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Business Ethics Test Questions with Answers

Chap 10:

16. Which of the following is true of gatekeepers?
a. They are not bound to ethical duties.
b. Investors and boards are examples of gatekeepers.
c. They serve as intermediaries between market participants.
d. They are not responsible for ensuring conformance to fairness in the marketplace.
Answer: c

17. Which of the following rely on gatekeepers for fair and effective functioning of economic markets?
a. Bankers
b. Auditors
c. Accountants
d. Financial analysts
Answer: a

18. The function of auditors as gatekeepers is to:
a. verify a company’s financial statements so that investors’ decisions are free from fraud and deception.
b. evaluate a company’s financial prospects or creditworthiness, so that banks and investors can make informed decisions.
c. ensure that decisions and transactions conform to the law.
d. function as intermediaries between a company’s stockholders and its executives.
Answer: a

19. Identify the gatekeepers who evaluate a company’s financial prospects or creditworthiness, so that banks and investors can make informed decisions.
a. Investors
b. Attorneys
c. Auditors
d. Analysts
Answer: d

20. Identify the gatekeepers who ensure that decisions and transactions conform to the law.
a. Accountants
b. Attorneys
c. Auditors
d. Analysts
Answer: b

21. Identify the gatekeepers who function as intermediaries between a company’s stockholders and its executives.
a. Accountants
b. Auditors
c. Board of directors
d. Financial analysts
Answer: c

22. Which of the following gatekeepers guarantee that executives act on behalf of the stockholders’ interests?
a. Accountants
b. Board of directors
c. Auditors
d. Analysts
Answer: b

23. A _____exists where a person holds a position of trust that requires that he exercise judgment on behalf of others, but where his personal interests conflict with those of others.
a. duty of care
b. community of interest
c. conflict of interest
d. duty of loyalty
Answer: c

24. A professional is said to have _____ if he has a professional and ethical obligation to clients rooted in trust that overrides his personal interests.
a. statutory duties
b. executive rights
c. creditor claims
d. fiduciary duties
Answer: d

25. Which of the following statements is true of conflicts of interests?
a. Self-interest makes it easy for individuals to fulfill their gatekeeper duties.
b. Legal protection cannot shield professionals from conflicts of interests.
c. Cross-selling of consulting services reduces conflicts of interests.
d. Excessive executive compensation involves conflicts of interests.
Answer: d

26. Which of the following statements is true of the Sarbanes-Oxley Act?
a. It is also known as the Financial Services Modernization Act of 2002.
b. It
is enforced by the Financial Accounting Standards Board.
c. It was passed by Congress because corporate boards failed to police themselves.
d. It fails to provide oversight in terms of direct lines of accountability and responsibility.
Answer: c

27. Which provision of the Sarbanes-Oxley Act prohibits various forms of professional services that are determined to be consulting rather than auditing?
a. Section 201
b. Section 301
c. Section 307
d. Section 404
Answer: a

28. Section 201 of the Sarbanes-Oxley Act addresses the:
a. rules of professional responsibility for attorneys.
b. codes of ethics for senior financial officers.
c. management assessment of internal controls.
d. services outside the scope of auditors.
Answer: d

29. Which of the following provisions of the Sarbanes-Oxley Act mandates majority of independents on any board and total absence of current or prior business relationships?
a. Section 407
b. Section 301
c. Section 406
d. Section 307
Answer: b

30. Section 307 of the Sarbanes-Oxley Act addresses the:
a. rules of professional responsibility for attorneys.
b. codes of ethics for senior financial officers.
c. management assessment of internal controls.
d. services outside the scope of auditors.
Answer: a

31. Which of the following provisions of the Sarbanes-Oxley Act requires lawyers to report concerns of wrongdoing if not addressed?
a. Section 407
b. Section 301
c. Section 406
d. Section 307
Answer: d

32. Section 404 of the Sarbanes-Oxley Act addresses the:
a. rules of professional responsibility for attorneys.
b. codes of ethics for senior financial officers.
c. management assessment of internal controls.
d. services outside the scope of auditors.
Answer: c

33. Section 406 of the Sarbanes-Oxley Act addresses the:
a. rules of professional responsibility for attorneys.
b. codes of ethics for senior financial officers.
c. management assessment of internal controls.
d. services outside the scope of auditors.
Answer: b

34. _____ of the Sarbanes-Oxley Act addresses the disclosure of audit committee financial expert.
a. Section 404
b. Section 301
c. Section 407
d. Section 307
Answer: c

35. Which of the following is a criticism of the Sarbanes-Oxley Act?
a. It excludes requirements for certification of documents by officers.
b. It imposes extraordinary financial costs on the firms.
c. It does not require lawyers to report concerns of wrongdoing if not addressed.
d. It does not require codes of ethics for senior financial officers.
Answer: b

36. Identify the external mechanism that seeks to ensure ethical corporate governance.
a. The Sarbanes-Oxley Act
b. The COSO framework
c. The European Union 7th Directive
d. The European Union 4th Directive
Answer: a

37. Which of the following is an internal mechanism that seeks to ensure ethical corporate governance?
a. European Union 8th Directive
b. The Sarbanes-Oxley Act
c. The COSO framework
d. European Union 7th directive
Answer: c

