Business Law (Irwin Business Law)- 15th Edition by Jane Mallor A. James Barnes L. Thomas Bowers Arlen Langvardt test bank

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Business Law (Irwin Business Law)- 15th Edition by Jane Mallor A. James Barnes L. Thomas Bowers Arlen Langvardt test bank

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Chapter 04
Business Ethics, Corporate Social Responsibility, Corporate Governance, and Critical Thinking

True / False Questions

1. Under the stakeholder theory of corporate social responsibility, employees interests are considered.

True False

2. Theories that focus only on actions or decisions are called deontological ethical theories.

True False

3. Asking whether a decision will produce the right results is an example of deontological theory.

True False

4. A teleological theory may find unacceptable that any competent employee loses his job, even if the layoffs effect is to reduce prices to consumers and increase profits.

True False

5. Profit maximization is a deontological theory.

True False

6. What would happen if everyone acted in this way? is a question that Kant would ask.

True False

7. Rights theory concerns itself with the costs and benefits of requiring respect for anothers rights.

True False

8. Rawlss justice theory focuses on outcomes.

True False

9. The ends justify the means: This statement reflects the utilitarian ethical theory.

True False

10. A retailers decision not to close earlier than its regular closing time even though a storm warning makes it unlikely that there will be any more customers that day is an example of rule utilitarianism.

True False

11. The reduced sales of Martha Stewart branded goods at K-Mart after she was accused of insider trading is an example of the strength of the profit maximization theory.

True False

12. Utilitarianism is based on the laissez faire theory of capitalism.

True False

13. The Sarbanes-Oxley Act of 2002 requires public companies to have board audit committees comprising only independent directors.

True False

14. A justice theorist would choose the alternative that allocates societys benefits and burden most fairly.

True False

15. Profit maximization compels a decision maker to consider stakeholders other than the corporation and its shareholders.

True False

16. Begging the question is also known as the slippery slope fallacy.

True False

Multiple Choice Questions

17. The purpose of the _____ is to increase penalties for corporate wrongdoers, establish rules designed to deter and prevent future wrongdoing, and encourage and enable corporate executives to be ethical and socially responsible.

A. Sarbanes-Oxley Act

B. Davis-Bacon Act

C. Goldwater-Nichols Act

D. Certiorari Act

18. The _____ of corporate social responsibility holds that rather than merely striving to maximize profits for its shareholders, a corporation should balance the interests of shareholders against the interests of employees, suppliers, customers, and the community.

A. deontological theory

B. Kantian theory

C. stakeholder theory

D. utilitarian theory

19. The stakeholder theory of corporate social responsibility:

A. strives to maximize profits for its shareholders.

B. tries to balance the interests of shareholders and stakeholders.

C. advocates the use of legal remedies to check corporate misbehavior.

D. advocates the freedom of corporations to run as they wish.

20. Which of the following ethical theories focuses on a decisions or action alone, irrespective of the result it produces?

A. Deontological theory

B. Teleological theory

C. Profit maximization theory

D. Utilitarian theory

21. _____ ethical theories focus on the consequences of a decision.

A. Deontological

B. Teleological

C. Kantian

D. Right

22. Which of the following ethical theories is a deontological theory?

A. Utilitarian theory

B. Teleological theory

C. Rights theory

D. Profit maximization theory

23. Which of the following ethical theories emphasizes that certain human rights are fundamental and must be respected by other humans?

A. Rights theory

B. Utilitarian theory

C. Teleological theory

D. Profit maximization theory

24. _____ theory emphasizes that one should use the categorical imperative and judge an action by applying it universally.

A. Utilitarian

B. Teleological

C. Justice

D. Kantian

25. _____ categorizes using or manipulating others as an unethical action.

A. Utilitarianism

B. Teleological ethics

C. Consequentialism

D. Kantianism

26. Which ethical theory justifies the protection of a neo-Nazis right to hateful speech, even though the cost of such speech includes damage to relations between ethnic groups, which may far outweigh any benefits the society receives from the speech?

A. Rights theory

B. Teleological theory

C. Profit maximization theory

D. Utilitarian theory

27. Which of the following ethical theories has been criticized for promoting moral fanaticism and reducing innovation, entrepreneurship, and production?

A. Rights theory

B. Teleological theory

C. Utilitarian theory

D. Profit maximization theory

28. ______ requires a decision maker to ensure the maximum good for the maximum number.

A. Profit maximization

B. Rights theory

C. Stakeholder theory

D. Utilitarianism

29. Which of the following ethical theories judges our actions as good or bad depending on their consequences and is expressed as the ends justify the means?

A. Rights theory

B. Utilitarianism

C. Kantianism

D. Deontological theory

30. _____ protects the rights of those who are less privileged in society.

A. Rights theory

B. Justice theory

C. Rule utilitarianism theory

D. Profit maximization theory

31. Which of the following ethical theories requires decision makers to maximize utility for the society as a whole?

A. Profit maximization theory

B. Deontological theory

C. Rights theory

D. Utilitarian theory

32. Kurt is trying to decide whether or not he should drive to work everyday and has a number of questions. Will it save valuable time? Will he be adding to environment pollution? Will it add to the problems of heavy traffic on the roads? Would carpooling be a better idea? Which of the following ethical theories does Kurt adhere to?

A. Utilitarian ethics

B. Deontological ethics

C. Kants categorical imperative

D. Rights theory

33. _____ is a teleological ethical theory because it focuses on results by maximizing total social welfare.

A. Rights theory

B. Kantian theory

C. Deontological theory

D. Profit maximization theory

34. Which of the following ethical theories is closely related to the profit maximization theory?

A. Utilitarianism

B. Kantianism

C. Deontological theory

D. Rights theory

35. Which of the following ethical theories illustrates that acting in ones selfish interests can ultimately result in ethical behavior and benefits to society?

