for $48.
3. An account receivable in the amount of $2,500 was collected in full. The collection was recorded by a debit to Cash for $2,500 and a debit to Accounts Payable for $2,500.
4. An account payable was paid by issuing a check for $800. The payment was recorded by debiting Accounts Payable $800 and crediting Accounts Receivable $800.

Ex. 190
L. Phair and Associates is a financial planning service. The account balances at December 31, 2015 are shown by the following alphabetical list:
Accounts Payable $ 5,000
Accounts Receivable 19,000
Buildings 140,000
Cash 11,700
Common Stock 143,400
Equipment 15,400
Land 42,000
Notes Payable 95,000
Notes Receivable 8,100
Prepaid Insurance 6,400
Supplies 800

Instructions
Prepare a trial balance with the accounts arranged in financial statement order.

Ex. 191
The ledger accounts of the Fabulous Muscles Gym at June 30, 2015 are shown below:

Accounts Payable $ 9,100
Accounts Receivable 1,050
Buildings 43,000
Cash 14,100
Common Stock 62,800
Dividends 10,500
Equipment 42,900
Notes Payable 40,000
Supplies 350

Instructions
Prepare a trial balance with the ledger accounts arranged in the proper financial statement order. Include the appropriate heading.

Ex. 192
The ledger account balances for Galaxie 500 Company are listed below. Accounts Payable $ 6,000 Accounts Receivable 7,000 Cash 5,200 Common Stock 11,000 Dividends 4,000 Salaries and Wages Expense 20,800 Service Revenue 30,000 Unearned Service Revenue 2,000 Utilities Expense 12,000
Instructions
Prepare a trial balance in proper form for Galaxie at December 31, 2015.

Ex 193

The bookkeeper for Antony Johnson Auto Repair made a number of errors in journalizing
and posting, as described below.

1. A credit posting of $500 to Accounts Receivable was omitted.
2. A debit posting of $750 for Prepaid Insurance was debited to Insurance Expense.
3. A collection from a customer of $100 in payment of its account owed was journalized and
posted as a debit to Cash $100 and a credit to Service Revenue $100.
4. A credit posting of $350 to Interest Payable was made twice.
5. A cash purchase of supplies for $250 was journalized and posted as a debit to Supplies $25
and a credit to Cash $25.
6. A debit of $685 to Advertising Expense was posted as $658.
Ex. 193 (cont.)
Instructions
For each error:
(a) Indicate whether the trial balance will balance.
(b) If the trial balance will not balance, indicate the amount of the difference.
(c) Indicate the trial balance column that will have the larger total.

Consider each error separately. Use the following form, in which error (1) is given as an example.

(a) (b) (c)
Error In Balance Difference Larger Column
(1) No $500 debit

COMPLETION STATEMENTS

194. An _______________ is a record of increases and decreases in specific assets, liabilities, and stockholders’ items.
195. The process of entering an amount on the left side of an account is called ____________ the account, and making an entry on the right side is called _________________ the account.
196. ______________, _______________, and _______________ have debit normal account balances whereas _______________, ________________, and ________________ have credit normal account balances.
197. The four subdivisions of stockholders’ equity are: ________________, ________________, ________________, and ________________.
198. The basic steps in the recording process are: _______________ each transaction, enter the transaction in a ________________, and transfer the _______________ information to appropriate accounts in the ________________.
199. A sales slip, a check, and a cash register tape are examples of ________________ used as evidence that a transaction has taken place.
200. An accounting record where transactions are initially recorded in chronological order is called a ________________.
201. When three or more accounts are required in one journal entry, the entry is referred to as a ________________ entry.
202. The entire group of accounts and their balances maintained by a company is called the ________________.
203. A two column list of all accounts and their balances at a given time is a ______________.

MATCHING

204. Match the items below by entering the appropriate code letter in the space provided.

A. Account F. Journal
B. Normal account balance G. Posting
C. Debit H. Chart of accounts
D. Revenue account I. Trial balance
E. Compound entry J. Simple entry

1. An entry that involves three or more accounts.
2. Transferring journal entries to ledger accounts.
3. The side which increases an account.
4. A list of all the accounts used by an enterprise.
5. A record of increases and decreases in specific assets, liabilities, and stockholdersl items.
6. Left side of an account.
7. An entry that involves only two accounts.
8. A book of original entry.
9. A list of accounts and their balances at a given time.
10. Has a credit normal balance

SHORT-ANSWER ESSAY QUESTIONS

S-A E 205
An account is an important accounting record where financial information is stored until needed. Briefly explain (1) the nature of an account, (2) the different types of accounts, and (3) the manner in which an account is increased and decreased and its normal balance.

S-A E 206
Your roommate, a marketing major, thinks that debit means decrease and credit means increase. And, that every account can be debited and credited and as result, every account can have both a debit and a credit balance. Explain to your roommate (1) the meaning of debit and credit; (2) which accounts can only be debited, which can only be credited, and which can be both debited and credited; and (3) which accounts normally have debit balances and which credit balances.

S-A E 207
A fellow classmate is confused about how debits and credits relate to the basic accounting equation. State the basic accounting equation, convert it into the expanded accounting equation, and then explain how it ties into the rules for debits and credits.

S-A E 208
Describe the process of preparing a trial balance. What is the purpose of preparing a trial balance? If a trial balance does not balance, identify what might be the reasons why it does not balance. If the trial balance does balance, does that insure that the ledger accounts are correct? Explain.

S-A E 209

A classmate who is a computer science major thinks that accountants are obsolete. She states that computers can do the entire process without any human assistance.

Discuss the steps in the recording process and indicate what role the computer plays in that process.

S-A E 210
Amy Pond, a fellow employee, wants to understand the basic steps in the recording process. Identify and briefly explain the steps in the order in which they occur.

S-A E 211
All recordable transactions are initially recorded in the journal. Discuss the contributions that the journal makes to the recording process.

S-A E 212

A bookkeeping student has come to you for tutoring on the recording process. She is confused about the relationship between the chart of accounts and the ledger. Explain the purpose of the chart of accounts and the general ledger. In your explanation indicate the relationship between these two items as well.

S-A E 213
The process of transferring the information in the journal to the general ledger is called posting. Explain the posting process, including the importance of the journal page number and the account numbers.

S-A E 214
During a study session, a classmate states that it is not necessary to make journal entries and then post them to the ledger. She states that it is sufficient to analyze the transaction and simply record the information in T-accounts.
What is your response to this statement? Be brief, yet concise.

S-A E 215 (Ethics)
Jim Coleman, Jr. was appointed the manager of Maris Properties, a recently formed company that manages residential rental properties. Linda Grider is the accountant. She prepared a chart of accounts based on an analysis of the expenditures of the company. Two of the largest expense categories are Travel and Entertainment. Mr. Coleman believes that it is important to maintain a presence in the social life of the city. In this, he sharply differs from his father, Jim Coleman, Sr. The elder Mr. Coleman has set up Maris Properties in order to test his son’s management skills before allowing him to manage the more lucrative commercial property business. Mr. Coleman, Sr. provided the capital for Maris, and maintains close contact with the company. He allowed his son, however, to hire his own employees.

S-A E 215 (cont.)
Mr. Coleman has asked Ms. Grider to change the names of the Travel and Entertainment Expense accounts to Property Development. He hopes to deflect his father’s attention away from the amount he has spent on travel and entertainment until he has proven that his methods work. When Ms. Grider resisted, he reminded her that he, not his father, hired her. He also reminded her that she had been enthusiastic about his business plans when she was hired.

Required:
1. Who are the stakeholders in this situation?
2. Should Ms. Grider agree to the change in the Travel Expense and Entertainment Expense accounts to Property Development? Explain.

S-A E 216 (Communication)
A classmate is considering dropping his accounting class because he cannot understand the rules of debits and credits.
a. Can the student be successful in the course without an understanding of the rules of debits and credits?
b. Explain the rules of debits and credits in a way that will help him understand them.

CHALLENGE EXERCISES

CE 1

Presented below is information related to Pickett Real Estate Agency.

Oct. 1 Jeff Pickett begins business as a real estate agent with a cash investment of $30,000 in exchange for common stock.

2 Hires an administrative assistant.

3 Purchases office equipment for $3,500, by paying $500 cash with the balance on account.

6 Sells a house and lot for N. Foster, earning a fee of $6,900 with $900 collected in cash and the balance billed to N. Foster.

27 Pays $1,000 on the balance related to the transaction of October 3.

30 Pays the administrative assistant $2,300 in salary for October.

31 Collects $1,500 of the balance owed by N. Foster.

Instructions

1. Journalize the transactions. (You may omit explanations.)

2. What balance would Pickett Real Estate Agency report for Accounts Payable in its October 31 financial statements? In which category of which financial statements would it be found?

3. What balance would Pickett Real Estate Agency report for Accounts Receivable in its October 31 financial statements? In which category of which financial statements would it be found?

CE 2

Selected transactions for Garver Company during its first month in business are presented below.

Sept. 1 Invested $25,000 cash in the business in exchange for common stock.

5 Purchased equipment for $27,000 paying $6,000 in cash and the balance on account.

11 Performed $3,900 of services for clients, collecting $1,000 cash and billing them for the remainder.

25 Paid $7,000 cash on balance owed for equipment.

30 Declared and paid a $600 cash dividend.

30 Collected $1,200 from the clients from the September 11 transactions.

The Chart of accounts shows: No. 101 Cash, No. 112 Accounts Receivable, No. 157 Equipment, No. 201 Accounts Payable, No. 311 Common Stock, No. 332 Dividends, and No. 400 Service Revenue.

Instructions

(a) Journalize the transactions on page 1 of the journal (Omit explanations).
(b) Post the transactions using the standard account form.
(c) Based only on these transactions, what amount would Garver Company report as total assets in the October 31 balance sheet?
(d) Based only on these transactions, what amount would Garver Company report as total liabilities in the October 31 balance sheet.

CE 3
The accounts in the ledger of Ace Delivery Service contain ithe following balances on July 31, 2015. Accounts Receivable $10,000 Accounts Payable 7,900 Cash ? Common Stock 35,000 Equipment 45,000
Dividends 900 Gasoline Expense 800 Utilities Expense 600 Maintenance and Repair Expense 1,100 Retained Earnings 5,000 Service Revenue 13,000 Salaries and Wages Expense ?
Salaries and Wages Payable 1,000
Supplies 3,000
Unearned Service Revenue 2,500
Notes Payable 22,000
Prepaid Insurance 2,000

Instructions

Prepare a trial balance with the accounts arranged as illustrated in the chapter and fill in the missing amounts for Cash and Salaries and Wages Expense. Assume net income for the period is $3,500.

CHAPTER 3

ADJUSTING THE ACCOUNTS

CHAPTER LEARNING OBJECTIVES
1. Explain the time period assumption.
2. Explain the accrual basis of accounting
3. Explain the reasons for adjusting entries and identify the major types of adjusting entries.
4. Prepare adjusting entries for deferrals.
5. Prepare adjusting entries for accruals
6. Describe the nature and purpose of an adjusted trial balance.
a7. Prepare adjusting entries for the alternative treatment of deferrals.
a8. Discuss financial reporting concepts.

TRUE-FALSE STATEMENTS
1. Many business transactions affect more than one time period.

2. The time period assumption states that the economic life of a business entity can be divided into artificial time periods.

3. The time period assumption is often referred to as the expense recognition principle.

4. A company’s calendar year and fiscal year are always the same.

5. Accounting time periods that are one year in length are referred to as interim periods.

6. Income will always be greater under the cash basis of accounting than under the accrual basis of accounting.

7. The cash basis of accounting is not in accordance with generally accepted accounting principles.

8. The expense recognition principle requires that efforts be matched with accomplishments.

9. Expense recognition is tied to revenue recognition.

10. The revenue recognition principle dictates that revenue be recognized in the accounting period in which cash is received.

11. Adjusting entries are not necessary if the trial balance debit and credit column balances are equal.

12. An adjusting entry always involves two balance sheet accounts.

13. Adjusting entries are often made because some business events are not recorded as they occur.

14. Adjusting entries are recorded in the general journal but are not posted to the accounts in the general ledger.

15. Revenue received before services are performed and expenses paid before being used or consumed are both initially recorded as liabilities.

16. Accrued revenues are revenues which have been received but not yet recognized.

17. The book value of a depreciable asset is always equal to its market value because depreciation is a valuation technique.

18. Accumulated Depreciation is a liability account and has a normal credit account balance.

19. A liability—revenue account relationship exists with an unearned rent revenue adjusting entry.

20. The balances of the Depreciation Expense and the Accumulated Depreciation accounts should always be the same.

21. Unearned revenue is a prepayment that requires an adjusting entry when services are performed.

22. Asset prepayments become expenses when they expire.

23. A contra asset account is subtracted from a related account in the balance sheet.

24. If prepaid costs are initially recorded as an asset, no adjusting entries will be required in the future.

25. The cost of a depreciable asset less accumulated depreciation reflects the book value of the asset.

26. Accrued revenues are revenues that have been recognized and received before financial statements have been prepared.

27. Financial statements can be prepared from the information provided by an adjusted trial balance.

a28. The adjusting entry at the end of the period to record an expired cost may be different depending on whether the cost was initially recorded as an asset or an expense.

a29. Rent received in advance and credited to a rent revenue account which is still unearned at the end of the period, will require an adjusting entry crediting a liability account for the amount still unearned.

a30. An adjusting entry requiring a credit to Insurance Expense indicates that the initial transaction was charged to an asset account.

a31. To be faithfully representative, accounting information should predict future events, confirm prior expectations, and be reported on a timely basis.

a32. Consistent use of the same accounting principles and methods is necessary for meaningful analysis of trends within a company.

a33. Consistency in accounting means that a company uses the same accounting principles from one accounting period to the next accounting period.

a34. The quality of consistency pertains to the use of the same accounting principles by firms in the same industry.

a35. The periodicity assumption states that the business will remain in operation for the foreseeable future.

a36. For accounting purposes, business transactions should be kept separate from the personal transactions of the owners of the business.

a37. The economic entity assumption states that economic events can be identified with a particular unit of accountability.

a38. The monetary unit assumption states that transactions that can be measured in terms of money should be recorded in the accounting records.

a39. The going concern assumption is that the business will continue in operation long enough to carry out its existing objectives and commitments.

a40. A common application of materiality is weighing the factual nature of cost figures versus the relevance of fair value.

