Business Law and Ethics Study Guide Questions
Course Introduction
Business Law and Ethics provides a comprehensive overview of the fundamental legal principles and ethical considerations that guide business operations and decision-making. The course covers key topics such as contract law, employment law, intellectual property, and regulatory compliance, while emphasizing how legal frameworks impact organizational behavior. Additionally, students will explore various ethical theories and real-world dilemmas faced by businesses, fostering critical thinking and responsible leadership. Through case studies and applied scenarios, the course equips students with the skills to identify and address legal and ethical challenges in contemporary business environments.
Recommended Textbook
Business and Society Ethics Sustainability and Stakeholder Management 10th Edition by Carroll
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Chapter 1: The Business and Society Relationship
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Sample Questions
Q1) Explain the rationale that is the foundation of The Iron Law of Responsibility. Answer: The Iron Law of Responsibility states, "In the long run, those who do not use power in a manner which society considers responsible will tend to lose it." This concept is based on the idea of legitimacy, or the proper use of power. If society does not see the use of power as legitimate, the party holding the power will eventually lose that power. An excellent example is the history of Nazi Germany. Nazis rose to power in Germany, but as German society (as well as other countries) saw the abuses of power wielded by Hitler, their legitimacy waned. World War II is ample evidence of the lengths that parties will go to wrest power from those who abuse it. Numerous assassination plots against Hitler also show the internal opposition he engendered.
Q2) Business interacts with only a limited number of stakeholder groups.
A)True
B)False Answer: False
Q3) The social contract is the set of rights and duties imposed on citizens by their government.
A)True
B)False Answer: False
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Page 3
Chapter 2: Corporate Social Responsibility, Citizenship, and Sustainability
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Sample Questions
Q1) The concept of business responsibility that is based on concern for the various groups that are affected by a business is known as the
A) legal model.
B) classical economic model.
C) ethical model.
D) stakeholder model.
Answer: D
Q2) The first and primary argument for corporate social responsibility is
A) it is a way to gain more power.
B) business is best equipped to handle social problems.
C) it is in business's long range interest to be socially responsible.
D) the free-market economic system has proven to be ineffective in dealing with social problems.
Answer: C
Q3) Which entity publishes annual "World's Most Admired Companies" rankings?
A) The Conference Board
B) Fortune Magazine
C) Walt Disney
D) The U.S. Chamber of Commerce
Answer: B
Page 4
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Chapter 3: The Stakeholder Approach to Business, Society, and Ethics
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Sample Questions
Q1) A nonhuman species (such as the spotted owl) that holds a direct stake in a firm is called a
A) primary social stakeholder.
B) secondary social stakeholder.
C) primary nonsocial stakeholder.
D) secondary nonsocial stakeholder.
Answer: C
Q2) The degree to which a stakeholder's claim requires immediate response is its A) power.
B) legitimacy.
C) urgency.
D) coercion.
Answer: C
Q3) Which of the views of the firm recognizes the fewest stakeholders and is the least complex?
A) production view
B) managerial view
C) ownership view
D) stakeholder view
Answer: A
Page 5
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Chapter 4: Corporate Governance: Foundational Issues
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Sample Questions
Q1) Some analysts believe that business's social legitimacy is fragile.
A)True
B)False
Q2) The board committee that has the primary responsibility of ensuring that competent, objective directors are selected is the A) qualifications committee.
B) personnel standards committee.
C) compensation committee.
D) nominating committee.
Q3) Church groups are key members in the shareholder activist movement. One way that they gain access to corporate executives is by purchasing a small amount of stock and holding it a certain length of time (state laws usually dictate how much they need to buy and how long they need to hold it), which then allows them to introduce shareholder resolutions at stockholder meetings. Should small investors be able to wield influence like this, which arguably goes beyond their financial stake in the firm?
Q4) Audit committees arguably have the most responsibility of all board committees.
A)True
B)False
Q5) What are the two main issues associated with CEO pay?
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Chapter 5: Strategic Management and Corporate Public Affairs
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Q1) Social performance reporting should be isolated from other forms of assessment and reporting.
A)True
B)False
Q2) Which of the following is not one of the steps in the strategic management process?
A) goal formulation
B) strategy implementation
C) problem identification
D) environmental analysis
Q3) Public Affairs activities and functions include all of these EXCEPT:
A) community relations
B) public relations
C) public advertising
D) government affairs
Q4) Name the categories of concerns considered by strategic management. Why should these concerns be part of corporate strategy?
Q5) Compare the public affairs office of today with its predecessor from twenty years ago.
Q6) What is a "value shift" and how does it come about?
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Chapter 6: Risk, Issue, and Crisis Management
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Sample Questions
Q1) When managers consider issues that affect their firm, they often ignore
A) ethical considerations.
B) financial concerns.
C) personnel matters.
D) personal stakes.
Q2) The immediate result of environmental scanning is often
A) identification of emerging issues.
B) publication of an internal report that is distributed throughout the company.
C) publication of a list of emerging issues for internal and external stakeholders.
D) resolution of some issues.
