Business Law Today 8th Edition by Miller – Test Bank

$20.00

Category:

Description

INSTANT DOWNLOAD WITH ANSWERS

Business Law Today 8th Edition by Miller – Test Bank

Chapter 6

 

 

Criminal Law and Cyber Crime

 

 

 

 

N.B.:  TYPE indicates that a question is new, modified, or unchanged, as follows.

 

N      A question new to this edition of the Test Bank.

+       A question modified from the previous edition of the Test Bank,

=       A question included in the previous edition of the Test Bank.

 

true/false questions

 

  1. The prosecution in a criminal case need only establish by a preponderance of the evidence that the defendant committed the crime.

 

ANSWER:    F                              PAGE:     169                          TYPE:      =

                  NAT: AACSB Analytic                           LOC:  AICPA Legal

 

  1. At a criminal trial, the burden of proof is on an accused person to prove his or her innocence.

 

ANSWER:    F                              PAGE:     169                          TYPE:      N

NAT: AACSB Analytic                           LOC:  AICPA Legal

 

  1. Only public officials prosecute criminal defendants.

 

ANSWER:    T                              PAGE:     169                          TYPE:      =

NAT: AACSB Analytic                           LOC:  AICPA Legal

 

  1. Criminal liability depends on the commission or omission of an act.

 

answer:    T                              PAGE:     170                          TYPE:      +

NAT: AACSB Analytic                           LOC:  AICPA Legal

 

  1. Criminal liability depends on a specific state of mind or intent.

 

ANSWER:    T                              PAGE:     170                          TYPE:      +

NAT: AACSB Analytic                           LOC:  AICPA Legal

 

  1. If a person does not know that he or she is taking the property of someone else, the person cannot be convicted of theft.

 

answer:    t                              PAGE:     170                          TYPE:      N

NAT: AACSB Reflective                        LOC:  AICPA Legal

 

  1. Larceny relies on stealth while robbery relies on fear and force.

 

ANSWER:    T                              PAGE:     173                          TYPE:      +

NAT: AACSB Analytic                           LOC:  AICPA Critical Thinking

 

  1. Obtaining another person’s phone card number so that it may be used to make unauthorized long-distance calls is theft.

 

ANSWER:    T                              PAGE:     173                          TYPE:      =

NAT: AACSB Reflective                        LOC:  AICPA Legal

 

  1. Stealing computer time is not a crime.

 

ANSWER:    F                              PAGE:     173                          TYPE:      =

NAT: AACSB Reflective                        LOC:  AICPA Legal

 

  1. Counterfeiting is forgery.

 

answer:    t                              PAGE:     174                          TYPE:      N

NAT: AACSB Reflective                        LOC:  AICPA Legal

 

  1. The recipient of stolen goods who does not know the identity of the owner or the thief has a defense to criminal liability.

 

ANSWER:    F                              PAGE:     174                          TYPE:      =

NAT: AACSB Analytic                           LOC:  AICPA Legal

 

  1. Crimes occurring in a business context are popularly referred to as blue-collar crime.

 

ANSWER:    F                              PAGE:     174                          TYPE:      N

NAT: AACSB Reflective                        LOC:  AICPA Legal

 

  1. Embezzlement is like robbery in that neither crime requires the use of force or fear.

 

answer:    F                              PAGE:     175                          TYPE:      N

NAT: AACSB Analytic                           LOC:  AICPA Critical Thinking

 

 

  1. Embezzlement can be committed only by physically taking property from the possession of another.

 

ANSWER:    F                              PAGE:     175                          TYPE:      =

NAT: AACSB Analytic                           LOC:  AICPA Legal

 

  1. It is a sufficient defense to a charge of embezzlement that the embezzler intended to return the embezzled property eventually.

 

ANSWER:    F                              PAGE:     175                          TYPE:      =

NAT: AACSB Analytic                           LOC:  AICPA Legal

 

  1. It is a crime to use the mail to defraud the public.

 

ANSWER:    T                              PAGE:     177                          TYPE:      =

NAT: AACSB Analytic                           LOC:  AICPA Legal

 

  1. A bribe need not consist of money to be a crime.

 

            ANSWER:   T        PAGE:         179    TYPE:          +

NAT: AACSB Reflective                        LOC:  AICPA Legal

 

  1. Bribery is a crime only if the recipient does what the person offering the bribe asks.

 

ANSWER:    F                              PAGE:     179                          TYPE:      N

NAT: AACSB Analytic                           LOC:  AICPA Legal

 

  1. Money laundering includes making “dirty” money appear to be the “profit” of a legiti­mate business.

 

answer:    t                              PAGE:     180                          TYPE:      N

NAT: AACSB Reflective                        LOC:  AICPA Legal

 

  1. Forfeiture of a business interest and dissolution of a business are possible penalties under RICO.

 

ANSWER:    T                              PAGE:     181                          TYPE:      =

NAT: AACSB Analytic                           LOC:  AICPA Legal

 

  1. Only white-collar crimes are prosecuted under RICO.

 

ANSWER:    F                              PAGE:     181                          TYPE:      +

NAT: AACSB Analytic                           LOC:  AICPA Legal

 

 

  1. A crime punishable by imprisonment in a federal or state penitentiary for any period of time is a misdemeanor.

 

ANSWER:    F                              PAGE:     182                          TYPE:      =

NAT: AACSB Analytic                           LOC:  AICPA Legal

 

  1. Some felonies are actually misdemeanors.

 

ANSWER:    F                              PAGE:     182                          TYPE:      =

NAT: AACSB Analytic                           LOC:  AICPA Legal

 

  1. Voluntary intoxication is always a defense to criminal liability.

 

ANSWER:    F                              PAGE:     183                          TYPE:      =

NAT: AACSB Reflective                        LOC:  AICPA Legal

 

  1. A person may not be responsible for a criminal act if, as a result of a mental defect, he or she did not appreciate the wrongfulness of the act.

