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Indicate whether the statement is true or false.
1. To be classified as a social entrepreneurship, a business must have a triple bottom line.
a. True
b. False
Indicate the answer choice that best completes the statement or answers the question.
2. The type of tax most likely to be a problem for entrepreneurs is:
a. federal income tax. b. employee payroll taxes.
c. state withholding tax. d. state sales tax.
3. Floyd would like to be able to monitor his employees’ Internet activity because:
a. his customers cannot view his company website if his employees are surfing the Web. b. employees have
to share Internet access and he wants to be fair to everyone.
c. such activity hinders workplace productivity. d. his data plan allows only 5 gigabytes of access every
month and overage charges are expensive.
4. The most important influence on ethics in a small business is
a. the accountant or bookkeeper who keeps honest financial records.
b. the salesperson who quotes a fair price to customers.
c. the founder or owner whose values are put into practice.
d. the existence of a written code of ethics.
5. Skimming is an unethical business practice involving
a. failure to report all income on tax returns.
b. employees taking cash from the cash register.
c. sales associates offering gifts and inducements to purchasers.
d. managers of competing firms agreeing to charge high prices.
6. Entrepreneurs should think carefully about their community commitments because “doing good” may add to a small
company’s
a. bottom line.
b. financial burden.
c. payroll.
d. local profile.
7. Clark, the owner of DEF LLC, bragged about hiding company income from the IRS but was surprised when he learned
his sales manager was accepting kickbacks from customers. Clark should have remembered:
a. kickbacks are common in his industry. b. lapses in integrity can easily be passed down
from superiors to subordinates.
c. his sales manager could alert the IRS and Clark could be prosecuted for tax evasion. d. bragging nearly
always leads to trouble.
8. In a small business, the most important key to ethical performance is
a. a code of ethics.
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b. the personal integrity of the founder or owner.
c. a training program based on the code of ethics.
d. the amount of legislation affecting the organization.
9. Bernard praises his employees as often as he catches someone doing something right. He often hosts family get-
togethers for his few employees. Bernard knows:
a. a little money spent on his people will be returned many times over in profits. b. happy employees make
for satisfied customers.
c. this will lead to his employees being more engaged and productive. d. it’s a waste of time and money
but he enjoys the camaraderie.
10. Environmentalism poses the greatest threat to small
a. medical waste disposal businesses.
b. drugstores.
c. movie theaters.
d. auto repair shops.
11. An example of a small business that actually benefits from the growing interest in environmentalism would be
a. a fast-lube and oil change center.
b. a producer of ethanol from farm waste.
c. a self-service car wash.
d. an asbestos removal service.
12. If Floyd elects to monitor the personal email accounts of his employees at work, he should:
a. install screening software to avoid hiring another IT employee. b. first develop a carefully worded and
legally sound policy and make sure all employees are aware of it.
c. consult an attorney before terminating an employee for viewing personal email at work. d. block access to
all personal email servers from company computers.
13. A small computer retailer makes every effort to satisfy customer needs both before and after the sale. However, this
retailer regards social problems as being beyond the scope of his business. This firm’s management has recognized
a. some degree of social responsibility in its commitment to customers.
b. the existence of social responsibilities but having failed to do anything about them.
c. ethical obligations to customers but not social responsibilities.
d. social responsibility as the domain of big business.
14. The ethical influence of a leader of a small business is
a. relatively minor.
b. overpowered by profit concerns of stockholders.
c. less important than the views of others within the firm.
d. more pronounced than that of a leader of a large corporation.
15. Damon landed his first contract as an entrepreneur then submitted to the local newspaper a news release that gave the
impression this was just one of a series of contracts and that business was booming. Damon has:
a. told a legitimacy lie. b. inflated his income.
c. evaded taxes. d. violated the law.
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16. Candace sells the muffins in her bakery at a higher price than the big-box grocery but she has a steady stream of
customers willing to pay what she asks. Candace also supports local charities. What would likely happen if she lowered
her prices and stopped her charitable contributions?
a. Nothing b. Customers would go elsewhere.
c. Business would increase. d. Income taxes would decrease.
