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Quiz 4 Marketing
Terms for chapters 7 and 8 for quiz 4 in marketing
| Term | Definition |
|---|---|
| Pricing System | A market mechanism or process (organized behavior) by which market participants discover, negotiate, or fix prices |
| Transaction Costs | Those costs incurred by buyer and seller as they search for market opportunities and make and complete business deals |
| What are the two types of pricing systems? | Price Discovery Systems and Price-setting Systems |
| What are the two components of Price Discovery Systems? | Organized markets and decentralized, individual negotiation |
| What are the three components of Price-setting Systems? | Firm price making, group negotiation, and government price setting |
| Price Discovery | The process by which buyers and sellers arrive as a specific price, when market conditions do not permit either group to set prices. *Typically for commodities and NOT FOR DIFFERENTIATED PRODUCTS. |
| D.I.N. stands for: | Decentralized, individual negotiations |
| Organized Markets are also known as: | Public Markets |
| Name 3 components of Organized Markets: | All potential buyers and sellers have open access to one another as they discover price, high level of price efficiency, and participation is facilitated by access, tempered by competition |
| Name 3 examples of Organized Markets: | Livestock auctions, futures markets, and fruit and vegetables in terminal markets |
| Decentralized Individual Negotiation (D.I.N.) | Any price discovery system outside of organized markets in which a buyer and seller as individuals negotiate a transaction |
| Name 3 components of D.I.N.: | Saves cost of central physical assembly and transaction costs, promotes a feeling of increased control of the selling process, and formula pricing |
| Price making by individual firms is more likely for what types of products? | Differentiated products (as opposed to commodities) |
| Does price making by individual firms tend to be more stable or unstable? | Stable |
| Group Negotiation | Collective pricing by farmers; "Collective bargaining"* |
| Group Negotiation is common in what commodities? | Fruits, veggies, nuts, and milk marketing orders |
| Groups in Group Negotiation have the power to control the entry or exit of producers (T/F) | False |
| Name the 3 components of Contractual Exchange Arrangements: | Vertical integration, marketing-procurement contract, and production contract |
| Vertical Integration | An arrangement in which the supply chain of a company is owned by that company; in other words, firm ownership of contiguous stages in the marketing channel. Ex: a feed company that owns livestock; a grocer that processes food |
| Market-Procurement Contract | An agreement between buyer and seller covering the product, quality, quantity, delivery time, price, etc. *Used frequently between retail chains and produce suppliers |
| Production Contract | Involves the buyer in the physical production process. The farmer takes responsibility for caring for broilers, turkeys, pigs OWNED* by contractor. Used also in the fruit & veggie canning industry |
| Quality | The sum of the attributes of a commodity that influence its acceptability and value to buyers and thus the price they are willing to pay for it. *Higher quality = higher price |
| Grading | Dividing a commodity into classes according to a set of criteria called grade standards*; resulting classes or groups are called grades* |
| Is grading sorting in the long or short run? | Short run |
| Marketing Channel Stages | Set of firms that move a commodity from the farm to the consumer |
| Pricing Efficiency | One component of marketing efficiency; a measure of how adequately market prices reflect production and marketing costs throughout the total marketing system |
| Homogeneous Demand | Buyers agree on the ordinal relationships of the various qualities of a commodity, e.g. milk |
| Heterogeneous Demand | Two or more groups of buyers give different rankings to various quantities; e.g. lean beef vs. fatty beef (*Japan Kobe Beef) |
| Is grading voluntary or involuntary? | Voluntary! |
| Meat Inspection vs. Grading | Meat inspection is REQUIRED for HEALTH and SAFETY purposes. Meat grading is VOLUNTARY for MARKETING purposes |
| The Meat Inspection Act of 1906 was administered by who? | The Food Safety and Inspection Service (FSIS) of USDA |
| Meat Grading is offered by whom? | The Agricultural and Marketing Service (AMS) of the USDA |
| What are the 4 principal lean cuts of pork? | Ham, loin, picnic shoulder, and boston butt |
| Grading is done by unbiased third parties (T/F) | True; USDA |
| Operational Efficiency | The ratio between the input to run a business operation and the output gained from the business |
| Price Efficiency | The premise that asset prices are efficient, to the extent that they already factor in or discount all available information |
| How does grading help producers? | There is more money for a higher quality grade; higher return |
| How does grading help consumers? | Higher quality, food safety, price control |
| How does grading help intermediate groups along the supply chain? | Facilitates communication; differentiates the product |
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