2
Ethics Chapter and Business
Decision Making
TRUE/FALSE QUESTIONS
1.
Ethicsisthebranchofphilosophythatfocusesonwhatconstitutesright
andwrongbehavior.
ANSWER: T
NAT:AACSBEthics
2.
PAGE:
37
TYPE:
AICPACriticalThinking
N
PAGE:
37
TYPE:
AICPACriticalThinking
N
Businessethicsfocusesonethicalbehaviorinthebusinessworld.
ANSWER: T
NAT:AACSBEthics
5.
N
Ethicsisnotconcernedwiththefairnessorjustnessofanaction.
ANSWER: F
NAT:AACSBEthics
4.
37
TYPE:
AICPACriticalThinking
Ethicsisnotconcernedwiththephilosophicalbasisformorality.
ANSWER: F
NAT:AACSBEthics
3.
PAGE:
PAGE:
37
TYPE:
AICPARiskAnalysis
N
Abusinessfirm'sprofitsmaysufferifthefirmactsunethically.
ANSWER: T
NAT:AACSBEthics
PAGE:
17
37
TYPE:
AICPACriticalThinking
N
18UNITONE:THEFOUNDATIONS
6.
Businesspersonswhowouldchoosetoactunethicallymaybedeterredfrom
doingsobecauseofpublicopinion.
ANSWER: T
NAT:AACSBEthics
7.
PAGE:
PAGE:
PAGE:
N
38
TYPE:
AICPARiskAnalysis
+
38
TYPE:
AICPARiskAnalysis
N
PAGE:
41
TYPE:
AICPACriticalThinking
=
Undertheprincipleofrightstheory,onepersonssetofvaluesisasright
asanothers.
ANSWER: F
NAT:AACSBEthics
13.
38
TYPE:
AICPACriticalThinking
Dutybased ethics may be based on religious precepts or philosophical
reasoning.
ANSWER: T
NAT:AACSBEthics
12.
N
Toactethicallyistothinknarrowlyaboutwhatisbestintheshortrunfor
onesemployer.
ANSWER: F
PAGE:
NAT:AACSBAnalytic
11.
38
TYPE:
AICPACriticalThinking
Settingrealisticworkplacegoalscanreducetheprobabilitythatemploy ees
willactunethically.
ANSWER: T
NAT:AACSBEthics
10.
N
Managersmustapplydifferentstandardstothemselvesthantheyapplyto
theiremployees.
ANSWER: F
NAT:AACSBEthics
9.
38
TYPE:
AICPACriticalThinking
Businessethicsisconsistentonlywithshortrunprofitmaximization.
ANSWER: F
NAT:AACSBEthics
8.
PAGE:
PAGE:
41
TYPE:
AICPACriticalThinking
Ethicalstandardsbasedonreligiousteachingstendtobeabsolute.
=
CHAPTER2:ETHICSANDBUSINESSDECISIONMAKING 19
ANSWER: T
NAT:AACSBEthics
14.
PAGE:
41
TYPE:
AICPACriticalThinking
N
Ethicalreasoningistheprocessthroughwhichanindividualrational izes
whateveractionheorshechoosestotake.
ANSWER: F
NAT:AACSBEthics
PAGE:
41
TYPE:
AICPACriticalThinking
N
20UNITONE:THEFOUNDATIONS
15.
Dutybasedethicalstandardsimplythatpeoplehavebasicrights.
ANSWER: T
NAT:AACSBEthics
16.
N
PAGE:
42
TYPE:
AICPARiskAnalysis
=
PAGE:
42
TYPE:
AICPACriticalThinking
N
PAGE:
42
TYPE:
AICPACriticalThinking
N
According to utilitarianism, it does not matter how many people benefit
fromanact.
ANSWER: F
NAT:AACSBEthics
21.
42
TYPE:
AICPACriticalThinking
Accordingtoutilitarianism,anactionthataffectsaminorityadverselyis
morallywrong.
ANSWER: F
NAT:AACSBEthics
20.
PAGE:
Establishing which duties take priority over others determines a firm's
viewsoncorporatesocialresponsibility.
ANSWER: T
NAT:AACSBEthics
19.
N
Inethicalterms,acostbenefitanalysisisanassessmentofthenegative
andpositiveeffectsofalternativeactionsonindividuals.
