Ethics And The Conduct Of Business, 7th Edition Test Bank

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Test Bank
for
Boatright
Ethics and the Conduct of
Business
Seventh Edition

Contents
Chapter 1 Ethics in the World of Business 1
Chapter 2 Ethical Decision Making 4
Chapter 3 Ethical Theories 7
Chapter 4 Whistle-Blowing 10
Chapter 5 Trade Secrets and Conflict of Interest 13
Chapter 6 Privacy 17
Chapter 7 Discrimination and Affirmative Action 20
Chapter 8 Employment Rights 23
Chapter 9 Occupational Health and Safety 26
Chapter 10 Marketing, Advertising, and Product Safety 30
Chapter 11 Ethics in Finance 33
Chapter 12 Corporate Social Responsibility 37
Chapter 13 Corporate Governance and Accountability 40
Chapter 14 International Business Ethics 43
iii

1
Chapter 1
Ethics in the World of Business
CHAPTER SUMMARY
Business ethics is concerned with identifying and understanding the ethical issues that arise
in business and with developing the knowledge and skills needed by a practicing manager to
address these issues and to make sound business decisions—that is, decisions that are
sound from both an ethical and a business perspective. Ethical issues are an inevitable
element of business decision making and are deeply intertwined with managerial practice
and economic activity generally. Business ethics is important for managers because many
business decisions upon which the success of individual managers, business organizations,
and, indeed, the whole economic system depend, are involved in ethical issues. Both
economics and law are important guides for business decision making, but they are not
complete. Nor is business ethics understood merely as the treatment of ethical issues from
a philosophical perspective. As the work of psychologists and sociologists on organizational
misconduct show, it is not enough merely to determine a right course of action. Misconduct
in organizations is also the result of flaws in individual and organizational decision making
that can be corrected only by changes in decision-making processes. Practicing managers
must also address the larger challenge of preventing misconduct within organizations.
CHAPTER OBJECTIVES
• Explain how business decision-making can run afoul of ethical concerns.
• Describe the kinds of decisions that are characteristic of the various levels of
business organization.
• Describe the relationship between ethics and the law.
SUGGESTED DISCUSSION PROMPTS
1. What types of ethical concerns do decision-makers at the management level need to
take into account?
2. What types of ethical concerns do decision-makers at lower organizational levels
need to take into account?
3. How would you respond to someone who says that a business should always do
whatever is in its economic interests?
4. What is wrong with the thought that abiding by the law is all the ethics that a
businessperson needs to worry about?
5. How does specialized knowledge come into play in the management of ethics?

2
ASSESSMENT FOR IN-CLASS USE
The following assessment has been created for in-class use. This assessment may be
available through Pearson’s MyTest website—allowing for easy access for creating your own
tests. This assessment may also be offered in a Blackboard/Angel/D2L/WebCT package.
Please contact your local Pearson sales representative to learn about the options available.
Visit, http://www.pearsonhighered.com/replocator.
Multiple Choice Questions
Choose the BEST possible answer for each of the following.
1. In many cases, rules of business ethics can be determined by .
A. applicable laws
B. company guidelines
C. economic requirements
D. rules of conduct that apply in everyday life
Answer: D
2. The economic character of business can be seen in its .
A. trading characteristics
B. ethical dimensions
C. personal aspects
D. legal guidelines
Answer: A
3. Organization in business is characterized mainly by its .
A. rules
B. hierarchy
C. profits
D. products
Answer: B
4. Decision making in business occurs at various distinctive .
A. places
B. levels
C. objectives
D. profits
Answer: B
5. It is possible for there to be unethical actions that are not .
A. illegal
B. wrong
C. avoidable
D. harmful
Answer: A

