Question 1

A doctor was banned from practicing medicine because he consistently prescribed unnecessary procedures. This doctor violated ________.

Accepted Answer

Professional ethics are the standards of behavior expected of professionals in a particular field. Doctors have a duty to act in the best interest of their patients and only prescribe procedures that are necessary for their health. By consistently prescribing unnecessary procedures, this doctor violated professional ethics and was rightfully banned from practicing medicine. The justice model of ethics focuses on fairness and equal treatment, the individual ethics focus on personal moral codes, and the utilitarian model of ethics focuses on promoting the greater good for the greatest number of people. While these models of ethics may also apply in different situations, the violation described in this scenario is most clearly a breach of professional ethics.

Question 2

The reputation effect ________.

Accepted Answer

The reputation effect reduces transaction costs by creating trust and reliability among parties in a transaction, thereby making transactions smoother and less costly.

Question 3

A son of a mobster believes that it is ethical to steal if it is in the best interest of his family. This view comes from ________.

Accepted Answer

The son's belief that stealing is ethical if it benefits his family is a personal ethical perspective, as it is based on his own values and beliefs. The justice model of ethics emphasizes fairness and impartiality, while the professional ethics focus on the specific responsibilities and codes of conduct within a profession. The moral rights model of ethics centers on protecting individual rights, which would not justify stealing in this scenario.

Question 4

A(n) ________ problem is a problem in determining managerial accountability that arises when delegating authority to managers.

Accepted Answer

The problem of determining managerial accountability when delegating authority to managers is commonly known as agency problem. This arises because the interests of the principal (owner or shareholders) may not be aligned with those of the agent (manager or employee), leading to potential conflicts of interest and moral hazard. Therefore, it is critical to design effective control mechanisms and incentive systems to ensure that managers act in the best interest of the organization.

Question 5

As per the ________ model of ethics, an ethical decision is one that produces the greatest good for the greatest number of people.

Accepted Answer

The model of ethics that emphasizes producing the greatest good for the greatest number of people is known as the utilitarian model. It weighs the benefits and harms of a course of action to determine what would produce the greatest net benefit for all involved.

Question 6

A manager decides to distribute the pool of bonus money equally among all of the subordinates, even though some performed better than others. Which model of ethics is being used by him in making this decision?

Accepted Answer

The manager's decision to distribute the bonus money equally among all subordinates is based on the principle of justice, which advocates for fair and equal treatment for everyone. This decision ensures that all subordinates receive an equal share of the bonus money, regardless of their performance. However, this decision may not be ethical from the perspective of other ethical models, such as moral rights and utilitarianism, which may prioritize individual performance and the overall benefit to the organization over equal distribution.

Question 7

________ occurs when an employee informs an outside person or agency, such as a government agency, a newspaper, or television reporter, about an organization's (its managers') illegal or immoral behavior.

Accepted Answer

Whistle-blowing is the act of reporting an organization's illegal or unethical behavior to an outside person or agency, such as a government agency, a newspaper, or a television reporter. It is seen as a form of ethical behavior by some, while others view it as a breach of loyalty to the organization.

Question 8

Which of the following managers has a staff role?

Accepted Answer

R&D (Research and Development) managers typically have a staff role as they support and advise the line managers (such as production managers, divisional managers, and assembly line supervisors) who are responsible for the day-to-day operations of a business. R&D managers help to develop new products or improve existing ones, conduct market research, and provide technical expertise to the line managers.

Question 9

Behavior that follows accepted ethical rules confers a(n) ________ effect on an individual or an organization.

Accepted Answer

Following accepted ethical rules leads to a positive reputation for both an individual and an organization. This reputation can have a positive impact on factors such as trust, loyalty, and credibility, which can ultimately lead to increased success and opportunities for growth.

Question 10

Which of the following organizations is most likely to commit unethical and illegal acts such as collusion, price fixing, or bribery?

Accepted Answer

An organization that is struggling to survive may resort to unethical and illegal acts such as collusion, price fixing, or bribery, in order to stay afloat and remain competitive.

Question 11

A manager decides to locate a manufacturing plant in a location that maximizes the overall benefits to the stakeholders. Which model of ethics is being used by the manager?