ANSWER: T
NAT:AACSBEthics
18.
41
TYPE:
AICPACriticalThinking
Ifanactionisethicalfromanoutcomebasedperspective,itis alwaysethical
fromadutybasedperspective.
ANSWER: F
NAT:AACSBEthics
17.
PAGE:
PAGE:
42
TYPE:
AICPACriticalThinking
=
Corporationscanbeperceivedasowingethicaldutiestogroupsotherthan
theirshareholders.
ANSWER: T
NAT:AACSBEthics
PAGE:
42
TYPE:
AICPACriticalThinking
+
CHAPTER2:ETHICSANDBUSINESSDECISIONMAKING 21
22.
Anethicsprogramcanclarifywhatacompanyconsiderstobeunaccept able
conduct.
ANSWER: T
NAT:AACSBEthics
23.
PAGE:
PAGE:
PAGE:
45
TYPE:
AICPARiskAnalysis
N
46
TYPE:
AICPACriticalThinking
=
46
TYPE:
AICPACriticalThinking
+
Abusinessfirmcansometimespredictwhetheragivenactionislegal.
ANSWER: T
PAGE:
NAT:AACSBAnalytic
29.
N
Anactionmaybeunethicalbutlegal.
ANSWER: T
PAGE:
NAT:AACSBAnalytic
28.
45
TYPE:
AICPARiskAnalysis
Intheinterestofpreservingpersonalfreedom,thelawcodifiesallethical
requirements.
ANSWER: F
PAGE:
NAT:AACSBAnalytic
27.
N
Corporateethicalpoliciesandprogramsmustbeintegratedthroughoutthe
firmtobeeffective.
ANSWER: T
NAT:AACSBEthics
26.
43
TYPE:
AICPACriticalThinking
Corporateethicalpoliciesmustbeclearlycommunicatedtobeeffective.
ANSWER: T
NAT:AACSBEthics
25.
N
Corporationscanbehaveasgoodcitizensbypromotinggoalsthatsociety
deemsworthwhile.
ANSWER: T
PAGE:
NAT:AACSBAnalytic
24.
43
TYPE:
AICPACriticalThinking
49
TYPE:
AICPACriticalThinking
N
Actingingoodfaithgivesabusinessfirmabetterchanceofdefendingits
actionsincourt.
22UNITONE:THEFOUNDATIONS
ANSWER: T
PAGE:
NAT:AACSBAnalytic
30.
=
Tobeethicalistodotherightthingbutitdoesnototherwisepay.
ANSWER: F
NAT:AACSBEthics
31.
49
TYPE:
AICPARiskAnalysis
PAGE:
51
TYPE:
AICPACriticalThinking
N
Ignoranceofalawexcusesabusinessfromliabilityforitsvio lation.
ANSWER: F
PAGE:
NAT:AACSBAnalytic
51
AICPALegal
TYPE:
+
CHAPTER2:ETHICSANDBUSINESSDECISIONMAKING 23
32.
Abusinessorganizationanditsactionscannotbebasedontrust.
ANSWER: F
PAGE:
NAT:AACSBAnalytic
33.
51
TYPE:
AICPARiskAnalysis
N
The roles that women play in some foreign countries may present some
difficultethicalproblemsforfirmsdoingbusinessinternationally.
ANSWER: T
PAGE: 52
NAT:AACSBDiversity AICPACriticalThinking
35.
N
Oneguidelinetoevaluatingtheethicsofaparticularactionistoletyour
consciencebeyourguide.
ANSWER: T
PAGE:
NAT:AACSBAnalytic
34.
51
TYPE:
AICPARiskAnalysis
TYPE:
N
Briberyofforeigngovernmentofficialsisbothanethicalandalegalissue.
ANSWER: T
PAGE:
NAT:AACSBAnalytic
54
TYPE:
AICPACriticalThinking
=
MULTIPLE CHOICE QUESTIONS
1.
JohnissalesmanagerforKleenNBriteProducts,Inc.ComparedtoJohns
personalactivities,hisbusinessactivitiesmostlikelyinvolve
a.
b.
c.
d.
morecomplexethicalissues.
simplerethicalissues.
thesameethicalissues.
noethicalissues.
