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Business Law Arlen Langvardt 17th Edition – Test Bank
Sample Questions
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Chapter 2 The Resolution of Private Disputes
1) Minor criminal cases and civil disputes are decided in the appellate courts.
Answer: FALSE
Explanation: Minor criminal cases and civil disputes involving small amounts of money or specialized matters frequently are decided in courts of limited jurisdiction. Appellate courts correct legal errors made by trial judges.
Difficulty: 1 Easy
Topic: State Courts and Their Jurisdiction
Learning Objective: 02-01 Describe the basic structures of state court systems and the federal court system.
Bloom’s: Remember
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
2) The plaintiff can sue the defendant in whatever court and locale that the plaintiff wishes.
Answer: FALSE
Explanation: The plaintiff in a civil case must chose a court to litigate in that has jurisdiction over the case. Jurisdiction is the court’s power to hear a case and issue a decision binding on the parties.
Difficulty: 1 Easy
Topic: State Courts and Their Jurisdiction
Learning Objective: 02-02 Explain the difference between subject-matter jurisdiction and in personam jurisdiction.
Bloom’s: Remember
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
3) For a state trial court to have the power to decide a civil case, it must have either in personam jurisdiction or in rem jurisdiction.
Answer: TRUE
Explanation: In order to decide a civil case, a state trial court needs to have either in personam or in rem jurisdiction.
Difficulty: 2 Medium
Topic: State Courts and Their Jurisdiction
Learning Objective: 02-03 Identify the major legal issues courts must resolve when deciding whether in personam jurisdiction exists with regard to a defendant in a civil case.
Bloom’s: Understand
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
4) Due process requirements are satisfied when a state or federal court asserts in personam jurisdiction over a nonresident defendant when he has been shown to have the requisite “minimum contacts” with the forum state or federal district.
Answer: TRUE
Explanation: The assertion of in personam jurisdiction satisfies federal or state due process guarantees so long as the defendant has sufficient “minimum contacts” with the forum state, such that maintaining an action there comports with “traditional notions of fair play and substantial justice.”
Difficulty: 2 Medium
Topic: State Courts and Their Jurisdiction
Learning Objective: 02-03 Identify the major legal issues courts must resolve when deciding whether in personam jurisdiction exists with regard to a defendant in a civil case.
Bloom’s: Understand
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
5) In rem jurisdiction is based only on the fact that property of the defendant is located within the state.
Answer: TRUE
Explanation: In rem jurisdiction is based on the presence of property within the state and it empowers state courts to determine rights in that property even if the persons whose rights are affected are outside the state’s in personam jurisdiction.
Difficulty: 1 Easy
Topic: State Courts and Their Jurisdiction
Learning Objective: 02-03 Identify the major legal issues courts must resolve when deciding whether in personam jurisdiction exists with regard to a defendant in a civil case.
Bloom’s: Remember
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
6) Generally, forum selection clauses in form agreements are unenforceable.
Answer: FALSE
Explanation: Courts generally enforce forum selection clauses unless they are shown to be unreasonable in a given set of circumstances.
Difficulty: 1 Easy
Topic: State Courts and Their Jurisdiction
Learning Objective: 02-03 Identify the major legal issues courts must resolve when deciding whether in personam jurisdiction exists with regard to a defendant in a civil case.
Bloom’s: Remember
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
7) In general, a court has venue if it is a territorially fair and convenient forum for both parties to litigate the case in that court.
Answer: TRUE
Explanation: A court has venue if it is a territorially fair and convenient forum to hear a case. Venue for state courts is typically set by state statutes.
Difficulty: 1 Easy
Topic: State Courts and Their Jurisdiction
Learning Objective: 02-03 Identify the major legal issues courts must resolve when deciding whether in personam jurisdiction exists with regard to a defendant in a civil case.
Bloom’s: Remember
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
8) For federal district court diversity jurisdiction to exist the only requirement is that the amount in controversy must be at least $75,000.
Answer: FALSE
Explanation: Diversity jurisdiction exists when (1) the case is between citizens of different states and (2) the amount in controversy exceeds $75,000.
Difficulty: 1 Easy
Topic: Federal Courts and Their Jurisdiction
Learning Objective: 02-04 Explain what is necessary in order for a federal court to have subject-matter jurisdiction over a civil case.
Bloom’s: Remember
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
9) The doctrine of certiorari jurisdiction makes it mandatory for the U.S. Supreme Court to hear appeals from federal and state courts.
Answer: FALSE
Explanation: The doctrine of certiorari jurisdiction grants the U.S. Supreme Court the discretion to decide whether it wants to hear a case or not. The court hears only a small percentage of the many appeals that come to it.
Difficulty: 2 Medium
Topic: Federal Courts and Their Jurisdiction
Learning Objective: 02-04 Explain what is necessary in order for a federal court to have subject-matter jurisdiction over a civil case.
Bloom’s: Understand
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
10) Brennan sues Melissa for breach of contract. In her reply, Melissa claims, among other things, that she should not be liable as she only entered the contract because Brennan defrauded her. This assertion is called an affirmative defense.
Answer: TRUE
Explanation: A successful affirmative defense enables the defendant to win the case even if all the allegations in the complaint are true and, by themselves, would have entitled the plaintiff to recover.
Difficulty: 3 Hard
Topic: Civil Procedure
Learning Objective: 02-05 Identify the major steps in a civil lawsuit’s progression from beginning to end.
Bloom’s: Apply
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
11) The defendant must wait until after the pleadings have been completed before making a motion to dismiss.
Answer: FALSE
Explanation: The motion to dismiss is often made after the filing of a complaint and before the defendant’s answer. The pleadings phase of a trial includes the complaint and answer and in some jurisdictions the reply.
Difficulty: 1 Easy
Topic: Civil Procedure
Learning Objective: 02-05 Identify the major steps in a civil lawsuit’s progression from beginning to end.
Bloom’s: Remember
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
12) Interrogatories are a form of discovery requiring a party to file written answers to questions submitted to that party.
Answer: TRUE
Explanation: Interrogatories are written questions directed by the plaintiff to the defendant, or vice versa. The litigant on whom interrogatories are served must provide written answers, under oath, within a time period prescribed by applicable law.
Difficulty: 1 Easy
Topic: Civil Procedure
Learning Objective: 02-06 Describe the different forms of discovery available to parties in civil cases.
Bloom’s: Remember
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
13) As in a criminal case, a defendant in a civil case may not be compelled by the plaintiff to testify.
Answer: FALSE
Explanation: The Fifth Amendment of the U.S. Constitution allows protections that prevent a defendant in a criminal case from being compelled to testify but, in a civil case, a defendant can be compelled to testify.
Difficulty: 2 Medium
Topic: Civil Procedure
Learning Objective: 02-06 Describe the different forms of discovery available to parties in civil cases.
Bloom’s: Understand
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
14) Normally, a motion for summary judgment requires that a court decide whether there are genuine questions of material fact and questions of law.
Answer: TRUE
Explanation: A summary judgment involves factual determinations. To prevail, the party moving for a summary judgment must show that (1) there is no genuine issue of material (legally significant) fact and (2) she is entitled to judgment as a matter of law.