38. Which of the following statements is true of the Committee of Sponsoring Organizations?
a. It improves financial reporting through a combination of controls and governance standards called the External Control—Integrated Framework.
b. It is an external mechanism that seeks to ensure ethical corporate governance.
c. It describes control as encompassing those elements of an organization that, taken together, support people in the achievement of the organization’s objectives.
d. It replaced the Sarbanes-Oxley Act to ensure ethical corporate governance.
Answer: c

39. Which of the following elements of COSO sets the tone or culture of a firm?
a. Ongoing monitoring
b. Information and communications
c. Risk assessment
d. Control environment
Answer: d

40. Which of the following elements of COSO refers to policies and procedures that support the cultural issues such as integrity, ethical values, competence, philosophy, and operating style? a. Ongoing monitoring
b. Information and communications
c. Control activities
d. Risk assessment
Answer: c

41. Identify the COSO element that is directed at supporting the control environment through fair and truthful transmission of facts.
a. Risk assessment
b. Information and communications
c. Control activities
d. Ongoing monitoring
Answer: b

42. Which of the following COSO elements provides assessment capabilities and
uncovers vulnerabilities?
a. Risk assessment
b. Information and communications
c. Control activities
d. Ongoing monitoring
Answer: d

43. According to the COSO framework, which of the following is true of internal control?
a. It is not geared to the achievement of objectives in overlapping categories.
b. It can provide absolute assurance to an entity’s board.
c. It is an end in itself, not a means to an end.
d. It is affected by people at every level of an organization.
Answer: d

44. Which of the following is true of the COSO controls and the Sarbanes-Oxley requirements?
a. They result in less transparency in ensuring ethical corporate governance.
b. They encourage greater accountability for financial stewardship.
c. They result in a lesser emphasis to prevent any financial misconduct.
d. They do not impact executives, boards, and internal audits.
Answer: b

45. Which of the following legal duties of board members suggests that a director does not need to be an expert or actually run the company?
a. Duty of care
b. Duty of good faith
c. Duty of candor
d. Duty of loyalty
Answer: a

46. Identify the duty of obedience according to which board members should strive toward corporate objectives, and are not permitted to act in a way that is inconsistent with the central goals of the organization?
a. Duty of care
b. Duty of good faith
c. Duty of candor
d. Duty of loyalty
Answer: b

47. Which of the following duties of board members suggests that conflicts of interest are always to be resolved in favor of the corporation?
a. Duty of care
b. Duty of good faith
c. Duty of candor
d. Duty of loyalty
Answer: d

48. Which of the following is true of Federal Sentencing Guidelines for boards?
a. The board must be knowledgeable about the objectives and process of the ethics program rather than simply the mere contents of a training session.
b. The board should avoid exercising reasonable oversight with respect to the effectiveness and implementation of the ethics program.
c. The board should leave the evaluation of all board policies, procedures, governance structure, and position descriptions to the executives.
d. The board need not work with executives to analyze the incentives for ethical behavior.
Answer: a

49. Which of the following are additional ethical responsibilities board members should have beyond legal obligations?
a. They should maintain closed conversations within the firm.
b. They should refrain from providing oversight.
c. They should be critical in their inquiries about corporate vulnerabilities.
d. They should pay out a significant amount of the company’s sustainable growth dollars to its chief executives in compensation.
Answer: c

50. Tom, an employee of Electronixx, adjusted credits and debits of the company’s ledger to show high profits. He also created false documents, underreported his income, and evaded paying taxes for a year. Tom can be convicted for _____.
a. unethical insider trading
b. conflicts of interest in corporate governance
c. conflicts of interest in accounting
d. unfair executive excessive compensation
Answer: c

51. According to Kevin Bahr, which of the following is a cause for conflicts in the financial markets?
a. The independence and lack of expertise of audit committees
b. The presence of shareholder activism
c. Long-term executive greed versus short-term shareholder wealth
d. Self-regulation of the accounting profession
Answer: d

52. Which of the following is true of excessive compensation packages?
a. When executive compensation is tied to stock price, executives have a strong incentive to focus on long-term corporate interests rather than short-term stock value.
b. When huge amounts of compensation depend on quarterly earnings reports, there is a strong incentive to manipulate those reports in order to achieve the money.
c. Economic fairness and personal morality always exists in executives receiving lofty compensation packages.
d. Excessive compensation packages serve corporate interests when they provide an incentive that is not based on executive performance or accomplishments.
Answer: b

53. Which of the following scenarios gives rise to conflicts of interests in corporate governance?
a. Senior executives determining the compensation received by board members
b. Board members hand-selecting employees in their company
c. A CEO not chairing the board of directors
d. The absence of cross-fertilization of boards
Answer: a

54. Which of the following exemplifies insider trading?
a. Underreporting income
b. Falsifying account documents
c. Misappropriation of proprietary knowledge
d. Illegally evading income taxes
Answer: c

55. Sara, an employee of PentaComp Inc., passed on confidential information of her company to her friend. Her friend benefitted from selling PentaComp’s stock based on the information shared by Sara. In this scenario, Sara can be convicted of _____.
a. insider trading
b. falsifying documents
c. underreporting income
d. evading taxes
Answer: a

Chap 9
16. The Triple Bottom Line approach involves measuring business success of sustainable businesses and sustainable economic development in terms of:
a. economic, legal, and environmental sustainability.
b. economic, ethical, and environmental sustainability.
c. economic, legal, and competitive sustainability.
d. legal, competitive, and environmental sustainability.
Answer: b