ANSWER: A
PAGE: 37
NAT:AACSBReflective AICPACriticalThinking
2.
TYPE:
N
LiaworksforMediaMarketingCompany.Herjobincludesputtingspin
onthefirmssuccessesandfailures.Inthiscontext,ethicsconsistof
a.
b.
c.
badversusgoodpublicity.
questionsofrightnessandwrongness.
thefirmsquarterlyrevenue.
24UNITONE:THEFOUNDATIONS
d.
whateverislegal.
ANSWER: B
PAGE: 37
NAT:AACSBReflective AICPACriticalThinking
TYPE:
+
CHAPTER2:ETHICSANDBUSINESSDECISIONMAKING 25
3.
Instudyingthelegalenvironmentofbusiness,ProfessorDooleysstu dents
alsoreviewethicsinabusinesscontext.Ethicsincludesthestudyofwhat
constitutes
a.
b.
c.
d.
fairorjustbehavior.
financiallyrewardingbehavior.
legalbehavior.
religiousbehavior.
ANSWER: A
PAGE: 37
NAT:AACSBReflective AICPACriticalThinking
4.
TYPE:
+
SuperiorCorporationengagesinethicalbehaviorsolelyforthepurposeof
gettinggoodpublicityandtherebyincreasingprofits.Superioris
a.
b.
c.
d.
actingunethicallyinitspursuitofpublicity.
actingunethicallyinitspursuitofprofits.
actingunethicallyinitssettingofpriorities.
notactingunethically.
ANSWER: D
PAGE: 38
NAT:AACSBReflective AICPACriticalThinking
TYPE:
N
Fact Pattern 2-1 (Questions 56 apply)
Leorunsanassetrecoverybusiness.Inonecase,herecruitsclientsbymisrepre
sentingthefactsandpretendingtobelicensedtopracticelawinMississippi.Hefiles
gratuitous,maliciouspleadings,liestothecourt,andotherwiseabusesthejudicial
process.Later,heinvolveshimselfinothercasesinwhichheusessimilartactics .
5.
RefertoFactPattern21.Accordingtothedescriptionquotedbythecourtin
Case2.1,Baum v. Blue Moon Ventures LLC,Leosconductis
a.
b.
c.
d.
anexampleofguerillawarfarethroughlitigation.
praiseworthyforitsingenuityinrecoveringhiddenassets.
understandableinthepursuitofprofitbutnotlaudable.
unjustifiablebutnotseriouslyreprehensible.
ANSWER: A
PAGE:
NAT:AACSBCommunication
39
TYPE: N
AICPADecisionModeling
26UNITONE:THEFOUNDATIONS
6.
RefertoFactPattern21.UnderthedecisionofthecourtinCase2.1, Baum v.
Blue Moon Ventures LLC,Leosconductmostlikelywarrants
a.
b.
c.
d.
anadmonishmentbutnoothersanctions.
aninjunctionagainstcertaincourtfilingsplusothersanctions.
nosanctionsbutnopraise.
praiseforitsaggressioninrecoveringtheassetsofdeadbeatdebtors.
ANSWER: B
PAGE:
NAT:AACSBCommunication
7.
39
TYPE:
AICPACriticalThinking
Tina,thechieffinancialofficerforUSAProductsCorporation,at temptsto
applyChristianpreceptsinmakingethicaldecisionsandindo ingbusiness.
Inapplyingdutybasedethicalstandardsthatarederivedfromare ligious
source,Tinawouldmostlikelyconsiderthemotivebehindanacttobe
a.
b.
c.
d.
irrelevant.
theleastimportantconsideration.
themostimportantconsideration.
theonlyconsideration.
ANSWER: A
PAGE: 41
NAT:AACSBReflective AICPACriticalThinking
8.
TYPE:
=
Dion,anaccountantforEngineeringAssociates,Inc.,attemptstoapplythe
dutybasedapproachtoethicalreasoninginconflictsthatoccuronthejob.
Thisapproachisbasedontheideathatapersonmust
a.
b.
c.
d.
achievethegreatestgoodforthemostpeople.
avoidunethicalbehaviorregardlessoftheconsequences.
conformtosocietysethicalstandards.
placehisorheremployersinterestfirst.
