In which statements does not represent a market failure

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Business Ethics

1 IN The most influential theory of corporate responsibility of the past century is:
A) The moral minimum model.
B) The classical model.
C) The social contract theory.
D) The stakeholder theory.

2 IN The ethical roots of the classical model of corporate social responsibility are found in which statement:
A) The idea that the interests of stakeholders are as important as the interests of a corporation's stockholders.
B) The free market theory which holds that managers are ethically obliged to make as much money as possible for their stockholders because to do otherwise would undermine the very foundations of our free society.
C) The ethical imperative to cause no harm.
D) The ethical imperative to prevent harm.

3 IN Which of the following reasons might a free market economic theorist use to justify the hostile takeover of a company?
A) The takeover target company's stock is undervalued. That is evidence that the resources are being inefficiently used.
B) If current management is not maximizing profits, it is violating the utilitarian imperative to maximize the overall good.
C) The organization seeking to take over the target company will maximize profits for the stockholders and will be serving the public's interests because it is only by satisfying consumer (public) demand that a business can make profits.
D) If the takeover target's managers are using their stockholders' money to serve interests other than those of the stockholders, they are stealing from them.
E) All of the above.
F) None of the above.

4 IN Which of the following statements does not represent a market failure, i.e., a situation in which the pursuit of profit will not result in a net increase in consumer satisfaction?
A) The costs of pollution, groundwater contamination and depletion, soil erosion and nuclear waste disposal are borne by parties external to the economic exchange between buyer and seller.
B) Where there is no mechanism for pricing, for setting a value on, public goods, there is no guarantee that the markets result in the optimal satisfaction of the public interest in regards to public goods.
C) Situations in which externalities have been internalized result in an equilibrium in the exchange price between true costs and benefits.
D) The pursuit of individual self-interest results in a worse outcome than would have occurred had the behavior of the parties involved in the economic exchange been coordinated through cooperation or regulation rather than mere competition.

5 IN Which statement does not support the claim that an unconditioned ethical directive such as the one the classical model of corporate social responsibility demands of business management is inappropriate for utilitarian theory?
A) Markets can work to prevent harm only by first-hand experience with harms that have to occur before they can be remedied.
B) It is claimed that once market failures are adequately addressed by the government, business just needs to obey the law that addressed them. Business, however, has the ability to inappropriately influence government policy and the law.
C) Business has the ability to influence consumers' desires by helping shape those desires through advertising.
D) A more precise formulation of a utilitarian-based principle would be to maximize profit whenever doing so produces the greatest good for the greatest number, with the proviso that managers must consider the impact a decision will have in many ways other than merely financial.

6 IN According to the private property defense of the classical model of corporate social responsibility, managers who use corporate funds for projects that are not directly devoted to maximizing profits are stealing from their owners. Which statement supports this view?
A) Property rights are restricted when they conflict with the basic rules of society as embodied in law and custom.
B) The connection between ownership and control that exists for personal property does not legally exist for corporate property.
C) Investors buy their stocks with the hope of maximizing return on their investment.
D) Stockholders in publicly traded corporations are better understood as investors rather than owners.

7 IN Which statement is true of Bowie's Kantian approach to business ethics?
A) People have a duty both to not cause harm and to prevent harm.
B) Both causing no harm and preventing harm override other ethical considerations.
C) While it is ethically good for managers to prevent harm or do some good, their duty to stockholders overrides these concerns.
D) A narrow interpretation of Bowie's "cause no harm" imperative makes the duties faced by management under the neo-classical model significantly different from the classical model.

8 IN Select the reasons, historically speaking, why the modern corporation was established as a legal entity:
A) Social benefits flow from corporate institutions.
B) Corporations provide an efficient means for raising large amounts of capital needed to produce and distribute socially desired goods and services.
C) Corporations distribute risks widely over large populations, minimizing the risk to any one individual.
D) Corporations provide individuals with efficient means for the creation of wealth and for supplying jobs.
E) All of the above.
F) None of the above.

9 IN Which statement does not challenge the notion of a hypothetical social contract between society and corporations?
A) If the social contract presupposes an amoral beginning, it seems to offer few guarantees that certain fundamental ethical rights will be protected under the contract.
B) Micro-social contracts can be developed within particular local communities that establish the specific ethical rights and responsibilities within that community as long as they fit within the general limitations of the hypernorms governing any and all social contracts.
C) It is difficult to specify exactly what responsibilities will be drawn from this hypothetical contract.
D) If the theory already begins with certain fundamental rights and responsibilities, then the social contract may be irrelevant to providing an ethical justification for business' responsibilities.

10 IN Which statement represents a challenge to Evan's and Freedman's defense of the stockholder theory against the classical model of corporate social responsibility?
A) The law now recognizes a wide range of managerial obligations to such stakeholders as consumers, employees, competitors, the environment, the disabled.
B) Courts and legislatures have recognized that the rights and interests of various constituencies affected by corporate decisions limit managers' fiduciary responsibility.
C) Stakeholder theory cannot answer the question as to how, exactly, a manager should go about balancing the diverse and competing claims of all parties.
D) There is no guarantee that when managers produce profits they will serve the interests of either stockholders or the public.

Reference no: EM131374654

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