Difficulty: 1 Easy
Topic: Civil Procedure
Learning Objective: 02-06 Describe the different forms of discovery available to parties in civil cases.
Bloom’s: Remember
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
15) The party successful in a civil lawsuit can seek to enforce a judgment by obtaining a writ of execution or by garnishment.
Answer: TRUE
Explanation: A writ of execution and a garnishment are methods by which a party can collect a judgment. A writ of execution allows the sheriff or federal marshal to seize designated property of the defendant and sell it at a judicial sale to help satisfy the judgment. Garnishments allow a party to seize property, money, and wages that belong to the defendant but are in the hands of a third party such as a bank or employer.
Difficulty: 1 Easy
Topic: Civil Procedure
Learning Objective: 02-06 Describe the different forms of discovery available to parties in civil cases.
Bloom’s: Remember
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
16) The proceedings in courts of limited jurisdiction may be informal, and parties often argue their own cases.
Answer: TRUE
Explanation: Minor criminal cases and civil disputes involving small amounts of money or specialized matters frequently are decided in courts of limited jurisdiction. Examples include traffic courts, probate courts, and small claims courts. Such courts often handle a large number of cases. In some of these courts, procedures may be informal, and parties often argue their own cases without representation by attorneys.
Difficulty: 1 Easy
Topic: State Courts and Their Jurisdiction
Learning Objective: 02-01 Describe the basic structures of state court systems and the federal court system.
Bloom’s: Remember
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
17) The judge, not the jury, always determines the applicable law.
Answer: TRUE
Explanation: Although the trial court’s fact-finding function may be handled by the judge or by a jury. Determination of the applicable law, however, is always the judge’s responsibility.
Difficulty: 2 Medium
Topic: State Courts and Their Jurisdiction
Learning Objective: 02-01 Describe the basic structures of state court systems and the federal court system.
Bloom’s: Understand
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
18) A trial court may address venue questions before jurisdiction is established.
Answer: FALSE
Explanation: Even if a court has jurisdiction, it may be unable to decide the case because venue requirements have not been met. Venue questions arise only after jurisdiction is established or assumed.
Difficulty: 2 Medium
Topic: State Courts and Their Jurisdiction
Learning Objective: 02-03 Identify the major legal issues courts must resolve when deciding whether in personam jurisdiction exists with regard to a defendant in a civil case.
Bloom’s: Understand
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
19) A defendant who participates in a case with inadequate service of process will be deemed to have waived the objection if it is not made promptly.
Answer: TRUE
Explanation: Although inadequate service of process may sometimes defeat the plaintiff’s claim, the defendant who participates in the case without making a prompt objection to the manner of service will be deemed to have waived the objection.
Difficulty: 2 Medium
Topic: Civil Procedure
Learning Objective: 02-05 Identify the major steps in a civil lawsuit’s progression from beginning to end.
Bloom’s: Understand
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
20) If the defendant’s answer contains a counterclaim, that claim can arise out of any matter between the plaintiff and the defendant.
Answer: FALSE
Explanation: A counterclaim is a new claim by the defendant arising from the matters stated in the complaint.
Difficulty: 2 Medium
Topic: Civil Procedure
Learning Objective: 02-05 Identify the major steps in a civil lawsuit’s progression from beginning to end.
Bloom’s: Understand
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
21) What is a court’s power to hear a case and to issue a decision binding on the parties called?
- A) Jurisdiction
- B) Prerogative
- C) Venue
- D) Assignment
Answer: A
Explanation: Jurisdiction is a court’s power to hear a case and to issue a decision binding on the parties.
Difficulty: 1 Easy
Topic: State Courts and Their Jurisdiction
Learning Objective: 02-02 Explain the difference between subject-matter jurisdiction and in personam jurisdiction.
Bloom’s: Remember
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
22) A “long-arm” statute allows:
- A) criminal courts jurisdiction over civil cases.
- B) state courts more power than federal ones.
- C) court’s jurisdiction over out-of-state defendants.
- D) appellate courts to hear new cases.
Answer: C
Explanation: Most states have enacted “long-arm” statutes that give their courts in personam jurisdiction over out-of-state defendants in certain instances. Under these statutes, nonresident individuals and businesses become subject to the jurisdiction of the state’s courts by, for example, doing business within the state, contracting to supply goods or services within the state, or committing a tort within the state.
Difficulty: 1 Easy
Topic: State Courts and Their Jurisdiction
Learning Objective: 02-03 Identify the major legal issues courts must resolve when deciding whether in personam jurisdiction exists with regard to a defendant in a civil case.
Bloom’s: Remember
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
23) Calvin, a resident of South Park, Colorado, creates a website called “But Seriously” which acts as an electronic billboard for posting funny stories. Ted, a resident of Northridge, California, posts a story on the website. Stu, another California resident from San Diego, files a lawsuit against Calvin in a federal district court in California, claiming that Calvin had defamed him on his website. Based on these facts, does Calvin have sufficient “minimum contacts” to give the California federal district court in personam jurisdiction over him?
- A) No, Ted’s posting alone is not enough to create sufficient “minimum contacts.”
- B) Yes, Ted’s posting creates sufficient “minimum contacts.”
- C) Yes, by creating a website that is accessible in California, Calvin has sufficient “minimum contacts” with that state.
- D) Calvin has sufficient “minimum contacts” with California only if Stu’s claim is in excess of $75,000.
Answer: A
Explanation: When the parties have a contractual relationship, “minimum contacts” may be shown by the parties’ negotiations preceding their agreement, the course of dealing between the parties, the terms of the agreement, and foreseeable future consequences arising out of the agreement. Federal circuit courts have rejected that merely posting defamatory or invasive material to the World Wide Web is enough to create “minimum contacts” for in personam jurisdiction.
Difficulty: 3 Hard
Topic: State Courts and Their Jurisdiction
Learning Objective: 02-03 Identify the major legal issues courts must resolve when deciding whether in personam jurisdiction exists with regard to a defendant in a civil case.
Bloom’s: Apply
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
24) Bubble Wrap Co. (BWC), an Atlanta corporation, has its principal place of business in New York. John, a resident of Florida, asserted on his website that BWC engaged in ongoing criminal activity, scams, and phishing. BWC sued John in the U.S. District Court for the District of New York, alleging defamation and injury to BWC’s business in New York. John filed a motion to dismiss the case alleging that neither subject-matter nor in personam jurisdiction existed. The court granted the defendant’s motion and dismissed the case because:
- A) BWC could not meet its burden of establishing sufficient “minimum contacts.”
- B) the court did not have subject-matter jurisdiction.
- C) the court neither had subject-matter jurisdiction nor in personam jurisdiction.
- D) publishing of those statements did not amount to defamation, and thus no injury was caused to BWC’s business.
Answer: A
Explanation: When the parties have a contractual relationship, “minimum contacts” may be shown by the parties’ negotiations preceding their agreement, the course of dealing between the parties, the terms of the agreement, and foreseeable future consequences arising out of the agreement. In this case, there is no such agreement and hence, it does not apply. Federal circuit courts have rejected that merely posting defamatory or invasive material to the World Wide Web is enough to create “minimum contacts” for in personam jurisdiction.
