Business and Its Environment, 6E David P Baron Test Bank

Type:

Test Bank

Resource:

Business and Its Environment

Edition:

6th Edition

Author(s):

David P. Baron

Copyright ©2010 Pearson Education, Inc. publishing as Prentice Hall

Chapter One Market and Nonmarket Environments True/False Questions: All companies are successful both in their markets and in the social, political and legal environment in which they operate.

(ANSWER: F, p.1) 1)

2)

Nike, Microsoft, and Citigroup have encountered problems from both the competitive market as well as their nonmarket environment.

(ANSWER: F, p.1) 3)

The nonmarket environment is characterized by the social, political, and legal arrangements that structure interactions outside of, but in conjunction, with markets and private agreements.

(ANSWER: T, p.2) 4)

Effective management of both the market and the nonmarket environments is a necessary condition for the successful performance of the firm and all that is needed for victory over their competitors.

(ANSWER: F, p.2) Nonmarket issues high on firms’ agendas include environmental protection, health and safety, regulation and deregulation, intellectual property protection, international trade policy, antitrust as well as other issues such as human rights.

(ANSWER: T, p.2) 5)

6) Managers operate in both the market and nonmarket environments.

(ANSWER: T, p.3) 7)

Successful management requires frameworks for analyzing nonmarket issues, principles for reasoning about them and strategies to address them.

(ANSWER: T, p. 3) 8)

Managers rarely participate actively in the implementation of nonmarket strategies.

(ANSWER: F, p.3) 9)

According to Robert Galvin, former leader at Motorola, companies must help shape the “rules of the game” in approaching its nonmarket environment.

(ANSWER: T, p.4)

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10)

In the case of agricultural biotechnology, the Environmental Protection Agency (EPA), the Centers for Disease Control, the Office of Homeland Security, the U.S. Department of Agriculture, the Congress, and the Food and Drug Administration were the primary government institutions involved.

(ANSWER: F, p.5) 11) Innovation is one of the four I’s characteristic of the nonmarket environment.

(ANSWER: F, p.5) 12) One of the issues facing the automobile industry is state CO2 regulations.

(ANSWER: T, p. 6) The Korea-United States free trade agreement of 2007 increased Korea’s tariffs on automobile imports from the United States.

(ANSWER: F, p.7) 13)

14)

General Motors received a perfect score for 2007 from the Human Rights Campaign, a gay rights organization.

(ANSWER: T, p.7) 15)

The following are examples of NGOs who form an interest group for the automobile industry: Center for Auto Safety, Friends of the Earth, Sierra Club, AARP, Union of Concerned Scientists and the League of Women Voters.

(ANSWER: F, p.9) 16)

The institutions in whose arenas the nonmarket issues for the automobile industry are addressed include the Presidency, the Environmental Protection Agency, and the commission of the European Union.

(ANSWER: T, p.10) 17) Information is often at the heart of strategies for addressing nonmarket issues.

(ANSWER: T, p.11) 18) Nonmarket issues come from both external forces and the firm’s actions.

(ANSWER: T, p.11) 19)

Scientific discoveries and technological advances usually produce slight change in both market and nonmarket environments.

(ANSWER: F, p.11)

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20) The U. S. Supreme Court is not a part of nonmarket issues.

(ANSWER: F, p.12) 21)

There is only one real approach to effectively managing nonmarket issues: responding to nonmarket issues only when they are strong enough to force the firm to act.

(ANSWER: F, p.13) 22)

The Hallmark Graduation Cards situation was an example of seeing from the perspective of others the impact of a new line of cards—in this case, ones that would feature alcoholic beverages.

(ANSWER: T, p.14) 23) The first step that a nonmarket issue passes through is issue identification.

(ANSWER: T, p.14) 24) All nonmarket issues pass through all five phases.

(ANSWER: F, p.15) 25)

The progress of a nonmarket issue is shaped by the actions taken toward that particular issue.

(ANSWER: T, p.15) 26) Costs are a major concern for the pharmaceutical industry.

(ANSWER: T, p.17) 27)

The drug companies are only impacted by federal regulations and not by state or local governments’ actions.

(ANSWER: F, p.17) 28)

Patents provide the most important protection for intellectual property in the pharmaceutical industry.

(ANSWER: T, p.19) 29)

When a drug company holds a patent in the US, no other country can produce that drug unless it changes some aspect, such as how it is manufactured, as India did.

(ANSWER: T, p.19) Google is one company that stays out of harm’s way when dealing with interest groups over nonmarket issues by doing everything it does within guidelines that everyone accepts as the best.

(ANSWER: F, p.25-32) 30)

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Multiple Choice Questions: 31)

Of the following companies, which has had to deal with public concerns on a continuing basis? a) Google b) McDonald’s c) Nike d) Toyota (ANSWER: C, p.1) 32)

All but which one of the following makes public institutions different from markets. a) Due process b) Majority rule c) Bottom line concerns d) Collective action (ANSWER: C, p.2) 33)

Successful management needs which of the following? a) Frameworks for analyzing nonmarket issues b) Principles for reasoning about them c) Approaches for formulating strategies d) All are correct (ANSWER: D, p.3)

34)

Firms typically deal with nonmarket issues in ___________to their potential impacts on _________. a) Size; success b) Proportion; performance c) Finance; human resources d) The market; bottom line (ANSWER: B, p.3) 35)

Which of the following was not an environmental pressure brought about because of the Exxon Valdez oil spill? a) Liability for damages b) Increased human resource coordination c) More stringent regulations d) Direct public pressure (ANSWER: B, p.4)

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Which of following is not one of the four I’s of the nonmarket environment: a) Issues b) Interests c) Information d) Innovation (ANSWER: D, p.5) 36)

37)

In the agricultural biotechnology industry, which of the following institutions is not a major player? a) The Environmental Protection Agency b) The U. S. Department of Agriculture c) The Central Intelligence Agency d) The Congress (ANSWER: C, p.5) 38)

Which of the following are parts of the framework for understanding the life cycle of nonmarket issues for the automobile industry? a) Safety b) Fuel economy c) International trade d) All of the above (ANSWER: D, p.5-8) 39)

Bills were introduced in Congress to raise the Corporate Average Fuel Economy standard by a) 10%. b) 20%. c) 30%. d) 40%.

(ANSWER: D, p.5) 40)

The Clean Air Act authorized the EPA to grant _____ a waiver allowing it to set more stringent auto pollution standards than federal standards. a) California b) Texas c) New Jersey d) Michigan (ANSWER: A, p.6) 41)

Which of the following represent types of interests? a) Advocacy groups b) Special interest c) Activist groups d) All of the above (ANSWER: D, p.8)

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42)

Which of the following is not an organized interest group that directly impacts the automobile industry? a) United Auto Workers b) Trial lawyers c) American Association of Automobile Manufacturers d) Oil industry (ANSWER: C, p.9) 43)

Which of the following is not a primary public institution in the nonmarket environment? a) Legislatures b) The executive branch c) The World Court d) Administrative agencies (ANSWER: C, p.9) 44)

Which of the following is a powerful force for providing information to officeholders regarding the likely consequences of policy alternative for their constituents and the public more broadly? a) United Auto Workers b) Newspapers from advocates of some position c) Lobbying d) None is correct (ANSWER: C, p. 11) 45)

Which one of the following makes up the Administrative and regulatory agencies arena in which nonmarket issues for the automobile industry are addressed? a) Congress b) Environmental Protection Agency c) European Union d) All of the above (ANSWER: D, p.10) 46)

Which auto company was targeted by the environmental groups seeking to mobilize the public to support greater fuel economy? a) General Motors b) DaimlerChrysler c) Ford d) Toyota (ANSWER: C, p.11)

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47)

Which of the following is not a source of nonmarket issues? a) Moral concerns b) Institutional change c) Interest group activity d) Crash of the stock market (ANSWER: D, p.11) What is the following new theory called: ‘under which firms could be held liable if their stock prices fell significantly when the firms’ projections of future earnings had been favorable? a) Fraud on the market b) Fraud on the nonmarket d) The common factor d) Collective deception (ANSWER: A, p.12) 48)

49)

The example of the Hallmark Graduation Cards is a case of: a) Looking to the past for inspiration. b) Being sensitive to the concerns of MADD. c) Failing to take in the perspectives of interest groups. d) None of the above.

(ANSWER: C, p.14) 50)

There are a number of ways to anticipate change in the nonmarket environment.

Which of the following is not one of those ways? a) Limit the extent of the damage once the firm is challenged by an issue b) Be proactive c) Be anticipatory d) Look inward (ANSWER: D, p.13)

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Essay and Review Questions: 1)

Using the U.S. Automobile Industry, or another industry of your choice, write an essay explaining the interaction between the market and nonmarket environments.

Use at least five nonmarket issues ranging from safety regulations to global warming in your analysis.

2)

Explain in detail, giving specific examples, the role of management in dealing with the nonmarket environment. Speculate on how that role has changed in 2008.

3)

Using the five stages of the nonmarket life cycle, analyze the automobile industry over the last three decades with emphasize on General Motors. Using the changes that you discuss, project into the future—that is, 20 years from now—what the role of automobiles will be in our society and in the global society.

4)

Using the fours I’s—issues, institutions, interests and information—that characterize the nonmarket environment, develop an analysis of the fast food industry using McDonald’s as your primary focus.

5)

You have been appointed as the vice president in charge of managing nonmarket issues for your company. Write the job description indicating your responsibilities, duties, and skills needed. Outline a plan of action including the several stages of managing the nonmarket issues. Give specific examples including the emerging issue of environmentalism.

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Chapter Two: Integrated Strategy True/False Questions: A business strategy serves as a firm’s navigational guide in its market and nonmarket environments.

(ANSWER: T, p.33) 1)

2)

A market strategy is a concerned pattern of actions taken in the nonmarket environment to create value by improving overall performance.

(ANSWER: F, p.33) 3) Nonmarket strategies deal with improving the economic performance of the firm.

(ANSWER: F, p.33) 4)

Market and nonmarket strategies focus on the pursuit of prospects and advantages in the face of market and nonmarket competition with the goal of achieving greater performance.

(ANSWER: T, p.33) 5) Opportunities cannot be controlled by private politics (ANSWER: F, p.35) The importance of nonmarket strategies is related to the control of the firm’s opportunities.

(ANSWER: T, p. 35) 6)

The importance of a nonmarket strategy is related to the control of a firm’s strengths.

(ANSWER: F, p.33) 7)

8)

When looking to the future in planning nonmarket strategies, it is best to assume that neither market nor nonmarket strategies will be fixed.

(ANSWER: T, p.35) 9) The nonmarket environment should be thought of as competitive.

(ANSWER: T, p.36) 10) Timing can be everything in a nonmarket strategy.

(ANSWER: T, p.36)

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11)

An effective market strategy is essential for successful performance, but it is not always the only feature needed.

(ANSWER: T, p.37) 12)

One can either integrate market and nonmarket analysis or view them as separate forces.

(ANSWER: T, p.41) 13) Nonmarket positioning is not influenced by a firm’s market strategy.

(ANSWER: F, p.43) 14)

Nonmarket positioning should be a conscious choice rather than dictated by a firm’s market positioning or by those in its environment.

(ANSWER: T, p.43) 15) The pharmaceutical companies tend to seek visibility rather than covering their activities through an association or other means.

(ANSWER: F, p.45) 16)

One role of nonmarket strategy is to level the playing field for the implementation of a market strategy.

(ANSWER: T, p.45) 17)

Positioning in political space affects the opportunity to participate effectively in lawmaking and rule-making processes.

(ANSWER: T, p.46) 18) All positioning in political space may become untenable..

(ANSWER: F, p. 47) 19)

A company that is very adept at managing the legal environment effectively is Microsoft.

(ANSWER: F, p.47) 20)

Just as firms create value by deploying market capabilities, firms deploy nonmarket capabilities to create value.

(ANSWER: T, p.48)

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21) Expertise in dealing with the news media is a market asset.

(ANSWER: F, p. 48) 22)

The framework for analysis of nonmarket issues includes the screening of generated alternatives, the analysis of those alternatives, and the choice of a strategy.