A. Rights theory

B. Profit maximization theory

C. Kantian theory

D. Justice theory

36. Which of the following is a characteristic of profit maximization?

A. It is concerned with the equal distribution of wealth in society.

B. It protects everyones fundamental rights.

C. It is closely related to utilitarianism because it focuses on results.

D. It ensures complete responsible and ethical behavior by corporations.

37. Profit maximization results in ethical conduct because:

A. it emphasizes the right to redistribute wealth in order to help the poor and disadvantaged.

B. it requires societys members to act within the constraints of the law.

C. it protects fundamental rights, unless some greater right takes precedence.

D. it focuses on the decision or action itself, irrespective of what results it produces.

38. The _____ requires a public company to disclose whether it has adopted a code of ethics for senior financial officers, and to disclose any change in the code or waiver of the codes application.

A. Davis-Bacon Act

B. Goldwater-Nichols Act

C. Sarbanes-Oxley Act

D. Certiorari Act

39. Which of the following factors can impose direct penalties for corporate misbehavior?

A. Market forces

B. Corporate management

C. Labor unions

D. Investors

40. Which of the following is a prescribed guideline for ethical decision making?

A. What gives me maximum profit?

B. Will stakeholders offer support?

C. How can I increase the number of shareholders?

D. How do the alternatives impact my business firm?

41. Speedster is an automobile manufacturing company that has a factory in Seattle, Washington. It has placed Keith McShane, the operations head of the factory, in charge of investigating the firms decision whether to move the factory to Qingdao, China. Keith is against the idea of the factory relocating to Qingdao because his fellow Americans will loose their jobs to the Chinese. Therefore, he is desperately searching for information that favors Seattle over Qingdao. Which of the following prescribed guidelines for ethical decision making will Keith need to focus on to make an unbiased, ethical decision?

A. Will the shareholders offer support?

B. What facts impact my decision?

C. How can I increase the number of shareholders?

D. Which decision will allow me to retain my job?

42. Your decision will be better for your firm and other stakeholders if you consider your selfish interest. Considering that this statement is true, which of the following prescribed guidelines for ethical decision making should you focus on?

A. Will the shareholders offer support?

B. How can I increase the number of shareholders?

C. How do the alternatives impact me, the decision maker?

D. Who are the stakeholders?

43. Bennett is in the process of making an important decision for his firm. Which of the following actions strengthens the argument that Bennett is a utilitarian?

A. Bennett chooses the alternative that promises the highest net welfare to society as a whole.

B. Bennett implements the alternative that allocates societys benefits and burden most fairly.

C. Bennett considers whether everyone is getting what he deserves.

D. Bennett determines whether anyones rights are negatively affected by an alternative.

44. Trisha has been given the responsibility of making an important decision for her firm. Which of the following actions strengthens the argument that Trisha is a justice theorist?

A. Trisha chooses the alternative that promises the highest net welfare to society as a whole.

B. Trisha chooses the alternative that respects the most important human right.

C. Trisha considers whether everyone is getting what he deserves.

D. Trisha determines whether anyones rights are negatively affected by an alternative.

45. Carol, an Acme Co. employee, regularly takes pens, paper, and other office supplies from the Acme office supply cabinet and brings them home for her husband to use in his home office. Carol defends this action by saying that: I dont get paid enough, and besides, no one will miss the supplies. This statement is an example of:

A. circular reasoning.

B. false analogy.

C. bandwagon fallacy.

D. a non sequitur.

46. A non-sequitur used in an argument is a wrong conclusion:

A. that does not follow from the facts or premises set out.

B. based on a false analogy.

C. that relies on the idea that a popular belief is true.

D. based on an attack against the speaker, not his/her reasoning.

47. An argumentum ad populum used in an argument is a wrong conclusion:

A. that does not follow from the facts or premises set out.

B. based on a false analogy.

C. that relies on the idea that a popular belief is true.

D. based on an attack against the speaker, not his/her reasoning.

48. Debra asks Alex, her stock broker, if she can trust his advice to purchase the stocks for Acme Co. Alex replies, Of course you can. Debra asks, Why should I trust you? Alex says, with a smile, Because I am a trustworthy person. Alex is engaging in:

A. circular reasoning.

B. bandwagon fallacy.

C. argumentum ad baculum.

D. false analogy.

49. Bill, a senior manager at Bizlaw, Inc., instructs Kim, a mid-level manager, to make false statements on the performance evaluation of Gloria, one of Kims employees who has recently filed a discrimination claim against Bill. Bill tells Kim, Look around you. Every manager makes up stories about employees Bizlaw wants to get rid of. Bills argument illustrates:

A. bandwagon fallacy.

B. argumentum ad baculum.

C. argumentum ad hominem.

D. circular reasoning.

50. A _____ argument states that we should or should not do something merely because one or more other people or firms do or do not do it.

