Chapter 3 PDF

CHAPTER 3: MASTER TEST BANK
SCANNING THE MARKETING ENVIRONMENT
Test Item Table by Major Section of the Chapter and Blooms Level of Learning
Blooms Level of Learning (LL)

Major Section Level 1 Level 2 Level 3
of the Chapter Knowledge Comprehension Application
(Knows Basic (Understands Concepts & (Applies
Terms & Facts) Principles) Principles)
Chapter 1, 2 3, 4
Opener:
Facebook
Nation
(pp. 62-64)
Environmental 5, 6, 7, 8, 9 10, 11, 12, 13, 14, 15, 16, 17, 18, 22, 23, 24, 25
Scanning 19, 20, 21 319, 320, 321
316, 317, 318
(pp. 64-65)
Social Forces 26, 27, 28, 29, 33, 34, 35, 38, 39, 30, 36, 45, 51, 52, 56, 57, 67, 68, 31, 32, 37, 48,
40, 41, 42, 43, 44, 46, 47, 49, 50, 69, 70, 71, 78, 79, 80, 85, 86, 87, 58, 59, 60, 61,
(pp. 66-73) 53, 54, 55, 63, 64, 65, 66, 72, 73, 89, 91, 92, 93, 96, 99, 108, 114, 62, 81, 82,
74, 75, 76, 77, 83, 84, 88, 90, 94, 115, 116, 121, 125, 126, 129, 130, 122, 133, 134,
95, 97, 98, 100, 101, 102, 103, 131, 132, 135, 136, 137, 138, 139, 141, 149
104, 105, 106, 107, 109, 110, 111, 140, 142, 143, 144, 145, 148 322
112, 113, 117, 118, 119, 120, 123, 322, 323, 324, 325, 326, 327, 328
124, 127, 128, 146, 147
Economic 150, 151, 152, 161, 162, 163, 164, 153, 156, 157, 158, 159, 168, 169, 154, 155, 160,
Forces 165, 166, 167, 170, 171, 175, 176, 172, 173, 174, 177, 180 181, 182, 183,
178, 179, 186 329 184, 185
(pp. 73-76)
Technological 187, 188, 199, 202, 203, 204, 205, 189, 190 191, 192, 193,
Forces 206, 208, 210 330, 331 194, 195, 196,
197, 198, 200,
(pp. 76-78) 201, 207, 209
Competitive 211, 212, 215, 218, 222, 228, 231, 213, 216, 217, 219, 223, 224, 229, 214, 220, 221,
Forces 232, 236, 237 230, 233, 234, 235 225, 226, 227
333, 335 332, 334
(pp. 78-79)
Regulatory 238, 239, 242, 243, 244, 246, 247, 245, 248, 251, 252, 254, 257, 258, 240, 260, 264,
Forces 249, 250, 253, 255, 256, 261, 262, 259, 266, 268, 269, 270, 271, 280, 265, 272, 273,
263, 267, 275, 276, 277, 278, 279, 281, 283, 284, 294, 295, 300, 301, 274, 286, 289,
(pp. 80-84) 282, 285, 287, 288, 290, 296, 297, 303, 306, 307, 308, 309, 310, 311, 291, 292, 293,
302, 304, 305 312 298, 299
336, 337, 338, 339
Video Case 3: 313, 314 315

Geek Squad
(pp. 85-87)
NOTE: Bold numbers indicate short essay questions. Underlined numbers indicate visually enhanced questions.
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Test Item Table by Learning Objective and Blooms Level of Learning
Blooms Level of Learning (LL)

Learning Objective Level 1 Level 2 Level 3
(LO) Knowledge Comprehension Application
(Knows Basic Terms & (Understands Concepts & (Applies
Facts) Principles) Principles)
LO1 Explain how 1, 2, 5, 6, 7, 8, 9, 313, 314, 315 3, 4, 10, 11, 12, 13, 14, 15, 16, 22, 23, 24, 25
environmental 17, 18, 19, 20, 21 319, 320, 321
scanning provides 316, 317, 318
information about
social, economic,
technological,
competitive, and
regulatory forces.
(pp. 64-65)
LO2 Describe how social 26, 27, 28, 29, 33, 34, 35, 38, 30, 36, 45, 51, 52, 56, 57, 67, 31, 32, 37, 48,
forces such as 39, 40, 41, 42, 43, 44, 46, 47, 68, 69, 70, 71, 78, 79, 80, 85, 58, 59, 60, 61,
demographics and 49, 50, 53, 54, 55, 63, 64, 65, 86, 87, 89, 91, 92, 93, 96, 99, 62, 81, 82,
culture can have an 66, 72, 73, 74, 75, 76, 77, 83, 108, 114, 115, 116, 121, 125, 122, 133, 134,
impact on marketing 84, 88, 90, 94, 95, 97, 98, 100, 126, 129, 130, 131, 132, 135, 141, 149
strategy. 101, 102, 103, 104, 105, 106, 136, 137, 138, 139, 140, 142, 322
(pp. 66-73) 107, 109, 110, 111, 112, 113, 143, 144, 145, 148
117, 118, 119, 120, 123, 124, 322, 323, 324, 325, 326, 327,
127, 128, 146, 147 328
LO3 Discuss how economic 150, 151, 152, 161, 162, 163, 153, 156, 157, 158, 159, 168, 154, 155, 160,
forces such as macro- 164, 165, 167, 170, 171, 175, 169, 172, 173, 174, 177, 180 181, 182, 183,
economic conditions 176, 178, 179, 186 329 184, 185
and consumer income
affect marketing.
(pp. 73-76)
LO4 Describe how 187, 188, 199, 202, 203, 204, 189, 190, 330, 331 191, 192, 193,
technological changes 205, 206, 208, 210 194, 195, 196,
can affect marketing. 197, 198, 200,
(pp. 76-78) 201, 207, 209
LO5 Discuss the forms of 211, 212, 215, 218, 222, 228, 213, 216, 217, 219, 223, 224, 214, 220, 221,
competition that exist 231, 232, 236, 237 229, 230, 233, 234, 235 225, 226, 227
in a market and the 333, 335 332, 334
key components of
competition.
(pp. 78-79)
LO6 Explain the major 238, 239, 242, 243, 244, 246, 245, 248, 251, 252, 254, 257, 240, 241, 260,
legislation that ensures 247, 249, 250, 253, 255, 256, 258, 259, 266, 268, 269, 270, 264, 265, 272,
competition and 261, 262, 263, 267, 275, 276, 271, 280, 281, 283, 284, 294, 273, 274, 286,
regulates the elements 277, 278, 279, 282, 285, 287, 295, 300, 301, 303, 306, 307, 289, 291, 292,
of the marketing mix. 288, 290, 296, 297, 302, 304, 308, 309, 310, 311, 312 293, 298, 299
(pp. 80-84) 305 336, 337, 338, 339
NOTE: Bold numbers indicate short essay questions. Underlined numbers indicate visually enhanced questions.
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MULTIPLE CHOICE QUESTIONS
3-1 CHAPTER OPENER: FACEBOOK SOCIAL NATION KNOWLEDGE
Mark Zuckerberg is a co-founder of the social networking website called __________.

a. MySpace
b. Groupon
c. Facebook
d. LinkedIn
e. Twitter
Answer: c Page(s): 63 LO: 1 AACSB: Technology QD: Easy

Rationale: Mark Zuckerberg is a co-founder of the social networking website called Facebook.
3-2 CHAPTER OPENER: FACEBOOK SOCIAL NATION KNOWLEDGE
As of late 2011, Facebook has approximately how many members around the globe?
a. 2 million
b. 7 million
c. 250 million
d. 770 million
e. 2 billion
Answer: d Page(s): 63 LO: 1 AACSB: Technology QD: Easy

Rationale: As of late 2011, Facebook has approximately 770 million members globally.
3-3 CHAPTER OPENER: FACEBOOK SOCIAL NATION COMPREHENSION
All of the following statements about the growth of social networks like Facebook are true
EXCEPT:
a. the Federal Trade Commission (FTC) has had a laissez faire policy of not interfering with the
development and marketing of social media websites.
b. Internet access and smartphones became more affordable to consumers around the world.
c. several companies provided many social networking alternatives.
d. advances in data storage, server speed, and software programming made social networks fast
and convenient.
e. people became increasingly interested in the social aspects of the Internet.
Answer: a Page(s): 63 LO: 1 AACSB: Technology QD: Medium

Rationale: There were five changes in the marketing environment that caused the growth of
social networks like Facebook: (1) Social forces. Society changed as people became increasingly
interested in the social aspects of the Internet. They wanted tools for obtaining information,
offering opinions, and interacting with friends. (2) Economic forces. The cost of wireless
connectivity, Internet service, and smartphones rapidly declined and made social networking
affordable for consumers around the world. (3) Technological forces. Advances in data storage,
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server speed, and software programming made social networks fast and convenient. (4)
Competitive forces. Several companies provided many social networking alternatives. (5)
Legal/regulatory forces. Facebook obtained rights to the name, developed privacy guidelines,
and settled a claim that some of the ideas behind Facebook had come from other students.
Alternative a is the correct answer. While mention of the FTCs efforts in the textbook is
silent, the U.S. government agency has been involved in regulating the practices of social
networks.
3-4 CHAPTER OPENER: FACEBOOK SOCIAL NATION COMPREHENSION
All of the following statements about these social networks are true EXCEPT:
a. Facebook contains user-generated content that each member supplies to the Web service.
b. Digg allows people to share articles.
c. Ning allows users to create custom social websites.
d. Google is increasingly becoming a fierce competitor to Facebook as a depository of societys
information.
e. Today, MySpace is the largest social networking website.
Answer: e Page(s): 63-64 LO: 1 AACSB: Technology QD: Medium

Rationale: While MySpace was the first major social networking website, it is not the largest in
terms of membership. As of late 2011, Facebook has approximately 770 million members
globally.
3-5 ENVIRONMENTAL SCANNING KNOWLEDGE
Environmental scanning refers to

a. assessing any possible negative impact a firms activities might have on the local ecology.
b. continually acquiring information on events occurring outside the organization to identify and
interpret potential trends.
c. setting up a regular schedule to assess the performance of different divisions within a firm.
d. initiating an internal talent search to identify employees who can think outside the box to
generate solutions to marketing problems caused by changes in the marketing environment.
e. requiring all employees to spend time outside the office to avoid the ivory tower syndrome.
Answer: b Page(s): 64-65 LO: 1 AACSB: Analytic QD: Easy

Rationale: Key term definitionenvironmental scanning.
The process of continually acquiring information on events occurring outside the organization to
identify and interpret potential trends is referred to as
a. significant trend analysis.
b. organizational scanning.
c. environmental scanning.
d. a SWOT analysis.
e. marketing intelligence.
Answer: c Page(s): 64-65 LO: 1 AACSB: Analytic QD: Easy

Rationale: Key term definitionenvironmental scanning.
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Environmental trends come from all of the following forces EXCEPT:

a. competitive
b. economic
c. regulatory
d. geographical
e. social
Answer: d Page(s): 64-65 LO: 1 AACSB: Analytic QD: Easy

Rationale: Environmental scanning trends come from social, economic, technological,
competitive, and regulatory forces. See Figures 3-1 and 3-2 in the textbook.
Between 1962 and 2010, adult coffee consumption has

a. steadily increased each year.
b. steadily decreased each year.
c. remained steady.
d. increased significantly due to adults consuming prepared coffee away from home at outlets
such as Starbucks.
e. fluctuated, first declining and then increasing.
Answer: e Page(s): 64-65 LO: 1 AACSB: Analytic QD: Easy

Rationale: Over a period of several decades, coffee consumption declined from 75 percent of the
adult population in 1962 to 49 percent in 2004. Then, it increased to 56 percent in 2010. The
percentage of adults who drink coffee prepared away from home has declined from 31 percent in
2008 to 26 percent in 2010, probably due to the ongoing recession and the comparatively higher
prices per serving relative to at-home prepared coffee.
Coffee consumption among consumers 18 to 24 years old has __________ from 2003 to today.
a. increased
b. decreased
c. remained the same
d. fluctuated, first declining and then increasing
e. fluctuated, first increasing and then declining
Answer: a Page(s): 64-65 LO: 1 AACSB: Analytic QD: Easy

Rationale: Coffee consumption among consumers 18 to 24 years old has increased from 16
percent in 2003 to 31 percent today. The textbook does not state that there were any fluctuations
in the increase in coffee consumptionjust an increase, so alternative a is the correct answer.
3-10 ENVIRONMENTAL SCANNING COMPREHENSION
Changes in coffee consumption affect all of the following EXCEPT:
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a. supermarkets.
b. government regulators.
c. coffee shops.
d. coffee growers.
e. coffee processors.
Answer: b Page(s): 64-65 LO: 1 AACSB: Analytic QD: Medium

Rationale: In general, changes in coffee consumption affect coffee retailers, such as
supermarkets and coffee shops like Starbucks and Dunkin Donuts. Moreover, they can impact
coffee growers and processors, firms that take the product from growers and then clean, bag, and
transport it to retailers. Government regulators are unlikely to be impacted when there is a
change in consumer preferences for coffee and competing beverages. Therefore, alternative b
is the correct answer.
The changes in coffee consumption are likely due to all of the following EXCEPT:
a. Coffee shops like Starbucks are using mobile payment systems to make purchases more
convenient.
b. Coffee marketers like Caribou Coffee are offering new flavors and seasonal blends.
c. The decreased use of Fair Trade certified coffee due to the added expenses incurred for
certification and farmer subsidies given the current economic downturn.
d. Coffee shops are using new machines to automate the brewing and dispensing of coffee faster
to reduce order processing time.
e. Supermarkets such as Safeway and booksellers such as Borders have added Starbucks and
Seattles Best (owned by Starbucks) boutiques to their gourmet brands of coffee within their
stores.
Answer: c Page(s): 64-65 LO: 1 AACSB: Analytic QD: Medium

Rationale: The textbook is silent on the use of Fair Trade certified coffee, which has increased
significantly over recent years. Fair Trade practices improve the quality of life for small
farmers/growers while using environmentally sustainable practices. Producers in developing
countries receive higher prices (or subsidies) for their products if grown organically. Therefore,
alternative c is the correct answer.
All of the following reasons explain the change in adult coffee consumption between 1962 and
2010 EXCEPT:
a. many coffee marketers increased the distribution of their coffees in supermarkets and/or other
retail outlets.
b. many coffee marketers added new coffee flavors and seasonal blends.
c. there was an increase in coffee consumption among those who are 18 to 24 years old.
d. there was a shift in demand from coffee to other competing beverages such as tea, soft drinks,
juices, and bottled water.
e. there was an increase in away-from-home consumption due to an increase in consumers
discretionary incomes.
Answer: e Page(s): 64-65 LO: 1 AACSB: Analytic QD: Medium
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Rationale: Due to the current economic recession, there has been a decline in away-from-home
consumption due to a decrease in consumers discretionary incomes. Therefore, alternative e is
the correct answer.
Over a period of several decades, coffee consumption declined from 75 percent of the adult
population in 1962 to 49 percent in 2004. Then, it increased to 56 percent in 2010. A firm with a
good marketing orientation would have
a. found a less volatile product to sell.
b. invested more money into market research.
c. changed to a new promotional firm.
d. explored the reasons behind these changes.
e. demoted coffee from being a star to a dog.
Answer: d Page(s): 64-65 LO: 1 AACSB: Analytic QD: Medium

Rationale: Identifying and interpreting trends such as the changes in coffee consumption and
developing explanations are essential to successful environmental scanning.
The purpose of environmental scanning is to

a. only identify trends in the marketplace.
b. only interpret trends in the marketplace.
c. only forecast trends in the marketplace.
d. identify, interpret, and forecast trends in the marketplace.
e. only identify and interpret trends in the marketplace.

Rationale: The purpose of environmental scanning is to identify and interpret trends in the
marketplace. Only after a marketer identifies and explains the trends that affects his/her market
and product/service can he/she then develop forecasts regarding future trends and/or sales of both
the industry within which his/her firm operates as well as sales projections for the product or
service itself. Predicting future trends and sales requires assumptions about the number of years
the trends will continue and the rate of increase or decrease within the segments that constitute
the market.
Which of the following statements regarding environmental scanning is the most accurate?
a. Environmental scanning changes the marketing environment.
b. Environmental scanning identifies and interprets potential trends.
c. Environmental scanning should be done at least every five years.
d. Environmental scanning focuses primarily on ecological factors.
e. There is too much information generated from environmental scanning to make it viable for
small firms.
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Rationale: The process of continually acquiring information on events occurring outside the
organization to identify and interpret potential trends is called environmental scanning.
Predicting the future in terms of environmental scanning requires assumptions about

a. the total potential investment required to achieve the companys goals.
b. the total potential revenues that could be generated as a result of additional investment now.
c. the number of years the trends will continue and the factors that cause these trends to change.
d. the skills the marketing department has to be able uncover trends in the marketplace.
e. the effectiveness of the tools employed, such as scenario casting.

Rationale: Predicting the future in terms of environmental scanning requires assumptions about
the number of years the trends will continue and the rate of increase or decline in the factors that
cause the trends.
Which of the following trends identified in an environmental scan is a social trend?

a. Online data collection leading to behavioral targeting will grow dramatically.
b. Microbusiness impact will increase through peer-to-peer websites.
c. International activity from Asia to Africa will grow as countries from these areas become
sources of economic growth.
d. There will be increasing regulatory guidance regarding green and environmental marketing
claims.
e. Consumer purchase decisions are becoming more values-based and focused on improving the
world.

Rationale: Figure 3-2 shows several key trends identified by an environmental scan of todays
marketplace according to the five environmental forces. Alternative a is a technological trend.
Alternative b is a competitive trend. Alternative c is an economic trend. Alternative d is a
regulatory trend.
Which of the following trends identified in an environmental scan is an economic trend?

a. The U.S., Japan, China, and the E.U. countries will increase investments in sustainable living
infrastructure.
b. Digital TVs, tablet devices, and smartphones will become increasingly connected.
c. Partnerships, collaborations, and co-creation of value will become important dimensions of
business rivalry.
d. Health consciousness will lead to more public and private smoke-free areas.
e. Global media consumption (online and social) will continue to grow dramatically.
Answer: a Page(s): 64-65 LO: 1 AACSB: Analytic QD: Medium

marketplace according to the five environmental forces. Alternative b is a technological trend.
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Alternative c is a competitive trend. Alternative d is a regulatory trend. Alternative e is a
social trend.
Which of the following trends identified in an environmental scan is a technological trend?

a. New smartphone apps, such as mobile location promotion, quick response (QR) codes, and
mobile payments will become increasingly more available.
b. Customer-generated content is growing as a competitive advantage.
c. The slow recovery of the current recession is leading to sustained higher levels of
unemployment.
d. Online privacy protection advocacy and regulation will continue to grow.
e. Social networks are becoming the dominant form of communication for consumers.

marketplace according to the five environmental forces. Alternative b is a competitive trend.
Alternative c is an economic trend. Alternative d is a regulatory trend. Alternative e is a
social trend.
Which of the following trends identified in an environmental scan is a competitive trend?

a. Online data collection leading to behavioral targeting will grow dramatically.
b. Microbusiness impact will increase through peer-to-peer websites.
c. International activity from Asia to Africa will grow as countries from these areas become
sources of economic growth.
d. There will be increasing regulatory guidance regarding green and environmental marketing
claims.
e. Consumer purchase decisions are becoming more values-based and focused on improving the
world.

Alternative c is an economic trend. Alternative d is a regulatory trend. Alternative e is a
social trend.
Which of the following trends identified in an environmental scan is a regulatory trend?

a. Digital TVs, tablet devices, and smartphones will become increasingly connected.
b. Partnerships, collaborations, and co-creation of value will become important dimensions of
business rivalry.
c. The U.S., Japan, China, and the E.U. countries will increase investments in sustainable living
structures.
d. Health consciousness will lead to more public and private smoke-free areas.
e. Global media consumption (online and social) will continue to grow dramatically.
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Alternative b is a competitive trend. Alternative c is an economic trend. Alternative e is a
social trend.
3-22 ENVIRONMENTAL SCANNING APPLICATION
From the start of the war on terrorism, billions have been spent on the war effort in Iraq.
According to an environmental scan of the United States, this military expenditure is an example
of a change in __________ forces.
a. economic
b. competitive
c. technological
d. social
e. regulatory
Answer: a Page(s): 64-65 LO: 1 AACSB: Analytic QD: Hard

Rationale: The increased military expenditure related to the war on terrorism is an example of a
change in economic forces.
The Lemon Tree is a high-fashion boutique selling top-of-the-line womens clothing and
accessories. The keys to its success include knowing customers changing tastes and providing
something different from other retailers. In addition, because of the high value of the
merchandise, The Lemon Trees management is exploring the use of computerized inventory
controls and sales order processing. From this description, one can infer that the LEAST
IMPORTANT environmental force to The Lemon Tree at this particular time would be
a. economic.
b. competitive.
c. technological.
d. social.
e. regulatory.
Answer: e Page(s): 64-65 LO: 1 AACSB: Analytic QD: Hard

Rationale: Only regulatory issues are not mentioned in the question.
As the director of marketing for Littleton Hospital, you must conduct an environmental scan to
help create a five-year marketing plan for the hospital. Which of the following environmental
trends should you consider to be the MOST IMPORTANT?
a. The number of people in the geographic area who are 65 years or older will increase by 23
percent during the next five years.
b. By the year 2015, baby boomers will control more than 50 percent of all consumer
expenditures in the United States.
c. The Littleton community has seen a rise in dual-income households.
d. By the year 2025, robotics will play a major role in surgical procedures.
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e. Twenty percent of the local population is of Hispanic origin.
Answer: a Page(s): 64-65 LO: 1 AACSB: Analytic QD: Hard

Rationale: The most important trend is the rise of the 65+ year old population in the community
because these consumers disproportionately demand healthcare care services. This will likely be
an important target market for the hospital. Alternative b applies to the United States as a
whole and thus is not relevant to a local hospital. Alternative c is somewhat important because
the rise in two-income households in the community means that more consumers may be able to
afford the hospitals services, if needed. Alternative d eventually will be important to the
hospital, but not now. Alternative e may be important if there are diseases that are unique to
Hispanics, like sickle cell anemia is to African Americans. Only alternative a would have a
direct, relatively immediate, and significant impact on the hospital.
One of the worlds largest publishers was totally unprepared for recent increases in the demand
for digital books. During 2011, the sale of e-books exceeded the sales of traditional printed
paperback books for the first time. If the publisher had __________, it would have been more
prepared for this shift in demand.
a. optimized its distribution by eliminating local and chain store bookstores (like Borders) that
failed to meet their sales quotas
b. noticed the change in the demographics of book readers in general
c. noticed the behavioral changes in moviegoers, who now prefer to view 3D movies in IMAX
theaters
d. shifted funds from product development to advertising
e. tracked, as part of its ongoing environmental scanning activities, the sales of e-books sold by
other publishers as well as e-book readers sold by Amazon.com (Kindle) and Barnes and
Noble (Nook)
Answer: e Page(s): 64-65 LO: 1 AACSB: Analytic QD: Hard

