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Chapter 5
Business Ethics
TRUE/FALSE QUESTIONS
B1. Ethics is as well defined as the law.
B2. Unless a corporation violates a law, its actions do not raise questions about the
role of corporations and the effect of corporate ethics on profit.
B3. Originally, the only goal or duty of a corporation was to maximize profits.
B4. An overemphasis on long-run profit maximization is the most common reason
that ethical problems occur in business.
B5. The study of business ethics is concerned with the purposes of a business and
how that business achieves those purposes.
2 TEST BANK B—UNIT ONE: THE LEGAL ENVIRONMENT OF BUSINESS
B6. An action may be legal but not ethical.
B7. Acting in good faith gives a business firm a better chance of defending its
actions in court.
B8. Company codes are not law.
B9. Ethics is based more on research than judgment.
B10. Compared to business ethics, employee ethics is not an important issue.
B11. Religious rules generally are absolute with respect to the behavior of their
adherents.
B12. Under the principle of rights theory, one person’s principles are as “right” as
another’s.
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B13. According to utilitarianism, it does not matter how many people suffer a
negative effect from an act.
B14. The concept of corporate social responsibility is imposed on corporations by
law.
B15. Corporations can demonstrate corporate social responsibility by promoting
goals that society deems worthwhile.
B16. It is always clear what is ethical in a given situation.
B17. Managers must apply the same standards to themselves as they do to the
company’s employees.
B18. The Sarbanes-Oxley Act requires companies to set up confidential systems so
that employees and others can “raise red flags” about suspected illegal or
unethical auditing and accounting practices.
B19. Given today’s global communications network, most companies can assume
that their actions in other nations will go unnoticed.
4 TEST BANK B—UNIT ONE: THE LEGAL ENVIRONMENT OF BUSINESS
B20. Some provisions of U.S. bribery laws are directed toward accountants.
MULTIPLE-CHOICE QUESTIONS
B1. In studying the business law, students also review ethics in a business context.
Ethics includes the study of what constitutes
a. right or wrong behavior.
b. financially rewarding behavior.
c. legal behavior.
d. religious behavior.
B2. In making business decisions, Ridgeline Utility Service Company and other
corporations should strive to be “good citizens” by evaluating
a. the legal implications of each decision.
b. the public relations impact.
c. the safety risks for consumers and employees.
d. all of the choices.
B3. Corporate Security Company provides other firms with security services.
Questions of what is ethical involve the extent to which Corporate Security has
a. a legal duty beyond those duties mandated by ethics.
b. an ethical duty beyond those duties mandated by law.
c. any duty beyond those mandated by both ethics and the law.
d. any duty when it is uncertain whether a legal duty exists.
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B4. Desdemona works for eInnovation, Inc. Her job includes putting “spin” on the
firm’s successes and failures. In this context, ethics has to do with how
businesspersons, in making their decisions, apply
a. legal doctrine.
b. moral and ethical principles.
c. corporate guidelines.
d. financial priorities.
B5. Green Hybrid Auto Corporation pays its executives an excessive amount
relative to what lower-level employees at the company receive and to what
executives at competitive companies are paid. Green Hybrid’s pay scale is
most likely to be challenged as
a. illegal.
b. unprofitable.
c. unconscionable.
d. unethical.
B6. Ronelle, the human resources director for Small Business Solutions, Inc., at–
tempts to comply with the law in dealing with applicants and employees. One of
the challenges Ronelle faces is that the legality of an action is
a. always clear.
b. never clear.
c. only sometimes clear.
d. usually clear.
6 TEST BANK B—UNIT ONE: THE LEGAL ENVIRONMENT OF BUSINESS
B7. Brewster, the chief executive officer of Cog & Gear Lubricants Corporation,
wants to ensure that Cog & Gear’s activities are legal and ethical. The best
course for Brewster and Cog & Gear is to act
a. in good faith.
b. out of ignorance of the law.
c. with regard for the firm’s shareholders only.
d. in their own self-interest.
B8. Situations in which employers face ethical issues with respect to social media
platforms include
a. conducting an Internet search to discover what a job candidate has
posted.
b. judging a job candidate based on what he or she does outside the work
environment.
c. rejecting a job candidate if he or she does not participate in any social
media.
d. all of the choices.
B9. Ryland, an officer for Sports Park, Inc., attempts to apply a duty-based
approach to ethical reasoning in conflicts that occur on the job. This approach
is based on the idea that a person must
a. achieve the greatest good for the most people.
b. avoid unethical behavior regardless of the consequences.
c. conform to society’s ethical standards.
d. place his or her employer’s interest first.
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B10. Dyan, the owner of Expert Restoration Services, Inc., adheres to the “principle
of rights” theory. Under this theory, a key factor in determining whether a
business decision is ethical is how that decision
a. compares to religious principles.
b. affects the rights of others.
c. effects consequences that would follow if everyone in society acted the
same way.
d. supports the right to make a profit.
