Business Law – Chapter 2

Ethics is the study of how people should act.
True
There is strong evidence that ethical behavior pays off financially for businesses.
False
Unethical behavior is a bar to financial success.
False
Society is hurt when business managers behave ethically.
False
Generally, ethical managers have happier, more satisfying lives.
True
The behavior of top executives regarding ethical issues has little effect on the behavior of the employees of the organization.
False
A company that engages in unethical behavior may suffer severe consequences.
True
Wever, Inc. is considering relocating a facility to Mexico. The interests of the various stakeholders affected by this decision may conflict.
True
In analyzing a situation to determine how to act ethically, a business manager should:
C. Determine whether an alternative violates important values
Zeno, Inc. is considering relocating its manufacturing facility from Illinois to Mexico City. The stakeholders in this decision might include:
D. All of the above
Ethics is the study of:
B. How people should act
Does ethical behavior maximize profitability?
C. Although there is no guarantee that ethical behavior pays in the short or long run, there is evidence that the ethical company is more likely to win financially
Why should ethics be a concern to a business?
D. All of the above
Which of the following are alternatives with issues of ethics in advertising?
D. All of the above are alternatives in dealing with issues of ethics in advertising
Research has shown that the least important motivation for managers in behaving ethically is:
D. Profitability
Why do many major corporations actively encourage ethical behavior?
B. Unethical behavior can quickly destroy a business
Unethical behavior in an organization can create:
D. All of the above
The observation that “The one and only social responsibility of business is to increase its profits” can be attributed to:
C. Milton Friedman
E-presto, Inc. has established an EthicsLine. EthicsLine is a toll-free phone number that employees can call any time of the day, any day of the week to discuses ethics and report suspected unethical or improper conduct. Why would E-presto establish the EthicsLine?
D. All of the above are reasons that would justify establishing an EthicsLine
Ethical companies:
E. Both A and B

(A. Tend to earn higher returns than companies that engage in wrong-doing)
(B. Tend to have more creative employees than companies that engage in wrong-doing)

Paul decided he did not want the new jeans he had purchased from a large discount department store. He had worn them three times and decided he just did not like them. The jeans fit him fine and there is nothing wrong with them. He takes the jeans back to the store and, as is its policy, the store gave him a full refund of his money. Which statement is correct?
B. Paul’s conduct was unethical
The Chief Executive Officer of Ticor, Inc. must decide about the disposal of toxic waste materials. Which of the following considerations should help the CEO reach an ethical business decision?
D. All of the above
Don runs a construction company. He hires people to work on his projects and tells them they are all “independent contractors.” Legally, they are not independent contractors since Don tells the workers when to come to work, how long to work, what days to work, what they are to do each day, and so forth. At the end of each week, Don pays his workers in cash rather than with a check. Also, he does not withhold any state, federal or local withholding tax (since he claims the workers are independent contractors). Which statement is correct?
A. Don has committed both unethical and illegal conduct
Nortron Corporation wants to create an ethical environment in its company. Which of the following has been found to help foster a sense of ethics within an organization?
D. All of the above alternatives have been used by U.S. companies to create an ethical environment in their organizations.
Lois is running for political office. She trails the incumbent and decides to start running a series of “attack ads.” The attack ads are very effective and one week before the election it appears that she has drawn even with her opponent. Lois admits that the attack ads were exaggerations and contained some distortions. Which statement is correct?
A. Lois engaged in unethical behavior
John discovered his company’s accountant was “skimming” money from the business. The accountant agreed to pay John a one-time payment of $25,000 not to report the skimming to company officials. The accountant promised she would pay the money back when she could. John accepted the money and never reported what he knew. A year later the accountant was fired when the embezzlement was discovered. She was also prosecuted for theft. The payment to John was never discovered. Which statement is correct?
A. John’s act was unethical and illegal