 

ANSWER:    T                              PAGE:     184                          TYPE:      +

NAT: AACSB Analytic                           LOC:  AICPA Legal

 

  1. A mistake of fact is a defense to criminal liability.

 

ANSWER:    T                              PAGE:     184                          TYPE:      =

NAT: AACSB Analytic                           LOC:  AICPA Legal

 

  1. Ignorance of the law is a defense to criminal liability.

 

answer:    f                              PAGE:     184                          TYPE:      N

NAT: AACSB Reflective                        LOC:  AICPA Critical Thinking

 

  1. Most crimes must be prosecuted within a certain period of time.

 

ANSWER:    T                              PAGE:     186                          TYPE:      =

NAT: AACSB Analytic                           LOC:  AICPA Legal

 

  1. Corporations cannot be compelled to give testimony that might subject them to criminal liability.

 

ANSWER:    F                              PAGE:     189                          TYPE:      =

NAT: AACSB Analytic                           LOC:  AICPA Legal

 

  1. A criminal suspect does not have a right to remain silent.

 

ANSWER:    F                              PAGE:     189                          TYPE:      N

NAT: AACSB Analytic                           LOC:  AICPA Legal

 

  1. Under the Fifth Amendment, there is no circumstance in which a person can be compelled to testify.

 

            ANSWER:   F        PAGE:         189    TYPE:          N

NAT: AACSB Reflective                        LOC:  AICPA Legal

 

  1. Under the exclusionary rule, all illegally obtained evidence must be included in any criminal prosecution.

 

ANSWER:    F                              PAGE:     189                          TYPE:      =

NAT: AACSB Analytic                           LOC:  AICPA Legal

 

  1. A federal judge must adhere strictly to federal sentencing guidelines.

 

answer:    F                              PAGE:     193                          TYPE:      N

NAT: AACSB Analytic                           LOC:  AICPA Legal

 

  1. “Stealing” computer data is not a crime unless the data is altered or erased.

 

ANSWER:    F                              PAGE:     196                          TYPE:      N

NAT: AACSB Reflective                        LOC:  AICPA Legal

 

  1. Downloading trade secrets is not a crime even if it is done without their owners’ permission.

 

answer:    F                              PAGE:     196                          TYPE:      N

NAT: AACSB Technology                     LOC:  AICPA Legal

 

 

MULTIPLE-CHOICE questions

 

  1. Lon is a “payday” lender charged with filing false claims in bankruptcy proceedings against his customer-debtors. The standard of proof to find a defendant who has been charged with a crime guilty is

 

  1. a preponderance of the evidence.
  2. beyond all doubt.
  3. beyond a reasonable doubt.
  4. clear and convincing evidence.

 

answer:    C                              PAGE:     169                          TYPE:      +

NAT: AACSB Reflective                        LOC:  AICPA Legal

 

 

  1. Tige steals United Network, Inc.’s (UNI) computer time and the use of UNI’s phones. Tige commits larceny when he steals

 

  1. the computer time only.
  2. the computer time or the use of the phones.
  3. neither the computer time nor the use of the phones.
  4. the use of the phones only.

 

answer:    B                              PAGE:     173                          TYPE:      N

NAT: AACSB Reflective                        LOC:  AICPA Legal

 

  1. Ben wrongfully takes an unopened carton from a City Warehouse loading dock, puts the carton in his car, and drives away. A person who wrongfully or fraudulently takes and carries away another’s personal property is guilty of

 

  1. burglary.
  2. forgery.
  3. larceny.
  4. robbery.

 

ANSWER:    C                              PAGE:     173                          TYPE:      =

NAT: AACSB Reflective                        LOC:  AICPA Legal

 

  1. Jack receives an MP3 player stolen from Kelly. To be criminally liable, Jack

 

  1. must know only that the player is stolen.
  2. must know only that Kelly is the true owner.
  3. must know that the player is stolen and that Kelly is the true owner.
  4. need not know that the player is stolen or that Kelly is the true owner.

 

            ANSWER:   A        PAGE:         174    TYPE:          =

NAT: AACSB Reflective                        LOC:  AICPA Legal

 

  1. Bait ‘n Tackle Corporation switches trademarks on products that it buys to sell to consumers. This is

 

  1. burglary.
  2. forgery.
  3. larceny.
  4. robbery.

 

answer:    B                              PAGE:     174                          TYPE:      =

NAT: AACSB Reflective                        LOC:  AICPA Legal

 

  1. Ira signs Jill’s name, without her authorization, to the back of a check made out to her. This is

 

  1. burglary.
  2. forgery.
  3. larceny.
  4. robbery.

 

ANSWER:    B                              PAGE:     174                          TYPE:      =

NAT: AACSB Reflective                        LOC:  AICPA Legal

 

  1. Phil sets fire to his house. At common law, the crime of arson could be committed only if a person burned down

 

  1. a commercial building.
  2. an unoccupied structure.
  3. his or her own house.
  4. the house of another person.

 

ANSWER:    D                              PAGE:     174                          TYPE:      N

NAT: AACSB Reflective                        LOC:  AICPA Legal

 

  1. Doug gains access to government records and alters certain dates and amounts in his favor. This is

 

  1. embezzlement.
  2. forgery.
  3. larceny.
  4. robbery.

 

ANSWER:    B                              PAGE:     174                          TYPE:      =

NAT: AACSB Reflective                        LOC:  AICPA Legal

 

  1. Jay is charged with embezzlement. Embezzlement is not robbery because embezzlement may be committed without

 

  1. a criminal act.
  2. a criminal intent.
  3. taking property from its owner.
  4. the use of force of fear.

 

ANSWER:    D                              PAGE:     175                          TYPE:      N

NAT: AACSB Reflective                        LOC:  AICPA Legal

 

 

  1. Bernice, an employee of City Bank, is charged with embezzlement, which requires

 

  1. fraudulently appropriating another’s property.
  2. obtaining lawful possession of property.
  3. physically taking property from its owner.
  4. the use of force or fear.

 

ANSWER:    A                              PAGE:     175                          TYPE:      =

NAT: AACSB Reflective                        LOC:  AICPA Legal

 

  1. After Edie solicits investors to invest in a nonexistent business, she is charged with “mail fraud.” This requires, among other things,

 

  1. claiming that an item is “in the mail” when it is not.
  2. deceiving postal authorities as to the content of an item of mail.
  3. depositing items in the postal system without proper postage.
  4. mailing or causing someone else to mail a writing.

 

answer:    D                              PAGE:     177                          TYPE:      N

NAT: AACSB Analytic                           LOC:  AICPA Legal

 

  1. Mona offers Ned, a building inspector, money to overlook the violations in her new warehouse. Ned accepts the money and overlooks the viola­tions. Mona is charged with the crime of bribery. The crime occurred when

 

  1. Mona decided to offer the bribe.
  2. Mona offered the bribe.
  3. Ned accepted the bribe.
  4. Ned overlooked the violations.

 

answer:    B                              PAGE:     179                          TYPE:      +

NAT: AACSB Reflective                        LOC:  AICPA Legal

 

  1. Ann, an employee of Beta, Inc., pays Curt, an employee of Beta’s competitor Delta Company, for a secret Delta pricing schedule. This may be

 

  1. an effective marketing strategy.
  2. commercial bribery.
  3. creative legal bookkeeping.
  4. money laundering.

