Business Ethics Quiz 2: Corporations

What is the primary purpose of government regulations in business?

To ensure fair competition, protect consumers, and promote safety

Which of the following statements about corporations is true?

They may be publicly or privately held and for profit or not for profit.

The Narrow View suggests that corporations may pursue social goals:

Only if it maximizes profit

Which of the following best describes a business's primary obligation to consumers regarding product safety?

Taking reasonable steps to prevent harm by ensuring products are safe for intended use

Galbraith argues that advertising does not increase consumers' welfare when it:

Creates the needs it satisfies.

Many claim that advertising:

Is part of a competitive free market.

An ethical question concerning corporations often centers on:

Whether they prioritize social responsibility over profit.

An ethical question about corporations often revolves around:

Whether they are moral agents.

Due care requires that businesses

-Refrain from deception

-Not be negligent

-Accept strict liability

Economist Kenneth Arrow argues that ethical codes in business:

Promote economic efficiency by fostering trust and cooperation.

According to economist Adam Smith, the "invisible hand" refers to:

A metaphorical mechanism by which individuals' self-interest indirectly benefits society.

Why are stockholders vulnerable to management?

-Asymmetries in information

-Conflicts of interest

-Exposure (they have money invested)

Critics of advertising contend that:

Ads rarely give consumers useful info.

Externalities in the context of business refer to:

Costs or benefits imposed on third parties not directly involved in a transaction.

What is the primary goal of self-regulation in an industry?

To enable businesses to establish and follow ethical and safety standards voluntarily

Which argument supports the "Business-Can't-Handle-It" perspective on corporate social responsibility?

Businesses lack the expertise to address social and environmental issues effectively.

Which of the following advertising tactics is generally considered unethical

due to its potential to mislead consumers?

Exaggerating product capabilities without clear disclaimers

Some say corporations are moral agents because:

-They make decisions like people.

-They have their own intentions.

Proponents of the "Narrow View" argue that corporations should:

Maximize shareholder wealth without regard for social or environmental concerns.

According to Galbraith's "dependence effect,":

Consumer preferences are shaped by production.

A common view on corporate punishment:

t may influence the corporation's behavior even if it isn't a moral agent.

"Puffery" is an example of which of the following deceptive or misleading advertising techniques?

Exaggeration

A company markets a weight-loss supplement using exaggerated claims, such as "Lose 20 pounds in one week!" What ethical issue does this raise in advertising?

Transparency and honesty

A company discovers a potential defect in one of its products that could cause minor injuries. What is the ethically responsible action?

Inform consumers and issue a product recall

Legal paternalism is the doctrine that the law:

May justifiably be used to restrict the freedom of individuals for their own good.

Terms "best", "finest", and "most" exemplify

puffery

Which statement is most accurate in its description of consumer protection?

The Consumer Product Safety Commission orders recalls, public warnings, and refunds

According to Milton Friedman, corporations should primarily:

Maximize profit and nothing else.

The Broad View says ___; the Narrow View says ___.

All stakeholders' interests matter; only stockholders' interests matter

What is advertising primarily known for?

persuasion to purchase the product.

Which of the following obligations is directly related to a company's duty to

avoid deceptive practices in advertising?

Clearly stating safety features and risks so consumers can make informed decisions

In a corporation, shareholders are typically liable for debts up to:

The extent of their investments.

Due care is based on

The idea that consumers and sellers don't meet as equals; consumers may be harmed.

The Narrow View wants to use the law to create an environment in which business can pursue profit. Critics reply that the law is not well suited to the task because it is

-reactive, coming only after bad things have happened.

-Cumbersome, requiring time and resources

-Compromised, due to the input of lobbyists and other biased actors.

Which statement accurately describes the doctrine of strict product

liability?

A manufacturer need not be negligent to be held liable for a defective product.

What is consumers' main source of product information?

The label and package

When a corporation sells shares of ownership to the public, it becomes:

Publicly traded

Words like "can be," "as much as," and "help" in advertising demonstrate:

Weasel words

Deceptive techniques of advertising

-Ambiguity

-Concealment of Facts

-Exaggeration

The notion that corporations have moral responsibilities is considered, by

most:

Useful and intelligible