(ANSWER: T, p.49) 23) Nonmarket capabilities can give a firm a nonmarket advantage.

(ANSWER: T, p.48) 24)

In the screening stage, alternatives that are contrary to the law, widely shared ethical principles, or a well-evaluated company policy are eliminated.

(ANSWER: T, p.49) 25) Moral motivations are analyzed in the screening phase of analysis.

(ANSWER: F, p.50) 26) In the nonmarket environment, many moral claims about rights are frequently made..

(ANSWER: T, p. 50) Citibank used a person’s undergraduate major as one measure of creditworthiness in deciding whether to issue a credit card.

(ANSWER: T, p. 51) 27)

28)

In the screening process, Citibank found the use of its screening device to be both discriminatory and illegal.

(ANSWER: F, p.51) Citibank’s screening approach meet with no opposition on campuses because it seem a fair and equitable system for evaluating students in terms of creditworthiness.

(ANSWER: F, p. 51) 29)

30)

The responsibility for addressing nonmarket issues should reside with operating managers and not with a separate staff unit.

(ANSWER: T, p. 53)

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Multiple Choice Questions: 31) What serves as a guide to a firm’s actions in its market and nonmarket environments? a) A business strategy b) The stock market c) Shareholders’ annual voting d) Employee demands (ANSWER: A, p.33) 32)

A market strategy consists of actions taken in the market environment to create which of the following for a firm by improving economic performance: a) Money. b) Customers. c) Value. d) Stakeholders.

(ANSWER: C, p.33) The importance of nonmarket strategies is related to the control of a firm’s a) Threats. b) Plans. c) People. d) Opportunities.

(ANSWER: D, p.33) 33)

34)

Opportunities can be controlled by ______ at one extreme and _____ at the other extreme. a) Competitors, customers b) Customers, suppliers c) Government, markets d) Markets, buyers (ANSWER: C, p.33) 35)

In the United States, the regulation of telecommunications is being replaced by what? a) International competition. b) Market competition. c) Globalization of the industry. d) Privatization.

(ANSWER: B, p. 35) 36)

Which of the following industries has the least government control? a) Local communications service b) Biotechnology c) Automobile d) Consumer electronics

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(ANSWER: D, p. 34) 37)

What can be crucial for the success of a nonmarket strategy? a) Timing b) Marketing c) Consumer involvement d) None of the above (ANSWER: A, p.36) 38)

In terms of strategy and nonmarket issue life cycle, Nike found itself reacting to what rather than shaping the development of the issue? a) The government only b) Their own culture c) Others’ actions d) None are correct (ANSWER: C, p. 36) 39)

Nonmarket issue life cycle and strategy ranges from what to what on the continuum of time? a) Issue identification; enforcement b) Interest group formation; enforcement c) Legislation; administration d) Issue identification; administration (ANSWER: A, p. 36) 40)

The most effective means of integrating nonmarket strategies and market strategies is to what? a) Consider both strategies b) Consider only nonmarket strategies c) Consider only market strategies d) Consider neither but come up with new strategies (ANSWER: A, p. 41) 41)

______ is a foundation for market or competitive strategy because it is a source of competitive advantage. a) Timing b) Lobbying c) Positioning d) Marketing (ANSWER: C, p.43)

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Nonmarket positioning is influenced by a firm’s a) Finances. b) Market strategy. c) Customers. d) Competition.

(ANSWER: B, p.43) 42)

43)

What was the primary concern for eBay in its positioning for a certain type of space? a) Market b) Consumer c) Legal d) Moral (ANSWER: C, p.44) 44)

The collection of diverse interests, viewpoints, and preferences of the individuals in society is known as what? a) Public individualiality b) Common sense c) Public sentiment d) Public wants and demands (ANSWER: C, p.46) 45)

BP managed its environment in many ways. One way that it solidified its positioning relative to the natural environment was to what? a) Move away from oil production and distribution of gasoline b) Changed its symbol and slogan c) Joined the Green Party d) Appoint only environmentalists to its Board of Directors (ANSWER: B, p. 46) 46)

Law-making and rule-making take place in what type of space? a) Social b) Legal c) Political d) Commercial (ANSWER: C, p.46) 47)

What space has Microsoft largely ignored, relying instead on its aggressive approach to markets? a) Legal b) Public sentiment c) Political d) Nonmarket (ANSWER: A, p.47)

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48)

Positioning can also have its perils. Which of the following companies has been lobbied heavily to increase its commitment to its own causes? a) Xerox b) GM c) Microsoft d) Starbucks (ANSWER: D, p.47) 49)

Firms deploy nonmarket capabilities to do what? a) Add value b) Beat the competition c) Create new markets d) Try new strategies (ANSWER: A, p.48) 50)

Which of the following are parts of the framework for the analysis of nonmarket issues? a) Screening b) Analysis c) Choice d) All of the above (ANSWER: D, p.49)

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Essay and Review Questions: 1)

Describe and explain the concept of strategy in the nonmarket environment. Use specific concepts and examples in your explanation focusing in on the specific cases of eBay and Microsoft.

2)

Using Exclusive Resorts as your example, write an analysis of nonmarket strategy and its integration with market strategy. Be sure to use specific details and issues in your analysis.

3)

“An effective market strategy is necessary for successful performance, but is not always sufficient. An effective nonmarket strategy is rarely sufficient, but for most firms it is necessary for successful performance.” Explain this statement using either the biotechnology or pharmaceutical industries.

4)

Describe, explore, analyze and critique the market and nonmarket strategies used

by Nike and BP.

5)

Using the three stage process of evaluating alternatives, analyze and critique the case of Citibank and credit cards for undergraduates. What would you have advised if you had been an analyst for the bank assigned to this project? Would it matter to you if you were just out of undergraduate school or were a wellestablished middle manager? Why or why not? How might your response impact your evaluation?

6)

“Reputations are established, and destroyed, by actions.” What does this statement mean? How do market and nonmarket strategies guide actions in a firm? In the current climate of distrust of many American businesses in the wake of Enron, WorldCom and others, how is this sentiment even more telling? Use specific firms to illustrate your points.

7)

Identify and analyze the issues, political, legal, and market explored in the case of Molecular Insight Pharmaceuticals. How well did MIP integrate the market and nonmarket components of its business strategy?

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Chapter Three: The News Media and Nonmarket Issues True/False Questions: 1) The news media plays an important role in the identification of nonmarket issues.

(ANSWER: T, p.66) 2)

Although the news media plays an important role in a democracy, its exposure of nonmarket business issues is minimal.

(ANSWER: F, p.66) 3)

The media has a responsibility to report the world as it sees it whether or not it is unbiased and accurate.

(ANSWER: F, p. 66) Edmund Burke called reporters the “Fourth Estate” (the fourth branch of government) and the editors and journalists the “officeholders” of the institution.”

(ANSWER: T, p.66) 4)

5) Media coverage can raise concerns about the policies and practices of firms (ANSWER: T, p.67) 6) Media coverage can increase the costs of collective nonmarket action.

(ANSWER: F, p.67) 7)

The theory of news media coverage and treatment uses the organization as the unit of analysis.

(ANSWER: F, p.69) 8)

One form treatment can take is a straightforward presentation of facts and description of events.

(ANSWER: T, p.69) 9)

Assessing intrinsic audience interest in issues such as international trade policy and product safety generally lies in the domain of measurement rather than judgment.

(ANSWER: F, p.69) 10)

The societal significance perspective views coverage and treatment as a reflection of the news media’s perception of the importance of the issue to society.

(ANSWER: T, p.70)

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11)

Nike painfully learned the cost of its handling of overseas workers when couched as a social significance perspective.

(ANSWER: T, p.70) 12)

In combining the two theories of intrinsic audience interest and social significance, treatment depends more on audience interest while coverage depends more on social significance.

(ANSWER: F, p.70) 13)

The theory of media coverage and treatment gives extensive coverage to business matters and moderate coverage to environmental issues and individual rights.

(ANSWER: F, p.71) 14)

An issue is also more newsworthy if it has a degree of urgency or immediacy such as linking the burning of the Amazon rainforests with global climate changes.

(ANSWER: T, p.72) 15)

Celebrities are often used to bring attention to issues such as Meryl Streep and the Alar issue.

(ANSWER: T, p.72) 16) Cost is no object for the media when obtaining information and producing a story.

(ANSWER: F, p.73) 17)

Most news organizations are owned by for-profit companies where profit is a primary objective.

(ANSWER: T, p.74) 18) Media decisions are made by the people who choose journalism as a career.

(ANSWER: T, p.74) 19)

Some feel that because large organizations now own more organs of the media that journalistic principles can be compromised by or dissipated by business monetary needs.

(ANSWER: T, p.74) 20)

The media covers every issue under the same criteria, which are treated under controls and editorial standards.

(ANSWER: F, p.75) 21)

There is no consensus on preferring less pollution to more pollution and there is no agreement on how to deal with the issue.

(ANSWER: F, p.75)

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22) The public widely views the media as biased.

(ANSWER: T, p.76) 23)

When the writer of a news story and the protagonists in the story disagree on coverage, it can create a sense of bias from the protagonists’ point of view.

(ANSWER: T, p.77) One of the six elements of an effective media strategy is “the medium is the message.”

(ANSWER: T, p.78) 24)

25)

Media strategies guide interactions with the media and communications with stakeholders and the public.

(ANSWER: T, p.78).

26)

On many issues, especially the nonmarket ones, business invites coverage so that the public knows what they are doing.

(ANSWER: F, p.79) 27)

The publisher of a major newspaper stated three cardinal rules in terms of good advice for media interviews: “Tell the truth. Tell the truth. Always remember the first two.”

(ANSWER: T, p.80) Under the Hewlett-Packard credo for dealing with the media is, “assume everything you say is ‘on the record.’”

(ANSWER: T. p. 80) 28)

29)

The subjects of news coverage at times perceive stories to be incomplete, inaccurate, or unfair.

(ANSWER: T, p.81) 30)

The First Amendment of the Constitution provides strong protection to the news media.

(ANSWER: T, p.84)

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Multiple Choice Questions: 31)

Which of the following roles does the news media play in nonmarket issues? a) Identification of nonmarket issues b) Nonmarket actions associated with the nonmarket issues c) The progress of nonmarket issues through life cycles d) All are media roles (ANSWER: D, p.66) 32)

Media coverage can do all but which of the following? a) Alert the public to nonmarket issues b) Raise concerns about the policies and practices of firms c) Increase the costs of nonmarket actions by interests d) Provide information (ANSWER: C, p.67) 33)

The National Resources Defense Council campaign on Alar used which of the following media strategies? a) The use of political entrepreneurship b) Repetitious use of its message about Alar c) The hiring of a communications firm to work with the media d) All of the above were used (ANSWER: D, pp.67-68) 34)

Because of the importance of the news media, firms and their managers must _______which issues will attract media coverage and how the media will treat them. a) Create b) Control c) Anticipate d) Announce (ANSWER: C, p.68) 35)

Treatment of information takes several forms. Which of the following is not included? a) A straightforward presentation of facts and description of events b) Advocacy of a course of action c) An interpretation of the facts and events d) A biased assessment of the information (ANSWER: D, p.69)

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36)

Advocacy journalism is usually restricted to which page of the newspaper? a) Editorial b) Front c) Business d) Sunday insert (ANSWER: A, p.69) 37)

The Intrinsic Audience Interest Theory of news coverage is based on which of the following premise(s)? a) The news media organizations are owned by for non-profit firms b) That coverage and treatment decisions are governed by revenue considerations c) That coverage increases with audience interest d) That the explanatory power of the theory comes primarily from the supply side (ANSWER: C, p.69) 38)

According to the intrinsic audience interest theory, the more proximate the consequences, the ____ the audience interest. a) Greater b) Lesser c) More constant d) More unconnected (ANSWER: A, p.69) 39)

The societal significance perspective of news media coverage is based on which of the following premise(s)? a) News media responds to its own perception of the significance of an issue to the society b) Coverage is a function of the news media perception as judged by the news media c) Income distribution and social tensions are high on the social significance dimension d) All the above are important premises (ANSWER: D, p.70) 40)

The special role that the media has in a democracy is what? a) The duty of not taking sides b) The duty of serving the people’s right to know c) The duty of serve the government’s perceptive d) The duty to print what they want (ANSWER: B, p.70)

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41)

The societal significance perspective of news media coverage assumes the following roles, except: a) Maintaining democracy b) The First Amendment protects the news media in assuming its role in the society c) Informing citizens of unjust behavior d) Protecting the government, the president and the Congress from themselves (ANSWER: D, p.70) 42)

Using the Audience Interest/Societal Significance continuum, which of the following rates highest on both? a) Poverty b) Environmental protection c) International trade d) The economy (ANSWER: B, p.71) 43)

Which of the following makes an issue more newsworthy? a) The degree of urgency b) A celebrity being involved with an issue c) If the issue contains controversy or conflict d) All are correct answers (ANSWER: D, p.72) According to well-known journalist Edwin Newman, “What is news on television often depends on_____________?” a) What the editor wants covered b) Where your reporters and cameramen are c) What the month is d) What you covered last (ANSWER: B, p.73)

44)

45)

In the United States new media organizations are: a) Primarily funded by the government. b) For-profit companies. c) Nonprofit entities. d) Owned by foreign investors.