 

answer:    B                              PAGE:     179                          TYPE:      =

NAT: AACSB Reflective                        LOC:  AICPA Legal

 

 

  1. Tim is a businessperson with investments in several legal and illegal opera­tions. Tim may be subject to penalties under RICO

 

  1. for making an unprofitable, but legal, investment.
  2. for the commission of any business fraud.
  3. only in a case involving a “racket.”
  4. only in a case involving organized crime.

 

answer:    B                              PAGE:     181                          TYPE:      =

NAT: AACSB Reflective                        LOC:  AICPA Legal

 

  1. Sandy, a businessperson, is convicted of RICO offenses. Sandy’s penalties may include

 

  1. dissolution of her business but not forfeiture of its assets or imprisonment.
  2. forfeiture of the business assets but not dissolution of the business or imprisonment.
  3. imprisonment and dissolution of her business but not forfeiture of its assets.
  4. dissolution of her business, forfeiture of its assets, and imprisonment.

 

answer:    D                              PAGE:     181                          TYPE:      =

NAT: AACSB Reflective                        LOC:  AICPA Legal

 

  1. Dina, a businessperson, is charged with RICO offenses. Dina may be sub­ject to penalties under RICO for a “pattern of racketeering activity” only if she

 

  1. committed two or more certain federal or state crimes.
  2. has never been convicted of a crime.
  3. intends to commit future RICO offenses.
  4. was previously convicted of a crime.

 

answer:    A                              PAGE:     181                          TYPE:      =

NAT: AACSB Reflective                        LOC:  AICPA Legal

 

 

  1. Earl, driving while intoxicated, causes a car accident that results in the death of Frank. Earl is arrested and charged with a felony. A felony is a crime punishable by death or imprisonment for more than

 

  1. one year.
  2. six months.
  3. ten years.
  4. thirty days.

 

answer:    a                              PAGE:     182                          TYPE:      =

NAT: AACSB Reflective                        LOC:  AICPA Legal

 

  1. Cathy causes a disturbance at Diners Cafe. She is arrested and charged with disorderly conduct, a misdemeanor. A misdemeanor is a crime punish­able by imprisonment up to

 

  1. one year.
  2. six months.
  3. ten years.
  4. thirty days.

 

answer:    a                              PAGE:     182                          TYPE:      =

NAT: AACSB Reflective                        LOC:  AICPA Legal

 

  1. Devon commits a criminal act while intoxicated. Voluntary intoxication may be a defense

 

  1. if it negates the state of mind that a crime requires.
  2. if it removes a person’s normal social inhibitions.
  3. under any circumstances.
  4. under no circumstances.

 

answer:    a                              PAGE:     183                          TYPE:      N

NAT: AACSB Reflective                        LOC:  AICPA Legal

 

  1. Jared is charged with a crime. Almost all federal courts and some state courts would not hold Jared liable if, at the time of the offense, as a result of a mental disease or defect, Jared lacked substantial capacity to

 

  1. appreciate the wrongfulness of his conduct only.
  2. appreciate the wrongfulness of his conduct and obey the law.
  3. appreciate the wrongfulness of his conduct or obey the law.
  4. obey the law only.

 

answer:    c                              PAGE:     184                          TYPE:      =

NAT: AACSB Reflective                        LOC:  AICPA Legal

 

  1. Ida is charged with a crime of which she claims she was ignorant. In some states, a mistake of law is a defense

 

  1. if the law was not reasonably made known to the public.
  2. if the mistake negates the mental state necessary to commit a crime.
  3. if the perpetrator was intoxicated.
  4. under any circumstances.

 

ANSWER:    A                              PAGE:     184                          TYPE:      N

NAT: AACSB Reflective                        LOC:  AICPA Legal

 

  1. Barb allows Candy to enter Barb’s warehouse and take a DVD player. Charged with theft, Candy can successfully claim, as a defense,

 

  1. consent.
  2. duress.
  3. entrapment.
  4. self-defense.

 

ANSWER:    A                              PAGE:     184                          TYPE:      =

NAT: AACSB Reflective                        LOC:  AICPA Legal

 

  1. Dian points a gun at Edie, threatening to shoot her unless she takes a certain file from Great Pharmaceutical Corporation. Charged with theft, Edie can successfully claim as a defense,

 

  1. consent.
  2. duress.
  3. entrapment.
  4. self-defense.

 

ANSWER:    B                              PAGE:     185                          TYPE:      =

NAT: AACSB Reflective                        LOC:  AICPA Legal

 

  1. Helen points a gun at Irma, threatening to shoot her. Irma hits Helen, causing her death. Charged with homicide, Irma can most likely successfully claim as a defense,

 

  1. consent.
  2. duress.
  3. entrapment.
  4. self-defense.

 

ANSWER:    D                              PAGE:     185                          TYPE:      =

NAT: AACSB Reflective                        LOC:  AICPA Legal

 

  1. Mary, who is charged with a crime, claims that Nick, a government agent, entrapped her. For entrapment to be a valid defense

 

  1. Mary must not have been predisposed to commit the crime.
  2. Nick must have pressured Mary into committing the crime.
  3. Nick must have suggested that the crime be committed.
  4. all of the choices.

 

answer:    D                              PAGE:     185                          TYPE:      =

NAT: AACSB Reflective                        LOC:  AICPA Legal

 

  1. Holly is granted immunity after she agrees to testify about a crime. Holly has an absolute privilege against self-incrimination and

 

  1. can be prosecuted only for the crime about which she agreed to testify.
  2. cannot be prosecuted for any crime.
  3. cannot refuse to testify on Fifth Amendment grounds.
  4. can refuse to testify on Fifth Amendment grounds.

 

ANSWER:    C                              PAGE:     187                          TYPE:      =

NAT: AACSB Reflective                        LOC:  AICPA Legal

 

  1. Bob is arrested at his home, after the police search it and seize certain property to be used as evidence. A judge sets Bob’s bail, as required by a state statute, and Bob is put on trial. The U.S. Constitution provides safeguards against all of the following except

 

  1. arrests without probable cause.
  2. excessive bail.
  3. trying someone for a criminal offense.
  4. unreasonable searches and seizures.

 

ANSWER:    C                              PAGE:     187                          TYPE:      =

NAT: AACSB Analytic                           LOC:  AICPA Legal

 

  1. The police arrest Lou, who confesses to a crime. Later, Lou refutes the confession and demands a trial, at which witnesses testify they saw him commit the crime. Lou is convicted and sentenced. The U.S. Constitution provides safeguards against all of the following except

 

  1. deprivations of life or liberty without due process of law.
  2. not being allowed to question witnesses.
  3. punishment.
  4. self-incrimination.