17. Knowing what the future must be, creative businesses then look backwards to the present and determine what must be done to arrive at that future. This process is known as:
a. backward integration.
b. forecasting.
c. forward integration.
d. backcasting.
Answer: d

18. Which of the following is true of the conservation movement?
a. It advocated that the natural world should not be used as a capital resource.
b. It regarded natural resources as being able to provide an inexhaustible
supply of material.
c. It recommended a more restrained and prudent approach to the natural world.
d. It argued against the natural world being used to provide indirect benefits.
Answer: c

19. The conservation movement:
a. regarded natural resources as being able to provide an inexhaustible supply of material.
b. advocated that the natural world should not be used as a capital resource.
c. argued that the natural world was valued as a resource, providing humans with both direct benefits and indirect benefits.
d. believed that business does not good reasons for conserving natural resources.
Answer: c

20. Reminiscent of the _____ tradition, it is suggested that some animals have the cognitive capacity to possess a conscious life of their own and people have a duty not to treat these animals as mere objects and means to their own ends.
a. Kantian
b. virtue ethic
c. neoclassical
d. social web
Answer: a

21. Which of the following is true of a market-based approach to resolving environmental challenges?
a. It is critical of the narrow, philanthropic view of corporate social responsibility (CSR).
b. It asserts that limited resources should not be distributed in the market.
c. It suggests that environmental problems deserve economic solutions.
d. It conveys that resources are infinite and fungible.
Answer: c

Difficulty: Easy

22. Which of the following is involved in environmental problems according to the market-based approach to resolving environmental challenges?
a. Lack of knowledge of producing renewable resources
b. Inability of businesses to produce and sell limited resources
c. Lack of use of appropriate substitutes for limited resources
d. Allocation and distribution of limited resources
Answer: d

23. Which of the following was suggested by William Baxter?
a. An optimal level of pollution can be achieved through competitive markets.
b. Society can strive for pure air and water at a very low cost.
c. From a strict market economic perspective, resources are infinite.
d. All resources can be replaced by substitutes.
Answer: a
Difficulty: Medium

24. In economic terms, all resources:
a. are infinite because they can be replaced by substitutes.
b. are distributed fairly by the government.
c. can be made available everywhere.
d. are distributed efficiently in the market.
Answer: a

25. Which of the following explains the statement “All resources are fungible”?
a. It means that all resources can be regulated by the government.
b. It means that all resources can be replaced by substitutes.
c. It means that all resources cannot be duplicated.
d. It means that all resources cannot be recycled and reused.
Answer: b

26. Which of the following is true about the market-based approach to environmental responsibility?
a. Market failure occurs when no markets exist to create a price for important social goods.
b. Free market exchanges can guarantee optimal results for addressing issues related to externalities.
c. The market-based approach always ensures that what is good and rational for a collection of individuals is also good and rational for a society.
d. Markets can be very successful if important ethical and policy questions and policy decisions are left solely to the outcome of individual decisions.
Answer: a

27. Which of the following ways can lead market failure to serious environmental harm?
a. Creating abundant markets to create a price for important social goods
b. Making no distinction between individual decisions and group consequences
c. Inexistence of externalities in the economic exchange system
d. Assigning property rights to unowned goods
Answer: b

28. Which of the following causes inadequacy in ad hoc attempts—internalizing external costs and assigning property rights to unowned goods such as wild species—to repair market failures?
a. The backcasting problem
b. The fungibility problem
c. The biomimicry problem
d. The first-generation problem
Answer: d

29. Markets can work to prevent harm only through information supplied by the existence of market failures. This is better known as the:
a. biomimicry effect.
b. backcasting problem.
c. first-generation problem.
d. primary market effect.
Answer: c

30. Before environmental legislation was enacted, the primary legal avenue open for addressing environmental concerns was:
a. tort law.
b. international law.
c. public law.
d. criminal law.
Answer: a

31. Which of the following is true about the regulatory approach to environmental challenges?
a. It overestimates the influence that business can have on establishing the law.
b. The government established regulatory standards to offer compensation after the occurrence of pollution or any other environmental harm.
c. It shifted the burden from those threatened with harm to those who would cause the harm.
d. This approach ensures that business does not pursue any financial opportunities that cause harm to the environment.
Answer: c

32. Which of the following is a problem associated with the regulatory approach to environmental challenges?
a. The regulatory model assumes that economic growth is environmentally and ethically benign.
b. If people rely on the law to protect the environment, environmental protection will extend beyond the law.
c. Business passively responds to consumer desires and consumers are unaffected by the messages that business conveys.
d. National regulations are the only means to effectively address international environmental challenges.
Answer: a

33. Which of the following is true about the concept of sustainable development and sustainable business practice?
a. It suggests a radically new vision for integrating financial and environmental goals, compared to the growth model that preceded it.
b. According to this concept, only individuals who can prove that they had been harmed by pollution can raise legal challenges.
c. According to this concept, an economic solution to compensation should be offered for the harm only after the harm has been done.
d. It focuses only on the costs that businesses incur in pursuing environmental goals.
Answer: a

34. The three goals of sustainable development that include economic, environmental, and ethical sustainability are referred to as the:
a. tripartite goals.
b. three pillars of sustainability.
c. three pronged charter.
d. shoulders of sustainability.
Answer: b

35. Which of the following was charged with developing recommendations for paths toward economic and social development that would not achieve short-term economic growth at the expense of long-term environmental and economic sustainability?
a. The Bluewash Commission
b. The Binding Commission
c. The Barentsburg Commission
d. The Brundtland Commission
Answer: d

36. Which of the following is true of the Brundtland Commission?
a. It was named as the Brundtland Commission after the place in Norway, where the summit was conducted for the first time.
b. It was charged with developing recommendations for paths toward economic and social development at the expense of underdeveloped and developing countries.
c. It defined sustainable development as development that meets the needs of the present without compromising the ability of future generations to meet their own needs.
d. It criticized the report from the United Nations’ World Commission on Environment and Development published in 1987.
Answer: c

37. Which of the following models does not differentiate natural resources from the other factors of production and does not explain the origin of resources?
a. The circular flow model
b. The triple bottom line model
c. The bilinear model
d. The sustainability model
Answer: a
.