17. Garner developed a code of ethics for his growing business because:
a. he wanted to define the ethical expectations for all his employees.
b. he wanted to have a legal defense should any of his people violate
the law.
c. he wanted to create an informal channel of communication for
discussions about ethical issues. d. he wanted to give his suppliers a formal document dictating how
they should behave.
18. A band who fails to record the cash they collected for admission to their shows could be charged with what illegal
practice?
a. cash diversion
b. tax evasion
c. skimming
d. payroll tax avoidance
19. The term for when an employee steals money from a firm is
a. cheating.
b. fraud.
c. embezzlement.
d. promotion.
20. Of all the concerns regarding Internet use, the greatest is:
a. how users’ personal information is being protected. b. whether
the content of a website is truthful.
c. how soon a Web customer will receive an order. d.
hacking.
21. While unethical practices do exist, it is good that the great majority of small firms strive to achieve the highest
standards of ____ in their quest for profits.
a. integrity
b. relativism
c. synchronous behavior
d. congruity
22. A baker looking for new retail space has returned from a seminar on environmentalism and wishes to act responsibly
in this area. Which action will best accomplish this purpose?
a. Looking into leasing a LEED certified space
b. Reducing product prices
c. Eliminating undesirable processing odors
d. Increasing service to customers
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23. A digital ID tag that is electronically sent to the customer’s computer when other requested materials are downloaded
from a Web site is known as
a. a cookie.
b. a saucer.
c. an inverted collector.
d. a contact signature.
24. A U.S. manager is upset with the company’s overseas representative for paying a small “access fee” to a local customs
official to ensure the expedited release of a customer order. The manager’s belief such payments are wrong reflects a
sense of _____.
a. cultural insensitivity
b. ethical elitism
c. ethical imperialism
d. cultural integrity
25. The most widely recommended principle for ethical behavior is to do what
a. is best for yourself.
b. will yield the most profits.
c. you would want others to do for you.
d. will reduce product prices.
26. Milton Friedman argues that businesses
a. should avoid social responsibility whenever it is possible to do so.
b. should be required to use their resources meet their social responsibilities.
c. can only earn profits if they do so in a socially responsible manner.
d. are justified in being socially responsible only if doing so increases the firm’s value.
27. Entrepreneurs must reconcile their social obligations with _____.
a. their family commitments.
b. their personal schedule.
c. the need to earn profits.
d. their religious beliefs.
28. If a student copies a favorite CD and gives it away to a friend to use, the student is engaged in the theft of _____
property.
a. collective
b. intangible
c. intellectual
d. real
29. A code of ethics becomes increasingly appropriate and necessary as a small business
a. expands its credit sales and acquires more customers who buy on credit.
b. begins to market products in other countries.
c. grows larger, with a consequent lessening of the owner’s personal influence.
d. increases borrowing to the extent that one-third of its assets are financed by borrowing.
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30. An example of an industry especially vulnerable to efforts to protect the environment is the _____ industry.
a. glass manufacturing
b. military construction
c. restaurants
d. asbestos removal
31. The owner of LMN Company has been asked to sponsor a Little League team by donating money to buy team
shirts. In return, the team will print the company name on the shirts. To which stakeholder group does this team belong?
a. Owners b. Customers
c. Employees d. Community
32. An eBay retailer selling counterfeit Gucci and Louis Vuitton handbags is in violation of laws related to
a. Internet fraud.
b. intellectual property.
c. bait-and-switch marketing.
d. ethical imperialism.
33. When a company delivers an excellent product with excellent service, ______________ are likely to follow.
a. profits and a good reputation b. customer satisfaction and profits
c. healthy sales and profits d. customer satisfaction and healthy sales
34. After issues related to customers and competitors, the second most common category of ethical issues that challenge
small businesses is concerned with
a. the treatment of employees.
b. international relations.
c. public relations.
d. harmful production processes.