 

ANSWER:    C                              PAGE:     187                          TYPE:      =

NAT: AACSB Reflective                        LOC:  AICPA Legal

 

  1. Jim is indicted for a crime. Before he is arrested, he confesses to the crime in a conversation with Kelly, the arresting officer. Kelly then arrests Jim and advises him of the right to counsel. Jim waives the right and repeats his confession. Later, Jim claims that his initial statement should be excluded as evidence from his trial. The statement will most likely be

 

  1. admitted because Jim knew he did the crime and confessed.
  2. admitted because Jim repeated it after being advised of his rights.
  3. excluded because a confession is not admissible in a criminal trial.
  4. excluded because it was elicited before Jim was advised of his rights.

 

answer:    D                              PAGE:     189                          TYPE:      =

NAT: AACSB Reflective                        LOC:  AICPA Legal

 

  1. Lara is indicted for a crime. Mac, the arresting officer, advises Lara of her right to counsel. Lara waives the right and confesses to the crime. Later, Lara claims that her confession should be excluded as evidence from her trial. The statement will most likely be

 

  1. admitted because Lara knew she did the crime and confessed.
  2. admitted because Lara made it after being advised of her rights.
  3. excluded because a confession is not admissible in a criminal trial.
  4. excluded because it was elicited before Lara was advised of her rights.

 

answer:    B                              PAGE:     189                          TYPE:      N

NAT: AACSB Reflective                        LOC:  AICPA Legal

 

  1. Alan, the president of Beta Investments, Inc., and Colin, Beta’s accountant, are charged with a crime, after the police search Beta’s Offices. Under the exclusionary rule

 

  1. certain Beta records are excluded from subpoena by the government.
  2. certain parties to a criminal action may be excluded from a trial.
  3. illegally obtained evidence must be excluded from a trial.
  4. persons who have biases that would prevent them from fairly decid­ing the case may be excluded from the jury.

 

ANSWER:    C                              PAGE:     189                          TYPE:      =

NAT: AACSB Reflective                        LOC:  AICPA Legal

 

 

  1. Harry, a computer programmer for Inventory Control Corporation, is arrested in his employer’s parking lot on suspicion of larceny. Harry must be informed of his right to

 

  1. a trial by jury.
  2. punishment.
  3. question witnesses.
  4. remain silent.

 

ANSWER:    D                              PAGE:     190                          TYPE:      =

NAT: AACSB Reflective                        LOC:  AICPA Legal

 

  1. Britney, an employee of Computer Associates, is arrested at work. A grand jury issues a formal charge against Britney for larceny. This charge is

 

  1. an arraignment.
  2. an indictment.
  3. an information.
  4. an inquisition.

 

ANSWER:    B                              PAGE:     191                          TYPE:      =

NAT: AACSB Reflective                        LOC:  AICPA Legal

 

  1. Mike is arrested at a warehouse in North Industrial Park. A government prosecutor issues a formal charge against Mike for receiving stolen property. This charge is

 

  1. an arraignment.
  2. an indictment.
  3. an information.
  4. an inquisition.

 

ANSWER:    C                              PAGE:     191                          TYPE:      =

NAT: AACSB Reflective                        LOC:  AICPA Legal

 

  1. Ben is a computer technician with the skills to hack into any unprotected computer. The Computer Access Device and Computer Fraud and Abuse Act of 1984 prohibits Ben from obtaining unauthorized access to

 

  1. information in a consumer reporting agency’s files on consumers.
  2. information in a financial institution’s financial records.
  3. restricted government information.
  4. all of the choices.

 

ANSWER:    D                              PAGE:     196                          TYPE:      =

NAT: AACSB Analytic                           LOC:  AICPA Legal

 

ESSAY questions

 

  1. Sophie is the president of Tasty Foods Corporation, a wholesale grocery company. An inspection by Uri, a government agent, uncovers unsani­tary conditions caused by Vic, a Tasty Foods employee, in the company’s ware­house. Will, a Tasty Foods vice president, assures Uri that the situation will be corrected, but a later inspection reveals no such corrections. Sophie knows nothing about any of this. Can Tasty Foods be convicted of a crime in these circumstances? Can Sophie be held personally liable?

 

ANSWER:    The answer to both questions is yes. A corporation may be held liable for the crime of its employee if the criminal act was committed by the employee acting within the scope of her or his employment. The corporation must have been able to prevent the act, or persons in supervisory positions within the corporation must have given authorized consent to, or known of, the act. A corporation can also be criminally liable for failing to perform specific duties imposed by law. Here, all of these elements are present. The unsanitary conditions in the warehouse were within the employee’s scope of employment, his failure to act was known by a company vice president, and the duty to keep the warehouse clean was imposed by law. As for the president’s personal liability, she can be held liable for the actions of employees under her supervision. Under the “responsible corporate officer” doctrine, criminal liability can be imposed on a corporate officer regardless of whether the officer participated in, directed, or knew about the violation.

 

            PAGES:       171–172                            TYPE:       +

NAT: AACSB Reflective                        LOC:  AICPA Decision Modeling

 

  1. Fred, a successful stockbroker, gives a lecture about investing. Some of the persons who attend the lecture form Gain & Profit, an investment club, and ask Fred to advise them. Gain & Profit allows Fred to set up an account for the club with a brokerage firm and gives Fred control of the account, but does not authorize Fred to withdraw funds for his own bene­fit. Fred uses the funds in the Gain & Profit account to repay per­sonal loans. Charged with embezzlement, Fred defends his actions on the ground that he intended to repay the club. Is Fred guilty of embezzle­ment? Why or why not?

 

ANSWER:    The answer is yes, Fred is guilty of embezzlement.  When a person entrusted with another’s funds or property and fraudulently ap­propriates it, the person has committed embezzlement. Force or fear is not required, and the funds or property does not need to be physically taken from another’s possession.  The intent to repay the funds or re­turn the property is not a valid defense. Here, Fred had control of the funds in the Gain & Profit account and withdrew them without permis­sion—fraudulently appropriated the funds—for his own benefit. Fred’s intent to repay the amount does not constitute a sufficient defense to the crime of embezzlement.

 

PAGES:         175–177                                            type:            N

NAT: AACSB Reflective                        LOC:  AICPA Decision Modeling

 

Chapter 7

 

 

Ethics and Business

Decision Making

 

 

 

 

N.B.:  TYPE indicates that a question is new, modified, or unchanged, as follows.

 

N      A question new to this edition of the Test Bank.

+       A question modified from the previous edition of the Test Bank,

=       A question included in the previous edition of the Test Bank.