Q3) Describe what "stakeholder integration techniques" are.
Q4) The most rudimentary form of issue identification entails
A) subscribing to a news clipping service.
B) subscribing to a forecasting service.
C) assigning a member of the organization to continuously scan a variety of publications.
D) relying on the staff of the public affairs office to scan the environment.
Q5) Using an enterprise-level strategy perspective, evaluate Johnson & Johnson's actions in response to the Tylenol crisis.
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Chapter 7: Business Ethics Essentials
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Sample Questions
Q1) Moral imagination is:
A) imagining the best possible outcome.
B) being able to see economic and moral relationships
C) the ability to see the relevance or nonrelevance of issues
D) deciding which course of action to adopt.
Q2) In Kohlberg's preconventional level of moral development, the individual's primary concern is for others.
A)True
B)False
Q3) Compare and contrast ethics and the law. How are they similar? How are they different? Which is the higher standard? Why aren't they the equivalent of one another?
Q4) The population hypothesis regarding ethical management models is
A) the three models approximate a normal curve.
B) that the moral management model is the largest segment of the normal curve.
C) that the immoral management model is the largest segment of the normal curve.
D) the three models exhibit a skewed curve, weighted toward either moral or immoral management models, depending on the society being studied.
Q5) Distinguish between descriptive and normative ethics.
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Page 9
Chapter 8: Managerial and Organizational Ethics
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Q1) Integrity is the quality most sought after in leaders.
A)True
B)False
Q2) Ethical theories that focus on duties are called
A) teleological.
B) virtue theories.
C) principled rights.
D) deontological.
Q3) Individual managers, through ethical leadership, can have a direct effect on business ethics at the societal and global levels.
A)True
B)False
Q4) The ethical principle that states, "we should always act so as to produce the greatest ratio of good to evil for everyone" is
A) deontology.
B) virtue ethics.
C) utilitarianism.
D) hedonism.
Q5) Discuss the board of directors' role in the firm's ethical climate.
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Chapter 9: Business Ethics and Technology
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Q1) Genetic profiling, which provides a perfect means for identifying a person, raises questions of privacy and possible discrimination.
A)True
B)False
Q2) Privacy and informed consent are issues that
A) are the same whether one is surfing the Web or visiting the local hardware store.
B) are always readily apparent to users of the Internet.
C) are of little importance to consumers of e-commerce.
D) become even more important on the Internet than in brick-and-mortar businesses.
Q3) Which of the following is not considered a questionable business practice made possible by the Internet?
A) plagiarism
B) pornography
C) gambling
D) music downloading
Q4) Discuss the benefits and problems associated with labeling genetically modified foods (GMFs).
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Chapter 10: Ethical Issues in the Global Arena
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Sample Questions
Q1) Global codes of conduct seek to establish domestic principles or guidelines by which businesses might follow while doing business around the world.
A)True
B)False
Q2) Regarding the infant formula controversy, Nestlé was criticized for all of these actions except:
A) distributing free samples.
B) providing purified water with the formula.
C) promoting bottle-feeding over breast-feeding.
D) the use of so-called "milk nurses."
Q3) The FCPA differentiates between:
A) domestic and international disputes
B) land ownership and building rental
C) bribes and grease payments
D) entry fees and corporate filing fees
Q4) Transparency International has sought to fight world corruption. Reflect on the meaning of their five priorities and two principles.
Q5) What are the most important factors leading a firm to take corporate action against corruption?
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Chapter 11: Business, Government, and Regulation
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Sample Questions
Q1) The act of governing or bringing under the control of law or constituted authority is called
A) regulation.
B) despotism.
C) central planning.
D) dictatorship.
Q2) Newer social regulations covers business practices in all industries.
A)True
B)False
Q3) Every form of state intervention that affects industry as a distinct part of the economy is called
A) internationalization.
B) globalization.
C) industrial policy.
D) privatization.
Q4) A strong industrial policy:
A) is present in most developing countries.
B) is a term heard continuously.
C) is government intervention.
D) helps firms compete in a fast-moving global economy.
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Chapter 12: Business Influence on Government and Public Policy
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Q1) Corporations which donate to PACs may encounter.
A) leadership problems.
B) agency problems.
C) coalition problems.
D) political problems.
Q2) The National Federation of Independent Businesses (NFIB) attributes its newfound power to
A) the growth of multinational companies.
B) globalization.
C) its new status as a trade association.
D) the growth of small businesses in business news.
Q3) Studies of financial performance outcomes on political spending
A) show a strong correlation between contributions to PACs, and corporate financial performance.
B) show a weak correlation between contributions to PACs, and corporate financial performance.
C) are inconclusive.
D) apply only to political outcomes.
Q4) Should PACs be outlawed? Why or why not?
Q5) What can be done to limit the influence of money on the political process?
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Chapter 13: Consumer Stakeholders: Information Issues
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Sample Questions
Q1) The Children's Television Act was passed to
A) prevent violent shows from being broadcast during morning hours.
B) prohibit the airing of commercials about products or characters during a show about those products or characters.
C) regulate the plotlines of children's shows.