Rationale: If the publisher had conducted an environmental scan, it may have discovered the
rising sales trend of digital books and invested resources to develop and test these offerings.
3-26 SOCIAL FORCES KNOWLEDGE
The set of environmental forces that consists of the demographic characteristics of the population
and its values is referred to as
a. social forces.
b. economic forces.
c. consumer forces.
d. cultural forces.
e. market forces.
Answer: a Page(s): 66 LO: 2 AACSB: Analytic QD: Easy

Rationale: Key term definitionsocial forces.
The demographic characteristics of the population and its values are referred to as
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a. attitudinal forces.
b. psychographic forces.
c. social forces.
d. cultural forces.
e. market forces.
Answer: c Page(s): 66 LO: 2 AACSB: Analytic QD: Easy

The social forces of the environment include the ____________ of the population and its values.
a. living standards
b. social classes
c. cohorts
d. ethics
e. demographic characteristics
Answer: e Page(s): 66 LO: 2 AACSB: Analytic QD: Easy

The social forces of the environment include the demographic characteristics of the population
and its __________.
a. geographic locations
b. social classes
c. cohorts
d. values
e. ethics
Answer: d Page(s): 66 LO: 2 AACSB: Analytic QD: Easy

3-30 SOCIAL FORCES COMPREHENSION
Which of the following statements regarding social forces is most accurate?

a. Social forces can have a dramatic impact on marketing strategy.
b. As a social force, consumer incomes have more impact on marketing strategy than
demographics.
c. Social forces within an organization motivate employees to improve their productivity.
d. Social forces determine all the other environmental forces that affect an organization.
e. Of all the environmental forces, social forces are the easiest for a marketer to manipulate.
Answer: a Page(s): 66 LO: 2 AACSB: Analytic QD: Medium

Rationale: Changes in these social forces can have a dramatic impact on marketing strategy.
3-31 SOCIAL FORCES APPLICATION
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MySpace.com is a social network that is targeted primarily to people under the age of 25. In
2005, when MySpace was the leading social network, News Corp., owner of The Wall Street
Journal and Fox News, bought the firm for $580 million. Since then, its membership has
declined precipitously due to changing consumer tastes. As a result, News Corp. sold MySpace
to a group of investors for a paltry $38 million in mid-2011. This is an example of how
__________ forces impact the marketing environment.
a. economic
b. competitive
c. social
d. technological
e. regulatory
Answer: c Page(s): 66 LO: 2 AACSB: Analytic QD: Hard

Rationale: Social forces include the demographic characteristics of the population, such as age.
In this case, the population under 25 who want to participate in a social networking environment
changed from MySpace to Facebook and Twitter as their principal social networking websites.
3-32 SOCIAL FORCES APPLICATION
An important social trend is the continued concern for health and well-being in the United States.
This is most likely evidenced by
a. First Lady Michelle Obamas Lets Move! initiative to eliminate childhood obesity.
b. the increased sales of Cigar Aficionado magazine.
c. the opening of more Starbucks coffee boutiques in supermarkets.
d. the upsizing of menu items at fast food restaurants.
e. the introduction of tablet devices such as the iPad.
Answer: a Page(s): 66 LO: 2 AACSB: Analytic QD: Hard

Rationale: Social forces include the demographic characteristics of the population and its values.
The concern for health and well-being is a value that led First Lady Michelle Obama to launch
her Lets Move! initiative to solve the problem of childhood obesity.
3-33 DEMOGRAPHICS KNOWLEDGE
Demographics refers to
a. the description of a population according to its values or cultural beliefs.
b. an objective measurement of a persons likelihood to purchase a product or service.
c. the psychological profile of prospective consumers.
d. the density of a population in a geographic area.
e. the description of a population according to selected characteristics such as age, gender,
ethnicity, income, and occupation.

Rationale: Key term definitiondemographics.
The description of a population according to selected characteristics such as age, gender,

ethnicity, income, and occupation is referred to as __________.
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a. product group profiling
b. demographics
c. behavioral analysis
d. psychographics
e. statistical analysis
Answer: b Page(s): 66 LO: 2 AACSB: Analytic QD: Easy

Demographics describe all of the following population characteristics EXCEPT:

a. income.
b. age.
c. gender.
d. zip code.
e. ethnicity/race.

3-36 DEMOGRAPHICS COMPREHENSION
It is predicted that the number of people in the United States over the age of 65 will __________
by 2030.
a. almost double
b. be significantly less than the growth of children under 16 years old
c. increase at the same worldwide rate
d. decrease at the same worldwide rate
e. begin to decrease, relative to previous growth rates

Rationale: Today, there are approximately 40 million people 65 and older in America. By 2030,
this age group will include more than 72 million people or 20 percent of the population.
3-37 DEMOGRAPHICS APPLICATION
More magazine is a publication designed to appeal to women aged 40 and over. Demand for such
magazines is an example of how changing __________ characteristics impact the marketing
environment.
a. cultural
b. behavioral
c. psychographic
d. occupational
e. demographic
Answer: e Page(s): 66 LO: 2 AACSB: Analytic QD: Hard
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Rationale: Describing a population according to selected characteristics such as age, gender,
ethnicity, income, and occupation is referred to as demographics. The question refers to women
aged 40 and over, which is a demographic characteristic.
3-38 WORLD POPULATION KNOWLEDGE
The most recent estimate indicates that the population of the world today is about __________.
a. 5.0 billion
b. 5.7 billion
c. 6.9 billion
d. 7.9 billion
e. 9.4 billion

Rationale: The world population today is estimated at 6.9 billion people.
By 2050, the worlds population is expected to be __________.

a. 5.0 billion
b. 5.7 billion
c. 6.9 billion
d. 7.9 billion
e. 9.4 billion

Rationale: By 2050, the worlds population is expected to be 9.4 billion.
The term that describes the rapid growth in world population is called the __________.
a. population expansion
b. population inversion
c. population migration
d. population explosion
e. population eruption

Rationale: Text term definitionpopulation explosion.
The population explosion has occurred

a. primarily in the developing countries of Latin America, Asia, and Africa.
b. evenly throughout the world.
c. primarily in the United States due to high birth rates and immigration.
d. primarily in the countries of the European Union due to high birth rates and immigration.
- 15 -
e. primarily in developed countries due to better economic, infrastructure, and healthcare
conditions.

Rationale: Text term definitionpopulation explosion.
Projections show that the population of the world is __________.

a. growing
b. declining
c. decreasing in Africa
d. increasing in Europe
e. decreasing in Latin America

Rationale: The world population is expected to grow from 6.9 billion to 9.4 billion over the next
4 decades (by 2050). In the developing countries within Africa, Asia, and Latin America, the
populations are expected to grow while the populations in the developed countries of the United
States, Japan, Australia, and the countries of Europe are expected to decline over this period.
The country expected to have the largest population in 2050 is __________.

a. India
b. the United States
c. China
d. Russia
e. Brazil

Rationale: India is predicted to have the worlds largest population in 2050 with 1.75 billion
people. China will be a close second with 1.44 billion people.
World population projections show that the number of people 60 years of age and older is
expected to __________ by 2050.
a. decline by 1 billion
b. double to 4 billion
c. reach 2 billion
d. triple to 3 billion
e. reach 6 billion

Rationale: The number of people 60 years of age and older is expected to more than triple in the
next four decades and reach 2 billion by 2050.
- 16 -
3-45 WORLD POPULATION COMPREHENSION
Which of the following global trends has significant implications to global marketers?
a. the declining populations of Latin/South American countries
b. the size of the markets in India and China
c. the tripling of the population of consumers under 40 years old
d. the decreasing interest in entrepreneurship in developing countries
e. the increased saving rates of elderly populations in developed countries
Answer: b Page(s): 66 LO: 2 AACSB: Analytic QD: Medium

Rationale: Global trends have many implications. The relative size of countries such as India
and China will mean they represent huge markets for many product categories. Elderly
populations in developed countries are likely to save less and begin spending their funds on
healthcare, travel, and other retirement-related products and services. Economic progress in
developing countries will lead to growth in entrepreneurship.
3-46 U.S. POPULATION KNOWLEDGE
Studies of the __________ characteristics of the U.S. population suggest that it is becoming
larger, older, and more diverse.
a. cultural
b. psychographic
c. geographic
d. demographic
e. economic

Rationale: Demographic variables include those such as age, gender, ethnicity, income, and
occupation that describe a population. Studies of the demographic characteristics of the U.S.
population suggest that it is becoming larger, older, and more diverse.
Generally, the U.S. population is becoming

a. smaller, younger, and more diverse.
b. smaller, older, and more diverse.
c. larger, older, and less diverse.
d. larger, younger, and more diverse.
e. larger, older, and more diverse.

Rationale: Studies of the demographic characteristics of the U.S. population suggest the
population is becoming larger, older, and more diverse.
3-48 U.S. POPULATION APPLICATION
All of the following factors contribute to the growth of a countrys population EXCEPT:
a. life expectancy (the average number of years a population lives from birth).
- 17 -
b. immigration (the number of people who enter a country for the purpose of permanent
residence).
c. population density (defined as the total number of people per square mile/kilometer).
d. birth rate (the number of births during a specified time period).
e. death rate (the number of deaths during a specified time period).

Rationale: Alternative c is correct because population density has little to do with the growth
or decline of a countrys population. All of the other alternatives have a significant impact on
population growth. Others factors include emigration, fecundity (the capability of females/males
in the population to produce offspring), and economic prosperity, to name a few.
By 2030, the U.S. population is expected to exceed

a. 273 million.
b. 308 million.
c. 323 million.
d. 373 million.
e. 408 million.

Rationale: In 2010, the U.S. population was estimated to be 308 million people. If current trends
in life expectancy, birthrates, and immigration continue, the U.S. population will exceed 373
million people by 2030.
Which age segment of the U.S. population is expected to grow to 72 million people or almost 20
percent of the population by 2030?
a. children under the age of 18
b. people aged 65 and over
c. children of baby boomers
d. children of Generation X
e. children of Generation Y

this age group will reach 72 million people or almost 20 percent of the population.
3-51 U.S. POPULATION COMPREHENSION
Demographers predict that the number of people in the U.S. aged 65 and over will __________
by 2030.
a. almost double
b. be significantly less than the number of children under 18 years old
c. increase at the same rate as the rate for developing countries
d. increase at the same rate as the rate for developed countries
e. stay the same as today
- 18 -
this age group will include more than 72 million people or almost 20 percent of the population.
3-52 U.S. POPULATION COMPREHENSION
The term minority is currently defined as a relatively small group of people who differ from
others with respect to race, religion, language, or political persuasion. Why will the term have
different implications in the future?
a. There will be stronger limits on immigration, so the presence of minorities will be less
noticeable.
b. Members of Generation Y are more socially conscious and embrace diversity.
c. The term minority has become politically incorrect.
d. The meaning of the word wont change at all; the group with the smallest population,
regardless of its absolute size, will always be labeled minority.
e. The size of most ethnic groups will double during the next two decades.
Answer: e Page(s): 67 LO: 2 AACSB: Analytic QD: Medium

Rationale: The term minority as it is currently used is likely to become obsolete as the size of
most ethnic groups will double during the next two decades.
3-53 BABY BOOMERS KNOWLEDGE
The generation of children born between 1946 and 1964 is referred to as

a. baby busters.
b. baby boomlets.
c. Generation Y.
d. baby boomers.
e. Generation X.

Rationale: Key term definitionbaby boomers.
Baby boomers can be defined as the generation of children born __________.

a. between 1918 and 1945
b. between 1946 and 1964
c. between 1965 and 1976
d. between 1977 and 1994
e. since 1995

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The generation of children born between 1946 and 1964 is referred to as
a. baby busters.
b. millennials.
c. Generation Y.
d. baby boomers.
e. Generation X.

3-56 BABY BOOMERS COMPREHENSION
Baby boomers are an important target market because

a. their workforce participation has made them the wealthiest generation in U.S. history,
accounting for an estimated 50 percent of all consumer spending.
b. they include most of the important business leaders in the United States.
c. they represent a small proportion of the population but have large disposable incomes.
d. they have the longest life expectancies, remaining an active participant in the marketplace for
a long time.
e. they will be able to pass along significant wealth to their children, the generation that will
succeed them.

Rationale: Baby boomers are an important target market because their workforce participation
has made them the wealthiest generation in U.S. history, accounting for an estimated 50 percent
of all consumer spending.
Which of the following statements regarding baby boomers is most accurate?

a. Baby boomers are an important consumer market segment because of their relatively high
wealth and workforce participation.
b. Baby boomers are more educated and therefore more proactive in making their needs known.
c. Baby boomers are important to marketers because they are leaving significant amounts of
wealth to their children.
d. Baby boomers are more personally and financially secure because they did not have to live
through any major wars.
e. Baby boomers are much more likely to spend their money on others than on themselves.

Rationale: As the 76 million baby boomers have aged, their participation in the workforce and
wealth have increased, making them an important consumer market segment.
3-58 BABY BOOMERS APPLICATION
In a recent issue of AARP The Magazine, a print ad for State Farm Insurance annuities advises
readers that The company has helped you enjoy your time with the kids and it can now help you
enjoy your time without them. The ad is most likely targeted toward which generational cohort?
a. Generation X
- 20 -
b. baby busters
c. Generation Y
d. the Greatest Generation
e. baby boomers

Rationale: Baby boomers interests reflect a concern for their own health, fitness, retirement
housing, finances, and physical appearance. Companies will need to develop and target products
that respond to the interests of this generational cohort.
Frito-Lay will be releasing a succession of reformulated snacks to address boomers concerns

about salt and saturated fat to address __________ health-related concerns.
a. echo-boomers
b. baby boomers
c. Generation Xers
d. Generation Yers
e. baby busters
Answer: b Page(s): 67 LO: 2 AACSB: Analytic QD: Hard

Rationale: Generally, baby boomers are receptive to products that are healthier for them.
Olays promotions for its Total Effects cleansing cloths, which fight signs of aging, are targeted
toward
a. echo-boomers.
b. Generation Xers.
c. Generation Yers.
d. baby boomers.
e. baby busters.
Answer: d Page(s): 67 LO: 2 AACSB: Analytic QD: Hard

Rationale: Generally, baby boomers are receptive to products that can improve their appearance.
- 21 -
Ameritrade Ad
The Ameritrade ad shown above is targeted at which generational cohort?

a. echo-boomers
b. Generation Xers
c. Generation Yers
d. baby boomers
e. baby busters

Rationale: Generally, baby boomers are receptive to products that focus on the planning for their
retirement housing and finances.
Which of the following marketing activities targets baby boomers?

a. Some educational institutions have developed degree programs that emphasize sustainable
practices.
b. Some hoteliers have remodeled their rooms to make them more casual and tech-friendly.
c. Some consumer packaged goods firms have reformulated their products to address concerns
about salt, sugar, and saturated fat.
d. Some travel agencies have developed distinctive, memorable, and personal vacations (cruises,
sightseeing trips, etc.)
e. Some greeting card firms have created birthday cards with sentiments designed for
stepparents and stepchildren.

Rationale: Alternative a is a marketing activity that some educational institutions have
developed to target millennialsthose consumers born after 1994. Alternative b is a marketing
activity that some hoteliers have implemented to target Gen Xers. Alternative d is a marketing
- 22 -
activity that some travel agencies have developed to target Gen Yers. Alternative e is a
marketing activity that some marketers have developed to target blended families.
3-63 GENERATION X KNOWLEDGE
Generation X is defined as the generation of children born __________.

a. between 1946 and 1964
b. between WWI and WWII
e. since the millennium

Rationale: Generation X includes the 15 percent of the U.S. population born between 1965 and
1976.
The 15 percent of the population born between 1965 and 1976, also called the baby bust, refers to
__________.
a. Generation X
b. millennials
c. Generation Y
d. Generation Z
e. baby boomers

Rationale: Key term definitionGeneration X.
The 15 percent of the population born between 1965 and 1976, also called the __________, refers
to Generation X.
a. Generation Y
b. baby bust
c. millennials
d. baby boomers
e. Generation Z
Answer: b Page(s): 67-68 LO: 2 AACSB: Analytic QD: Easy

Generation X is the label often given to

a. persons born between 1965 and 1976.
b. persons 65 years old and older.
c. the upbeat or carefree generation.
- 23 -
d. the greatest generation born between the baby boomer generation and their parents,
Generation Wthe World War II generation.
e. those people who were born during the millennium.

3-67 GENERATION X COMPREHENSION
The name given to the group of consumers who are described as self-reliant, supportive of racial
and ethnic diversity, and better educated than previous generations is __________.
a. Generation Z
b. Generation Y
c. millennials
d. Generation X
e. baby boomers

Rationale: Generation X includes the 15 percent of the population born between 1965 and 1976.
These consumers are self-reliant, supportive of racial and ethnic diversity, and better educated
than previous generations. They are not prone to extravagance and are likely to pursue lifestyles
that are a blend of caution, pragmatism, and traditionalism. They are also collaborative decision-
makers. Generation X is replacing baby boomers as the largest segment of business travelers.
Generation X consumers are

a. people that like to rely on others.
b. collaborative decision-makers.
c. somewhat prone to extravagance.
d. generally not supportive of racial and ethnic diversity.
e. poorly educated.

Generation X
a. is the least healthy generation since the 1940s.
b. accounts for the largest amount of consumer spending.
c. is the largest segment of business travelers.
d. is interested in distinctive, memorable, and personal experiences.
e. includes younger members known as millennials.
- 24 -
When compared to baby boomers, members of Generation X are more likely to invest their
money in __________.
a. entertainment
b. non-durables
c. discretionary spending
d. diamonds
e. real estate

All of the following statements about Generation X are true EXCEPT:

a. Generation X is not prone to extravagance.
b. Generation X is replacing baby boomers as the largest segment of business travelers.
c. Generation X is the first generation to have less than the previous generation.
d. Generation X was born during the baby bust era because the number of children born each
year was declining.
e. Generation X was born during the echo boom or baby boomlet era because the number of
children born each year was rising.

They are not prone to extravagance and are replacing baby boomers as the largest segment of
business travelers.
3-72 GENERATION Y KNOWLEDGE
Americans born between 1977 and 1994 are referred to as __________.

a. Generation X
b. baby boomers
c. Generation Y
d. baby busters
e. Generation Z
- 25 -
Rationale: Key term definitionGeneration Y.
Generation Y is defined as the generation of children born __________.

a. between WWI and WWII
b. between 1946 and 1964
e. since the millennium

Rationale: Key term definitionGeneration Y.
Generation Y is sometimes referred to as

a. echo-boomers.
b. baby boomers.
c. baby busters.
d. millennials.
e. Generation Zers.

Rationale: Text term definitionecho-boom.
The generation of children born to baby boomers is sometimes referred to as

a. echo busters.
b. baby busters.
c. the lost generation.
d. baby boomerangs.
e. baby boomlets.

Rationale: Generation Y includes those born between 1977 and 1994. This was a period of
increasing births, which resulted from baby boomers having children. This cohort is sometimes
referred to as the echo-boom or baby boomlet.
Which generational cohort is interested in distinctive, memorable, and personal experiences?

a. baby busters
b. Generation Y
c. baby boomers
d. Generation X
- 26 -
e. Generation Z

Rationale: Generation Y is interested in distinctive, memorable, and personal experiences.
Which generational cohort is adept at managing their lives to create a work-life balance?
a. baby boomers
b. Generation Z
c. Generation Y
d. Generation X
e. baby busters

Rationale: Generation Y is adept at managing their lives to create a work-life balance.
3-78 GENERATION Y COMPREHENSION
When compared to Generation X, members of Generation Y are more likely to influence

a. childrens designer clothing lines.
b. health care and insurance.
c. retirement plans.
d. all forms of communication.
e. automobile design.
Answer: d Page(s): 68 LO: 2 AACSB: Analytic QD: Medium

Rationale: Generation Y includes those born between 1977 and 1994. Generation Y exerts
influence on music, sports, computers, video games, and all forms of communication.
Which of the following is an example of how Generation Y members are different from other
generations?
a. They are parents of the baby boomers.
b. They represent the first generation that has less than the previous generation.
c. They represent the greatest generation: parents of post-WWII babies.
d. They have little interest in communication relative to other generations.
e. They are attracted to purposeful work where they have control.

Rationale: Generation Y includes the 72 million Americans born between 1977 and 1994 who
are attracted to purposeful work where they have control.
Which generation (1) feels passionate about the environment and (2) is optimistic about the
future?
a. Generation X
- 27 -
b. baby boomers
c. Generation Y
d. baby busters
e. Generation Z
Answer: c Page(s): 68 LO: 2 AACSB: Analytic QD: Medium

Rationale: Generation Y includes those born between 1977 and 1994. Members of this group are
strong-willed, passionate about the environment, and optimistic.
HTC Thunderbolt Ad
3-81 GENERATION Y APPLICATION
Which generational cohort is the HTC Thunderbolt ad above most likely trying to reach?
a. Generation X
b. baby boomers
c. Generation Z
d. baby busters
e. Generation Y

Rationale: Generation Y exerts influence on music, sports, computers, video games, and all
forms of communication.
3-82 GENERATION Y APPLICATION
The Sierra Club is the oldest continuously operating environmental organization. By 2001, its
growth had plateaued. To rekindle interest in the organization, its members elected a new 23-
year-old president who promised to use MTV artists to create public service announcements
about the organization targeting his peer group, who are members of
a. Generation X.
b. Generation Y.
- 28 -
c. Generation Z.
d. baby busters.
e. baby boomers.

Rationale: The new Sierra Club president, who was 23 years old in 2001, means that he was born
in 1978. This makes him part of Generation Y, whose members are born between 1977 and 1994.
Gen Yers influence music, so they are likely to be MTV viewers and may respond to the PSAs
the Sierra Club develops using MTV artists.
3-83 MILLENNIALS KNOWLEDGE
Younger members of Generation Y born since 1994 are referred to as

a. baby boomers.
b. baby busters.
c. millennials.
d. echo boomlets.
e. Gen Y siblings.