 

True/False Questions

 

  1. Ethics is the branch of philosophy that focuses on what constitutes right and wrong behavior.

 

ANSWER:             T                                          PAGE:           204                                     TYPE:             N

NAT: AACSB Ethics                                                       LOC:  AICPA Critical Thinking

 

  1. Ethics is not concerned with the philosophical basis for morality.

 

ANSWER:             F                                          PAGE:           204                                     TYPE:             N

NAT: AACSB Ethics                                                       LOC:  AICPA Critical Thinking

 

  1. Ethics is not concerned with the fairness or justness of an action.

 

answer:    F                              PAGE:     204                          TYPE:      N

NAT: AACSB Ethics                                                       LOC:  AICPA Critical Thinking

 

  1. Business ethics focuses on ethical behavior in the business world.

 

ANSWER:             T                                          PAGE:           204                                     TYPE:             N

NAT: AACSB Ethics                                                       LOC:  AICPA Risk Analysis

 

 

  1. A business firm’s profits may suffer if the firm acts unethically.

 

ANSWER:             T                                          PAGE:           204                                     TYPE:             N

NAT: AACSB Ethics                                                       LOC:  AICPA Critical Thinking

 

  1. Business ethics is consistent only with short-run profit maximization.

 

ANSWER:             F                                          PAGE:           204                                     TYPE:             N

NAT: AACSB Ethics                                                       LOC:  AICPA Critical Thinking

 

  1. Businesspersons who would choose to act unethically may be deterred from doing so because of public opinion.

 

ANSWER:             T                                          PAGE:           205                                     TYPE:             N

NAT: AACSB Ethics                                                       LOC:  AICPA Critical Thinking

 

  1. Managers must apply different standards to themselves than they apply to their employees.

 

ANSWER:             F                                          PAGE:           205                                     TYPE:             N

NAT: AACSB Ethics                                                       LOC:  AICPA Critical Thinking

 

  1. Setting realistic workplace goals can reduce the probability that employ­ees will act unethically.

 

ANSWER:             T                                          PAGE:           205                                     TYPE:             +

NAT: AACSB Ethics                                                       LOC:  AICPA Risk Analysis

 

  1. To act ethically is to think narrowly about what is best in the short run for one’s employer.

 

answer:    F                              PAGE:     205                          TYPE:      N

NAT: AACSB Analytic                                                  LOC:  AICPA Risk Analysis

 

  1. Duty-based ethics may be based on religious precepts or philosophical reasoning.

 

answer:    T                              PAGE:     208                          TYPE:      =

NAT: AACSB Ethics                                                       LOC:  AICPA Critical Thinking

 

  1. Under the principle of rights theory, one person’s set of values is as “right” as another’s.

 

ANSWER:             F                                          PAGE:           208                                     TYPE:             =

NAT: AACSB Ethics                                                       LOC:  AICPA Critical Thinking

 

 

  1. Ethical standards based on religious teachings tend to be absolute.

 

answer:    T                              PAGE:     208                          TYPE:      N

NAT: AACSB Ethics                                                       LOC:  AICPA Critical Thinking

 

  1. Duty-based ethical standards imply that people have basic rights.

 

answer:    T                              PAGE:     208                          TYPE:      N

NAT: AACSB Ethics                                                       LOC:  AICPA Critical Thinking

 

  1. Ethical reasoning is the process through which an individual rationalizes whatever action he or she chooses to take.

 

ANSWER:             F                                          PAGE:           208                                     TYPE:             N

NAT: AACSB Ethics                                                       LOC:  AICPA Critical Thinking

 

  1. If an action is ethical from an outcome-based perspective, it is always ethical from a duty-based perspective.

 

answer:    f                              PAGE:     209                          TYPE:      N

NAT: AACSB Ethics                                                       LOC:  AICPA Critical Thinking

 

  1. In ethical terms, a cost-benefit analysis is an assessment of the negative and positive effects of alternative actions on individuals.

 

answer:    T                              PAGE:     209                          TYPE:      =

NAT: AACSB Ethics                                                       LOC:  AICPA Risk Analysis

 

  1. Establishing which duties take priority over others determines a firm’s views on corporate social responsibility.

 

ANSWER:             T                                          PAGE:           209                                     TYPE:             N

NAT: AACSB Ethics                                                       LOC:  AICPA Critical Thinking

 

  1. According to utilitarianism, an action that affects a minority adversely is morally wrong.

 

answer:    T                              PAGE:     209                          TYPE:      N

NAT: AACSB Ethics                                                       LOC:  AICPA Critical Thinking

 

  1. According to utilitarianism, it does not matter how many people benefit from an act.

 

answer:    F                              PAGE:     209                          TYPE:      =

NAT: AACSB Ethics                                                       LOC:  AICPA Critical Thinking

 

  1. Corporations can behave as good citizens by promoting goals that society deems worthwhile.

 

answer:    T                              PAGE:     209                          TYPE:      N

NAT: AACSB Analytic                                                  LOC:  AICPA Critical Thinking

 

  1. Corporations can be perceived as owing ethical duties to groups other than their shareholders.

 

ANSWER:             T                                          PAGE:           209                                     TYPE:             +

NAT: AACSB Ethics                                                       LOC:  AICPA Critical Thinking

 

  1. An ethics program can clarify what a company considers to be unacceptable conduct.

 

ANSWER:             T                                          PAGE:           209                                     TYPE:             N

NAT: AACSB Ethics                                                       LOC:  AICPA Critical Thinking

 

  1. Corporate ethical policies must be clearly communicated to be effective.

 

ANSWER:             T                                          PAGE:           212                                     TYPE:             N

NAT: AACSB Ethics                                                       LOC:  AICPA Risk Analysis

 

  1. Corporate ethical policies and programs must be integrated throughout the firm to be effective.

 

ANSWER:             T                                          PAGE:           212                                     TYPE:             N

NAT: AACSB Ethics                                                       LOC:  AICPA Risk Analysis

 

  1. In the interest of preserving personal freedom, the law codifies all ethical requirements.

 

ANSWER:             F                                          PAGE:           212                                     TYPE:             =

NAT: AACSB Analytic                                                  LOC:  AICPA Critical Thinking

 

  1. An action may be unethical but legal.

 

ANSWER:             T                                          PAGE:           212                                     TYPE:             +

NAT: AACSB Analytic                                                  LOC:  AICPA Critical Thinking

 

  1. A business firm can sometimes predict whether a given action is legal.

 

answer:    T                              PAGE:     215                          TYPE:      N

NAT: AACSB Analytic                                                  LOC:  AICPA Critical Thinking

 

  1. Acting in good faith gives a business firm a better chance of defending its actions in court.

 

answer:    T                              PAGE:     215                          TYPE:      =

NAT: AACSB Analytic                                                  LOC:  AICPA Risk Analysis

 

  1. To be ethical is to “do the right thing” but it does not otherwise “pay.”

 

answer:    F                              PAGE:     217                          TYPE:      N

NAT: AACSB Ethics                                                       LOC:  AICPA Critical Thinking

 

  1. Ignorance of a law excuses a business from liability for its vio­lation.

 

answer:    F                              PAGE:     217                          TYPE:      +

NAT: AACSB Analytic                                                  LOC:  AICPA Legal

 

  1. A business organization and its actions cannot be based on trust.

 

answer:    F                              PAGE:     217                          TYPE:      N

NAT: AACSB Analytic                                                  LOC:  AICPA Risk Analysis

 

  1. One guideline to evaluating the ethics of a particular action is to “let your conscience be your guide.”

 

answer:    T                              PAGE:     217                          TYPE:      N

NAT: AACSB Analytic                                                  LOC:  AICPA Risk Analysis

 

  1. The roles that women play in some foreign countries may present some difficult ethical problems for firms doing business internationally.