Additional True-False Questions

41. The expense recognition principle requires that expenses be matched with revenues.

42. In general, adjusting entries are required each time financial statements are prepared.

43. Every adjusting entry affects one balance sheet account and one income statement account.

44. The Accumulated Depreciation account is a contra asset account that is reported on the balance sheet.

45. Accrued revenues are amounts recorded and received but not yet recognized.

46. An adjusted trial balance should be prepared before the adjusting entries are made.

a47. When a prepaid expense is initially debited to an expense account, expenses and assets are both overstated prior to adjustment.

MULTIPLE CHOICE QUESTIONS
48. Monthly and quarterly time periods are called
a. calendar periods.
b. fiscal periods.
c. interim periods.
d. quarterly periods.

49. The time period assumption states that
a. a transaction can only affect one period of time.
b. estimates should not be made if a transaction affects more than one time period.
c. adjustments to the company’s accounts can only be made in the time period when the business terminates its operations.
d. the economic life of a business can be divided into artificial time periods.

50. An accounting time period that is one year in length, but does not begin on January 1, is referred to as
a. a fiscal year.
b. an interim period.
c. the time period assumption.
d. a reporting period.

51. Adjustments would not be necessary if financial statements were prepared to reflect net income from
a. monthly operations.
b. fiscal year operations.
c. interim operations.
d. lifetime operations.

52. Management usually desires ________ financial statements and the IRS requires all businesses to file _________ tax returns.
a. annual, annual
b. monthly, annual
c. quarterly, monthly
d. monthly, monthly

53. The time period assumption is also referred to as the
a. calendar assumption.
b. cyclicity assumption.
c. periodicity assumption.
d. fiscal assumption.

54. In general, the shorter the time period, the difficulty of making the proper adjustments to accounts
a. is increased.
b. is decreased.
c. is unaffected.
d. depends on if there is a profit or loss.

55. Which of the following is not a common time period chosen by businesses as their accounting period?
a. Daily
b. Monthly
c. Quarterly
d. Annually

56. Which of the following time periods would not be referred to as an interim period?
a. Monthly
b. Quarterly
c. Semi-annually
d. Annually

57. The fiscal year of a business is usually determined by
a. the IRS.
b. a lottery.
c. the business.
d. the SEC.

58. Which of the following is in accordance with generally accepted accounting principles?
a. Accrual-basis accounting
b. Cash-basis accounting
c. Both accrual-basis and cash-basis accounting
d. Neither accrual-basis nor cash-basis accounting

59. The revenue recognition principle dictates that revenue should be recognized in the accounting records
a. when cash is received.
b. when the performance obligation is satisfied.
c. at the end of the month.
d. in the period that income taxes are paid.

60. In a service-type business, revenue is considered recognized
a. at the end of the month.
b. at the end of the year.
c. when the service is performed.
d. when cash is received.

61. The expense recognition principle matches
a. customers with businesses.
b. expenses with revenues.
c. assets with liabilities.
d. creditors with businesses.

62. Live Wire Hot Rod Shop follows the revenue recognition principle. Live Wire services a car on July 31. The customer picks up the vehicle on August 1 and mails the payment to Live Wire on August 5. Live Wire receives the check in the mail on August 6. When should Live Wire show that the revenue was recognized?
a. July 31
b. August 1
c. August 5
d. August 6

63. A company spends $15 million dollars for an office building. Over what period should the cost be written off?
a. When the $15 million is expended in cash.
b. All in the first year.
c. Over the useful life of the building.
d. After $15 million in revenue is recognized.

64. The expense recognition principle states that expenses should be matched with revenues. Another way of stating the principle is to say that
a. assets should be matched with liabilities.
b. efforts should be matched with accomplishments.
c. owner withdrawals should be matched with owner contributions.
d. cash payments should be matched with cash receipts.

65. A flower shop makes a large sale for $1,200 on November 30. The customer is sent a statement on December 5 and a check is received on December 10. The flower shop follows GAAP and applies the revenue recognition principle. When is the $1,200 considered to be recognized?
a. December 5.
b. December 10.
c. November 30.
d. December 1.

66. A candy factory’s employees work overtime to finish an order that is sold on February 28. The office sends a statement to the customer in early March and payment is received by mid-March. The overtime wages should be expensed in
a. February.
b. March.
c. the period when the workers receive their checks.
d. either in February or March depending on when the pay period ends.

67. Expenses sometimes make their contribution to revenue in a different period than when they are paid. When salaries and wages are incurred in one period and paid in the next period, this often leads to which account appearing on the balance sheet at the end of the time period?
a. Due from Employees.
b. Due to Employer.
c. Salaries and Wages Payable.
d. Salaries and Wages Expense.

68. Under accrual-basis accounting
a. cash must be received before revenue is recognized.
b. net income is calculated by matching cash outflows against cash inflows.
c. events that change a company’s financial statements are recognized in the period they occur rather than in the period in which cash is paid or received.
d. the ledger accounts must be adjusted to reflect a cash basis of accounting before financial statements are prepared under generally accepted accounting principles.

69. Adjusting entries are required
a. yearly.
b. quarterly.
c. monthly.
d. every time financial statements are prepared.

70. Which one of the following is not an application of revenue recognition?
a. Recording revenue as an adjusting entry on the last day of the accounting period.
b. Accepting cash from an established customer for services to be performed over the next three months.
c. Billing customers on June 30 for services completed during June.
d. Receiving cash for services performed.

71. Which statement is correct?
a. As long as a company consistently uses the cash basis of accounting, generally accepted accounting principles allow its use.
b. The use of the cash basis of accounting violates both the revenue recognition and expense recognition principles.
c. The cash basis of accounting is objective because no one can be certain of the amount of revenue until the cash is received.
d. As long as management is ethical, there are no problems with using the cash basis of accounting.

72. The following is selected information from Motley Corporation for the fiscal year ending October 31, 2015.
Cash received from customers $300,000
Revenue recognized 375,000
Cash paid for expenses 180,000
Cash paid for computers on November 1, 2014 that will be used
for 3 years (annual depreciation is $16,000) 48,000
Expenses incurred, including interest, but excluding any depreciation 220,000
Proceeds from a bank loan, part of which was used to pay for
the computers 100,000
Based on the accrual basis of accounting, what is Motley Corporation’s net income for the year ending October 31, 2015?
a. $72,000.
b. $104,000.
c. $139,000.
d. $155,000.

73. Crue Company had the following transactions during 2015:
• Sales of $4,800 on account
• Collected $2,000 for services to be performed in 2016
• Paid $1,625 cash in salaries
• Purchased airline tickets for $250 in December for a trip to take place in 2016

What is Crue’s 2015 net income using accrual accounting?
a. $2,925.
b. $3,175.
c. $4,925.
d. $5,175.

74. Crue Company had the following transactions during 2015:
• Sales of $4,500 on account
• Collected $2,500 for services to be performed in 2016
• Paid $1,625 cash in salaries
• Purchased airline tickets for $250 in December for a trip to take place in 2016

What is Crue’s 2015 net income using cash basis accounting?
a. $625.
b. $875.
c. $5,125.
d. $5,375.

75. A small company may be able to justify using a cash basis of accounting if they have
a. sales under $1,000,000.
b. no accountants on staff.
c. few receivables and payables.
d. all sales and purchases on account.

76. Adjusting entries are required
a. because some costs expire with the passage of time and have not yet been journalized.
b. when the company’s profits are below the budget.
c. when expenses are recorded in the period in which they are incurred.
d. when revenues are recorded in the period in which services are performed.

77. Which one of the following is not a justification for adjusting entries?
a. Adjusting entries are necessary to ensure that the revenue recognition principle is followed.
b. Adjusting entries are necessary to ensure that the expense recognition principle is followed.
c. Adjusting entries are necessary to enable financial statements to be in conformity with GAAP.
d. Adjusting entries are necessary to bring the general ledger accounts in line with the budget.

78. An adjusting entry
a. affects two balance sheet accounts.
b. affects two income statement accounts.
c. affects a balance sheet account and an income statement account.
d. is always a compound entry.

79. The preparation of adjusting entries is
a. straight forward because the accounts that need adjustment will be out of balance.
b. often an involved process requiring the skills of a professional.
c. only required for accounts that do not have a normal balance.
d. optional when financial statements are prepared.

80. If a resource has been consumed but a bill has not been received at the end of the accounting period, then
a. an expense should be recorded when the bill is received.
b. an expense should be recorded when the cash is paid out.
c. an adjusting entry should be made recognizing the expense.
d. it is optional whether to record the expense before the bill is received.

81. Accounts often need to be adjusted because
a. there are never enough accounts to record all the transactions.
b. many transactions affect more than one time period.
c. there are always errors made in recording transactions.
d. management can’t decide what they want to report.

82. Adjusting entries are
a. not necessary if the accounting system is operating properly.
b. usually required before financial statements are prepared.
c. made whenever management desires to change an account balance.
d. made to balance sheet accounts only.

83. Expenses incurred but not yet paid or recorded are called
a. prepaid expenses.
b. accrued expenses.
c. interim expenses.
d. unearned expenses.

84. A law firm received $3,000 cash for legal services to be rendered in the future. The full amount was credited to the liability account Unearned Service Revenue. If the legal services have been rendered at the end of the accounting period and no adjusting entry is made, this would cause
a. expenses to be overstated.
b. net income to be overstated.
c. liabilities to be understated.
d. revenues to be understated.

85. Adjusting entries can be classified as
a. postponements and advances.
b. accruals and deferrals.
c. deferrals and postponements.
d. accruals and advances.

86. Accrued revenues are
a. cash received and a liability recorded before services are performed.
b. revenue for services performed and recorded as liabilities before they are received.
c. revenue for services performed but not yet received in cash or recorded.
d. revenue for services performed and already received in cash and recorded.

87. Prepaid expenses are
a. paid and recorded in an asset account before they are used or consumed.
b. paid and recorded in an asset account after they are used or consumed.
c. incurred but not yet paid or recorded.
d. incurred and already paid or recorded.

88. Accrued expenses are
a. paid and recorded in an asset account before they are used or consumed.
b. paid and recorded in an asset account after they are used or consumed.
c. incurred but not yet paid or recorded.
d. incurred and already paid or recorded.

89. Unearned revenues are
a. cash received and a liability recorded before services are performed.
b. revenue for services performed and recorded as liabilities before they are received.
c. revenue for services performed but not yet received in cash or recorded.
d. revenue for services performed and already received in cash and recorded.

90. A liability—revenue relationship exists with
a. prepaid expense adjusting entries.
b. accrued expense adjusting entries.
c. unearned revenue adjusting entries.
d. accrued revenue adjusting entries.

91. Which of the following reflects the balances of prepayment accounts prior to adjustment?
a. Balance sheet accounts are understated and income statement accounts are understated.
b. Balance sheet accounts are overstated and income statement accounts are overstated.
c. Balance sheet accounts are overstated and income statement accounts are understated.
d. Balance sheet accounts are understated and income statement accounts are overstated.

92. An asset—expense relationship exists with
a. liability accounts.
b. revenue accounts.
c. prepaid expense adjusting entries.
d. accrued expense adjusting entries.

93. Lake of Fire Company purchased supplies costing $7,000 and debited Supplies for the full amount. At the end of the accounting period, a physical count of supplies revealed $1,900 still on hand. The appropriate adjusting journal entry to be made at the end of the period would be
a. Debit Supplies Expense, $1,900; Credit Supplies, $1,900.
b. Debit Supplies, $5,100; Credit Supplies Expense, $5,100.
c. Debit Supplies Expense, $5,100; Credit Supplies, $5,100.
d. Debit Supplies, $1,900; Credit Supplies Expense, $1,900.

94. If an adjustment is needed for unearned revenues, the
a. liability and related revenue are overstated before adjustment.
b. liability and related revenue are understated before adjustment.
c. liability is overstated and the related revenue is understated before adjustment.
d. liability is understated and the related revenue is overstated before adjustment.

95. The balance in the supplies account on June 1 was $5,200, supplies purchased during June were $3,500, and the supplies on hand at June 30 were $3,000. The amount to be used for the appropriate adjusting entry is
a. $3,500.
b. $5,700.
c. $6,500.
d. $11,700.

96. Depreciation expense for a period is the
a. original cost of an asset – accumulated depreciation.
b. book value of the asset ÷ useful life.
c. portion of an asset’s cost that expired during the period.
d. market value of the asset ÷ useful life.

97. Accumulated Depreciation is
a. an expense account.
b. a stockholders’ equity account.
c. a liability account.
d. a contra asset account.

98. Meat Puppets Company purchased equipment for $7,200 on December 1. It is estimated that annual depreciation on the equipment will be $1,800. If financial statements are to be prepared on December 31, the company should make the following adjusting entry:
a. Debit Depreciation Expense, $1,800; Credit Accumulated Depreciation, $1,800.
b. Debit Depreciation Expense, $150; Credit Accumulated Depreciation, $150.
c. Debit Depreciation Expense, $5,400; Credit Accumulated Depreciation, $5,400.
d. Debit Equipment, $7,200; Credit Accumulated Depreciation, $7,200.