38. Which of the following is true of the circular flow model?
a. It differentiates natural resources from the other factors of production.
b. It suggests that to keep up with the economy, the population must grow.
c. It treats economic growth as both the solution to all social ills and also as
boundless.
d. It argues that the economy cannot grow indefinitely.
Answer: c

39. The possibility that the economy cannot grow indefinitely is simply not part of the:
a. three pillars of sustainability approach.
b. circular flow model.
c. triple bottom line approach.
d. bilinear model.
Answer: b

40. According to economist Herman Daly, neoclassical economics, with its emphasis on economic growth as the goal of economic policy will inevitably fail to meet these challenges:
a. if it suggests that the population of the world needs to be controlled.
b. unless it recognizes that the economy is but a subsystem within earth’s biosphere.
c. unless it recognizes that resources are infinite.
d. if it focuses on recycling and reusing the by-products of the production process.
Answer: b

41. According to the _____ law of thermodynamics (the conservation of matter/energy), neither matter nor energy can truly be “created,” it can only be transferred from one form to another.
a. first
b. second
c. third
d. fourth
Answer: a

42. The model of economy, in consistency with the second law of thermodynamics, implies that:
a. the amount of re-usable products decreases with an increase in production.
b. the economy exists beyond a finite biosphere.
c. wastes are not produced at each stage of economic activity.
d. the amount of usable energy decreases over time.
Answer: d

43. Over the long term, resources and energy cannot be used, nor waste produced, at rates at which the biosphere cannot replace or absorb them without jeopardizing its ability to sustain life. These are what Herman Daly calls the:
a. “economic limitations.”
b. “backcasting effect.”
c. “biophysical limits to growth.”
d. “un-expandable boundaries.”
Answer: c

44. Which of the following is true of the sustainability model in terms of environmental responsibilities?
a. Sustainability need not be a long-term strategy.
b. The huge unmet market potential among the world’s developing economies can only be met in sustainable ways.
c. Sustainable practices lead to reduced cost savings.
d. Firms that follow sustainable practices lose competitive advantage.
Answer: b

45. Which of the following is true of the sustainability model in terms of environmental responsibilities?
a. Sustainability reduces competitive advantage.
b. Sustainability is not a prudent long-term strategy.
c. Sustainability is a good risk management strategy.
d. Sustainability leads to reduced cost-savings.
Answer: c

46. Estimates suggest that with present technologies, businesses can readily achieve at least a fourfold increase in efficiency, and perhaps as much as a tenfold increase. This can be achieved through the first principle of sustainability known as:
a. biomimicry.
b. eco-efficiency.
c. the cradle-to-cradle responsibility.
d. the take-make-waste model.
Answer: b

47. Which of the following recommends cycling the waste of one activity into the resource of another?
a. The biomimicry principle
b. The cradle-to-grave model
c. The cradle-to-cradle model
d. The eco- efficiency principle
Answer: a

48. “Closed-loop” production seeks to integrate what is presently waste, back into production. In an ideal situation, the waste of one firm becomes the resource of another, and such synergies can create eco-industrial parks. This principle is often referred to as:
a. biomimicry.
b. eco-efficiency.
c. biosynergy.
d. backcast.
Answer: a

49. Which of the following suggests that a business takes resources, makes products out of them, and discards whatever is left over?
a. The cradle-to-grave model
b. The take-make-waste approach
c. The Cradle-to-cradle model
d. The eco-efficiency principle
Answer: b

50. Which of the following holds that a business is responsible for the entire life of its products, including the ultimate disposal even after the sale? a. The cradle-to-grave model
b. The take-make-waste appoach
c. The cradle-to-cradle model
d. The eco-efficiency principle
Answer: a

51. Cradle-to-grave and cradle-to-cradle responsibilities are part of the _____ sustainable business principle.
a. eco-efficiency
b. backcasting
c. biomimicry
d. take-make-waste
Answer: c

52. Which of the following would hold a business liable for groundwater contamination caused by its products even years after they had been buried in a landfill?
a. “Backcast” model
b. “Eco-efficiency” model
c. “Take-make-waste” model
d. “Cradle-to-grave” model
Answer: d

53. Which of the following holds that a business should be responsible for incorporating the end results of its products back into the productive cycle?
a. Backcasting
b. Cradle-to-cradle
c. Take-make-waste
d. Cradle-to-grave
Answer: b

54. Which of the following responsibilities entail an incentive to redesign products so that they can be recycled efficiently and easily?
a. Cradle-to-grave
b. Backcasting
c. Cradle-to-cradle
d. Eco-efficiency
Answer: c