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3
6. Economic reasoning describes how we .
A. ought to reason
B. prioritize our desires
C. reason when pursuing our goals
D. would reason if we could have whatever we wanted
Answer: C
7. Adam Smith’s economic theory is based on which of the following assumptions?
A. People want to promote each others’ interests.
B. Morality is not relevant to economic concerns.
C. Free markets will fix their own ethical problems.
D. People will behave rationally as they pursue their interests.
Answer: D
8. What fact does the “ultimatum bargaining game” demonstrate?
A. It is often rational to price products below their market value.
B. Free markets will usually self-regulate.
C. Many people do not understand economics.
D. Many people would rather not trade than be treated unfairly.
Answer: D
9. The school of thought that says that law and ethics govern two different realms is
wrong because .
A. ethics applies to every field of life
B. anything that is legal is also ethical
C. anything that is illegal is also unethical
D. the law governs every aspect of life
Answer: A
10. It is not ethically sufficient to obey the law because .
A. the law does not apply to business in general
B. ethical constraints sometimes require that the law be ignored
C. ethics goes beyond what can be legally codified
D. the law itself is stricter than ethics
Answer: C
Essay Questions
1. What is economic efficiency, and in what ways might the pursuit of economic
efficiency be unethical?
2. Describe and explain an example of a business decision that would be unethical even
though it is legal.
3. In what ways does it benefit businesses to pursue ethical choices beyond what they
are legally required to do?

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4
Chapter 2
Ethical Decision Making
CHAPTER SUMMARY
Ethical decision making in business is often difficult and complex. Some situations are easily
handled because what one ought to do or what is right and wrong are evident. Those
situations that give us pause or produce moral anguish require careful thought and
ultimately an ability to engage in ethical reasoning. This chapter contributes to an
understanding of ethical decision making by offering a division of business ethics into two
parts: an ethics of the market and an ethics of roles and relationships, including firms. In
business, we deal with some parties purely as market actors who are on the other side of a
market transaction or exchange. For such market activity, certain moral rules or standards
apply. Much of business, however, involves roles and relationships and takes place in firms
or organizations. These roles, relationships, and firms arise in a market, but, by mutual
agreement in a market, we take ourselves out of the market and govern our actions by a
different “ethics,” the ethics of these roles and relationships.
When we attempt to think through the ethical issues that arise in business, we are engaging
in ethical reasoning, which may be conducted on different levels. Ethical theories, which are
presented in the next chapter, can guide ethical reasoning on the highest level by providing
the most comprehensive and fundamental grounds for our moral beliefs and judgments.
Fortunately, substantial moral arguments can be constructed that do not require an
understanding of these theories. Most of our everyday ethical reasoning employs familiar
ethical concepts and principles that can be readily understood and applied. Accordingly, this
chapter provides a framework of seven basic ethical principles that are sufficient for most
business decision making. For those who seek more, though, the next chapter provides a
survey of the main philosophical theories of ethics.
CHAPTER OBJECTIVES
• Identify the ethical duties and obligations of business that arise from the market.
• Identify the ethical duties and obligations of business that arise from roles and
relationships.
• Describe the philosophical bases of ethical reasoning.
• Describe the psychological bases of ethical reasoning.
SUGGESTED DISCUSSION PROMPTS
1. What is ethically required of participants in a market economic system?
2. In what ways do participants in a market system have to depend upon each other?
3. In what ways do ethical considerations work against perfect operation of a market
economy?
4. How does the prisoner’s dilemma reflect the limitations of a free market system?
5. What capacities are required of an agent to engage in ethical reasoning?

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5
ASSESSMENT FOR IN-CLASS USE
The following assessment has been created for in-class use. This assessment may be
available through Pearson’s MyTest website—allowing for easy access for creating your own
tests. This assessment may also be offered in a Blackboard/Angel/D2L/WebCT package.
Please contact your local Pearson sales representative to learn about the options available.
Visit, http://www.pearsonhighered.com/replocator.
Multiple Choice Questions
Choose the BEST possible answer for each of the following.
1. A market economy is based fundamentally on .
A. ethical motivations
B. the profit motive
C. human welfare
D. manufacturing
Answer: B
2. A market with perfect competition would require .
A. agents to not be rational
B. that there be no contracts
C. that ethics not be necessary
D. ethical guidelines to be legally codified
Answer: C
3. Fraud is unethical because .
A. all parties must have access to pertinent information
B. no one may be permitted to profit too much
C. market economies require freedom of action
D. the market requires everyone to further their own interests
Answer: A
4. The difference between Homo economicus and actual people is that .
A. Homo economicus is capable of making any decision
B. Homo economicus pursues many different interests
C. actual people pursue their own self-interest
D. actual people are less than perfectly rational
Answer: D
5. A market economy alone cannot sustain public goods because .
A. no one would want to take advantage of public goods
B. everyone would be free riders if they could be
C. people would try to sell each other public goods
D. participants in a market economy are imperfectly rational
Answer: B