ANSWER: B
PAGE: 41
NAT:AACSBReflective AICPACriticalThinking
9.
N
TYPE:
=
Del, vicepresident of sales for EZ Products, Inc., adheres to relig ious
ethicalstandards.Theirapplicationinvolvesanelementof
a.
b.
c.
absolutism.
afterthefactrationalization.
personaldiscretion.
CHAPTER2:ETHICSANDBUSINESSDECISIONMAKING 27
d.
utilitarianism.
ANSWER: A
PAGE: 41
NAT:AACSBReflective AICPACriticalThinking
TYPE:
N
28UNITONE:THEFOUNDATIONS
10.
Rob,theownerofSuperStores,Inc.,adherestotheprincipleofrights
theory.Underthistheory,akeyfactorindeterminingwhetherabusi ness
decisionisethicalishowthatdecisionaffects
a.
b.
c.
d.
therightdeterminationunderacostbenefitanalysis.
therightsofothers.
therightthingtodo.
therighttomakeaprofit.
ANSWER: B
PAGE: 41
NAT:AACSBReflective AICPACriticalThinking
11.
areligiousrule.
thecategoricalimperative.
theprincipleofrights.
utilitarianism.
ANSWER: C
PAGE: 41
NAT:AACSBReflective AICPACriticalThinking
TYPE:
N
EnergyResearchCorporationasksitsemployeestoconsiderethicalbe hav
iorfromacategoricalimperativeperspective.Thisapproach
a.
b.
c.
d.
categorizescertainactionsasimperative.
considerstheconsequencestofollowifeveryoneactedthesame.
focusesoncategoriesofrightsandprivileges.
imposessanctionsonthosewhobehaveunethically.
ANSWER: B
PAGE: 41
NAT:AACSBReflective AICPACriticalThinking
13.
=
Inmakingbusinessdecisions, Brian,personnelmanagerforConservative
Investments, Inc., applies his belief that all persons have fundamental
rights.Thisis
a.
b.
c.
d.
12.
TYPE:
TYPE:
N
Inbusinessdeals,Elin,thechiefexecutiveofficerofFrostedDonuts,Inc.,
followsdutybasedethicalstandards.Thesearemostlikelyderivedfrom
a.
b.
c.
d.
acorporateethicscode.
acostbenefitanalysis.
philosophicalreasoning.
thelaw.
CHAPTER2:ETHICSANDBUSINESSDECISIONMAKING 29
ANSWER: C
PAGE: 41
NAT:AACSBReflective AICPACriticalThinking
14.
howthecorporationcanbestfulfillitsdutytosociety.
theeffectoncorporateprofitsofignoringanydutytosociety.
whetherthecorporationowesadutytosociety.
allofthechoices.
ANSWER: A
PAGE: 42
NAT:AACSBReflective AICPACriticalThinking
b.
c.
d.
N
an action is morally correct when, among affects, thepeopleit it
producesthegreatestamountofgoodforthegreatestnumber.
foreveryaction,thereisanequalandoppositereaction.
lifeinastateofnatureisnasty,brutish,andshort.
thepursuitbyindividualsoftheirselfinterestwillresultinacor re
spondingincreaseinsocietalwelfare.
ANSWER: A
NAT:AACSBEthics
PAGE:
42
TYPE:
AICPACriticalThinking
N
Callie,alawyeronthestaffofDrollInternationalLtd.,appliestheutili tar
iantheoryofethicsinbusinesscontexts.Utilitarianismfocuseson
a.
b.
c.
d.
moralvalues.
religiousbeliefs.
theconsequencesofanaction.
thenatureofanaction.
ANSWER: C
NAT:AACSBEthics
17.
TYPE:
Teresa,inmakingmarketingdecisions forUnoStuff,Inc., takesautili
tarianperspective.Acharacteristicstatementofthisphilosophyis
a.
16.
N
Indecidingquestionsofcorporatesocialresponsibility,MegaDeals,Inc.,is
concernedwith
a.
b.
c.
d.
15.
TYPE:
PAGE:
42
TYPE:
AICPACriticalThinking
=
In making decisions for Sales Unlimited Inc., Tajik uses a costbenefit
analysis.Thisisapartof
30UNITONE:THEFOUNDATIONS
a.
b.
c.
d.
dutybasedethics.