55. Which of the following is true of a service-based economy?
a. A service-based economy tends to the consumers’ demand for clothes cleaning, floor covering, illumination, entertainment, and so forth.
b. A service-based economy interprets consumer demand as a demand for washing machines, carpets, lights, consumer electronics, and so forth.
c. A service-based economy weakens the production efficiencies.
d. A service-based economy increases material and energy costs significantly.
Answer: a

Chap 8
16. Which of the following is a set of processes for creating, communicating, and delivering value to customers and for managing customer relationships in ways that benefit the organization and its stakeholders?
a. Procuring
b. Branding
c. Marketing
d. Copywriting
Answer: c

17. Which of the following is one of the “Four Ps” of marketing?
a. Purpose
b. Planning
c. Promotion
d. People
Answer: c

18. The _____ ethical tradition would see a simple situation of an agreement for an exchange between two parties as upholding respect for individuals by treating them as autonomous agents capable of pursuing their own ends.
a. role-based
b. rights-based
c. rules-based
d. strategy-based
Answer: b

19. The _____ ethical tradition would take the two parties’ agreement as evidence that both are better off than they were prior to the exchange and thus conclude that overall happiness has been increased by any exchange freely entered into.
a. utilitarian
b. virtual
c. Kantian
d. deontological
Answer: a

20. The simple situation in which two parties come together and freely agree to an exchange is ethically legitimate only prima facie because:
a. investigation proves that a simple exchange does not involve unethical situations.
b. a simple exchange involves the consent of both parties involved, which leaves no room for unethical acts.
c. certain conditions must be met before it can be concluded that autonomy has been respected and mutual benefit has been achieved.
d. exchange occurs on mutual consent and for mutual benefit, parties get involved in an exchange only if they see their benefit.
Answer: c

21. While approaching an ethical issue in marketing, the rights-based tradition would:
a. ask to what degree the participants are respected as free and autonomous agents rather than treated simply as means to the end of making a sale.
b. calculate the benefits and costs of each exchange.
c. attempt to find out about other values that are affected by the exchange.
d. want to know the degree to which the transaction provided actual as opposed to merely apparent benefits for each participant.
Answer: a

22. While approaching an ethical issue in marketing, the utilitarian tradition would want to know:
a. the degree to which individuals freely participate in an exchange.
b. the degree to which the transaction provided actual as opposed to merely apparent benefits.
c. about other values that are affected by the exchange.
d. about the personal characters of the parties that are involved in the exchange.
Answer: b

23. A consumer’s consent to purchase a product is not informed if that consumer is:
a. unwilling to listen to the product details from the sales person.
b. injured after using the product and filed a product liability suit.
c. asked to buy a product without a warranty.
d. being misled or deceived about the product.
Answer: d

24. Greater consumption is likely to lead to unhappiness, a condition termed _____.
a. affluenza
b. caveat emptor
c. influenza
d. insomnia
Answer: a

25. The legal doctrine of strict liability is ethically controversial because:
a. it assumes informed consent of the buyer and therefore it is assumed to be ethically legitimate.
b. it allows consumers to assume that products are safe for use.
c. it holds that consumer demand depends upon what producers sell.
d. it holds a business accountable for paying damages whether or not it was at fault.
Answer: d

26. Identify the approach that assumes that every purchase involves the informed consent of the buyer and is ethically legitimate.
a. Res ipsa loquitur approach
b. Prima facie approach
c. Caveat emptor approach
d. Caveat venditor approach
Answer: c

27. In selling a product, a business offers tacit assurances that the product is reasonably suitable for its purpose. The law refers to this as the:
a. doctrine of caveat emptor.
b. implied warranty of merchantability.
c. doctrine of caveat lector.
d. implied warranty of productivity.
Answer: b

28. Which of the following statements is correct about the implied warranty of merchantability?
a. It refers to the caveat emptor approach.
b. This standard shifts the burden of proof from producers to consumers.
c. Most courts allow a business to completely disclaim the implied warranty of merchantability.
d. Many businesses issue a disclaimer of liability, or offer an expressed and limited warranty to limit their liability.
Answer: d

29. The implied warranty of merchantability shifts the burden of proof from:
a. producers to consumers.
b. producers to suppliers.
c. consumers to producers.
d. suppliers to consumers.
Answer: c

30. A business will seek to limit its liability by explicitly disowning any promise or warranty by:
a. using the caveat venditor principle.
b. issuing a disclaimer of liability.
c. completely disclaiming the implied warranty of merchantability.
d. denying responsibility for the behavior of its suppliers.
Answer: b

31. How did the use of an implied warranty of merchantability solve a set of problems with the contract law approach to product liability?
a. Consumers do not need complex contracts in order to protect themselves from all possible harms that products might cause.
b. The burden of proof has shifted from producers to consumers as consumers are allowed to assume that products are safe for ordinary use.
c. It has forced businesses to issue a disclaimer of liability and offer limited warranties to limit its liability.
d. Buyers have the responsibility to look out for their own interests and protect their own safety when buying a product.
Answer: a

32. Which of the following is true about tort law?
a. Tort law holds that the only duties that a person owes are those that have been explicitly promised to another party.
b. Tort law holds manufacturers accountable in cases when consumers are injured by products and no one is at fault.
c. Tort law holds a principal responsible for the actions of an agent when that agent is acting in the ordinary course of his or her duties to the principal.
d. Tort law holds that people do not owe other people any general duties, if they have not voluntarily assumed them.
Answer: b