 

answer:    T                              PAGE:     218                          TYPE:      N

NAT: AACSB Diversity                         LOC:  AICPA Critical Thinking

 

  1. Bribery of foreign government officials is both an ethical and a legal issue.

 

answer:    T                              PAGE:     219                          TYPE:      =

NAT: AACSB Analytic                                                  LOC:  AICPA Critical Thinking

 

 

 

multiple choice questions

 

  1. John is sales manager for Kleen ‘N Brite Products, Inc. Compared to John’s personal activities, his business activities most likely involve

 

  1. more complex ethical issues.
  2. simpler ethical issues.
  3. the same ethical issues.
  4. no ethical issues.

 

ANSWER:             A                                         PAGE:           204                                     TYPE:             N

NAT: AACSB Reflective                                              LOC:  AICPA Critical Thinking

 

  1. Lia works for Media Marketing Company. Her job includes putting “spin” on the firm’s successes and failures. In this context, ethics consist of

 

  1. “bad” versus “good” publicity.
  2. questions of rightness and wrongness.
  3. the firm’s quarterly revenue.
  4. whatever is legal.

 

answer:    B                              PAGE:     204                          TYPE:      +

NAT: AACSB Reflective                                              LOC:  AICPA Critical Thinking

 

  1. In studying the legal environment of business, Professor Dooley’s students also review ethics in a business context. Ethics includes the study of what constitutes

 

  1. fair or just behavior.
  2. financially rewarding behavior.
  3. legal behavior.
  4. religious behavior.

 

answer:    A                              PAGE:     204                          TYPE:      +

NAT: AACSB Reflective                                              LOC:  AICPA Critical Thinking

 

  1. Superior Corporation engages in ethical behavior solely for the purpose of get­ting good publicity and thereby increasing profits. Superior is

 

  1. acting unethically in its pursuit of publicity.
  2. acting unethically in its pursuit of profits.
  3. acting unethically in its setting of priorities.
  4. not acting unethically.

 

answer:    D                              PAGE:     205                          TYPE:      N

NAT: AACSB Reflective                                              LOC:  AICPA Critical Thinking

 

Fact Pattern 7-1 (Questions 5–6 apply)

Leo runs an asset recovery business. In one case, he recruits clients by misrepresenting the facts and pretending to be licensed to practice law in Mississippi. He files gratuitous, malicious pleadings, lies to the court, and otherwise abuses the judicial process. Later, he involves himself in other cases in which he uses similar tactics.

 

  1. Refer to Fact Pattern 7-1. According to the description quoted by the court in Case 7.1, Baum v. Blue Moon Ventures LLC, Leo’s conduct is

 

  1. “an example of guerilla warfare through litigation.”
  2. “praiseworthy for its ingenuity in recovering hidden assets.”
  3. “understandable in the pursuit of profit but not laudable.”
  4. “unjustifiable but not seriously reprehensible.”

 

answer:    A                              PAGE:     206                          TYPE:      N

NAT: AACSB Communication          LOC:  AICPA Decision Modeling

 

  1. Refer to Fact Pattern 7-1. Under the decision of the court in Case 7.1, Baum v. Blue Moon Ventures LLC, Leo’s conduct most likely warrants

 

  1. an admonishment but no other sanctions.
  2. an injunction against certain court filings plus other sanctions.
  3. no sanctions but no praise.
  4. praise for its aggression in recovering the assets of “deadbeat” debtors.

 

answer:    B                              PAGE:     206                          TYPE:      N

NAT: AACSB Communication          LOC:  AICPA Critical Thinking

 

  1. Tina, the chief financial officer for USA Products Corporation, at­tempts to apply Christian precepts in making ethical decisions and in do­ing busi­ness. In applying duty-based ethical standards that are derived from a re­ligious source, Tina would most likely consider the motive behind an act to be

 

  1. irrelevant.
  2. the least important consideration.
  3. the most important consideration.
  4. the only consideration.

 

answer:    A                              PAGE:     208                          TYPE:      =

NAT: AACSB Reflective                                              LOC:  AICPA Critical Thinking

 

 

  1. Dion, an accountant for Engineering Associates, Inc., attempts to apply the duty-based approach to ethical reasoning in conflicts that occur on the job. This ap­proach is based on the idea that a person must

 

  1. achieve the greatest good for the most people.
  2. avoid unethical behavior regardless of the consequences.
  3. conform to society’s ethical standards.
  4. place his or her employer’s interest first.

 

answer:    B                              PAGE:     208                          TYPE:      =

NAT: AACSB Reflective                                              LOC:  AICPA Critical Thinking

 

  1. Rob, the owner of Super Stores, Inc., adheres to the “principle of rights” theory. Under this theory, a key factor in determining whether a busi­ness decision is ethical is how that decision affects

 

  1. the right determination under a cost-benefit analysis.
  2. the rights of others.
  3. the “right” thing to do.
  4. the right to make a profit.

 

ANSWER:             B                                         PAGE:           208                                     TYPE:             =

NAT: AACSB Reflective                                              LOC:  AICPA Critical Thinking

 

  1. Del, vice-president of sales for EZ Products, Inc., adheres to relig­ious ethical standards. Their application involves an element of

 

  1. absolutism.
  2. after-the-fact rationalization.
  3. personal discretion.
  4. utilitarianism.

 

answer:    A                              PAGE:     208                          TYPE:      N

NAT: AACSB Reflective                                              LOC:  AICPA Critical Thinking

 

  1. In making business decisions, Brian, personnel manager for Conservative Investments, Inc., applies his belief that all persons have fundamental rights. This is

 

  1. a religious rule.
  2. the categorical imperative.
  3. the principle of rights.
  4. utilitarianism.