99. REM Real Estate received a check for $27,000 on July 1 which represents a 6 month advance payment of rent on a building it rents to a client. Unearned Rent Revenue was credited for the full $27,000. Financial statements will be prepared on July 31. REM Real Estate should make the following adjusting entry on July 31:
a. Debit Unearned Rent Revenue, $4,500; Credit Rent Revenue, $4,500.
b. Debit Rent Revenue, $4,500; Credit Unearned Rent Revenue, $4,500.
c. Debit Unearned Rent Revenue, $27,000; Credit Rent Revenue, $24,000.
d. Debit Cash, $27,000; Credit Rent Revenue, $27,000.

100. As prepaid expenses expire with the passage of time, the correct adjusting entry will be a
a. debit to an asset account and a credit to an expense account.
b. debit to an expense account and a credit to an asset account.
c. debit to an asset account and a credit to an asset account.
d. debit to an expense account and a credit to an expense account.

101. A company usually determines the amount of supplies used during a period by
a. adding the supplies on hand to the balance of the Supplies account.
b. summing the amount of supplies purchased during the period.
c. taking the difference between the supplies purchased and the supplies paid for during the period.
d. taking the difference between the balance of the Supplies account and the cost of supplies on hand.

102. If a company fails to make an adjusting entry to record supplies expense, then
a. stockholders’ equity will be understated.
b. expense will be understated.
c. assets will be understated.
d. net income will be understated.

103. What is the proper adjusting entry at June 30, the end of the fiscal year, based on a prepaid insurance account balance before adjustment, $18,500, and unexpired amounts per analysis of policies of $6,000?
a. Debit Insurance Expense, $6,000; Credit Prepaid Insurance, $6,000.
b. Debit Insurance Expense, $18,500; Credit Prepaid Insurance, $18,500.
c. Debit Prepaid Insurance, $12,500; Credit Insurance Expense, $12,500.
d. Debit Insurance Expense, $12,500; Credit Prepaid Insurance, $12,500.

104. At December 31, 2015, before any year-end adjustments, Murmur Company’s Insurance Expense account had a balance of $2,450 and its Prepaid Insurance account had a balance of $3,800. It was determined that $2,800 of the Prepaid Insurance had expired. The adjusted balance for Insurance Expense for the year would be
a. $2,450.
b. $3,450.
c. $2,800.
d. $5,250.

105. Depreciation is the process of
a. valuing an asset at its fair value.
b. increasing the value of an asset over its useful life in a rational and systematic manner.
c. allocating the cost of an asset to expense over its useful life in a rational and systematic manner.
d. writing down an asset to its real value each accounting period.

106. A new accountant working for Spirit Walker Company records $900 Depreciation Expense on store equipment as follows:
Dr. Depreciation Expense 900
Cr. Cash 900
The effect of this entry is to
a. adjust the accounts to their proper amounts on December 31.
b. understate total assets on the balance sheet as of December 31.
c. overstate the book value of the depreciable assets at December 31.
d. understate the book value of the depreciable assets as of December 31.

107. From an accounting standpoint, the acquisition of productive facilities can be thought of as a long-term
a. accrual of expense.
b. accrual of revenue.
c. accrual of unearned revenue.
d. prepayment for services.

108. The balance in the Prepaid Rent account before adjustment at the end of the year is $21,000, which represents three months’ rent paid on December 1. The adjusting entry required on December 31 is to
a. debit Rent Expense, $7,000; credit Prepaid Rent, $7,000.
b. debit Rent Expense, $14,000; credit Prepaid Rent $14,000.
c. debit Prepaid Rent, $7,000; credit Rent Expense, $7,000.
d. debit Prepaid Rent, $14,000; credit Rent Expense, $14,000.

109. An accumulated depreciation account
a. is a contra-liability account.
b. increases on the debit side.
c. is offset against total assets on the balance sheet.
d. has a normal credit balance.

110. The difference between the cost of a depreciable asset and its related accumulated depreciation is referred to as the
a. market value of the asset.
b. blue book value of the asset.
c. book value of the asset.
d. depreciated difference of the asset.

111. Book value is also referred to as
a. accumulated depreciation.
b. carrying value.
c. fair value.
d. original cost.

112. Which of the following would not result in unearned revenue?
a. Rent collected in advance from tenants
b. Services performed on account
c. Sale of season tickets to football games
d. Sale of two-year magazine subscriptions

113. If a business pays rent in advance and debits a Prepaid Rent account, the company receiving the rent payment will credit
a. Cash.
b. Prepaid Rent.
c. Unearned Rent Revenue.
d. Rent Revenue.

114. Unearned revenue is classified as
a. an asset account.
b. a revenue account.
c. a contra-revenue account.
d. a liability account.

115. If a business has received cash in advance of services performed and credits a liability account, the adjusting entry needed after the services are performed will be
a. debit Unearned Service Revenue and credit Cash.
b. debit Unearned Service Revenue and credit Service Revenue.
c. debit Unearned Service Revenue and credit Prepaid Expense.
d. debit Unearned Service Revenue and credit Accounts Receivable.

116. Dreamtime Laundry purchased $7,000 worth of supplies on June 2 and recorded the purchase as an asset. On June 30, an inventory of the supplies indicated only $1,000 on hand. The adjusting entry that should be made by the company on June 30 is
a. Debit Supplies Expense, $1,000; Credit Supplies, $1,000.
b. Debit Supplies, $1,000; Credit Supplies Expense, $1,000.
c. Debit Supplies, $6,000; Credit Supplies Expense, $6,000.
d. Debit Supplies Expense, $6,000; Credit Supplies, $6,000.

117. On July 1, Runner’s Sports Store paid $14,000 to Corona Realty for 4 months rent beginning July 1. Prepaid Rent was debited for the full amount. If financial statements are prepared on July 31, the adjusting entry to be made by Runner’s Sports Store is
a. Debit Rent Expense, $14,000; Credit Prepaid Rent, $3,500.
b. Debit Prepaid Rent, $3,500; Credit Rent Expense, $3,500.
c. Debit Rent Expense, $3,500; Credit Prepaid Rent, $3,500.
d. Debit Rent Expense, $14,000; Credit Prepaid Rent, $14,000.

118. Fugazi City College sold season tickets for the 2015 football season for $240,000. A total of 8 games will be played during September, October and November. In September, three games were played. The adjusting journal entry at September 30
a. is not required. No adjusting entries will be made until the end of the season in November.
b. will include a debit to Cash and a credit to Ticket Revenue for $60,000.
c. will include a debit to Unearned Ticket Revenue and a credit to Ticket Revenue for $90,000.
d. will include a debit to Ticket Revenue and a credit to Unearned Ticket Revenue for $80,000.

119. Fugazi City College sold season tickets for the 2015 football season for $240,000. A total of 8 games will be played during September, October and November. In September, two games were played. In October, three games were played. The balance in Unearned Ticket Revenue at October 31 is
a. $0.
b. $60,000.
c. $90,000.
d. $150,000.

120. Fugazi City College sold season tickets for the 2015 football season for $240,000. A total of 8 games will be played during September, October and November. Assuming all the games are played, the Unearned Ticket Revenue balance that will be reported on the December 31 balance sheet will be
a. $0.
b. $90,000.
c. $150,000.
d. $240,000.

121. At March 1, 2015, Minutemen Corp. had supplies on hand of $500. During the month, Minutemen purchased supplies of $1,200 and used supplies of $1,500. The March 31 adjusting journal entry should include a
a. debit to the supplies account for $1,500.
b. credit to the supplies account for $500.
c. debit to the supplies account for $1,200.
d. credit to the supplies account for $1,500.

122. Double Nickels Company purchased equipment for $9,000 on January 1, 2015. The company expects to use the equipment for 3 years. It has no salvage value. Monthly depreciation expense on the asset is
a. $0.
b. $250.
c. $3,000.
d. $9,000.

123. Husker Du Supplies Inc. purchased a 12-month insurance policy on March 1, 2015 for $1,800. At March 31, 2015, the adjusting journal entry to record expiration of this asset will include a
a. debit to Prepaid Insurance and a credit to Cash for $1,800.
b. debit to Prepaid Insurance and a credit to Insurance Expense for $200.
c. debit to Insurance Expense and a credit to Prepaid Insurance for $150.
d. debit to Insurance Expense and a credit to Cash for $150.

124. Mary Chain Investments purchased an 18-month insurance policy on May 31, 2015 for $3,600. The December 31, 2015 balance sheet would report Prepaid Insurance of
a. $0 because Prepaid Insurance is reported on the Income Statement.
b. $1,400.
c. $2,200.
d. $3,600.

125. At March 1, Psychocandy Inc. reported a balance in Supplies of $200. During March, the company purchased supplies for $750 and consumed supplies of $800. If no adjusting entry is made for supplies
a. stockholders’ equity will be overstated by $800.
b. expenses will be understated by $750.
c. assets will be understated by $250.
d. net income will be understated by $800.

126. Pixies Inc. pays its rent of $54,000 annually on January 1. If the February 28 monthly adjusting entry for prepaid rent is omitted, which of the following will be true?
a. Failure to make the adjustment does not affect the February financial statements.
b. Expenses will be overstated by $4,500 and net income and stockholders’ equity will be understated by $4,500.
c. Assets will be overstated by $9,000 and net income and stockholders’ equity will be understated by $9,000.
d. Assets will be overstated by $4,500 and net income and stockholders’ equity will be overstated by $4,500.

127. On January 1, 2014, Doolittle Company purchased furniture for $7,560. The company expects to use the furniture for 3 years. The asset has no salvage value. The book value of the furniture at December 31, 2015 is
a. $0.
b. $2,520.
c. $5,040.
d. $7,560.

128. On January 1, 2014, Mudhoney Inc. purchased equipment for $45,000. The company is depreciating the equipment at the rate of $750 per month. At January 31, 2015, the balance in Accumulated Depreciation is
a. $750.
b. $9,000.
c. $9,750.
d. $35,250.

129. On January 1, 2015, Superfuzz Company purchased equipment for $40,000. The company is depreciating the equipment at the rate of $800 per month. The book value of the equipment at December 31, 2015 is
a. $0.
b. $9,600.
c. $30,400.
d. $40,000.

130. Ultramega Company collected $19,600 in May of 2015 for 4 months of service which would take place from October of 2015 through January of 2016. The revenue reported from this transaction during 2015 would be
a. 0.
b. $4,900.
c. $14,700.
d. $19,600.

131. Soundgarden Company collected $18,200 in May of 2015 for 5 months of service which would take place from October of 2015 through February of 2016. The revenue reported from this transaction during 2015 would be
a. $0.
b. $7,280.
c. $10,920.
d. $18,200.

132. Sonic Youth Corporation purchased a one-year insurance policy in January 2015 for $49,500. The insurance policy is in effect from March 2015 through February 2016. If the company neglects to make the proper year-end adjustment for the expired insurance
a. net income and assets will be understated by $41,250.
b. net income and assets will be overstated by $41,250.
c. net income and assets will be understated by $8,250.
d. net income and assets will be overstated by $8,250.

133. Dinosaur Junior Corporation purchased a one-year insurance policy in January 2015 for $75,000. The insurance policy is in effect from May 2015 through April 2016. If the company neglects to make the proper year-end adjustment for the expired insurance
a. net income and assets will be understated by $50,000.
b. net income and assets will be overstated by $50,000.
c. net income and assets will be understated by $25,000.
d. net income and assets will be overstated by $25,000.

134. If an adjusting entry is not made for an accrued revenue,
a. assets will be overstated.
b. expenses will be understated.
c. stockholders’ equity will be understated.
d. revenues will be overstated.

135. If an adjusting entry is not made for an accrued expense,
a. expenses will be overstated.
b. liabilities will be understated.
c. net income will be understated.
d. stockholders’ equity will be understated.

136. Failure to prepare an adjusting entry at the end of the period to record an accrued expense would cause
a. net income to be understated.
b. an overstatement of assets and an overstatement of liabilities.
c. an understatement of expenses and an understatement of liabilities.
d. an overstatement of expenses and an overstatement of liabilities.

137. Failure to prepare an adjusting entry at the end of a period to record an accrued revenue would cause
a. net income to be overstated.
b. an understatement of assets and an understatement of revenues.
c. an understatement of revenues and an understatement of liabilities.
d. an understatement of revenues and an overstatement of liabilities.

138. Sebastian Belle has performed $2,000 of CPA services for a client but has not billed the client as of the end of the accounting period. What adjusting entry must Sebastian make?
a. Debit Cash and credit Unearned Service Revenue
b. Debit Accounts Receivable and credit Unearned Service Revenue
c. Debit Accounts Receivable and credit Service Revenue
d. Debit Unearned Service Revenue and credit Service Revenue

139. Sebastian Belle, CPA, has billed her clients for services performed. She subsequently receives payments from her clients. What entry will Sebastian make upon receipt of the payments?
a. Debit Unearned Service Revenue and credit Service Revenue
b. Debit Cash and credit Accounts Receivable
c. Debit Accounts Receivable and credit Service Revenue
d. Debit Cash and credit Service Revenue

140. NWA Air Charter signed a four-month note payable in the amount of $20,000 on September 1. The note requires interest at an annual rate of 9%. The amount of interest to be accrued at the end of September is
a. $150.
b. $200.
c. $600.
d. $1,800.

141. Uncle Tupelo’s Gifts signs a three-month note payable to help finance increases in inventory for the Christmas shopping season. The note is signed on November 1 in the amount of $75,000 with annual interest of 12%. What is the adjusting entry to be made on December 31 for the interest expense accrued to that date, if no entries have been made previously for the interest?
a. Interest Expense 1,500
Interest Payable 1,500
b. Interest Expense 2,250
Interest Payable 2,250
c. Interest Expense 1,500
Cash 1,500
d. Interest Expense 1,500
Notes Payable 1,500

142. Stone Roses Candies paid employee wages on and through Friday, January 26, and the next payroll will be paid in February. There are three more working days in January (29–31). Employees work 5 days a week and the company pays $1,500 a day in wages. What will be the adjusting entry to accrue wages expense at the end of January?
a. Salaries and Wages Expense 1,500
Salaries and Wages Payable 1,500
b. Salaries and Wages Expense 7,500
Salaries and Wages Payable 7,500
c. Salaries and Wages Expense 4,500
Salaries and Wages Payable 4,500
d. No adjusting entry is required.