A. bandwagon fallacy

B. circular reasoning

C. false cause

D. gamblers fallacy

51. Which of the following attacks the speaker for his argument, not his reasoning?

A. Argumentum ad hominem

B. Argumentum from authority

C. Argumentum as populism

D. Argumentum ad vacuum

52. Guilty by association is a form of:

A. begging the question.

B. argumentum ad hominem.

C. argumentum ad populum.

D. gamblers fallacy.

53. Jack flipped a coin five times and each time it came up heads. His friend Atmel saw this and bet Jack that the next flip would come up tails. Atmel figured that it was overdue for a tails and so tails was a more likely outcome in the next flip. Atmel has fallen prey to:

A. sunk cost fallacy.

B. reductio ad absurdum.

C. argumentum ad hominem.

D. gamblers fallacy.

54. Which of the following is also called the slippery slope fallacy?

A. Gamblers fallacy

B. Reductio ad absurdum

C. Sunk cost fallacy

D. Argumentum ad hominem

55. Bob DeSlob, CEO of Westlake, Inc., had supported the development and distribution of the Super Widget, a product that is expensive to make. The Super Widget failed to meet its expected sales. Bob, now, decides to invest more resources to produce and aggressively market the Super Widget, rationalizing that if he did not invest more in the product, what he has invested would be lost. Bob is engaging in:

A. sunk cost fallacy.

B. argumentum ad baculum.

C. argumentum ad hominem.

D. reductio ad absurdum.

56. The last tactic to adopt in resisting a request to act unethically is to:

A. buy time to think about a solution.

B. find a mentor and peer group.

C. prepare to leave the job.

D. find win-win solutions.

57. Which of the following critical thinking errors is likely to occur among the subordinates if a leader is unethical?

A. False analogy

B. Bandwagon fallacy

C. False cause

D. Gamblers fallacy

Essay Questions

58. What two conditions must be met if profit-maximization is to maximize utility?

59. What three things are seen in the corporate scandals of 2002, such as Enron and WorldCom?

60. How can a corporation improve its corporate governance and corporate responsibility?

61. Carol, a senior manager in Bizlaw, Inc., encourages Rob, her junior manager, to bill Bizlaws clients for his commute time, and identify it as meet and confer with senior manager. Carol explains that she will then adjust her own billing sheet to match this entry. Carol tells Rob that all other Bizlaw junior and senior managers engage in this practice, and that clients have never questioned such entries. Rob is not sure whether this would be an ethical action. What should Rob do?


Chapter 04 Business Ethics, Corporate Social Responsibility, Corporate Governance, and Critical Thinking Answer Key

True / False Questions

1. Under the stakeholder theory of corporate social responsibility, employees interests are considered.

TRUE
The stakeholder theory of corporate social responsibility tries to balance the interests of shareholders against those of corporate stakeholders, such as employees, suppliers, customers, and the community in an attempt to check unethical corporate behavior.

AACSB: Ethics
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 04-01 Appreciate the strengths and weaknesses of the various ethical theories.
Topic: Ethical Theories

2. Theories that focus only on actions or decisions are called deontological ethical theories.

TRUE
Deontological ethical theories focus only on decisions or actions, not their results.

AACSB: Ethics
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 04-01 Appreciate the strengths and weaknesses of the various ethical theories.
Topic: Ethical Theories

3. Asking whether a decision will produce the right results is an example of deontological theory.

FALSE
Asking whether a decision will produce the right results is an example of a teleological theory.

AACSB: Ethics
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 04-01 Appreciate the strengths and weaknesses of the various ethical theories.
Topic: Ethical Theories

4. A teleological theory may find unacceptable that any competent employee loses his job, even if the layoffs effect is to reduce prices to consumers and increase profits.

FALSE
A teleological theory will accept such a decision because it will look at the larger consequence of this action.

AACSB: Ethics
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 04-01 Appreciate the strengths and weaknesses of the various ethical theories.
Topic: Ethical Theories

5. Profit maximization is a deontological theory.

FALSE
Profit maximization is a teleological theory, because it looks at the consequences of a decision.

AACSB: Ethics
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 04-01 Appreciate the strengths and weaknesses of the various ethical theories.
Topic: Ethical Theories

6. What would happen if everyone acted in this way? is a question that Kant would ask.

TRUE
According to Kant, one must apply a categorical imperative to ones decisions and test whether the action should become universal law; therefore, this question becomes necessary.

AACSB: Ethics
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 04-01 Appreciate the strengths and weaknesses of the various ethical theories.
Topic: Ethical Theories

7. Rights theory concerns itself with the costs and benefits of requiring respect for anothers rights.

FALSE
Rights theory concerns itself with everyones fundamental rights, irrespective of the costs of those rights to society.

AACSB: Ethics
Blooms: Remember
Difficulty: 2 Medium
Learning Objective: 04-01 Appreciate the strengths and weaknesses of the various ethical theories.
Topic: Ethical Theories

8. Rawlss justice theory focuses on outcomes.

TRUE
Rawlss justice theory focused on outcomes, especially in the context of business, and whether people in society were getting what they deserved.

AACSB: Ethics
Blooms: Remember
Difficulty: 2 Medium
Learning Objective: 04-01 Appreciate the strengths and weaknesses of the various ethical theories.
Topic: Ethical Theories

9. The ends justify the means: This statement reflects the utilitarian ethical theory.

TRUE
Utilitarian theory tries to achieve the highest level of satisfactions over dissatisfactions and justify the maximum good.

AACSB: Ethics
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 04-01 Appreciate the strengths and weaknesses of the various ethical theories.
Topic: Ethical Theories

10. A retailers decision not to close earlier than its regular closing time even though a storm warning makes it unlikely that there will be any more customers that day is an example of rule utilitarianism.

TRUE
Rule utilitarianism judges actions by rule that over the long run maximizes profits. It does not change itself according to the situation or context.

AACSB: Ethics
AACSB: Reflective Thinking
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 04-01 Appreciate the strengths and weaknesses of the various ethical theories.
Topic: Ethical Theories

11. The reduced sales of Martha Stewart branded goods at K-Mart after she was accused of insider trading is an example of the strength of the profit maximization theory.

TRUE
Profit maximization theory requires that decision makers consider the rights protected by rights and justice theories. The reduced sales show that ignoring these rights can have a negative impact on a corporation.