Kantianethics.
theprincipleofrights.
utilitarianism.
ANSWER: D
NAT:AACSBEthics
18.
PAGE:
42
TYPE:
AICPACriticalThinking
Lacey, a vicepresident of Medico Pharmaceuticals, Inc., does not apply
utilitarianismtobusinessethicalissues.Oneproblemwithutilitarianismis
thatit
a.
b.
c.
d.
givesbusinessprofitspriorityoverproductioncosts.
ignoresthepracticalcostsofagivensetofcircumstances.
requirescomplexcostbenefitanalysesofsimplesituations.
tendstojustifyhumancoststhatmanyfindunacceptable.
ANSWER: D
PAGE: 42
NAT:AACSBReflective AICPACriticalThinking
19.
TYPE:
=
Any decision by Reggie and the other managers of Standard Solutions
Corporationmaysignificantlyaffectthefirms
a.
b.
c.
d.
operatorsonly.
operators,owners,suppliers,thecommunity,orsocietyasawhole.
ownersonly.
suppliers,thecommunity,orsocietyasawholeonly.
ANSWER: B
PAGE: 42
NAT:AACSBReflective AICPARiskAnalysis
20.
N
TYPE:
N
ManufacturedMetals,Inc.,asksitsemployees,manyofwhomaremem bers
oftheNationalMachinistsUnion,toapplytheutilitariantheoryofethics.
Thistheorydoesnotrequire
a.
b.
c.
d.
a choice among alternatives that will produce maximum so cietal
utility.
adeterminationofwhomanactionwillaffect.
anassessmentoftheeffectsofalternativesonthoseaffected.
theacquiringofthemeansofproductionbyworkers.
ANSWER:
D
PAGE:
42
TYPE:
N
CHAPTER2:ETHICSANDBUSINESSDECISIONMAKING 31
NAT:AACSBReflective AICPACriticalThinking
21.
A common ethical dilemma faced by the management of Wheel Deals
Corporationinvolvestheeffectthatitsdecisionwillhaveon
a.
b.
c.
d.
onegroupasopposedtoanother.
thefirmscompetitors.
thegovernment.
allofthechoices.
ANSWER: A
PAGE: 42
NAT:AACSBReflective AICPACriticalThinking
22.
N
GeneralAuto,Inc.,needstocutcostsbydownsizing.Indetermin ingwhich
employeestodischarge,GeneralAutowillmostlikelyweigh
a.
b.
c.
d.
itsethicaldutytolongtermemployeesandthelegalityofdis charg
ingolderworkersonly.
itsethicaldutytolongtermemployees,itsprofitmargin,andthele
galityofdischargingolderworkers.
thelegalityofdischargingolderworkersonly.
noduty.
ANSWER: B
PAGE: 42
NAT:AACSBReflective AICPACriticalThinking
23.
TYPE:
TYPE:
N
SteeleToolCompanysdecisionmakersviewaparticularriskintheuseof
Steelesproductasopenandobvious.Theybelievethatbecausetheriskis
obvious,consumersarealreadytakingstepstoavoiditandthataddinga
warning could result in lower sales that would necessitate lay offs of
employees. Thus, in the managers view, the warning would not benefit
consumersbutcouldhaveaseriousnegativeimpactonSteelesemployees.
Continuing to market the product without telling consumers of the risk
couldbejustifiedfromaperspectiveof
a.
b.
c.
d.
dutybasedethics.
Kantianethics.
rightsbasedethics.
utilitarianethics.
ANSWER: D
PAGE: 42
NAT:AACSBReflective AICPARiskAnalysis
TYPE:
N
32UNITONE:THEFOUNDATIONS
24.
QualityPaperCorporation(QPC)makesandsellsitsproductsnation wide.
To be considered socially responsible when making a business decision,
QPCcouldtakeintoaccounttheneedsof
a.
b.
c.
d.
itsconsumers,thecommunity,andsocietyonly.
itsemployeesandownersonly.
itsemployees,owners,consumers,thecommunity,andsociety.
noone.
ANSWER: C
PAGE: 42
NAT:AACSBReflective AICPARiskAnalysis
TYPE:
+
CHAPTER2:ETHICSANDBUSINESSDECISIONMAKING 33
25.