Rationale: Text term definitionmillennials. Younger members of Generation Y are sometimes
referred to as millennials, and were born after 1994.
3-84 MILLENNIALS KNOWLEDGE
Younger members of Generation Y, also known as __________, are determined to make a

difference in the world, and by doing so, make the world a better place.
a. activists
b. sustainers
c. progressives
d. reformers
e. millennials
Answer: e Page(s): 68-69 LO: 2 AACSB: Ethics QD: Easy

Rationale: Younger members of Generation Y, also known as millennials, are determined to
make a difference in the world, and by doing so, make the world a better place. They are
idealistic and eager to get started, particularly when it comes to environmental sustainability.
3-85 MAKING RESPONSIBLE DECISIONS COMPREHENSION
Members of Generation Y are idealistic and eager to get started making the world a better place.
One way they hope to achieve their goal is through __________.
a. environmental sustainability
b. political activism
c. intergenerational dialogue
d. fiscal conservatism
e. educational reform
Answer: a Page(s): 68-69 LO: 2 AACSB: Ethics QD: Medium
- 29 -
Rationale: Members of Generation Y are determined to make a difference in the world, and by
doing so, make the world a better place. They are idealistic and eager to get started, particularly
when it comes to environmental sustainability.
For millennials, environmental sustainability means __________.

a. engaging in free market economics with fair but limited regulations to manage exchange
relationships
b. social responsibility, or having organizations being accountable to society for their actions
c. exploiting a nations natural resources for the betterment of its society
d. executing a drill baby drill strategy regarding oil and natural gas exploration to make the
United States energy independent
e. seeking brown jobs in agriculture that emphasize economies of scale in farming and
ranching
Answer: b Page(s): 68-69 LO: 2 AACSB: Ethics QD: Medium

Rationale: For millennials, who are younger members of Generation Y, environmental
sustainability means to be socially responsible.
All of the following statements are true EXCEPT:

a. LEED stands for Leadership in Energy and Environmental Design.
b. Todays college graduates now seek green jobs that involve some aspect of social
responsibility.
c. Colleges of business have yet to establish sustainability course electives, case studies, or links
to organizations that expose students to socially responsibility concepts and initiatives.
d. Many students want to be involved with organizations like Net Impact to use business to
improve the world.
e. Millennials want to make a difference by making the world a better place.
Answer: c Page(s): 68-69 LO: 2 AACSB: Ethics QD: Easy

Rationale: Alternative c is the correct answer because in the Making Responsible Decisions
box, one example discussed a students choice to enroll at an educational institution where she
could take a course on renewable energy while another example discussed a students choice to
join the Peace Corps to be a part of something bigger than just me-me-me.
3-88 GENERATIONAL MARKETING KNOWLEDGE
Generational marketing refers to

a. the process of continually acquiring information on different age groups to identify and
interpret potential trends.
b. the factors that represent both the objective and subjective attributes of a brand Generations X
and Y use to compare different products and brands.
c. the distinct phases that a generational cohort progresses through from family formation to
retirement, each phase bringing with it identifiable purchasing behaviors.
d. the sequence of stages a buyer of each generational cohort goes through from initial
awareness of a product to its trial or adoption.
- 30 -
e. different marketing programs developed for each generational cohort due to each groups
distinctive attitudes and behaviors.

Rationale: Alternative a is a modified definition of environmental scanning. Alternative b is
a modified definition of evaluative criteria. Alternative c is a modified definition of family life
cycle. Alternative d is a modified definition of hierarchy of effects.
3-89 GENERATIONAL MARKETING COMPREHENSION
Marketers have developed generational marketing programs because

a. grandparents are moving into their childrens homes as a result of the recent economic
downturn, so it is easier for marketers to reach them.
b. it is better to find one market niche and stay with it rather than to cross generational lines.
c. it doesnt really matter when people are born; what really matters is what they buy.
d. members of each generation are distinctive in their attitudes and consumer behavior.
e. even though people are labeled as being part of a generational cohort, it doesnt mean that
they will have different buyer attitudes and behaviors as other cohorts.

Rationale: Text term definitiongenerational marketing. Different generations are distinctive in
their attitudes, which impacts consumer behavior.
3-90 AMERICAN HOUSEHOLD KNOWLEDGE
Today, married households comprise __________ of the U.S. population.

a. 10 percent
b. 21 percent
c. 50 percent
d. 60 percent
e. 75 percent

Rationale: Today, married households comprise 50 percent of the U.S. population (alternative
c), down from 75 percent in 1960 (alternative e). Only 21 percent of households are married
with children (alternative b). And 10 percent of households consist of working fathers and
stay-at-home moms (alternative a).
3-91 AMERICAN HOUSEHOLD COMPREHENSION
Which of the following statements about the American household is most accurate?
a. The structure of the American household has not changed significantly since 1960.
b. With a drop in the divorce rate, almost 58 percent of households today are married couples
with children.
c. The number of households with working fathers and stay-at-home moms has recently
begun to increase again and makes up almost 25 percent of all American households.
d. One of the fastest-growing types of households are those adults who has moved back home
with their parents.
e. The percentage of married couples has increased from 50 percent in 1960 to 75 percent today.
- 31 -
Rationale: The structure of the American household has also changed. In 1960, 75 percent of all
households consisted of married couples. Today, this type of household comprises just 50
percent of the population. Only 10 percent of the households have working fathers and stay-at-
home moms. Some of the fastest-growing types of households are those with an adult child
moving back home with their parents and those with unmarried partners.

a. Only 21 percent of American households consist of married couples with children.
b. Parents close to retirement typically refuse to allow their parents or children to move in with
themthey like their empty nest lifestyle.
c. The increase in unmarried partner households is likely due to the current economic downturn.
d. Today, most divorced couples choose to remarry rather than remaining in single person
households, with or without children.
e. Currently, many young people are postponing marriage and parenthood.

Rationale: Given the current state of the U.S. economy, many children, particularly those who
are unemployed, are moving back to their parents households to pool their resources.
Because young people are postponing marriage and parenthood, this social trend will impact all
of the following purchases EXCEPT:
a. greeting cards.
b. weddings.
c. baby products.
d. homes.
e. child products.

Rationale: Greeting card purchases would be affected by the social trend of the rise of blended
families, not the trend of younger people postponing marriage and parenthood.
3-94 BLENDED FAMILY KNOWLEDGE
The blended family refers to a family

a. that is formed by merging two previously separated units into a single household.
b. that contains both male and female children.
c. that houses two or more generational cohorts under the same roof.
d. in which its members are of multiple races and/or ethnicities.
e. in which parents raise nonbiological children, either through adoption or foster care.

Rationale: Key term definitionblended family.
- 32 -
3-95 BLENDED FAMILY KNOWLEDGE
A family formed by merging two previously separated units into a single household is referred to
as a
a. cohort.
b. blended family.
c. merged household.
d. reconstituted family.
e. multigenerational household.

Rationale: Key term definitionblended family.
3-96 BLENDED FAMILY COMPREHENSION
Which of the following statements about the American blended family is most accurate?
a. The blended family is too small to warrant the development of a marketing program by a firm
to reach its members with a product or service.
b. The rise in the divorce rate among baby busters is called a gray divorce because their
divorce rate now exceeds 50 percent.
c. The majority of divorced people never remarry; instead, they choose to cohabitate.
d. Firms like Hallmark Cards have developed greeting cards with sentiments specifically created
for stepparents, stepchildren, and stepsiblings.
e. The percentage of divorced couples has increased from 15 percent in 1960 to 60 percent
today.

Rationale: Because of the relatively large incidence of divorce and remarriage, firms like
Hallmark Cards have developed greeting cards with sentiments specifically created for
stepparents, stepchildren, and stepsiblings.
3-97 POPULATION SHIFTS KNOWLEDGE
A major regional shift in the U.S. population toward the __________ states is under way.
a. eastern
b. west coast
c. southern
d. midwestern
e. southern and western
Answer: e Page(s): 68-69 LO: 2 AACSB: Analytic QD: Easy

Rationale: A major regional shift in the U.S. population toward southern and western states is
under way. The most recent U.S. Census Bureau estimates indicate that the populations of
Wyoming, Utah, Texas, and Colorado grew at the fastest rates in the nation.
3-98 POPULATION SHIFTS KNOWLEDGE
Today, seven of the top 10 cities are located __________.
- 33 -
a. along the east coast
b. near the Canadian border
c. along the west coast
d. near the Mexican border
e. within the central fly over region of the United States
Answer: d Page(s): 68-69 LO: 2 AACSB: Analytic QD: Easy

Rationale: Nearly a century ago, each of the top 10 most populous cities in the United States was
within 500 miles of the Canadian border. Today, seven of the top 10 most populous cities are in
states that border Mexico.
3-99 POPULATION SHIFTS COMPREHENSION

a. During the past few years, more people have migrated from suburbs to exurbs.
b. The number of micropolitan statistical areas exceeds those of metropolitan statistical areas.
c. During the 2000s, the U.S. population shifted from urban cities to suburbs.
d. During the early 1900s, the U.S. population shifted from rural areas to cities.
e. Most of the people in the United States reside in suburbs.

Rationale: During the past few years, more people have migrated back to urban areas from
exurbs and suburbs, the reverse of what is stated in alternative d.
3-100 EXURBS KNOWLEDGE
Remote suburbs are called __________.

a. exurbs
b. suburbia
c. outstate residents
d. subdivisions
e. minor statistical areas

Rationale: Text term definitionexurbs.
Exurbs are
a. statistical areas of at least 50,000 or more people.
b. remote suburbs.
c. statistical areas of at least 10,000 but less than 50,000 people.
d. statistical areas that contains a population of 2.5 million or more.
e. the combination of metropolitan statistical areas and micropolitan statistical areas.

Rationale: Text term definitionexurbs.
- 34 -
Today, __________ of all Americans live in central cities, __________ live in suburbs, and
__________ live in rural locations.
a. 30%; 30%; 40%
b. 20%; 50%; 30%
c. 50%; 30%; 20%
d. 20%; 30%; 50%
e. 30%; 50%; 20%

Rationale: Today, 30 percent of all Americans live in central cities, 50 percent live in suburbs,
and 20 percent live in rural locations.
3-103 STATISTICAL AREAS KNOWLEDGE
To assist marketers in gathering data on the population, the U.S. Census Bureau has developed a
classification system to describe the varying locations of the population. The system consists of
two types of __________.
a. geometric areas
b. zip code areas
c. statistical areas
d. geodemographic areas
e. residential areas

Rationale: Text term definitionstatistical areas.
3-104 METROPOLITAN STATISTICAL AREA KNOWLEDGE
A statistical area of at least one urbanized area of 50,000 or more people and adjacent territory
that has a high degree of social and economic integration is referred to as a
a. micropolitan statistical area.
b. metropolitan statistical area.
c. downtown statistical area.
d. zip code.
e. combined statistical area.

Rationale: Text-term definitionmetropolitan statistical area.
3-105 METROPOLITAN STATISTICAL AREA KNOWLEDGE
A metropolitan statistical area refers to

a. a statistical area that has at least one urban cluster of at least 10,000 but less than 50,000
people and adjacent territory that has a high degree of social and economic integration.
b. a statistical area of 2.5 million people or more.
c. a cluster of exurbs that function as a single unit due to the proximity of their geographic
locations to an urbanized area.
- 35 -
d. a highly urbanized area with a centrally located population of at least 1,000,000 people.
e. a statistical area of at least one urbanized area of 50,000 or more people and adjacent territory
that has a high degree of social and economic integration.

Rationale: Text-term definitionmetropolitan statistical area.
3-106 MICROPOLITAN STATISTICAL AREA KNOWLEDGE
A statistical area that has at least one urban cluster of at least 10,000 but less than 50,000 people
and adjacent territory that has a high degree of social and economic integration is referred to as a
a. micropolitan statistical area.
b. metropolitan statistical area.
c. consolidated metropolitan statistical area.
d. megapolitan statistical area.
e. metropolitan division.

Rationale: Text-term definitionmicropolitan statistical area.
3-107 MICROPOLITAN STATISTICAL AREA KNOWLEDGE
A micropolitan statistical area refers to

a. a statistical area of 2.5 million people or more.
b. a highly urbanized area with a centrally located population of at least 1,000,000 people.
c. a cluster of exurbs that function as a single unit due to the proximity of their geographic
locations to an urbanized area.
d. a statistical area that has at least one urban cluster of at least 10,000 but less than 50,000
people and adjacent territory that has a high degree of social and economic integration.
e. a statistical area of at least one urbanized area of 50,000 or more people and adjacent territory
that has a high degree of social and economic integration.

Rationale: Text-term definitionmicropolitan statistical area.
3-108 MICROPOLITAN STATISTICAL AREA COMPREHENSION
The U.S. Census Bureau has developed a two-level classification system that reflects the varying
locations of the population. The smaller of these classifications is called the
a. consolidated metropolitan statistical area.
b. metropolitan division.
c. metropolitan statistical area.
d. minipolitan statistical area.
e. micropolitan statistical area.

Rationale: From larger to smaller, the two areas are the metropolitan statistical area (MSA) that
has at least one urbanized area of 50,000 or more and the micropolitan statistical area, which has
at least one urban cluster of at least 10,000 but less than 50,000 people.
- 36 -
3-109 METROPOLITAN DIVISIONS KNOWLEDGE
If a metropolitan statistical area contains a population of 2.5 million or more, it may be

subdivided into smaller areas called __________.
a. population subdivisions
b. metroplex divisions
c. metropolitan divisions
d. combined divisions
e. statistical divisions

Rationale: Text-term definitionmetropolitan divisions.
3-110 METROPOLITAN DIVISIONS KNOWLEDGE
A metropolitan division
a. can be divided into even smaller units called micropolitan divisions.
b. is called a metropolitan megamarket if it has a population of 1,000,000 or more.
c. can be divided into even smaller units called metroplex divisions.
d. is part of a metropolitan statistical area that contains a population of 2.5 million or more.
e. has its own zip code to reflect the U.S. Postal Service designation.

Rationale: Text-term definitionmetropolitan divisions.
3-111 COMBINED STATISTICAL AREAS KNOWLEDGE
Adjacent metropolitan statistical areas and micropolitan statistical areas may be grouped into
__________ statistical areas.
a. zip code
b. residential
c. megapolitan
d. aggregated
e. combined

Rationale: Text-term definitioncombined statistical area.
3-112 COMBINED STATISTICAL AREAS KNOWLEDGE
The U.S. Census Bureau uses a classification system that reflects the varying locations of the
population. The largest of these geographical areas is called
a. megapolitan statistical areas.
b. statistical areas.
c. combined statistical areas.
d. zip codes.
e. metropolitan statistical areas.
- 37 -
Rationale: Adjacent metropolitan statistical areas and micropolitan statistical areas may be
grouped into combined statistical areas, which makes them the largest of these geographical area
classifications.
3-113 COMBINED STATISTICAL AREA KNOWLEDGE
If a metropolitan statistical area contains a population of 2.5 million or more, it may be

subdivided into smaller areas called metropolitan divisions. In addition, adjacent metropolitan
statistical areas and micropolitan statistical areas may be grouped into __________ statistical
areas.
a. megapolitan
b. metropolitan
c. micropolitan
d. zip code
e. combined

Rationale: Text term definitioncombined statistical areas.
Figure 3-A
3-114 STATISTICAL AREAS COMPREHENSION
The U.S. Office of Management and Budget has developed a classification system that defines
geographic areas based on the size of the population contained within them. The U.S. Census
Bureau uses these statistical areas to collect, tabulate, and publish various reports on demographic
profiles and economic activity. Figure 3-A above shows these statistical areas for the Dallas-Fort
Worth metroplex. The largest of these geographical areas is called a
a. megapolitan statistical area.
b. micropolitan statistical area.
- 38 -
c. metropolitan statistical area.
d. zip code.
e. combined statistical area.

Rationale: Adjacent metropolitan statistical areas and micropolitan statistical areas may be
grouped into combined statistical areas, which makes them the largest of these geographical area
classifications.
geographic areas based on the size of the population that is contained within them. The U.S.
Census Bureau uses these statistical areas to collect, tabulate, and publish various reports on
demographic profiles and economic activity. Based on Figure 3-A above, which of the following
best defines a micropolitan statistical area for the Dallas-Fort Worth geographic area?
a. the counties in the darker shaded areas (e.g. Grayson [Sherman-Denison], Collin, Delta,
Dallas, Kaufman, Johnson, Tarrant, Parker, Wise, etc.)
b. the cities of Mineral Wells, Gainesville, Bonham, Athens, and Granbury (within their
respective counties) in the lighter shaded areas
c. the counties of Wise, Parker, Tarrant, and Johnson bounded by the black line
d. the Fort Worth-Arlington area (within Tarrant county) that is in the darker shaded area
e. the entire set of counties in the light and darker shaded areas

Rationale: A micropolitan statistical area has at least one urban cluster of at least 10,000 but less
than 50,000 people and adjacent territory that has a high degree of social and economic
integration. The legend for Figure 3-A, which shows the map of the Dallas-Fort Worth
metroplex, identifies micropolitan statistical areas as lightly shaded counties. Each of these
counties also lists its principal city: Palo Pinto (Mineral Wells), Cooke (Gainesville), Fannin
(Bonham), Henderson (Athens), and Hood (Granbury).
geographic areas based on the size of the population that is contained within them. The U.S.
Census Bureau uses these statistical areas to collect, tabulate, and publish various reports on
demographic profiles and economic activity. Based on Figure 3-A above, which of the following
best defines a metropolitan division within the Dallas-Fort Worth metroplex?
a. the counties in the darker shaded areas (e.g. Grayson [Sherman-Denison], Collin, Delta,
Dallas, Kaufman, Johnson, Tarrant, Parker, Wise, etc.)
b. the cities of Mineral Wells, Gainesville, Bonham, Athens, and Granbury (within their
respective counties) in the lighter shaded areas
c. the counties of Wise, Parker, Tarrant, and Johnson bounded by the black line
d. the Fort Worth-Arlington area (within Tarrant county) that is within the darker shaded area
e. the entire set of counties in the light and darker shaded areas

Rationale: Metropolitan divisions are smaller geographic statistical areas that are the result of
dividing a large metropolitan statistical area that contains a population of 2.5 million or more.
- 39 -
The legend for Figure 3-A, which shows the map of the Dallas-Fort Worth metroplex, identifies
two separate metropolitan divisions, both of which are bounded by a black line. One
metropolitan division is labeled Fort Worth-Arlington, and consists of Wise, Parker, Tarrant,
and Johnson counties. The is alternative c. The other is labeled Dallas-Fort Worth-
Arlington, and consists of Denton, Collin, Hunt, Delta, Dallas, Rockwall, Kaufman, and Ellis
counties.
3-117 RACIAL AND ETHNIC DIVERSITY KNOWLEDGE
Approximately one in __________ U.S. residents is African American, American Indian or

Alaska Native, Asian American, or Native Hawaiian/Pacific Islander.
a. ten
b. seven
c. five
d. three
e. two
Answer: d Page(s): 70 LO: 2 AACSB: Diversity QD: Easy

Rationale: A notable trend is the changing racial and ethnic composition of the U.S. population.
Approximately one in three U.S. residents is African American, American Indian or Alaska
Native, Asian American, or Native Hawaiian/Pacific Islander.
A notable trend of the U.S. population is the changing racial and ethnic composition.
__________, who may be from any race, currently make up 16 percent of the U.S. population.
a. Hispanics
b. African Americans
c. Asian Americans
d. Caucasians
e. American Indian and other native populations
Answer: a Page(s): 70 LO: 2 AACSB: Diversity QD: Easy

Rationale: Hispanics, who may be from any race, currently make up 16 percent of the U.S.
population and are represented by Mexicans, Puerto Ricans, Cubans, and others of Central and
South American ancestry.
By 2030, __________ will constitute the largest racial or ethnic population in the U.S.
a. African Americans
b. Asian Americans
c. Caucasians
d. American Indian and other native populations
e. Hispanics
Answer: e Page(s): 70 LO: 2 AACSB: Diversity QD: Easy

Rationale: Between 2010 and 2030, the Hispanic population will grow from 49 million to more
than 85 million people, or 23 percent of the population. The number of Asians in the United
- 40 -
States will almost double to 23 million people, or 6 percent of the population, and the African
American population will be approximately 48 million people, or 13 percent of the population.
By 2015, which racial or ethnic group will have the greatest economic impact in the United States
in terms of its buying power?
a. Asian Americans
b. Hispanics
c. African Americans
d. American Indian and other native populations
e. Indian immigrants (from India)
Answer: b Page(s): 70 LO: 2 AACSB: Diversity QD: Easy

Rationale: As a group, Hispanics have the greatest economic impact in the United States in terms
of its buying power, spending $1.5 trillion by 2015. African Americans, the second largest group,
is estimated to spend $1.2 trillion while Asian Americans will spend $775 billion by 2015.
3-121 RACIAL AND ETHNIC DIVERSITY COMPREHENSION
Minority racial and ethnic groups (excluding Caucasians) are concentrated in geographic regions
of the United States. Native American groups are heavily concentrated in
a. Arizona.
b. Colorado.
c. Nebraska.
d. North Carolina.
e. South Carolina.
Answer: a Page(s): 70 LO: 2 AACSB: Diversity QD: Medium

Rationale: Figure 3-3 in the textbook suggests that the majority of Native Americans are
concentrated in the state of Arizona and somewhat smaller clusters found in neighboring states
(Utah, Colorado, and New Mexico) as well as Montana, the Dakotas, Minnesota, and Oklahoma.
3-122 RACIAL AND ETHNIC DIVERSITY APPLICATION
HSBC Bank International Ltd. (Europes largest bank) selected its advertising agency because
that agency was always sensitive to the possibility that something might not translate well or
may offend superstitions about colors or numbers. Its advertising agency was responsive to
a. psychographic differences.
b. population shifts.
c. racial and ethical diversity.
d. a value consciousness.
e. macroeconomics.
Answer: c Page(s): 70 LO: 2 AACSB: Diversity QD: Hard

Rationale: Many companies are developing multicultural marketing programs, which are
combinations of the marketing mix that reflect the unique attitudes, ancestry, communication
preferences, and lifestyles of different races.
- 41 -
3-123 MULTICULTURAL MARKETING KNOWLEDGE
Combinations of the marketing mix that reflect the unique attitudes, ancestry, communication
preferences, and lifestyles of different races are referred to as __________ marketing programs.
a. panethnic
b. generational
c. cross-cultural
d. multicultural
e. regional

Rationale: Key term definitionmulticultural marketing.
3-124 MULTICULTURAL MARKETING KNOWLEDGE
Multicultural marketing refers to combinations of the marketing mix that reflect the unique
attitudes, ancestry, communication preferences, and lifestyles of different __________.
a. races
b. nations
c. religions
d. generational cohorts.
e. genders.
Answer: a Page(s): 70 LO: 2 AACSB: Diversity QD: Easy

Rationale: Key term definitionmulticultural marketing.
3-125 MULTICULTURAL MARKETING COMPREHENSION
Which of the following statements is most accurate?

a. Racial and ethnic groups are equally dispersed throughout the United States.
b. Racial and ethnic groups do not respond to multicultural marketing programs since they are
similar to Caucasians in terms of their attitudes and behaviors.
c. Organizations that target racial and ethnic groups tend to separate their multicultural
marketing efforts from their regional marketing activities.
d. Racial and ethnic groups tend to be concentrated in geographic regions in the United States.
e. Due to the melting pot effect, racial and ethnic groups in the United States tend to have
very similar attitudes, communication preferences, and lifestyles because they have been
effectively assimilated within the population.
Answer: d Page(s): 70-71 LO: 2 AACSB: Diversity QD: Medium

Rationale: Racial and ethnic groups tend to be concentrated in different geographic regions in the
United States (see Figure 3-3). Consequently, all the other response options are incorrect.
Specifically, racial and ethnic groups are not equally dispersed throughout the United States
(alternative a). Nor are they likely to respond similarly to the same marketing program as
Caucasians or other racial and ethnic groups; hence the need for multicultural marketing
programs (alternative b). And because racial and ethnic groups are likely to be concentrated in
geographic regions in the United States, firms can efficiently combine their multicultural
marketing efforts with their regional marketing activities (alternative c). Finally, organizations
do engage in multicultural marketing because racial and ethnic groups still retain their unique
- 42 -
attitudes, communication preferences, and lifestyles even though they have become part of
American society (alternative e).
3-126 MULTICULTURAL MARKETING COMPREHENSION
Which of the following statements is most accurate?