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6
6. Market outcomes lead to unequal outcomes mainly because .
A. it involves random processes
B. participants have differing levels of skill
C. free markets are inherently unjust
D. there is government interference
Answer: B
7. A fiduciary has the special responsibility to .
A. care for another’s financial interests
B. sell goods as efficiently as possible
C. provide as much information as possible
D. take a professional interest in another’s success
Answer: A
8. The ethical requirements that are specific to professionals arise in part from
.
A. their duty not to profit at others’ expense
B. the implicit contract that they have with other professionals
C. the duties they owe to their governing association
D. their specialized knowledge and responsibilities
Answer: D
9. The internal workings of firms are founded on .
A. markets
B. agents
C. roles
D. relationships
Answer: D
10. The ethical concept of dignity most centrally involves .
A. treating all persons equally
B. disclosing all information that is needed by others
C. recognizing the intrinsic value of persons or other entities
D. behaving with high standards of virtue
Answer: C
Essay Questions
1. What are the basic components of a market system, and what assumptions are made
about human behavior?
2. What is the difference between a fiduciary and an agent? What special obligations
are characteristic of a fiduciary that is not an agent?
3. What are the required components of the moral point of view, and how are they
exercised in a business setting?

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7
Chapter 3
Ethical Theories
CHAPTER SUMMARY
This chapter presents the main concepts and theories of ethics that have been developed
over centuries by major moral philosophers. The value of any theory for business ethics is
its usefulness in evaluating business practices, institutional arrangements, and economic
systems. In general, all of these theories justify most prevailing business practices, the
institution of the modern corporation, and capitalism or the market system, but they also
provide the basis for some criticism and improvement. In the subsequent chapters, this
theoretical foundation is used to explore a wide range of practical business ethics topics.
CHAPTER OBJECTIVES
• Identify the role that ethical theories play in moral reasoning.
• Explain what utilitarianism is and its two types.
• Explain the basis and the cardinal rule of Kantian ethics.
• Explain the basis of virtue ethics.
• Describe various emphases of rights and justice in ethical theory.
SUGGESTED DISCUSSION PROMPTS
1. What would an act utilitarian and a rule utilitarian say differently when evaluating the
same case?
2. What specific problem is posed to utilitarianism by its economic application?
3. What is the major contrast between utilitarianism and Kantian ethics?
4. What are the attractive features of virtue theory? What are its limitations in
application to business?
5. In what ways is the rights and justice perspective a fitting ethical theory for business
ethics?

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8
ASSESSMENT FOR IN-CLASS USE
The following assessment has been created for in-class use. This assessment may be
available through Pearson’s MyTest website—allowing for easy access for creating your own
tests. This assessment may also be offered in a Blackboard/Angel/D2L/WebCT package.
Please contact your local Pearson sales representative to learn about the options available.
Visit, http://www.pearsonhighered.com/replocator.
Multiple Choice Questions
Choose the BEST possible answer for each of the following.
1. What does the P&G case show about the applicability of ethics to business?
A. When a company makes unethical decisions, it is usually breaking the law.
B. Ethics in business applies differently from how it does in the rest of the world.
C. A company’s behavior many be unethical even if no harm is done.
D. A company’s ethical decisions should always affect its bottom line.
Answer: C
2. Teleological theories of ethics locate goodness in .
A. the outcome of actions
B. the intentions of the agent
C. the obligations of people to each other
D. the maximization of economic opportunity
Answer: A
3. Rule utilitarianism favors rules that .
A. always benefit the most people
B. everyone agrees with
C. utilitarians think are good rules
D. would maximize goodness if everyone followed them
Answer: D
4. What is the most fundamental drawback of having cost-benefit analyses serve as the
basis for ethical decisions in business?
A. Some things do not really have value.
B. A determinate value must be placed on things that have incalculable value.
C. Cost-benefit analyses are time-consuming and require specialized skill.
D. Cost-benefit analyses require a commitment to consequentialism.
Answer: B