(ANSWER: B, p.74) 46)

Journalist are generally perceived on which end of the political spectrum? a) Liberal b) Middle of the road moderates c) Socialists d) Conservatives (ANSWER: A, p.74)

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47)

Under what circumstances might the media adopt an advocacy approach? a) When executives, producers, and correspondents all share the same view b) When the public demands such as stance c) When they cannot think of another way to get through to the public d) When the First Amendment is enforced (ANSWER: A, p. 75) 48)

Any citizen has recourse to the law in a case of media coverage by injecting the law of defamation. Which of the following statements is not a valid interpretation of the law? a) It could be used in case of a false statement made to a third party that damage a person's reputation b) Human beings and legal entities as corporations are considered persons c) Slander and libel are forms of defamation d) Only statements made in public are admitted as basis for legal action (ANSWER D, p.83) 49)

The rationale for the standard enunciated in the New York v. Sullivan is based on which of the following bases? a) No exception to the right of all individuals to retain their rights to privacy b) When individuals participate in "public" activities, they lose a degree of their privateness c) The publicness of a plaintiff may not pertain to private citizens who appear in public d) None of the above rationale is correct (ANSWER: B, p.83) Which early founder of democracy said the following: “Were it left to me to decide whether we should have a government without newspapers or newspapers without a government, I should not hesitate to prefer the latter,”? a) George Washington b) John Adams c) Thomas Jefferson d) Benjamin Franklin (ANSWER: C, p. 85) 50)

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Essay and Review Questions: 1)

Write an essay outlining the role of the news media in market and nonmarket issues. Give examples to explain each role focusing on the Alar episode.

2)

Discuss and explain the theory of the news media using the variables of intrinsic audience interest and societal significance. Use specific examples such as the recent fraud in Corporate America and the coverage by the media.

3)

As a private citizen, do you have any recourse in disputes with the media?

Explain such recourse, its limitations and problems. Use history, legal arguments and facts in your analysis.

4)

Give examples of the relationship between news media and the business sector.

Assess the effects of both on the society at large and its social fabric. Use the case of Procter and Gamble and General Motors in your analysis.

5)

What role does the news media play in our political system and what are its constitutional foundations? Give examples and include court cases in your analysis.

6)

Discuss and critique the news media as an industry. What are the various roles played by the participants in the news industry? How does management differ from journalists in their perspectives on what constitutes the who, what, where, and why of a story? Who and what controls the media in the 21st century and why?

7)

Identify and discuss the six elements of an effective media strategy. Use the case of Illinois Power Company (A) for your analysis.

8)

How would you assess Hewlett-Packard Corporation’s 12 guides for conducting a media interview? List at least 6 of the guides and discuss how they might be applied to a specific instance such as the Alar case.

9)

What were the key media issues in the case of Procter and Gamble? What did you think of each of the parties and how they handled themselves? Using the chapter as a guide, what advice would you have given to Procter and Gamble? Be specific in your responses.

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10)

You are the editor of a major newspaper. Your reporters have just uncovered damaging information on the handling of nuclear waste by the firm hired to move the waste to Yucca Mountain in Nevada. The President seems to be involved with the firm in some illegal way. However, he is now in the Middle East nearing a settlement on the Israeli-Palestine conflict. You are aware that publishing anything damaging at this time about the President might set back if not totally derail the peace conference in the Middle East. But what about your duty to the people’s right to know? What would you do and why?

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Chapter Four: Private Politics True/False Questions: 1) Public nonmarket action can arise from self-interest as well as broader concerns.

(ANSWER: F, p.90) 2) Many nonmarket issues are addressed largely in the shadow of public institution.

(ANSWER: T, p.90) 3) Private nonmarket actions include direct pressure and boycotts.

(ANSWER: T, p.90) 4)

The groups involved in private nonmarket actions barely affect the nonmarket environment.

(ANSWER: F, p.90) 5)

These private nonmarket interest groups affect the organization of interests by forming watchdog and advocacy groups and by mobilizing people to work for causes.

(ANSWER: T, p.90) 6)

One tool that is used by these private nonmarket groups is the boycott of a firm and its products.

(ANSWER: T, p.91) 7) Because of its family-values orientation, Disney has never been boycotted.

(ANSWER: F, p.91) 8)

Boycotts can be used to target causes such as the opportunity presented by the 2000 Olympics in Australia that was used by Greenpeace to launch a boycott against Coca-Cola and its use of hydorfluorocarbons as a refrigerant in its dispensing machines.

(ANSWER: T, p. 91)

9) Activists and interest groups use only private politics strategies.

(ANSWER: F, p.92)

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10)

The Health Care Reform Project, an interest group formed by a coalition of organizations led by labor unions, released a report attacking both Pizza Hut and McDonald’s for not providing adequate nutrition content in their consumer products.

(ANSWER: F, p.93) 11)

The choice between public and private politics is strategic, and activists are increasingly choosing private politics.

(ANSWER: T, p.95) 12)

Activists groups have access to the media, public institutions, the general public, but they do not have any standing before the courts to sue a firm.

(ANSWER: F, p.97) 13)

An infrequently used strategy of activists is to conduct a policy or scientific investigation to call attention to an issue such as in the Alar case.

(ANSWER: F, p.98) 14) An important component of a private politics campaign is selection of a target.

(ANSWER: T, p.98) 15) Activists target individuals in both their personal and professional roles.

(ANSWER: T, p.100) 16) Potential targets should not anticipate the actions of activist groups.

(ANSWER: F, p.100) 17)

Ralph Nader groups' main concern is consumer safety and health. The conduct of government is not one of their interests.

(ANSWER: F, p.102) 18)

David Bower, former executive director of the Sierra Club, founded the Earth Island Institute that has spawned other environmental organizations such as the International Rivers Network and the Rainforest Action Network.

(ANSWER: T, p. 102) 19)

Greenpeace International is an environmental organization with about 250 million members worldwide, offices in 75 countries and a budget of $230 million.

(ANSWER: F, p.102) 20) Greenpeace has two primary campaigns: nuclear power and ocean dumping.

(ANSWER: F, p. 102)

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21)

One of the keys to managing an activist environment is to understand the broader public support of their agenda.

(ANSWER: T, p. 103) 22)

When confronted with private nonmarket actions, a natural reaction is to be on the offensive.

(ANSWER: F, p.104) 23)

It is very rare for a firm to choose as a strategy to meet with activists groups to show their concern about an issue.

(ANSWER: F, p.104) 24)

Paper agreements are usually sufficient where the stakes are high and monitoring of the firm’s actions is difficult.

(ANSWER: F, p.105)

25) Negotiations with activists can be voluntary.

(ANSWER: T, p.105) 26) To monitor its agreement with Home Depot, RAN used local volunteers.

(ANSWER: T, p. 104) 27)

The threat of an indirect action against OnBank created an atmosphere for negotiations.

(ANSWER: F, p. 105) 28) The demands made in a campaign often are reasonable.

(ANSWER: F, p. 106) 29)

Brent Spar, director of Greenpeace in Europe, was the leader of the Greenpeace activities in the North Sea. (ANSWER: F, p. 109) 30) Nike’s problems from activists groups came from its labor policies in Mexico.

(ANSWER: F, p. 112)

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Multiple Choice Questions: 31) In general, which of the following statements best describes private collective action? a) It is a nonmarket action, which takes place in the shadow of public institutions b) It includes direct and indirect pressures, boycotts and attempts to affect public opinion c) It is intended to force firms to take action d) All the above are reasonable descriptions (ANSWER: D, p.90) 32)

Activist groups play the following roles, except: a) They alert management to issues that the management is unaware of b) They can affect the organization of interests by forming watchdog and advocacy groups c) They are often appointed to a firm’s board of directors d) They provide information to the public and public office holders (ANSWER: C, p.91) 33)

Boycotts are sometimes more ________than______ , but many attract considerable media and public attention. a) Symbolic; real b) Political; socially concerned c) Real; political d) Consumer-driven; symbolic (ANSWER: A, p.91) 34)

Firms argue what about the impact of boycotts? a) They have tremendous impact b) They do not have any significant effect on their performance c) They have a fair amount of affect d) They have no impact whatsoever (ANSWER: B, p.92) 35)

Which companies are the most susceptible to boycotts? a) Consumer products b) Products with low switching costs c) A brand name that can be damaged d) All are correct (ANSWER: D, p.94)

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36)

The Health Care Reform Project released a report attacking Pizza Hut and McDonald’s. What was the attack about? a) Both corporations were serving what the Project considered to be food too high in fat content b) Both corporations had bad safety and health records c) Both corporations provided better health care coverage for their German and Japanese employees than for their U.S. employees d) Both corporations were out of compliance with several U. S. Department of Health Services regulations (ANSWER: C, p.93) 37)

What are the two basic strategies of activists? a) Putting direct pressure on firms and working through public institutions b) Putting indirect pressure on firms and direct pressure on government c) Putting little pressure on firms and lots of indirect pressure on government d) Putting pressure on firm boards of directors and working with public entities (ANSWER: A, p.96) 38)

Activist groups use their standing with all of the following except? a) Courts b) Legislatures c) Administrative organizations d) Boards of Directors (ANSWER: D, p. 97) 39)

What legal tool may serve as a bargaining lever and may generate funds to support a group’s activities such as in the case of the Natural Resources Defense Council? a) Boycotts b) Lawsuits c) Lobbying d) Legislation (ANSWER: B, p.98) 40)

An important component of a private politics campaign is selection of a a) Court b) Target c) Boycott d) Strategy (ANSWER: B, p. 98)

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In terms of an activists’ generic strategy, what is a low-cost method of getting information out to the public that they want to be distributed? a) Use the news media b) Use television spots c) Use nationwide lobbying of legislatures d) Go with a lawsuit (ANSWER: A, p.101) 41)

Which of the following is not one of Greenpeace’s campaigns? a) Ancient rain forests b) Climate c) Toxics d) River dumping in the Amazon (ANSWER: D, p.102) 42)

43)

In terms of addressing the activist environment, which of the follow is the guideline for engaging in a fight? a) Fight all out b) Win at any cost c) Fight when you are right and can win—but be careful d) Fighting never gains an advantage (ANSWER: C, p.103) 44)

When confronted with a private nonmarket action, a natural reaction is to be _______, but a better response is to _______the claims and demands the activists make. a) Defensive; deny b) Defensive; evaluate c) Welcoming; accept d) Offensive; reject (ANSWER: B, p.104) What was Environmental Defense’s (ED) concern about McDonald’s? a) Sourcing supplies from old growth forests b) Practice of harvesting old timber c) Practice of solid waste disposal d) All of the above (ANSWER: C, p.104) 45)

46)

All of the following were the threats against OnBank except? a) Direct action against the bank b) Required regulatory approval c) The reporting of lending data by census track d) Bringing in a union (ANSWER: D, p.106)

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47)

Why was Royal Dutch/Shell such a formidable company for Greenpeace to take on? a) It is well-regarded in the British Isles and it has a history of fighting all comers b) It is the largest corporation in Europe and the third largest in the world c) It is the third largest corporation in Europe and the sixth in world d) It is regarded as the best oil company in the world and consumers back it in all issues (ANSWER: B, p.109)

What was one of Greenpeace’s principal strategies used against Royal Dutch/Shell? a) Attracting public attention through high profile, confrontational actions that were covered by Greenpeace photographers and film crews b) A lawsuit filed in Wales c) Using passive techniques to encourage a boycott of the company d) A sit-down strike of all of its gas stations (ANSWER: A, p.110) 48)

Activist groups were criticizing what about Nike’s factories overseas? a) Working conditions and wages b) Working conditions and the lack of unions c) Political favors and wages d) The company’s shoe design and costs (ANSWER: A, pp. 112-113) 49)

50)

Among the thousands of groups working for environmental and human rights, ___ was a radical organization. a) Greenpeace b) Globe Trade Watch c) Center for Study of Responsive Laws d) RAN (ANSWER: D, p. 115)

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Essay and Review Questions: 1)

Write an essay on the positive and less than positive roles played by activist groups. Give specific examples of each of these roles. Use Greenpeace International as your focus of analysis.