a. Some companies use mobile marketing to reach geographic concentrations of ethnic groups
on their smartphones or tablet devices.
b. Most consumer packaged good firms have now moved their advertising accounts from
multicultural agencies to their own in-house advertising agency to realize greater marketing
efficiencies.
c. Most companies have failed to encourage their advertising agencies to develop cross-cultural
campaigns with messages that reach all ethnic groups.
d. Since racial and ethnic groups tend to be equally dispersed throughout the United States,
multicultural marketing programs need not be developed.
e. Due to the melting pot effect, racial and ethnic groups in the United States tend to have
very similar attitudes, communication preferences, and lifestyles, which means that they will
respond similarly to advertising messages.
Answer: a Page(s): 70-71 LO: 2 AACSB: Diversity QD: Medium

Rationale: Some companies use mobile marketing to reach geographic concentrations of ethnic
groups on their smartphones or tablet devices. Consequently, all the other response options are
incorrect. Some firms (including consumer packaged good marketers) have moved their
advertising accounts from multicultural agencies to general, full service agenciesbut NOT to
in-house agencies (alternative b). Most companies are encouraging their advertising agencies
to develop cross-cultural campaigns with messages that reach all ethnic groups (alternative b).
Racial and ethnic groups are not equally dispersed throughout the United States (alternative d).
Finally, organizations do engage in multicultural marketing because racial and ethnic groups still
retain their unique attitudes, communication preferences, and lifestyles even though they have
become part of American society (alternative e).
3-127 CULTURE KNOWLEDGE
The set of values, ideas, and attitudes that are learned and shared among the members of a group
is referred to as __________.
a. customs
b. morals
c. norms
d. culture
e. ethics

Rationale: Key term definitionculture. Norms (alternative c) are the standards or patterns
that are typical or expected of a group.
3-128 CULTURE KNOWLEDGE
Culture refers to the

a. moral and ethical beliefs of a family passed down from generation to generation.
- 43 -
b. set of values, ideas, and attitudes that are learned and shared among the members of a group.
c. pastimes associated with the fine arts, such as ballet, music, and theater.
d. standard or pattern of behaviors that is typical or expected of a group.
e. description of a population according to selected characteristics such as age, gender,
ethnicity, income, and occupation.
Answer: b Page(s): 71 LO: 2 AACSB: Diversity QD: Easy

Rationale: Key term definitionculture. Norms (alternative d), are the standards or patterns
that are typical or expected of a group.
3-129 CULTURE COMPREHENSION
Culture is a component of what type of environmental force that must be scanned to assess its
impact on the organizations marketing environment?
a. regulatory
b. technological
c. competitive
d. economic
e. social
Answer: e Page(s): 71 LO: 2 AACSB: Diversity QD: Medium

Rationale: Culture incorporates the set of values, ideas, and attitudes that are learned and shared
among the members of a group. Culture is a component of the social force (the other being
demographics) that is one of five forces that impact an organizations marketing environment.
Culture includes values, which vary with age groups. Consumers under 20 years old rank
__________ as the third most important cultural value.
a. honesty
b. protecting the family
c. friendship
d. self-esteem
e. health and fitness

Rationale: Consumers under 20 years old rank friendship third, while the 20-to-29 and 30-to-
39 age groups rank self-esteem and health and fitness as their third most important values,
respectively.
Culture includes values, which vary with age. Consumers between the ages of 20 to 29 years old
rank __________ as the third most important cultural value.
a. honesty
c. friendship
d. self-esteem
- 44 -
respectively.
Culture includes values, which vary with age. Consumers between the ages of 30-to-39 years old
rank __________ as the third most important cultural value.
a. honesty
c. friendship
d. self-esteem

respectively.
3-133 CULTURE APPLICATION
Concern for health and fitness is one reason that 51 million people in the United States report that
they are trying to control their weight. This concern is an example of
a. changing values.
b. changing population composition.
c. changing demographics.
d. an increase in value consciousness.
e. changing ethnic composition.

Rationale: Culture includes values, such as the value of a healthy and balanced lifestyle.
3-134 CULTURE APPLICATION
Many consumers are committed to brands with a strong link to social action. An example of this
would be
a. McDonalds Im Lovin It campaign.
b. Britas Filter for Good campaign.
c. Imagine Babyz video game.
d. Liz Claibornes Claiborne for Men campaign.
e. Samsungs The Jitterbug campaign.

Rationale: Recent research indicates that consumers around the world are committed to brands
with a strong link to social action. For example, Britas Filter for Good campaign asks
consumers to take a pledge to reduce their plastic bottle waste.
- 45 -
3-135 CHANGING ATTITUDES AND ROLES COMPREHENSION
According to some predictions, which of the following statements regarding attitudes and the
roles of men and women is most likely to occur if current trends continue?
a. The attitudes of men towards women will change more dramatically than the attitudes of
women towards men.
b. The attitudes of women towards men will change more dramatically than the attitudes of men
towards women.
c. The buying habits of women will become much more predictable than those of men.
d. The gap between buying patterns of men and women will grow.
e. The gap between buying patterns of men and women will diminish.

Rationale: One of the most notable cultural changes in the United States in the past 30 years has
been in the attitudes and roles of men and women in the marketplace. Some experts predict that
there will eventually be very few differences in the buying patterns of men and women.
There have been significant cultural changes in the United States over the past 30 years,
especially in the attitudes and roles of men and women in the marketplace. The first generational
cohort to have NO collective memory of these dramatic changes consists of
a. baby boomers.
b. Generation X.
c. Generation Y.
d. Generation Z.
e. millennials.

Rationale: Since the 1990s, women and men have encouraged the slow movement toward
equality in the marketplace. As a result, todays Generation Y represents the first generational
cohort of women who have no collective memory of the dramatic changes that have taken place.
In the past several decades, attitudes of both men and women have changed. Increased
participation in __________ has eliminated one of the most visible inequalities in opportunities
for women.
a. organized sports
b. graduate business (MBA) programs
c. fashion design programs
d. financial/investment banking jobs
e. medical professions

Rationale: Several factors have contributed to the shift in attitudes and roles of men and women,
such as the increased participation of women in organized sports that has eliminated one of the
most visible inequalities in opportunities for women.
- 46 -
Over the past 30 years in the United States, the attitudes of men and women have changed. One
factor has been the __________.
a. Internet, which made gender, race, and ethnicity invisible in the marketplace
b. way women were portrayed in the movies and on television
c. increased participation of women in the workforce, which has made employers more open-
minded
d. efforts of political activists to advocate the power of women
e. economic shift that resulted in the courting of women to increase overall discretionary
spending

Rationale: Several factors have contributed to the shift in attitudes such as the Internet, which
has provided exposure to the marketplace through a mechanism that makes gender, race, and
ethnicity invisible.
Significant changes in attitudes of men and women have occurred during the past thirty years.
However, __________ believe that there is still a need for improvement in the workplace and in
politics.
a. baby boomers
b. women of Generation X
c. men of Generation X
d. women of Generation Y
e. men of Generation Y

Rationale: Recent surveys however, suggest that many of the 35 million Generation Y women
believe that there is still a need for equal opportunities and treatment in the workplace and in
politics.
UGG Australia built a strong reputation among women with its high quality sheepskin boots. The
firm is now attempting to attract men with new products. To reach them, UGG is
a. offering its existing women customers a Buy 1 Pair, Get 1 Free deal on its lines of mens
boots.
b. using New England Patriots quarterback Tom Brady as a spokesperson.
c. using product placements in TV programs, such as Two and a Half Men and ESPNs
SportsNation, that men primarily watch.
d. outfitting players of the Australian Football (rugby) League.
e. targeting skate boarders and snow boarders with its Be Stupid campaign.

Rationale: To reach male consumers, UGG Australia is using New England Patriots quarterback
Tom Brady as a spokesperson.
- 47 -
3-141 CHANGING ATTITUDES AND ROLES APPLICATION
Secret deodorants ad, Strong enough for a man, but made for a woman, reflected
a. the need to market products to a single gender at a time.
b. highlight that women were just as strong as men.
c. a bridge of the gap between men and women in terms of market focus.
d. the desire to highlight the differences between genders.
e. a way to capitalize on the sex appeal of a clean scent to attract women.
Answer: c Page(s): 71-72 LO: 2 AACSB: Analytic QD: Hard

Rationale: In the 1970s and 1980s, ads began to create a bridge between genders with the
messages, such as Secrets Strong enough for a man, but made for a woman ad.
3-142 CHANGING VALUES COMPREHENSION
All of the following are commonly held values in the United States EXCEPT:
a. equality.
b. individualism.
c. continuous change.
d. belief in fate (fatalism).
e. personal control.

Rationale: Today, commonly held values include personal control, continuous change, equality,
individualism, self-help, competition, future orientation, and action, which are useful in
understanding the behaviors of U.S. consumers. Contrasting values outside the United States
include the belief in fate (fatalism), the importance of tradition, a focus on group welfare, and
acceptance of birthright.
Two increasingly important values for consumers around the world are __________.
a. self-esteem and fitness
b. wealth and health
c. patriotism and friendship
d. family and fun
e. sustainability and preservation of the environment

Rationale: Two increasingly important values for consumers are sustainability and preserving the
environment.
Consumers are buying hybrid gas-electric automobiles such as the Toyota Prius. This is an
example of which of the following cultural values?
a. preserving the environment
b. paying the least amount possible for products
- 48 -
c. meeting the growing perceived inequality among competing brands
e. reducing cognitive dissonance

Rationale: An increasingly important cultural value for consumers is sustainability and
preserving the environment, such as buying hybrid gas-electric automobiles.
Many consumers are committed to brands with a strong link to social action. An example of this
would be
a. McDonalds Im Lovin It campaign.
b. Britas Filter for Good campaign.
c. Diesels Be Stupid campaign.
d. Liz Claibornes Claiborne for Men campaign.
e. Samsungs The Jitterbug campaign.

Rationale: Recent research indicates that consumers around the world are committed to brands
with a strong link to social action. Britas Filter for Good campaign asks consumers to take a
pledge to reduce their plastic bottle waste.
3-146 VALUE CONSCIOUSNESS KNOWLEDGE
Value consciousness refers to

a. the difference between perceived value and actual value of a product or service.
b. a fear of being subliminally influenced by marketing actions such as advertisements,
endorsements, etc.
c. a desire to pay the least amount possible for a product or service that meets minimum
performance requirements.
d. the concern for obtaining the best quality, features, and performance of a product or service
for a given price.
e. the concern for obtaining the best product or service regardless of the cost.

Rationale: Key term definitionvalue consciousness.
3-147 VALUE CONSCIOUSNESS KNOWLEDGE
The concern for obtaining the best quality, features, and performance of a product or service for a
given price is called
a. customer value.
b. the value proposition.
c. buyer-centric excellence.
d. purchasing value.
e. value consciousness.

Rationale: Key term definitionvalue consciousness.
- 49 -
3-148 VALUE CONSCIOUSNESS COMPREHENSION
Todays consumption orientation known as value consciousness is primarily due to

a. a rise in using debt to fund purchases.
b. the economic recession.
c. an expansion in the purchase of quality brand name products.
d. a cutback on the purchase of discretionary items like flat screen TVs.
e. a desire to purchase products of lesser quality to receive a lower price.

Rationale: Value consciousness is the concern for obtaining the best quality, features, and
performance of a product or service for a given price. Todays consumption orientation to value
consciousness is primarily due to the economic recession, which had led to high unemployment
and lower real estate prices. As a result, U.S. consumers have become cautious buyers by cutting
back on brand name products in order to buy discretionary products like flat screen TVs.
3-149 VALUE CONSCIOUSNESS APPLICATION
The overwhelming response by bargain-hunting consumers to Groupons online deals is an

example that demonstrates the change in consumption orientation known as
a. the quality-value proposition.
b. buyer-centric excellence.
c. value consciousness.
d. customer value.
e. purchasing value.

Rationale: Value consciousness is the concern for obtaining the best quality, features, and
performance of a product or service for a given price. The Groupon example illustrates a concern
for value consciousness on the part of consumers.
3-150 ECONOMY KNOWLEDGE
The term that pertains to the income, expenditures, and resources that affect the cost of running a
business or household is referred to as (the) __________.
a. banking
b. economy
c. finances
d. budgeting
e. money management

Rationale: Key term definitioneconomy.
3-151 ECONOMY KNOWLEDGE
The economy refers to
- 50 -
a. the independent financial factors that are not affected by changes in government spending.
b. the purchase of the highest quality product for the lowest possible price.
c. the production, distribution, and consumption of products, services, and ideas by households.
d. the income, expenditures, and resources that affect the cost of running a business and
household.
e. the forces within a manufacturers control that affect the demand and supply its offerings.

Rationale: Key term definitioneconomy. Alternative c is incorrect because households only
consume; they do not produce or distribute products, services, or ideas. Alternative e is
incorrect because an individual firm cannot control an environmental force such as the economy.
3-152 ECONOMIC INDICATORS KNOWLEDGE
All of the following are economic indicators EXCEPT:

a. inflation
b. barriers to entry
c. unemployment
d. GDP
e. deflation

Rationale: At the macroeconomic level, economic performance is measured by the following
metrics: GDP (gross domestic product), unemployment, and price changes (inflation or deflation).
Alternative b is incorrect because barriers to entry are business practices or conditions that
make it difficult for new firms to enter the marketcapital requirements, advertising
expenditures, product identity, distribution access, or the cost to customers of switching suppliers.
3-153 ECONOMIC FORCES COMPREHENSION
A sudden drop in the average consumer income would be an example of which environmental
force?
a. economic
b. competitive
c. technological
d. social
e. regulatory

Rationale: Consumer income is an aspect of the economic environmental force.
3-154 ECONOMIC FORCES APPLICATION
According to a recent environmental scan, the United States has spent over $1 trillion on the war
on terrorism since 2001. This expenditure is an example of a(n) __________ force.
a. social
b. economic
c. technological
d. competitive
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e. regulatory

Rationale: The increased expenditures related to the war on terrorism is an example of an
economic force.
Microsoft, Intuit, and Yahoo are building new facilities in Quincy, WA, a town that previously
had a population of 3,500. Along with these new neighbors, the residents of Quincy are also
going to get more traffic lights, a strip mall, higher housing prices, and new jobs. This example
best illustrates a(n) __________ change that will impact the people and businesses of Quincy.
a. social
b. regulatory
c. competitive
d. economic
e. technological

Rationale: The economy pertains to the income, expenditures, and resources that affect the cost
of running a business and household.
3-156 INFLATIONARY ECONOMY COMPREHENSION
In a(n) __________ economy, the cost to produce and buy products and services escalates as
prices increase.
a. inflationary
b. deflationary
c. stagflationary
d. recessionary
e. depressive

Rationale: In an inflationary economy, the cost to produce and buy products and services
escalates as prices increase.
In a(n) __________ economy, if prices rise faster than consumer incomes, the number of items
consumers can buy decreases.
a. deflationary
b. stagflationary
c. recessionary
d. inflationary
e. depressive

Rationale: In an inflationary economy, if prices rise faster than consumer incomes, the number of
items consumers can buy decreases.
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In an inflationary economy, the cost to produce and buy products and services __________ as
prices __________.
a. increases; increase
b. increases; decrease
c. decreases; increase
d. decreases; decrease
e. does not change; increase

increases as prices increase.
The National Center for Public Policy and Higher Education reports that since 1980, college
tuition and fees have increased by 440 percent whereas family incomes have risen less than 150
percent. This is an example of a(n) __________ economy.
a. deflationary
b. recessionary
c. disinflationary
d. inflationary
e. depressive

escalates as prices increase. In this example, college tuition and fees have risen almost three
times (440% 150%) the rate of family incomes since 1980.
Policy makers at the Federal Reserve in the United States believe it takes a far bigger change in
inflation to affect unemployment than it did 25 years ago. Now, when inflation fluctuates, they
are more likely to blame other factors, such as the price of oil. This is an example of a(n)
__________ environmental force.
a. cultural
b. regulatory
c. competitive
d. cost
e. economic

Rationale: The economy pertains to the income, expenditures, and resources that affect the cost
of running a business and household.
3-161 RECESSIONARY ECONOMY KNOWLEDGE
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A time of declining economic activity when businesses decrease production, unemployment rises,
and many consumers have less money to spend is referred to as
a. deflation.
b. inflation.
c. prosperity.
d. a recession.
e. a depression.

Rationale: Recession is a time of slow economic activity. Businesses decrease production,
unemployment rises, and many consumers have less money to spend.
3-162 RECESSIONARY ECONOMY KNOWLEDGE
All of the following are time periods that the U.S. economy experienced a period of recession
EXCEPT:
a. 19731975
b. 19811982
c. 19901991
d. 20072009
e. 20102011 (as of late-2011)

Rationale: The U.S. economy has experienced recessions from 19731975, 19811982,
19901991, and 20072009. The period from 20102011 has experienced slow but positive, not
recessionary, economic growth.
3-163 CONSUMER EXPECTATIONS KNOWLEDGE
Which of the following measures consumers expectations of the U.S. economy?

a. Index of Consumer Sentiment
b. Consumer Expenditure Survey
c. U.S. 2010 Census
d. Survey of Consumer Finances
e. Survey of Buying Power

Rationale: Alternative b is a survey conducted by the U.S. Department of Labor. Alternative
d is a triennial survey of the balance sheet, pension, income, and other demographics of U.S.
families conducted by the Federal Reserve Board.
3-164 CONSUMER INCOME KNOWLEDGE
Components of a consumers income include __________.

a. inflation, recession, and depression
b. salary, wages, and commissions
c. gross, disposable, and discretionary income
d. sales taxes, income taxes, and property taxes
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e. assets, liabilities, and equities

Rationale: A consumers ability to buy is related to income, which consists of gross, disposable,
and discretionary components.
3-165 GROSS INCOME KNOWLEDGE
The total amount of money made in one year by a person, household, or family unit is referred to
as __________ income.
a. government
b. discretionary
c. disposable
d. gross
e. livable

Rationale: Key term definitiongross income.
Gross income refers to

a. the money that remains after paying for taxes and necessities.
b. the money deducted from a persons paycheck to pay for federal, state, and local taxes.
c. the money a consumer has left after paying taxes to use for necessities such as food, shelter,
clothing, and transportation.
d. the total amount of money made by a single individual in his or her lifetime.
e. the total amount of money made in one year by a person, household, or family unit.

Rationale: Key term definitiongross income.
At the U.S. Census Bureau, gross income is referred to as __________.

a. buying power
b. cash inflow
c. money income
d. fiscal power
e. household income

Rationale: Key term definitiongross income/money income.
3-168 GROSS INCOME COMPREHENSION
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In 1970, the typical U.S. household earned about $8,700. In 2009, the typical U.S. household
earned about $49,777. If adjusted for inflation, the gross income of the typical U.S. household in
2009 relative to 1970 has __________.
a. increased dramatically
b. increased somewhat
c. remained relatively stable
d. decreased somewhat
e. decreased dramatically

Rationale: While the typical U.S. household earned only about $8,700 of income in 1970, it
earned about $49,777 in 2009. However, when this gross income is adjusted for inflation, income
of the typical U.S. household has remained relatively stable.
3-169 GOING ONLINE COMPREHENSION
Marketers collect and use environmental information to better understand consumers. The ESRI
Tapestry Segmentation tool is used to
a. obtain an economic profile of hometowns in comparison to national profiles.
b. obtain a profile of customers who identify themselves as members of multiracial or
multiethnic groups.
c. identify behavioral segments of the population interested in the more domestic arts such as
sewing, crocheting, knitting, and quilting.
d. help segment markets in the areas of home design based on decorating styles such as
traditional, Victorian, contemporary, etc.
e. identify similarities rather than differences among a diverse group of consumers by race,
ethnicity, gender, and age.

Rationale: Marketers collect and use environmental information to better understand consumers.
One way to begin an environmental scan is to compare economic data about a particular segment
of the population to what is typical or average for the entire population. The ESRI Tapestry
Segmentation tool allows you to compare your hometown economic information to the nations
averages.
3-170 DISPOSABLE INCOME KNOWLEDGE
The money a consumer has left after paying taxes to use for necessities such as food, shelter,
clothing, and transportation is referred to as __________.
a. net income
b. disposable income
c. discretionary income
d. household income
e. gross income

Rationale: Key term definitiondisposable income.
3-171 DISPOSABLE INCOME KNOWLEDGE
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Disposable income refers to
a. the money that remains after paying for taxes and necessities.
b. the money deducted from a persons paycheck to pay for federal, state, and local taxes.
c. the total amount of money made by a single individual in his or her lifetime.
d. the money a consumer has left after paying taxes to use for necessities such as food, shelter,
e. the money that is spent for necessities or charitable causes that is exempt from taxation

Rationale: Key term definitiondisposable income.
3-172 DISPOSABLE INCOME COMPREHENSION
If taxes rise at a faster rate than incomes, consumers will

a. have less disposable income and try to economize.
b. feel more confident in the government and therefore spend more money.
c. be able to afford to take a vacation.
d. recognize that its the perfect opportunity to buy a car.
e. react by voting for all incumbent members of Congress.

Rationale: Consumers must economize since tax increases reduce disposable income.
Alternatives b, c, and d call for an increase in spending, which is difficult to do when
consumers have less disposable incomes to spend for necessities. Alternative e is unlikely
since many voters would vote against incumbents after a period of rising taxes and reduced
disposable incomes.
During a recessionary period, which of the following is expected?

a. The use of credit would decline.
b. Consumer spending would increase.
c. Taxes would increase nationally.
d. Property values would jump dramatically.
e. Consumers would use the majority of their discretionary income on entertainment.

Rationale: During a recessionary period, spending, debt, and the use of credit all decline.
The recent large decline in __________ has had a psychological impact on consumers who tend
to spend more when they feel their net worth is rising and postpone purchases when it declines.
a. automobile prices
b. fuel prices
c. the number of people competing for jobs
d. consumer confidence
e. property values
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Rationale: A consumers net worth would be based on their personal assets such as property. If
the value of their property rises, they are more confident and can spend more; if the value of their
property declines, they are less confident and spend less.
3-175 DISCRETIONARY INCOME KNOWLEDGE
The money that remains after paying for taxes and necessities is referred to as __________.
a. net income
b. discretionary income
c. disposable income
d. household income
e. gross income

Rationale: Key term definitiondiscretionary income.
Discretionary income refers to

a. the money deducted from a persons paycheck to pay for federal, state, and local taxes.
b. the total amount of money made by a single individual in his or her lifetime.
c. the money a consumer has left after paying taxes to use for necessities such as food, shelter,
d. the money that remains after paying for taxes and necessities.
e. the money that is spent for necessities or charitable causes that is exempt from taxation.