EagleProductionCorporationcoulddemonstrateacommitmenttoethi cal
behaviorby
a.
b.
c.
d.
complyingwiththelawonly.
implementingethicalprogramsonly.
makingaprofitonly.
complying with the law, establishing ethics codes, and making
money.
ANSWER: D
PAGE: 46
NAT:AACSBReflective AICPACriticalThinking
26.
alegaldutybeyondthosedutiesmandatedbyethics.
anethicaldutybeyondthosedutiesmandatedbylaw.
anydutybeyondthosemandatedbybothethicsandthelaw.
anydutywhenitisuncertainwhetheralegaldutyexists.
ANSWER: B
PAGE: 46
NAT:AACSBReflective AICPACriticalThinking
TYPE:
=
Capital Acquisitions Corporation buys, reorganizes, and sells other com
panies.IfCapitalstrictlycomplieswithexistinglaws,thefirmwill
a.
b.
c.
d.
fulfillallbusinessethicsobligations.
fulfillnobusinessethicsobligations.
fulfillsomebusinessethicsobligations.
notneedtofulfillanybusinessethicsobligations.
ANSWER: C
PAGE: 46
NAT:AACSBReflective AICPACriticalThinking
28.
N
EquityCorporationprovidesotherfirmswithfundstoexpandop erations.
QuestionsofwhatisethicalinvolvetheextenttowhichEquityhas
a.
b.
c.
d.
27.
TYPE:
TYPE:
N
ImportExportSales,Inc.,likeotherbusinesses,hasdutiesprescribedby
a.
b.
c.
d.
ethicsandthelaw.
ethicsonly.
thelawonly.
themarketonly.
ANSWER:
A
PAGE:
46
TYPE:
N
34UNITONE:THEFOUNDATIONS
NAT:AACSBReflective AICPACriticalThinking
29.
Sven, the human resources director for Temp Labor Unlimited, Inc., at
temptstocomplywiththelawindealingwithapplicants,employ ees,and
clients.OneofthechallengesSvenfacesisthatthelegalityofanactionis
a.
b.
c.
d.
alwaysclear.
neverclear.
notalwaysclear.
usuallyclear.
ANSWER: C
PAGE: 47
NAT:AACSBReflective AICPALegal
30.
alegaldutyonly.
anethicalandalegalduty.
anethicaldutyonly.
neitheranethicalnoralegalduty.
ANSWER: C
PAGE: 47
NAT:AACSBReflective AICPACriticalThinking
TYPE:
N
TYPE:
+
MaxliestoNora,hisspouse.Thisis
a.
b.
c.
d.
illegalandunethical.
illegalonly.
neitherillegalnorunethicalonly.
unethicalonly.
ANSWER: D
PAGE: 47
NAT:AACSBReflective AICPACriticalThinking
32.
=
Some consumers misuse the products of Hardware Gear, Inc., and are
injured, although the products come with detailed instructions and
warningsagainstmisuse.Intermsofresponsibility,Hardwaremayhave
a.
b.
c.
d.
31.
TYPE:
Housemate,Inc.,makesandsellsavarietyofhouseholdproducts.Witha
fairamountofcertainty,Housematesdecisionmakerscanpredictwhether
agivenbusinessactionwouldbelegalin
a.
b.
allsituations.
manysituations.
CHAPTER2:ETHICSANDBUSINESSDECISIONMAKING 35
c.
d.
nosituations.
practicallynosituations.
ANSWER: B
PAGE: 47
NAT:AACSBReflective AICPALegal
TYPE:
N
36UNITONE:THEFOUNDATIONS
33.
Otto,thechiefexecutiveofficerofPrismaticDiamondCorporation(PDC),
wantstoensurethatPDCsactivitiesarelegalandethical.Thebestcourse
forOttoandPDCistoactin
a.
b.
c.
d.
goodfaith.
ignoranceofthelaw.
regardforPDCsshareholdersonly.
theirownselfinterest.
ANSWER: A
PAGE: 49
TYPE:
NAT:AACSBReflective AICPADecisionModeling
34.