143. A company shows a balance in Salaries and Wages Payable of $38,000 at the end of the month. The next payroll amounting to $48,000 is to be paid in the following month. What will be the journal entry to record the payment of salaries?
a. Salaries and Wages Expense 48,000
Salaries and Wages Payable 48,000
b. Salaries and Wages Expense 48,000
Cash 48,000
c. Salaries and Wages Expense 10,000
Cash 10,000
d. Salaries and Wages Expense 10,000
Salaries and Wages Payable 38,000
Cash 48,000

144. A business pays weekly salaries of $30,000 on Friday for a five-day week ending on that day. The adjusting entry necessary at the end of the fiscal period ending on a Thursday is
a. debit Salaries and Wages Payable, $24,000; credit Cash, $24,000.
b. debit Salaries and Wages Expense, $24,000; credit Cash, $24,000.
c. debit Salaries and Wages Expense, $24,000; credit Salaries and Wages Payable, $24,000.
d. debit Salaries and Wages Expense, $6,000; credit Salaries and Wages Payable, $6,000.

145. SurferRosa Music Store borrowed $30,000 from the bank signing a 9%, 3-month note on September 1. Principal and interest are payable to the bank on December 1. If the company prepares monthly financial statements, the adjusting entry that the company should make for interest on September 30, would be
a. Debit Interest Expense, $2,700; Credit Interest Payable, $2,700.
b. Debit Interest Expense, $225; Credit Interest Payable, $225.
c. Debit Notes Payable, $2,700; Credit Cash, $2,700.
d. Debit Cash, $675; Credit Interest Payable, $675.

146. Nirvana Corporation issued a one-year, 9%, $400,000 note on April 30, 2015. Interest expense for the year ended December 31, 2015 was
a. $21,000.
b. $24,000.
c. $27,000.
d. $36,000.

147. Yo La Corporation issued a one-year, 6%, $100,000 note on August 31, 2015. Interest expense for the year ended December 31, 2015 was
a. $6,000.
b. $2,500.
c. $2,000.
d. $1,500.

148. Employees at Tengo Corporation are paid $15,000 cash every Friday for working Monday through Friday. The calendar year accounting period ends on Wednesday, December 31. How much salaries and wages expense should be recorded two days later on January 2?
a. $15,000
b. $9,000
c. $6,000
d. None, matching requires the weekly salary to be accrued on December 31.

149. Can financial statements be prepared directly from the adjusted trial balance?
a. They cannot. The general ledger must be used.
b. Yes, adjusting entries have been recorded in the general journal and posted to the ledger accounts.
c. No, the adjusted trial balance merely proves the equality of the total debit and total credit balances in the ledger after adjustments are posted. It has no other purpose.
d. They can because that is the only reason that an adjusted trial balance is prepared.

150. The adjusted trial balance is prepared
a. after financial statements are prepared.
b. before the trial balance.
c. to prove the equality of total assets and total liabilities.
d. after adjusting entries have been journalized and posted.

151. An adjusted trial balance
a. is prepared after the financial statements are completed.
b. proves the equality of the total debit balances and total credit balances of ledger accounts after all adjustments have been made.
c. is a required financial statement under generally accepted accounting principles.
d. cannot be used to prepare financial statements.

152. Which of the statements below is not true?
a. An adjusted trial balance should show ledger account balances.
b. An adjusted trial balance can be used to prepare financial statements.
c. An adjusted trial balance proves the mathematical equality of debits and credits in the ledger.
d. An adjusted trial balance is prepared before all transactions have been journalized.

a 153. Sebadoah is a barber who does his own accounting for his shop. When he buys supplies he routinely debits Supplies Expense. Sebadoah purchased $1,500 of supplies in January and his inventory at the end of January shows $300 of supplies remaining. What adjusting entry should Sebadoah make on January 31?
a. Supplies Expense 300
Supplies 300
b. Supplies Expense 1,500
Cash 1,500
c. Supplies 300
Supplies Expense 300
d. Supplies Expense 1,200
Supplies 1,200

a 154. Alternative adjusting entries do not apply to
a. accrued revenues and accrued expenses.
b. prepaid expenses.
c. unearned revenues.
d. prepaid expenses and unearned revenues.

a 155. Elliott Smith is a lawyer who requires that his clients pay him in advance of legal services rendered. Elliott routinely credits Service Revenue when his clients pay him in advance. In June Elliott collected $15,000 in advance fees and completed 70% of the work related to these fees. What adjusting entry is required by Elliott’s firm at the end of June?
a. Unearned Service Revenue 10,500
Service Revenue 10,500
b. Unearned Service Revenue 4,500
Service Revenue 4,500
c. Cash 15,000
Service Revenue 15,000
d. Service Revenue 4,500
Unearned Service Revenue 4,500

a 156. If prepaid expenses are initially recorded in expense accounts and have not all been used at the end of the accounting period, the failure to make an adjusting entry will cause
a. assets to be understated.
b. assets to be overstated.
c. expenses to be understated.
d. contra-expenses to be overstated.

a 157. If unearned revenues are initially recorded in revenue accounts and not all the related services been performed at the end of the accounting period, the failure to make an adjusting entry will cause
a. liabilities to be overstated.
b. revenues to be understated.
c. revenues to be overstated.
d. accounts receivable to be overstated.

a158. On January 2, 2015, Superchunk purchased a general liability insurance policy for $2,700 for coverage for the calendar year. The entire $2,700 was charged to Insurance Expense on January 2, 2015. If the firm prepares monthly financial statements, the proper adjusting entry on January 31, 2015, will be:
a. Insurance Expense 2,475
Prepaid Insurance 2,475
b. Prepaid Insurance 2,475
Insurance Expense 2,475
c. Insurance Expense 225
Prepaid Insurance 225
d. Prepaid Insurance 225
Insurance Expense 225

a 159. If accounting information has relevance, it is useful in making predictions about
a. future tax audits.
b. new accounting principles.
c. foreign currency exchange rates.
d. the future events of a company.

a 160. Which one of the following is not an enhancing quality of useful information?
a. Timeliness
b. Understandability
c. Materiality
d. Comparability

a 161. All of the following are characteristics of accounting information except
a. faithful representation.
b. comparability.
c. relevance.
d. flexibility.

a 162. The two fundamental qualities of useful information are
a. verifiability and timeliness.
b. relevance and faithful representation.
c. comparability and flexibility.
d. understandability and consistency.

a 163. Relevant accounting information
a. is information that has been audited.
b. must be reported within the operating cycle or one year, whichever is longer.
c. has been objectively determined.
d. is information that is capable of making a difference in a business decision.

a 164. Characteristics associated with relevant accounting information are
a. comparability and timeliness.
b. predictive value and confirmatory value.
c. neutral and verifiable.
d. consistency and understandability.

a 165. Characteristics associated with faithfully representative accounting information are
a. verifiable and timely.
b. neutral and verifiable.
c. complete and neutral.
d. relevance and verifiable.

a 166. Which of the following statements is not true?
a. Comparability means using the same accounting principles from year to year within a company.
b. Faithful representation is the quality of information that gives assurance that it is free from error.
c. Relevant accounting information must be capable of making a difference in the decision.
d. The primary objective of financial reporting is to provide financial information that is useful to investors and creditors for making decision.

a167. An item is considered material if
a. it doesn’t cost a lot of money.
b. it is of a tangible good.
c. it is likely to influence the decision of an investor or creditor.
d. the cost of reporting the item is greater than its benefits.

a168. A company using the same accounting principles from year to year is an application of
a. timeliness.
b. consistency.
c. full disclosure.
d. materiality.

a 169. Which of the following is a constraint in accounting?
a. Comparability.
b. Cost.
c. Consistency.
d. Relevance.

a 170. The periodicity assumption states that the economic life of a business can be divided into
a. equal time periods.
b. cyclical time periods.
c. artificial time periods.
d. perpetual time periods.

a 171. Which accounting assumption assumes that an enterprise will continue in operation long enough to carry out its existing objectives and commitments?
a. Monetary unit assumption.
b. Economic entity assumption.
c. Periodicity assumption.
d. Going concern assumption.

a 172. The economic entity assumption states that economic events
a. of different entities can be combined if all the entities are corporations.
b. must be reported to the IASB.
c. of a sole proprietorship cannot be distinguished from the personal economic events of its owners.
d. of every entity can be separately identified and accounted for.

a 173. Which of the following is not an accounting assumption?
a. Integrity.
b. Going concern.
c. Periodicity.
d. Economic entity.

a 174. The periodicity assumption states
a. the business will remain in operation for the foreseeable future.
b. the life of a business can be divided into artificial time periods and that useful reports covering those periods can be prepared.
c. every economic entity can be separately identified and accounted for.
d. only those things that can be expressed in money are included in the accounting records.

a175. Valuing assets at their fair value rather than at their cost is inconsistent with the:
a. economic entity assumption.
b. historical cost principle.
c. periodicity assumption.
d. full disclosure principles.

a 176. Jackson Cement Corporation reported $35 million for sales when it only had $20 million of actual sales. Which of the following qualities of useful information has Jackson most likely violated?
a. Comparability
b. Relevance
c. Faithful representation
d. Consistency

Additional Multiple Choice Questions

177. Which of the following statements concerning accrual-basis accounting is incorrect?
a. Accrual-basis accounting follows the revenue recognition principle.
b. Accrual-basis accounting is the method required by generally accepted accounting principles.
c. Accrual-basis accounting recognizes expenses when they are paid.
d. Accrual-basis accounting follows the expense recognition principle.

178. The revenue recognition principle dictates that revenue be recognized in the accounting period
a. before it is earned.
b. after it is earned.
c. in which the performance obligation is satisfied.
d. in which it is collected.

179. An expense is recorded under the cash basis only when
a. services are performed.
b. it is earned.
c. cash is paid.
d. it is incurred.

180. For prepaid expense adjusting entries
a. an expense—liability account relationship exists.
b. prior to adjustment, expenses are overstated and assets are understated.
c. the adjusting entry results in a debit to an expense account and a credit to an asset account.
d. none of these answer choices are correct.

181. Expenses paid and recorded as assets before they are used are called
a. accrued expenses.
b. interim expenses.
c. prepaid expenses.
d. unearned expenses.

182. Buffalo Tom Cruises purchased a five-year insurance policy for its ships on April 1, 2015 for $60,000. Assuming that April 1 is the effective date of the policy, the adjusting entry on December 31, 2015 is
a. Prepaid Insurance 9,000
Insurance Expense 9,000
b. Insurance Expense 9,000
Prepaid Insurance 9,000
c. Insurance Expense 12,000
Prepaid Insurance 12,000
d. Insurance Expense 3,000
Prepaid Insurance 3,000

183. Pavement Company purchased a truck from Bee Thousand Corp. by issuing a 6-month, 8% note payable for $90,000 on November 1. On December 31, the accrued expense adjusting entry is
a. No entry is required.
b. Interest Expense 7,200
Interest Payable 7,200
c. Interest Expense 3,600
Interest Payable 3,600
d. Interest Expense 1,200
Interest Payable 1,200

184. If the adjusting entry for depreciation is not made,
a. assets will be understated.
b. stockholders’ equity will be understated.
c. net income will be understated.
d. expenses will be understated.

185. Ryan Adams, an employee of Heartbreaker Corp., will not receive his paycheck until April 2. Based on services performed from March 15 to March 31, his salary was $1,000. The adjusting entry for Heartbreaker Corp. on March 31 is
a. Salaries and Wages Expense 1,000
Salaries and Wages Payable 1,000
b. No entry is required.
c. Salaries and Wages Expense 1,000
Cash 1,000
d. Salaries and Wages Payable 1,000
Cash 1,000

186. Which of the following statements related to the adjusted trial balance is incorrect?
a. It shows the balances of all accounts at the end of the accounting period.
b. It is prepared before adjusting entries have been made.
c. It proves the equality of the total debit balances and the total credit balances in the ledger.
d. Financial statements can be prepared directly from the adjusted trial balance.

187. Financial statements are prepared directly from the
a. general journal.
b. ledger.
c. trial balance.
d. adjusted trial balance.

188. Accrual-basis accounting is allowed under
a. GAAP but not IFRS.
b. IFRS but not GAAP.
c. both IFRS and GAAP.
d. neither IFRS nor GAAP.

189. Cash-basis accounting is allowed under
a. GAAP but not IFRS.
b. IFRS but not GAAP.
c. both IFRS and GAAP.
d. neither IFRS nor GAAP.

190. The time period assumption is used under
a. GAAP but not IFRS.
b. IFRS but not GAAP.
c. both IFRS and GAAP.
d. neither IFRS nor GAAP.

191. IFRS requires that companies present
a. a complete set of financial statement, including comparative information, annually.
b. only a statement of financial position, including comparative information, annually.
c. only an income statement, including comparative information, annually.
d. only a statement of changes in cash flows, including comparative information, annually.

192. Revenue recognition under IFRS is
a. substantially different from revenue recognition under GAAP.
b. generally the same as revenue recognition under GAAP, but with more detailed guidance.
c. generally the same as revenue recognition under GAAP, but with less detailed guidance.
d. exactly the same as revenue recognition under GAAP.

193. Revenue recognition fraud is
a. a major issue in the U.S. but not worldwide.
b. a major issue internationally, but not in the U.S.
c. a major issue in the U.S. and worldwide.
d. not a major issue anywhere.

