978-0136118671 Chapter 4 Solution Manual Part 3

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28.* The incredible shrinking potato chip package. Julie is brand manager for potato chips.

Due to an abrupt rise in the price of potatoes, she must raise the unit price 15% to maintain the

already-slim margins. She hits on the idea of reducing the package contents 13% but retaining

the current price. This would result in the same revenue as before if unit sales don’t change. She

suspects that customers who would balk at a higher price won’t notice that the bag is slightly

less full. Her boss assures her that “package shorting” is standard practice in the industry and

may well have the intended effect. It is also legal, because the package will indicate the correct

net weight. The boss leaves the decision to Julie, and she must decide whether package shorting

is a deceptive practice.

The situation is similar to that of Exercise 21, but here the rationale is somewhat different.

Package shorting is not something one can do every day. It is a transition from one package and

price to another. It can be implemented for a particular product only two or three times at most.

Note that this doesn’t imply that all companies are going to downsize the potato chip package at

the same time Julie does. If they did, Julie could presumably maintain the same market share she

had before, and the policy would be generalizable. Rather, we must suppose the other companies

may use package shorting at a different time, because the trigger for the action may occur at a

Julie may respond that when the cost of potatoes rises for her, it rises for everyone, and the

generalization test should recognize that her rationale for package shorting applies to her

Yet this is neither an intelligible rationale nor Julie’s rationale. It is not an intelligible rationale

because the company’s goal is to cut costs while maintaining sales. If it can achieve this by

package shorting, it doesn’t matter whether the competition is facing the same increase in

We conclude that the matter rides on whether Julie’s understanding of the market allows her to

Actually, there is an intelligible rationale under which package shorting is clearly generalizable:

one’s competitors are in fact going to use package shorting. In other words, it is a defensive

measure against simultaneous package shorting by others. This is generalizable, because if all

29. Better is good enough. Kirk is being groomed for the controller’s position in a

medium-sized manufacturing firm. While attending a monthly financial meeting, he listens

intently as the company’s chief engineer explains that the firm’s new plant, now on the drawing

board, will require an upgrade of the current waste disposal system if it is to meet industry

standards. However, the existing facilities are in compliance with minimum legal requirements,

even if some environmental activists are pressuring the government for tougher standards. Bob,

company president, points out that the closest competitor in the business has waste treatment

facilities that are even inferior to theirs. He is therefore not in favor of further expenditures in

this area. Most managers at the meeting express strong agreement, and the discussion moves to

another topic. Kirk soon begins reflecting on whether this is the right firm for him. Hint: First

analyze the president’s decision, and then Kirk’s personal decision.

Beginning with the president’s decision, it appears generalizable. The factors in the decision

appear to be (a) the facilities are already in compliance with the law, (c) they are more advanced

Condition (c) is important, because the decision may not be generalizable otherwise. If the

company is operating in a country with weak laws, generalizing its level of pollution worldwide

While the company’s level of pollution seems generalizable, a serious ethical problem remains.

Every polluter therefore has a marginal effect, and we must assume that this company’s waste

creates some amount of illness or hardship that would not occur if it upgraded the equipment.

The company can get a rough idea of this by comparing the cost versus the positive impact of

upgrading all comparable equipment in all plants. Accountants and environmental experts may

If the utilitarian principle doesn’t require the company to upgrade, Kirk’s dilemma goes away.

Actually, it could go either way. Kirk must assess whether changing jobs would have a positive

overall effect. It needn’t be large effect, but to impose an obligation, it must be an effect that he

Virtue ethics plays a key role here. Perhaps Kirk entered a manufacturing career to create value

Career choices deserve a more thorough ethical analysis than is provided in the text. Thoughtful

students may point out that quitting one’s job for public health work in a third-world country

may increase net utility, but this is not generalizable. If everyone took this kind of sacrificial job,

30.* Another type of discrimination. Paula is Brand Manager for a line of soap used to scrub

floors. Her assistant Terry is uneasy about the fact that Paula’s plan calls for advertising spots

that feature unattractive actors. In her view, this kind of ad promotes harmful stereotyping of

less-attractive people. Paula defends her plan by citing an article in a top marketing journal,

which reports research showing that sales are enhanced when attractive people appear in ads

for glamorous products and unattractive people appear in cooking and cleaning ads. Terry,

however, carried out a project in college in which she reviewed over 1,000 studies of societal

attitudes toward physical appearance. She found a strong bias against unattractive people, who

are discriminated against in employment and education even when equally qualified. Can she

make an ethical case against Paula’s advertising plan?