2)

Activist groups may have damaging effects on an industry and on consumers of services. Explain and give relevant examples of their motivation, strategies and membership. Be specific in your analysis.

3)

Andrea and Rob are graduating from college and are debating joining an activist group. Andrea is for joining a Nader organization, and Rob is for individual activism. Outline Andrea's argument of the benefits of such groups and their effectiveness as well as Rob’s desire for individual action.

4)

You are the president of Andrea's state university. An activist group headed by many influential students is advocating boycotting classes to force the university to cut tuition. Outline a plan of action to deal with this activist group effectively.

Define your strategy and tactics and assess the potential outcome of your actions.

5)

Discuss, analyze and critique the issues presented in the cases of Greenpeace, Shell, and Brent Spar. Use specific facts in your analysis including both sides of the issue.

6)

What is RAN’s objective? What is its position among NGOs?

7)

What were the issues Nike faced? How did the CEO react and why? What are the strategies involved? What is your stand on the Nike situation and explain why you have taken that stance?

8)

In 2001 the nation was made aware of the levels of corporate malfeasance, corruption and illegal activities, the ‘cooking of the books’ in terms of accounting practices, and a host of other problems from excessive CEO pay to firm shareholders losing most if not all of their retirement benefits. Using the chapter information as a framework, develop a plan for bringing about corporate responsibility and accountability to all shareholders. Be specific in your arguments. At the conclusion of your points, develop a short, impassioned speech you would give to people to back your ideas.

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Chapter Five: Crisis Management True/False Questions: 1) Crises happen even to firms that take measures to avoid them.

(ANSWER: T, p.120) 2) All crises involving businesses have a degree of human involvement.

(ANSWER: F, p. 120) 3)

Only firms that have experienced a crisis take measures to reduce the likelihood of a crisis, formulate management preparedness plans, and develop crisis response plans.

(ANSWER: F, p.120) 4)

A crisis may be defined as a situation in which harm to people or property either has occurred or is imminent.

(ANSWER: T, p.120) 5) Crises do not fester for extended periods.

(ANSWER: F, p.120) 6)

In 1992, seven people died from swallowing Tylenol capsules injected with cyanide.

(ANSWER: F, p.121) 7) The 1989 grounding of the Exxon Valdez and the accompanying spill of 11 million gallons of crude oil created an environmental crisis, and Exxon’s response escalated the crisis.

(ANSWER: T, p.121) 8)

Crises often have a pattern that can be conceptualized using the systems framework.

(ANSWER: F, p.121) 9) The stages of crisis management are identification, escalation, intervention, and resolution.

(ANSWER: T, p.121) 10) The first stage in the life cycle of a crisis is escalation..

(ANSWER: F, p.122)

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11)

The subprime mortgage crisis of 2008 was the result of risky home mortgages issued over a period of several years that resulted in widespread defaults when the economy slowed..

(ANSWER: T, p.122) 12)

Some crises have unusual causes and come as a considerable surprise, such as the case of Société Génerale.

(ANSWER: F, p.122) 13) The second stage in the life cycle of a crisis is escalation.

(ANSWER: T, p.122) 14)

An important factor influencing the development of the public phase of a crisis is media coverage.

(ANSWER: T, p.122) 15)

Particularly in a proactive situation, communication with shareholders, the public, and government through the media can be crucial to dealing with the crisis.

(ANSWER: F, p.122) 16)

Greater media coverage can be expected when the issue at the core of the crisis is viewed as important to society and when the potential audience is large..

(ANSWER: T, p. 122) 17)

The intervention stage of a crisis involves actions by the company or government to deal with the crisis.

(ANSWER: T, p.123) 18) Intervention involves turning the crisis into a manageable nonmarket issue.

(ANSWER: F, p.123) 19)

Resolution may be accomplished by eliminating any further potential for harm, assuring the public and the media that the crisis has passed, or compensating those harmed.

(ANSWER: T, p.123) 20) Resolution can also involve moving the crisis into the institutions of law.

(ANSWER: F, p.123) 21) Crisis management has six components..

(ANSWER: F, p.125) 22) The most important component of a crisis management program is avoidance.

(ANSWER: T, p.126)

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23)

The second most important component of a crisis management program is root cause analysis.

(ANSWER: F. p.126) 24) One aspect of an avoidance strategy is auditing.

(ANSWER: T, p.126) 25) A type of audit that is part of an avoidance strategy focuses on repatriation risk.

(ANSWER: F, p.126) 26) Many firms appear to underestimate the strength of their reputation and the protection it provides.

(ANSWER: F, p. 126) 27)

Firms susceptible to a crisis need a crisis management team that can be mobilized quickly and can substantively address the root cause of a crisis.

(ANSWER: T, p.127) 28) An important part of preparedness is organizational learning.

(ANSWER: T, p.127) 29) Root cause analysis has the objective of identifying the effects of the crisis.

(ANSWER: F, p.129) 30)

The appropriate response to a crisis depends on the root cause and the specifics of the situation.

(ANSWER: T, p.129)

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Multiple Choice Questions: 31)

_____ happen even to firms that take measures to avoid them. a) Strategies b) Successes c) Crises d) Dilemmas (ANSWER: C, p.120) 32) Many firms, even those that have not experienced a crisis, have taken measures to reduce the likelihood of a crisis, formulated management preparedness plans, and developed a) root cause analysis b) internal audit standards c) crisis response plans d) management succession plans (ANSWER: C, p.120) 33)

Which one of the following is NOT a component of crisis management? a) Root cause analysis b) Preparedness c) Avoidance d) Succession (ANSWER: D, p.120) 34)

What term is defined as follows: a situation in which harm to people or property either has occurred or is imminent. a) Crisis b) Insolvency c) Bankruptcy d) Liquidation (ANSWER: A, p.120) 35)

Which of the following is true of a crisis? a) It is typically unexpected b) It can escalate quickly c) It can damage a firm’s operating performance d) All are true of a crisis (ANSWER: D, p.120)

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36)

In 1982, _____ people died from swallowing Tylenol capsules injected with cyanide. a) eighteen b) two c) sixteen d) seven (ANSWER: D, pp. 121) 37)

Which of the following is NOT a stage in crisis management? a) Identification b) Reconciliation c) Escalation d) Intervention (ANSWER: B, p. 121) 38)

The first stage in the life cycle of a crisis is a) reconciliation b) escalation c) identification d) intervention (ANSWER: C, p.121) 39)

In what stage do some crises explode as a result of media coverage, government actions, or company actions? a) Reconciliation b) Identification c) Intervention d) Escalation (ANSWER: D, p. 122) 40)

An important factor influencing the development of the public phase of a crisis is a) media coverage b) company’s admittance of fault c) company’s denial of fault d) the economy of the nation (ANSWER: A, p.122)

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41) ______ media coverage can be expected when the issue at the core of the crisis is viewed as important to society and when the potential audience is large. a) Lesser b) Greater c) Biased d) Unbiased (ANSWER: B, p. 122) 42)

__________ involves actions by the company or government to deal with the crisis. a) Reconciliation b) Settlement c) Intervention d) Postponement (ANSWER: C, pp.123) 43)

Resolution involves turning the crisis into a manageable ________ issue. a) operating b) tactical c) strategic d) nonmarket (ANSWER: D, p.123) 44)

Which of the following is NOT a component of crisis management? a) Response b) Avoidance c) Root cause analysis d) All are components (ANSWER: D, p.125) 45)

Which is the most important component of a crisis management program? a) Preparedness b) Resolution c) Avoidance d) Reconciliation (ANSWER: C, p.126) 46)

The second most important component of a crisis management program is a) Auditing b) Preparedness c) Root cause analysis d) Budgeting (ANSWER: B, p.126) 47)

One aspect of an avoidance strategy is

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a) budgeting b) auditing c) strategizing d) confronting (ANSWER: B, p.126) 48)

Which step of a crisis management program deals with identifying the cause of the crisis? a) Root cause analysis b) Pareto analysis c) Avoidance analysis d) Confrontation analysis (ANSWER: A, p.129) 49)

What are the two principal components of crisis response? a) Auditing and analysis b) Communication and rectification c) Agreement and settlement d) Negotiation and settlement (ANSWER: B, p. 129) 50)

What kind of a response did Abbott Laboratories choose in the case of its AIDS drug in Thailand? a) Conciliatory b) Agreeable c) Hardball d) Denial (ANSWER: C, p.133)

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Essay and Review Questions: 1)

Take a company (such as Lehmann Brothers) that has confronted a major financial crisis in recent times. Write an essay identifying how the company dealt with that crisis.

2)

What are the similarities and differences in the way Johnson & Johnson dealt with the Tylenol crisis and Exxon with the Exxon Valdez crisis?

3)

Can companies prepare for a major crisis or is the case of Wal-Mart and Hurricane Katrina an exception?

4)

What are the key issues in the case of Buffalo Savings Bank (A)?

5)

Evaluate how Merck dealt with the Vioxx issue in the case Merck and Vioxx.

6)

You are a newly appointed vice president in a large chemical firm. One of your first tasks is to develop a crisis management program for the company. Outline the steps in such a program.

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Chapter Six: Nonmarket Analysis for Business True/False Questions: 1)

Nonmarket actions taken by pluralistic interests in the context of government institutions determine the outcomes of nonmarket issues involving private politics.

(ANSWER: T, p.153) 2) Nonmarket action is transformed into outcomes through government institutions.

(ANSWER: T, p.153) 3) Interests may be assessed on distributive and procedural dimensions.

(ANSWER: F, p.154) 4)

The distributive consequences of interests are measured by the benefits and costs associated with their possible outcomes.

(ANSWER: T, p.154) 5)

The distributive consequences of interests are measured in terms of the surplus and rents associated with their possible outcomes as well as other criteria such as profit and loss.

(ANSWER: T, p.154) 6)

It is easier to assess the moral dimension of interests that motivate actions than to assess their distributive consequences.

(ANSWER: F, p.154) 7)

Incentives, whether distributive or moral in their origin, can cause an individual, firm, union, nonprofit organization, or activist group to become inactive on an issue.

(ANSWER: F, p.154) 8)

The Small Business Administration, the Department of Agriculture and the Export-Import Bank are examples of the success of interest groups to have the executive branch of the government establish an institution to serve their own needs.

(ANSWER: T, p.154) 9)

Constitutions and laws grant rights to individuals and organizations to pursue their interests and to protect those interests from the actions of others.

(ANSWER: T, p.155)

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10)

U.S. trade law gives firms, labor unions, and communities rights to seek relief from imports.

(ANSWER: T, p.155) 11)

Aggregate benefits are always the best indicators of the incentive to take nonmarket action.

(ANSWER: F, p.155) 12)

Effectiveness of group action is like an increase in the cost of a given level of political action on the input of the action.

(ANSWER: F, p.157) 13)

If the number of affected individuals or groups is small, the costs of organizing are likely to be low.