194. The IFRS standard dealing specifically with revenue recognition is based on
a. whether the revenue is realized or realizable.
b. whether the revenue is earned.
c. whether the revenue is realized or realizable, and earned.
d. the probability that economic benefits will flow to the company, and reliability of measurement.

195. Depreciation based on revaluation of land and buildings is permitted under
a. GAAP but not IFRS.
b. IFRS but not GAAP.
c. both IFRS and GAAP.
d. neither IFRS nor GAAP.

196. Under IFRS, income is defined as
a. revenue less expenses.
b. revenues and gains, less expenses and losses.
c. revenues and gains.
d. revenues, gains, and contributions by owners.

197. The procedures of the closing process are applicable to all companies when they are using
a. GAAP but not IFRS.
b. IFRS but not GAAP.
c. both IFRS and GAAP.
d. neither IFRS nor GAAP.

BRIEF EXERCISES
BE 198
State whether each situation is a prepaid expense (PE), unearned revenue (UR), accrued revenue (AR) or an accrued expense (AE).
1. Unrecorded interest on savings bonds is $245.
2. Property taxes that have been incurred but that have not yet been paid or recorded amount to $300.
3. Legal fees of $1,000 were collected in advance. By year end 60 percent were still unearned.
4. Prepaid insurance had a $500 balance prior to adjustment. By year end, 40 percent was still unexpired.

BE 199
Prepare adjusting entries for the following transactions. Omit explanations.
1. Depreciation on equipment is $900 for the accounting period.
2. There was no beginning balance of supplies and purchased $500 of supplies during the period. At the end of the period $150 of supplies were on hand.
3. Prepaid rent had a $1,000 normal balance prior to adjustment. By year end $400 was unexpired.

BE 200
On June 1, during its first month of operations, Crooked Rain purchased supplies for $4,500 and debited the supplies account for that amount. At June 30, an inventory of supplies showed $1,000 of supplies on hand. What adjusting journal entry should be made for June?

BE 201
On January 1, Chan & Chan, CPAs received a $15,000 cash retainer for accounting services to be rendered ratably over the next 3 months. The full amount was credited to the liability account Unearned Service Revenue. Assuming that the revenue is recognized equally over the 3-month period, what adjusting journal entry should be made at January 31?

BE 202
On February 1, Results Income Tax Service received a $3,000 cash retainer for tax preparation services to be rendered equally over the next 4 months. The full amount was credited to the liability account Unearned Service Revenue. Assuming that the revenue is recognized equally over the 4-month period, what balance would be reported on the February 28 balance sheet for Unearned Service Revenue?

BE 203
Bakesale Enterprises purchased equipment on May 1, 2015 for $6,300. The company expects to use the equipment for 5 years. It has no salvage value.
1. What adjusting journal entry should the company make at the end of each month if monthly financials are prepared (annual depreciation is $1,260)?
2. What is the book value of the equipment at May 31, 2015?

BE 204
Rhodes National purchased software on October 1, 2015 for $14,400. The company expects to use the software for 3 years. It has no salvage value.
1. What adjusting journal entry should the company make at the end of each month if monthly financials are prepared? (annual depreciation is $4,800)
2. What balance will be reported on the December 31, 2015 balance sheet for Accumulated Depreciation?

BE 205
Teenage Fanclub Printings sold annual subscriptions to their magazine for $30,000 in December, 2014. The magazine is published monthly. The new subscribers received their first magazine in January, 2015.
1. What adjusting entry should be made in January if the subscriptions were originally recorded as a liability?
2. What amount will be reported on the January 2015 balance sheet for Unearned Subscription Revenue?

BE 206
On January 1, 2015, Bottle Rockets Corp. purchased a general liability insurance policy for $9,000 to provide coverage for the calendar year.

1. If the company recorded the policy as an asset when purchased, what is the monthly adjusting journal entry that should be recorded at January 31, 2015?
*2. If the company expensed the cost of the policy on January 1, 2015, what is the monthly adjusting entry that should be recorded at January 31, 2015?

BE 207
Identify the impact on the balance sheet if the following information is not used to adjust the accounts.
1. Supplies consumed totaled $3,000.
2. Interest accrues on notes payable at the rate of $200 per month.
3. Insurance of $450 expired during the month.
4. Plant and equipment are depreciated at the rate of $1,200 per month.

BE 208
Determine the impact on the balance sheet accounts if the following information is not used to adjust the accounts of Mood Food Company for the month of January, 2015. Round answers to the nearest dollar.
1. The company rents extra office space to Beulah, CPAs. Beulah pays the $6,000 rent annually on January 1.
2. The company has an outstanding loan to its President in the amount of $150,000. The loan accrues interest at the annual rate of 6%. Principal and interest are due January 1, 2017.
3. The company completed work on a project during January that was not yet billed to the client. The client will be charged $3,100.

BE 209
For each of the following oversights, state whether total assets will be understated (U), overstated (O), or no affect (NA).
_____ 1. Failure to record revenue recognized but not yet received.
_____ 2. Failure to record expired prepaid rent.
_____ 3. Failure to record accrued interest on the bank savings account.
_____ 4. Failure to record depreciation.
_____ 5. Failure to record accrued wages.
_____ 6. Failure to record the recognized portion of unearned revenues.

BE 210
Blue Guitar Music School borrowed $30,000 from the bank signing an 8%, 6-month note on November 1. Principal and interest are payable to the bank on May 1. If the company prepares monthly financial statements, what adjusting entry should the company make at November 30 with regard to the note (round answer to the nearest dollar)?

BE 211
The adjusted trial balance of Rocky Acre Spread Inc. on December 31, 2015 includes the following accounts: Accumulated Depreciation, $6,000; Depreciation Expense, $2,000; Notes Payable $7,500; Interest Expense $150; Utilities Expense, $300; Rent Expense, $500; Service Revenue, $19,600; Salaries and Wages Expense, $6,000; Supplies, $200; Supplies Expense, $1,200; Salaries and Wages Payable, $600. Prepare an income statement for the month of December.

BE 212
The adjusted trial balance of Old 97 Automotive Service Company on June 30, 2015 includes the following accounts: Supplies, $300; Accumulated Depreciation, $9,500; Salaries Payable, $1,550, Notes Payable $6,750; Service Revenue, $22,100; Salaries and Wages Expense, $8,750; Depreciation Expense, $3,250; Supplies Expense, $1,000; Rent Expense, $400; Utilities Expense, $350; and Interest Expense $250. Prepare an income statement for the month of June.

BE 213
The adjusted trial balance of Sodajerk Company at December 31, 2015 includes the following accounts: Retained Earnings $12,600; Dividends $7,000; Service Revenue $38,000; Salaries and Wages Expense $13,000; Insurance Expense $2,000; Rent Expense $3,500; Supplies Expense $2,500; and Depreciation Expense $2,000. Prepare a retained earnings statement for the year.

BE 214
The adjusted trial balance of Hanson Hawk Company at September 30, 2015 includes the following accounts: Retained Earnings $27,700; Dividends $9,750; Service Revenue $46,800; Insurance Expense $1,950; Salaries Expense $18,000; Rent Expense $3,000; Supplies Expense $650; and Depreciation Expense $1,100. Prepare a retained earnings statement for the year.

aBE 215
The following terms relate to the fundamental qualities of useful information. Match the key letter of the correct term with the descriptive statement below.

a. Confirmatory value e. Faithful representation
b. Neutral f. Timely
c. Predictive value g. Verifiable
d. Relevant

_____ 1. Accounting information that is not biased toward one position or another.
_____ 2. Providing information before it loses its capacity to influence decision.
_____ 3. Independent measures, using the same methods, obtain similar results.
_____ 4. Providing information that would make a difference in a business decision.
_____ 5. Provide information that accurately depicts what really happened.
_____ 6. Confirms or corrects prior decisions.

LO 8, BT: K, Difficulty: Easy, TOT: 5 min., AACSB: Analytic, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting

aBE 216
Presented below are the basic assumptions and principles underlying financial statements.

a. Historical cost principle d. Going concern assumption
b. Economic entity assumption e. Monetary unit assumption
c. Full disclosure principle f. Periodicity assumption

Identify the basic assumption or principle that is described below.

_____ 1. The economic life of a business can be divided into artificial time periods.
_____ 2. The business will continue in operation long enough to carry out its existing objectives.
_____ 3. Assets should be recorded at their cost.
_____ 4. Economic events can be identified with a particular unit of accountability.
_____ 5. Circumstances and events that make a difference to financial statement users should be disclosed.
_____ 6. Only transaction data that can be expressed in terms of money should be included in the accounting records.

EXERCISES
Ex. 217
The balance sheets of Red House Painters include the following:
12/31/15 12/31/14
Interest Receivable $0 $4,300
Supplies 3,000 5,000
Salaries and Wages Payable 3,800 5,600
Unearned Service Revenue 4,000 -0-

The income statement for 2015 shows the following:
Interest Revenue $18,400
Service Revenue 72,700
Supplies Expense 8,700
Salaries and Wages Expense 39,000

Instructions
Calculate the following for 2015:
1. Cash received for interest.
2. Cash paid for supplies.
3. Cash paid for salaries and wages.
4. Cash received for revenue.

Ex. 218
Hal Corp. prepared the following income statement using the cash basis of accounting:

HAL CORP.
Income Statement, Cash Basis
For the Year Ended December 31, 2015

Service revenue (does not include $25,000 of services rendered on account
because the collection will not be until 2016) $370,000
Expenses (does not include $15,000 of expenses on account because
payment will not be made until 2016) 220,000
Net income $150,000

Additional data:
1. Depreciation on a company automobile for the year amounted to $6,000. This amount is not included in the expenses above.
2. On January 1, 2015, paid for a two-year insurance policy on the automobile amounting to $1,800. This amount is included in the expenses above.

Instructions
(a) Recast the above income statement on the accrual basis in conformity with generally accepted accounting principles. Show computations and explain each change.
(b) Explain which basis (cash or accrual) provides a better measure of income.

Ex. 219
Before month-end adjustments are made, the February 28 trial balance of Neutral Milk Hotel contains revenue of $7,000 and expenses of $4,400. Adjustments are necessary for the following items:
• Depreciation for February is $1,800.
• Revenue recognized but not yet billed is $2,700.
• Accrued interest expense is $700.
• Revenue collected in advance that is now recognized is $2,500.
• Portion of prepaid insurance expired during February is $400.
Instructions
Calculate the correct net income for Neutral Milk Hotel’s Income Statement for February.

Ex. 220
On December 31, 2015, Fashion Nugget Company prepared an income statement and balance sheet and failed to take into account three adjusting entries. The incorrect income statement showed net income of $35,000. The balance sheet showed total assets, $115,000; total liabilities, $45,000; and stockholders’ equity, $70,000.
The data for the three adjusting entries were:
(1) Depreciation of $10,000 was not recorded on equipment.
(2) Wages amounting to $7,000 for the last two days in December were not paid and not recorded. The next payroll will be in January.
(3) Rent of $12,000 was paid for two months in advance on December 1. The entire amount was debited to Rent Expense when paid.

Ex. 220 (cont.)
Instructions
Complete the following tabulation to correct the financial statement amounts shown (indicate deductions with parentheses):
Item Net Income Total Assets Total Liabilities Stockholders’ Equity
Incorrect balances $ 35,000 $115,000 $ 45,000 $ 70,000
Effects of:
Depreciation
Wages
Rent
Correct Balances

Ex. 221
Indicate (a) the type of adjustment (prepaid expense, unearned revenue, accrued revenue, or accrued expense), and (b) the accounts before adjustment (overstated or understated) for each of the following:
1. Supplies of $200 have been used. 2. Salaries of $600 are unpaid. 3. Rent received in advance totaling $300 has been earned. 4. Services provided but not recorded total $500.

Ex. 222
Buena Vista Social Club accumulates the following adjustment data at December 31.
1. Revenue of $1,600 collected in advance has been recognized.
2. Salaries of $600 are unpaid.
3. Prepaid rent totaling $500 has expired.
4. Supplies of $450 have been used.
5. Revenue recognized but unbilled total $750.
6. Utility expenses of $250 are unpaid.
7. Interest of $300 has accrued on a note payable.

Instructions
(a) For each of the above items indicate:
1. The type of adjustment (prepaid expense, unearned revenue, accrued revenue, or accrued expense).
2. The account relationship (asset/liability, liability/revenue, etc.).
3. The status of account balances before adjustment (understatement or overstatement).
4. The adjusting entry.

(b) Assume net income before the adjustments listed above was $15,500. What is the adjusted net income?

Prepare your answer in the tabular form presented below.

Account Balances
Before Adjustment
Type of Account (Understatement
Adjustment Relationship or Overstatement) Adjusting Entry

Ex. 223
The adjusted trial balance of the Victoria Lane Paving Company includes the following balance sheet accounts that frequently require adjustment. For each account, indicate (a) the type of adjusting entry (prepaid expenses, unearned revenues, accrued revenues, or accrued expenses) and (b) the related account in the adjusting entry.
(a) (b)
Balance Sheet Account Type of Adjusting Entry Related Account
1. Supplies
2. Accounts Receivable
3. Prepaid Insurance
4. Accumulated Depreciation—
Equipment
5. Interest Payable
6. Salaries and Wages Payable
7. Unearned Revenue

Ex. 224
Match the statements below with the appropriate terms by entering the appropriate letter code in the spaces provided.
TERMS:
A. Prepaid Expenses
B. Unearned Revenues
C. Accrued Revenues
D. Accrued Expenses
STATEMENTS:

1. A revenue not yet recognized; collected in advance.

2. Office supplies on hand that will be used in the next period.

3. Interest revenue collected; not yet recognized.

4. Rent not yet collected; already recognized.

5. An expense incurred; not yet paid or recorded.

6. A revenue recognized; not yet collected or recorded.

7. An expense not yet incurred; paid in advance.

8. Interest expense incurred; not yet paid.

Ex. 225
The Shins, a minor league baseball team, prepare financial statements on a monthly basis. Their season begins in April, but in March the team engaged in the following transactions:
(a) Paid $210,000 to Kansas City as advance rent for use of Kansas City Stadium for the six month period April 1 through September 30.
(b) Collected $450,000 cash from sales of season tickets for the team’s 20 home games. This amount was credited to Unearned Ticket Revenue.