Accepted Answer

The utilitarian model of ethics seeks to maximize overall benefits to all stakeholders, and this is the model being used by the manager in this scenario.

Question 12

In the long run, an organization that follows unethical practices is most likely to ________.

Accepted Answer

Organizations that follow unethical practices are more likely to become bureaucratized, as they may prioritize following rules and regulations over ethical decision-making. They may also become more risk-averse and less innovative as a result. Spending less on advertising or managerial salaries or investing more in research and development are not directly related to ethical practices.

Question 13

As per the ________ Act, CEOs, COOs, and the chief financial officer are required to sign off on their company's balance statements so they can be held personally and legally liable for accidental or deliberate mistakes found later.

Accepted Answer

The Sarbanes-Oxley Act, also known as the Public Company Accounting Reform and Investor Protection Act, was passed in 2002 in response to several high-profile corporate accounting scandals. It requires CEOs, COOs, and CFOs to sign off on their company's financial statements and assumes personal and legal responsibility for mistakes or errors found later. Taft-Hartley, Walsh-Healey, and Davis-Bacon Acts are all related to labor and employment laws and are not relevant to the context of the question.

Question 14

Which of the following is generally used to solve agency problems?

Accepted Answer

Stock-based compensation schemes are generally used to solve agency problems as they align the interests of the agents with those of the principal by providing incentives for the agents to act in the best interests of the company and its shareholders. Self-dealing creates agency problems by encouraging agents to prioritize their own interests over those of the principal. A highly centralized organization structure may help to reduce agency problems by allowing for greater control and oversight, but it may also limit flexibility and innovation. A matrix organization structure is designed to balance the needs of different parts of the organization, but it may also create confusion and diffuse accountability. Therefore, the best choice is B.

Question 15

A manager chooses to tell affected employees about an impending layoff, despite the damage this causes to the stock price of the organization. She did this because it was "the right thing to do." Which model of ethics is she using?

Accepted Answer

The manager is using the moral rights model of ethics because she believes that it is the right thing to do to inform the affected employees about the impending layoff, even if it causes damage to the organization's stock price. This model focuses on respecting individuals' inherent rights and dignity, rather than just maximizing overall utility or maintaining fairness in distribution.

Question 16

"Self-dealing" is defined as ________.

Accepted Answer

Self-dealing refers to a situation where a manager or executive acts in their own best interest rather than in the best interest of the other stakeholders of the organization, such as shareholders or employees. This can include taking actions that benefit themselves financially or otherwise, even if it is detrimental to the company or its stakeholders as a whole. Choices B and C both involve specific actions that could potentially be considered self-dealing, but they do not fully encompass the broader definition of the term. Choice D describes a form of control, not self-dealing.

Question 17

Which of the following is one of the two conditions that lead to a moral hazard problem?

Accepted Answer

A moral hazard problem occurs when the agent has an incentive to pursue goals and objectives that are different from the principal's. The other condition that leads to a moral hazard problem is that the agent has asymmetric information, meaning that they possess more information than the principal. The other choices are not conditions that directly lead to a moral hazard problem.

Question 18

The "tragedy of the commons" illustrates that ________.

Accepted Answer

The tragedy of the commons is a concept that illustrates that the rational pursuit of individual self-interest can lead to the depletion and degradation of a shared resource, resulting in a collective disaster. It highlights the limitations of relying solely on self-regulation and individual decision-making in situations that have broader impacts on a community or society. It does not necessarily suggest that the utilitarian model of ethics is the most effective or that all unethical actions are illegal. Additionally, it does not necessarily advocate for an equal distribution of resources among stakeholders, as this may not be practical or feasible in all situations.

Question 19

Which of the following statements is true regarding a divisional manager?

Accepted Answer

Divisional managers oversee a specific division or segment of a company rather than the entire organization, distinguishing them from corporate managers who have a broader, company-wide focus.

Question 20

Which of the following is a model of ethics?

Accepted Answer

The utilitarian model of ethics focuses on maximizing overall happiness or well-being for the greatest number of people. It is a consequentialist approach that prioritizes the outcome of an action rather than the act itself or the intentions behind it.

Quiz 2: Stakeholders, Managers, and Ethics