AACSB: Ethics
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 04-01 Appreciate the strengths and weaknesses of the various ethical theories.
Topic: Ethical Theories

12. Utilitarianism is based on the laissez faire theory of capitalism.

FALSE
The theory of laissez faire allows corporations to run their business as they wish. However, Utilitarianism advocates those decisions that lead to the greatest good for society as a whole.

AACSB: Ethics
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 04-01 Appreciate the strengths and weaknesses of the various ethical theories.
Topic: Ethical Theories

13. The Sarbanes-Oxley Act of 2002 requires public companies to have board audit committees comprising only independent directors.

TRUE
According to the Sarbanes-Oxley Act of 2002, public companies are required to have board audit committees of independent directors in order to ensure ethical corporate behavior.

AACSB: Ethics
Blooms: Remember
Difficulty: 2 Medium
Learning Objective: 04-01 Appreciate the strengths and weaknesses of the various ethical theories.
Topic: Ethical Theories

14. A justice theorist would choose the alternative that allocates societys benefits and burden most fairly.

TRUE
A strength of the justice theory is that it seeks to allocate the resources as fairly as possible so that those who are the least advantaged society are able to benefit as well.

AACSB: Ethics
Blooms: Remember
Difficulty: 2 Medium
Learning Objective: 04-01 Appreciate the strengths and weaknesses of the various ethical theories.
Topic: Ethical Theories

15. Profit maximization compels a decision maker to consider stakeholders other than the corporation and its shareholders.

TRUE
A profit maximizer will choose the alternative that produces the most long-run profits for the company, within the limits of the law. Profit maximization compels a decision maker to consider stakeholders other than the corporation and its shareholders.

AACSB: Ethics
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 04-02 Apply the Guidelines for Ethical Decision Making to business and personal decisions.
Topic: Guidelines for Ethical Decision Making

16. Begging the question is also known as the slippery slope fallacy.

FALSE
Reductio ad absurdum is also called the slippery slope fallacy because it carries an argument to a logical end without considering whether it is an inevitable or probable cause.

AACSB: Ethics
Blooms: Remember
Difficulty: 2 Medium
Learning Objective: 04-03 Recognize critical thinking errors in your own and others arguments.
Topic: Thinking Critically

Multiple Choice Questions

17. The purpose of the _____ is to increase penalties for corporate wrongdoers, establish rules designed to deter and prevent future wrongdoing, and encourage and enable corporate executives to be ethical and socially responsible.

A. Sarbanes-Oxley Act

B. Davis-Bacon Act

C. Goldwater-Nichols Act

D. Certiorari Act
Congress passed the Sarbanes-Oxley Act which increased penalties for corporate wrongdoers and established rules designed to deter and prevent future wrongdoing. The purpose of the statute is to encourage and enable corporate executives to be ethical and socially responsible.

AACSB: Ethics
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 04-01 Appreciate the strengths and weaknesses of the various ethical theories.
Topic: Why Study Business Ethics?

18. The _____ of corporate social responsibility holds that rather than merely striving to maximize profits for its shareholders, a corporation should balance the interests of shareholders against the interests of employees, suppliers, customers, and the community.

A. deontological theory

B. Kantian theory

C. stakeholder theory

D. utilitarian theory
The stakeholder theory of corporate social responsibility holds that rather than merely striving to maximize profits for its shareholders, a corporation should balance the interests of shareholders against the interests of other corporate stakeholders, such as employees, suppliers, customers, and the community.

AACSB: Ethics
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 04-01 Appreciate the strengths and weaknesses of the various ethical theories.
Topic: The Corporate Social Responsibility Debate

19. The stakeholder theory of corporate social responsibility:

A. strives to maximize profits for its shareholders.

B. tries to balance the interests of shareholders and stakeholders.

C. advocates the use of legal remedies to check corporate misbehavior.

D. advocates the freedom of corporations to run as they wish.
The stakeholder theory of corporate social responsibility argues that businesses should adhere to a standard of ethical behavior that is higher than the law. It holds that rather than merely striving to maximize profits for its shareholders, a corporation should balance the interests of shareholders against the interests of other corporate stakeholders, such as employees, suppliers, customers, and the community.

AACSB: Ethics
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 04-01 Appreciate the strengths and weaknesses of the various ethical theories.
Topic: The Corporate Social Responsibility Debate

20. Which of the following ethical theories focuses on a decisions or action alone, irrespective of the result it produces?

A. Deontological theory

B. Teleological theory

C. Profit maximization theory

D. Utilitarian theory
Theories that focus on decisions or actions alone are deontological ethical theories; they do not look at the consequences of an action or decision.

AACSB: Ethics
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 04-01 Appreciate the strengths and weaknesses of the various ethical theories.
Topic: Ethical Theories

21. _____ ethical theories focus on the consequences of a decision.

A. Deontological

B. Teleological

C. Kantian

D. Right
Theories that focus on the consequences of a decision are teleological ethical theories.

AACSB: Ethics
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 04-01 Appreciate the strengths and weaknesses of the various ethical theories.
Topic: Ethical Theories

22. Which of the following ethical theories is a deontological theory?

A. Utilitarian theory

B. Teleological theory

C. Rights theory

D. Profit maximization theory
Rights theory is a deontological theory because it focuses on decisions or actions alone.

AACSB: Ethics
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 04-01 Appreciate the strengths and weaknesses of the various ethical theories.
Topic: Ethical Theories

23. Which of the following ethical theories emphasizes that certain human rights are fundamental and must be respected by other humans?

A. Rights theory

B. Utilitarian theory

C. Teleological theory

D. Profit maximization theory
Rights theory encompasses a variety of ethical philosophies holding that certain human rights are fundamental and must be respected by other humans.

AACSB: Ethics
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 04-01 Appreciate the strengths and weaknesses of the various ethical theories.
Topic: Ethical Theories

24. _____ theory emphasizes that one should use the categorical imperative and judge an action by applying it universally.