During the month of April, the Shins played four home games and five road games.

Instructions
Prepare the adjusting entries required at April 30 for the transactions above.

Ex. 226
On July 1, 2015, Damlen Jurado Company pays $12,000 to its insurance company for a 2-year insurance policy. Instructions Prepare the necessary journal entries for Damlen Jurado on July 1 and December 31.

Ex. 227
On July 1, 2015, Jeffrey Underwriters Associates received $8,000 from a client for a 2-year insurance policy.
Instructions Prepare the necessary journal entries for Jeffrey Underwriters Associates on July 1 and December 31.
Ex. 228
Mother Hips Garment Company purchased equipment on June 1 for $90,000, paying $20,000 cash and signing a 9%, 2-month note for the remaining balance. The equipment is expected to depreciate $18,000 each year. Mother Hips Garment Company prepares monthly financial statements.

Instructions
(a) Prepare the general journal entry to record the acquisition of the equipment on June 1st.
(b) Prepare any adjusting journal entries that should be made on June 30th.
(c) Show how the equipment will be reflected on Mother Hips Garment Company’s balance sheet on June 30th.

Ex. 229
Scotsman Company prepares monthly financial statements. Below are listed some selected accounts and their balances in the September 30 trial balance before any adjustments have been made for the month of September.
SCOTSMAN COMPANY
Trial Balance (Selected Accounts)
September 30, 2015
———————————————————————————————————————————
Debit Credit
Supplies $ 3,200
Prepaid Insurance 4,800
Equipment 16,200
Accumulated Depreciation—Equipment $1,000
Unearned Rent Revenue 1,200
(Note: Debit column does not equal credit column because this is a partial listing of selected account balances)

An analysis of the account balances by the company’s accountant provided the following additional information:
1. A physical count of supplies revealed $1,000 on hand on September 30.
2. A two-year life insurance policy was purchased on June 1 for $4,800.
3. Equipment depreciated $3,000 per year.
4. The amount of rent received in advance that remains unearned at September 30 is $500.

Instructions
Using the above additional information, prepare the adjusting entries that should be made by Scotsman Company on September 30.

Ex. 230
Prepare the required end-of-period adjusting entries for each independent case listed below.

Case 1
Sleater-Kinney Company began the year with a $3,000 balance in the Supplies account. During the year, $8,500 worth of additional supplies were purchased. A physical count of supplies on hand at the end of the year revealed that $7,400 worth of supplies had been used during the year. No adjusting entry has been made until year end.

Case 2
Western Company has a calendar year-end accounting period. On July 1, the company purchased equipment for $30,000. It is estimated that the equipment will depreciate $300 each month. No adjusting entry has been made until year end.

Case 3
Ranch Realty is in the business of renting several apartment buildings and prepares monthly financial statements. It has been determined that 3 tenants in $900 per month apartments and one tenant in the $1,200 per month apartment had not paid their August rent as of August 31st.

Ex. 231
Aeroplane Insurance Agency prepares monthly financial statements. Presented below is an income statement for the month of June that is correct on the basis of information considered.
AEROPLANE INSURANCE AGENCY
Income Statement
For the Month Ended June 30
———————————————————————————————————————————
Revenues
Sales revenue $35,000
Expenses
Salaries and wages expense $6,000
Rent expense 4,200
Depreciation expense 2,800
Advertising expense 800
Total expenses 13,800
Net income $21,200
Additional Data: When the income statement was prepared, the company accountant neglected to take into consideration the following information:
1. A utility bill for $2,500 was received on the last day of the month for electric and gas service for the month of June.
2. A company insurance salesman sold a life insurance policy to a client for a premium of $25,000. The agency billed the client for the policy and is entitled to a commission of 20%.
3. Supplies on hand at the beginning of the month were $3,000. The agency purchased additional supplies during the month for $4,000 in cash and $2,200 of supplies were on hand at June 30.
4. The agency purchased a new car at the beginning of the month for $22,000 cash. The car will depreciate $5,400 per year.
5. Salaries owed to employees at the end of the month total $6,100. The salaries will be paid on July 5.
Instructions
Prepare a correct income statement.

Ex. 232
One part of eight adjusting entries is given below.

Instructions
Indicate the account title for the other part of each entry.
1. Unearned Service Revenue is debited.
2. Prepaid Rent is credited.
3. Accounts Receivable is debited.
4. Depreciation Expense is debited.
5. Salaries and Wages Expense is debited.
6. Interest Payable is credited.
7. Service Revenue is credited (give two possible debit accounts).
8. Supplies Expense is debited.

Ex. 233
For each of the following accounts, indicate (a) the type of adjusting entry (prepaid expense, accrued revenue, etc.) and (b) the related account in the adjusting entry.
1. Depreciation Expense
2. Salaries and Wages Payable
3. Service Revenue
4. Supplies
5. Unearned Service Revenue

Ex. 234
Prepare the necessary adjusting entry for each of the following:
1. Services provided but unrecorded totaled $700. 2. Accrued salaries at year-end are $1,000. 3. Depreciation on equipment for the year is $600.

Ex. 235
The following ledger accounts are used by the Sebastopol Dog Track:
Accounts Receivable
Prepaid Advertising
Prepaid Rent

Unearned Ticket Revenue

Advertising Expense
Rent Expense

Ticket Revenue
Sales Revenue

Instructions
For each of the following transactions below, prepare the journal entry (if one is required) to record the initial transaction and then prepare the adjusting entry, if any, required on September 30, the end of the fiscal year.
(a) On September 1, paid rent on the track facility for three months, $210,000.
(b) On September 1, sold season tickets for admission to the racetrack. The racing season is year-round with 25 racing days each month. Season ticket sales totaled $900,000.
(c) On September 1, borrowed $350,000 from First National Bank by issuing a 9% note payable due in three months.
(d) On September 5, programs for 20 racing days in September, 25 racing days in October, and 15 racing days in November were printed for $3,600.
(e) The accountant for the concessions company reported that gross receipts for September were $150,000. Ten percent is due to the track and will be remitted by October 10.

Ex. 236
Gwynn Company has an accounting fiscal year which ends on June 30. The company also has a policy of paying the weekly payroll on Friday. Payroll records indicate the following salary costs were incurred.
Date Amount
Monday June 28 $3,000
Tuesday June 29 3,800
Wednesday June 30 3,300
Thursday July 1 3,500
Friday July 2 2,400

Instructions
(a) Prepare any necessary adjusting journal entries that should be made at year end on June 30.
(b) Prepare the journal entry to record the payment of the weekly payroll on July 2.

Ex. 237
On Friday of each week, Spoon Company pays its factory personnel weekly wages amounting to $45,000 for a five-day work week.

Instructions
(a) Prepare the necessary adjusting entry at year end, assuming December 31 falls on Wednesday.
(b) Prepare the journal entry for payment of the week’s wages on the payday which is Friday, January 2 of the next year.

Ex. 238
Presented below is the Trial Balance and Adjusted Trial Balance for Morning Jacket Company on December 31.
MORNING JACKET
Trial Balance
December 31
———————————————————————————————————————————
Before Adjustment After Adjustment
Dr. Cr. Dr. Cr.
Cash $ 2,000 $ 2,000
Accounts Receivable 2,800 3,800
Prepaid Rent 2,100 1,400
Supplies 1,200 650
Equipment 18,000 18,000
Accumulated depreciation—
Equipment $ 1,300 $ 1,550
Accounts Payable 2,700 2,700
Notes Payable 10,000 10,000
Interest Payable 140
Salaries and Wages Payable 1,270
Unearned Service Revenue 4,460 3,960
Common Stock 7,200 7,200
Dividends 3,200 3,200
Service Revenue 8,000 9,500
Salaries and Wages Expense 3,860 5,130
Rent Expense 500 1,200
Supplies Expense 550
Depreciation Expense—
Equipment 250
Interest Expense 140
Totals $33,660 $33,660 $36,320 $36,320

Instructions
Prepare in journal form, with explanations, the adjusting entries that explain the changes in the balances from the trial balance to the adjusted trial balance.

Ex. 239
Compute the net income for 2015 based on the following amounts presented on the adjusted trial balance of D-Lay Company.
Accumulated Depreciation – Equip. $20,000 Depreciation Expense 18,000 Salaries and Wages Expense 15,000 Service Revenue 40,000 Unearned Service Revenue 8,000

Ex. 240
New Slang Pest Control has the following balances in selected accounts on December 31, 2014.
Accounts Receivable $ 0
Accumulated Depreciation – Equipment 0
Equipment 6,650
Interest Payable 0
Notes Payable 20,000
Prepaid Insurance 2,220
Salaries and Wages Payable 0
Supplies 2,940
Unearned Service Revenue 30,000
All of the accounts have normal balances. The information below has been gathered at December 31, 2015.
1. Depreciation on the equipment for 2015 is $1,300.
2. New Slang Pest Control borrowed $20,000 by signing a 10%, one-year note on July 1, 2015.
3. New Slang Pest Control paid $2,220 for 12 months of insurance coverage on October 1, 2015.
4. New Slang Pest Control pays its employees total salaries of $11,000 every Monday for the preceding 5-day week (Monday-Friday). On Monday, December 27, 2015, employees were paid for the week ending December 24, 2015. All employees worked the five days ending December 31, 2015.
5. New Slang Pest Control performed disinfecting services for a client in December 2015. The client will be billed $3,200.
6. On December 1, 2015, New Slang Pest Control collected $30,000 for disinfecting processes to be performed from December 1, 2015, through May 31, 2015.
7. A count of supplies on December 31, 2015, indicates that supplies of $850 are on hand.

Instructions
Prepare in journal form with explanations, the adjusting entries for the seven items listed for New Slang Pest Control.

Ex. 241
The trial balances before and after adjustments for Old Julian Calendars at the end of its fiscal year are presented below.
Old Julian Calendars
Trial Balance
September 31, 2014
———————————————————————————————————————————
Before Adjustment After Adjustment
Dr. Cr. Dr. Cr.
Cash $ 15,080 $ 15,080
Accounts Receivable 14,960 16,110
Supplies 2,760 885
Prepaid Insurance 5,800 1,450
Equipment 13,300 13,300
Accumulated Depreciation – Equip $ 5,220 $ 6,960
Accounts Payable 9,860 9,860
Salaries and Wages Payable 4,500
Unearned Sales Revenue 2,175 1,150
Unearned Rent Revenue 2,100 525
Common Stock 18,395 18,395
Sales Revenue 48,800 50,975
Rent Revenue 1,575 3,150
Salaries and Wages Expense 36,225 40,725
Supplies Expense 1,875
Insurance Expense 0 4,350
Depreciation Expense 0 0 1,740 0
$ 88,125 $ 88,125 $ 95,515 $ 95,515
Ex. 241 Cont’d

Instructions
Prepare the adjusting entries that were made.

Ex. 242
The White Stripes Animal Encounters operates a drive through tourist attraction. The company adjusts its accounts at the end of each month. The selected accounts appearing below reflect balances after adjusting entries were prepared on April 30. The adjusted trial balance shows the following:

Prepaid Rent $16,000
Buildings 30,000
Accumulated Depreciation—Buildings 6,600
Unearned Ticket Revenue 600

Other data:
1. Three months’ rent had been prepaid on April 1.
2. The buildings are being depreciated at $7,200 per year.
3. The unearned ticket revenue represents tickets sold for future visits. The tickets were sold at $5.00 each on April 1. During April, thirty of the tickets were used by customers.

Instructions
(a) Calculate the following:
1. Monthly rent expense.
2. The age of the buildings in months.
3. The number of tickets sold on April 1.
(b) Prepare the adjusting entries that were made by the White Stripes Animal Encounters on April 30.

Ex. 243
The adjusted trial balance of C.S. Financial Planners appears below. Using the information from the adjusted trial balance, you are to prepare for the month ending December 31, 2015:
1. an income statement.
2. a retained earnings statement.
3. a balance sheet.

C.S. Financial Planners
Adjusted Trial Balance
December 31, 2015
———————————————————————————————————————————
Debit Credit
Cash $ 4,900
Accounts Receivable 2,200
Supplies 1,800
Equipment 15,000
Accumulated Depreciation—Equipment $ 4,000
Accounts Payable 3,300
Unearned Service Revenue 6,000
Common Stock 10,000
Retained Earnings 4,400
Dividends 2,500
Service Revenue 4,200
Supplies Expense 600
Depreciation Expense 2,500
Rent Expense 2,400
$31,900 $31,900

Ex. 244
Yankee Hotel Foxtrot initiated operations on July 1, 2015. To manage the company officers and managers have requested monthly financial statements starting July 31, 2015. The adjusted trial balance amounts at July 31 are shown below.
Debits Credits
Cash $ 7,680 Accumulated Depreciation – Equipment $ 840
Accounts Receivable 810 Notes Payable 6,000
Prepaid Rent 1,965 Accounts Payable 2,140
Supplies 1,160 Salaries and Wages Payable 360
Equipment 11,400 Interest Payable 40
Dividends 800 Unearned Service Revenue 580
Salaries and Wages Expense 7,145 Common Stock 5,000
Rent Expense 2,740 Retained Earnings 5,640
Depreciation Expense 665 Service Revenue 14,390
Supplies Expense 580 Total credits $34,990
Interest Expense 45
Total debits $ 34,990

(a) Determine the net income for the month of July.
(b) Determine the total assets and total liabilities at July 31, 2015 for Yankee Hotel Foxtrot.
(c) Determine the amount that appears for Retained Earnings at July 31, 2015.

aEx. 245

1. Drive-by Truckers prepares monthly financial statements. On July 1, the Supplies account had a balance of $3,000. During July, additional supplies were purchased for $4,800 and that amount was debited to Supplies Expense. On July 31, a physical count of supplies revealed that there was $2,000 on hand. Prepare the adjusting journal entry that Drive-by Truckers should make on July 31.

