Chapter 5
Ethics and Business
Decision Making
N.B.: TYPE indicates that a question is new, modified, or unchanged, as follows.
N A question new to this edition of the Test Bank.
+ A question modified from the previous edition of the Test Bank.
= A question included in the previous edition of the Test Bank.
TRUE/FALSE QUESTIONS
B1. Ethics is concerned with the fairness or justness of an action.
B2. Business ethics applies only to the owners, operators, and employees of corporations.
B3. An action may be legal but not ethical.
B4. Simply obeying the law does not fulfill all ethical obligations.
B5. Acting in good faith gives a business firm a better chance of defending its actions in
court.
B6. A business firm can sometimes predict whether a given action is legal.
B7. The most common reason that ethical problems occur in business is an overemphasis
on long-run profit maximization.
B8. Managers must apply different standards to themselves than they apply to their
employees.
B9. An ethics program can clarify what a company considers to be unacceptable conduct.
B10. Corporate ethical policies must be clearly communicated to be effective.
B11. Stock buybacks are illegal and serve no legitimate purposes.
B12. Ethical standards based on religious teachings tend to be absolute.
B13. Under the principle of rights theory, one person’s principles are as “right” as
another’s.
B14. According to utilitarianism, it does not matter how many people suffer a negative
effect from an act.
B15. If an action is ethical from an outcome-based perspective, then it cannot be ethical
from a duty-based perspective.
B16. Corporations can be good citizens by promoting goals that society deems worthwhile.
B17. To be ethical is to “do the right thing” but it does not otherwise “pay.”
B18. A business organization and its actions cannot be based on trust.
B19. The role played by women may present some difficult ethical problems for firms doing
business internationally.
B20. Some U.S. bribery laws are directed toward accountants.
MULTIPLE-CHOICE QUESTIONS
B1. In studying the legal environment of business, Professor Dooley’s students also review
ethics in a business context. Ethics includes the study of what constitutes
a. fair or just behavior.
b. financially rewarding behavior.
c. legal behavior.
d. religious behavior.
B2. Lia works for Media Marketing Company. Her job includes putting “spin” on the firm’s
successes and failures. In this context, ethics consist of
a. “bad” versus “good” publicity.
b. questions of rightness and wrongness.
c. the firm’s quarterly revenue.
d. whatever is legal.
B3. Bess runs Creditors Asset Recovery. She recruits clients by misrepresenting the facts
and pretending to be licensed in various occupations in Michigan. Bess’s conduct most
likely warrants
a. an ethical admonishment but no other sanctions.
b. an injunction plus other sanctions.
c. no sanctions but no praise.
d. praise for her aggression in recovering the assets of “deadbeat” debtors.
B4. DeLouse Plastics Corporation pays its executives an excessive amount relative to other
employees and to what executives at competitive companies are paid. This is most
likely to be challenged as
a. illegal and unethical.
b. illegal only.
c. neither illegal nor unethical.
d. unethical only.
B5. Sharon, the human resources director for Tempo Corporation, attempts to comply
with the law in dealing with applicants and employees. One of the challenges Sharon
faces is that the legality of an action is
a. always clear.
b. never clear.
c. sometimes clear.
d. usually clear.
B6. Eden, the chief executive officer of Flo-Thru Piping Corporation, wants to ensure that
Flo-Thru’s activities are legal and ethical. The best course for Eden and Flo-Thru is to
act in
a. good faith.
b. ignorance of the law.
c. regard for the firm’s shareholders only.
d. their own self interest.
B7. Straitway Company encourages its managers to behave ethically, reasoning that the
employees will take their cues from management. One of the most important ways to
create and maintain an ethical behavior workplace is for 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.”
B8. Whirlwind Financial Corporation sends its executives to a resort in Mexico—at
taxpayers’ expense—to consider using the firm’s cash to buy back its stock and
thereby prop up the value. Many of its competitors are doing the same thing. One of
the best ways to learn about the ethical responsibilities inherent in operating a
business is to look at
a. the mistakes made by other companies.
b. the benefits of pursuing profit despite the appearance of impropriety.
c. the prevalence of a practice among other corporations.
d. who is footing the bill for a particular action.