Rationale: Key term definitiondiscretionary income.
3-177 DISCRETIONARY INCOME COMPREHENSION
Income used to buy luxury items such as a Regent cruise is referred to as __________.
a. gross income
b. disposable income
c. surplus income
d. wealth income
e. discretionary income

Rationale: Discretionary income is the money that remains after paying for taxes and necessities.
It is the money that is used for luxury items such as a Regent cruise.
The Department of Labor monitors consumer expenditures through its annual __________.
a. Consumer Price Index
- 58 -
b. Consumer Confidence Index
c. Consumer Expenditure Survey
d. Index of Consumer Sentiment
e. National Consumer Spending Survey

Rationale: The Department of Labor monitors consumer expenditures through its annual
Consumer Expenditure Survey.
The Department of Labor monitors consumer expenditures through its annual Consumer
Expenditure Survey. In 2009, consumers spent about 13 percent of their income on food, 34
percent on __________, and 3.5 percent on clothes.
a. education
b. housing
c. vacations
d. health care
e. transportation

Rationale: In the 2009 Department of Labor Consumer Expenditure Survey, consumers spent
about 13 percent of their income on food, 34 percent on housing, and 3.5 percent on clothes.
While an additional 22 percent is often spent on transportation and health care, the remainder is
generally viewed as discretionary.
3-180 DISCRETIONARY INCOME COMPREHENSION
Increases in discretionary income can occur as a result of all of the following EXCEPT:
a. an increase in gross income.
b. a decrease in taxes.
c. an increase in disposable income.
d. an increase in savings.
e. a decline in inflation.

Rationale: Discretionary expenditures can also be increased by reducing savings.
3-181 DISCRETIONARY INCOME APPLICATION
Emily had an excellent year as a saleswoman in 2011, earning $97,000. She paid $17,000 for
necessities such as mortgage, food, and clothing. She was given a six-week, all expenses paid
vacation by the company for her sales performance that had a value of $9,000. Her state and
federal income taxes totaled $24,000. What was her discretionary income?
a. $41,000
b. $56,000
c. $65,000
d. $73,000
e. There is not enough data provided to calculate her discretionary income.
- 59 -
Discretionary income = Gross income (wages, salaries, commissions, dividends, and noncash
income such as an all expense paid trip) Taxes (federal, state, and local) Necessities
(mortgage, food, and clothing). Discretionary income = ($97,000 + $9,000) $24,000 $17,000
= $65,000. The value of the vacation of $9,000 must be added to the gross income total because
the IRS counts this vacation as income.
The owner of your local KFC franchise had a good year with rising revenues and reduced
operating costs that resulted in a personal income of approximately $100,000. One-third of that
was taken for local, state, and federal income taxes and another third went to pay for a home
mortgage, car payments, food, clothing, and other necessities. What is the remaining third
called?
a. gross income
b. bonus income
c. discretionary income
d. disposable income
e. profit

Rationale: Since discretionary income is the money that remains after paying for taxes and
necessities, $100,000 less one-third for taxes and less one-third for necessities leaves one-third
for discretionary income.
Carl and Nancy Johnson prepared a household budget in an attempt to manage their money better.
As part of their budgeting process, Carl and Nancy prepared the following list:
Monthly Income (after taxes): $4,500

Monthly Expenses (Necessities)
Rent: $550
Auto Loan: $250
Student Loan: $200
Savings: $500
Food: $200
Total Monthly Expenses: $1,700
Amount Left Over: $2,800
After totaling their necessary expenses, which equals $1,700, Carl and Nancy subtracted that
amount from their monthly income of $4,500. The Johnsons were happy to realize that they had
$2,800 left over, which is their __________.
a. gross income
b. personal income
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c. disposable income
d. discretionary income
e. profit

Rationale: The three components of consumer income are gross income (not given in the
problem), disposable income ($4,500 in the problem), and discretionary income ($2,800 in the
problem), which is the money that remains after paying for taxes and necessities.
Recently, the number of people who attended music concerts, plays, and other live entertainment
increased because they had the __________ to enjoy these activities.
a. gross income
b. bonus income
c. profit
d. disposable income
e. discretionary income

Discretionary income is used for luxury items like theater and concert tickets.
Last year, the Parker family used to eat at nice restaurants almost four times a week. Even though
Mr. Parker received a 5 percent raise, the cost of living rose by 7 percent. As a result, the family
now eats most of their meals at home, dining out only four times a month. This reflects
a. a decrease in the number of fine restaurants that can stay in business during times of
economical downturn.
b. a reaction to a loss of discretionary income.
c. a significant drop in disposable income since there was a negative gain in income.
d. a rise in deflation.
e. a shift from spending to investing.

Rationale: The cost of living increase of 7 percent represents inflation, which exceeded Parkers
rise in gross income. Therefore, the Parker family experienced a reduction in discretionary
incomethe amount left to spend after paying for taxes and necessitiessuch as meals eaten out
of the home. To increase discretionary income, one either has to earn more (gross income) or
reduce taxes, reduce the amount spent on necessities, like housing and insurance, or reduce
savings.
3-186 SAVINGS RATE KNOWLEDGE
Recent data on consumer expenditures indicate that the savings rate of U.S. consumers has
__________.
a. declined 6 percent; they are taking money from savings to pay current expenses on
necessities
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b. remained flat at 0 percent
c. risen slightly at 2 percent
d. risen to 6 percent
e. exploded to 10 percent

Rationale: Recent data on consumer expenditures indicate that the savings rate of U.S.
consumers has risen to about 6 percent.
3-187 TECHNOLOGY KNOWLEDGE
Inventions or innovations from applied science or engineering research are referred to as

a. scientific discoveries.
b. theoretical development.
c. technology.
d. patents.
e. dynamic engineering.

Rationale: Key term definitiontechnology.
3-188 TECHNOLOGY KNOWLEDGE
Technology refers to
a. any device or process based on scientific discoveries that are less than one year old.
b. any mechanical device used in the production or distribution of a product.
c. only those inventions or innovations from applied science that are used to generate a profit.
d. ideas or concepts that will one day be translated into useable devices, mechanisms, or
processes.
e. the inventions or innovations from applied science or engineering research.
Answer: e Page(s): 76 LO: 4 AACSB: Technology QD: Easy

Rationale: Key term definitiontechnology.
- 62 -
The New Yorker Ad
3-189 TECHNOLOGICAL FORCES COMPREHENSION
Technological advances are difficult to predict. One great advance can replace or substitute for
existing products in a relatively short period of time. As shown The New Yorker ad above shows,
tablet devices, such as the iPad, are likely to replace its weekly __________.
a. radio broadcast
b. television broadcast
c. magazine
d. e-book
e. online video game
Answer: c Page(s): 76 LO: 4 AACSB: Technology QD: Medium

Rationale: Technologies such as the iPad and other tablet devices are likely to replace or
substitute for existing print media such as magazines, newspapers, and books. The correct
answer is alternative c since The New Yorker is a magazine.
Four new technologies are expected to have impact on marketing. These are
a. biotechnology, SmartGrids, natural user interfaces, and social networks.
b. neuron technology, lithium batteries, cloud computing, and wireless power.
c. crowdsourcing, genomics, QR codes, and CRT TVs.
d. books, video conferencing, solar cells, and quantum dots.
e. nanotechnology, autobots, cloud computing, and wireless power.
Answer: a Page(s): 76 LO: 4 AACSB: Technology QD: Medium

Rationale: According to the textbook, alternative a is the correct answer. Each of the other
alternatives has one incorrect element to the response (b has lithium batteries; c has CRT
TVs; d has books; and e has autobotsa name from the Transformers movies).
- 63 -
3-191 TECHNOLOGICAL FORCES APPLICATION
Medication sensors have been developed that can dispense medicines by circulating within the
arteries of the body and sensing when the medication is needed. This is an example of how
__________ forces help improve or replace existing products and companies.
a. ecological
b. regulatory
c. legal
d. competitive
e. technological
Answer: e Page(s): 76 LO: 4 AACSB: Technology QD: Hard

Rationale: Technology refers to inventions or innovations from applied science or engineering
research. The new medical sensor is an example of specialized technologybiotechnology.
Very recently, ink has been developed that will conduct electricity. The application for this ink is
to print circuitry that can be read electronically. This may help to drive down the cost of radio
frequency (RFID) tags that are currently used in industry. This is an example of how
__________ forces are applied to industry.
a. ecological
b. regulatory
c. technological
d. competitive
e. marketing mix
Answer: c Page(s): 76 LO: 4 AACSB: Technology QD: Hard

research such as this type of ink.
One reason some people dont like to buy clothing from Internet retailers is the inability to know
if the clothes will fit once they have arrived. ImageTwin has developed a scanning system that
obtains the measurements of individuals of all different sizes, which is then fed into a database.
So, when you want to buy something at LandsEnd.com, you can see a 3D image of what the item
should look like on your body. This is an example of the __________ force in the marketing
environment.
a. economic
b. technological
c. sociocultural
d. competitive
e. marketing mix
Answer: b Page(s): 76 LO: 4 AACSB: Technology QD: Hard

Rationale: Technology refers to inventions or innovations or applied science or engineering
research, such as ImageTwin.
- 64 -
Cloud computing, such as Apples iCloud, enables businesses and consumers to share ones data
or use a firms software application like Microsoft Office directly from that firms or a third
partys server over the Internet rather than having that data file or program reside on a personal
computer. This is an example of a change in the __________ marketing environment.
a. regulatory
b. sociocultural
c. competitive
d. technological
e. marketing mix
Answer: d Page(s): 76 LO: 4 AACSB: Technology QD: Hard

research. Cloud computing is an example of a technological change in the marketing
environment.
Microsoft has developed __________ software to use with its 3D image capture technology
called Kinect.
a. natural user interface
b. Facebook
c. Twitter
d. cloud computing
e. digital payments
Answer: a Page(s): 76 LO: 4 AACSB: Technology QD: Hard

Rationale: Microsoft has developed natural user interface software to use with its 3D image
capture technology called Kinect.
SmartGrid infrastructure, online energy management, and consumer-generated energy (home

wind turbines) best describe examples of todays (and tomorrows) __________ force identified
through an environmental scan.
a. sociocultural
b. competitive
c. legal/regulatory
d. technological
e. economic
Answer: d Page(s): 76 LO: 4 AACSB: Technology QD: Hard

Rationale: SmartGrid infrastructure, online energy management, and consumer-generated energy
(home wind turbines) best describe examples of todays (and tomorrows) technological force
identified through an environmental scan.
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An example of a dramatic __________ change is the increasing use of e-readers like Amazons
Kindle and tablet devices like Apples iPad to read digital books.
a. managerial
b. technological
c. ethical
d. regulatory
e. economic
Answer: b Page(s): 76 LO: 4 AACSB: Technology QD: Hard

Rationale: Society is in a period of dramatic technological change. Technology, as an
environmental force, refers to inventions or innovations from applied science or engineering
research. The increasing use of e-readers like Amazons Kindle and tablet devices like Apples
iPad to read digital books is an example of such as change in the marketing environment.
The Electronic Signatures in Global and National Commerce Act makes digital signatures as
valid as non-digital pen-and-ink signatures. This act created a demand for software and hardware
that would collect, transmit, and receive digital signatures. This example indicates how
__________ forces can work together in the marketing environment.
a. technological and regulatory
b. technological and competitive
c. social and competitive
d. social and economic
e. regulatory and economic

Rationale: The software to collect and transmit the signature is an example of technology. The
law itself is part of the regulatory environment.
3-199 RECYCLING KNOWLEDGE
Technology can change existing products and the ways they are produced. Many companies are
using technological developments to allow the __________ of products through the
manufacturing cycle several times.
a. pruning
b. adding
c. recycling
d. precycling
e. refining

Rationale: Text term definitionrecycling.
3-200 RECYCLING APPLICATION
In the U.S. alone, roughly 500 million computers will become obsolete by 2017. These
computers contain more than 2 billion pounds of what will become lead waste that is harmful to
the environment. As a result, computer manufacturers are being pressured to accept the return of
- 66 -
used computers for the safety of communities. This environmental issue reflects a problem with
__________, a technological issue within the marketing environment.
a. recycling
b. gray marketing
c. preowned marketing
d. postcycling
e. precycling

Rationale: Technology can also change existing products and the ways they are produced. Many
companies are using technological developments to recycling products through the manufacturing
cycle several times. The fast-paced change of technology in the computer industry highlights the
need for the corresponding recycling programs.
3-201 RECYCLING APPLICATION
With the rise of electronic music keyboards, the United States is overrun with unwanted pianos.
A craftsman decided that old pianos were the perfect height for computer desks. The computer
keyboard can be placed where the piano keys once were. He sells his converted pianos for about
$1,500. Go to PianoDesk.com if you are interested in this unusual __________ effort.
a. reapplied engineering
b. post innovation
c. recycling
d. postcycling
e. precycling

Rationale: Recycling is defined as the use of technological developments to allow products to go
through the manufacturing cycle several times. What began as a piano is remanufactured into a
computer desk.
3-202 PRECYCLING KNOWLEDGE
Efforts by manufacturers to avoid waste by decreasing the amount of packaging they use is
termed __________.
a. shrinkage
b. downsizing
c. recycling
d. postcycling
e. precycling

Rationale: Text term definitionprecycling.
3-203 MARKETSPACE KNOWLEDGE
Marketspace refers to
a. the two-way buyerseller electronic communication in a computer-mediated environment in
which the buyer controls the kind and amount of information received from the seller.
- 67 -
b. websites that allow people to congregate online and exchange views on topics of common
interest.
c. Internet search engines used for the purpose of data mining.
d. an information- and communication-based electronic exchange environment mostly occupied
by sophisticated computer and telecommunication technologies and digitized offerings.
e. the blending of different communication and delivery channels that are mutually reinforcing
in attracting, retaining, and building relationships with consumers who shop and buy in
traditional intermediaries and online.
Answer: d Page(s): 78 LO: 4 AACSB: Technology QD: Easy

Rationale: Key term definitionmarketspace. Alternative a is the definition of interactive
marketing (see Chapter 21). Alternative b is the definition of Web communities (see Chapter
21). Alternative e is the definition of multichannel marketing (see Chapter 15).
3-204 MARKETSPACE KNOWLEDGE
An information- and communication-based electronic exchange environment mostly occupied by

sophisticated computer and telecommunications technologies and digitized offerings is referred to
as __________.
a. Internet marketing
b. marketspace
c. electronic commerce
d. marketplace
e. e-exchange
Answer: b Page(s): 78 LO: 4 AACSB: Technology QD: Easy

Rationale: Key term definitionmarketspace.
3-205 ELECTRONIC COMMERCE KNOWLEDGE
Any activity that uses some form of electronic communication in the inventory, exchange,
advertisement, distribution, and payment of goods and services is referred to as __________.
a. electronic commerce
b. Internet barter
c. intranet commerce
d. electronic exchange
e. extranet commerce
Answer: a Page(s): 78 LO: 4 AACSB: Technology QD: Easy

Rationale: Key term definitionelectronic commerce.
3-206 ELECTRONIC COMMERCE KNOWLEDGE
Electronic commerce refers to

a. an information- and communication-based electronic exchange environment mostly occupied
by sophisticated computer and telecommunications technologies and digitized offerings.
b. any activity that uses some form of electronic communication in the inventory, exchange,
advertisement, distribution, and payment of goods and services.
- 68 -
c. two-way buyerseller electronic communication in a computer-mediated environment in
which the buyer controls the kind and amount of information received from the seller.
d. electronic storefronts that focus on converting an online browser into an online, catalog, or
in-store buyer.
e. electronic storefronts that advertise and promote a companys products and services and
provide information on how items can be used and where they can be purchased.

Rationale: Key term definitionelectronic commerce. Alternative a is the definition of
marketspace. Alternative c is the definition of interactive marketing (see Chapter 21).
Alternative d is the definition of a transactional website (see Chapter 21). Alternative e is the
definition of a promotional website (see Chapter 21).
3-207 ELECTRONIC COMMERCE APPLICATION
Buying a book at www.amazon.com to give as a birthday present is an example of a(n)

__________ transaction.
a. i-market
b. intranet
c. electronic commerce
d. extranet
e. marketplace

Rationale: Any activity that uses some form of electronic communication in the inventory,
exchange, advertisement, distribution, and payment of goods and services is often called
electronic commerce. A purchase at Amazon.com is an example of electronic commerce.
3-208 INTRANETS KNOWLEDGE
A(n) __________ is an Internet-based network used within the boundaries of an organization.

a. web exchange
b. commercial online service
c. extranet
d. Internet service provider
e. intranet

Rationale: Text term definitionintranet.
3-209 INTRANETS APPLICATION
Office Depot has given its staff wireless tablet devices. When customers inquire about a product,
a computer-equipped sales associate can pull up detailed information about the product from the
corporate database. In addition, employees at one store can contact employees at another store
for advice or information. This is an example of how a(n) __________ can be used to enhance
marketing.
a. Internet service provider
b. web exchange
- 69 -
c. commercial online service
d. extranet
e. intranet
Answer: e Page(s): 78 LO: 4 AACSB: Technology QD: Hard

Rationale: An intranet is an Internet-based network used within the boundaries of an
organization to support their internal electronic business strategies, such as the one in use at
Office Depot.
3-210 EXTRANETS KNOWLEDGE
Companies often use Internet-based technologies called a(n) __________ that permits
communication between a company and its suppliers, distributors, and other partners.
a. Internet service provider
b. extranet
c. intranet
d. commercial online service
e. web exchange

Rationale: Text term definitionextranets.
3-211 COMPETITION KNOWLEDGE
Alternative firms that could provide a product to satisfy a specific markets needs are referred to
as __________.
a. substitute firms
b. target markets
c. complementary firms
d. cross product marketers
e. competition

Rationale: Key term definitioncompetition.
3-212 COMPETITION KNOWLEDGE
Competition refers to
a. identical products that perform identical functions.
b. any for profit organization that targets the customers of other organizations.
c. alternative firms that could provide a product to satisfy a specific markets needs.
d. any product or service that vies for a portion of a customers discretionary income.
e. the set of firms that operate in a given geographic region, regardless of product or service.

Rationale: Key term definitioncompetition.
3-213 COMPETITION COMPREHENSION
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In marketing, the four basic forms of competition are
a. pure competition, limited competition, oligopoly, and monopoly.
b. dictatorship, monarchy, oligarchy, and democracy.
c. pure competition, cross-market competition, oligopoly, and pure monopoly.
d. pure competition, monopolistic competition, oligopoly, and pure monopoly.
e. technological competition, market competition, governmental competition, and
environmental competition.

Rationale: Four basic forms of competition form a continuumfrom pure competition to
monopolistic competition to oligopoly to pure monopoly. Pure competition occurs when there
are many sellers and they each have a similar product. Monopolistic competition occurs when
there are many sellers competing with substitutable products within a price range. Oligopoly
occurs when a few companies control the majority of industry sales. Pure monopoly occurs when
only one firm sells the product.
3-214 COMPETITIVE FORCES APPLICATION
Many firms now use e-mail and the Internet to promote their products instead of sending
promotional literature to current and prospective customers though the mail. UPS and FedEx
continue to grow, as they have both expedited (overnight) and ground package delivery services.
These marketplace activities have caused the U.S. Postal Service (USPS) to lose millions of
customers and billions of dollars in revenues. As a result, the USPS has had to cope with new
___________ forces in the marketplace.
a. economic
b. competitive
c. legal
d. social
e. technological

Rationale: The USPS has had to cope with new competitive forces in the marketplace, such as
the growing trend for firms, which once relied on the USPS to deliver its promotional literature
and packages, to now rely on e-mail, the Internet, UPS, and FedEx for its promotional and
package delivery needs.
3-215 PURE COMPETITION KNOWLEDGE
The form of competition in which there are many sellers and they each have a similar product is
referred to as __________.
a. pure competition
b. singular competition
c. an oligopoly
d. monopolistic competition
e. a monopoly

Rationale: Text term definitionpure competition.
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3-216 PURE COMPETITION COMPREHENSION
In _________, there are many sellers and they each have a similar product, such as commodities
common to agribusinesses.
a. limited competition
b. pure competition
c. oligopoly competition
e. a monopoly

Rationale: Text term definitionpure competition.
3-217 PURE COMPETITION COMPREHENSION
__________ is the form of competition where distribution is the only element of the marketing
mix that exerts an impact on the firm.
a. Cross-market competition
b. Limited competition
c. Pure competition
d. Monopolistic competition
e. A monopoly

Rationale: In pure competition, there are many firms that market a similar product. As a result,
distribution is the only marketing mix element that is important; others have little impact on the
firm.
3-218 MONOPOLISTIC COMPETITION KNOWLEDGE
The form of competition in which many sellers compete with their products on a substitutable
basis within a price range is called
a. pure competition.
b. cross-market competition.
c. an oligopoly.
d. monopolistic competition.
e. a monopoly.

Rationale: Text term definitionmonopolistic competition.
3-219 MONOPOLISTIC COMPETITION COMPREHENSION
Coupons and sales are frequently used marketing tactics for which form of competition?
a. pure competition
b. cross-market competition
c. an oligopoly
d. a monopoly
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e. monopolistic competition

Rationale: In monopolistic competition, many sellers compete with substitutable products within
a price range. Coupons and sales are frequently used in monopolistic competition.
3-220 MONOPOLISTIC COMPETITION APPLICATION
Paul Avery is a salesperson at the only Ford automobile dealership in Wausau, Wisconsin.
However, there are several other auto dealerships in town, offering both domestic and foreign
cars and trucks. Paul works hard to keep his customers satisfied because he knows that if his
customers are unhappy, they can simply buy a car from one of the several other comparable
dealers in Wausau. This is an example of
a. pure competition.
b. monopolistic competition.
c. an oligopoly.
d. a monopoly.
e. marginal competition.