B11. Steaks n’ Fries Restaurant Company’s decision makers view a particular risk in
the consumption of Steaks n’ Fries’ products as open and obvious. Continuing
to market the products without explicitly telling consumers of the risk could be
justified from a perspective of
a. duty-based ethics.
b. corporate social responsibility.
c. religious ethical principles.
d. outcome-based ethics.
B12. Ross, a research manager for Stock & Bond Investments, Inc., adheres to
utilitarian ethics. Ross will determine that an action is morally correct when it
produces the greatest good for
a. Ross.
b. Stock & Bond Investments.
c. the fewest people.
d. the most people.
8 TEST BANK B—UNIT ONE: THE LEGAL ENVIRONMENT OF BUSINESS
B13. Palette Paints, Inc. expends funds and takes steps to ensure that all employees
are safe on the job, that all products are safe for consumers, and that the
environmental impact of the corporation is minimal. Palette Paints appears to
believe in the concept of
a. the moral minimum.
b. corporate social responsibility.
c. “grey areas” in the law.
d. government oversight.
B14. Digital Analytics, Inc., considers the impact of its corporate decisions on various
groups and often acts in the interest of a group that has a greater stake in a
decision than Digital’s shareholders. This approach is most likely to attract
potential employees who are
a. investors focused on short-term profits.
b. older professionals.
c. information technology specialists.
d. recent college graduates.
B15. Comfort Foods Corporation makes and markets its products nationwide. To be
considered socially responsible when making a business decision, Comfort
Foods must take into account the needs of
a. its customers and the community only.
b. its employees and owners only.
c. its employees, owners, customers, creditors, suppliers, and the
community.
d. no one.
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B16. GetTogether, A Social Media Company encourages its managers to behave
ethically, reasoning that lower-level employees will take their cues from
management. One of the most important ways to create and maintain an ethical
workplace is for GetTogether’s management to
a. demonstrate a commitment to ethical decision making.
b. discreetly engage in unethical or illegal acts.
c. look the other way when an employee engages in an unethical act.
d. direct employees to “do as we say, not as we do.”
B17. Ricardo suspects his supervisor Simone of unethical accounting practices. But
Ricardo does not want to report Simone if she will find out who reported her
and fire Ricardo. An important feature of online reporting systems like
EthicsPoint is that an employee reporting unethical behavior
a. can do so anonymously.
b. is financially compensated if he or she is fired as a result of a report.
c. must fully identify themselves when making a report.
d. must have additional employee support to make a report.
B18. Lowell runs Medical Debt Collection Agency. He collects debts by
misrepresenting the facts and pretending to be licensed to perform various
occupations. Lowell’s conduct most likely warrants
a. an admonition for unethical behavior but no other sanctions.
b. an injunction plus other sanctions.
c. no sanctions but no praise.
d. praise for the aggressive approach to collecting debts.
10 TEST BANK B—UNIT ONE: THE LEGAL ENVIRONMENT OF BUSINESS
B19. Discount Mart Corporation contracts with companies in developing nations to
produce goods, because the wage rates in those nations are significantly lower
than those in the United States. Discount Mart takes steps to avoid bad
publicity by monitoring its suppliers’ workplaces to make sure that the
employees are not mistreated. Discount Mart is
a. acting unethically in its pursuit of good publicity.
b. acting unethically in its pursuit of profits.
c. acting unethically by monitoring its suppliers.
d. not acting unethically.
B20. Petro Refining Corporation makes payments to potential customers, suppliers,
and others with whom they might do business, including foreign private
companies and the representatives of foreign labor organizations. If Petro
knows that these payments will be passed on to a foreign government, this
practice is
a. illegal if the payments violate the Foreign Corrupt Practices Act.
b. legal if a third party acts as a “go–between.”
c. legal if private parties are involved on both sides of the deal.
d. legal if the payments are intended to facilitate business.
ESSAY QUESTIONS
B1. Precision Tool Corporation sells a product that is capable of seriously injuring
consumers who misuse it in a foreseeable way, even though the label warns
against the misuse. Does the firm have an ethical duty to take this product off
the market? What conflicts might arise if the firm stops selling this product?
CHAPTER 5: BUSINESS ETHICS 11
B2. Carney & Deb, Accountants, perform a variety of tasks for their clients—
financial statements and tax returns, for example. To accomplish these tasks,
Carney & Deb collects their clients’ personal and financial information. Carney
& Deb can store the personal and financial information of its clients on any
electronic device, including a smartphone, a tablet, a flash drive, a laptop, and
a copier. When Carney & Deb upgrades its storage media, the information is
transferred between devices. Does Carney & Deb have an ethical obligation to
its clients with respect to this information? If so, what are the ethics in the
situation?