A. Utilitarian

B. Teleological

C. Justice

D. Kantian
Kant viewed humans as moral actors that are free to make choices. He believed humans are able to judge the morality of any action by applying his famous categorical imperative. One formulation of the categorical imperative is, Act only on that maxim whereby at the same time you can will that it shall become a universal law. This means that we judge an action by applying it universally.

AACSB: Ethics
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 04-01 Appreciate the strengths and weaknesses of the various ethical theories.
Topic: Ethical Theories

25. _____ categorizes using or manipulating others as an unethical action.

A. Utilitarianism

B. Teleological ethics

C. Consequentialism

D. Kantianism
Kant had a formulation of the categorical imperative: Always act to treat humanity, whether in yourself or in others, as an end in itself, never merely as a means. That is, we may not use or manipulate others to achieve our own happiness.

AACSB: Ethics
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 04-01 Appreciate the strengths and weaknesses of the various ethical theories.
Topic: Ethical Theories

26. Which ethical theory justifies the protection of a neo-Nazis right to hateful speech, even though the cost of such speech includes damage to relations between ethnic groups, which may far outweigh any benefits the society receives from the speech?

A. Rights theory

B. Teleological theory

C. Profit maximization theory

D. Utilitarian theory
Rights theory does not concern itself with the costs or benefits of requiring respect for anothers right; it looks at an individuals rights as absolute.

AACSB: Ethics
Blooms: Remember
Difficulty: 3 Hard
Learning Objective: 04-01 Appreciate the strengths and weaknesses of the various ethical theories.
Topic: Ethical Theories

27. Which of the following ethical theories has been criticized for promoting moral fanaticism and reducing innovation, entrepreneurship, and production?

A. Rights theory

B. Teleological theory

C. Utilitarian theory

D. Profit maximization theory
Critics of Rights theory contend that it promotes moral fanaticism and creates a sense of entitlement, thus, reducing innovation, entrepreneurship, and production.

AACSB: Ethics
Blooms: Remember
Difficulty: 2 Medium
Learning Objective: 04-01 Appreciate the strengths and weaknesses of the various ethical theories.
Topic: Ethical Theories

28. ______ requires a decision maker to ensure the maximum good for the maximum number.

A. Profit maximization

B. Rights theory

C. Stakeholder theory

D. Utilitarianism
Utilitarianism tries to achieve the greatest good possible for society as a whole.

AACSB: Ethics
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 04-01 Appreciate the strengths and weaknesses of the various ethical theories.
Topic: Ethical Theories

29. Which of the following ethical theories judges our actions as good or bad depending on their consequences and is expressed as the ends justify the means?

A. Rights theory

B. Utilitarianism

C. Kantianism

D. Deontological theory
A teleological theory, utilitarianism judges our actions as good or bad depending on their consequences. This is sometimes expressed as the ends justify the means.

AACSB: Ethics
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 04-01 Appreciate the strengths and weaknesses of the various ethical theories.
Topic: Ethical Theories

30. _____ protects the rights of those who are less privileged in society.

A. Rights theory

B. Justice theory

C. Rule utilitarianism theory

D. Profit maximization theory
The strength of the justice theory lies in the fact that it is concerned with ensuring the rights of those who are the least advantaged in society.

AACSB: Ethics
Blooms: Remember
Difficulty: 2 Medium
Learning Objective: 04-01 Appreciate the strengths and weaknesses of the various ethical theories.
Topic: Ethical Theories

31. Which of the following ethical theories requires decision makers to maximize utility for the society as a whole?

A. Profit maximization theory

B. Deontological theory

C. Rights theory

D. Utilitarian theory
In utilitarianism, the focus is on society as a whole and a utilitarian will act only if the benefits of the action to society outweigh the societal costs of the action.

AACSB: Ethics
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 04-01 Appreciate the strengths and weaknesses of the various ethical theories.
Topic: Ethical Theories

32. Kurt is trying to decide whether or not he should drive to work everyday and has a number of questions. Will it save valuable time? Will he be adding to environment pollution? Will it add to the problems of heavy traffic on the roads? Would carpooling be a better idea? Which of the following ethical theories does Kurt adhere to?

A. Utilitarian ethics

B. Deontological ethics

C. Kants categorical imperative

D. Rights theory
Act utilitarianism judges each act separately, assessing an acts benefits and costs to society.

AACSB: Ethics
AACSB: Reflective Thinking
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 04-01 Appreciate the strengths and weaknesses of the various ethical theories.
Topic: Ethical Theories

33. _____ is a teleological ethical theory because it focuses on results by maximizing total social welfare.

A. Rights theory

B. Kantian theory

C. Deontological theory

D. Profit maximization theory
By focusing on resultsmaximizing total social welfareprofit maximization is a teleological ethical theory.

AACSB: Ethics
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 04-01 Appreciate the strengths and weaknesses of the various ethical theories.
Topic: Ethical Theories

34. Which of the following ethical theories is closely related to the profit maximization theory?

A. Utilitarianism

B. Kantianism

C. Deontological theory

D. Rights theory
Profit maximization theory is closely related to utilitarianism, but it differs fundamentally in how ethical decisions are made.

AACSB: Ethics
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 04-01 Appreciate the strengths and weaknesses of the various ethical theories.
Topic: Ethical Theories

35. Which of the following ethical theories illustrates that acting in ones selfish interests can ultimately result in ethical behavior and benefits to society?

A. Rights theory

B. Profit maximization theory

C. Kantian theory

D. Justice theory
By working in our own interests, in accordance with the profit maximization theory, we compete for societys scarce resources which are allocated to those people and businesses that can use them most productively and efficiently.