Rationale: One brand of automobile is often viewed as substitutable for another. In this case, the
several sellers compete with their products on a substitutable basis within a price range in
monopolistic competition.
3-221 MONOPOLISTIC COMPETITION APPLICATION
During the Christmas season, many catalog retailers offer buyers price reductions, coupons, two-
for-one deals, and/or free delivery. This is because these catalog retailers operate in a(n)
__________ environment.
a. pure competition
b. oligopoly
c. monopolistic competition
d. monopoly
e. marginal competition

Rationale: Catalog retailers operate in a monopolistic competitive environment where many
sellers compete with substitutable products within a given price range.
3-222 OLIGOPOLY KNOWLEDGE
The form of competition where just a few companies control the majority of industry sales is
a. pure competition
c. an oligopoly
e. a monopoly
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Rationale: Text term definitionoligopoly.
3-223 OLIGOPOLY COMPREHENSION
Because there are few sellers, price competition among firms is not desirable in which form of
competition?
a. pure competition
c. a monopoly
e. an oligopoly

Rationale: Since there are few sellers in an oligopoly, price competition among firms is not
desirable because it leads to reduced profits for all producers.
3-224 OLIGOPOLY COMPREHENSION
According to a 2011 Federal Communications Commission report, AT&T, Verizon, Sprint-

Nextel, and T-Mobile control the vast majority of the subscribers in the U.S. wireless mobile
phone market. Which form of competition characterizes this market?
a. pure competition
b. limited competition
c. a monopoly
d. an oligopoly

Rationale: An oligopoly occurs when a few companies control the majority of industry sales, as
is the case in the U.S. wireless mobile phone market.
3-225 OLIGOPOLY APPLICATION
Boeing, Northrup Grumman, and Lockheed Martin control the vast majority of the U.S. defense
contractor industry. In terms of the form of competition, this industry is an example of a(n)
__________.
a. oligopoly
b. trilateral monopoly
c. monopoly
d. pure competition

is the case in the defense contractor industry.
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As of late 2011, the four major retailers of online music include the iTunes, Napster, Amazon,
and Rhapsody. In terms of the form of competition, this industry is an example of a(n)
__________.
a. monopoly
b. mega monopoly
c. pure competition
d. oligopoly

is the case in the online music retail industry.
Kodak, Fuji, and Agfa control the majority of sales for traditional 35mm photographic film. The
film industry is an example of a(n) __________.
a. monopoly
b. mega monopoly
c. oligopoly
d. pure competition

is the case in the traditional 35mm photographic film industry.
3-228 PURE MONOPOLY KNOWLEDGE
In marketing, the form of competition that occurs when only one firm sells the product is referred
to as __________.
a. pure competition
b. a megopoly
c. an oligopoly
e. pure monopoly

Rationale: Text term definitionpure monopoly.
3-229 PURE MONOPOLY COMPREHENSION
Since ___________ is regulated by the state or federal government, marketing plays a relatively
small role in this setting.
a. pure competition
b. a pure monopoly
c. an oligopoly
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e. a megopoly

Rationale: A pure monopoly occurs when only one firm sells the product. Typically, marketing
plays a small role in a monopolistic setting because the firm is regulated by the state or federal
government.
3-230 COMPONENTS OF COMPETITION COMPREHENSION
The factors that drive competition include

a. monopolistic competition, cross-market competition, entry, and the bargaining power of
buyers and suppliers.
b. cross-market competition, entry, the bargaining power of buyers and suppliers, and
substitution possibilities.
c. monopolistic competition, cross-market competition, bargaining power of buyers and
suppliers, existing rivalries.
d. entry, the bargaining power of buyers and suppliers, existing rivalries, and substitution
possibilities.
e. cross-market competition, entry, bargaining power of buyers and suppliers, and federal
regulation.

Rationale: In developing a marketing program, companies must consider the factors that drive
competition: entry, the bargaining power of buyers and suppliers, existing rivalries, and
substitution possibilities.
3-231 BARRIERS TO ENTRY KNOWLEDGE
Business practices or conditions that make it difficult for new firms to enter the market are
a. market obstructions
b. barriers to entry
c. switching costs
d. import-export firewalls
e. preemptive practices

Rationale: Key term definitionbarriers to entry.
3-232 BARRIERS TO ENTRY KNOWLEDGE
Barriers to entry refer to

a. business practices or conditions that make it difficult for new firms to enter the market.
b. governmental prohibitions regarding the establishment of businesses that are considered
immoral.
c. governmental prohibitions regarding the establishment of businesses that are considered legal
but unethical.
d. restrictive fees that are set intentionally high in order to prevent additional competition in an
already highly competitive industry.
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e. strong-armed tactics that are illegal but commonly used in certain industries to hinder
competition.

Rationale: Key term definitionbarriers to entry.
3-233 BARRIERS TO ENTRY COMPREHENSION
Barriers to entry include capital requirements, switching costs, advertising expenditures, and
a. personnel shortages.
b. distribution access.
c. field of experience.
d. inventory deficits.
e. prior enterprise failures.

Rationale: Barriers to entry are business practices or conditions that make it difficult for new
firms to enter the market. Barriers to entry can be in the form of capital requirements, advertising
expenditures, product identity, distribution access, or the cost to customers of switching suppliers.
The higher the expense of the barrier, the more likely it will deter new entrants.
3-234 POWER OF BUYERS COMPREHENSION
Powerful buyers exist when

a. there are many buyers.
b. switching costs are low.
c. the product represents a small share of the buyers total costs.
d. the product is critical to the buyer.
e. preemptive practices exist.

Rationale: Powerful buyers exist when they are few in number, there are low switching costs, or
the product represents a large share of the buyers total costs. The seller has power when the
product is critical to the buyer. Alternative e does not apply to this question at all.
3-235 COMPETITORS AND SUBSTITUTES COMPREHENSION
Competitive pressures among existing firms depend on

a. the current economic growth rate.
b. the total number of established competitors.
c. low fixed costs.
d. the rate of industry growth.
e. the availability of raw materials and natural resources.

Rationale: Competitive pressures among existing firms depend on the rate of industry growth. In
slow-growth settings, competition is more heated for possible market share gains. High fixed
costs also create competitive pressures for firms to fill production capacity.
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3-236 SMALL BUSINESS KNOWLEDGE
Small businesses make up the majority of the competitive landscape for most businesses. There
are approximately __________ small businesses in the United States.
a. 17 million
b. 27 million
c. 37 million
d. 50 million
e. 100 million

Rationale: There are approximately 27 million small businesses in the United States.
3-237 SMALL BUSINESS KNOWLEDGE
Small businesses account for __________ of the gross domestic product (GDP).
a. 25 percent
b. 30 percent
c. 50 percent
d. 65 percent
e. 80 percent

Rationale: Small businesses account for 50 percent of the gross domestic product (GDP).
3-238 REGULATION KNOWLEDGE
The restrictions that state and federal laws place on business with regard to the conduct of its
activities are referred to as
a. jurisprudence.
b. competitive constrains.
c. barriers to entry.
d. restraints of trade.
e. regulation.

Rationale: Key term definitionregulation.
3-239 REGULATION KNOWLEDGE
Regulation refers to
a. the restrictions that state and federal laws place on business with regard to the conduct of its
activities.
b. constraints placed on businesses for activities that are legal but unethical.
c. societys values and standards that are enforceable in the courts.
d. requirements concerning which customers a firm may serve or not serve.
e. the moral principles and values that govern the actions and decisions of an individual or
group.
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Rationale: Key term definitionregulation.
3-240 REGULATORY FORCES APPLICATION
F. Hoffman-LaRoche Ltd. and BASF AG, two international pharmaceutical companies, were
ordered to pay $725 million in fines for plotting to raise and fix prices of vitamins used in
virtually every home in the United States. This is an example of how __________ forces affect
the marketing environment.
a. economic
b. ecological
c. technological
d. social
e. regulatory

Rationale: Regulation consists of restrictions state and federal laws place on business with regard
to the conduct of its activities. The fines and other punishments were levied as a result of price-
related legislation.
3-241 REGULATORY FORCES APPLICATION
A car collector, Mr. F. Hansen, who said his 1975 Chevrolet Corvette was certified as the last
Corvette convertible to be produced, sued General Motors to stop it from manufacturing any
more of the convertible sports cars. The suit also requested $1.5 million in damages. Hansen
claimed he bought the car for its collectors value. It came with a letter from GM dated August
25, 1975, which said that the car was the last Corvette convertible that General Motors Corp.
would ever manufacture. Hansen said the value of his car has been decreasing ever since GM
resumed manufacturing Corvette convertibles in 1985. If the court ruled in favor of Mr. Hansen,
what general type of regulation would such a ruling represent?
a. protecting companies from one another
b. protecting consumers from unfair trade practices
c. protecting the future interests of society from dangerous business practices
d. protecting consumers from one another
e. protecting businesses from unfair consumer practices

Rationale: Regulation consists of restrictions state and federal laws place on business with regard
to the conduct of its activities. For consumers, the focus of legislation is to protect them from
unfair trade practices and ensure their safety. GM advertised the last convertible in 1975 to
help sell cars then. By resuming production in 1985, GM likely deceived consumers, in
particular, Mr. Hansen.
3-242 SHERMAN ANTITRUST ACT KNOWLEDGE
The first major federal legislation passed to encourage competition in the United States was the
a. Sherman Antitrust Act.
b. Lanham Act.
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c. Federal Trade Commission Act.
d. Robinson-Patman Act.
e. Clayton Act.

Rationale: Major federal legislation has been passed to encourage competition, which is deemed
desirable because it permits the consumer to determine which competitor will succeed and which
will fail. The first such law was the Sherman Antitrust Act (1890).
The first major federal legislation passed to forbid contracts, combinations, or conspiracies in
restraint of trade in the United States was the
a. Lanham Act.
b. Sherman Antitrust Act.
c. Federal Trade Commission Act.
d. Robinson-Patman Act.
e. Clayton Act.

Rationale: Text term definitionSherman Antitrust Act.
The first major federal legislation passed to forbid actual monopolies or attempts to monopolize
any part of trade or commerce in the United States was the
a. Lanham Act.
b. Federal Trade Commission Act.
c. Robinson-Patman Act.
d. Sherman Antitrust Act.
e. Clayton Act.

Rationale: Text term definitionSherman Antitrust Act.
3-245 SHERMAN ANTITRUST ACT COMPREHENSION
Which of the following laws has the purpose of protecting competition?

a. Lanham Act.
b. Federal Trade Commission Act.
c. Fair Trade Act.
d. Unfair Practices Act.
e. Sherman Antitrust Act.

Rationale: The Sherman Antitrust Act is one of several laws that were passed to protect
competition. The others include the Clayton Act and the Robinson-Patman Act.
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3-246 CLAYTON ACT KNOWLEDGE
The purpose of the Clayton Act is to

a. provide incentives for interstate commerce.
b. forbid actions that are likely to lessen competition, although no actual harm has yet occurred.
c. exact compensation from firms found guilty of violating fair trade practices.
d. repeal provisions of the Sherman Antitrust Act.
e. strengthen the Robinson-Patman Act.

Rationale: Text term definitionClayton Act.
3-247 CLAYTON ACT KNOWLEDGE
The purpose of the __________ is to forbid certain actions that are likely to lessen competition,
although no actual harm has yet occurred.
a. Federal Trade Commission Act
b. Lanham Act
c. Clayton Act
d. Sherman Antitrust Act
e. Robinson-Patman Act

Rationale: Text term definitionClayton Act.
3-248 CLAYTON ACT COMPREHENSION

a. Prevention and Enforcement Act
b. Clayton Act
c. Federal Trade Commission Act
d. Fair Trade Act
e. Unfair Practices Act

Rationale: The Clayton Act is one of several laws that were passed to protect competition. The
others include the Sherman Antitrust Act and the Robinson-Patman Act.
3-249 ROBINSON-PATMAN ACT KNOWLEDGE
The __________ makes it unlawful to discriminate in prices charged to different purchasers of

the same product, where the effect may substantially lessen competition or help to create a
monopoly.
a. Fair Trade Act
b. Clayton Act
c. Lanham Act
d. Robinson-Patman Act
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Rationale: Text term definitionRobinson-Patman Act.
3-250 ROBINSON-PATMAN ACT KNOWLEDGE
The purpose of the Robinson-Patman Act is to

a. outlaw price discrimination for purchasers of the same product.
b. encourage pure competition.
c. protect inventors from having their intellectual property stolen.
d. repeal the Sherman Antitrust Act.
e. provide incentives for interstate commerce.

Rationale: The Robinson-Patman Act makes it unlawful to discriminate in prices charged to
different purchasers of the same product, where the effect may substantially lessen competition or
help to create a monopoly.
3-251 ROBINSON-PATMAN ACT COMPREHENSION
Twenty years after the Clayton Act, the growth of chain stores such as Sears led many to fear that
retail chains presented a threat to smaller, independent retailers. The federal government enacted
the __________ to make it unlawful to discriminate in prices charged to different purchasers of
the same product, where the effect may substantially lessen competition or help to create a
monopoly.
a. Robinson-Patman Act
b. Fair Trade Act
c. Clayton Act
d. Lanham Act

Rationale: The Robinson-Patman Act makes it unlawful to discriminate in prices charged to
different purchasers of the same product, where the effect may substantially lessen competition or
help to create a monopoly.
3-252 ROBINSON-PATMAN ACT COMPREHENSION

a. Robinson-Patman Act
b. Lanham Act
c. Federal Trade Commission Act
d. Fair Trade Act

Rationale: The Robinson-Patman Act is one of several laws that were passed to protect
competition. The others include the Clayton Act and the Sherman Antitrust Act.
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3-253 PATENT LAW KNOWLEDGE
The purpose of patent law is to

a. provide incentives for increased competition.
b. give an author of a literary, dramatic, musical, or artistic work the exclusive right to print,
perform, or otherwise copy that work.
c. give inventors the right to exclude others from making, using, or selling products that infringe
the patented invention.
d. guarantee the quality and safety of any product produced or distributed in the United States.
e. level the playing field between inventors who work for large corporations and those who
work on their own.

Rationale: Patent law gives inventors the right to exclude others from making, using, or selling
products that infringe the patented invention.
3-254 PATENT LAW COMPREHENSION
A company can protect its competitive position under __________, which gives inventors the
right to exclude others from making, using, or selling products that infringe the patented
invention.
a. copyright law
b. patent law
c. criminal law
d. commercial law
e. antitrust law

Rationale: Patent laws give inventors the right to exclude others from making, using, or selling
products that infringe on the patented invention.
3-255 COPYRIGHT LAW KNOWLEDGE
The purpose of copyright law is to

a. provide incentives for increased competition.
b. give inventors the right to exclude others from making, using, or selling products that infringe
the patented invention.
c. level the playing field between inventors who work for large corporations and those who
work on their own.
d. guarantee the quality and safety of any product produced or distributed in the United States.
e. give an author of a literary, dramatic, musical, or artistic work the exclusive right to print,
perform, or otherwise copy that work.

Rationale: Copyright law gives the author of a literary, dramatic, musical, or artistic work the
exclusive right to print, perform, or otherwise copy that work.
3-256 COPYRIGHT LAW KNOWLEDGE
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The purpose of __________ is to give the author of a literary, dramatic, musical, or artistic work
the exclusive right to print, perform, or otherwise copy that work.
a. copyright law
b. patent law
c. criminal law
d. commercial law
e. antitrust law

exclusive right to print, perform, or otherwise copy that work.
3-257 COPYRIGHT LAW COMPREHENSION
In 1998, President Clinton signed the Digital Millennium Copyright Act, which
a. limits access of children to online material considered to be inappropriate or harmful.
b. improves protection of copyrighted digital products.
c. allows the government to collect taxes if printed materials are sold online.
d. prevents the pirating of digital products that do not display the copyright symbol.
e. allows anyone with access to a computer to publish original materials online and seek
remuneration (pay).

exclusive right to print, perform, or otherwise copy that work. The Digital Millennium Copyright
Act is legislation designed to improve protection of copyrighted digital products.
3-258 PRODUCT-RELATED LEGISLATION COMPREHENSION
The Infant Formula Act, the Nutritional Labeling and Education Act, and the Fair Packaging and
Labeling Act are all examples of
a. consumer-oriented legislation.
b. pricing-related legislation.
c. distribution-related legislation.
d. requirement contracts.
e. fair trade legislation.

Rationale: The Infant Formula Act, the Nutritional Labeling and Education Act, and the Fair
Packaging and Labeling Act are laws that relate to food, drugs, and cosmetics with the objective
of protecting consumers.
The Infant Formula Act (1980), the Nutritional Labeling and Education Act (1990), and the Fair
Packaging and Labeling Act (1966) are all examples of
a. pricing-related legislation.
b. consumer-oriented federal laws.
c. fair trade legislation.
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d. distribution-related legislation.
e. requirement contracts.

Rationale: These laws relate to food, drugs, and cosmetics with the objective of protecting
consumers.
3-260 PRODUCT-RELATED LEGISLATION APPLICATION
A mother bought what she thought was a large box of unsweetened cereal. It was the same 22 oz.
size as other brands whose boxes clearly marked. However, when she opened the box it was
barely full. The Fair Packaging and Labeling Act would not protect her unless
a. the package printed the disclaimer that the product might settle during shipping.
b. the package states that the contents should be purchased by weight rather than by volume.
c. the package clearly states 22 oz. on the front but the actual weight of the contents was only 16
oz.
d. the package lists all the ingredients including the total amount of sugar.
e. an identical package by the same manufacturer had the exact same amount inside.
Answer: c Page(s): 80-81 LO: 6 AACSB: Analytic QD: Hard

Rationale: The Fair Packaging and Labeling Act (1996) is a broad consumer-oriented federal
law.
3-261 CONSUMER PRODUCT SAFETY ACT KNOWLEDGE
The __________ established the Consumer Product Safety Commission to monitor product safety
and establish uniform product safety standards.
a. Nutritional Labeling and Education Act
b. Consumer Protection Act
c. Fair Packaging and Labeling Act
d. Child Protection Act
e. Consumer Product Safety Act

Rationale: Text term definitionConsumer Product Safety Act.
3-262 CONSUMERISM KNOWLEDGE
The grassroots movement started in the 1960s to increase the influence, power, and rights of
consumers in dealing with institutions is referred to as __________.
a. Naderism
b. consumerism
c. green marketing
d. anti-corporate activism
e. consumptionism

Rationale: Key term definitionconsumerism.
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3-263 CONSUMERISM KNOWLEDGE
Consumerism refers to
a. a movement of conspicuous consumption that began when the World War II ended.
b. conducting business in a way that protects the natural environment while making economic
progress.
c. a collaborative effort between buyers and sellers to create an exchange where each benefit.
d. the recognition of the need for organizations to improve the state of people, the planet, and
profit simultaneously if they are to achieve sustainable, long-term growth.
e. the grassroots movement started in the 1960s to increase the influence, power, and rights of
consumers in dealing with institutions.

Rationale: Key term definitionconsumerism.
3-264 CONSUMERISM APPLICATION
In the 1960s, President Kennedy developed what is known as the Consumer Bill of Rights. This
legislation was developed to protect consumers from unscrupulous marketers and guaranteed
consumers four fundamental rights, including the right to be informed, the right to choose, the
right to be protected, and the right to be heard. More recently, the Children's Online Privacy
Protection Act (1998) has been passed. Many laws such as these are the results of __________.
a. marketing ethics
b. self-regulation
c. cause marketing
d. consumerism
e. Naderism

Rationale: Many laws and regulations developed to increase the power, influence, and rights of
consumers dealing with marketers and organizations in general are a result of consumerism.
3-265 CONSUMERISM APPLICATION
Each year, the U.S. Army shoots an estimated 200 million rounds of lead bullets at target practice
areas across the United States. Pentagon officials, in response to environmentalists concerns
over lead poisoning in the soil, have invested over $12 million to develop an environmentally safe
tungsten bullet. This is an example of one of the outcomes of __________.
a. marketing ethics
b. consumerism
c. cause marketing
d. self-regulation
e. Naderism

Rationale: Environmental abuse is a hotly debated consumerism issue.
3-266 TRADEMARKS COMPREHENSION
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The two major purposes for any trademark statute are to
a. (1) protect the investment of energy, time, and money that the owner of a trademark has
invested in the development of the product and (2) guarantee the owner of the trademark
complete rights to his work for the duration of the owners lifetime.
b. (1) protect the inventors individual rights and (2) provide the company with the maximum
profits possible.
c. protect the rights of the inventor both here and abroad.
d. (1) protect the public so they will get the product it wants and asks for and (2) protect the
government so it will be able to collect its fair share of taxes from the revenues generated.
e. (1) protect the public so they will get the product it wants and asks for and (2) protect the
investment of energy, time, and money that the owner of a trademark has invested in the
development of the product.

Rationale: A Senate report states that the purposes of a trademark are twofold: (1) protect the
public so it is confident that, in purchasing a product bearing a particular trademark which it
favorably knows, it will get the product which it asks for and wants to get and (2) protect the
owner of a trademark, who has spent energy, time, and money in presenting to the public the
product, from misappropriation in pirates and cheats.
3-267 LANHAM ACT KNOWLEDGE
The Lanham Act (1946)

a. prevents someone from using a trademark on a noncompeting product.
b. protects the consumer from product defects.
c. provides for registration of a companys trademarks.
d. allows a company to secure rights to a name before its actual use.
e. facilitates the protection of U.S. trademark rights throughout the world.

Rationale: Text term definitionLanham Act.
3-268 LANHAM ACT COMPREHENSION
The __________ provides for registration of a companys trademark, such as the Nike swoosh.
a. Lanham Act
b. Patent Act
c. Clayton Act
d. Sherman Antitrust Act
e. Miller-Tydings Act

Rationale: Text term definitionLanham Act.
The Lanham Act cannot protect the rights to a trademark if

a. the company is accused of violating the Sherman Antitrust Act.
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b. the product patent is less than 17 years old.
c. the word, name, or symbol has become generic.
d. the statute of limitations has run out.
e. the government refuses to enforce violations.

Rationale: A company can lose its trademark under the Lanham Act if its products trademark
becomes generic, which means that it has become merely a commonly used descriptive word for
the product, such as elevator and aspirin.
Registration under the Lanham Act provides important advantages to a trademark owner that has
used the trademark in interstate or foreign commerce, but it does not
a. allow a trademark to be used for more than 83 years.
b. provide reciprocity with foreign firms allowing their trademarks to be honored here.
c. prevent other firms from obtaining similar trademarks for significant improvements of the
original product.
d. guarantee protection under the Trademark Law Revision Act.
e. confer ownership.

Rationale: Registration under the Lanham Act provides important advantages to a trademark
owner that has used the trademark in interstate or foreign commerce, but it does not confer
ownership.
Generics Photo
In the Generics photo above, the manufacturers of these products are concerned that their brand
names will become generic. The legislation most likely to address this issue is the __________.
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a. Sherman Antitrust Act
b. Patent Act
c. Clayton Act
d. Lanham Act
e. Miller-Tydings Act

Rationale: The Lanham Act (1946) provides for registration of a companys trademarks.
Historically, the first user of a trademark in commerce had the exclusive right to use that
particular word, name, or symbol in its business. Registration under the Lanham Act provides
important advantages to a trademark owner that has used the trademark in interstate or foreign
commerce, but it does not confer ownership. A company can lose its trademark if it becomes
generic, which means that it has primarily come to be merely a common descriptive word for the
product.
3-272 GENERICS APPLICATION
Which of the products in the Generics photo above is least likely, at this point in time, to be
concerned with having its name become generic?
a. Kleenex because most people just ask for a tissue.
b. Jell-O because there are not other gelatin desserts.
c. All Sport Disk because most people call it a Frisbee.
d. Q-Tips because most people call it a cotton swab.
e. Vaseline because most people refer to it as petroleum jelly.