(ANSWER: T, p.157) 14)

In the Wilson-Lowi Matrix, if the costs from enacting the political alternative and the benefits from enacting the nonmarket alternative are concentrated, you have interest group politics.

(ANSWER: T, p.159) 15)

When the benefits from a nonmarket alternative are narrowly distributed, the per capita benefits and thus incentives to take political action are likely to be low.

(ANSWER: F, p.160) 16)

When the benefits are widely distributed and the harm is concentrated, those bearing the harm have a weaker incentive to take nonmarket action than do the beneficiaries.

(ANSWER: F, p.160) 17)

One strategy of interests is to attempt to change the nature of the politics of an issue.

(ANSWER: T, p.160) 18)

Assessing how individuals with various moral standards view a nonmarket alternative can be difficult.

(ANSWER: T, p.162) 19)

In the case of Boeing in a pickle, the pickle refers to it having international investment problems.

(ANSWER: F, p. 163) 20)

Congress tried to stimulate the economy with the passage of the Economic Recovery Tax Act or ERTA in 1981.

(ANSWER: T, pp. 163)

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21)

The ratification of the North American Free Trade Agreement, or NAFTA, is an example of a win for labor and consumers and a loss for business.

(ANSWER: F, p.159) 22)

The nature of political competition is a function of the relevant concentration or dispersion of the benefits of supporting or opposing an alternative, such as a bill, before Congress.

(ANSWER: T, p.159) 23)

When the aim is to have an alternative policy adopted that goes against the status quo, a social entrepreneur is needed to mobilize disperse interests.

(ANSWER: F, p. 160) 24)

According to Wilson's analysis, the legislation having to do with international trade and the legislation that pits labor against business are examples of interest group politics.

(ANSWER: T, p.159) 25)

When the benefits from supporting a political alternative are concentrated and the benefits from opposing it are widely distributed, the supporters have weaker incentives to take political action than do the opponents.

(ANSWER: F, p.160) 26)

When the benefits from opposing a political alternative are widely distributed, and the benefits from supporting it are concentrated, the supporters have stronger incentives to take political actions than do the opponents.

(ANSWER: T, p.160) 27)

Airbus, the European consortium of four companies, was in direct competition with Boeing for business.

(ANSWER: T, p. 164) 28)

One means by Boeing was subsidized was through government export financing at below-market interest rates..

(ANSWER: F, p. 164) 29)

Boeing felt that it was locked in a fierce competitive struggle with the highly subsidized Airbus.

(ANSWER: T p.164) 30)

The demand for political action depends on the value of the associated tax benefits as in the Boeing case.

(ANSWER: T, p.165)

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Multiple Choice Questions: 31)

Which of the following most clearly describes what results from a pluralism of interests and the political actions taken to further those interests? a) Public policies b) Supreme Court decisions c) Executive vetoes d) Elections (ANSWER: A, p.153) 32)

Nonmarket action is transformed into outcomes by public institutions. These institutions include all of the following, except which? a) Administrative agencies b) Regulatory commissions c) International accords d) The Boy Scouts of America (ANSWER: D, p.153) 33)

Public policy reflects which of the following? a) Nonmarket interests b) Institutional features c) Information d) All of the above are reflected (ANSWER: D, p.153) 34)

On what two dimensions can interests be characterized? a) Moral and distributive b) Legal and ethical c) Self-interest and legal d) Redistributive and deconstructionist (ANSWER: A, p.154) 35)

Most issues have distributive consequences as measured by all of the following except which? a) Benefits and costs b) Surpluses and rents c) Leases and rents d) Profits and losses (ANSWER: C, p. 154)

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36)

Which of the following characteristics describes interest groups? a) They may organize around a single issue b) They may be organized by a political entrepreneur c) They may be successful in having the executive branch of the government establish an institution that can serve their interests d) All the above are valid characteristics (ANSWER: D, p.154) 37)

Aligned interests such as in the environmental area allow for specialization. For example, the Wilderness Society emphasizes: a) A broad environmental and political agenda. b) Open lands. c) Toxic waste issues. d) Litigation.

(ANSWER: B, p.154) What is Greenpeace’s approach to drawing attention to environmental issues? a) Peaceful assembly b) Confrontational c) Letter campaigns d) Exclusive lobbying (ANSWER: B, p. 154) 38)

39)

Which of the following is not an institution established by the executive branch of the federal government to serve an interest group? a) The First Reformed Church of America b) The Export-Import Bank c) The Small Business Administration d) The Department of Agriculture (ANSWER: A, p.154)

40)

The demand for nonmarket action originates from the anticipated effects of that action on the consequences of a political alternative. For firms, which of the following are relevant? a) Prices, qualities, and availability of goods and services b) Jobs and wages c) Sales, profits, and market value d) None of the above is relevant (ANSWER: C, p.155)

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41)

On some issues, the benefits from nonmarket action can be obtained through other means, referred to as: a) Complements. b) Substitutes. c) Benefits. d) Legalistic.

(ANSWER: B, p.156) 42)

In the case of the unitary tax and the location of foreign firms, which of the following represents the concept presented? a) Substitutes b) The unfairness of taxing foreign companies located in the United States c) The benefits of taxation to foreign businesses d) The no-way-out policy (ANSWER: A, p.156) 43)

When the benefits from supporting a political alternative are concentrated and the benefits from opposing it are widely distributed, the supporters would have: a) Stronger incentive to take political action than the opponents. b) Weaker incentive to take political action than the opponents. c) It is better for them not to take any action. d) None of the above actions is advisable.

(ANSWER: A, p.156) 44)

When the benefits from supporting a political alternative are widely distributed but the benefits for opposing it are concentrated, the opponents would have: a) No incentive to undertake political action against it while its supporters have little incentive to work for its adoption. b) Strong incentive to undertake political action against it. c) A weaker incentive to undertake political action against it. d) Any one of the above actions is reasonable to win.

(ANSWER: B, pp.156) 45)

Proposition 13, the public referendum in California, is an example of what at work? a) Political entrepreneurship b) Congressional redistricting c) Federal mandates d) Failed public policy (ANSWER: A, p.156)

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46)

Which among the following constitute costs for organizing? a) Identifying potential participants b) Contacting potential members c) Motivating people to join d) All of the above represent costs (ANSWER: D, p.156) 47)

The cost of organizing is greater the more serious the ______ problem becomes. a) Substitution b) Free-rider c) Benefit d) None of the above is correct (ANSWER: B, pp.156) 48)

Legislation that pits business against labor, such as NAFTA, is typically characterized as: a) Unfair. b) Interest group politics. c) Justice as fairness. d) Entitlement.

(ANSWER: B, p.159) 49)

In terms of the concentration and distribution of benefits and costs, entrepreneurial politics are the opposite side of the coin from ______politics. a) Grassroots b) Client c) Majoritarian d) Status quo (ANSWER: B, p.160) 50)

In the case of Boeing in a Pickle, the major issue was: a) The investment tax credit b) Airline safety c) Boeing’s new pickle franchises d) Defense contracts (ANSWER: A, p.162)

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Essay and Review Questions: 1)

You were hired as the Executive Director of the Students for Reduced Tuition (SFRT) organization in California. Write a report for the consideration of your Board of Directors stating and explaining the framework for your nonmarket and collective action strategies.

2)

Write an essay to explain the sources for the demand for nonmarket action. Use examples to show the benefits derived from nonmarket action activities.

3)

Because the amount of nonmarket action generated depends on its cost, state and explain the different components of such cost for a new interest group whose goals include the right of all Americans to free higher education. How do you minimize the cost and maximize the benefits of your efforts?

4)

Write a brief description of the Tobacco Politics. What are the political and moral issues here? What are the legal issues? Why is it such a hot issue and who are the major players? Speculate on the future of tobacco in this nation.

5)

Using a distributive politics spreadsheet, analyze Boeing's Company options in their attempt to lessen the effects of Pickle's bill regarding the Economic Recovery Tax Act of 1981. What is the conclusion you draw from your analysis?

6)

You are a member of a conservative fundamentalist Christian church. You are working for an investment firm where you enjoy your work and have made steady progress towards an excellent future with this company. You have just found out that the company wants you to advise your clients to make investments in a series of health clinics, some of which perform abortions. What would you do? What might be some of the interests that might impact your company, yourself and your clients? What moral and social justice issues are involved?

7)

Using the environment as your issue area, discuss the role that specific environmental organizations play. How would you describe the current political athmosphere concerning environmental issues? What do you think makes people join or not join organizations such as the Sierra Club or Wilderness Society?

What impacts do environmental groups have on firms and consumers?

8)

Discuss the nature of nonmarket competition using an issue area such as affirmative action, international trade, or toxic waste disposal.

9)

Discuss the role of political entrepreneurs using specific entrepreneurs as examples. How do these people change the shape and sometimes, destiny, of an issue?

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10)

What were the issues in the case of Tobacco Politics? Who are the interests groups involved and why? What specific concepts from the chapter help you to analyze and explain the case? Be specific.

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Chapter 7: Nonmarket Strategies for Government Arenas True/False Questions: 1) The rules of the game for many firms and industries are established by legislation.

(ANSWER: T, p.185) 2)

Strategy formulation in the nonmarket environment is similar to its counterpart in the market environment..

(ANSWER: F, p.185) 3)

Nonmarket issues attract a broader set of participants than those involved in markets.

(ANSWER: T, p.185) 4)

In the short run, a firm has influence over nonmarket issues to the extent that its interests are aligned with those of citizens.

(ANSWER: F, p.186) 5)

In market competition, a firm that faces weak competition has market power that enables it to restrict output and obtain a price below its costs.

(ANSWER: F, p.186)

6)

One criticism of nonmarket action by business is that it can be contrary to the public interest.

(ANSWER: T, p.186) 7)

Society cannot control the exercise of nonmarket power or require disclosure of nonmarket actions.

(ANSWER: F, p.186) 8)

One of the criticisms of the nonmarket activities of business is that in their quest to make a profit, they support political alternatives which are in congruity with the public interest.

(ANSWER: F, p.186) 9) Public interest cannot be advanced by business participation.

(ANSWER: F, p.186)

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10)

In First National Bank of Boston v. Bellotti (1978), the Supreme Court ruled that the First Amendment protects the right of corporations to make expenditures and participate in the political competition on a state ballot proposition.

(ANSWER: T, pp. 186) 11)

In Pacific Gas & Electric Co. v. Public Utilities Commission of California, the Supreme Court ruled that a company cannot be forced to include messages from other groups in its billing envelopes.

(ANSWER: T, p. 187) 12)

The Supreme Court upheld a Michigan law that allowed corporations to make independent expenditures on behalf of a candidate.

(ANSWER: F, p.187) 13) There are those who criticize business as having too little power and influence.

(ANSWER: F, p.187) 14)

The nonmarket power of business is rarely controlled because it is naturally divided.

(ANSWER: F, p.188) 15)

The Supreme Court upheld a Michigan law that prohibits corporations from making independent expenditures on behalf of a candidate.

(ANSWER: T, p. 187) 16)

Some criticize business for manipulating consumers. An example of this is Enron that consistently misrepresented financial information..

(ANSWER: T, pp. 188) 17)

Most managers are involved in nonmarket issues on a continual rather than periodic basis.

(ANSWER: F, p.190) 18)

Nonmarket strategies focus on both the initial institutional arena and on subsequent delegation to administrative or regulatory agencies.

(ANSWER: T, p.190) 19)

In a nonmarket analysis, motivation and the nature of the politics are important factors.

(ANSWER: T, p. 190) 20)

Once the nonmarket analysis is completed, the firm can then implement the strategy.

(ANSWER: F, p.190)

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21) Analysis of supply and demand is a part of strategy formulation.

(ANSWER: F, p.190) 22)

Nonmarket strategies are the link between objectives and the specific actions taken to achieve them.

(ANSWER: T, p.191) 23)

The nonmarket strategies available to firms are the same as those available to other interest groups but their appropriateness and effectives can differ.

(ANSWER: T, p.192) 24) Firms and interest groups build their strategies on nonmarket assets.

(ANSWER: T, p.192) 25)

When an industry seeks to defeat legislation, a unified position may be most effective.

