Question 1

The expected level of shirking or opportunistic behavior by an agent:

Accepted Answer

A) can always be determined accurately. 
B) is always less than zero. 
C) is always zero. 
D) is always greater than zero.

Question 2

According to the theory of economic Darwinism,in the absence of barriers to entry,firms that survive in the long run are those that:

Accepted Answer

A) follow the most ethical practices. 
B) provide productivity-based incentives to the employees. 
C) deliver products consumers want at the lowest cost. 
D) do not compete with other firms in the industry on quality.

Question 3

Economist Milton Friedman argued that the goal of corporations should be "to make as much money for its owners as possible while conforming to the basic rules of society." What does this mean in terms of corporate ethical behavior?

Accepted Answer

The answer of Economist Milton Friedman argued that the goal...

Question 4

Value maximization leads to predictable resource misallocation when the firm:

Accepted Answer

A) operates in a competitive market. 
B) buys inputs from a monopsonist. 
C) has monopoly power in the market. 
D) sets price below long-run marginal cost.

Question 5

To design a value-increasing architectural system we need:

Accepted Answer

A) top management to assign decision rights,middle management to evaluate performance,and an external agency to sanction unethical behavior. 
B) a clear partition between assigning decision rights and evaluating performance from sanctioning unethical behavior. 
C) internal consistency between assigning decision rights and evaluating performance while sanctioning unethical behavior must be left to top management. 
D) internal consistency between assigning decision rights,evaluating performance,and sanctioning unethical behavior.

Question 6

Informational asymmetry in constructing a contract between a buyer and a seller can lead the seller to:

Accepted Answer

A) improve the quality of the product. 
B) lower the price of the product. 
C) focus on ethical codes of conduct. 
D) make a perfect contract.

Question 7

Which of the following is true of warranties?

Accepted Answer

A) They are not important costs in the business world. 
B) They leave contracting costs unchanged in the business world. 
C) They increase contracting costs in the business world. 
D) They reduce contracting costs in the business world.

Question 8

What are some mechanisms for encouraging ethical behavior?

Accepted Answer

The answer of What are some mechanisms for encouraging ethical...

Question 9

Identify the correct statement regarding business ethics.

Accepted Answer

A) Business ethics seeks to proscribe those behaviors that maximize an organization's profit. 
B) Business ethics and organizational architecture are independent of each other. 
C) Business ethics and organizational architecture are interdependent. 
D) Business ethics seeks to proscribe those behaviors that maximize an employee's productivity.

Question 10

According to Kantian theory on ethics:

Accepted Answer

A) an act is ethical if and only if it promotes the individual's long-term interests. 
B) an act is ethical if it produces the greatest possible balance of good over bad for everyone affected by it. 
C) only good deeds matter. 
D) good deeds often result in bad outcomes.

Question 11

Corporate social responsibility may require changing the mission of the company to a 'constrained' wealth maximization.Is it possible for a few firms in the marketplace to shift their objective functions in this way? Why?

Accepted Answer

The answer of Corporate social responsibility may require changing the...

Question 12

The Project on Corporate Responsibility launched by Ralph Nader in 1969 seeks to:

Accepted Answer

A) lower the company's legal expenses. 
B) devote substantial resources to stakeholders instead of employees,customers,suppliers,and local communities. 
C) make corporate management responsible for upholding a broader spectrum of democratic values. 
D) reduce the company's wage bill.

Question 13

Johnson & Johnson,a personal care products company,has a four-tiered credo or mission.In order,it states its relationship to customers,employees,communities,and finally stockholders.This credo seems to have improved the ethical standards of this corporation.Why doesn't it conflict with wealth creation?

Accepted Answer

The answer of Johnson & Johnson,a personal care products company,has...

Question 14

Ethics codes in corporate life tend to emphasize (a)compliance with laws and regulations,(b)honesty and integrity,and (c)avoidance of conflicts of interests.Which one is the most important in today's world? How does economics help in understanding its importance?

Accepted Answer

The answer of Ethics codes in corporate life tend to...

Exam 22: Ethics and Organizational Architecture