Rationale: The Lanham Act (1946) provides for registration of a companys trademarks.
Historically, the first user of a trademark in commerce had the exclusive right to use that
particular word, name, or symbol in its business. Registration under the Lanham Act provides
important advantages to a trademark owner that has used the trademark in interstate or foreign
commerce, but it does not confer ownership. A company can lose its trademark if it becomes
generic, which means that it has primarily come to be merely a common descriptive word for the
product. Kleenex, Jell-O, Q-Tips, and Vaseline are almost synonymous with the product itself.
Coca-Cola hired brand police to make sure that the Coca-Cola brand name and logo are not
used without written permission. Why is Coca-Cola so rigorous in protecting its trademark?
a. Coca-Cola risks losing its generic status.
b. In order to maintain the use of its widely recognizable trademark, Coca-Cola must prevent the
name from becoming generic.
c. The Robinson-Patman Act conferred ownership of the Coke name and other trademarked
property to the Coca-Cola Company.
d. The government will file charges for trademark infringement only if the owner of the
trademark has documented proof of wrongdoing.
e. By protecting its trademark, Coca-Cola is protecting the entire soft drink industry from
indirect competition.
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Rationale: A company can lose its trademark if it becomes generic, which means that it has
primarily come to be merely a common descriptive word for the product.
In 2008, Apple filed for and received approval from the U.S. Patent and Trademark Office to
trademark the App Store name to describe a service that allows its iPhone and iPad customers
to purchase and download applications, video games, and other software. Over the past few
years, Apple has invested millions in advertising and publicity and customers have purchased
millions of dollars of software from its App Store. However, Amazon.com and Microsoft both
claim that Apple does not have exclusive rights to the name because other firms use it to describe
their online storefronts where consumers can obtain software for smartphones and tablet devices.
Apple has filed lawsuits against these firms, particularly Amazon, for violating its trademark.
Why should Apple rigorously protect its App Store trademark?
a. Apple risks losing its status as a generic smartphone and tablet device manufacturer.
b. In order to maintain the use of its widely recognizable trademark, Apple must prevent the
name from becoming generic.
c. The Robinson-Patman Act conferred ownership of the App Store name and other
trademarked property to Apple and/or Microsoft.
d. The government will file charges for trademark infringement only if Apple, the owner of the
trademark, has documented proof of wrongdoing by Amazon.
e. By protecting its trademark, Apple is protecting the entire smartphone and tablet device
industries from indirect competition.

Rationale: A company can lose its trademark if it becomes generic, which means that it has
primarily come to be merely a common descriptive word for the product or service. As a result, a
firm like Apple must rigorously protect its trademarks.
3-275 TRADEMARK LAW REVISION ACT KNOWLEDGE
In 1988, the Trademark Law Revision Act resulted in a major change to the Lanham Act. The
change allows
a. a company to secure rights to a name before its actual use by declaring an intent to use the
name.
b. products to use generic terms as trademarks.
c. inventors to apply for use of Internet domain names.
d. a company to declare trademark ownership in foreign markets.
e. products to use more than one trademark.

Rationale: Text term definitionTrademark Law Revision Act. This legislation resulted in a
major change to the Lanham Act, allowing a company to secure rights to a name before actual use
by declaring an intent to use the name.
The Trademark Law Revision Act (1988) addresses the right of a company to
a. sell to the highest bidder a trademark that has expired or been retired.
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b. incorporate an unlimited number of new products under the same trademark.
c. secure rights to a name before the product is even in use.
d. alter its trademark in terms of color, design, or slogan without having to reapply for a new
trademark.
e. protects U.S. trademark rights throughout the world.

Rationale: Text term definitionTrademark Law Revision Act. This legislation resulted in a
major change to the Lanham Act, allowing a company to secure rights to a name before its actual
use by declaring an intent to use the name.
The Trademark Law Revision Act (1988)

a. prevents someone from using a trademark on a noncompeting product.
b. provides for registration of a companys trademarks.
c. protects only the consumer.
d. allows a company to secure rights to a name before its actual use.
e. facilitates the protection of U.S. trademark rights throughout the world.

Rationale: Text term definitionTrademark Law Revision Act resulted in a major change to the
Lanham Act, allowing a company to secure rights to a name before actual use by declaring an
intent to use the name.
3-278 MADRID PROTOCOL KNOWLEDGE
The Madrid Protocol is

a. a method of registering a trademark with language adaptations for different countries.
b. the act of collectively seeking a trademark for an entire industry.
c. a form of national branding, i.e., Chilean Sea Bass.
d. a treaty that facilitates the protection of U.S. trademark rights throughout the world.
e. an agreement to stop piracy of noncopyrighted products abroad.

Rationale: Text term definitionMadrid Protocol.
3-279 DOPPELGANGERS KNOWLEDGE
In marketing, doppelgangers refer to

a. ads or logos that look similar to a familiar brand that have been altered by digital technology.
b. products that are so similar to one another in form and function that trademarks cannot be
issued to one of them.
c. products that are almost identical, but are registered independently with different trademarks
in different countries.
d. two trademark symbols that closely resemble one another in appearance.
e. two distinctly different products (and product classes) whose colors are so similar to one
another that customers believe both products are owned by the same company.
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Rationale: Doppelgangers are ads or logos that look similar to a familiar brand that have been
altered by digital technology.
3-280 DOPPELGANGERS COMPREHENSION
The primary purpose of a doppelganger is to

a. make people laugh, which subconsciously makes them desire the real product.
b. undermine the integrity of an existing brand.
c. make the brand generic.
d. increase productivity of advertising.
e. protect trademark infringement by competing firms in the same industry.

Rationale: Doppelgangers are ads or logos that look similar to a familiar brand that have been
altered by digital technology to undermine the integrity of an existing brand.
3-281 TRADEMARKS COMPREHENSION
A trademark is a device that can take almost any form, as long as it is capable of identifying and
distinguishing specific products or services. Owens-Corning Fiberglas Corporations trademark
is an example of a product that is protected by
a. combination of letters and designs.
b. product shape.
c. picture.
d. logo.
e. color.

Rationale: Based on a recent U.S. Supreme Court ruling, companies can obtain trademarks for
colors associated with their products because over time, consumers associate a particular color
with a specific brand. Consumers associate Owens-Corning Fiberglas Corporations insulation
with the color pink.
3-282 FEDERAL DILUTION ACT KNOWLEDGE
The Federal Dilution Act

a. prevents someone from using a trademark on a non-competing product.
b. provides for registration of a companys trademarks.
c. allows a company to secure rights to a name before its actual use.
d. facilitates the protection of U.S. trademark rights throughout the world.
e. allows language adaptations for trademarks in different parts of the world.

Rationale: Text term definitionFederal Dilution Act is used to prevent someone from using a
trademark on a noncompeting product (e.g., Cadillac brushes).
3-283 PRICING-RELATED LEGISLATION COMPREHENSION
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The pricing component of the marketing mix is the focus of regulation from two perspectives:
a. quantity discounts and price gouging.
b. price fixing and price discounting.
c. promotional allowances and trade allowances.
d. selling and bartering.
e. competitive pricing and illegal bartering.

Rationale: The pricing component of the marketing mix is the focus on regulation from two
perspectives: price fixing and price discounting. Although the Sherman Antitrust Act did not
outlaw price fixing, the courts view this behavior as per se illegal (per se means through or of
itself), which means the courts see price fixing itself as illegal. Certain forms of price
discounting are allowed.
3-284 PRICE FIXING COMPREHENSION
The courts see price fixing as per se illegal, which means the courts
a. see price fixing itself as illegal.
b. dont view price fixing as illegal.
c. only consider price fixing to be illegal if a company is sued.
d. compare the company behavior to behavior typical in its industry.
e. view price fixing as illegal only if it causes destructive competition.

Rationale: Although the Sherman Antitrust Act did not outlaw price fixing, the courts view this
behavior as per se illegal (per se means through or of itself), which means the courts see price
fixing itself as illegal.
3-285 EXCLUSIVE DEALING KNOWLEDGE
An arrangement a manufacturer makes with a reseller to handle only its products and not those of
competitors is referred to as a(n) __________.
a. tying arrangement
b. requirement contracting
c. exclusive dealing
d. territorial dealership contracting
e. selective distribution

Rationale: Text term definitionexclusive dealing.
3-286 EXCLUSIVE DEALING APPLICATION
If a major food company offered supermarket chains special prices and incentives to carry its
brand of frozen vegetables and not to carry competing brands, it could be accused of __________
and would be subject to prosecution if its actions substantially reduce competition.
a. requirement contracting
b. a tying arrangement
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c. a territorial infringement
d. a monopolistic practice
e. exclusive dealing

Rationale: Exclusive dealing is an arrangement a manufacturer makes with a reseller to handle
only its products and not those of its competitors.
3-287 REQUIREMENT CONTRACTS KNOWLEDGE
__________ demand buyers purchase all or part of their needs for a product from a particular
seller for a period of time.
a. Exclusive deals
b. Requirement contracts
c. Tying arrangements
d. Territorial dealership contracts
e. Selective promotion contracts

Rationale: Text term definitionrequirement contracts.
3-288 EXCLUSIVE TERRITORIAL DISTRIBUTORSHIPS KNOWLEDGE
A situation in which a manufacturer grants a distributor the sole rights to sell a product in a
specific geographic area is called __________.
a. exclusive dealing
b. a tying arrangement
c. a selective promotion contract
d. an exclusive territorial distributorship
e. a requirement contract

Rationale: Text term definitionexclusive territorial distributorship.
3-289 EXCLUSIVE TERRITORIAL DISTRIBUTORSHIPS APPLICATION
The agent for John Grishams newest novel has sold its rights to a British publisher for sales in
the United Kingdom and Ireland, to a U.S. publisher for the United States and Canada, and to an
Australian publisher for Australia and New Zealand. This is an example of ________.
b. an exclusive territorial distributorship
c. a tying arrangement
d. a geographic compact

Rationale: Exclusive territorial distributorships involve a manufacturer granting a distributor the
sole rights to sell a product in a specific geographical area. Copyright law gives Grisham, the
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author, the exclusive right to print his book. His agent has granted distributors (publishers in the
three countries) the sole rights to sell the book in these specific geographical areas.
3-290 TYING ARRANGEMENT KNOWLEDGE
A sellers requirement that the purchaser of one product also buy another item in the line is called
__________.
b. a requirement contract
d. an exclusive territorial distributorship
e. a selective promotion contract

Rationale: Text term definitiontying arrangement.
3-291 TYING ARRANGEMENT APPLICATION
A software manufacturer will only sell its popular line of Harry Potter software games to retailers
who will also carry its less successful Star Wars: The Prequel software game. This is an example
of a(n) __________.
b. requirement contract
c. exclusive territorial distributorship
d. tying arrangement
e. selective promotion contract

Rationale: In tying arrangements, a seller requires the purchasers of one product to also buy
another item in the line.
A paint manufacturer will sell a retail paint outlet its paint only if the retailer also buys the
manufacturers line of brushes and accessories. This is an example of __________.
b. a requirement contract
c. an exclusive territorial distributorship
d. a selective promotion contract
e. a tying arrangement

Rationale: In tying arrangements, a seller requires the purchaser of one product to also buy
another item in the line.
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Until federal laws and regulations were clarified to cover such cases, audio electronic component
manufacturers required that retailers who wanted to carry their amplifiers also carry their
speakers and sell their customers a system of same-brand components. This distribution
strategy, called __________, may be illegal.
a. bait and switch
b. caveat emptor
d. double dealing
e. per se

Rationale: In tying arrangements, a seller requires the purchaser of one product to also buy
another item in the line. These contracts may be illegal when the seller has such economic power
in the tying product that the seller can restrain trade in the tied product.
3-294 FEDERAL TRADE COMMISSION ACT COMPREHENSION
Which of the following is an example of advertising- and promotion-related legislation?

a. the Robinson-Patman Act
b. the Consumer Product Safety Act
c. the Lanham Act
d. the Federal Trade Commission Act
e. the Fair Packaging and Labeling Act

Rationale: The Federal Trade Commission Act established the Federal Trade Commission,
which closely monitors promotion and advertising. The FTC has been concerned with deceptive
or misleading advertising and unfair business practices.
3-295 FEDERAL TRADE COMMISSION ACT COMPREHENSION
The __________ can require a company to spend money on corrective advertising to rectify
previous misleading ads.
a. Food and Drug Administration
b. U.S. Department of Justice
c. Federal Trade Commission
d. Better Business Bureau
e. American Marketing Association

Rationale: With corrective advertising, the Federal Trade Commission (FTC) can require a
company to spend money on advertising to correct previous misleading ads.
3-296 CEASE AND DESIST ORDER KNOWLEDGE
Which of the following is an action the FTC can take to stop a company from continuing an
unfair trade practice?
a. corrective advertising
b. a cease and desist order
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c. a private ruling
d. a consent degree
e. a stay

Rationale: Text term definitioncease and desist order.
3-297 CORRECTIVE ADVERTISING KNOWLEDGE
Which of the following is an action the FTC can take to require a company to spend money on
advertising to rectify previous misleading ads?
a. corrective advertising
b. a cease and desist order
c. an advertising injunction
d. a truth in advertising order
e. comparative advertising

Rationale: Text term definitioncorrective advertising.
3-298 CORRECTIVE ADVERTISING APPLICATION
There are many diet aids on the market. They promise immediate weight loss without exercise or
a change in diet. Each is accompanied by a testimonial from a satisfied user. If you pay close
attention, you will notice that each ad also contains the statement, Results may vary. Most
likely, this statement is included to prevent the FTC from requiring the dietary aid distributor
from having to
a. engage in self-regulation.
b. engage in comparative advertising.
c. issue an advertising injunction.
d. guarantee truth-in-advertising.
e. run corrective advertising.

Rationale: Corrective advertising is an FTC action that requires a company to spend money on
advertising to correct previous misleading ads. The ads with the statement, Results may vary,
do not promise that everyone will have the same results, which reduces the likelihood they will be
found to be misleading.
3-299 CORRECTIVE ADVERTISING APPLICATION
For 18 months, Warner-Lambert Co. was required to include the following statement in all
television advertisements for Listerine: Listerine will not help prevent colds or sore throats or
lessen their severity. The FTC imposed this requirement because previous advertising had
caused consumers to believe Listerine was effective against colds. This is an example of the FTC
action of
a. corrective advertising.
b. deceptive advertising.
c. unethical advertising.
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d. cease-and-desist advertising.
e. self-regulation.

Rationale: Corrective advertising is an FTC action that requires a company to spend money on
advertising to correct previous misleading ads. The FTC found that Listerine had been
misleading advertised as a cold remedy.
3-300 DECEPTIVE ADVERTISING COMPREHENSION
It had been the Campbell Soup Co.s practice to insert clear glass marbles into the bottom of soup
containers used in print advertisements to bring the soup ingredients (e.g., noodles or chicken) to
the surface, thus misrepresenting the amount of solid ingredients in the soup. This was an
example of
a. corrective advertising.
b. bait-and-switch advertising.
c. deceptive advertising.
d. cease-and-insist advertising.
e. self-regulation.

Rationale: Advertising is closely monitored by the Federal Trade Commission to prevent
deceptive or misleading advertising. Campbells practiced deceptive advertising by using
marbles to misrepresent the amount of solid ingredients in the soup.
3-301 ADVERTISING AND PROMOTION-RELATED LEGISLATION COMPREHENSION
The Deceptive Mail Prevention and Enforcement Act provides specifications for direct mail
sweepstakes, such as requiring the statement
a. A guaranteed winner in every state.
b. You cant win if you dont play.
c. You may never get another chance to win.
d. No purchase necessary to win.
e. There is no better time to play.

Rationale: The Deceptive Mail Prevention and Enforcement Act provides specifications for
direct mail sweepstakes, such as the requirement that the statement No purchase is necessary to
enter is displayed in the mailing, in the rules, and on the entry form.
3-302 DO NOT CALL REGISTRY KNOWLEDGE
The purpose of the national Do Not Call Registry is to

a. prevent manufacturers from being deluged with customer complaints during business hours.
b. separate listed from unlisted phone numbers in telephone books and online information
directories.
c. divert enquiries from manufacturers to their suppliers that are ultimately responsible for
product distribution.
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d. remove identification codes from mobile phones and tablet devices that would identify them
as customers as well as their locations.
e. protect consumers from unsolicited telemarketing calls.

Rationale: Text term definitionDo Not Call Registry, which is a list of consumer phone
numbers of people who do not want to receive unsolicited telemarketing calls.
3-303 ADVERTISING AND PROMOTION-RELATED LEGISLATION COMPREHENSION
Recent legislation, such as the Childrens Online Privacy Protection Act and the Controlling the
Assault of Non-solicited Pornography and Marketing (CAN-SPAM) Act, are reforms that are
a. promotion-related.
b. price-related.
c. distribution-related.
d. self-regulated.
e. product-related.

Rationale: The forms of regulation are designed to restrain information collection and unsolicited
e-mail promotions and specify simple opt-out processes on the Internet.
3-304 SELF-REGULATION KNOWLEDGE
An alternative to government control where an industry attempts to police itself is referred to as

a. consumer protection.
b. self-regulation.
c. industry accountability.
d. voluntary compliance.
e. government-imposed ethical policing.

Rationale: Key term definitionself-regulation.
3-305 SELF-REGULATION KNOWLEDGE
Self-regulation refers to
a. governmental guidelines that suggests what is legal and ethical and what is not.
b. a self-imposed set of rules set by a specific industry watchdog group that dictates legal and
ethical behaviors.
c. an alternative to government control where an industry attempts to police itself.
d. voluntary compliance to governmental rules and regulations set for a specific industry.
e. a set of rules created and enforced by the FTC to which all members of an industry
voluntarily agree to comply.

Rationale: Key term definitionself-regulation.
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3-306 SELF-REGULATION COMPREHENSION
One of the problems associated with self-regulation is

a. the lack of a written code of ethics by firms in the industry.
b. the intrusive enforcement by the FTC.
c. the opportunity corporate for espionage by competitors.
d. the absence of an industry association with the power to use moral suasion.
e. noncompliance by members.

Rationale: The problems associated with self-regulation include noncompliance by members and
enforcement.
3-307 BETTER BUSINESS BUREAU COMPREHENSION
The best-known self-regulatory group is the __________, which is a voluntary alliance of

companies whose goal is to help maintain fair practices.
a. U.S. Department of Justice
b. National Chamber of Commerce
c. Better Business Bureau
d. Federal Trade Commission
e. National Federation of Independent Business

Rationale: The best-known self-regulatory group is the Better Business Bureau. Although the
BBB has no legal power, it does try to use moral suasion to get members to comply with its
standards.
The Better Business Bureau

a. is the best-known federal agency involved in monitoring self-regulation of competing
businesses.
b. has a great deal of legal power to force a company to comply with its regulations.
c. is not involved with Internet commerce.
d. is a voluntary alliance of companies whose goal is to help maintain fair practices.
e. oversees advertising that runs on television programs.

Rationale: The BBB is the best-known self-regulatory group whose goal is to help maintain fair
business practices. It is not a federal agency, has no legal power, and it has recently established
guidelines for Internet selling. The television industry has its own self-regulating board.
The Better Business Bureau (BBB) tries to use __________ to get its members to comply with its
standards of business conduct.
a. the FTC
b. industry trade associations
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c. moral suasion
d. the courts
e. competitors
Answer: c Page(s): 83-84 LO: 6 AACSB: Ethics QD: Medium

Rationale: An alternative to government control is self-regulation, where an industry attempts to
police itself. The best-known self-regulation group is the BBB, which uses moral suasion to get
members to comply with its standards in order to maintain fair practices.
When a firm or business displays the Better Business Bureau (BBB) Accredited Business logo on
its store window or website, it assures consumers that
a. the companys products comply with current safety standards set by the Consumer Product
Safety Commission.
b. it is a member of a voluntary alliance of companies whose goal is to help maintain fair
business practices.
c. the firm has met the standards for qualification as a green marketing firm.
d. the firm takes a proactive stance on diversity in the workplace.
e. the company incorporates sustainable business practices.
Answer: b Page(s): 83-84 LO: 6 AACSB: Ethics QD: Medium

Rationale: The best-known self-regulatory group is the Better Business Bureau (BBB). This
agency is a voluntary alliance of companies whose goal is to help maintain fair practices.
Although the BBB has no legal power, it does try to use moral suasion to get members to
comply with its standards.
One of the primary uses of the BBB Accredited Business logo is to

a. find the best price for a product or service among member firms.
b. facilitate local businesses that practice sustainability.
c. create a social network forum whereby firms and their customers can have an open dialogue.
d. provide objective consumer protection for Internet users.
e. create a working relationship among businesses with similar core values.
Answer: d Page(s): 83-84 LO: 6 AACSB: Ethics QD: Medium

Rationale: BBB Online is a reliability assurance program recently developed by BBB that
provides objective consumer protection for Internet shoppers.
Before displaying the BBB Online logo on their websites, participating companies must: (1) be
members of their local Better Business Bureau; (2) have been in business for at least one year; (3)
have agreed to participate in BBBs advertising self-regulation program; (4) agree to abide by the
BBB Code of Business Practices; and (5)
a. actively recruit other firms in their industry to become BBB members.
b. guarantee their customers the best quality, price, and service at all times.
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c. use the products and services of fellow BBB members whenever possible.
d. pay a yearly registration fee based on a sliding scale of the previous years profits.
e. work with the BBB to resolve consumer disputes that arise over goods or services promoted
or advertised on their site.
Answer: e Page(s): 83-84 LO: 6 AACSB: Ethics QD: Medium

Rationale: Before displaying the BBB Online logo shown in Figure 3-6 on their websites,
participating companies must: (1) be members of their local Better Business Bureau; (2) have
been in business for at least one year; (3) have agreed to participate in BBBs advertising self-
regulation program; (4) agree to abide by the BBB Code of Business Practices; and (5) work with
the BBB to resolve consumer disputes that arise over goods or services promoted or advertised on
their site.
3-313 VIDEO CASE 3: GEEK SQUAD KNOWLEDGE
Geek Squad set out to provide timely and effective help with all computing needs regardless of
the make, model, or place of purchase. Employees were called agents and wore uniforms with
a Geek Squad logo to create a humble attitude that was not threatening to customers. Agents
drove a black-and-white
a. Chrysler Neon.
b. Ford Focus.
c. Volkswagen Beetle.
d. Dodge Caravan.
e. Toyota Prius.

Rationale: The Geek Squad agents drove black-and-white Volkswagen Beetles.
3-314 VIDEO CASE 3: GEEK SQUAD KNOWLEDGE
In 2002, Geek Squad was purchased by leading consumer electronics retailer __________.
a. Frys Electronics.
b. Best Buy.
c. Circuit City.
d. Micro Center.
e. Ultimate Electronics.

Rationale: Geek Squad was purchased by Best Buy in 2002 for about $3 million. Best Buy
research revealed that consumers were beginning to see service as a critical element of an
electronics purchase.
3-315 VIDEO CASE 3: GEEK SQUAD COMPREHENSION
Which of the following statements regarding the Geek Squad is MOST accurate?
a. Men in need of help from the Geek squad do not want women Geeks to help them because
it makes them feel inferior.
b. The Geek Squad has exclusive rights to the home-help segment thanks to their relationship
with Best Buy.
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c. The Geek Squad can only assist customers who purchase Dell computers.
d. The need for the Geek Squad was the result of many environmental factors, not simply a need
for technological knowledge.
e. Although the Geek Squad brought more customers into Best Buy, the rate of product returns
has only dropped a negligible amount.