35. The purpose of the Better Business Bureau is:
a. to provide an outlet for customer complaints about a business. b.
to promote ethical conduct on the part of all businesses in a region.
c. to report relevant information to law enforcement agencies. d. to
impose penalties on companies that engage in unethical business practices.
36. Naked Sports Gear’s dedication to its customers, employees, and the environment is an example of:
a. a sustainable small business. b. ethical relativism.
c. social entrepreneurship. d. ethical imperialism.
37. In drawing up a code of ethics, a small business owner should adopt a code
a. provided by the Ethics Resource Center of Washington, D.C.
b. that outlines ethical principles and gives examples.
c. that outlines ethical principles but avoids examples.
d. suggested by the Better Business Bureau.
38. When evaluating alternatives, the entrepreneur will select one that is truthful, beneficial to all parties, fair, and
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a. exploitable. b. publishable
c. profitable d. repeatable.
39. Providing inaccurate or misleading financial information to stakeholders can:
a. damage critical relationships. b. reduce profits.
c. increase profits. d. enhance critical relationships.
40. An example of an employee acting unethically towards his or her employer is:
a. Taking a vacation
b. Taking unjustified sick leave
c. Working overtime
d. Taking a 15 minute break
41. U.S. Government assistance is available to lead the entrepreneur in compliance with environmental law through the
a. Small Business Administration.
b. Department of Energy.
c. Department of Commerce.
d. Interior Department.
42. Entrepreneurs often come up short on their tax commitments because of a single-minded focus on their product or
service and/or _____.
a. casual accounting systems
b. low-cost accounting software
c. incompetent in-house accountant
d. cash-basis accounting systems
43. The application of U.S. standards to ethical issues that are clouded by cultural differences abroad is sometimes
categorized as _____.
a. overly idealistic.
b. ethical imperialism.
c. USA arrogance.
d. situation ethics.
44. Of all the possible stakeholders, the three primary ones are
a. the government, the community, and the customers. b. the
customers, the employees, and the owners.
c. the creditors, the investors, and the employees. d. the
suppliers, the customers, and society at large.
45. Perhaps the greatest benefit of integrity in business is the _____ it generates.
a. trust
b. profit
c. reputation
d. sales
46. A firm’s employees would be considered __________________ in the business.
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a. investors b. stakeholders
c. customers d. stockholders
47. The saying “When in Rome, do as the Romans do” reflects a philosophy of _____.
a. ethical insensitivity
b. ethical elitism
c. ethical imperialism
d. ethical relativism
48. In order to make an ethical decision, the key to problem definition is to
a. go with the obvious solution.
b. look at the surface of the problem.
c. find the most cost effective solution.
d. identify the root of the problem.
49. PRO factors include
a. products, resources, and outputs. b. products, representatives, and organizations
c. people, resources, and outputs. d. performance, relationships, and options.
50. An ethical business not only treats customers and employees honestly, but also acts as a good citizen in the
community. These broader obligations of citizenship are called
a. community commitment.
b. philanthropy.
c. environmentalism.
d. social responsibilities.
51. Annabelle often shops for clothing and household goods online while at work. Which of the following best describes
this situation?
a. Abusive behavior b. Lying to employees
c. Improper use of company resources d. Inappropriate Internet use at work
52. The price of integrity is high, but the potential payoff is incalculable because it is impossible to compute
a. the price of a clear conscience.
b. the cost of environmental destruction.
c. the value of ethical imperialism.
d. the profit margin on good deeds.
53. A person understating income or claiming personal expenses as business expenses is guilty of _____.
a. bait and switch
b. skimming
c. scaling
d. relativism
54. Karl Eller reports in his book, Integrity Is All You’ve Got, which of the following characterizes entrepreneurial
businesses with integrity?
a. The entrepreneur with integrity gives the company a competitive edge.