(ANSWER: F, p.193)

26)

In the long-run, the rent of a firm equals its profit, but in the short-run a rent can differ from profit because of sunk costs.

(ANSWER: T, p.193) 27)

Implementation relates to the selection of specific actions and assignments of jobs to organizational units and individual managers.

(ANSWER: T, p.194) 28)

One generic strategy is representation where the focus is on developing the needed votes in a legislature to enact or defeat a bill.

(ANSWER: F, p.196) 29) Toshiba’s problem, in terms of trade sanctions, was one of client politics.

(ANSWER: T, p.197) 30) The U.S. legislative process is very complicated with multiple pivots.

(ANSWER: T, p.200)

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Multiple Choice Questions: 31)

Strategy formulation and its implementation in nonmarket environments differs from strategies that are formulated and implemented in a market environment.

Which of the following is one of these differences? a) Nonmarket issues attract the same participants as those involved in the markets b) The logic of collective and political action is the same c) Several of the important components of political strategies are implemented in public view that can constrain the actions of the firm d) Issues are resolved by voluntary agreements (ANSWER: C, p.185) 32)

Nonmarket activities of business have been criticized on a number of grounds.

These include which of the following? a) Due to the for-profit goals of firms, business supports political alternatives that are contrary to public interest b) In reality, business does not have too much power c) Business does not manipulate the political process d) Business goals are always congruent with public interests (ANSWER: A, p.186) 33)

From the pluralist point of view, a policy to ban smoking cigarettes or imposing high taxes on tobacco products should include considering the following interests, except which? a) The interests of smokers and their families b) Cigarettes companies and their employees c) Farmers who grow tobacco on marginal lands d) The effect on the ozone level.

(ANSWER: D, p.186) 34)

Firms have been granted rights to participate in political processes irrespective of which of the following? a) The interests they represent b) When they incorporated c) The number of shareholders d) Their type of product (ANSWER: A, p.186) 35)

Which amendment protects the right of the corporation to make expenditures and participate in the political competition on a state ballot proposition? a) First b) Second c) Tenth d) Sixteenth (ANSWER: A, p.186)

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36)

The Supreme Court ruled that collective corporate action, such as joint lobbying for a political purpose: a) Violates antitrust laws. b) Does not violate antitrust laws. c) The first Amendment of the Constitution of the USA does not extend to corporations. d) Firms do not have the right to participate in coalitions.

(ANSWER: B, p.187) 37)

In Austin v. Michigan Chamber of Commerce (1990), the Supreme Court did what concerning corporations making independent expenditures on behalf of a candidate? a) Upheld their right to do so b) Denied them the right to make independent contributions c) Sent the case back to the Michigan Supreme Court d) None is correct (ANSWER: B, p.187) 38)

_______ can take two basic forms: one involves misrepresentation and the other involves exploiting institutional features. a) Cheating b) Lobbying c) Manipulation d) Abusing (ANSWER: C, p.188) 39)

Which of the following industry cases represented the concern that business political activity goes beyond interests and power and centers on manipulation? a) The dairy industry b) The fast food industry c) The pharmaceutical industry d) The fashion industry (ANSWER: C, p.189) 40)

Nonmarket analysis involves the following activities, except which of the following? a) Identifying the interests affected by an issue b) Analyzing the demand for and the supply of political action c) Identifying the institutional arenas in which the issue will be addressed d) Analyzing the financial statements of the firm (ANSWER: D, p.190)

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41)

Nonmarket assets include which of the following? a) Reputation of firm b) Reputation of top management c) Personal relationships with institutional officeholders d) All are assets (ANSWER: D, p.192) 42)

The value chain includes all but which one of the following? a) Inbound logistics b) Marketing & sales c) Suppliers d) Operations (ANSWER: C, p. 194) 43)

Analogous to the _____ chain for market strategies is the ____ chain for nonmarket strategies? a) Rent; value b) Profit; nonprofit c) Nonprofit; profit d) Value; rent (ANSWER: D, p.193) 44)

Each of the following is seen as an asset to a firm except: a) The firm’s reputation. b) The firm’s access to institutional actors. c) The experience of the firm. d) The stakeholders’ views of the firm.

(ANSWER: D, p.193) 45)

What type of strategy is based on the constituency connection between elected officeholders and their constituents? a) Client b) Representation c) Coalition d) Entrepreneurial (ANSWER: B, p.196) 46)

What does a vote recruitment strategy focus on? a) Voters who are registered b) Voters in general c) Voters who give to campaigns d) Pivotal voters (ANSWER: B, p.199)

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47)

What two factors does the agenda-setting strategy focus on? a) Recruiting the agenda setter and building support for an alternative b) Recruiting the agenda setter and then lobbying other committee members c) Supporting the current agenda and collecting votes for that agenda d) Supporting the current agenda and supporting any action of the committee (ANSWER: A, p.201) 48)

What is the key to making an informational strategy is to be effective? a) The legislator be more informed about the issue than anyone else b) The interest group is more informed about the issue than are the government officeholders c) The paid lobbyists know the most d) None are correct answers (ANSWER: B, p. 202) 49)

Lobbying involves the strategic requirement of which of the following two types of information? a) Political and economic b) Political and social c) Political and technical d) Political and international (ANSWER: C, p.202) 50)

Nonmarket strategies are ultimately directed to whom? a) The public at large b) The customer c) The voters d) The public officeholders (ANSWER: D, p.203)

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Essay and Review Questions: 1)

One of the basic criticisms of the nonmarket activities of business is that business supports political alternatives that may be contrary to public interest. Discuss this argument, giving examples. Do you think this criticism is justified? What could be done about it? Should anything be done about it? Why or why not?

2)

It has been argued that business has too much power that, once exercised, even in a responsible manner, distorts the balance of political power in the country.

Discuss both sides of this issue. Where do you stand? Explain your position and the reasoning behind it. Use the recent downfall of Enron and Arthur Anderson in your analysis.

3)

Many people believe that business manipulates the nonmarket process in an unacceptable way. What are the bases for such a belief? What is the businesses' point of view? What do you think of this criticism of business? Give examples of both sides of the issue.

4)

As the Vice President in charge of Political Strategy formulation and implementation at Amanda International Corporation, you were asked to make a presentation before the Board of Control in which you outline your specific responsibilities, the process you are planning to use to formulate your strategies, and the methods to implement such strategies. Write the outline of your presentation.

5)

APPROPRIATE FOR A TAKE HOME EXAMINATION OR CLASS PROJECT: The Issue: Cost of higher education.

The Perspective: Students’ and parents’ perspectives.

The Assignment: Using a checklist for nonmarket analysis and strategy formulation, identify the issue, map your strategy, assess the potential nonmarket action, identify the key institutions and individuals involved in the issue, the strategy formulation and implementation as well as the ongoing activities.

6)

Taking a controversial issues out of today’s headlines such as corporate reform, gun control, genetic engineering or health care reform, write an analysis formulating the nonmarket strategies that are being used by the significant actors in the debates.

8)

What nonmarket issues are present in the case of Federal Express and Labor Organization? What basic strategies can the Federal Express adopt? What would you do if you were the CEO?

9)

What are the key issues in the Wal-Mart and its Urban Expansion Strategy case?

Formulate a plan for Wal-Mart’s urban expansion.

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10)

Identify the issues and discuss the complex factors in the Toshiba case on trade sanctions. Describe the political strategies of Toshiba and evaluate how it managed this situation. How might the handling of the situation differ between a Japanese firm and an American one?

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Chapter Eight: Implementing Nonmarket Strategies in Government Arenas True/False Questions: 1) Strategy formation and implementation are necessarily intertwined.

(ANSWER: T, p.220) 2) Most companies prefer high-profile nonmarket strategies.

(ANSWER: F, p.220) 3)

Lobbying is a marginal component of most representation and information strategies.

(ANSWER: F, p.220) 4)

The pharmaceutical industry is a major lobbying force, but spends little money on the effort, instead relying on the need for drugs in this country for health care.

(ANSWER: F, p.222) 5) Lobbying as a profession has become increasingly specialized. .

(ANSWER: T, p.222) 6)

Executives are often effective lobbysists because members of Congress and other government officials want to hear about a firm’s concerns from the people in charge.

(ANSWER: T, p.223) High-level managers also have better knowledge of the firm’s activities than do professional lobbyists and thus can be more specific.

(ANSWER: T, p.223) 7)

Congressional members’ staffs are usually ignored in the lobbying effort because they do not vote and have little influence on their bosses.

(ANSWER: F, p.223) 8)

9)

There are many principles for effective lobbying, including shading the facts if it is your own best interest.

(ANSWER: F, p.224) In one’s lobbying efforts, it is a good principle to make straightforward presentations to members of trade associations.

(ANSWER: T, p.224) 10)

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11)

With the decentralization of Congress in the early 1970s, subcommittees have increased autonomy and an increased number of influential positions.

(ANSWER: T, p.225) 12)

Federal Express is an example of a company that is so strong and profitable that it need only spend a small amount of time and resources lobbying Congress.

(ANSWER: F, p. 226) 13) Lobbying should be timed to the phases of the legislative process.

(ANSWER: T, p.226) 14)

One way to get government allies is to do what the Semiconductor Industry Association did—that is, form a Congressional Support Group made up of members from both chambers of Congress.

(ANSWER: T, p.226) 15)

The First Amendment of the Constitution establishes the right to petition the government, so lobbying is a relatively regulated activity.

(ANSWER: T, p.226) 16) The principle law governing lobbying activities is the Lobbying Act of 1998.

(ANSWER: F, p.226) 17) Lobbyists are required to report the fees they receive as well as their expenditures.

(ANSWER: T, p.227) 18)

The Ethics in Government Act of 1978 dealt with the issue of officials who leave government and lobby former employers. It places restrictions on those former officials.

(ANSWER: T, p.227) 19)

Grassroots campaigns are based on the connection between constituents and their elected representatives.

(ANSWER: T, p.231) 20)

Mobilization involves providing information to constituents on the importance of an issue and helping reduce the costs of participation.

(ANSWER: T, p.231) “Fly-ins” is the modern equivalent of ‘bus-ins’ where an interest group will fly in supporters to show support for their interests.

(ANSWER: T, p.231) 21)

22) Letter-writing campaigns are the most expensive grassroots activity.

(ANSWER: F, p.231)

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23)

A business grassroots strategy is built on corporate stakeholders, as identified by the rent chain.

(ANSWER: T, p.232) 24)

It is illegal to use employees in a grassroots campaign when their interests are aligned with the firm’s.

(ANSWER: F, p.232) 25) The effectiveness of a grassroots campaign depends on demand-side factors.

(ANSWER: F, p.232) 26)

Peak or umbrella organizations include firms from a number of industries and thus represent a range of interests.

(ANSWER: T, p.233) 27)

An ad hoc coalition is a group of interests that join together on a specific market issue.

(ANSWER: T, p.235) 28) Although firms in the same industry are often aligned on issues, they may be opposed on some nonmarket issues.

(ANSWER: T, p.235) 29)

The alignment of interests not only affects who participates in a coalition but also the bargaining within a coalition.

(ANSWER: T, p.235) 30)

On some issues, particularly those characterized by majoritarian politics, firms use private advocacy to communicate directly with the public.

(ANSWER: F, p. 237)

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Multiple Choice Questions: 31)

Which of the following are strategy implementation strategies? a) Lobbying b) Grassroots and constituency c) Coalition building d) All are correct (ANSWER: D, p.220) 32)

Which of the following is not a legitimate route of access to regulatory and administrative agencies? a) Campaign contributions b) Constituency connection c) Bribery d) Personal relationships (ANSWER: C, p.220) 33)

Where does lobbying traditionally take place? a) In committee b) Behind the scenes c) In the press d) In full chamber (ANSWER: B, p.220) 34)

According to the Center for Responsive Politics, which of the following spent the most in business lobbying expenses in 2007? a) Transportation b) Health c) Finance, insurance, and real estate d) Communications/electronics (ANSWER: b, p.222) 35)

All of the following are principles of effective lobbying except: a) Know the officeholder’s interests. b) Explore opportunities to build coalitions. c) Time lobbying to the phases of the firm’s budget. d) Make straightforward presentations.