2. Alesandro Rental Agency prepares monthly financial statements. On September 1, a check for $9,000 was received from a tenant for six months’ rent. The full amount was credited to Rent Revenue. Prepare the adjusting entry the company should make on September 30.

COMPLETION STATEMENTS
246. The ______________ assumption divides the economic life of a business into artificial time periods.

247. An accounting period that is one year in length is referred to as a ______________ year.

248. The ______________ principle gives accountants guidance as to when revenue is to be recorded.

249. In a service company, revenue is recognized when the service is ______________.

250. The expense recognition principle attempts to match ______________ with ______________.

251. Expenses paid and recorded in an asset account before they are used or consumed are called ______________. Revenue received and recorded as a liability before it is recognized is referred to as ______________.

252. Failure to adjust a prepaid expense account for the amount expired will cause ______________ to be understated and ________________ to be overstated.

253. Depreciation is a ______________ allocation process rather than a process of ______________.

254. Depreciation expense for a period is an ______________ rather than a factual measurement of cost that has expired.

255. An adjusting entry recording accrued salaries for a period indicates that Salaries Expense has been ________________ but has not yet been ________________ or recorded.

256. An adjusted trial balance proves the ______________ of the total debit and credit balances after all ______________ entries have been made.

MATCHING
257. Match the items below by entering the appropriate code letter in the space provided.

A. Time period assumption F. Accrued revenues
B. Fiscal year G. Depreciation
C. Revenue recognition principle H. Accumulated depreciation
D. Prepaid expenses I. Accrued expenses
E. Expense recognition principle J. Book value

1. A twelve month accounting period
2. Expenses paid before they are incurred
3. Cost less accumulated depreciation
4. Divides the economic life of a business into artificial time periods
5. Efforts are related to accomplishments
6. A contra asset account
7. Recognition of revenue when the performance obligation is satisfied
8. Revenues recognized but not yet received
9. Expenses incurred but not yet paid
10. A cost allocation process

SHORT-ANSWER ESSAY QUESTIONS
S-A E 258
The income statement is an important financial statement used by individuals who are interested in the operations of a business enterprise. Explain how the time period assumption and the revenue recognition and expense recognition principles provide guidance to accountants in preparing an income statement.

S-A E 259
In developing an accounting information system, it is important to establish procedures whereby all transactions that affect the components of the accounting equation are recorded. Why then, is it often necessary to adjust the accounts before financial statements are prepared even in a properly designed accounting system? Identify the major types of adjustments that are frequently made and give a specific example of each.

S-A E 260
You are visiting with a friend, Jim Borke, who wants to start a new business. During discussions on forming the business, Jim makes this statement:
Our business will have accounts receivable and accounts payable. It will also acquire a substantial amount of computers and equipment. Will it be acceptable to use the cash basis of accounting?

Prepare a response for Jim.

S-A E 261
The long-term liability section of Escovedo Company’s Balance Sheet includes the following accounts:
Notes Payable $100,000
Mortgage Payable 250,000
Salaries and Wages Payable 75,000
Accumulated Depreciation 125,000
Total Long-Term Liabilities $550,000
Escovedo Company is an established company and does not experience any financial difficulties or have any cash flow problems. Discuss at least two items that are questionable as long-term liabilities.

S-A E 262 (Ethics)
Jay Farrar Company is a manufacturing company that specializes in writing instruments. The past year was a difficult one for the company, as it sought to retain its share in a market in which the largest competitors were also rapid innovators. Jay Farrar introduced a new product late in the year, even though testing was not complete. It was a pen designed with two cartridges: one supplying ink and the other correction fluid. A person could then switch easily between writing and correcting errors. It was priced fairly high, and was never heavily advertised. Even so, the Correct-O-Pen, as the product was named, was an overwhelming success.

The success of the product has Josh Ritter, the manager of the New Products division, worried, however. He was concerned that quality problems would begin occurring, since the longevity of the pen and stability of the correction fluid formulation had not been tested. He did not want sales personnel to get the bonuses that appeared to be indicated, since they might aggressively promote a product that would fail in use. He preferred to complete testing of the pen first, so that more confidence could be placed in the results.

Top management, however, declined the tests. Mr. Ritter then instructed you, the accountant, not to prorate payroll taxes or rent expense for the rest of the year, but to show them as current expenses in total. In this way, the new product would appear to be only slightly profitable.

Required:
1. Describe the alternatives that you as an accountant would have in this situation.
2. Indicate which alternative is best.

S-A E 263 (Communication)
A new sales representative, Jiggs Lucero, has just received his copy of the month-end financial reports. He is puzzled by the term “unearned revenue.” He left the following e-mail message for you on the company’s bulletin board system:

What is this??? Creative Accounting, or what??? Line item 12 on year-to-date financials shows over $25Gs in Unearned Revenue!!! Come on, guys! Either we earned it, or we didn’t … Right??! Is this how you guys lower our commissions? Reply to j.lucero@sbd

Required:
Write a response to send to Jiggs.

CHALLENGE EXERCISES
CE 1
O’Brien Industries collected $190,000 from customers in 2015. Of the amount collected, $40,000 was from revenue accrued from services performed in 2014, and $20,000 was received in advance for 2016 revenue. In addition, O’Brien earned $70,000 of revenue in 2015, which will not be collected until 2016. O’Brien also earned $25,000 of revenue in 2015 which had been collected in 2014.
O’Brien Industries paid $150,000 for expenses in 2015. Of the amount paid, $50,000 was for expenses incurred on account in 2014, $22,000 was paid in advance for 2016 expenses. In addition, O’Brien incurred $78,000 of expenses in 2015, which will not be paid until 2016. O’Brien also incurred $29,000 of expenses in 2015 which had been paid in 2014.

Instructions
(a) Compute 2015 cash-basis net income.
(b) Compute 2015 accrual-basis net income.

CE 2
The ledger of Laurie Rental Agency on March 31 of the current year includes the following selected accounts before adjusting entries have been prepared
Debit Credit
Prepaid Insurance $6,000
Supplies 4,500
Equipment 40,000
Accumulated Depreciation–Equipment $12,600
Notes Payable 20,000
Unearned Rent Revenue 14,100
Rent Revenue 90,000
Interest expense -0-
Salaries and Wages Expense 20,000
An analysis of the accounts shown the following.
1. The equipment depreciates $400 per month.
2. Two-thirds of the unearned rent revenue was recognized during the quarter.
3. The note payable is dated January 1 and bears 12% interest.
CE 2 (Cont.)
4. Suppliers on hand total $800.
5. The insurance policy is a two-year policy dated January 1.

Instructions
A. Prepare the adjusting entries at March 31, assuming that adjusting entries are made quarterly. Additional accounts are: Depreciation Expense, Insurance Expense, Interest Payable, and Supplies Expense.
B. Compute the ending balances for Prepaid Insurance, Supplies, Unearned Rent Revenue, and Rent Revenue, and indicate in which financial statement those items will be reported.

CE 3
The income statement of Annette Co, for the month of July shows net income of $2,400 based on Service Revenue $7,200, Salaries and Wages Expense $2,900 Supplies Expense $1,400, and Utilities Expense $500.In reviewing the statement, you discover the following.
1. Insurance expired during July of $600 was omitted.
2. Supplies expense includes $300 of supplies that are still on hand at July 31.
3. Depreciation on equipment of $250 was omitted.
4. Accrued but unpaid salaries and wages at July 31 of $400 were not included.
5. Services performed but unrecorded totaled $700.

CE 3 (Cont.)
Instructions
A. Prepare a correct income statement for July 2015.
B. What effect do the corrections have on the amount reported as total assets on the balance sheet?
C. What effect do the corrections have on the amount reported as total liabilities on the balance sheet?

CHAPTER 4

COMPLETING THE ACCOUNTING CYCLE

CHAPTER Learning OBJECTIVES
1. Prepare a worksheet.
2. Explain the process of closing the books
3. Describe the content and purpose of a post-closing trial balance.
4. State the required steps in the accounting cycle
5. Explain the approaches to preparing correcting entries.
6. Identify the sections of a classified balance sheet.
a7. Prepare reversing entries.

TRUE-FALSE STATEMENTS
1. A worksheet is a mandatory form that must be prepared along with an income statement and balance sheet.

2. If a worksheet is used, financial statements can be prepared before adjusting entries are journalized.

3. If total credits in the income statement columns of a worksheet exceed total debits, the enterprise has net income.

4. It is not necessary to prepare formal financial statements if a worksheet has been prepared because financial position and net income are shown on the worksheet.

5. The adjustments on a worksheet can be posted directly to the accounts in the ledger from the worksheet.

6. The adjusted trial balance columns of a worksheet are obtained by subtracting the adjustment columns from the trial balance columns.

7. The balance of the depreciation expense account will appear in the income statement debit column of a worksheet.

8. Closing entries are unnecessary if the business plans to continue operating in the future and issue financial statements each year.

9. The dividends account is closed to the Income Summary account in order to properly determine net income (or loss) for the period.

10. After closing entries have been journalized and posted, all temporary accounts in the ledger should have zero balances.

11. Closing revenue and expense accounts to the Income Summary account is an optional bookkeeping procedure.

12. Closing the dividends account to Retained Earnings is not necessary if net income is greater than dividends during the period.

13. The dividends account is a permanent account whose balance is carried forward to the next accounting period.

14. Closing entries are journalized after adjusting entries have been journalized.

15. The amounts appearing on an income statement should agree with the amounts appearing on the post-closing trial balance.

16. The post-closing trial balance is entered in the first two columns of a worksheet.

17. A business entity has only one accounting cycle over its economic existence.

18. The accounting cycle begins at the start of a new accounting period.

19. Both correcting entries and adjusting entries always affect at least one balance sheet account and one income statement account.

20. Correcting entries are made any time an error is discovered even though it may not be at the end of an accounting period.

21. An incorrect debit to Accounts Receivable instead of the correct account Notes Receivable does not require a correcting entry because total assets will not be misstated.

22. In a corporation, Retained Earnings is a part of stockholders’ equity.

23. A company’s operating cycle and fiscal year are usually the same length of time.

24. Cash and supplies are both classified as current assets.

25. Long-term investments would appear in the property, plant, and equipment section of the balance sheet.

26. A liability is classified as a current liability if the company is to pay it within the forthcoming year.

27. A company’s liquidity is concerned with the relationship between long-term investments and long-term debt.

28. Current assets are customarily the first items listed on a classified balance sheet.

29. The operating cycle of a company is determined by the number of years the company has been operating.

a30. Reversing entries are an optional bookkeeping procedure.

31. After a worksheet has been completed, the statement columns contain all data that are required for the preparation of financial statements.

32. To close net income to retained earnings, Income Summary is debited and Retained Earnings is credited.

33. In one closing entry, Dividends is credited and Income Summary is debited.

34. The post-closing trial balance will contain only retained earnings statement accounts and balance sheet accounts.

35. The operating cycle of a company is the average time required to collect the receivables resulting from producing revenues.

36. Current assets are listed in the order of liquidity.

37. Current liabilities are obligations that the company is to pay within the coming year.

MULTIPLE CHOICE QUESTIONS
38. Preparing a worksheet involves
a. two steps.
b. three steps.
c. four steps.
d. five steps.

39. The adjustments entered in the adjustments columns of a worksheet are
a. not journalized.
b. posted to the ledger but not journalized.
c. not journalized until after the financial statements are prepared.
d. journalized before the worksheet is completed.

40. The information for preparing a trial balance on a worksheet is obtained from
a. financial statements.
b. general ledger accounts.
c. general journal entries.
d. business documents.

41. After the adjusting entries are journalized and posted to the accounts in the general ledger, the balance of each account should agree with the balance shown on the
a. adjusted trial balance.
b. post-closing trial balance.
c. the general journal.
d. adjustments columns of the worksheet.

42. If the total debit column exceeds the total credit column of the income statement columns on a worksheet, then the company has
a. earned net income for the period.
b. an error because debits do not equal credits.
c. suffered a net loss for the period.
d. to make an adjusting entry.

43. A worksheet is a multiple column form that facilitates the
a. identification of events.
b. measurement process.
c. preparation of financial statements.
d. analysis process.

44. Which of the following companies would be least likely to use a worksheet to facilitate the adjustment process?
a. Large company with numerous accounts
b. Small company with numerous accounts
c. All companies, since worksheets are required under generally accepted accounting principles
d. Small company with few accounts

45. A worksheet can be thought of as a(n)
a. permanent accounting record.
b. optional device used by accountants.
c. part of the general ledger.
d. part of the journal.

46. The account, Supplies, will appear in the following debit columns of the worksheet.
a. Trial balance
b. Adjusted trial balance
c. Balance sheet
d. All of these answer choices are correct

47. When constructing a worksheet, accounts are often needed that are not listed in the trial balance already entered on the worksheet from the ledger. Where should these additional accounts be shown on the worksheet?
a. They should be inserted in alphabetical order into the trial balance accounts already given.
b. They should be inserted in chart of account order into the trial balance already given.
c. They should be inserted on the lines immediately below the trial balance totals.
d. They should not be inserted on the trial balance until the next accounting period.

48. When using a worksheet, adjusting entries are journalized
a. after the worksheet is completed and before financial statements are prepared.
b. before the adjustments are entered on to the worksheet.
c. after the worksheet is completed and after financial statements have been prepared.
d. before the adjusted trial balance is extended to the proper financial statement columns.