AACSB: Ethics
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 04-01 Appreciate the strengths and weaknesses of the various ethical theories.
Topic: Ethical Theories

36. Which of the following is a characteristic of profit maximization?

A. It is concerned with the equal distribution of wealth in society.

B. It protects everyones fundamental rights.

C. It is closely related to utilitarianism because it focuses on results.

D. It ensures complete responsible and ethical behavior by corporations.
Profit maximization is considered a teleological ethical theory because it focuses on the results of business decisions taken. It is closely related to utilitarianism, but it differs fundamentally in how ethical decisions are made.

AACSB: Ethics
Blooms: Remember
Difficulty: 2 Medium
Learning Objective: 04-01 Appreciate the strengths and weaknesses of the various ethical theories.
Topic: Ethical Theories

37. Profit maximization results in ethical conduct because:

A. it emphasizes the right to redistribute wealth in order to help the poor and disadvantaged.

B. it requires societys members to act within the constraints of the law.

C. it protects fundamental rights, unless some greater right takes precedence.

D. it focuses on the decision or action itself, irrespective of what results it produces.
Profit maximization results in ethical conduct because it requires societys members to act within the constraints of the law. A profit maximizer acts ethically by complying with societys mores as expressed in its laws.

AACSB: Ethics
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 04-01 Appreciate the strengths and weaknesses of the various ethical theories.
Topic: Ethical Theories

38. The _____ requires a public company to disclose whether it has adopted a code of ethics for senior financial officers, and to disclose any change in the code or waiver of the codes application.

A. Davis-Bacon Act

B. Goldwater-Nichols Act

C. Sarbanes-Oxley Act

D. Certiorari Act
The Sarbanes-Oxley Act requires a public company to disclose whether it has adopted a code of ethics for senior financial officers, and to disclose any change in the code or waiver of the codes application.

AACSB: Ethics
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 04-01 Appreciate the strengths and weaknesses of the various ethical theories.
Topic: Ethical Theories

39. Which of the following factors can impose direct penalties for corporate misbehavior?

A. Market forces

B. Corporate management

C. Labor unions

D. Investors
Of all the devices for corporate control we have considered, only market forces and the law impose direct penalties for corporate misbehavior.

AACSB: Ethics
Blooms: Remember
Difficulty: 2 Medium
Learning Objective: 04-01 Appreciate the strengths and weaknesses of the various ethical theories.
Topic: Ethical Theories

40. Which of the following is a prescribed guideline for ethical decision making?

A. What gives me maximum profit?

B. Will stakeholders offer support?

C. How can I increase the number of shareholders?

D. How do the alternatives impact my business firm?
A decision maker who wishes to act ethically would look at all the alternatives possible in a creative manner. The solution is not simply to do or not do something; there are many solutions that are possible between the two extremes.

AACSB: Ethics
Blooms: Remember
Difficulty: 2 Medium
Learning Objective: 04-02 Apply the Guidelines for Ethical Decision Making to business and personal decisions.
Topic: Guidelines for Ethical Decision Making

41. Speedster is an automobile manufacturing company that has a factory in Seattle, Washington. It has placed Keith McShane, the operations head of the factory, in charge of investigating the firms decision whether to move the factory to Qingdao, China. Keith is against the idea of the factory relocating to Qingdao because his fellow Americans will loose their jobs to the Chinese. Therefore, he is desperately searching for information that favors Seattle over Qingdao. Which of the following prescribed guidelines for ethical decision making will Keith need to focus on to make an unbiased, ethical decision?

A. Will the shareholders offer support?

B. What facts impact my decision?

C. How can I increase the number of shareholders?

D. Which decision will allow me to retain my job?
Many people enter a decision-making process biased in favor of a particular option. As a result, they look only for facts that support that option. Keith should search for all the facts that are related to Seattle and Qingdao and make an unbiased decision based on the information favoring either Seattle or Qingdao.

AACSB: Ethics
AACSB: Reflective Thinking
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 04-02 Apply the Guidelines for Ethical Decision Making to business and personal decisions.
Topic: Guidelines for Ethical Decision Making

42. Your decision will be better for your firm and other stakeholders if you consider your selfish interest. Considering that this statement is true, which of the following prescribed guidelines for ethical decision making should you focus on?

A. Will the shareholders offer support?

B. How can I increase the number of shareholders?

C. How do the alternatives impact me, the decision maker?

D. Who are the stakeholders?
At least two reasons explain why you can and should consider your own interest yet act ethically for your firm. First, as the decision maker, you are impacted by the decision. Second, and more important, reason to consider your own interest is that your decision may be better for your firm and other stakeholders if you also consider your selfish interest.

AACSB: Ethics
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 04-02 Apply the Guidelines for Ethical Decision Making to business and personal decisions.
Topic: Guidelines for Ethical Decision Making

43. Bennett is in the process of making an important decision for his firm. Which of the following actions strengthens the argument that Bennett is a utilitarian?

A. Bennett chooses the alternative that promises the highest net welfare to society as a whole.

B. Bennett implements the alternative that allocates societys benefits and burden most fairly.

C. Bennett considers whether everyone is getting what he deserves.

D. Bennett determines whether anyones rights are negatively affected by an alternative.
A utilitarian would choose the alternative that promises the highest net welfare to society as a whole.

AACSB: Ethics
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 04-02 Apply the Guidelines for Ethical Decision Making to business and personal decisions.
Topic: Guidelines for Ethical Decision Making

44. Trisha has been given the responsibility of making an important decision for her firm. Which of the following actions strengthens the argument that Trisha is a justice theorist?