D) limit the number of hours children could watch television.
Q2) The industry under the greatest attack for its marketing and advertising practices is A) pharmaceuticals.
B) liquor.
C) automobiles.
D) cigarettes.
Q3) The consumer movement is generally traced back to a single cause or event, although the specific incident varies from author to author.
A)True
B)False
Q4) Why is advertising to children particularly troubling to ethicists?
Q5) Explain how digital video recorders such as TiVo have contributed to ad creep.
Q6) What is the basic reason for the ethical issues surrounding product information?
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Chapter 14: Consumer Stakeholders: Product and Service Issues
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Sample Questions
Q1) The legal principle that anyone in the value chain of a product is liable for harm caused to the user if the product as sold was unreasonably dangerous is
A) strict liability.
B) absolute liability.
C) relative liability.
D) market share liability.
Q2) The ethical theory based on the concept of duty that focuses on the relative vulnerability of the customer is
A) contractual theory.
B) due care theory.
C) social costs view.
D) caveat vendor.
Q3) The Food and Drug Administration is involved in the regulation of A) pet food.
B) weight loss programs.
C) dietary supplements.
D) fast foods.
Q4) Why are the food and manufacturing industries particularly susceptible to product liability suits?
Page 16
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Chapter 15: Sustainability and the Natural Environment
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Sample Questions
Q1) Describe the major sources of pollution in the area where you live.
Q2) Environment means many different things to different people.
A)True
B)False
Q3) Because of widespread concern over water pollution, toxic chemicals are no longer dumped into U.S. lakes and rivers.
A)True
B)False
Q4) Today businesses do not bother with sustainability.
A)True
B)False
Q5) Deforestation occurs only in less developed countries (LDCs).
A)True
B)False
Q6) A measure of disorder of energy, indicating its unavailability for recycling for the same use, is
A) entropy.
B) dissolution.
C) atrophy.
D) declination.
Page 17
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Chapter 16: Business and Community Stakeholders
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Q1) Of the portion of corporate philanthropy that goes to education, most of donations go to
A) executive education programs.
B) higher education.
C) K-12 education.
D) private schools rather than public institutions.
Q2) One of the major questions in corporate giving to higher education is whether the donations should be "with strings attached" or not. Should corporate giving have specific expectations attached to it?
Q3) Health and human services are critical to the well-being of any community.
A)True
B)False
Q4) What reasons to corporate executives use to justify corporate giving to the arts?
Q5) Making profits and addressing social concerns are not mutually exclusive. A)True
B)False
Q6) Outsourcing today affects both blue collar and white collar jobs.
A)True
B)False
Page 18
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Chapter 17: Employee Stakeholders and Workplace Issues
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Q1) Describe the range of duties covered by due process.
Q2) The idea that the relationship between a worker and employer is voluntary and can be terminated at any time, by either party, is the
A) employment-at-will doctrine.
B) due process principle.
C) corporate governance system.
D) arbitrary employment doctrine.
Q3) Is the employment-at-will doctrine fair to both employer and employee?
Q4) An alternative dispute resolution method that allows the employee to be represented by an attorney in front of a neutral company executive is called A) mediation.
B) arbitration.
C) a hearing procedure.
D) trial by fire.
Q5) All the following are true of the new social contract except A) focus on teambuilding projects
B) communication through technology
C) pay that reflects contributions
D) loyalty to employer
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Chapter 18: Employee Stakeholders: Privacy, Safety, and Health
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Q1) Review the policy guidelines for ensuring employees' right of privacy in the workplace.
Q2) The Privacy Act of 1974
A) was repealed by the USA Patriot Act of 2001.
B) restricts the use of personal information by private companies.
C) set controls on the right of government to collect, use, and share data about individuals.
D) set time limits for how long personal data could be maintained by government and private companies.
Q3) Experts on workplace violence recommend that companies respond to this hazard by
A) installing metal detection devices in their places of business.
B) Establishing a zero-tolerance policy toward workplace violence.
C) developing a strong relationship with the local law enforcement officials.
D) instituting stringent pre-hiring filters.
Q4) One study estimates that passive smoke was responsible for 2,400 lung cancer deaths, in one year, in the United States.
A)True
B)False
Q5) Describe the pluses and minuses to the use of integrity tests.
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Chapter 19: Employment Discrimination and Workplace
Diversity
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Q1) Religious discrimination includes
A) allowing employees to pray at work.
B) asking employees their religious affiliations.
C) discharging workers who take leave for religious events.
D) providing bibles in the breakroom.
Q2) One challenge for business will be to assimilate an increasingly diverse workforce.
A)True
B)False
Q3) The Americans with Disabilities Act of 1990 requires transportation and communication systems to
A) provide preferential hiring for the physically and mentally handicapped.
B) avoid job discrimination based mental disability.
C) allow free access for the disabled.
D) facilitate access for the disabled.
Q4) Some companies are now specifically including white males in their diversity programs. Evaluate the wisdom and propriety of this idea.
Q5) The category of people labeled as Hispanic is actually a very diverse group.
A)True
B)False
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