Difficulty: 3 Hard
Topic: State Courts and Their Jurisdiction
Learning Objective: 02-03 Identify the major legal issues courts must resolve when deciding whether in personam jurisdiction exists with regard to a defendant in a civil case.
Bloom’s: Apply
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
25) Jurisdiction based on the presence of property within the state is called ________ jurisdiction.
- A) in rem
- B) personam
- C) sui iuris
- D) subject-matter
Answer: A
Explanation: In rem jurisdiction is based on the presence of property within the state.
Difficulty: 1 Easy
Topic: State Courts and Their Jurisdiction
Learning Objective: 02-03 Identify the major legal issues courts must resolve when deciding whether in personam jurisdiction exists with regard to a defendant in a civil case.
Bloom’s: Remember
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
26) Which of the following is not an example of a court of limited jurisdiction?
- A) Traffic court
- B) Probate court
- C) Trial court
- D) Small claims court
Answer: C
Explanation: Minor criminal cases and civil disputes involving small amounts of money or specialized matters frequently are decided in courts of limited jurisdiction. Examples include traffic courts, probate courts, and small claims courts.
Difficulty: 2 Medium
Topic: State Courts and Their Jurisdiction
Learning Objective: 02-01 Describe the basic structures of state court systems and the federal court system.
Bloom’s: Understand
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
27) In general, a court has ________ if it is a territorially fair and convenient forum in which to hear the case.
- A) venue
- B) original jurisdiction
- C) limited jurisdiction
- D) standing
Answer: A
Explanation: A court has venue if it is a territorially fair and convenient forum in which to hear the case. Even if a court has jurisdiction, it may be unable to decide the case because venue requirements have not been met.
Difficulty: 1 Easy
Topic: State Courts and Their Jurisdiction
Learning Objective: 02-03 Identify the major legal issues courts must resolve when deciding whether in personam jurisdiction exists with regard to a defendant in a civil case.
Bloom’s: Remember
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
28) Contracts sometimes contain a provision reciting that disputes between the parties regarding matters connected with the contract must be litigated in the courts of a particular state. What is such a provision called?
- A) Choice of law clause
- B) Forum selection clause
- C) Substantive clause
- D) Minimum contacts clause
Answer: B
Explanation: Contracts sometimes contain a forum selection clause reciting that disputes between the parties regarding matters connected with the contract must be litigated in the courts of a particular state. Depending on its wording, a forum selection clause may have the effect of addressing both jurisdiction and venue issues.
Difficulty: 1 Easy
Topic: State Courts and Their Jurisdiction
Learning Objective: 02-03 Identify the major legal issues courts must resolve when deciding whether in personam jurisdiction exists with regard to a defendant in a civil case.
Bloom’s: Remember
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
29) Bob is a merchant in New York and Betty is a merchant in California. Bob wants to do business with Betty but he is concerned that if a lawsuit should result from their transaction, he might have to travel to California and hire a California lawyer to litigate the dispute. What type of clause should Bob try to include in his contract with Betty that will probably assure him that if litigation ensues, it will take place in New York?
- A) Confession of judgment clause
- B) Forum selection clause
- C) Choice of law clause
- D) Substantive clause
Answer: B
Explanation: A forum selection clause may address both jurisdiction and venue issues. Hence, it would be a useful tool for Bob in case any type of litigation takes place in the future.
Difficulty: 3 Hard
Topic: State Courts and Their Jurisdiction
Learning Objective: 02-03 Identify the major legal issues courts must resolve when deciding whether in personam jurisdiction exists with regard to a defendant in a civil case.
Bloom’s: Apply
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
30) Defending against a federal district court suit by Paul, Dan claims that Paul has sued him in the wrong federal district court. Dan has raised a question of:
- A) long-arm jurisdiction.
- B) in personam jurisdiction.
- C) venue.
- D) standing.
Answer: C
Explanation: Even if a court has jurisdiction, it may not be able to decide a case because of venue requirements. A court has venue if it is a territorially fair and convenient forum in which to hear the case.
Difficulty: 3 Hard
Topic: State Courts and Their Jurisdiction
Learning Objective: 02-03 Identify the major legal issues courts must resolve when deciding whether in personam jurisdiction exists with regard to a defendant in a civil case.
Bloom’s: Apply
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
31) Infobox Online, an Internet access provider, includes in its “clickwrap” contract a clause stating that California courts have “exclusive jurisdiction” over subscribers’ disputes with Infobox Online. This clause will most likely be:
- A) unenforceable because it was not the result of bargaining.
- B) unenforceable against a subscriber in another state.
- C) enforceable if the subscriber does not file a motion to dismiss.
- D) enforceable if it is considered reasonable by a court.
Answer: D
Explanation: An Internet access provider (IAP) may include a forum selection clause in a so-called “clickwrap” document that sets forth the terms of its Internet-related services—terms to which the IAP’s subscribers are deemed to have agreed by virtue of utilizing the IAP’s services. Forum selection clauses, whether expressly bargained for or included in a “clickwrap” agreement, are generally enforced by courts unless they are shown to be unreasonable in a given set of circumstances.
Difficulty: 3 Hard
Topic: State Courts and Their Jurisdiction
Learning Objective: 02-03 Identify the major legal issues courts must resolve when deciding whether in personam jurisdiction exists with regard to a defendant in a civil case.
Bloom’s: Apply
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
32) For federal “diversity” jurisdiction to exist:
- A) the case must begin in a federal court of appeals.
- B) the amount in controversy must exceed $75,000.
- C) both the plaintiff and the defendant must be citizens of the same state.
- D) the case must pertain to the Constitution, laws, or treaties of the United States.
Answer: B
Explanation: Diversity jurisdiction arises when the case is (1) between citizens of different states and (2) the amount in controversy exceeds $75,000. Federal question jurisdiction exists when the case arises under the Constitution, laws, or treaties of the United States.
Difficulty: 1 Easy
Topic: Federal Courts and Their Jurisdiction
Learning Objective: 02-04 Explain what is necessary in order for a federal court to have subject-matter jurisdiction over a civil case.
Bloom’s: Remember
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
33) In federal courts, a corporation is:
- A) a citizen of only the place where is has been incorporated.
- B) a citizen of only it principal place of business.
- C) a citizen of both the state where it has been incorporated and the state where it has its principal place of business.
- D) a citizen of that state which has enacted a “long-arm” statute, and thus has jurisdiction.
Answer: C
Explanation: Under diversity jurisdiction, a corporation is a citizen of both the state where it has been incorporated and the state where it has its principal place of business.
Difficulty: 1 Easy
Topic: Federal Courts and Their Jurisdiction
Learning Objective: 02-04 Explain what is necessary in order for a federal court to have subject-matter jurisdiction over a civil case.
Bloom’s: Remember
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
34) ________ jurisdiction exists when the case arises under the Constitution, laws, or treaties of the United States.
- A) Original
- B) Federal question
- C) Diversity
- D) Exclusive
Answer: B
Explanation: Federal question jurisdiction exists when the case arises under the Constitution, laws, or treaties of the United States. The “arises under” requirement normally is met when a right created by federal law is a basic part of the plaintiff’s case.
