Chapter 1: Law, Ethics, Business: An Introduction | Business/Accounting Test Bank

Test Bank

1. Select the best definition of ethics:
a. a set of rules for behavior.
b. a menu of options regarding what we must do.
c. a menu of options regarding what we should do.
d. standards that must be met to avoid penalty.
2. Laws must be static and unyielding in order to provide stability for a society.
a. True
b. False
3. Choose the statement regarding duty to rescue that is false:
a. There is no general duty to rescue an individual.
b. Individual freedom of dictates that a person should not be forced to act.
c. Under a liberalcommunitarian approach, citizens owe a duty to the state to rescue other citizens.
d. When one taunts another person who then puts themselves in danger in response to the teasing, the teaser has a duty to rescue the person teased.
4. All of the following are considered exceptions to the general rule that there is no duty to rescue except:
a. Pre-existing duty: For example, lifeguards have signed contracts agreeing to rescue people in exchange for pay and benefits.
b. Witnessing an accident: This creates a duty to step in and help the injured.
c. Employer: A duty exists to help an employee injured while working for that employer.
d. Endangerment: If one puts another in danger, they are obligated to rescue the person put in danger.
5. Which of the following views would be consistent with the free market ethics approach advocated by Milton Friedman?
a. Outsourcing to other countries is wrong because it is detrimental to the overall US economy.
b. When making decisions, corporate managers should consider the interests of all the corporations stakeholders.
c. The only social responsibility of business is to increase profits in a legal and ethical manner.
d. Automating processes and replacing workers is unethical since it does not serve a greater good.
6. Which of the following statements best illustrates the view of utilitarianism?
I. From each according to his abilities, to each according to his needs.
II. The risk reasonably to be perceived defines the duty to be obeyed and risks imports relation; it is risk to another or to others within the range of apprehension.
III. An action is right when maximizing welfare and total well-being.
IV. Individuals should pursue his or her own self-interest, even at the expense of others.
a. I only
b. III only
c. I and II
d. I, II, and III
7. According to deontological thinker Kant:
I. It is only acceptable to lie when done to protect an innocent person.
II. The level of respect owed to another is based on ones relationship to that person.
III. It is wrong to use another person unless mutual benefit is attached.
IV. Once chosen, actions will be repeated whenever the same situation arises.
a. I and III
b. II and IV
c. III and IV
d. I, III, and IV
8. Virtue ethics:
a. focuses on what human beings are capable of being.
b. develop from learning how to make choices in difficult situations.
c. accepts that individuals rarely reach moral excellence.
d. are based on the concept that a persons ethical beliefs are developed in childhood and do not change.
9. The Ethic of Care is:
a. A set of rules that explain how to prioritize those people affected by a decision so that a utilitarian analysis can be done successfully.
b. A set of universal principles, which applied evenly to all decisions will result in fairness and equity in ethical decisions.
c. The idea that we should all make decisions under the assumption that we dont know our station in life, that we could be the person most negatively impacted by the decision.
d. A set of principles that encourage decision makers to look at human relationships as a primary motivator for a decision.
10. Assuming a business ethical dilemma, which statement best illustrates Gilligan approach suggested in her theory of The Ethics of Care?
a. individual rights and justice for all
b. applies only to women and not men
c. care and responsibility to others
d. obedience to independent moral rules or duties
11. Which of the following statements is INCORRECT regarding the rights of shareholders?
I. voting power on major issues and ownership in a portion of the company
II. right to transfer ownership and dividend entitlement
III. hire and fire management and select and appoint a chief executive
a. I and II
b. I, II, and III
c. I only
d. III only

12. According to Citizens United v. Federal Election Commission, which of the following is not a reason to allow corporations the right to spend money and advertise for political candidates?
a. Political speech is the most important, and most protected, speech that exists. It is crucial to the democratic process that political speech be encouraged and heard.

b. The immense wealth of a corporation allows it to be the most accurate in providing messages to people.

c. Independent expenditure by corporations do not give rise to corruption or the appearance of corruption.

d. Rapid changes in technology suggest laws restricting political speech should not be upheld.
13. Corporate director or officer decisions to dedicate corporate funds for social causes is called:
a. Corporate Social Responsibility (CSR)
b. Social Activism (SA)
c. Business Engagement in Environmental Situations (BEES)
d. Strategic Investment in Stakeholder Issues (SISI)
14. Which of the following statements regarding Benefit Corporations is true?
a. Benefit corporations are required to identify one or more specific benefit purposes.
b. Directors of benefit corporations are protected from all lawsuits from both shareholders and beneficiaries of the corporations public benefit purpose.
c. Benefit corporations are incorporated under state law with the intent to be profitable.
d. All of these statements regarding benefit corporations are true.
Essay Questions
15. Describe the difference between the law and ethics.
ANSWER: Law provides for a set of rules for behavior. When these rules are broken, behavior is punishable. On the other hand, ethics presents a menu of options, perhaps disconnected from laws. Laws are what a person must do, and ethics addresses what a person should do.
16. From where do ethical preferences originate?
ANSWER: Ethical preferences originate not from legislators or judges, but from an individuals own critical consciousness.

17. Discuss how multinational corporations can be both a benefit and a detriment to society.
ANSWER: As a benefit, multinational corporations provide new jobs and produce new or less expensive goods and services. They introduce technology, capital, and skills to their host countries and raise the standard of living.
As a detriment, they have been blamed for taking advantage of weak and/or corrupt governments to exploit resources in developing countries; for implementing questionable safety, environmental, and financial practices; and for profiting from unsustainable technologies while using their political clout to block reasonable regulation. These corporations are implicated in some of the worlds most pressing problems including the growing disparities between rich and poor and global climate change.

18. Explain why laws exist that do not impose a duty to rescue.
ANSWER: Traditionally, our society has tended to grant maximum leeway to individual freedom of choice. Requiring that people help one another in emergencies would infringe on that freedom by forcing people to act when they might choose not to. Further, imposing a duty to rescue presupposes that there is agreement that rendering assistance is always the right thing to do, which in some cases, it is not.
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19. Describe the philosophy of noted economist, Milton Friedman, on the issue of free market ethics.
ANSWER: Friedman held that it is wrong for managers to use corporate resources to deal with problems in society at large. Decisions regarding such social problems should be addressed by governments in the political arena and funded by tax dollars. A decision by corporate managers to aid society is, in effect, theft of stockholders resources.
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20. Discuss the differences in utilitarianism and virtue ethics in making a decision.
ANSWER: According to utilitarianism, in any situation, the alternative that produces the greatest overall good should be chosen. It lends itself to a very business-like approach to the decision. A cost-benefit analysis should be done, not just for the organization making the decision, but for all who will be affected by the decision. Virtue ethics has a more internal focus with an analysis of the mission statement, values and culture of an organization to make a decision that creates the best fit with the organization.
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21. Discuss the similarities and differences between a traditional corporation and a benefit corporation.
ANSWER: Both types of corporations are incorporated under state law with a purpose to be profitable. Both submit annual reports to shareholders. Directors of both types of corporations have a responsibility to adequately consider shareholder financial interest and shareholders can bring a traditional action against directors for failing to do so.
Benefit corporations differ from traditional corporations in that they are intended to make a profit through conducting business in a socially and environmentally responsible way. B corporations focus on profit, people and planet. Unlike traditional corporations that are allowed to form for any lawful purpose, benefit corporations are required to have a purpose of creating public benefit.
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