(ANSWER: C, p. 224) 36)

What happened in Congress in the early 1970s gave additional powers to subcommittees? a) Centralization of the structure b) Decentralization of the structure c) More members were added to all committees d) Members were given less power (ANSWER: B, p.225)

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37)

Congressional ______ in the early 1970s gave additional autonomy to subcommittees and thereby increased the number of influential positions substantially. a) democratization b) centralization c) decentralization d) apportionment (ANSWER: C, p. 225) 38)

When legislation is being drafted or rewritten, lobbying often centers on which of the following? a) Committee staff b) Executive branch c) Clerk of the House d) Members (ANSWER: A, p.226) 39)

In 1995, the Lobbying Disclosure Act required lobbyists to do what? a) Register their activities b) Report the amount of income they receive as well as their expenditures c) Report the earnings of the corporations they represent as a percentage of their lobbying budget d) Register all of their grassroots members (ANSWER: B, p. 227) 40)

Which of the following is the least expensive of the grassroots activities? a) Organizing people b) Letter writing campaigns c) Actual trips to Washington to lobby d) All of these are equally expensive (ANSWER: B, pp.231) 41)

Business grassroots strategy is built on corporate stakeholders as identified by what? a) Rent chain b) Money c) Partisan politics d) Median voters (ANSWER: A, p.232) 42)

The principal vehicle for creating a majority coalition is from: a) Collection of minorities. b) Large firms. c) Those without power. d) Anyone willing to join.

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(ANSWER: A, p.233) 43)

Business coalitions are made up of three types except which of the following? a) Peak organizations b) Industry organizations c) Ad hoc coalitions d) stakeholder groups (ANSWER: D, p.233) 44)

Which of the following peak associations focuses on the concerns of small business? a) Inc. b) Association of Small Business Concerns c) Entrepreneurs and Small Business Organization d) National Federation of Independent Business.

(ANSWER: D, p.234) 45)

Trade associations serve a variety of _____ and ______ functions. a) market, corporate b) market, nonmarket c) corporate, nonmarket d) corporate, stakeholder (ANSWER: B, p.234) 46)

In Buckley v. Valeo (1976), the Supreme Court ruled what concerning limits on campaign expenditures? a) There are definite dollar limits b) Any limit threatens the freedoms of speech and association c) A limit of $100 million d) A partial limit is fine to preserve the First Amendment (ANSWER: B, p.229) 47)

Campaign contributions are made for all but which of the following reasons? a) Influence legislative voting b) Obtain access to present or future officeholders c) Affect outcome of elections d) Help a CEO with his/her political future (ANSWER: D, p.230) 48)

In which of the following venues do managers testify? a) Regulatory agencies b) Congressional committees c) Courts d) All are correct (ANSWER: D, p.236)

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49)

In a regulatory setting, ______ is important not only because the information presented can affect regulatory decisions, but also because it creates a record that may serve as a basis for judicial review. a) Affidavits b) Evidence c) Testimony d) Law (ANSWER: C, p.236) Because lobbying is the centerpiece of most firms’ participation in political issues, what two types of people are usually employed? a) Professional lobbyists and grassroots b) Professional lobbyists and ex-members c) Professional lobbyists and former staff d) Professional lobbyists and managers responsible for presenting a firm’s position (ANSWER: D, p.239) 50)

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Essay and Review Questions: 1)

As the newly hired lobbyist for an international corporation in Washington, write a brief report on your job explaining at least the following aspects: the nature of lobbying; the importance of access to congress members; the significance of timing; and the controls on lobbying. Give specific examples.

2)

You would like to start your grassroots organization to bring government back to the citizens of your city. Write the charter of this organization. Explain the different tactics and strategies that are available to the organization. Evaluate the potential effectiveness of the grassroots programs. Use some examples for illustration.

3)

There has been much talk about electoral reform. Write a report describing some of the electoral strategies, the election finance laws, the pattern and purposes of campaign contributions. What do you think should be done to reform the system?

4)

Write your own proposals for reforming the role of business in the political process in the USA. Evaluate the feasibility of each of your proposals. Give examples.

5)

You are an entrepreneur in a fast growing high-tech industry. You have heard that the government plans to begin regulatory actions soon on your products. Because the industry is so new, there are no organizations joined together to look after the collective interests of the industry. What would you do in such a situation and what would you suggest others in your industry do? Be specific.

6)

Using the case of Responsible Lobbying as your focus, discuss and critique the case from the perspective of politics, regulation, ethics and lobbying.

7)

You want to be a lobbyist for an industry but are not sure which one. Write a brief essay on why you want to be a lobbyist, what preparation you would need to be one, the pros and cons of the job, and how you would evaluate which industry you might lobby for.

8)

What are the issues in the Internet Taxation case? Who are the important players in the case and why? What strategies are exercised? Be specific in your analysis.

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Chapter Nine: Antitrust: Economics, Law, and Politics True and False Questions: 1) Antitrust policy is a recent development that goes back to the 1970’s.

(ANSWER: F, p.265) 2)

The Interstate Commerce Act of 1887 provides the states the ability to regulate the trade passing through their state.

(ANSWER: F, p.265) 3)

The Interstate Commerce Act and the Sherman Act represent both social and economic policy.

(ANSWER: T, p.265) 4)

The antitrust laws control the concentration of economic power and the potential of abuse of such power once concentrated.

(ANSWER: T, p.265) 5)

The main federal antitrust statutes are the Sherman Act, the Clayton Act of 1914, and the Federal Trade Commission Act of 1914.

(ANSWER: T, p. 265) 6)

There are a number of schools of thought about antitrust of which one is the structure-conduct-performance approach.

(ANSWER: F, p. 266) 7)

The broad language employed in antitrust laws does not leave much room for interpretation.

(ANSWER: F, pp. 267) 8)

Practices that come under the antitrust laws are classified as national or international.

(ANSWER: F, p.268) The Robinson-Patman Act of 1934 strengthened Section 2 of the Clayton Act’s prohibition of racial discrimination.

(ANSWER: F, p.268) 9)

The Federal Trade Commission Act states: “Unfair methods of competition in commerce, and unfair or deceptive acts or practices in commerce, are hereby declared unlawful.”

(ANSWER: T, p.267) 10)

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11) There are no exemptions under the antitrust laws.

(ANSWER: F, p.269) 12)

A conglomerate merger involves two firms that operate in the same industries as competitors or as part of a channel of distribution of supply.

(ANSWER: F, p.283) 13)

The definition of a monopoly in economic theory is the presence of a firm that dominates in a market and can restrict its output to increase the price consumers pay.

(ANSWER: T, pp.268) 14) Monopolization cases such as those against Microsoft are quite common.

(ANSWER: F, p.269) 15)

Both the Department of Justice (DOJ) and the Federal Trade Commission (FTC) have the authority to enforce the Sherman Act and the Clayton Act, but only the FTC can enforce the Federal Trade Commission Act. (ANSWER: T, p.270) 16)

The Federal Trade Commission (FTC) is an independent commission of 15 members appointed by the Senate to seven-year terms.

(ANSWER: F, p.270) 17)

Consent decrees are agreements reached by the litigants under the sanction of the Federal Trade Commission (FTC).

(ANSWER: F, p.271) 18)

Under the provisions of the 1974 Antitrust Procedures and Penalties Act, fines against corporations can be as high as $10 million per count in criminal cases.

(ANSWER: T, p.271) 19)

During the past 25 years, the DOJ and the FTC have effectively stopped enforcing the Robinson-Patman Act because of their view that it stifles competition.

(ANSWER: T, p.271) 20)

In spite of the lack of enforcement against certain vertical arrangements, federal enforcement of the antitrust laws is active.

(ANSWER: T, p.272) 21) Few antitrust cases are the result of private lawsuits.

(ANSWER: F, p.272) 22)

The courts have held that some acts are so egregious on their face that they violate antitrust laws and are said to be per se illegal.

(ANSWER: T, p.273)

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23)

The defendant has just one defense under the rule of reason: the defendant did not commit the act in question.

(ANSWER: F, p. 274) 24)

The Chicago school views the objectives of antitrust as economic efficiency and competition as the worst means for achieving efficiency.

(ANSWER: T, p.274) 25)

The principal area where the structural and Chicago schools have differed concerns vertical arrangements.

(ANSWER: T, p.274) 26)

The new IO approach to antitrust is derived from the politics of modern industrial organization.

(ANSWER: F, p. 274) 27)

Under the theories of the Chicago school, the purpose of antitrust policy is for economic objectives with a focus on static and dynamic efficiency.

(ANSWER: F, p. 275) 28)

The underlying values in the Structural View are economic efficiency and individual-collective responsibility.

(ANSWER: F, p. 275) 29) Under the IO theory, consumers can protect themselves when they have choices.

(ANSWER: T, p. 275) 30)

The traditional perspective on predatory pricing is that firms may attempt to drive a competitor out of a market by cutting prices below costs.

(ANSWER: T, p. 282)

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Multiple Choice Questions: 31)

The antitrust acts were the result of political pressures by whom? a) The Populist movement b) Farmers concerned about the railroad's pricing practices c) The distribution of power between farmers and railroads d) All of the above were political pressures to enact antitrust laws (ANSWER: D, p.265) 32)

Antitrust laws are concerned with the following, except: a) Structure of the markets. b) Foreign policy. c) Conduct of market participants. d) Performance of the markets.

(ANSWER: B, p.265) 33)

Antitrust policy had its origins in the___________ movement of the 1870’s. a) Democratic b) Whig c) Populist d) No Nothings (ANSWER: C, p. 265) 34)

Which of the following is not an example of a law pertaining to antitrust acts? a) Robinson-Patman Act b) The Federal Trade Commission Act c) The Wagner Price Fixing Act d) The Clayton Act (ANSWER: C, p.265) 35)

What percentage of suits filed under the federal antitrust laws do private litigants bring? a) 10 b) 34 c) 67 d) Over 90 (ANSWER: D, p. 266) 36)

Section 1 of the Sherman Antitrust Act pertains to which of the following? a) Unilateral monopoly conduct b) Unreasonable restraints of trade with a focus on joint conduct c) Unfair pricing standards d) Market domination in advertising (ANSWER: B, p. 267)

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37)

The Robinson-Patman Act was intended to achieve which of the following goal(s)? a) Protect farmers from unfair competition from railroads b) Make price fixing illegal c) Prohibit deceptive acts and practices d) Protect small businesses and merchants from their larger competitors such as supermarkets (ANSWER: D, p.268) 38)

Which of the following are not vertical practices? a) Boycotts b) Tying c) Price discrimination d) Exclusive dealing (ANSWER: C, p.268) 39)

The Department of Justice can enforce antitrust laws only through which means? a) Lawsuits filed in federal court b) Lawsuits filed in state court c) Lawsuits filed in even years d) Lawsuits that have legitimate standing (ANSWER: A, pp. 270) 40)

Which of the following must confirm members of the FTC? a) House of Representatives b) Senate c) Both a and b d) Neither a nor b (ANSWER: B, p. 270) 41)

The Hart-Scott-Rodino Antitrust Improvement Act of 1976 requires premerger notifications to the ___ and the ___ of plans to merge. a) DOJ; FTC b) DOJ; FBI c) FTC; FCC d) There is no such provision in the law (ANSWER: A, p.271) 42)

In 2000, what was the number of possible mergers reported under the provisions of the Hart-Scott-Rodino Act? a) None because firms do not need to report such information to the government b) 1,547 c) 2,389 d) 4,926 (ANSWER: D, p.271)

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43)

Private antitrust suits appear to be going in which of the following directions? a) Increasing substantially b) Decreasing substantially c) Doubling is numbers year to year d) Almost disappearing (ANSWER: B, p. 272) 44)

The Clayton Act has a provision for ____damages and this provides a ______incentive to file suits. a) Quadruple; strong b) Treble; strong c) Seven times; strong d) Only twice; weak (ANSWER: B, p. 273) 45)

If acts are said to be per se illegal, one defense allowed is the defendant did not commit the act and the second is what? a) Defendant is irrational b) Defendant is unethical c) Prosecution is out to get the defendant d) The defendant committed the act, but it was not unreasonable to do so (ANSWER: D, p.274) 46)

Which of the following characteristics is not part of the Structural school of thought regarding the purpose of antitrust policy? a) international and global b) Government is to protect society from economic power c) Competition is the best protector of consumers and economic efficiency d) Market is fragile and prone to failure (ANSWER: A, p. 275) 47)

Under the structural or traditional approach, it believed that in concentrated industries collusion is _____________. a) Unlikely b) Given c) Likely d) Very rare (ANSWER: C, p.275)

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48)

Which of the following statements is a characteristic of the Chicago school of thought pertaining to antitrust laws? a) Social and political as well as economic objectives b) Markets are resilient enough that market imperfections can be addressed through incentives c) Government is to protect society from economic power d) Market power derives from both horizontal and vertical arrangements (ANSWER: B, p.275) 49)

The aspect of entry into markets is viewed differently between the structural and the Chicago schools of thought. The former advocates the following practices with one exception. The exception is what? a) Few barriers to entry b) Barriers are due to the efficiency of incumbent firms c) Potential entry limits the economic power of incumbents d) High barriers to entry reduce efficiency (ANSWER: D, p.275) 50)

The New IO Approach to antitrust advocates the following principles except: a) Competition can be effective with a small number of competitors. b) Barriers to entry can be present. c) More competitors mean more competition. d) Innovation and competition are required for efficiency.