33. Which of the following statements is true about negligence?
a. It is not a central component of tort law.
b. One can be negligent by doing something that one should not.
c. One cannot be held negligent by failing to do something that one should have done.
d. It excludes acts of both commission and omission.
Answer: b

34. Which of the following is true about strict product liability?
a. The United States has adopted clear strict liability standards.
b. It holds that the government must pay consumers where neither the producer nor the consumer is at fault.
c. It insures that society creates a strong incentive for business to produce safer goods and services by holding business strictly liable for any harm their products cause.
d. It is the same as negligence, and it suggests that holding business liable for harms caused due to negligence provides an incentive to better protect products in the future.
Answer: c

35. Society creates a strong incentive for businesses to produce safer goods and services by holding them responsible for any harm their products cause. This claim supports the:
a. strict product liability standard.
b. actual foreseeability standard.
c. reasonable person standard.
d. consent and informed decision standard.
Answer: a

36. Which of the following statements is true about manipulation?
a. It involves total control of direction or management.
b. A person cannot manipulate someone without deception.
c. It implies guiding people’s behavior with their conscious understanding. d. To manipulate something is to guide or direct its behavior.
Answer: d

37. Which of the following ethical traditions would have the strongest objections to manipulation?
a. Economic
b. Virtue-based
c. Principle-based
d. Utilitarian
Answer: c

38. Which of the following statements about manipulation would a strong believer of the principle-based ethical tradition most likely support?
a. Cases of paternalistic manipulation, in which someone is manipulated for their own good, are acceptable.
b. Manipulation executed without deception is acceptable.
c. Even unsuccessful manipulations are guilty of ethical wrong.
d. The ethical consequence of manipulation depends on the personal characteristics of the manipulator.
Answer: c

39. Marketing practices targeted at elderly populations for goods such as supplemental health insurance, funerals etc. are subject to criticism because:
a. that population is vulnerable.
b. interest gained on such investments are not highly profitable.
c. they target the considered and rational desires of the consumers.
d. they do not abide by the principles of welfare economics.
Answer: a

40. According to economist John Kenneth Galbraith, advertising and marketing were creating the very consumer demand that production then aimed to satisfy. The assertion that consumer demand relies upon what producers have to sell is termed:
a. the Hawthorne effect.
b. the dependence effect.
c. the reverse channel effect.
d. the supplemental effect.
Answer: b

41. Identify one of the implications of the “dependence effect.”
a. Unless a seller explicitly warrants a product as safe, buyers are liable for any harm they suffer.
b. Advertising and marketing create consumer wants that support the entire economy.
c. The court’s ruling on product liability cases is dependent on the extent of manipulation.
d. By creating consumer wants, advertising and other marketing practices violate consumer autonomy.
Answer: d

42. Which of the following do advertising and other marketing practices violate by creating consumer wants?
a. Right to free speech
b. Consumer autonomy
c. Right to privacy
d. Consumer demand
Answer: b

43. How does advertising distort the economy?
a. It manipulates prices for promotion to gain a foothold in a market.
b. It results in supply becoming a function of demand.
c. It is not able to create nonautonomous desires.
d. It creates irrational and trivial consumer wants.
Answer: d

44. Consumer vulnerability occurs when:
a. a person has an impaired ability to make an informed consent to the market exchange.
b. a person is susceptible to injuries from falls and medical emergencies.
c. the consumer is treated as an end in itself.
d. the law of supply and demand is reversed.
Answer: a

45. Which of the following is an example of consumer vulnerability?
a. Elderly people susceptible to expensive health care bills
b. Poor people susceptible to bankruptcy
c. Children susceptible to any bright, attractive items of no practical value
d. Single women walking alone at night susceptible to sexual assault
Answer: c

46. General vulnerability occurs when:
a. a person has an impaired ability to make an informed consent to the market exchange.
b. a person is susceptible to some specific physical, psychological, or financial harm.
c. children are shown commercials in and around schools.
d. people are susceptible to the harm of not satisfying their consumer desires and/or losing their money.
Answer: b

47. Consumers are vulnerable when they are not aware that they are subject to a marketing campaign. This type of campaign is called:
a. imminent marketing.
b. word-of-mouth marketing.
c. network marketing.
d. undercover marketing.
Answer: d

48. Which of the following statements is true about stealth marketing?
a. It occurs when consumers are aware that they are subject to a marketing campaign.
b. It refers to situations where consumers are subject to directed commercial activity without their knowledge.
c. It occurs when consumers pay little or no attention to billboards while speeding past a highway.
d. It is not an intentional effort to hide the true marketing element of the interaction.
Answer: b

49. Marketing experts consider stealth marketing extraordinarily effective because:
a. a consumer does not question the message as she might challenge a traditional advertising campaign.
b. the consumer’s guard is not down while accepting the message.
c. consumers do not see the communication as
too personal and often tend to trust an advertisement or other marketing material much more than they would trust the communicator.
d. consumers seek out the communicator’s vested interest.
Answer: a

50. An employer is held liable for damages caused by an accident involving an employee driving the company car on company business. Identify the law underlying this decision.
a. The doctrine of caveat emptor
b. The doctrine of respondent superior
c. Implied warranty of merchantability
d. The doctrine of caveat lector
Answer: b