This case arises in a U.S. cultural context in which stereotyping is socially unacceptable,

although the social norms are generally more concerned with race, gender, ethnic origin, and

The Rawlsian Difference Principle (as we interpret it) requires that a company adopt a policy

that, if generalized to all companies, would maximize the welfare of the least advantaged group

—where a group is defined as the smallest collection of people for which the policy’s effect can

Paula claims further that cleaning ads would result in less discrimination against unattractive

people than would exist if such ads, industry-wide, portrayed more attractive persons in cleaning

Some may object that this is political correctness run amok. There are so many protected groups

that one can scarcely take any action without stepping on someone’s toes. However, the

31. Whistle-blower accepts a deal. An auditor employed by a pharmaceutical company

submitted documentation to the Food and Drug Administration (FDA) to support the approval of

new drugs. He later suspected inaccuracies in the information he provided for one particular

drug and, upon investigation, discovered that the project director in fact falsified data. When he

reported this to his superiors, the company board of directors offered the auditor a deal. If he

will not interfere with the FDA’s imminent decision to approve the drug, the company will

discontinue the drug and request the FDA to withdraw approval due to “mistakes in marketing

projections.” The aim was to avoid the bad press that would result from public knowledge of the

falsification. The auditor accepted the deal, the company kept its word, and the project director

quietly resigned. No further scandals of this sort have occurred. Was the auditor’s decision

ethical?

Our first observation is that the auditor need not worry about whether the company will keep its

The company could, of course, withdraw the application before the FDA approves it. This is

One might argue that asking the FDA to rescind approval (I’m not sure what this means or why

Let’s first assess the utilitarian situation. Blowing the whistle externally could do a great deal of

harm to the company and its stakeholders, and the drug will not be sold in any case. I will

The most obvious question is whether professional obligation requires the auditor to report the

false data to the FDA before it issues approval. As in all matters of professional obligation, this

If we assume that cooperating with the company conforms to legal and professional obligations,

Next we must consider the issue of whether the FDA or stakeholders are being deceived. The

We therefore ask whether the auditor’s failure to blow the whistle causes stakeholder or officials

at the FDA to believe that the submitted data were not falsified. We can say thus much: the

company’s compound act of submitting false data and failing to correct them when irregularities

We conclude that the outcome rides on an analysis of the legal and professional obligations in

this case.

32.* Family plans. Barbara has been with Apex for four years and is now controller. Apex will

merge with another firm on July 1, two weeks from now, and the ensuring staff cuts will be

announced on August 1. The new company will need only one controller. Barbara hears

through the grapevine that Sam, controller at the other company, is perceived favorably by

management but will probably be dismissed, perhaps because he has been at the firm less than a

year. In the meantime, Barbara has dealt with the increasing burden of caring for her parents.

Her father has cancer and is expected to live six months. Her mother needs frequent support. In

addition, Barbara is expecting her first child in a few months. She plans to take a short

maternity leave and return to work. She believes that she can balance her personal and

professional life, but she wonders if she should make her boss aware of her situation before

August 1.

Barbara clearly has a loyalty obligation to her family. She may have relationships with company

managers that imply loyalty obligations, but there is no indication of such in the case description,

The case description seems to suggest that, unlike Sam, she can keep her job (due to seniority)

even if she loses the controller’s position, and she would therefore be financially able to support

However, it is very hard to assess what is necessary to meet family obligations. If she judges

You may be thinking that the company shouldn’t consider such matters as maternity leave in the

Let’s assume that there are no contractual obligations for Barbara to inform the company at this

time about her situation (particularly her upcoming maternity leave). We must decide whether it

is deceptive for her to withhold this information, because deception is ungeneralizable. Does

As for the utilitarian test, it seems pretty clear that overall expected utility is higher if Sam takes

The issue is quite general. Is it ethical for me to compete for a position if I know the other

person is probably better? That is, I know the expected utility is higher if the other party takes

the position, although I don’t know that the actual outcome will be better. To show that it is

This argument seems valid up to a point. If I am quite sure that the other person is more

So if Barbara is quite sure that Sam will contribute more than she, then she should not compete

for the job. I’m not sure whether being silent about her personal burdens is tantamount to