 

answer:    C                              PAGE:     208                          TYPE:      N

NAT: AACSB Reflective                                              LOC:  AICPA Critical Thinking

 

  1. Energy Research Corporation asks its employees to consider ethical be­hav­ior from a “categorical imperative” perspective. This approach

 

  1. categorizes certain actions as imperative.
  2. considers the consequences to follow if everyone acted the same.
  3. focuses on categories of rights and privileges.
  4. imposes sanctions on those who behave unethically.

 

answer:    B                              PAGE:     208                          TYPE:      N

NAT: AACSB Reflective                                              LOC:  AICPA Critical Thinking

 

  1. In business deals, Elin, the chief executive officer of Frosted Donuts, Inc., follows duty-based ethical standards. These are most likely derived from

 

  1. a corporate ethics code.
  2. a cost-benefit analysis.
  3. philosophical reasoning.
  4. the law.

 

answer:    C                              PAGE:     208                          TYPE:      N

NAT: AACSB Reflective                                              LOC:  AICPA Critical Thinking

 

  1. In deciding questions of corporate social responsibility, Mega Deals, Inc., is concerned with

 

  1. how the corporation can best fulfill its duty to society.
  2. the effect on corporate profits of ignoring any duty to society.
  3. whether the corporation owes a duty to society.
  4. all of the choices.

 

answer:    A                              PAGE:     209                          TYPE:      N

NAT: AACSB Reflective                                              LOC:  AICPA Critical Thinking

 

  1. Teresa, in making marketing decisions for Uno Stuff, Inc., takes a utili­tarian perspective. A characteristic statement of this philosophy is

 

  1. “an action is morally correct when, among the people it affects, it produces the greatest amount of good for the greatest number.”
  2. “for every action, there is an equal and opposite reaction.”
  3. “life in a state of nature is nasty, brutish, and short.”
  4. “the pursuit by individuals of their self-interest will result in a cor­re­sponding increase in societal welfare.”

 

ANSWER:             A                                         PAGE:           209                                     TYPE:             N

NAT: AACSB Ethics                                                       LOC:  AICPA Critical Thinking

 

  1. Callie, a lawyer on the staff of Droll International Ltd., applies the utilitar­ian theory of ethics in business contexts. Utilitarianism focuses on

 

  1. moral values.
  2. religious beliefs.
  3. the consequences of an action.
  4. the nature of an action.

 

answer:    C                              PAGE:     209                          TYPE:      =

NAT: AACSB Ethics                                                       LOC:  AICPA Critical Thinking

 

  1. In making decisions for Sales Unlimited Inc., Tajik uses a cost-benefit analysis. This is a part of

 

  1. duty-based ethics.
  2. Kantian ethics.
  3. the principle of rights.
  4. utilitarianism.

 

answer:    D                              PAGE:     209                          TYPE:      N

NAT: AACSB Ethics                                                       LOC:  AICPA Critical Thinking

 

  1. Lacey, a vice-president of Medico Pharmaceuticals, Inc., does not ap­ply utilitarianism to business ethical issues. One problem with utili­tari­anism is that it

 

  1. gives business profits priority over production costs.
  2. ignores the practical costs of a given set of circumstances.
  3. requires complex cost-benefit analyses of simple situations.
  4. tends to justify human costs that many find unacceptable.

 

ANSWER:             D                                         PAGE:           209                                     TYPE:             =

NAT: AACSB Reflective                                              LOC:  AICPA Critical Thinking

 

  1. Any decision by Reggie and the other managers of Standard Solutions Corporation may significantly affect the firm’s

 

  1. operators only.
  2. operators, owners, suppliers, the community, or society as a whole.
  3. owners only.
  4. suppliers, the community, or society as a whole only.

 

ANSWER:             B                                         PAGE:           209                                     TYPE:             N

NAT: AACSB Reflective                                              LOC:  AICPA Risk Analysis

 

  1. Manufactured Metals, Inc., asks its employees, many of whom are mem­bers of the National Machinists Union, to apply the utilitarian theory of ethics. This theory does not require

 

  1. a choice among alternatives that will produce maximum so­cietal utility.
  2. a determination of whom an action will affect.
  3. an assessment of the effects of alternatives on those affected.
  4. the acquiring of the means of production by workers.

 

answer:    D                              PAGE:     209                          TYPE:      N

NAT: AACSB Reflective                                              LOC:  AICPA Critical Thinking

 

  1. General Auto, Inc., needs to cut costs by downsizing. In determin­ing which employees to discharge, General Auto will most likely weigh

 

  1. its ethical duty to long-term employees and the legality of discharg­ing older workers only.
  2. its ethical duty to long-term employees, its profit margin, and the le­gality of discharging older workers.
  3. the legality of discharging older workers only.
  4. no duty.

 

answer:    B                              PAGE:     209                          TYPE:      N

NAT: AACSB Reflective                                              LOC:  AICPA Critical Thinking

 

  1. A common ethical dilemma faced by the management of Wheel Deals Corporation involves the effect that its decision will have on

 

  1. one group as opposed to another.
  2. the firm’s competitors.
  3. the government.
  4. all of the choices.

 

answer:    A                              PAGE:     209                          TYPE:      N

NAT: AACSB Reflective                                              LOC:  AICPA Critical Thinking

 

  1. Quality Paper Corporation (QPC) makes and sells its products nationwide. To be considered socially responsible when making a business decision, QPC could take into account the needs of

 

  1. its consumers, the community, and society only.
  2. its employees and owners only.
  3. its employees, owners, consumers, the community, and society.
  4. no one.

 

answer:    C                              PAGE:     209                          TYPE:      +

NAT: AACSB Reflective                                              LOC:  AICPA Risk Analysis

 

  1. Steele Tool Company’s decision makers view a particular risk in the use of Steele’s product as open and obvious. Continuing to market the product without telling consumers of the risk could be justified from a perspective of

 

  1. duty-based ethics.
  2. Kantian ethics.
  3. rights-based ethics.
  4. utilitarian ethics.

 

answer:    D                              PAGE:     209                          TYPE:      N

NAT: AACSB Reflective                                              LOC:  AICPA Risk Analysis

 

  1. Eagle Production Corporation could demonstrate a commitment to ethical behavior by

 

  1. complying with the law only.
  2. implementing ethical programs only.
  3. making a profit only.
  4. complying with the law, establishing ethics codes, and making money.

 

answer:    D                              PAGE:     212                          TYPE:      N

NAT: AACSB Reflective                                              LOC:  AICPA Critical Thinking

 

  1. Equity Corporation provides other firms with funds to expand op­erations. Questions of what is ethical involve the extent to which Equity has

 

  1. a legal duty beyond those duties mandated by ethics.
  2. an ethical duty beyond those duties mandated by law.
  3. any duty beyond those mandated by both ethics and the law.
  4. any duty when it is uncertain whether a legal duty exists.