Difficulty: 1 Easy
Topic: Federal Courts and Their Jurisdiction
Learning Objective: 02-04 Explain what is necessary in order for a federal court to have subject-matter jurisdiction over a civil case.
Bloom’s: Remember
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
35) Patent cases being litigated in the federal system are an example of:
- A) concurrent jurisdiction.
- B) original jurisdiction.
- C) exclusive jurisdiction.
- D) certiorari jurisdiction.
Answer: C
Explanation: The federal district courts have exclusive jurisdiction over some matters, such as patents. Patent cases must be litigated in the federal system.
Difficulty: 2 Medium
Topic: Federal Courts and Their Jurisdiction
Learning Objective: 02-04 Explain what is necessary in order for a federal court to have subject-matter jurisdiction over a civil case.
Bloom’s: Understand
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
36) In a case where concurrent jurisdiction exists, a state court may decide a case involving federal questions if:
- A) it is a criminal case.
- B) it is a civil case.
- C) the plaintiff opts for a state court.
- D) the defendant belongs to that state.
Answer: C
Explanation: Sometimes, federal district courts have concurrent jurisdiction with state courts—meaning that both state and federal courts have jurisdiction over the case. State courts may sometimes decide cases involving federal questions if concurrent jurisdiction exists and the plaintiff opts for a state court.
Difficulty: 2 Medium
Topic: Federal Courts and Their Jurisdiction
Learning Objective: 02-04 Explain what is necessary in order for a federal court to have subject-matter jurisdiction over a civil case.
Bloom’s: Understand
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
37) Today, most appealable decisions from the lower courts fall within the Supreme Court’s ________ jurisdiction, under which the Court has discretion whether to hear the appeal.
- A) appellate
- B) certiorari
- C) original
- D) exclusive
Answer: B
Explanation: The United States Supreme Court, the highest court in the land, is mainly an appellate court. Therefore, it considers only questions of law when it decides appeals from the federal courts of appeals and the highest state courts. Today, most appealable decisions from these courts fall within the Supreme Court’s certiorari jurisdiction, under which the Court has discretion whether to hear the appeal.
Difficulty: 1 Easy
Topic: Federal Courts and Their Jurisdiction
Learning Objective: 02-04 Explain what is necessary in order for a federal court to have subject-matter jurisdiction over a civil case.
Bloom’s: Remember
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
38) In which of the following cases will the U.S. Supreme Court have original, but not exclusive, jurisdiction?
- A) When the validity of any treaty has been questioned.
- B) When the validity of a federal statute has been questioned.
- C) When there is a controversy between two or more states.
- D) When a state proceeds against citizens of another state.
Answer: D
Explanation: The U.S. Supreme Court has original, but not exclusive, jurisdiction over cases involving foreign ambassadors, ministers, and like parties; controversies between the United States and a state; and cases in which a state proceeds against citizens of another state or against aliens. Article III of the Constitution grants the Supreme Court jurisdiction of controversies between individual States and citizens from another state or against aliens. The Supreme Court has original and exclusive jurisdiction over all controversies between two or more states.
Difficulty: 2 Medium
Topic: Federal Courts and Their Jurisdiction
Learning Objective: 02-04 Explain what is necessary in order for a federal court to have subject-matter jurisdiction over a civil case.
Bloom’s: Understand
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
39) Which of the following notifies the defendant that he, she, or it is being sued?
- A) Summons
- B) Motion to Dismiss
- C) Deposition
- D) Interrogatories
Answer: A
Explanation: A summons notifies the defendant that he, she, or it is being sued. It typically names the plaintiff and states the time within which the defendant must enter an appearance in court. In most jurisdictions, it is accompanied by a copy of the plaintiff’s complaint.
Difficulty: 1 Easy
Topic: Civil Procedure
Learning Objective: 02-05 Identify the major steps in a civil lawsuit’s progression from beginning to end.
Bloom’s: Remember
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
40) The ________ are the documents the parties file with the court when they first state their respective claims and defenses.
- A) summons
- B) pleadings
- C) appeals
- D) clauses
Answer: B
Explanation: The pleadings are the documents the parties file with the court when they first state their respective claims and defenses. They include the complaint, the answer, and, in some jurisdictions, the reply.
Difficulty: 1 Easy
Topic: Civil Procedure
Learning Objective: 02-05 Identify the major steps in a civil lawsuit’s progression from beginning to end.
Bloom’s: Remember
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
41) A(n) ________ must state the remedy requested in the case.
- A) summons
- B) interrogatory
- C) affirmative defense
- D) complaint
Answer: D
Explanation: The complaint states the plaintiff’s claim in separate, numbered paragraphs. The complaint must also state the remedy requested.
Difficulty: 1 Easy
Topic: Civil Procedure
Learning Objective: 02-05 Identify the major steps in a civil lawsuit’s progression from beginning to end.
Bloom’s: Remember
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
42) Which of the following may contain an affirmative defense?
- A) Summons
- B) Interrogatory
- C) Complaint
- D) Answer
Answer: D
Explanation: A defendant needs to file an answer to the plaintiff’s complaint within a designated time after service of the complaint. An answer may include an affirmative defense to the claim asserted in the complaint. A successful affirmative defense enables the defendant to win the case even if all the allegations in the complaint are true and, by themselves, would have entitled the plaintiff to recover.
Difficulty: 2 Medium
Topic: Civil Procedure
Learning Objective: 02-05 Identify the major steps in a civil lawsuit’s progression from beginning to end.
Bloom’s: Understand
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
43) A counterclaim differs from an affirmative defense in that, a counterclaim:
- A) is a new claim by the plaintiff.
- B) does not permit a defendant to claim for damages caused by a fraud.
- C) is merely an attack on the plaintiff’s claims.
- D) is the defendant’s attempt to obtain legal relief.
Answer: D
Explanation: A counterclaim is a new claim by the defendant arising from the matters stated in the complaint. Unlike an affirmative defense, it is not merely an attack on the plaintiff’s claim, but is the defendant’s attempt to obtain legal relief. In addition to using fraud as an affirmative defense to a plaintiff’s contract claim, for example, a defendant might counterclaim for damages caused by that fraud.
Difficulty: 2 Medium
Topic: Civil Procedure
Learning Objective: 02-05 Identify the major steps in a civil lawsuit’s progression from beginning to end.
Bloom’s: Understand
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
44) Mike sues Randy for “aesthetic pollution.” The basis for his suit is Randy’s habit of wearing clothes that Mike considers to be ugly. Mike’s complaint offers details of Randy’s “ugly” clothing in many separate, numbered paragraphs. However, no law requires one to pay damages for wearing clothes that another considers ugly and for causing aesthetic dissatisfaction to some other party. Thus, Randy wants to defeat Mike’s claim as fast as possible. The best procedural device for doing so is the:
- A) motion to dismiss.
- B) motion for summary judgment.
- C) motion for judgment notwithstanding the verdict.
- D) motion for a directed verdict.
