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Chapter 1
Ethics in the World of Business
Chapter Summary
Business ethics is concerned with identifying and understanding the ethical issues that arise in
business, along with the development of knowledge and skills needed by a practicing manager to
address these issues and to make sound business decisions. Ethical issues are an inevitable
element of business decision making, and they are deeply intertwined with managerial practice
and economic activity in general. The success of individual managers, business organizations,
and the whole economic system depend upon sound ethical decision making. Although
economics and law are important guides for business decision making, they are not entirely
sufficient. Organizational research conducted by psychologists and sociologists further show that
the treatment of business ethics from a purely philosophical perspective is likewise an
insufficient approach. Organizational misconduct is often the result of flaws in individual and
organizational decision making that can be corrected only by changing the overall decision
making process. Practicing managers can promote an ethical organizational culture by actively
discouraging misconduct and rewarding ethical decision making and conduct.
1.1: Identify ethical issues created by diverse business situations and relationships and the
level of decision making required to address them
1.2: Recognize the role of ethics in the conduct of business, with respect to economic
1.3: Distinguish between ethical management and the management of ethics, and each of the
1.4: Analyze how ethical business conduct is challenged by decision making on individual
and organizational levels
SUGGESTED DISCUSSION PROMPTS
1.
2.
What types of ethical concerns do decision-makers at lower organizational levels
3.
How would you respond to someone who says that a business should always do
4.
What is wrong with the thought that abiding by the law is all the ethics that a
5.
How does specialized knowledge come into play in the management of ethics?
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ASSESSMENT FOR IN-CLASS USE
Multiple Choice Questions
Choose the BEST possible answer for each of the following.
1. In many cases, rules of business ethics can be determined by _________ .
A.
applicable laws
B.
company guidelines
C.
economic requirements
D.
rules of conduct that apply in everyday life
Difficulty Level: Easy
Skill Level: Understanding
2. The economic character of business can be seen in its _________ .
A.
trading characteristics
B.
ethical dimensions
C.
personal aspects
D.
legal guidelines
Difficulty Level: Easy
Skill Level: Understanding
3. Organization in business is characterized mainly by its ________ .
A.
rules
B.
hierarchy
C.
profits
D.
products
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Difficulty Level: Easy
Skill Level: Understanding
4. Decision making in business occurs at various distinctive ________ .
A.
places
B.
levels
C.
objectives
D.
profits
Difficulty Level: Easy
Skill Level: Understanding
5. If a business manager decides to proceed with a course of action although the manager
has information that suggests the need to rethink the decision, the manager is being
influenced by
A.
anchor heuristic
B.
confirmation bias
C.
sunk cost bias
D.
adjustment heuristic
Difficulty Level: Moderate
Skill Level: Application
6. Economic reasoning describes how we _________.
A. ought to reason
B. prioritize our desires
C. reason when pursuing our goals
D. would reason if we could have whatever we wanted
Difficulty Level: Easy
Skill Level: Understanding
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7. Adam Smith’s economic theory is based on which of the following assumptions?
A. People want to promote each others’ interests.
B. Morality is not relevant to economic concerns.
C. Free markets will fix their own ethical problems.
D. People will behave rationally as they pursue their interests.
Difficulty Level: Moderate
Skill Level: Analysis
8. What fact does the “ultimatum bargaining game” demonstrate?
A. It is often rational to price products below their market value.
B. Free markets will usually self-regulate.
C. Many people do not understand economics.
D. Many people would rather not trade than be treated unfairly.
Difficulty Level: Moderate
Skill Level: Analysis
9. The school of thought that says that law and ethics govern two different realms is wrong
because ____________
A. ethics applies to every field of life
B. anything that is legal is also ethical
C. anything that is illegal is also unethical
D. the law governs every aspect of life
Difficulty Level: Easy
Skill Level: Understanding
10. It is not ethically sufficient to obey the law because ___________
A. the law does not apply to business in general
B. ethical constraints sometimes require that the law be ignored
C. ethics goes beyond what can be legally codified
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D. the law itself is stricter than ethics
Difficulty Level: Moderate
Skill Level: Application
Essay Questions
1. Identify two dangers of rationalization which can lead an individual to make unethical
decisions.
1.4: Analyze how ethical business conduct is challenged by decision making on
individual and organizational levels
Topic/Concept: Ethics in Organizations
Difficulty Level: Moderate
Skill Level: Analysis
2. Describe and explain an example of a business decision that would be unethical even
though it is legal.
1.2: Recognize the role of ethics in the conduct of business, with respect to economic
principles and the law
Topic/Concept: Ethics, Economics, and Law
Difficulty Level: Moderate
Skill Level: Analysis
3. Examine one way in which a manager’s role (job obligations) may conflict with his or
her moral obligations.
1.3: Distinguish between ethical management and the management of ethics, and each of
the three main roles of a manager
Topic/Concept: Ethics and Management
Difficulty Level: Moderate
Skill Level: Analysis
4. What is wrong with the thought that abiding by the law is all the ethics that a
businessperson needs to worry about?
1.2: Recognize the role of ethics in the conduct of business, with respect to economic
principles and the law
Topic/Concept: Ethics, Economics, and Law
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Difficulty Level: Moderate
Skill Level: Evaluation
5. How does specialized knowledge come into play in the management of ethics?
1.3: Distinguish between ethical management and the management of ethics, and each of
the three main roles of a manager
Topic/Concept: Ethics and Management
Difficulty Level: Moderate
Skill Level: Analysis