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b. The management of these companies understand the bottom line so that is still their singular focus.
c. For the most part, founders with integrity are stressed to balance growing the business and following their
principles.
d. A solid financial performance needs to be achieved so that customers will know about the company’s integrity.
55. Ethical issues
a. seldom involve legal issues.
b. are questions of right and wrong.
c. are always clearly defined.
d. often resolve themselves.
56. Members of a community will react _____ to a business they trust.
a. negatively
b. positively
c. indifferently
d. indecisively
57. An effective way for an entrepreneur to establish legitimacy is:
a. to hire experienced employees from competitors. b. to insist on
professional behavior from all customer-contact employees.
c. to communicate the company’s mission clearly and frequently. d.
to out-perform the competition by underbidding and over-promising.
58. Because a firm has considerable discretion in reporting performance results, financial reports can sometimes be _____
without technically being illegal.
a. inaccurate
b. misleading
c. unreliable
d. bellicose
59. Many types of socially responsible actions can be consistent with a firm’s long-term profit resulting in some degree of
_____ being earned by such behavior.
a. money
b. respect
c. goodwill
d. management expertise
60. Abner sometimes shorts the customer when weighing out bulk merchandise, believing the practice leads to higher
profits so it is acceptable. We could infer that
a. Abner lacks integrity. b. Abner is not an entrepreneur.
c. Abner cheats on his taxes. d. Abner is skimming.
61. When Evelyn hired a new sales manager, she issued a press release emphasizing the new hire’s education and industry
experience because:
a. she wanted to introduce the sales manager to the community. b.
this was her first new hire and she wanted everyone to know her business was expanding.
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c. She had stolen the sales manager from a competitor and wanted to gloat
publicly. d. she wanted to bolster the sales manager’s credibility.
62. Giving the impression a business is something it is not
a. is ingenious and resourceful. b. is illegal.
c. is acceptable so long as no one is hurt by the transactions.
d. is a way to manipulate customers.
63. Refusing to pay a bribe even though it is a common practice in the country one is doing business in is an example of:
a. cultural relativism
b. social entrepreneurship
c. integrity
d. sustainability
Enter the appropriate word(s) to complete the statement.
64. The purpose of the ___________ _________ _________ is to promote ethical conduct on the part of all businesses in
a region.
65. Waverly Corporation ensures the temperature of water released back into the river is the same temperature as water
drawn from the river for its production needs. It does the same for its exhausted air. Its products are made with a minimal
environmental impact and it has won many awards in its industry. Waverly Corporation is an example of a __________
______ ________.
66. Rhoda, the bookkeeper for a small company, has been diverting company funds into her personal bank
account. Rhoda is engaging in ____________.
67. Milton Friedman believed the only ________ ____________ of a business is to make a profit while operating within
the rules of the game.
68. PQR Company promotes its practice of using only recycled and recyclable materials in its products. In the customer
waiting area, recycle bins are available for plastic, glass, and aluminum drink containers. PQR is riding the wave of
_____________, a concern for the protection of nature.
69. Entrepreneurs would do well to remember that customers who have questions about the ________ ____________
(products, representatives, or the organization) are less likely to make purchases.
70. Ralph has vending machines on his business property for the convenience of his employees. He reports on his income
tax form only half the cash collected by these machines. The rest is hidden Ralph’s personal account. This practice is an
example of ___________.
71. Richard believes the United States is the greatest nation on earth and that all other countries should subscribe to our
system of democracy and human rights. Therefore, he expects his overseas sales reps to follow American business
practices. This is an example of _________ _____________.
72. Millicent, founder of a small company that markets baked goods made from organic ingredients, emphasis honesty in
all transactions. In this respect, Millicent acts with ____________.
73. Suppliers, creditors, and the community are examples of ______________ of a business.
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74. Carlos understands that cultures develop different standards and practices that govern how business is conducted. He
is careful to observe local customs when he interacts with foreign companies. Carlos is practicing ___________
_____________.
75. William wants everyone to think his business is growing faster than it actually is so he built an impressive website
with an exaggerated company history. His efforts to mislead are known as ____________ ______.