A. Trisha chooses the alternative that promises the highest net welfare to society as a whole.

B. Trisha chooses the alternative that respects the most important human right.

C. Trisha considers whether everyone is getting what he deserves.

D. Trisha determines whether anyones rights are negatively affected by an alternative.
A justice theorist would choose the alternative that allocates societys benefits and burden most fairly. This requires the decision maker to consider whether everyone is getting what he deserves.

AACSB: Ethics
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 04-02 Apply the Guidelines for Ethical Decision Making to business and personal decisions.
Topic: Guidelines for Ethical Decision Making

45. Carol, an Acme Co. employee, regularly takes pens, paper, and other office supplies from the Acme office supply cabinet and brings them home for her husband to use in his home office. Carol defends this action by saying that: I dont get paid enough, and besides, no one will miss the supplies. This statement is an example of:

A. circular reasoning.

B. false analogy.

C. bandwagon fallacy.

D. a non sequitur.
A non sequitur is a conclusion that does not follow from the facts or premises that one sets out and the speaker comes to an irrelevant conclusion. The point here is not whether the Carol is getting paid enough or not, it is simply whether she is right in bringing office stationery home.

AACSB: Ethics
AACSB: Reflective Thinking
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 04-03 Recognize critical thinking errors in your own and others arguments.
Topic: Thinking Critically

46. A non-sequitur used in an argument is a wrong conclusion:

A. that does not follow from the facts or premises set out.

B. based on a false analogy.

C. that relies on the idea that a popular belief is true.

D. based on an attack against the speaker, not his/her reasoning.
A non sequitur is a conclusion that does not follow from the facts or premises one sets out. The speaker is missing the point or coming to an irrelevant conclusion.

AACSB: Ethics
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 04-03 Recognize critical thinking errors in your own and others arguments.
Topic: Thinking Critically

47. An argumentum ad populum used in an argument is a wrong conclusion:

A. that does not follow from the facts or premises set out.

B. based on a false analogy.

C. that relies on the idea that a popular belief is true.

D. based on an attack against the speaker, not his/her reasoning.
Argumentum ad populum means argument to the people. It is an emotional appeal to popular beliefs, values, or wants. The fallacy is that merely because many or all people believe something does not mean it is true.

AACSB: Ethics
AACSB: Reflective Thinking
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 04-03 Recognize critical thinking errors in your own and others arguments.
Topic: Thinking Critically

48. Debra asks Alex, her stock broker, if she can trust his advice to purchase the stocks for Acme Co. Alex replies, Of course you can. Debra asks, Why should I trust you? Alex says, with a smile, Because I am a trustworthy person. Alex is engaging in:

A. circular reasoning.

B. bandwagon fallacy.

C. argumentum ad baculum.

D. false analogy.
Alex is engaging in circular reasoning because he merely restates what Debra is saying, although in different words. He does not actually answer her question properly.

AACSB: Ethics
AACSB: Reflective Thinking
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 04-03 Recognize critical thinking errors in your own and others arguments.
Topic: Thinking Critically

49. Bill, a senior manager at Bizlaw, Inc., instructs Kim, a mid-level manager, to make false statements on the performance evaluation of Gloria, one of Kims employees who has recently filed a discrimination claim against Bill. Bill tells Kim, Look around you. Every manager makes up stories about employees Bizlaw wants to get rid of. Bills argument illustrates:

A. bandwagon fallacy.

B. argumentum ad baculum.

C. argumentum ad hominem.

D. circular reasoning.
A bandwagon argument states that we should do or not do something merely because others are doing it. The mere fact that others are doing it, does not make an action correct or ethical.

AACSB: Ethics
AACSB: Reflective Thinking
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 04-03 Recognize critical thinking errors in your own and others arguments.
Topic: Thinking Critically

50. A _____ argument states that we should or should not do something merely because one or more other people or firms do or do not do it.

A. bandwagon fallacy

B. circular reasoning

C. false cause

D. gamblers fallacy
The bandwagon fallacy is similar to argumentum ad populum. A bandwagon argument states that we should or should not do something merely because one or more other people or firms do or do not do it.

AACSB: Ethics
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 04-03 Recognize critical thinking errors in your own and others arguments.
Topic: Thinking Critically

51. Which of the following attacks the speaker for his argument, not his reasoning?

A. Argumentum ad hominem

B. Argumentum from authority

C. Argumentum as populism

D. Argumentum ad vacuum
Argumentum ad hominem means argument against the man, and an argument based on this principle attacks the speaker, not his reasoning.

AACSB: Ethics
Blooms: Remember
Difficulty: 2 Medium
Learning Objective: 04-03 Recognize critical thinking errors in your own and others arguments.
Topic: Thinking Critically

52. Guilty by association is a form of:

A. begging the question.

B. argumentum ad hominem.

C. argumentum ad populum.

D. gamblers fallacy.
Guilty by association is an argumentum ad hominem in which a speaker is attacked for his/her association with something unpopular.

AACSB: Ethics
Blooms: Remember
Difficulty: 2 Medium
Learning Objective: 04-03 Recognize critical thinking errors in your own and others arguments.
Topic: Thinking Critically

53. Jack flipped a coin five times and each time it came up heads. His friend Atmel saw this and bet Jack that the next flip would come up tails. Atmel figured that it was overdue for a tails and so tails was a more likely outcome in the next flip. Atmel has fallen prey to:

A. sunk cost fallacy.

B. reductio ad absurdum.

C. argumentum ad hominem.

D. gamblers fallacy.
The belief that independent prior outcomes affect future outcomes is called a gamblers fallacy. It can lead to wrong conclusions and bad decision making by managers, who wrongly attribute success to various causes.