51. UniCo—a multinational corporation that specializes in designing, developing, and selling consumer electronics—outsources manufacturing products to a third-world country company. Human rights activists have criticized UniCo for operating inhumane sweatshops at the manufacturing plants to gain profits. Although UniCo. is not directly liable to the labor exploitation, it threatens to pull out its business from the contracted company if the laborers are not provided with dignified wages and good working conditions. Which of the following responsibilities did the company fulfill in this scenario?
a. Caveat emptor
b. Implied merchantability
c. Respondent superior
d. Strict liability
Answer: c

52. Which of the following is an often overlooked aspect of advertising?
a. Pricing function
b. Evaluation function
c. Educational function
d. Watchdog function
Answer: c

53. Identify the practice of promoting a product by misleading consumers about the environmentally beneficial aspects of the product.
a. Greenwashing
b. Redlining
c. Gentrification
d. Greenskinning
Answer: a

54. Labeling products with such terms as “environmentally friendly,” “natural,” “eco,” “energy efficient,” “biodegradable” and the like can help promote products that have little or no environmental benefits. This practice is known as:
a. greenskinning.
b. redlining.
c. gentrification.
d. greenwashing.
Answer: d

55. Which of the following refers to the growing marketing practice of taking back one’s products after their useful life?
a. Reintermediation
b. Reverse channels
c. Disintermediation
d. Forward integration
Answer: b

Chap 7

16. Two general and connected understandings of privacy have been identified: privacy as a right to be ‘left alone’ within a personal zone of solitude, and privacy as the:
a. right to understand one’s emotions.
b. right to understand others’ emotions.
c. right to control information about others.
d. right to control information about oneself.
Answer: d

17. Values that are fundamental across culture and theory are called:
a. authentic norms.
b. hypernorms.
c. ethnocentric norms.
d. executive norms.
Answer: b

18. According to Donaldson and Dunfee, examples of hypernorms include the right to:
a. a safe workplace.
b. public information.
c. personal freedom.
d. vote.
Answer: c

19. According to Donaldson and Dunfee, the right to _____ is an example of a hypernorm.
a. a safe workplace.
b. public information.
c. vote
d. physical movement
Answer: d

20. Which of the following is true about privacy?
a. The right to privacy is not restricted by any social contract.
b. Privacy cannot be legally protected by common law.
c. Privacy can be legally protected by the constitution.
d. The right to privacy is unrelated to the universal right to autonomy.
Answer: c

21. _____ refers to the body of law comprised of the decisions handed down by courts, rather than specified in any particular statutes or regulations.
a. Statutory law
b. Common law
c. Civil law
d. Constitutional law
Answer: b

22. The Constitution’s Fourth Amendment protection against an unreasonable search and seizure governs only the public sector workplace because:
a. unions exist only in public sector organizations.
b. the private sector does not cater to appeals of unreasonable search or seizure.
c. the Constitution applies only to state action.
d. only public sector organizations deal with classified information.
Answer: c

23. Which of the following prohibits the “interception” or unauthorized access of stored communications?
a. The Electronic Communications Privacy Act of 1986
b. The Computer Security Act of 1987
c. The Privacy Act of 1974
d. The Computer Fraud and Abuse Act of 1986
Answer: a

24. The impact of the ECPA is to punish electronic monitoring only by third parties and not by employers because courts have ruled that “interception” applies only:
a. to access of messages by employers.
b. when monitoring is done without consent.
c. when employees file a case.
d. to messages in transit.
Answer: d

25. Which of the following statements about the Electronic Communications Privacy Act of 1986 is true?
a. Courts have ruled that the “interception” of stored communications applies only to messages that have actually reached company computers.
b. A firm that secures employee consent to monitoring at the time of hire is immune from ECPA liability.
c. The impact of the ECPA is to punish electronic monitoring only by employers.
d. The ECPA does not allow interception even when consent has been granted.
Answer: b

26. Name the legal violation that occurs when someone intentionally interferes on the private affairs of another when the interference would be “highly offensive to a reasonable person.”
a. Calumny
b. Vilification
c. Intrusion into seclusion
d. Defamation
Answer: c

27. If the basis for finding an invasion of privacy is often the employee’s legitimate and reasonable expectation of privacy, then a situation where there is no real expectation of privacy occurs when the:
a. employee has actual notice.
b. employer is covered under the ECPA.
c. work requires transference of sensitive data.
d. employee belongs to a minority group.
Answer: a

28. Which of the following states in the U.S. requires employers to notify workers when they are being monitored?
a. Ohio
b. Illinois
c. Michigan
d. Connecticut
Answer: d

29. Which of the following is true about the European Union’s Directive on Personal Data Protection?
a. It prohibits EU firms from transferring personal information to a non-EU country unless that country maintains “adequate protections” of its own.
b. It is also known as the European Union Safe Harbor Act.
c. It encourages member countries to maintain myriad standards for information gathering and protection.
d. It states that United States in the only non-member country that maintains “adequate protection” of personal
data.
Answer: a

30. The U.S. Department of Commerce negotiated a Safe Harbor exception:
a. because the U.S. would not qualify as having adequate protection.
b. so that the European Union could get access to personal information.
c. so that each European country could maintain its own standard of information gathering and protection while trading with the U.S.
d. because the law required that all imports to the European Union meet the Safe Harbor standards.
Answer: a

31. According to economist Antonio Argandona, which of the following elements would include issues relating to company secrets, espionage, and intelligence gathering?
a. Truthfulness and accuracy
b. Respect for property and safety rights
c. Respect for privacy
d. Accountability
Answer: c