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9
5. A “maxim,” according to Kant’s terminology, is .
A. the outcome of an action
B. the reason that one undertakes an action
C. the moral principle that one has in mind
D. that which would make an action moral
Answer: B
6. Kant’s rule requiring respect for persons asks that we .
A. not use people as means to an end
B. view each person as a moral agent
C. view each person as an end unto himself
D. only use another person if we have sufficient reason for doing so
Answer: C
7. Virtue ethics defines a moral action as that which .
A. a wise person would do
B. leads to the most virtue overall
C. is done with the most virtuous intentions
D. is done according to the proper rules
Answer: A
8. A drawback to theorizing about business ethics in terms of rights is that .
A. not everyone has rights
B. people’s rights may conflict
C. it is hard to draw the line between different types of rights
D. conceptions of rights differ between cultures
Answer: B
9. The notion of justice is most basically concerned with .
A. fairness
B. equality
C. rights
D. economics
Answer: A
Essay Questions
1. In what ways is the need to calculate utility a problem for utilitarianism?
2. What is Kant’s categorical imperative? Explain its two formulations.
3. Describe how rights and justice can be explained in terms of one another.

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10
Chapter 4
Whistle-Blowing
CHAPTER SUMMARY
Whether or not to blow the whistle on misconduct in an organization is the most difficult
decision that some people ever have to make. The decision is wrenching personally because
the stakes are so high. Yet many whistle-blowers say that they could not have lived with
themselves if they had stayed silent. The decision is also difficult ethically, because whistle-
blowing involves a conflict between two competing duties: to protect the public and to be
loyal to an organization. Although loyalty is not always overriding, as the loyal agent
argument holds, neither is it inconsequential. Deciding between these duties often requires
that an employee exercise very careful judgment.
The one certain conclusion of this chapter is that whistle-blowing is ethically permissible
under certain carefully specified conditions. (Whether it can ever be ethically required is a
different question that seldom arises. Everyone has an obligation not to be a part of illegal
and immoral activity, but exposing it at great risk to oneself is usually regarded as beyond
what duty requires.) Blowing the whistle is only one response that an employee can make
to corporate misconduct, however, and the act of whistle-blowing itself can take many
different forms. So in addition to whether to become a whistle-blower, employees are faced
with the further question of how to blow the whistle in a justified manner. Finally, it is
evident that employees who are justified in blowing the whistle ought not to suffer
retaliation. What ought to be done to protect whistle-blowers from this fate is less clear. A
plausible case can be made for legislation in this area, but the difficulty is drafting laws that
achieve the desired result without interfering unduly in the legitimate conduct of business.
CHAPTER OBJECTIVES
• Describe the process of whistle-blowing.
• Explain the dilemma between whistle-blowing and loyalty.
• Identify appropriate conditions for whistle-blowing.
• Identify employer and legal issues relating to whistle-blowing protection
SUGGESTED DISCUSSION PROMPTS
1. Why do employees want to blow the whistle?
2. Do employers have valid reasons to frown on whistle-blowing?
3. What must an employee do in order to ensure that they blow the whistle properly?
4. What are the objectives of legal protection for whistle-blowers?
5. Why would a company develop a whistle-blowing policy?

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11
ASSESSMENT FOR IN-CLASS USE
The following assessment has been created for in-class use. This assessment may be
available through Pearson’s MyTest website—allowing for easy access for creating your own
tests. This assessment may also be offered in a Blackboard/Angel/D2L/WebCT package.
Please contact your local Pearson sales representative to learn about the options available.
Visit, http://www.pearsonhighered.com/replocator.
Multiple Choice Questions
Choose the BEST possible answer for each of the following.
1. A whistle-blower is primarily motivated by .
A. retaliation
B. ethical concern
C. personal gain
D. fear of retribution
Answer: B
2. Which of the following is necessary for whistle-blowing to occur?
A. information
B. legal protection
C. a nondisclosure agreement
D. managing authority
Answer: A
3. Some corporations have an ombudsman, whose role is to .
A. blow the whistle
B. release information to the public
C. report on employees
D. hear complaints
Answer: D
4. How does the disloyalty argument against whistleblowing receive support from the
law?
A. Loyalty to a single company is enforced by the law.
B. There is little legal precedent for whistleblower protection.
C. There are many laws enforcing corporate confidentiality.
D. Employees of a corporation are by legal definition agents of that corporation.
Answer: D
5. The biggest weakness in the disloyalty argument against whistleblowing is that
.
A. an employee differs in many ways from an agent
B. employees do not receive protection when whistleblowing
C. employers have no right to expect loyalty from employees
D. it does not apply to at-will employment
Answer: A

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