AACSB: Ethics
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 04-03 Recognize critical thinking errors in your own and others arguments.
Topic: Thinking Critically

54. Which of the following is also called the slippery slope fallacy?

A. Gamblers fallacy

B. Reductio ad absurdum

C. Sunk cost fallacy

D. Argumentum ad hominem
Reductio ad absurdum carries an argument to its logical end, without considering whether it is an inevitable or probable result. This is often called the slippery slope fallacy.

AACSB: Ethics
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 04-03 Recognize critical thinking errors in your own and others arguments.
Topic: Thinking Critically

55. Bob DeSlob, CEO of Westlake, Inc., had supported the development and distribution of the Super Widget, a product that is expensive to make. The Super Widget failed to meet its expected sales. Bob, now, decides to invest more resources to produce and aggressively market the Super Widget, rationalizing that if he did not invest more in the product, what he has invested would be lost. Bob is engaging in:

A. sunk cost fallacy.

B. argumentum ad baculum.

C. argumentum ad hominem.

D. reductio ad absurdum.
Sunk cost fallacy is an attempt to recover invested time, money, and other resources by spending still more resources. Bob is wasting resources in an attempt to do something that he failed in the first attempt.

AACSB: Ethics
AACSB: Reflective Thinking
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 04-03 Recognize critical thinking errors in your own and others arguments.
Topic: Thinking Critically

56. The last tactic to adopt in resisting a request to act unethically is to:

A. buy time to think about a solution.

B. find a mentor and peer group.

C. prepare to leave the job.

D. find win-win solutions.
Preparing to lose the job should be a persons last tactic in resisting a request to act unethically; this is because by quitting or losing your job you are deprived of your ability to help the firm make ethical decisions.

AACSB: Ethics
Blooms: Remember
Difficulty: 2 Medium
Learning Objective: 04-04 Utilize a process to make ethical decisions in the face of pressure from others.
Topic: Resisting Requests to Act Unethically

57. Which of the following critical thinking errors is likely to occur among the subordinates if a leader is unethical?

A. False analogy

B. Bandwagon fallacy

C. False cause

D. Gamblers fallacy
No one can lead ethically who does not attempt and mostly succeed in behaving ethically in her business and personal life. Few underlings respect an unethical leader, and many will be tempted to rationalize their own unethical conduct when they see their leaders acting unethically. They fall prey to the bandwagon fallacy, arguing for example that since the CFO is doing something wrong, so may they.

AACSB: Ethics
Blooms: Remember
Difficulty: 2 Medium
Learning Objective: 04-05 Be an ethical leader.
Topic: Leading Ethically

Essay Questions

58. What two conditions must be met if profit-maximization is to maximize utility?

Profit maximization demands that we use societal resources as efficiently as possible to benefit society. This can happen if there is genuine and honest competition without any kinds of malpractices. This will lead to genuine profit maximization for all shareholders and stakeholders. Another point, one not raised in the text, concerns the possibility that marginal utility falls as abundance increases. If there, there may be a natural upper limit on the utility we can get through uninhibited profit-maximization.

AACSB: Ethics
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 04-01 Appreciate the strengths and weaknesses of the various ethical theories.
Topic: Ethical Theories

59. What three things are seen in the corporate scandals of 2002, such as Enron and WorldCom?

The corporate wrongdoers acted in their selfish interests, the corporate reward system encouraged them to act selfishly, illegally, and unethically, and the wrongdoers acted without effective supervision.

AACSB: Ethics
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 04-01 Appreciate the strengths and weaknesses of the various ethical theories.
Topic: Ethical Theories

60. How can a corporation improve its corporate governance and corporate responsibility?

Corporations should adopt codes of ethics or codes of conduct, and have it apply to senior financial officers. Under the Sarbanes-Oxley Act of 2002, the corporation must disclose whether it has such a code and whether any waiver or change in the code has occurred: having such a code will communicate to its shareholders that the corporation is making genuine efforts to foster ethical behavior. The corporation should also offer ethical instruction to all its decisionmakers. Further, the corporation should consider having an ethics officer who has actual power and control over the corporations actions. Additionally, the corporation should allow a greater shareholder role in its governance. Finally, the corporation should consider all the stakeholders interests in making decisions.

AACSB: Ethics
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 04-01 Appreciate the strengths and weaknesses of the various ethical theories.
Topic: Ethical Theories

61. Carol, a senior manager in Bizlaw, Inc., encourages Rob, her junior manager, to bill Bizlaws clients for his commute time, and identify it as meet and confer with senior manager. Carol explains that she will then adjust her own billing sheet to match this entry. Carol tells Rob that all other Bizlaw junior and senior managers engage in this practice, and that clients have never questioned such entries. Rob is not sure whether this would be an ethical action. What should Rob do?

First, Rob needs to recognize that Carol is making an unethical request because she is essentially asking Rob to lie to clients so that Bizlaw may collect additional fees. Rob could then buy time to find more facts and understand the impact on Bizlaws stakeholders created by such a practice by telling Carol he is working on his billing statements. He could then solicit information and mentorship from another senior manager, to determine if such a practice is widely accepted at Bizlaw, and if so, what affect it has had on its stakeholders. Rob could also consider win-win solutions: Perhaps he could arrange to have actual meetings with Carol each morning, to provide her with the billable hours she seeks while adding value to the service provided to Bizlaw clients. Forming a mentor or peer group could also help Rob to stop this billing practice, perhaps through Bizlaws ethics committee or officer. If the practice prevails at Bizlaw, then Rob must consider whether this requested action will compromise values he holds important, and if so, whether his job at Bizlaw is worth it.

AACSB: Ethics
AACSB: Reflective Thinking
Blooms: Analyze
Difficulty: 3 Hard
Learning Objective: 04-04 Utilize a process to make ethical decisions in the face of pressure from others.
Topic: Resisting Requests to Act Unethically

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