B9. Global Distribution Corporation suggests that its employees apply the “categorical
imperative” to ethical issues that arise at work. This requires that the employees
a. categorize the issues according to legality, morality, and profitability.
b. consider only the benefits that would accrue to them personally.
c. look only at the result, regardless of the means to attain it.
d. weigh the consequences that would follow if everyone acted the same.
B10. In business deals, Felipe, the chief executive officer of Glazed Donuts, Inc., follows
duty-based ethical standards. These are most likely derived from
a. a corporate ethics code.
b. a cost-benefit analysis.
c. philosophical reasoning.
d. the law.
B11. Tilly, the chief financial officer for USA Products Corporation, attempts to apply
Christian precepts in making ethical decisions and in doing business. In applying duty-
based ethical standards that are derived from a religious source, Tilly would consider
the motive behind an act to be
a. irrelevant.
b. the least important consideration.
c. the most important consideration.
d. the only consideration.
B12. Dion, an accountant for Entertainment Sports, 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.
B13. Ryan, the owner of SuperMart Stores, 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 affects
a. the right determination under a cost-benefit analysis.
b. the rights of others.
c. the “right” thing to do.
d. the right to make a profit.
B14. Solid Tool Company’s decision makers view a particular risk in the use of Solid’s
product as open and obvious. Continuing to market the product without telling
consumers of the risk could be justified from a perspective of
a. duty-based ethics.
b. Kantian ethics.
c. rights-based ethics.
d. utilitarian ethics.
B15. Fess, research manager for Greenergy Products, Inc., applies utilitarian ethics to
determine that an action is morally correct when it produces the greatest good for
a. Fess.
b. Greenergy.
c. the fewest people.
d. the most people.
B16. In deciding questions of corporate social responsibility, Valley Disposal & Recycling,
Inc., is concerned with
a. how the corporation can best fulfill any ethical duty to society.
b. the effect on corporate profits of ignoring any ethical duty to society.
c. whether the corporation owes any ethical duty to society.
d. all of the choices.
B17. Applied Business Corporation makes and markets its products nationwide. Under the
stakeholder approach, to be considered socially responsible when making a business
decision, Applied must take into account the needs of
a. its consumers, the community, and society only.
b. its employees and owners only.
c. its employees, owners, consumers, the community, and society.
d. no one.
B18. Sunny Energy Corporation engages in ethical behavior solely for the purpose of getting
good publicity and thereby increasing profits. Sunny is
a. acting unethically in its pursuit of publicity.
b. acting unethically in its pursuit of profits.
c. acting unethically in its setting of priorities.
d. not acting unethically.
B19. BarBQ Sushi Taco Company 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 BarBQ’s shareholders. This is most likely to attract potential employees who are
a. investors focused on short-term profits.
b. irresponsible slackers.
c. politically-motivated complainers.
d. recent college graduates.
B20. Rio Business Corporation pays potential clients, including private foreign companies
and the representatives of foreign labor organizations to facilitate business. If Rio
knows that the 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 because a third party acts as a “go–between.”
c. legal because private parties are involved on both sides of the deal.
d. legal because the payments are intended to facilitate business.
ESSAY QUESTIONS
B1. Recreation & Sports Equipment Corporation sells a product that is capable of seriously
injuring consumers who misuse it in a foreseeable way. Does the firm owe an ethical
duty to take this product off the market? What conflicts might arise if the firm stops
selling this product?
B2. Quixotic Corporation decides to respond to what it sees as a moral obligation to cor–
rect for past gender discrimination by adjusting pay differences among its male and
female employees. Does this raise an ethical conflict among those employees? Be–
tween the employer and the employees? Between the corporation and its
shareholders? If so, how should it be resolved?