responsibilities. Laws and regulations are a society’s codified ethics, embodying notions of right and
wrong. They also establish the rules of the game.
References
Multiple Choice Difficulty: 2 Medium Learning Objective: 01-04 Conduct a
stakeholder impact analysis.
42.
Award: 1.00 point
The amount of polyethanal that can be used in household paint is legally limited to 0.03 percent.
Anything beyond this amount is hazardous to health and the environment and is considered a legal
offense. Consequently, PrismPaints Corp. has vouched to make its products as safe as possible.
Therefore, it manufactures polyethanal-free paints even though this increases its costs and reduces
the dividends paid to its shareholders in the long run. Which of the following responsibilities is Prism
Paints Corp. primarily compromising in this scenario?
legal responsibilities toward the government
economic responsibilities toward its shareholders
philanthropic responsibilities toward the local community
ethical responsibilities toward the society
Prism Paints Corp. is primarily compromising its economic responsibilities toward its shareholders.
The business enterprise is first and foremost an economic institution. Investors expect an adequate
return for their risk capital. Firms must obey the law and act ethically in their quest to gain and
sustain competitive advantage.
References
Multiple Choice Difficulty: 2 Medium Learning Objective: 01-04 Conduct a
stakeholder impact analysis.
43.
Award: 1.00 point
Industrial Drills, a company that manufactures industrial tools, incurs higher costs because of its
refusal to outsource its manufacturing to countries where labor costs are lower. This reflects
Industrial Drills’ ________ responsibility.
economic
legal
ethical
demographic
This reflects Industrial Drills’ ethical responsibility. A firm’s ethical responsibilities go beyond its legal
responsibilities. They embody the full scope of expectations, norms, and values of its stakeholders.
Managers are called upon to do what society deems just and fair.
References
Multiple Choice Difficulty: 2 Medium Learning Objective: 01-04 Conduct a
stakeholder impact analysis.
44.
Award: 1.00 point
Batt Packs recently came under criticism when a newspaper article revealed that the company’s
production plant had leaked a chemical compound into a sensitive wetland ecosystem. Although
use of the chemical was not technically prohibited by law, the local government levied a small fine
for cleaning up the spill. Environmental groups, however, argued that continued use of the chemical
was damaging to the local wildlife and threatened to organize a boycott against Batt Packs. What
should Batt Packs do to ensure that it meets its ethical responsibilities?
pay the fine levied by the local government and resume operations
move its production facilities to an area that is less concerned with environmental issues
take out an advertisement arguing that use of the chemical is perfectly legal
design batteries without the chemical and market them as environmentally friendly
A firm’s ethical responsibilities go beyond its legal responsibilities. In this case, Batt Packs had a
legal responsibility to pay the fine, but its ethical responsibilities to its stakeholders required the firm
to eliminate use of the controversial chemical entirely. By doing so, the firm was motivated to
produce a new line of environmentally friendly products and turned a threat into an opportunity.
References
Multiple Choice Difficulty: 3 Hard Learning Objective: 01-04 Conduct a
stakeholder impact analysis.
45.
Award: 1.00 point
46.
Award: 1.00 point
Which of following practices of a firm satisfies its ethical responsibilities?
using plastic as the packaging material, even though it is harmful to the environment, yet
legal
outsourcing production to a less developed country and paying wages that are below its
own country’s accepted minimum wages
using advertising and other forms of promotion to endorse luxurious lifestyles
selling vaccines at a subsidized price in a less developed country even though this results
in reduced shareholder returns
Selling vaccines at a subsidized price in a less developed country even though this results in
reduced shareholder returns satisfies a firm’s ethical responsibilities. A firm’s ethical responsibilities
go beyond its legal responsibilities. They embody the full scope of expectations, norms, and values