Answer: A
Explanation: Sometimes it is evident from the complaint or the pleadings that the plaintiff does not have a valid claim. In such a situation, it would be wasteful for the litigation to proceed further. The procedural device for ending the case at this early stage is commonly called the motion to dismiss. The most important type of motion to dismiss is the motion to dismiss for failure to state a claim upon which relief can be granted, sometimes called the demurrer. It asserts that the plaintiff cannot recover even if all of his allegations are true because no rule of law entitles him to win on those facts.
Difficulty: 3 Hard
Topic: Civil Procedure
Learning Objective: 02-05 Identify the major steps in a civil lawsuit’s progression from beginning to end.
Bloom’s: Apply
AACSB: Analytical Thinking; Reflective Thinking
Accessibility: Keyboard Navigation
45) The motion to dismiss for failure to state a claim upon which relief can be granted is sometimes called the:
- A) deposition.
- B) demurrer.
- C) interrogatory.
- D) directed verdict.
Answer: B
Explanation: The procedural device for ending the case at an early stage is commonly called the motion to dismiss. The most important type of motion to dismiss is the motion to dismiss for failure to state a claim upon which relief can be granted, sometimes called the demurrer.
Difficulty: 1 Easy
Topic: Civil Procedure
Learning Objective: 02-05 Identify the major steps in a civil lawsuit’s progression from beginning to end.
Bloom’s: Remember
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Business Law, 17e (Langvardt)
Chapter 4 Business Ethics, Corporate Social Responsibility, Corporate Governance, and Critical Thinking
1) Under the stakeholder theory of corporate social responsibility, employees’ interests are considered.
Answer: TRUE
Explanation: The stakeholder theory of corporate social responsibility tries to balance the interests of shareholders against those of corporate stakeholders, such as employees, suppliers, customers, and the community in an attempt to check unethical corporate behavior.
Difficulty: 1 Easy
Topic: The Corporate Social Responsibility Debate
Learning Objective: 04-01 Appreciate the strengths and weaknesses of the various ethical theories.
Bloom’s: Remember
AACSB: Ethics
Accessibility: Keyboard Navigation
2) Theories that focus only on actions or decisions alone are called deontological ethical theories.
Answer: TRUE
Explanation: Deontological ethical theories focus only on decisions or actions, not their results.
Difficulty: 1 Easy
Topic: Ethical Theories
Learning Objective: 04-01 Appreciate the strengths and weaknesses of the various ethical theories.
Bloom’s: Remember
AACSB: Ethics; Reflective Thinking
Accessibility: Keyboard Navigation
3) Asking whether a decision will produce the right results is an example of deontological theory.
Answer: FALSE
Explanation: Asking whether a decision will produce the right results is an example of a teleological theory. Teleological theories focus on the consequences of a decision while deontological theories focus on decisions or actions.
Difficulty: 1 Easy
Topic: Ethical Theories
Learning Objective: 04-01 Appreciate the strengths and weaknesses of the various ethical theories.
Bloom’s: Remember
AACSB: Ethics; Reflective Thinking
Accessibility: Keyboard Navigation
4) A teleological theory may find unacceptable that any competent employee loses his job, even if the layoff’s effect is to reduce prices to consumers and increase profits.
Answer: FALSE
Explanation: A teleological theory will accept such a decision because it will look at the larger consequence of this action.
Difficulty: 2 Medium
Topic: Ethical Theories
Learning Objective: 04-01 Appreciate the strengths and weaknesses of the various ethical theories.
Bloom’s: Understand
AACSB: Ethics; Analytical Thinking
Accessibility: Keyboard Navigation
5) Profit maximization is a deontological theory.
Answer: FALSE
Explanation: Profit maximization is a teleological theory, because it looks at the consequences of a decision.
Difficulty: 2 Medium
Topic: Ethical Theories
Learning Objective: 04-01 Appreciate the strengths and weaknesses of the various ethical theories.
Bloom’s: Understand
AACSB: Ethics; Analytical Thinking
Accessibility: Keyboard Navigation
6) “What would happen if everyone acted in this way?” is a question that Kant would ask.
Answer: TRUE
Explanation: According to Kant, one must apply a categorical imperative to one’s decisions and test whether the action should become universal law; therefore, this question becomes necessary.
Difficulty: 2 Medium
Topic: Ethical Theories
Learning Objective: 04-01 Appreciate the strengths and weaknesses of the various ethical theories.
Bloom’s: Understand
AACSB: Ethics; Analytical Thinking
Accessibility: Keyboard Navigation
7) Rights theory concerns itself with the costs and benefits of requiring respect for another’s rights.
Answer: FALSE
Explanation: Rights theory concerns itself with everyone’s fundamental rights, irrespective of the costs of those rights to society.
Difficulty: 1 Easy
Topic: Ethical Theories
Learning Objective: 04-01 Appreciate the strengths and weaknesses of the various ethical theories.
Bloom’s: Remember
AACSB: Ethics; Reflective Thinking
Accessibility: Keyboard Navigation
8) Rawls’s justice theory focuses on outcomes.
Answer: TRUE
Explanation: Rawls’s justice theory focused on outcomes, especially in the context of business, and whether people in society were getting what they deserved.
Difficulty: 1 Easy
Topic: Ethical Theories
Learning Objective: 04-01 Appreciate the strengths and weaknesses of the various ethical theories.
Bloom’s: Remember
AACSB: Ethics; Reflective Thinking
Accessibility: Keyboard Navigation
9) “The ends justify the means.” This statement reflects the utilitarian ethical theory.
Answer: TRUE
Explanation: Utilitarian theory tries to achieve the highest level of satisfactions over dissatisfactions and justify the maximum good.
Difficulty: 2 Medium
Topic: Ethical Theories
Learning Objective: 04-01 Appreciate the strengths and weaknesses of the various ethical theories.
Bloom’s: Understand
AACSB: Ethics; Analytical Thinking
Accessibility: Keyboard Navigation
10) A retailer’s decision not to close earlier than its regular closing time even though a storm warning makes it unlikely that there will be any more customers that day is an example of rule utilitarianism.
Answer: TRUE
Explanation: Rule utilitarianism judges actions by a rule that over the long run maximizes benefits over costs. It does not change itself according to the situation or context.
Difficulty: 3 Hard
Topic: Ethical Theories
Learning Objective: 04-01 Appreciate the strengths and weaknesses of the various ethical theories.
Bloom’s: Apply
AACSB: Ethics; Analytical Thinking
Accessibility: Keyboard Navigation
11) The reduced sales of Martha Stewart branded goods at K-Mart after she was accused of insider trading is an example of the strength of the profit maximization theory.
Answer: TRUE
Explanation: Profit maximization theory requires that decision makers consider the rights protected by rights and justice theories. The reduced sales show that ignoring these rights can have a negative impact on a corporation.
Difficulty: 2 Medium
Topic: Ethical Theories
Learning Objective: 04-01 Appreciate the strengths and weaknesses of the various ethical theories.
Bloom’s: Understand
AACSB: Ethics; Analytical Thinking
Accessibility: Keyboard Navigation
12) Utilitarianism is based on the laissez faire theory of capitalism.
Answer: FALSE
Explanation: The theory of laissez faire allows corporations to run their business as they wish. However, utilitarianism advocates those decisions that lead to the greatest good for society as a whole.