 

answer:    B                              PAGE:     212                          TYPE:      =

NAT: AACSB Reflective                                              LOC:  AICPA Critical Thinking

 

  1. Capital Acquisitions Corporation buys, reorganizes, and sells other companies. If Capital strictly complies with existing laws, the firm will

 

  1. fulfill all business ethics obligations.
  2. fulfill no business ethics obligations.
  3. fulfill some business ethics obligations.
  4. not need to fulfill any business ethics obligations.

 

answer:    C                              PAGE:     212                          TYPE:      N

NAT: AACSB Reflective                                              LOC:  AICPA Critical Thinking

 

  1. Import-Export Sales, Inc., like other businesses, has duties pre­scribed by

 

  1. ethics and the law.
  2. ethics only.
  3. the law only.
  4. the market only.

 

answer:    A                              PAGE:     212                          TYPE:      N

NAT: AACSB Reflective                                              LOC:  AICPA Critical Thinking

 

  1. Sven, the human resources director for Temp Labor Unlimited, Inc., at­tempts to comply with the law in dealing with applicants, employ­ees, and clients. One of the challenges Sven faces is that the legality of an action is

 

  1. always clear.
  2. never clear.
  3. not always clear.
  4. usually clear.

 

ANSWER:             C                                         PAGE:           213                                     TYPE:             =

NAT: AACSB Reflective                                              LOC:  AICPA Legal

 

  1. Some consumers misuse the products of Hardware Gear, Inc., and are injured, although the products come with detailed instructions and warnings against misuse. In terms of responsibility, Hardware may have

 

  1. a legal duty only.
  2. an ethical and a legal duty.
  3. an ethical duty only.
  4. neither an ethical nor a legal duty.

 

answer:    C                              PAGE:     213                          TYPE:      N

NAT: AACSB Reflective                                              LOC:  AICPA Critical Thinking

 

  1. Max lies to Nora, his spouse. This is

 

  1. illegal and unethical.
  2. illegal only.
  3. neither illegal nor unethical only.
  4. unethical only.

 

ANSWER:             D                                         PAGE:           213                                     TYPE:             +

NAT: AACSB Reflective                                              LOC:  AICPA Critical Thinking

 

  1. Housemate, Inc., makes and sells a variety of household products. With a fair amount of certainty, Housemate’s decision makers can predict whether a given business action would be legal in

 

  1. all situations.
  2. many situations.
  3. no situations.
  4. practically no situations.

 

answer:    B                              PAGE:     213                          TYPE:      N

NAT: AACSB Reflective                                              LOC:  AICPA Legal

 

  1. Otto, the chief executive officer of Prismatic Diamond Corporation (PDC), wants to en­sure that PDC’s activities are legal and ethical. The best course for Otto and PDC is to act in

 

  1. good faith.
  2. ignorance of the law.
  3. regard for PDC’s shareholders only.
  4. their own self interest.

 

answer:    A                              PAGE:     215                          TYPE:      =

NAT: AACSB Reflective                                              LOC:  AICPA Decision Modeling

 

  1. Fealty Financial Corporation asks its employees to judge their actions and get on the ethical business decision-making “bandwagon.” Guidelines for evaluating individual actions include all of the following except

 

  1. an individual’s conscience.
  2. business rules and procedures.
  3. loopholes in the law or company policies.
  4. promises to others.

 

answer:    C                              PAGE:     217                          TYPE:      N

NAT: AACSB Reflective                                              LOC:  AICPA Critical Thinking

 

  1. Make-It Construction Corporation makes a side payment to a govern­ment official in Nigeria to obtain a contract. In the United States, this is

 

  1. illegal and unethical.
  2. illegal only.
  3. neither illegal nor unethical.
  4. unethical only.

 

answer:    A                              PAGE:     219                          TYPE:      =

NAT: AACSB Reflective                                              LOC:  AICPA Critical Thinking

 

Essay Questions

 

  1. Recreation & Sports Equipment Corporation sells a product that is capable of seriously injuring consumers who misuse it in a foreseeable way. Does the firm owe an ethical duty to take this product off the market? What con­flicts might arise if the firm stops selling this product?

 

ANSWER:    Ethical behavior can sometimes generate sufficient good will to warrant practicing it out of a desire for increased profits. By the same to­ken, unethical behav­ior can sometimes generate enough bad publicity to warrant avoiding it out of the same desire. A business firm’s activities that are perceived as ethical and receive wide publicity can benefit the firm’s owners in the short run-and even in the long run if the firm’s enhanced public image continues to attract more consumers to its products. There is nothing unethical about making a profit. It is the behavior that generates the profit that can be questionable. Business ethics thus has a practical element. A business firm should act in its best interest. A firm inter­ested in profits should also be interested in the public’s opinion. Of course, it is not a company’s fault when consumers mis­use its product. If continuing to sell a product is not a strict violation of the law, stopping its sale would likely re­duce profits. This could impact the firm’s owners, employees, and others. But suspending sales could re­duce injuries, and it could lead to increased profits from the sales of other products, if the suspension stops negative publicity. When a busi­ness en­tity decides to re­spond to what it sees as a moral or ethical obliga­tion by removing a product from the market, an ethi­cal conflict is raised be­tween the firm and its employees and between the firm and its share­holders. This conflict arises directly out of the impact that the decision has on the firm’s profits. If meeting this perceived obligation in­creases the firm’s profitability, then all parties “win” and the dilemma would be easily re­solved in favor of “doing the right thing.”

 

PAGES: 204 & 209–211                                                       type: N

NAT: AACSB Reflective                                              LOC:  AICPA Decision Modeling

 

  1. Olaf, an executive with Product Distribution, Inc., has to decide whether to market a product that might have undesirable side effects for a small per­centage of users. What is the balance that must be struck in de­cid­ing whether to sell the product? How does the standard of ethics that is applied affect this balance?

 

ANSWER:    When a corporate executive has to decide whether to market a product that might have unde­sirable side ef­fects for a small percentage of users but that would be beneficial for most users, the decision turns on the benefit to the many versus the harm to the few. Of course, all pos­sible precautions should be taken to protect the few. A more specific answer depends in part on which sys­tem of ethics is applied. From a utilitarian perspective, under a cost-benefit analysis, if the product were sold, it could benefit the greatest number of persons—future and cur­rent employees, as well as shareholders, and most consumers. If there was “bad” publicity, and it was adverse enough to reduce sales, however, more persons could benefit from the decision not to market the product.

 

PAGES: 209–211                                                                   type: N

NAT: AACSB Reflective                                              LOC:  AICPA Decision Modeling