FealtyFinancialCorporationasksitsemployeestojudgetheiractionsand
get on the ethical business decisionmaking bandwagon. Guidelines for
evaluatingindividualactionsincludeallofthefollowingexcept
a.
b.
c.
d.
anindividualsconscience.
businessrulesandprocedures.
loopholesinthelaworcompanypolicies.
promisestoothers.
ANSWER: C
PAGE: 51
NAT:AACSBReflective AICPACriticalThinking
35.
=
TYPE:
N
MakeItConstructionCorporationmakesasidepaymenttoagovern ment
officialinNigeriatoobtainacontract.IntheUnitedStates,thisis
a.
b.
c.
d.
illegalandunethical.
illegalonly.
neitherillegalnorunethical.
unethicalonly.
ANSWER: A
PAGE: 54
NAT:AACSBReflective AICPACriticalThinking
TYPE:
=
ESSAY QUESTIONS
1.
Recreation&SportsEquipmentCorporationsellsaproductthatisca pable
ofseriouslyinjuringconsumerswhomisuseitinaforeseeableway.Does
thefirmoweanethicaldutytotakethisproductoffthemar ket?Whatcon
flictsmightariseifthefirmstopssellingthisproduct?
CHAPTER2:ETHICSANDBUSINESSDECISIONMAKING 37
ANSWER: Ethicalbehaviorcansometimesgeneratesufficientgoodwill
towarrantpracticingitoutofadesireforincreasedprofits.Bythesameto
ken,unethicalbehaviorcansometimes generateenough badpublicityto
warrantavoidingitoutofthesamedesire.Abusinessfirmsactivitiesthat
areperceivedasethicalandreceivewidepublicitycanbenefitthefirms
ownersintheshortrunandeveninthelongrunifthefirmsenhanced
publicimagecontinuestoattractmoreconsumerstoitsproducts.Thereis
nothingunethicalaboutmakingaprofit.Itisthebe haviorthatgenerates
theprofit that canbequestionable.Business eth ics thus has apractical
element.Abusinessfirmshouldactinitsbestinterest.Afirminter estedin
profitsshouldalsobeinterestedinthepub licsopinion.Ofcourse,itisnota
companysfaultwhenconsumersmisuseitsproduct.Ifcontinuingtosella
productisnotastrictviolationofthelaw,stoppingitssalewouldlikelyre
duceprofits.Thiscouldimpactthefirmsowners,employees,andothers.
Butsuspendingsalescouldreduceinjuries,anditcouldleadtoincreased
profitsfromthesalesofotherproducts,ifthesuspensionstopsnegative
publicity.When a businessentitydecidestorespondtowhatitseesasa
moralorethicalobligationbyremovingaproductfromthemarket,anethi
calconflictisraisedbetweenthefirmanditsemployeesandbetweenthe
firmanditsshareholders.Thisconflictarisesdirectlyoutoftheimpactthat
thedecisionhasonthefirmsprofits.Ifmeetingthisperceivedobligation
increasesthefirmsprofitability,thenallpartieswinandthedilemma
wouldbeeasilyresolvedinfavorofdoingtherightthing.
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3738&4245
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NAT:AACSBReflective AICPADecisionModeling
2.
Olaf,anexecutivewithProductDistribution,Inc.,hastodecidewhetherto
marketaproductthatmighthaveundesirablesideeffectsforasmallper
centage of users. What is the balance that must be struck in de ciding
whethertoselltheproduct?Howdoesthestandardofethicsthatisap plied
affectthisbalance?
ANSWER: Whenacorporateexecutivehastodecidewhethertomarketa
productthatmighthaveundesirablesideeffectsforasmallpercentageof
usersbutthatwouldbebeneficialformostusers,thedecisionturnsonthe
benefit to the many versus the harm to the few. Of course, all pos sible
precautions should be taken to protect the few. A more specific an swer
dependsinpartonwhichsys temofethicsisapplied.Fromautili tarian
perspective,underacostbenefitanalysis,iftheproductweresold,itcould
benefitthegreatestnumberofpersonsfutureandcur rentemployees,as
38UNITONE:THEFOUNDATIONS
wellasshareholders,andmostconsumers.Iftherewasbadpublicity,and
itwasadverseenoughtoreducesales,however,morepersonscouldbenefit
fromthedecisionnottomarkettheproduct.
PAGES:
4245
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NAT:AACSBReflective AICPADecisionModeling