Difficulty: 1 Easy
Topic: Ethical Theories
Learning Objective: 04-01 Appreciate the strengths and weaknesses of the various ethical theories.
Bloom’s: Remember
AACSB: Ethics; Reflective Thinking
Accessibility: Keyboard Navigation
13) The Sarbanes-Oxley Act requires public companies to have board audit committees comprising only independent directors.
Answer: TRUE
Explanation: According to the Sarbanes-Oxley Act public companies are required to have board audit committees of independent directors in order to ensure ethical corporate behavior.
Difficulty: 2 Medium
Topic: Ethical Theories
Learning Objective: 04-01 Appreciate the strengths and weaknesses of the various ethical theories.
Bloom’s: Understand
AACSB: Ethics; Analytical Thinking
Accessibility: Keyboard Navigation
14) A justice theorist would choose the alternative that allocates society’s benefits and burden most fairly.
Answer: TRUE
Explanation: A strength of the justice theory is that it seeks to allocate resources as fairly as possible so that those who are the least advantaged are able to benefit as well.
Difficulty: 2 Medium
Topic: Ethical Theories
Learning Objective: 04-01 Appreciate the strengths and weaknesses of the various ethical theories.
Bloom’s: Understand
AACSB: Ethics; Analytical Thinking
Accessibility: Keyboard Navigation
15) Profit maximization compels a decision maker to consider stakeholders other than the corporation and its shareholders.
Answer: TRUE
Explanation: A profit maximizer will choose the alternative that produces the most long-run profits for the company, within the limits of the law. Profit maximization compels a decision maker to consider stakeholders other than the corporation and its shareholders.
Difficulty: 1 Easy
Topic: Guidelines for Ethical Decision Making
Learning Objective: 04-02 Apply the Guidelines for Ethical Decision Making to business and personal decisions.
Bloom’s: Remember
AACSB: Ethics; Reflective Thinking
Accessibility: Keyboard Navigation
16) “Begging the question” is also known as the slippery slope fallacy.
Answer: FALSE
Explanation: Reductioad absurdum is called the slippery slope fallacy because it carries an argument to a logical end without considering whether it is an inevitable or probable cause. Begging the question is when an arguer takes for granted or assumes the thing that is being proved.
Difficulty: 1 Easy
Topic: Thinking Critically
Learning Objective: 04-03 Recognize critical thinking errors in your own and others’ arguments.
Bloom’s: Remember
AACSB: Ethics; Reflective Thinking
Accessibility: Keyboard Navigation
17) An individual can lead ethically while not attempting to behave in an ethical way.
Answer: FALSE
Explanation: No one can lead ethically who does not attempt and mostly succeed in behaving ethically in his or her business and professional life.
Difficulty: 2 Medium
Topic: Leading Ethically
Learning Objective: 04-05 Be an ethical leader.
Bloom’s: Understand
AACSB: Ethics; Analytical Thinking
Accessibility: Keyboard Navigation
18) Sometimes ethical conduct requires consideration of the decision maker’s self-interest to produce a moral result.
Answer: TRUE
Explanation: While, sometimes, ethical conduct requires acting unselfishly, in other contexts, consideration of your self-interest is not only consistent with ethical conduct, but also necessary to produce a moral result.
Difficulty: 2 Medium
Topic: Guidelines for Ethical Decision Making
Learning Objective: 04-02 Apply the Guidelines for Ethical Decision Making to business and personal decisions.
Bloom’s: Understand
AACSB: Ethics; Analytical Thinking
Accessibility: Keyboard Navigation
19) By examining rights that are espoused by various stakeholders, decision makers are more likely to consider all the costs and benefits of their decisions and know which rights can adversely affect the firm’s profitability if they fail to take them into account.
Answer: TRUE
Explanation: While apparently difficult to identify and rank valid rights, rights theory has value even to a utilitarian and a profit maximizer. By examining rights that are espoused by various stakeholders, we are more likely to consider all the costs and benefits of our decision and know which rights can adversely affect the firm’s profitability if we fail to take them into account.
Difficulty: 2 Medium
Topic: Guidelines for Ethical Decision Making
Learning Objective: 04-02 Apply the Guidelines for Ethical Decision Making to business and personal decisions.
Bloom’s: Understand
AACSB: Ethics; Analytical Thinking
Accessibility: Keyboard Navigation
20) Critically thinking is not a skill that can be improved, someone either has it or they do not.
Answer: FALSE
Explanation: Thinking critically is a skill, and like with any skill, one can improve through greater awareness of common mistakes and intentional practice of those methods that will lead to improvement.
Difficulty: 2 Medium
Topic: Thinking Critically
Learning Objective: 04-03 Recognize critical thinking errors in your own and others’ arguments.
Bloom’s: Understand
AACSB: Ethics; Analytical Thinking
Accessibility: Keyboard Navigation
21) The purpose of the ________ is to increase penalties for corporate wrongdoers, establish rules designed to deter and prevent future wrongdoing, and encourage and enable corporate executives to be ethical and socially responsible.
- A) Sarbanes-Oxley Act
- B) Davis-Bacon Act
- C) Goldwater-Nichols Act
- D) Certiorari Act
Answer: A
Explanation: Congress passed the Sarbanes-Oxley Act, which increased penalties for corporate wrongdoers and established rules designed to deter and prevent future wrongdoing. The purpose of the statute is to encourage and enable corporate executives to be ethical and socially responsible.
Difficulty: 1 Easy
Topic: Why Study Business Ethics?
Learning Objective: 04-01 Appreciate the strengths and weaknesses of the various ethical theories.
Bloom’s: Remember
AACSB: Ethics; Reflective Thinking
Accessibility: Keyboard Navigation
22) The ________ of corporate social responsibility holds that rather than merely striving to maximize profits for its shareholders, a corporation should balance the interests of shareholders against the interests of employees, suppliers, customers, and the community.
- A) deontological theory
- B) Kantian theory
- C) stakeholder theory
- D) utilitarian theory
Answer: C
Explanation: The stakeholder theory of corporate social responsibility holds that rather than merely striving to maximize profits for its shareholders, a corporation should balance the interests of shareholders against the interests of other corporate stakeholders, such as employees, suppliers, customers, and the community.
Difficulty: 1 Easy
Topic: The Corporate Social Responsibility Debate
Learning Objective: 04-01 Appreciate the strengths and weaknesses of the various ethical theories.
Bloom’s: Remember
AACSB: Ethics; Reflective Thinking
Accessibility: Keyboard Navigation
23) The stakeholder theory of corporate social responsibility:
- A) strives to maximize profits for its shareholders.
- B) tries to balance the interests of shareholders and stakeholders.
- C) advocates the use of legal remedies to check corporate misbehavior.
- D) advocates the freedom of corporations to run as they wish.
Answer: B
Explanation: The stakeholder theory of corporate social responsibility argues that businesses should adhere to a standard of ethical behavior that is higher than the law. It holds that rather than merely striving to maximize profits for its shareholders, a corporation should balance the interests of shareholders against the interests of other corporate stakeholders, such as employees, suppliers, customers, and the community.
Difficulty: 2 Medium
Topic: The Corporate Social Responsibility Debate
Learning Objective: 04-01 Appreciate the strengths and weaknesses of the various ethical theories.