49. Assuming that there is a net loss for the period, debits equal credits in all but which section of the worksheet?
a. Income statement columns
b. Adjustments columns
c. Trial balance columns
d. Adjusted trial balance columns

50. Adjusting entries are prepared from
a. source documents.
b. the adjustments columns of the worksheet.
c. the general ledger.
d. last year’s worksheet.

51. The net income (or loss) for the period
a. is found by computing the difference between the income statement credit column and the balance sheet credit column on the worksheet.
b. cannot be found on the worksheet.
c. is found by computing the difference between the income statement columns of the worksheet.
d. is found by computing the difference between the trial balance totals and the adjusted trial balance totals.

52. The worksheet does not show
a. net income or loss for the period.
b. revenue and expense account balances.
c. the ending balance in the retained earnings account.
d. the trial balance before adjustments.

53. If the total debits exceed total credits in the balance sheet columns of the worksheet, stockholders’ equity
a. will increase because net income has occurred.
b. will decrease because a net loss has occurred.
c. is in error because a mistake has occurred.
d. will not be affected.

54. The income statement and balance sheet columns of Iron and Wine Company’s worksheet reflect the following totals:

Income Statement Balance Sheet
Dr. Cr. Dr. Cr.
Totals $72,000 $44,000 $60,000 $88,000

The net income (or loss) for the period is
a. $44,000 income.
b. $28,000 income.
c. $28,000 loss.
d. not determinable.

55. The income statement and balance sheet columns of Iron and Wine Company’s worksheet reflect the following totals:

Income Statement Balance Sheet
Dr. Cr. Dr. Cr.
Totals $72,000 $48,000 $60,000 $84,000

To enter the net income (or loss) for the period into the above worksheet requires an entry to the
a. income statement debit column and the balance sheet credit column.
b. income statement credit column and the balance sheet debit column.
c. income statement debit column and the income statement credit column.
d. balance sheet debit column and the balance sheet credit column.

56. Closing entries are necessary for
a. permanent accounts only.
b. temporary accounts only.
c. both permanent and temporary accounts.
d. permanent or real accounts only.

57. Each of the following accounts is closed to Income Summary except
a. Expenses.
b. Dividends.
c. Revenues.
d. All of these are closed to Income Summary.

58. Closing entries are made
a. in order to terminate the business as an operating entity.
b. so that all assets, liabilities, and stockholders’ equity accounts will have zero balances when the next accounting period starts.
c. in order to transfer net income (or loss) and dividends to the retained earnings account.
d. so that financial statements can be prepared.

59. Closing entries are
a. an optional step in the accounting cycle.
b. posted to the ledger accounts from the worksheet.
c. made to close permanent or real accounts.
d. journalized in the general journal.

60. The income summary account
a. is a permanent account.
b. appears on the balance sheet.
c. appears on the income statement.
d. is a temporary account.

61. If Income Summary has a credit balance after revenues and expenses have been closed into it, the closing entry for Income Summary will include a
a. debit to the retained earnings account.
b. debit to the dividends account.
c. credit to the retained earnings account.
d. credit to the dividends account.

62. Closing entries are journalized and posted
a. before the financial statements are prepared.
b. after the financial statements are prepared.
c. at management’s discretion.
d. at the end of each interim accounting period.

63. Closing entries
a. are prepared before the financial statements.
b. reduce the number of permanent accounts.
c. cause the revenue and expense accounts to have zero balances.
d. summarize the activity in every account.

64. Which of the following is a true statement about closing the books of a corporation?
a. Expenses are closed to the Expense Summary account.
b. Only revenues are closed to the Income Summary account.
c. Revenues and expenses are closed to the Income Summary account.
d. Revenues, expenses, and the dividends account are closed to the Income Summary account.

65. Closing entries may be prepared from all of the following except
a. Adjusted balances in the ledger
b. Income statement and balance sheet columns of the worksheet
c. Balance sheet
d. Income and retained earnings statements

66. In order to close the dividends account, the
a. income summary account should be debited.
b. income summary account should be credited.
c. retained earnings account should be credited.
d. retained earnings account should be debited.

67. In preparing closing entries
a. each revenue account will be credited.
b. each expense account will be credited.
c. the retained earnings account will be debited if there is net income for the period.
d. the dividends account will be debited.

68. The most efficient way to accomplish closing entries is to
a. credit the income summary account for each revenue account balance.
b. debit the income summary account for each expense account balance.
c. credit the dividends balance directly to the income summary account.
d. credit the income summary account for total revenues and debit the income summary account for total expenses.

69. The closing entry process consists of closing
a. all asset and liability accounts.
b. out the retained earnings account.
c. all permanent accounts.
d. all temporary accounts.

70. The final closing entry to be journalized is typically the entry that closes the
a. revenue accounts.
b. dividends account.
c. retained earnings account.
d. expense accounts.

71. An error has occurred in the closing entry process if
a. revenue and expense accounts have zero balances.
b. the retained earnings account is credited for the amount of net income.
c. the dividends account is closed to the retained earnings account.
d. the balance sheet accounts have zero balances.

72. The Income Summary account is an important account that is used
a. during interim periods.
b. in preparing adjusting entries.
c. annually in preparing closing entries.
d. annually in preparing correcting entries.

73. The balance in the income summary account before it is closed will be equal to
a. the net income or loss on the income statement.
b. the beginning balance in the retained earnings account.
c. the ending balance in the retained earnings account.
d. zero.

74. After closing entries are posted, the balance in the retained earnings account in the ledger will be equal to
a. the beginning retained earnings reported on the retained earnings statement.
b. the amount of the retained earnings reported on the balance sheet.
c. zero.
d. the net income for the period.

75. The income statement for the month of June, 2015 of Camera Obscura Enterprises contains the following information:
Revenues $7,000
Expenses:
Salaries and Wages Expense $3,000
Rent Expense 1,500
Advertising Expense 800
Supplies Expense 300
Insurance Expense 100
Total expenses 5,700
Net income $1,300

The entry to close the revenue account includes a
a. debit to Income Summary for $1,300.
b. credit to Income Summary for $1,300.
c. debit to Income Summary for $7,000.
d. credit to Income Summary for $7,000.

76. The income statement for the month of June, 2015 of Camera Obscura Enterprises contains the following information:
Revenues $7,000
Expenses:
Salaries and Wages Expense $3,000
Rent Expense 1,500
Advertising Expense 800
Supplies Expense 300
Insurance Expense 100
Total expenses 5,700
Net income $1,300

The entry to close the expense accounts includes a
a. debit to Income Summary for $1,300.
b. credit to Rent Expense for $1,500.
c. credit to Income Summary for $5,700.
d. debit to Salaries and Wages Expense for $3,000.

77. The income statement for the month of June, 2015 of Camera Obscura Enterprises contains the following information:
Revenues $7,000
Expenses:
Salaries and Wages Expense $3,000
Rent Expense 1,500
Advertising Expense 800
Supplies Expense 300
Insurance Expense 100
Total expenses 5,700
Net income $1,300

After the revenue and expense accounts have been closed, the balance in Income Summary will be
a. $0.
b. a debit balance of $1,300.
c. a credit balance of $1,300.
d. a credit balance of $7,000.

78. The income statement for the month of June, 2015 of Camera Obscura Enterprises contains the following information:
Revenues $7,000
Expenses:
Salaries and Wages Expense $3,000
Rent Expense 1,500
Advertising Expense 800
Supplies Expense 300
Insurance Expense 100
Total expenses 5,700
Net income $1,300

The entry to close Income Summary to Retained Earnings includes
a. a debit to Revenues for $7,000.
b. credits to Expenses totalling $5,700.
c. a credit to Income Summary for $1,300
d. a credit to Retained Earnings for $1,300.

79. The income statement for the month of June, 2015 of Camera Obscura Enterprises contains the following information:
Revenues $7,000
Expenses:
Salries and Wages Expense $3,000
Rent Expense 1,500
Advertising Expense 800
Supplies Expense 300
Insurance Expense 100
Total expenses 5,700
Net income $1,300

At June 1, 2015, Camera Obscura reported retained earnings of $35,000. The company had no dividends during June. At June 30, 2015, the company will report retained earnings of
a. $29,300.
b. $35,000.
c. $36,300.
d. $42,000.

80. The income statement for the year 2015 of Fugazi Co. contains the following information:
Revenues $70,000
Expenses:
Salaries and Wages Expense $45,000
Rent Expense 12,000
Advertising Expense 10,000
Supplies Expense 6,000
Utilities Expense 2,500
Insurance Expense 2,000
Total expenses 77,500
Net income (loss) $ (7,500)

The entry to close the revenue account includes a
a. debit to Income Summary for $7,500.
b. credit to Income Summary for $7,500.
c. debit to Revenues for $70,000.
d. credit to Revenues for $70,000.

81. The income statement for the year 2015 of Fugazi Co. contains the following information:
Revenues $70,000
Expenses:
Salaries and Wages Expense $45,000
Rent Expense 12,000
Advertising Expense 10,000
Supplies Expense 6,000
Utilities Expense 2,500
Insurance Expense 2,000
Total expenses 77,500
Net income (loss) $ (7,500)

The entry to close the expense accounts includes a
a. debit to Income Summary for $7,500.
b. credit to Income Summary for $7,500.
c. debit to Income Summary for $77,500.
d. debit to Utilities Expense for $2,500.

82. The income statement for the year 2015 of Fugazi Co. contains the following information:
Revenues $70,000
Expenses:
Salaries and Wages Expense $45,000
Rent Expense 12,000
Advertising Expense 10,000
Supplies Expense 6,000
Utilities Expense 2,500
Insurance Expense 2,000
Total expenses 77,500
Net income (loss) $ (7,500)

After the revenue and expense accounts have been closed, the balance in Income Summary will be
a. $0.
b. a debit balance of $7,500.
c. a credit balance of $7,500.
d. a credit balance of $70,000.

83. The income statement for the year 2015 of Fugazi Co. contains the following information:
Revenues $70,000
Expenses:
Salaries and Wages Expense $45,000
Rent Expense 12,000
Advertising Expense 10,000
Supplies Expense 6,000
Utilities Expense 2,500
Insurance Expense 2,000
Total expenses 77,500
Net income (loss) $ (7,500)

The entry to close Income Summary to Retained Earnings includes
a. a debit to Revenue for $70,000.
b. credits to Expenses totalling $77,500.
c. a credit to Income Summary for $7,500.
d. a credit to Retained Earnings for $7,500.

84. The income statement for the year 2015 of Fugazi Co. contains the following information:
Revenues $70,000
Expenses:
Salaries and Wages Expense $45,000
Rent Expense 12,000
Advertising Expense 10,000
Supplies Expense 6,000
Utilities Expense 2,500
Insurance Expense 2,000
Total expenses 77,500
Net income (loss) $ (7,500)

At January 1, 2015, Fugazi reported retained earnings of $50,000. Dividends for the year totalled $10,000. At December 31, 2015, the company will report retained earnings of
a. $17,500.
b. $32,500.
c. $40,000.
d. $42,500.

85. The income statement for the year 2015 of Fugazi Co. contains the following information:
Revenues $70,000
Expenses:
Salaries and Wages Expense $45,000
Rent Expense 12,000
Advertising Expense 10,000
Supplies Expense 6,000
Utilities Expense 2,500
Insurance Expense 2,000
Total expenses 77,500
Net income (loss) $ (7,500)

After all closing entries have been posted, the Income Summary account will have a balance of
a. $0.
b. $7,500 debit.
c. $7,500 credit.
d. $77,500 credit.

86. The income statement for the year 2015 of Fugazi Co. contains the following information:
Revenues $70,000
Expenses:
Salaries and Wages Expense $45,000
Rent Expense 12,000
Advertising Expense 10,000
Supplies Expense 6,000
Utilities Expense 2,500
Insurance Expense 2,000
Total expenses 77,500
Net income (loss) $ (7,500)

After all closing entries have been posted, the revenue account will have a balance of
a. $0.
b. $70,000 credit.
c. $70,000 debit.
d. $7,500 credit.

87. A post-closing trial balance is prepared
a. after closing entries have been journalized and posted.
b. before closing entries have been journalized and posted.
c. after closing entries have been journalized but before the entries are posted.
d. before closing entries have been journalized but after the entries are posted.

88. All of the following statements about the post-closing trial balance are correct except it
a. shows that the accounting equation is in balance.
b. provides evidence that the journalizing and posting of closing entries have been properly completed.
c. contains only permanent accounts.
d. proves that all transactions have been recorded.

89. A post-closing trial balance will show
a. only permanent account balances.
b. only temporary account balances.
c. zero balances for all accounts.
d. the amount of net income (or loss) for the period.

90. A post-closing trial balance should be prepared
a. before closing entries are posted to the ledger accounts.
b. after closing entries are posted to the ledger accounts.
c. before adjusting entries are posted to the ledger accounts.
d. only if an error in the accounts is detected.

91. A post-closing trial balance will show
a. zero balances for all accounts.
b. zero balances for balance sheet accounts.
c. only balance sheet accounts.
d. only income statement accounts.

92. The purpose of the post-closing trial balance is to
a. prove that no mistakes were made.
b. prove the equality of the balance sheet account balances that are carried forward into the next accounting period.
c. prove the equality of the income statement account balances that are carried forward into the next accounting period.
d. list all the balance sheet accounts in alphabetical order for easy reference.

93. The balances that appear on the post-closing trial balance will match the
a. income statement account balances after adjustments.
b. balance sheet account balances after closing entries.
c. income statement account balances after closing entries.
d. balance sheet account balances after adjustments.

94. Which account listed below would be double ruled in the ledger as part of the closing process?
a. Cash
b. Retained Earnings
c. Dividends
d. Accumulated Depreciation—Equipment

95. A doubl