76. As her business grew, Gretchen could not spend as much time individually with her employees. She wanted to make
sure her values and beliefs permeated the entire organization so she prepared a ____ __ ______ for distribution to all her
employees so everyone could follow the same guiding principles.
77. Small businesses are learning that sustainable business practices can hold down _________, attract _________, and
generate value for ___________.
78. Entrepreneurs should think carefully about their community commitments because charitable acts may be a
_________ to the organization.
79. Sometimes Vincent doesn’t have enough cash on hand to send in the monthly taxes withheld from his employees’
paychecks. This could be the result of a single-minded focus on production or because of a casual ____________
___________.
80. Successful entrepreneur Karl Eller noted the crucial role of ________ to achievement in business.
81. When her employees review a situation, they sometimes ask themselves, “What would Marcella do in this
situation?” They know her __________ ____________ have helped to build the business on a foundation of integrity and
serve as a guide for their own decisions.
82. The triple bottom line sought by the social entrepreneur includes three outcomes of interest: people, profits, and
___________.
83. Malcolm is careful to share with his employees information about customer orders, financial performance, and quality
concerns. Malcolm is exercising _________ __________.
84. Owners, customers, and employees are considered to be the _________ ____________ of a business.
85. Companies that use renewable resources, reduce emissions of harmful chemicals into the environment, and help other
firms reduce their waste have taken advantage of ______ _____________.
86. Among the many __________ of any small business are owners, employees, and customers.
87. The Rotary Club International calls on its members, when making a business decision, to ask themselves the following
questions:
1. Is it the ________?
2. Is it ______ to all concerned?
3. Will it build __________ and better friendships?
4. Will it be _________ to all concerned?
88. Tyrone gives 1% of the profits of his company to local organizations like the Little League and the Boys and Girls
Club. In this way, Tyrone is fulfilling his _________ ______________.
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89. Franco treats his customers with respect. He is always truthful, even if it means losing a sale. He uses high quality
materials and careful craftsmanship. If he can’t meet a customer’s deadline, he says so. His customers appreciate his
integrity, which has helped to build ________ between them and Franco.
90. Sales people are often asked to walk a fine line between _________ and ____________.
a. code of ethics
b. environmentalism
c. ethical imperialism
d. ethical relativism
e. integrity
f. intellectual property
g. social responsibilities
h. skimming
i. stakeholders
j. sustainable small business
k. underlying values
91. The belief that ethical standards are subject to local interpretation
92. A company’s ethical obligations to the community
93. Beliefs that provide a foundation for ethical behavior in a firm
94. The belief that the ethical standards of one’s own country can be applied universally
95. A general sense of honesty and reliability that is expressed in a strong commitment to doing the right thing, regardless
of the circumstances
96. Individuals or groups who either can affect or are affected by the performance of the company
97. The effort to protect and preserve the environment
98. Original intellectual creations, including inventions, literary creations, and works of art, that are protected by patents
or copyrights
99. A profitable company that responds to customers’ needs while showing reasonable concern for the environment
100. Official standards of employee behavior formulated by a business owner
101. List the six-step decision making process in order and comment on each of the steps in resolving ethical issues.
102. Describe PRO factors and how these factors relate to customers.
103. Discuss the relationship between profits and social responsibility in the small firm.
104. Using examples discussed in the book, discuss how sustainability has resulted in different goals for small businesses.
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105. Explain how integrity applies to various stakeholder groups, including owners, customers, employees, the
community and the government.
106. Describe the five fundamental principles that an ethics policy should address.
107. What are some important social responsibilities of small businesses?
108. How can integrity and financial success be related? Use the Home Grown Farm as an example to strengthen the
argument.
109. Discuss the issues related to Internet usage and personal privacy from both a business perspective and an employee
standpoint. What should a small business do to decrease conflict?
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Answer Key
1. False
2. b
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26. d
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52. a
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