32. Which of the following is true about technology and its usage?
a. It prohibits access to any information that was once easily accessible.
b. It ensures that the lines between people’s personal lives and professional lives are not blurred.
c. It tends to cause facelessness that is a challenge that has to be met.
d. It allows users to be much more careful with their communications.
Answer: c

33. When we do not get to know someone because we do not have to see that person in order to do our business, we often do not take into account the impact of our decisions on him or her. This is the challenge posed by the:
a. facelessness that results from the use of new technology accessible in the workplace.
b. knowledge gap that exists between people who understand the technology and others who do not understand it.
c. lack of clear boundaries between people’s personal and professional lives.
d. assumption by users of technology that the Internet is safe.
Answer: a

34. Which of the following is an advantage of monitoring?
a. Monitoring tends to promote effective performance since it reduces employees’ stress and pressure.
b. Monitoring tends to create a friendly workplace without any suspicions.
c. Monitoring increases the level of worker autonomy and respect, as well as workers’ right to control their environment.
d. Monitoring allows to ensure effective performance by preventing the loss of productivity to inappropriate technology use.
Answer: d

35. The desire to place workers in appropriate positions, to ensure compliance with affirmative action requirements, or to administer workplace benefits is sufficient reason for employers to undertake employee _____.
a. training
b. orientation
c. monitoring
d. drug testing
Answer: c

36. Which of the following is an advantage of drug testing?
a. Drug testing does not present any ethical challenges for employers.
b. Drug testing tends to provide a productivity benefit for companies.
c. There are no possibilities of incorrect presumptions in connection with drug testing.
d. There are no legal issues relating to monitoring employees through drug testing.
Answer: b

37. From a utilitarian perspective, individual rights to privacy or right to control information about oneself may be outweighed in cases where:
a. public safety is at risk.
b. the employee compensation package is very high.
c. the proposed benefit to the employer is high.
d. employee productivity depends directly on the number of hours they put in.
Answer: a

38. Which of the following acts stipulates that employers cannot use “protected health information” in making employment decisions without prior consent?
a. The Personal Information Protection and Electronic Documents Act
b. The Federal Information Security Management Act
c. The Personal Information and Health Documents Act
d. The Health Insurance Portability and Accountability Act
Answer: d

39. Identify the situation prohibited by The Genetic Information Non-Discrimination Act of 2008 (GINA).
a. An employer releases genetic information about an employee in response to a court order.
b. An employer releases genetic information about an employee in connection with the employee’s compliance to the certification provisions of the Family and Medical Leave Act.
c. An employer releases genetic information about an employee to a health researcher.
d. An employer releases genetic information about an employee to the human resource department differentiate among employees.
Answer: d

40. Which of the following statements about the Genetic Information Non-Discrimination Act of 2009 (GINA) is true?
a. Under GINA, an employer can collect genetic information in order to monitor the biological effects of toxic substances in the workplace.
b. Under GINA, an employer is subject to the same conditions as under the Health Insurance Portability and Accountability Act (HIPAA).
c. Under GINA, an employer cannot collect genetic information in order to comply with the Family Medical Leave Act.
d. Under GINA, an employer cannot release genetic information about an employee to a public health agency.
Answer: a

41. Which of the following is a disadvantage of monitoring?
a. Monitoring tends to constrain effective performance since it can cause increased stress and pressure.
b. Monitoring prevents employers from managing their workplaces to place workers in appropriate positions.
c. Monitoring does not allow managers to ensure compliance with affirmative action requirements.
d. Monitoring cannot be utilized to prevent the loss of productivity due to inappropriate technology use.
Answer: a

42. Which of the following statements is true about monitoring?
a. It reduces workers’ right to control their environment without reducing the level of worker autonomy and respect.
b. It has the potential to cause physical disorders such as carpal tunnel syndrome.
c. It does not have a negative impact on performance.
d. It can lead to mental pressures, but health problems have not been reported.
Answer: b

43. Which of the following is true about the “Hawthorne Effect”?
a. According to the Hawthorne effect, workers’ productivity improves when they are singled out.
b. According to the Hawthorne effect, workers show poor performance when they know that they are being monitored.
c. The Hawthorne effect allows managers to monitor their employees effectively.
d. The Hawthorne effect only occurs when the mechanisms used to monitor employees are unethical.
Answer: a

44. Employees will be on their best behavior during phone calls if they know that those calls are being monitored. Identify this effect of employee monitoring.
a. The placebo effect
b. The observer-expectancy effect
c. The Hawthorne effect
d. The halo effect
Answer: c

45. An employer can resolve the concerns related to the “Hawthorne Effect” through:
a. notified, random monitoring.
b. consented, selective monitoring.
c. selective, notified monitoring.
d. random, anonymous monitoring.
Answer: d

46. If an employee’s weight is evidence of or results from a disability, the employer must explore whether the worker is otherwise qualified for the position. Under the Americans with Disabilities Act (ADA), the individual is considered “otherwise qualified” if she or he:
a. has prior work experience relevant to the position, even if she or he is not able to perform the functions of the position due to the disability.
b. can perform normal daily activities like taking a bath and eating.
c. can perform the functions of the position with or without reasonable accommodations.
d. has a good academic record and good conduct.
Answer: c

47. Some companies have a(n) _____ policy under which an employer refuses to hire or terminates a worker on the basis of the spouse’s working at the same firm.

 

 

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