Rationale: Many changes in the environment occurred to create the need for Geek Squads
services. The most obvious changes may be related to technology. Another environmental
change that contributes to the popularity of Geek Squad is the change in social factors such as
demographics and culture. Competition, economics, and the regulatory environment have also
had a big influence on Geek Squad.
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SHORT ESSAY QUESTIONS
What is environmental scanning? How is it used in marketing?
Answer:
Environmental scanning is a process of acquiring information about events occurring outside an
organization to identify and interpret potential trends. The objective is to determine if these
trends will pose specific opportunities or threats to be managed. The five environmental forces
that businesses must monitor are: social, economic, technological, competitive, and regulatory.
By identifying trends related to each of these forces, businesses can develop and maintain
successful marketing programs that can lead them to take appropriate marketing actions.
Page(s): 64 LO: 1 AACSB: Analytic QD: Medium
3-317 ENVIRONMENTAL FORCES COMPREHENSION
List the five environmental forces that have an impact on an organization as well as its suppliers
and customers. Provide examples of factors that might be examined as part of environmental
scanning for each of those forces.
Answer:
The following environmental forces have an impact on the organization: (1) Social
demographic shifts, and cultural changes; (2) Economicmacroeconomic conditions and
consumer income; (3) Technologicalchanging technology, technologys impact on customer
value, and electronic business technologies; (4) Competitivealternative forms of competition
and small businesses; and (5) Regulatorylaws protecting competition, laws affecting marketing
mix actions, and self-regulation. See Figure 3-1 in the textbook.
Page(s): 64-65 LO: 1 AACSB: Analytic QD: Medium
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Figure 3-1
3-318 ENVIRONMENTAL FORCES COMPREHENSION
Using Figure 3-1 above, identify and explain the five environmental forces (A, B, C, D,
and E) that affect an organization.
Answer:
Environmental trends typically arise from five sources: (1) social, (2) economic, (3)
technological, (4) competitive, and (5) regulatory. Social forces (A) include the demographic
characteristics of the population and its values. Economic forces (B) include the income,
expenditures, and resources that affect the cost of running a business and household.
Technological forces (C) include the inventions or innovations from applied science or
engineering research. Competitive forces (D) include the alternative firms that could provide a
product to satisfy a specific markets needs. Regulatory forces (E) include the restrictions state
and federal laws place on business with regard to the conduct of its activities.
3-319 ENVIRONMENTAL FORCES APPLICATION
Give an example of how each of the five environmental forces has or can affect the marketing
environment.
Answer:
This question can be made a little more challenging by asking students to provide an example of
each of the environmental forces. Student answers will vary, but may include: (1) Socialto
adapt to the new marketplace in which Hispanics, African Americans, and Asians will spend
$1.20 trillion, $1.13 trillion, and $670 billion each year respectively; (2) Economicas consumer
discretionary income increases, so does spending on pleasure and travel; (3) Technological
increasing popularity of Mobile TV; (4) Competitivethe retailers that only operate on the
Internet are competing with retailers that only operate offline who are competing with retailers
that have both an offline and an online presence as well concern about new forms of competition;
and (5) Regulatoryconcerns about privacy, and protecting intellectual property.
Page(s): 64-84 LO: 1 AACSB: Analytic QD: Hard
What is environmental scanning? Using the five environmental forces that affect organizations,
describe considerations for conducting environmental scanning for a new model of automobile.
Answer:
Environmental scanning involves the acquisition of information about events occurring outside an
organization to identify and interpret potential trends that might present opportunities or threats to
be managed by the firm. In the case of a new model automobile, environmental forces can
include the following: (1) Socialan aging American population, more money in the hands of
younger people, and women making more auto-buying decisions. (2) Economiccorporate
downsizing, higher wages for laborers, inflation, and the current recession. (3) Technological
more advanced safety engineering, battery technology development, and new materials to create
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lighter weight cars. (4) Competitivenew models by other manufacturers, European prestige,
Japanese engineering, and lower prices made possible by cheaper foreign labor. (5) Regulatory
government controls of imports, laws affecting highway safety, and consumerism.
How would the following environmental trends influence the success of a manufacturer of
televisions, DVD players, and related equipment: (1) growing number of older Americans; (2)
population shifts to remote suburbs and small towns; (3) increase in per capita income and
standard of living; and (4) increased use of various types of communication technology.
Answer:
All four trends are relevant to growing sales of these home entertainment products. Older
Americans will have more leisure time in retirement to spend at home, some of which would be
spent watching more television programs. People of all ages living far from centers where they
can attend live sports, music, and other events are likely to watch such entertainment on
television. Increased incomes and communication technology will make it possible for these
consumers to buy higher-quality equipment to enjoy better reception and more features such as
HDTV. Increased use of various types of communication technologies have led and will lead to
incorporating them into new TV models. Consumers can make telephone calls through their TVs,
upload photos from digital cameras, etc.
Which generational cohort is part of the graying of America? Describe the interests and
lifestyles of this cohort and why it is important to marketers.
Answer:
Today, there are approximately 40 million people 65 and older. By 2030, this age group will
include more than 72 million people, or almost 20 percent of the population. A major reason for
the graying of America is that the baby boomersthe generation of children born between 1946
and 1964are growing older. As these 76 million boomers have aged, their participation in the
work force has made them the wealthiest generation in U.S. history, accounting for an estimated
50 percent of all consumer spending. This has resulted in making them an important consumer
market. In the future, companies that target boomers will need to respond to their interests in
health, fitness, retirement housing, financial planning, and physical appearance.
Which generational cohort is also known as the baby bust? Describe the interests and lifestyles of
this cohort and explain why it is important to marketers.
Answer:
The baby boom cohort is followed by Generation X, which includes the 15 percent of the
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population born between 1965 and 1976. This period is also known as the baby bust because the
number of children born each year was declining. This is a generation of consumers who are self-
reliant, supportive of racial and ethnic diversity, and better educated than any previous
generation. They are not prone to extravagance and are likely to pursue lifestyles that are a blend
of caution, pragmatism, and traditionalism. They are collaborative decision makers. In terms of
net worth, Generation X is the first generation to have less than the previous generation. As baby
boomers move toward retirement, Generation X is becoming a dominant force in many markets.
Which generational cohort is often referred to as the echo-boom or baby boomlet? Describe the
interests and lifestyles of this cohort and explain why it is important to marketers.
Answer:
The generational cohort labeled Generation Y includes the 72 million Americans born between
1977 and 1994. This was a period of increasing births, which resulted from baby boomers having
children, and it is often referred to as the echo-boom or baby boomlet. Generation Y exerts
influence on music, sports, computers, video games, and especially mobile phones. Generation Y
members are interested in distinctive, memorable, and personal experiences and are very adept at
managing their lives to create a worklife balance. They are strong-willed, passionate about the
environment, and optimistic. This is also a group that is attracted to purposeful work where they
have control.
3-325 THE AMERICAN HOUSEHOLD COMPREHENSION
How has the structure of the American household changed since 1960? In your answer, define
the blended family and give an example of a way in which marketers have targeted that group.
Answer:
In 1960, 75 percent of all households consisted of married couples. Today, that type of
household is just 50 percent of the population. Only 21 percent of households are married
couples with children, and only 10 percent are households with working fathers and stay-at-home
moms. Some of the fastest growing types of households are those with an adult child who has
moved back home with his or her parents and those with unmarried partners. These two
categories included 5.5 million individuals and 7.5 million couples, respectively, in 2010.
Analysis by the U.S. Bureau of the Census indicates that young people are postponing marriage
and parenthood and that the increase in households with unmarried partners reflects that pooling
resources by moving in together may be one method of coping with extended unemployment.
Businesses are adjusting to the changes because they have implications for purchases related to
weddings, homes, baby and child products, and many other industries. The increase in
cohabitation (households with unmarried partners) may be one reason the national divorce rate
has declined during recent years. Even so, the likelihood that a couple will divorce exceeds 40
percent, and divorce among baby boomerswhat is being called gray divorceappears to be
increasing. The majority of divorced people eventually remarry, which has created the blended
family, one formed by merging two previously separated units into a single household. Today,
one of every three Americans is a stepparent, stepchild, stepsibling, or some other member of a
blended family. Hallmark Cards, Inc., now has specially designed cards and verses for blended
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families to cater to these consumers.
3-326 RACIAL AND ETHNIC DIVERSITY COMPREHENSION
Explain how the racial and ethnic composition of the U.S. is expected to change between 2010
and 2030.
Answer:
Between 2010 and 2030, the Hispanic population will grow from 49 million to more than 85
million, or 23 percent of the population. The number of Asians in the United States will almost
double to 23 million, or 6 percent of the population, and the African American population will be
approximately 48 million, or 13 percent of the population. Overall, the trends in the composition
of the population suggest that the U.S. market will no longer be dominated by one group and that
non-Hispanic Caucasians will be a declining majority over the next two decades.
3-327 CHANGING ATTITUDES OF MEN AND WOMEN COMPREHENSION
How have businesses responded to the changing roles of men and women?
Answer:
The changing roles of men and women have been important to marketers in suggesting new
product opportunities. Many U.S. companies that had a consumer base that was primarily men or
primarily women in the past are preparing for growth from the other gender. Grocery stores, car
dealers, investment services, and many others hope to appeal to both groups in the future. In fact,
todays Generation Y represents the first generation of women who have no collective memory of
the dramatic changes we have undergone.
3-328 CHANGING ATTITUDES OF MEN AND WOMEN COMPREHENSION
What factors contributed to changes in attitudes of women during the past thirty years?
Answer:
Several factors have contributed to the shift in attitudes: (1) many young women had career
mothers who provided a reference point for lifestyle choices; (2) an increased participation in
organized sports eliminated one of the most visible inequalities in opportunities for women; and
(3) the Internet has provided exposure to the marketplace through a mechanism that makes
gender, race, and ethnicity invisible.
3-329 ECONOMIC FORCES COMPREHENSION
How do the macroeconomic conditions as well as consumer income affect marketing?
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Answer:
The economy pertains to the income, expenditures, and resources that affect the cost of running a
business and household. Of particular concern at the macroeconomic level is the inflationary or
recessionary state of the economy, whether actual or perceived by consumers or businesses. In an
inflationary economy, the cost to produce and buy products and services escalates as prices
increase. From a marketing standpoint, if prices rise faster than consumer incomes, the number
of items consumers can buy decreases. Recession is a time of declining economic activity.
Businesses decrease production, unemployment rises, and many consumers have less money to
spend. Consumer expectations of an inflationary and recessionary U.S. economy are an
important element of environmental scanning. Consumer spending, which accounts for two-
thirds of the U.S. economic activity, is affected by expectations of the future. Microeconomic
trends in terms of consumer income are also important issues for marketers. Having a product
that meets the needs of consumers may be of little value if they are unable to purchase it. A
consumers ability to buy is related to income, which consists of gross, disposable, and
discretionary components. Gross income is the total amount of money made in one year by a
person, household, or family unit. Disposable income is the money a consumer has left after
paying taxes to use for food, shelter, clothing, and transportation. Discretionary income is the
money that remains after paying for taxes and necessities.
How does technology affect marketing?
Answer:
Technology refers to inventions or innovations from applied science or engineering research.
Technological forces affect marketing because each new wave of innovation can displace existing
products and companies. Advancing technology has a dramatic impact on marketing. For
example, social networks will become social platforms that provide functionality, community,
and identity well beyond the value provided by traditional corporate websites. Natural user
interfaces will utilize gesture, touch, and voice to change the way we interact with and control
computers and complicated machines. Green technologies such as SmartGrid infrastructure,
online energy management, and consumer-generated energy (e.g., home wind turbines) will gain
widespread acceptance among American consumers. Biotechnology is being used to develop
genetically modified crops to create enough food for a growing world population.
How does technology affect customer value?
Answer:
Technological forces affect customer value in three ways. First, customer value is increased
because the cost of technology is plummeting. Second, technology provides value through the
development of new products. Finally, technology can also change existing products and the
ways they are produced, either by (1) recycling products through the manufacturing cycle several
times and/or (2) precycling, efforts by manufacturers and consumers to avoid creating waste. For
manufacturers this includes decreasing the amount of packaging they use, and for consumers it
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means buying products that last longer, avoiding products with excess packaging, and reusing as
much as possible.
3-332 ALTERNATE FORMS OF COMPETITION APPLICATION
There are only three major recording labels in the worldSony Music Entertainment, Time-
Warners Warner Music Group, and GEs Universal Music Group. They are responsible for the
vast majority of music recordings that are made. Harry says that these three music companies
operate as an oligopoly. Maryanne says that they operate as monopolistic competition. Explain
how each came to his or her conclusion. Who is correct?
Answer:
Monopolistic competition occurs when many sellers compete with similar products. Oligopoly
occurs when just a few companies control the majority of industry sales. Since these three
recording labels produce the vast majority of music recordings and each recording is substantially
different (people are fans of particular artists), Harry is correct.
Page(s): 78 LO: 5 AACSB: Analytic QD: Hard
Describe the three components of competition.
Answer:
The three components of competition are: (1) EntryBarriers to entry are business practices or
conditions that make it difficult for new firms to enter the market. Barriers to entry can be in the
form of capital requirements, advertising expenditures, product identity, distribution access, or
switching costs. The higher the expense of the barrier, the more likely it will deter new entrants.
(2) Power of Buyers and SuppliersPowerful buyers exist when they are few in number, there
are low switching costs, or the product represents a significant share of the buyers total costs.
This last factor leads the buyer to exert significant pressure for price competition. A supplier
gains power when the product is critical to the buyer and when it has built up the switching costs.
(3) Existing Competitors and SubstitutesIn slow-growth settings, competition is more heated
for any possible gains in market share. High fixed costs also create competitive pressures for
firms to fill production capacity.
3-334 COMPONENTS OF COMPETITION APPLICATION
Would you expect the music player (MP3) industry to be highly competitive? Provide support
for your answer using the three components of competition.
Answer:
(1) EntryBarriers to entry are business practices or conditions that make it difficult for new
firms to enter the market. Barriers to entry can be in the form of capital requirements, advertising
expenditures, product identity, distribution access, or switching costs. The higher the expense of
the barrier, the more likely it will deter new entrants. The music player industry has become less
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competitive as Apple became the dominant marketer of these MP3 devices. This increases the
difficulty of new firms entering the business and thus decreases the competitiveness in the
industry. (2) Power of Buyers and SuppliersPowerful buyers exist when they are few in
number, there are low switching costs, or the product represents a significant share of the buyers
total costs. This last factor leads the buyer to exert significant pressure for price competition. A
supplier gains power when the product is critical to the buyer and when it has built up the
switching costs. The manufacturers of music players (buyers) are powerful because there are just
a few of them, and switching costs for components are fairly low. This reduces competition in
the industry. (3) Existing Competitors and SubstitutesIn slow-growth settings, competition is
more heated for any possible gains in market share. High fixed costs also create competitive
pressures for firms to fill production capacity. Also, smartphones are now substitutes for music
players. Growth in the music player industry has slowed dramatically as a result, leading to a
much less competitive industry.
Page(s): 79 LO: 5 AACSB: Analytic QD: Hard
Describe the three components of competition.
Answer:
The three components of competition are: (1) EntryBarriers to entry are business practices or
conditions that make it difficult for new firms to enter the market. Barriers to entry can be in the
form of capital requirements, advertising expenditures, product identity, distribution access, or
switching costs. The higher the expense of the barrier, the more likely it will deter new entrants.
(2) Power of Buyers and SuppliersPowerful buyers exist when they are few in number, there
are low switching costs, or the product represents a significant share of the buyers total costs.
This last factor leads the buyer to exert significant pressure for price competition. A supplier
gains power when the product is critical to the buyer and when it has built up the switching costs.
(3) Existing Competitors and SubstitutesIn slow-growth settings, competition is more heated
for any possible gains in market share. High fixed costs also create competitive pressures for
firms to fill production capacity.
3-336 PROTECTING COMPETITION COMPREHENSION
Explain the difference(s) between the Sherman Act, the Clayton Act, and the Robinson-Patman
Act, all of which were enacted to protect competition.
Answer:
The Sherman Antitrust Act (1890) was the first law passed to protect competition. It forbids (1)
contracts, combinations, or conspiracies in restraint of trade and (2) actual monopolies or
attempts to monopolize any part of trade or commerce. Because of vague wording and
government inactivity, there was only one successful case against a company in nine years. In
1914, the Sherman Act was supplemented with the Clayton Act, which forbids certain actions that
are likely to lessen competition, although no actual harm has yet occurred. In 1936, the
Robinson-Patman Act made it unlawful to discriminate in prices charged to different purchasers
of the same product, where the effect may substantially lessen competition or help to create a
monopoly.
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What is the difference between a patent and a copyright?
Answer:
A patent gives inventors of new and novel products the right to exclude others from making,
using, or selling products that infringe the patented invention. A copyright gives the author of a
literary, dramatic, musical, or artistic work the exclusive right to print, perform, or otherwise
copy that work. Copyright is secured automatically when the work is created. However, the
published work should bear an appropriate copyright notice, including the copyright symbol, the
first year of publication, and the name of the copyright owner, and it must be registered under the
federal copyright law. Digital technology has necessitated additional copyright legislation, called
the Digital Millennium Copyright Act (1998), to improve protection of copyrighted digital
products.
3-338 ADVERTISING- AND PROMOTION-RELATED LEGISLATION COMPREHENSION
What actions does the Federal Trade Commission have the power to implement when dealing
with deceptive or misleading advertising and unfair business products?
Answer:
Promotion and advertising are aspects of marketing closely monitored by the Federal Trade
Commission (FTC), which was established by the FTC Act of 1914. The FTC has been
concerned with deceptive or misleading advertising and unfair business practices and has the
power to (1) issue cease and desist orders and (2) order corrective advertising. In issuing a cease
and desist order, the FTC orders a company to stop practices the commission considers unfair.
With corrective advertising, the FTC can require a company to spend money on advertising to
correct previous misleading ads. The enforcement powers of the FTC are so significant that often
just an indication of concern from the commission can cause companies to revise their promotion.
3-339 SELF-REGULATION COMPREHENSION
Some industries have opted for self-regulation of their members to ensure that each acts fairly.
Discuss potential problems associated with self-regulation.
Answer:
An alternative to government control is self-regulation where an industry attempts to police itself.
There are two problems with self-regulation: noncompliance by members and enforcement. An
industry alliance created to institute self-regulation typically has no authority to enforce its
regulations. Also, if the attempts at self-regulation are too rigorous, the members of the industry
alliance may violate the Robinson-Patman Act. The best-known self-regulatory group is the
Better Business Bureau (BBB). Although the BBB has no legal power, it does try to use moral
suasion to get members to comply with its standards.
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CHAPTER 3: MASTER TEST BANK

SCANNING THE MARKETING ENVIRONMENT

Blooms Level of Learning (LL)

Video Case 3: 313, 314 315

Blooms Level of Learning (LL)

MULTIPLE CHOICE QUESTIONS

3-1 CHAPTER OPENER: FACEBOOK SOCIAL NATION KNOWLEDGE

Mark Zuckerberg is a co-founder of the social networking website called __________.

Answer: c Page(s): 63 LO: 1 AACSB: Technology QD: Easy

3-2 CHAPTER OPENER: FACEBOOK SOCIAL NATION KNOWLEDGE

Answer: d Page(s): 63 LO: 1 AACSB: Technology QD: Easy

3-3 CHAPTER OPENER: FACEBOOK SOCIAL NATION COMPREHENSION

Answer: a Page(s): 63 LO: 1 AACSB: Technology QD: Medium

3-4 CHAPTER OPENER: FACEBOOK SOCIAL NATION COMPREHENSION

Answer: e Page(s): 63-64 LO: 1 AACSB: Technology QD: Medium

3-5 ENVIRONMENTAL SCANNING KNOWLEDGE

Environmental scanning refers to

Answer: b Page(s): 64-65 LO: 1 AACSB: Analytic QD: Easy

3-6 ENVIRONMENTAL SCANNING KNOWLEDGE

Answer: c Page(s): 64-65 LO: 1 AACSB: Analytic QD: Easy

Environmental trends come from all of the following forces EXCEPT:

Answer: d Page(s): 64-65 LO: 1 AACSB: Analytic QD: Easy

3-8 ENVIRONMENTAL SCANNING KNOWLEDGE

Between 1962 and 2010, adult coffee consumption has

Answer: e Page(s): 64-65 LO: 1 AACSB: Analytic QD: Easy

3-9 ENVIRONMENTAL SCANNING KNOWLEDGE

Answer: a Page(s): 64-65 LO: 1 AACSB: Analytic QD: Easy

3-10 ENVIRONMENTAL SCANNING COMPREHENSION

Changes in coffee consumption affect all of the following EXCEPT:

Answer: b Page(s): 64-65 LO: 1 AACSB: Analytic QD: Medium

3-11 ENVIRONMENTAL SCANNING COMPREHENSION

Answer: c Page(s): 64-65 LO: 1 AACSB: Analytic QD: Medium

3-12 ENVIRONMENTAL SCANNING COMPREHENSION

Answer: e Page(s): 64-65 LO: 1 AACSB: Analytic QD: Medium

3-13 ENVIRONMENTAL SCANNING COMPREHENSION

Answer: d Page(s): 64-65 LO: 1 AACSB: Analytic QD: Medium

3-14 ENVIRONMENTAL SCANNING COMPREHENSION

The purpose of environmental scanning is to

Answer: e Page(s): 64-65 LO: 1 AACSB: Analytic QD: Medium

3-15 ENVIRONMENTAL SCANNING COMPREHENSION

Answer: b Page(s): 64-65 LO: 1 AACSB: Analytic QD: Medium

3-16 ENVIRONMENTAL SCANNING COMPREHENSION

Predicting the future in terms of environmental scanning requires assumptions about

Answer: c Page(s): 64-65 LO: 1 AACSB: Analytic QD: Medium

3-17 ENVIRONMENTAL SCANNING COMPREHENSION

Which of the following trends identified in an environmental scan is a social trend?

Answer: e Page(s): 64-65 LO: 1 AACSB: Analytic QD: Medium

3-18 ENVIRONMENTAL SCANNING COMPREHENSION

Which of the following trends identified in an environmental scan is an economic trend?

Answer: a Page(s): 64-65 LO: 1 AACSB: Analytic QD: Medium

3-19 ENVIRONMENTAL SCANNING COMPREHENSION

Which of the following trends identified in an environmental scan is a technological trend?

Answer: a Page(s): 64-65 LO: 1 AACSB: Analytic QD: Medium

3-20 ENVIRONMENTAL SCANNING COMPREHENSION

Which of the following trends identified in an environmental scan is a competitive trend?

Answer: b Page(s): 64-65 LO: 1 AACSB: Analytic QD: Medium

3-21 ENVIRONMENTAL SCANNING COMPREHENSION

Which of the following trends identified in an environmental scan is a regulatory trend?

3-22 ENVIRONMENTAL SCANNING APPLICATION

Answer: a Page(s): 64-65 LO: 1 AACSB: Analytic QD: Hard

3-23 ENVIRONMENTAL SCANNING APPLICATION

Answer: e Page(s): 64-65 LO: 1 AACSB: Analytic QD: Hard

3-24 ENVIRONMENTAL SCANNING APPLICATION