Bloom’s: Understand
AACSB: Ethics; Analytical Thinking
Accessibility: Keyboard Navigation
24) Which of the following ethical theories focuses on decisions or action alone, irrespective of the result it produces?
- A) Deontological theory
- B) Teleological theory
- C) Profit maximization theory
- D) Utilitarian theory
Answer: A
Explanation: Theories that focus on decisions or actions alone are deontological ethical theories; they do not look at the consequences of an action or decision.
Difficulty: 1 Easy
Topic: Ethical Theories
Learning Objective: 04-01 Appreciate the strengths and weaknesses of the various ethical theories.
Bloom’s: Remember
AACSB: Ethics; Reflective Thinking
Accessibility: Keyboard Navigation
25) ________ ethical theories focus on the consequences of a decision.
- A) Deontological
- B) Teleological
- C) Kantian
- D) Rights
Answer: B
Explanation: Theories that focus on the consequences of a decision are teleological ethical theories.
Difficulty: 1 Easy
Topic: Ethical Theories
Learning Objective: 04-01 Appreciate the strengths and weaknesses of the various ethical theories.
Bloom’s: Remember
AACSB: Ethics; Reflective Thinking
Accessibility: Keyboard Navigation
26) Which of the following ethical theories is a deontological theory?
- A) Utilitarian theory
- B) Teleological theory
- C) Rights theory
- D) Profit maximization theory
Answer: C
Explanation: Rights theory is a deontological theory because it focuses on decisions or actions alone.
Difficulty: 1 Easy
Topic: Ethical Theories
Learning Objective: 04-01 Appreciate the strengths and weaknesses of the various ethical theories.
Bloom’s: Remember
AACSB: Ethics; Reflective Thinking
Accessibility: Keyboard Navigation
27) Which of the following ethical theories emphasizes that certain human rights are fundamental and must be respected by other humans?
- A) Rights theory
- B) Utilitarian theory
- C) Teleological theory
- D) Profit maximization theory
Answer: A
Explanation: Rights theory encompasses a variety of ethical philosophies holding that certain human rights are fundamental and must be respected by other humans.
Difficulty: 1 Easy
Topic: Ethical Theories
Learning Objective: 04-01 Appreciate the strengths and weaknesses of the various ethical theories.
Bloom’s: Remember
AACSB: Ethics; Reflective Thinking
Accessibility: Keyboard Navigation
28) ________ theory emphasizes that one should use the categorical imperative and judge an action by applying it universally.
- A) Utilitarian
- B) Teleological
- C) Justice
- D) Kantian
Answer: D
Explanation: Kant viewed humans as moral actors that are free to make choices. He believed humans are able to judge the morality of any action by applying his famous categorical imperative. One formulation of the categorical imperative is, “Act only on that maxim whereby at the same time you can will that it shall become a universal law.” This means that we judge an action by applying it universally.
Difficulty: 1 Easy
Topic: Ethical Theories
Learning Objective: 04-01 Appreciate the strengths and weaknesses of the various ethical theories.
Bloom’s: Remember
AACSB: Ethics; Reflective Thinking
Accessibility: Keyboard Navigation
29) ________ categorizes using or manipulating others as an unethical action.
- A) Utilitarianism
- B) Teleological ethics
- C) Consequentialism
- D) Kantianism
Answer: D
Explanation: Kant had a formulation of the categorical imperative: “Always act to treat humanity, whether in yourself or in others, as an end in itself, never merely as a means.” That is, we may not use or manipulate others to achieve our own happiness.
Difficulty: 2 Medium
Topic: Ethical Theories
Learning Objective: 04-01 Appreciate the strengths and weaknesses of the various ethical theories.
Bloom’s: Understand
AACSB: Ethics; Analytical Thinking
Accessibility: Keyboard Navigation
30) Which ethical theory probably justifies the protection of a neo-Nazi’s right to hateful speech, even though the cost of such speech includes damage to relations between ethnic groups, which may far outweigh any benefits the society receives from the speech?
- A) Rights theory
- B) Teleological theory
- C) Profit maximization theory
- D) Utilitarian theory
Answer: A
Explanation: Rights theory does not concern itself with the costs or benefits of requiring respect for another’s right; it looks at an individual’s rights as absolute.
Difficulty: 2 Medium
Topic: Ethical Theories
Learning Objective: 04-01 Appreciate the strengths and weaknesses of the various ethical theories.
Bloom’s: Understand
AACSB: Ethics; Analytical Thinking
Accessibility: Keyboard Navigation
31) Which of the following ethical theories has been criticized for creating a sense of entitlement reducing innovation, entrepreneurship, and production?
- A) Rights theory
- B) Teleological theory
- C) Utilitarian theory
- D) Profit maximization theory
Answer: A
Explanation: In the context of discussions around public policy and political economy, some argue that rights theory can be perverted to create a sense of entitlement reducing innovation, entrepreneurship, and production.
Difficulty: 2 Medium
Topic: Ethical Theories
Learning Objective: 04-01 Appreciate the strengths and weaknesses of the various ethical theories.
Bloom’s: Understand
AACSB: Ethics; Analytical Thinking
Accessibility: Keyboard Navigation
32) ________ requires a decision maker to ensure the maximum good for the maximum number.
- A) Profit maximization
- B) Rights theory
- C) Stakeholder theory
- D) Utilitarianism
Answer: D
Explanation: Utilitarianism tries to achieve the greatest good possible for society as a whole.
Difficulty: 2 Medium
Topic: Ethical Theories
Learning Objective: 04-01 Appreciate the strengths and weaknesses of the various ethical theories.
Bloom’s: Understand
AACSB: Ethics; Analytical Thinking
Accessibility: Keyboard Navigation
33) Which of the following ethical theories judges our actions as good or bad depending on their consequences and is expressed as “the ends justify the means”?
- A) Rights theory
- B) Utilitarianism
- C) Kantianism
- D) Deontological theory
Answer: B
Explanation: A teleological theory, utilitarianism judges our actions as good or bad depending on their consequences. This is sometimes expressed as “the ends justify the means.”
Difficulty: 1 Easy
Topic: Ethical Theories
Learning Objective: 04-01 Appreciate the strengths and weaknesses of the various ethical theories.
Bloom’s: Remember
AACSB: Ethics; Reflective Thinking
Accessibility: Keyboard Navigation
34) ________ protects the rights of those who are less privileged in society.
- A) Rights theory
- B) Justice theory
- C) Rule utilitarianism theory
- D) Profit maximization theory
Answer: B
Explanation: The strength of the justice theory lies in the fact that it is concerned with ensuring the rights of those who are the least advantaged in society.
Difficulty: 1 Easy
Topic: Ethical Theories
Learning Objective: 04-01 Appreciate the strengths and weaknesses of the various ethical theories.
Bloom’s: Remember
AACSB: Ethics; Reflective Thinking
Accessibility: Keyboard Navigation
35) Which of the following ethical theories requires decision makers to maximize utility for society as a whole?
