Collins, Business Ethics 3e
SAGE Publishing, 2021
Test Bank
CASE STUDY 4: THE HAPPINESS MINIMUM WAGE: THE STORY OF DAN PRICE
AND GRAVITY PAYMENTS
Multiple Choice
1. Dan Price’s company, Gravity Payments, prioritized ______ when it was founded.
a. customer service
b. fee transparency
c. high profits
d. community service
2. The happiness minimum wage is a wage level that permits an individual to
experience ______.
a. increased satisfaction in the workplace
b. increased standard of living
c. maximum productivity
d. maximum daily personal happiness
3. Which is true about the happiness minimum wage theory?
a. Daily happiness tends to decline after a certain salary is reached.
b. Daily happiness will always increase exponentially as salary increases.
c. Daily happiness tends to peak when one earns roughly $75,000.
d. Daily happiness plateaus when one earns roughly $60,000.
Collins, Business Ethics 3e
SAGE Publishing, 2021
AACSB Standard: Knowledge
4. In Kahneman and Deaton’s research, a person’s experience of emotional well-being
was measured by asking which question?
a. How are you feeling today?
b. How did you feel last week?
c. How satisfied are you with the last few months?
d. How satisfied are you with your life?
5. What did Kahneman and Deaton’s research find about the relationship between life
satisfaction and income?
a. Life satisfaction continues to increase as long as salary increases.
b. Life satisfaction plateaus after salary hits $75,000.
c. Life satisfaction is relatively unaffected by salary.
d. Life satisfaction tends to increase when salary is lower.
6. Kahneman and Deaton found that lack of adequate income contributes to ______.
a. sadness
b. satisfactory life evaluations
c. anger
d. emotional happiness
7. A person who earns less than $3,000 per month is more likely to experience ______
than someone with higher income.
a. benefits of the weekend
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SAGE Publishing, 2021
b. emotional distress
c. better health
d. lower stress
8. After changing their salary structure, Gravity payments experienced which of the
following?
a. higher revenue
b. fewer employees
c. lower creativity
d. higher levels of stress
9. According to scholasticism, commerce should be characterized by ______.
a. maximizing profits and reducing internal costs
b. dispersing profits among all workers equally
c. the owner enjoying profits because of their capital investment
d. fair bargaining and just treatment
10. Which is true about Thomas Aquinas?
a. He is considered one of the greatest capitalists of all time.
b. He argued that communities needed unity and commonality.
c. He condemned all commercial activity.
d. He did not believe owners had a right to generate profits.
11. Thomas Aquinas argued that determination of just wages were not likely to occur if
______.
a. the negotiating parties try to exploit one another
b. the sole purpose of all negotiating parties is to generate profits
c. all negotiating parties have a common goal
d. wages were too high and, thus, eroded virtue
12. In Rerum novarum, Pope Leo XIII noted that a fair wage was one that ______.
a. reduced stress and, therefore, immorality
b. provided a comfortable living for all people
c. supported a frugal and well-behaved person
d. was determined by fair negotiations
13. According to Scottish theorist Adam Smith, natural wages should ______.
a. support a frugal, well-behaved person
b. be more than what is considered sufficient
c. reflect the level of a worker’s productivity
d. support the owner’s profits
Collins, Business Ethics 3e
SAGE Publishing, 2021
14. According to Scottish theorist Adam Smith, who is most likely to be sympathetic
toward business owners?
a. an elected official
b. an employee
c. the general public
d. labor union leaders
15. Secular calculations of a living wage include consideration of ______.
a. entertainment costs
b. saving money for retirement
c. geographic area
d. dining out
16. With regard to wages, states are required to ______.
a. reevaluate their living wage annually
b. reevaluate their minimum wage annually
c. pay the federal minimum wage
d. pay a living wage
17. The theory of efficiency wages would argue that employees should be paid ______.
a. below market value
b. above market value
c. the federal minimum wage
d. the state minimum wage
Collins, Business Ethics 3e
SAGE Publishing, 2021
18. Imagine you own a company. Even though the average market wage for employees
in your industry is $8 per hour, you decide that you will page all employees a minimum
wage of $16 per hour. According to efficiency wage theory, what is likely to occur?
a. Your employees will be more likely to take time off.
b. You will have trouble attracting qualified job applicants.
c. You income and profits will be lower than industry benchmarks.
d. Your employees will work more efficiently than employees at other companies.
19. Gravity Payments’ employees reported ______ after their wages were adjusted to
$70,000.
a. lower levels of energy
b. dramatically increased commute times
c. lower levels of happiness
d. greater levels of financial stability
20. One analysis of Dan Price’s adjustment to his company’s salary structure
determined which of the following?
a. Dan Price was motivated to restructure wages to boost his own profits.
b. Dan Price likely restructured wages to boost his own personal fame.
c. Dan Price had to personally liquidate his own resources to enable the restructuring.
d. Dan Price’s company suffered a high loss of customers after the restructuring.
Collins, Business Ethics 3e
SAGE Publishing, 2021
True/False
1. Dan Price’s decision to change the salary structure of his company was well received
by all industry experts.
2. A lack of adequate income is tied to poor health.
3. The fundamental premise of capitalism is that the owner is entitled to enjoy profits,
since they made the initial investment of capital.
4. In Rerum novarum, Pope Leo XIII noted that only the rights of workers should both be
protected.
5. Currently, it is relatively easy to achieve a decent standard of living if one earns the
federal minimum wage.
Collins, Business Ethics 3e
SAGE Publishing, 2021
Essay
1. According to researchers Daniel Kahneman and Angus Deaton, what are the
similarities and differences between one’s life satisfaction and one’s emotional well-
being?
2. Imagine that you work for a company with a history of paying employees low wages.
Your colleagues are considering starting a union to better advocate for a more livable
wage and ask if this is something you think would yield a fair wage. Considering the
teachings of Thomas Aquinas, do you think this is something you would support?
Explain your answer.
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SAGE Publishing, 2021
3. Given historical philosophical thought on wage determination, do you think you would
have made the same decision Dan Price did? Use examples to support your answer.
4. Imagine that your company has tasked you with determining the starting wage that
will be offered to new employees as your company. How would you determine this?
5. People earning the minimum wage in states that have simply retained the federal
minimum wage have lost an estimated 17% in pay in the last 10 years. If you were a
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SAGE Publishing, 2021
federal legislator, would you make changes to how the federal minimum wage is
determined and updated? Explain your answer.