- A) Profit maximization theory
- B) Deontological theory
- C) Rights theory
- D) Utilitarian theory
Answer: D
Explanation: In utilitarianism, the focus is on society as a whole and a utilitarian will act only if the benefits of the action to society outweigh the societal costs of the action.
Difficulty: 1 Easy
Topic: Ethical Theories
Learning Objective: 04-01 Appreciate the strengths and weaknesses of the various ethical theories.
Bloom’s: Remember
AACSB: Ethics; Reflective Thinking
Accessibility: Keyboard Navigation
36) Kurt is trying to decide whether or not he should drive to work every day and has a number of questions. Will it save valuable time? Will he be adding to environmental pollution? Will it add to the problems of heavy traffic on the roads? Would carpooling be a better idea? Which of the following ethical theories does Kurt adhere to?
- A) Utilitarian ethics
- B) Deontological ethics
- C) Kant’s categorical imperative
- D) Rights theory
Answer: A
Explanation: Act utilitarianism judges each act separately, assessing an act’s benefits and costs to society.
Difficulty: 3 Hard
Topic: Ethical Theories
Learning Objective: 04-01 Appreciate the strengths and weaknesses of the various ethical theories.
Bloom’s: Apply
AACSB: Ethics; Analytical Thinking
Accessibility: Keyboard Navigation
37) ________ is a teleological ethical theory because it focuses on results by maximizing total social welfare.
- A) Rights theory
- B) Kantian theory
- C) Deontological theory
- D) Profit maximization theory
Answer: D
Explanation: By focusing on results—maximizing total social welfare—profit maximization is a teleological ethical theory.
Difficulty: 1 Easy
Topic: Ethical Theories
Learning Objective: 04-01 Appreciate the strengths and weaknesses of the various ethical theories.
Bloom’s: Remember
AACSB: Ethics; Reflective Thinking
Accessibility: Keyboard Navigation
38) Which of the following ethical theories illustrates that acting in one’s selfish interests can ultimately result in ethical behavior and benefits to society?
- A) Rights theory
- B) Profit maximization theory
- C) Kantian theory
- D) Justice theory
Answer: B
Explanation: By working in our own interests, in accordance with the profit maximization theory, we compete for society’s scarce resources which are allocated to those people and businesses that can use them most productively and efficiently.
Difficulty: 2 Medium
Topic: Ethical Theories
Learning Objective: 04-01 Appreciate the strengths and weaknesses of the various ethical theories.
Bloom’s: Understand
AACSB: Ethics; Analytical Thinking
Accessibility: Keyboard Navigation
39) Which of the following is a characteristic of profit maximization?
- A) It is concerned with the equal distribution of wealth in society.
- B) It protects everyone’s fundamental rights.
- C) It is closely related to utilitarianism because it focuses on results.
- D) It ensures complete responsible and ethical behavior by corporations.
Answer: C
Explanation: Profit maximization is considered a teleological ethical theory because it focuses on the results of business decisions taken. It is closely related to utilitarianism, but it differs fundamentally in how ethical decisions are made.
Difficulty: 2 Medium
Topic: Ethical Theories
Learning Objective: 04-01 Appreciate the strengths and weaknesses of the various ethical theories.
Bloom’s: Understand
AACSB: Ethics; Analytical Thinking
Accessibility: Keyboard Navigation
40) Profit maximization results in ethical conduct because:
- A) it emphasizes the right to redistribute wealth in order to help the poor and disadvantaged.
- B) it requires society’s members to act within the constraints of the law.
- C) it protects fundamental rights, unless some greater right takes precedence.
- D) it focuses on the decision or action itself, irrespective of what results it produces.
Answer: B
Explanation: Profit maximization results in ethical conduct because it requires society’s members to act within the constraints of the law. A profit maximizer acts ethically by complying with society’s mores as expressed in its laws.
Difficulty: 2 Medium
Topic: Ethical Theories
Learning Objective: 04-01 Appreciate the strengths and weaknesses of the various ethical theories.
Bloom’s: Understand
AACSB: Ethics; Analytical Thinking
Accessibility: Keyboard Navigation
41) The ________ requires a public company to disclose whether it has adopted a code of ethics for senior financial officers, and to disclose any change in the code or waiver of the code’s application.
- A) Davis-Bacon Act
- B) Goldwater-Nichols Act
- C) Sarbanes-Oxley Act
- D) Certiorari Act
Answer: C
Explanation: The Sarbanes-Oxley Act requires a public company to disclose whether it has adopted a code of ethics for senior financial officers, and to disclose any change in the code or waiver of the code’s application.
Difficulty: 1 Easy
Topic: Ethical Theories
Learning Objective: 04-01 Appreciate the strengths and weaknesses of the various ethical theories.
Bloom’s: Remember
AACSB: Ethics; Reflective Thinking
Accessibility: Keyboard Navigation
42) Which of the following factors can impose direct penalties for corporate misbehavior?
- A) Market forces
- B) Corporate management
- C) Labor unions
- D) Investors
Answer: A
Explanation: Of all the devices for corporate control we have considered, only market forces and the law impose direct penalties for corporate misbehavior.
Difficulty: 2 Medium
Topic: Ethical Theories
Learning Objective: 04-01 Appreciate the strengths and weaknesses of the various ethical theories.
Bloom’s: Understand
AACSB: Ethics; Analytical Thinking
Accessibility: Keyboard Navigation
43) Which of the following is a prescribed guideline for ethical decision making?
- A) What gives me maximum profit?
- B) Will stakeholders offer support?
- C) How can I increase the number of shareholders?
- D) How do the alternatives impact my business firm?
Answer: D
Explanation: A decision maker who wishes to act ethically would look at all the alternatives possible in a creative manner. The solution is not simply to do or not do something; there are many solutions that are possible between the two extremes.
Difficulty: 1 Easy
Topic: Guidelines for Ethical Decision Making
Learning Objective: 04-02 Apply the Guidelines for Ethical Decision Making to business and personal decisions.
Bloom’s: Remember
AACSB: Ethics; Reflective Thinking
Accessibility: Keyboard Navigation
44) Speedster is an automobile manufacturing company that has a factory in Seattle, Washington. It has placed Keith McShane, the operations head of the factory, in charge of investigating the firm’s decision whether to move the factory to Qingdao, China. Keith is against the idea of the factory relocating to Qingdao because his fellow Americans will lose their jobs to the Chinese. Therefore, he is desperately searching for information that favors Seattle over Qingdao. Which of the following prescribed guidelines for ethical decision making will Keith need to focus on to make an unbiased, ethical decision?
- A) Will the shareholders offer support?
- B) What facts impact my decision?
- C) How can I increase the number of shareholders?
- D) Which decision will allow me to retain my job?
Answer: B
Explanation: Many people enter a decision-making process biased in favor of a particular option. As a result, they look only for facts that support that option. Keith should search for all the facts that are related to Seattle and Qingdao and make an unbiased decision based on the information favoring either Seattle or Qingdao.
Difficulty: 3 Hard
Topic: Guidelines for Ethical Decision Making
Learning Objective: 04-02 Apply the Guidelines for Ethical Decision Making to business and personal decisions.
Bloom’s: Apply
AACSB: Ethics; Analytical Thinking
Accessibility: Keyboard Navigation
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