(ANSWER: C, p. 275)

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Essay and Review Questions: 1)

Antitrust laws and the agencies involved in enforcing such acts seem to be confusing. Please outline, in a concise way, the basic acts or laws concerning antitrust, the specific governmental agencies in charge of enforcing each law, the limits of the responsibility of such agencies, and your suggestions to simplify the process.

2)

Trace the evolution of antitrust laws and their enforcement in the U.S.A. to the present. Explain the justifications for expanding government involvement in the process. Note the newest theories and thoughts on antitrust in a knowledge-based, global economy.

3)

Compare the basic premises and/or assumptions of the three antitrust schools of thought. Give specific examples that the proponents of each school provide in favor of their opinions. Choose one of the schools and explain why you like it best.

4)

Outline, diagrammatically, the basic differences in antitrust thought, especially as related to: a) Vertical arrangements b) Predatory pricing c) Entry deterrence, and d) Collusion and price fixing

5)

The U.S. president has appointed you as his special assistant. He has asked you to educate him on the question of mergers and merger guidelines and their evolution over the past few decades. He also asked you to prepare some new directions for policy analysis and possible actions by his administration. Please write the report, including what the ramifications might be of changing such policies in light of all the corruption and fraud being identified in Corporate America. Also refer to the case of Microsoft in your analysis and recommendations. How has this company changed the face of antitrust or has it?

6)

Discuss in detail the issues involved in the case, Price Fixing in the Airways.

7)

What are the issues in the case of The Staples-Office Depot Merger? What agencies are involved and why? Was this case a merger versus an acquisition?

What is the difference? What are the potential antitrust issues in this case? What are the basic issues? What would your ruling be and why?

8)

In The Microsoft Antitrust case, who was involved and why? What were the basic issues and why were they relevant in this case? From the perspective of antitrust law, what are the issues concerning this case? What are the political, social and economic aspects of this case?

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9)

What are the issues concerning antitrust laws and enforcement? Who is involved and why? How would you recommend that the system be changed and why?

10)

We have just entered a new century with many antitrust laws that were passed in the heart of the industrial age. We are now in the technological and informational age that is brain- and decreasingly brawn-based. Write an essay recommending what type of antitrust laws will be needed in the 21st century as we become more information-dependent and globally connected.

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Chapter Ten: Regulation: Law, Economics, and Politics True/False Questions: 1)

Regulation is government intervention in economic activity using commands, controls, and incentives.

(ANSWER: T, p.302) 2)

In contrast to antitrust, regulation is not implemented through judicial institutions but instead by independent commissions and agencies of the executive branch.

(ANSWER: T, p.302) 3)

Antitrust is implemented through independent commissions and agencies of the executive branch of the federal government.

(ANSWER: F, p.302) 4)

In spite of the fact that regulations are not implemented through judicial institutions, the courts play a central role in interpreting these regulatory statutes.

(ANSWER: T, p.302) 5)

Regulation is such a broad subject. It does not specify particular industries, products or conditions.

(ANSWER: F, p. 303) 6)

In the United States, the first period of major regulatory change occurred in the 1930's during the great Depression.

(ANSWER: F, p.303) 7)

The major period of regulatory changes in the 1860's and 1870's brought social regulation.

(ANSWER: F, p.303) 8)

It is interesting to note that since the 1960's, while social regulation continued at a fast pace, major deregulation in important industries occurred simultaneously.

(ANSWER: T, p. 304) 9)

Government regulation can be traced to the 1100’s when the Dutch monarchy started to contract with corporations for services.

(ANSWER: F, p.304) 10)

The U.S. Constitution provides the authority to the Congress to regulate commerce among states. Yet, it also imposes certain limitations on such authority in the Fifth and Fourteenth Amendments.

(ANSWER: T, p.304)

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11) The government’s right to regulate is exceedingly broad.

(ANSWER: T, p. 304) 12)

There are two basic forms of regulatory agencies. These are legislative commissions and judiciary institutions.

(ANSWER: F, p.305) 13)

Most commissions make decisions through consensus-rule voting and formal rulemaking procedures.

(ANSWER: F, p. 305) 14) Consensus forming is the most important activity of most regulatory agencies.

(ANSWER: F, p.307) 15)

The Reagan administration sought the elimination of the Consumer Products Safety Commission (CPSC), but Congress refused.

(ANSWER: T, p.309) 16)

Independent regulatory commissions are immune from Congressional oversight or interference in their affairs.

(ANSWER: F, p.309) 17)

The courts have considerable influence on regulation through their power to review the constitutionality of such regulations and/or their conformity with other statutes.

(ANSWER: T, p.310) 18)

Two theories have been offered to explain where regulation is and is not imposed. The first is the theory of market swings and the second is internationally focused.

(ANSWER: F, p.310) 19)

A monopoly is unnatural if one firm can produce a given set of goods at lower costs than any larger number of firms.

(ANSWER: F, p.310) 20)

The classical theory of natural monopoly predicts that the monopolists would increase output resulting in a price equal to marginal cost.

(ANSWER: F, p.310) 21)

In the case of natural monopoly, economic theory recommends that government set the price to be equal to total cost of the product.

(ANSWER: F, p.310)

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22)

An example of network externality is when building a new plant in a certain location will result in driving the wage pay upward, unless labor supply is perfectly elastic.

(ANSWER: F, p. 312) 23) A pecuniary externality provides a rationale for regulation.

(ANSWER: F, p.312) 24)

A public good may be defined as a good whose consumption by one person does not reduce its availability to other people. National defense is an example of a public good.

(ANSWER: T, p. 313) 25) Public goods can be supplied by the private sector.

(ANSWER: T, p. 313) 26)

Asymmetric information is a form of market mechanism that results in the markets acting efficiently.

(ANSWER: F, p.313) 27)

Moral hazard means that the behavior is encouraged when people do not bear the consequences of their actions.

(ANSWER: T, p. 314) 28)

A common problem in markets is the incentive for sellers to cheat on the quality of goods or services.

(ANSWER: T, p.315) 29)

The Chicago school sees regulation as demanded by interest groups and supplied through the political process.

(ANSWER: T, p. 316) 30)

Cross-subsidization occurs when one group of customers pays more and another group pays less than the cost of providing their services.

(ANSWER: T, p.320)

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Multiple Choice Questions: 31)

Regulation is government intervention in economic activity using all but which of the following? a) Commands b) Controls c) Incentives d) Market manipulation (ANSWER: D, p.302) 32)

Which of the following statements is applicable to regulation? a) Is not implemented through judicial institutions b) Is not implemented through independent commissions c) Cannot be appealed to courts d) They take place through confidential hearings (ANSWER: A, p.302) 33)

The courts have a central role to play in regulatory matters. They become involved in all of these except: a) Interpreting regulations. b) Due process requirement. c) Determining constitutionality. d) Introducing regulatory legislation.

(ANSWER: D, p.302) 34)

How many major periods of regulatory change has the United States experienced? a) Two b) Four c) Six d) Eight (ANSWER: B, p. 303) 35)

The major focus of the second phase of regulation in the progressive era and the New Deal was? a) Labor and economic regulation b) Deregulation c) Social regulation d) Political regulation (ANSWER: A, p.303)

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36)

Which of the following statements depicts the evolution of regulation in the past three decades? a) Social regulation continued progressively; the movement toward deregulation of important industries picked up speed b) Many new regulatory agencies have been created c) Authority of the existing social regulatory agencies has diminished d) Economic regulation relies more on the markets and competition (ANSWER: A, p. 304) In which of the following cases did the Supreme Court rule: “What a company is entitled to ask is a fair return upon the value of that which it employs for the public convenience”? a) Munn v. Illinois b) Smith v. Ames c) McDonald v. FTC d) Mayberry v. Madison (ANSWER: B, p.305) 37)

38)

The following are all examples of federal regulatory agencies and commissions except: a) National Labor Relations Board. b) Environmental Protection Agency. c) The Federal Reserve System. d) The Senate Foreign Relations Committee.

(ANSWER: D, p.305) 39)

Which Act provides for the public notice and comment on rule making prior to rules being promulgated? a) The Administrative Procedures Act of 1946 b) The Public Hearing Act of 1964 c) The Common Sense Act of 1988 d) The Rules and Policies Act of 1935 (ANSWER: A, pp. 306) 40)

There are many ways through which the President influences the regulatory process.

These include: a) Appointment of the agencies administrators. b) Directing the review of regulations. c) Policy expertise of cabinet agencies. d) The President can use all these measures to influence the regulatory process and outcomes.

(ANSWER: D, p.308)

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41)

The Congress exerts great influence on the regulatory agencies through which of the following means? a) Using its budgetary and oversight authorities b) Appointing the regulatory agencies administrators c) Using the Office of Management and Budget (OMB) d) Using the independent commissions (ANSWER: A, p.308) 42)

Which of the following is a cause of market imperfection? a) Pure competition b) Asymmetric information c) Government has no intervention in the economy d) Complete free trade (ANSWER: B, p.313) 43)

In the case of a natural monopoly, economic theory recommends that government set the price of goods and services to be: a) Equal to total cost of production b) Equal to average cost of production c) Equal to marginal cost of production d) Equal to the competitors’ price (ANSWER: C, p. 310) 44)

Which one of the following activities could be considered a nonpecuniary externality? a) Effect of a firm’s new plant on the demand and price of labor b) The increase in the oil price after the oil shock of the 1970's c) Generating pollution by driving a car d) All the above have nonpecuniary externalities (ANSWER: C, p.312) 45)

Which of the following is not a public good? a) National defense b) Radio broadcasting c) Bridges and roads d) Buying a TV set from the army's surplus store (ANSWER: D, p. 313) 46)

What term below refers to behavior induced when people do not bear full consequences for their actions? a) Moral hazard b) Transaction costs c) Asymmetric information d) Free entry and exit into the market (ANSWER: A, p. 314)

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47)

What theory predicts that regulation initially will be found where there are market imperfections and over time will evolve to serve the interests of the regulated industry? a) Interest group b) Capture c) Flexible d) Jurassic (ANSWER: B, p. 316) 48)

Capture theory predicts that regulation will be found where there is/are market ______. a) Perfection b) Shifts c) Imperfections d) Regularities (ANSWER: C, p.316) 49)

______ occurs when one group of customers pays more and another group pays less than the cost of providing their service. a) Market imperfection b) Free-riding c) Moral hazard d) Cross-subsidization (ANSWER: D, p.320) 50)

Rent control of the housing market is an example of what type of regulatory use? a) Cross-subsidization b) Redistribution of wealth c) Grassroots domination d) Voting rights (ANSWER: B, p. 320)

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Essay and Review Questions: 1)

Write an essay on the topic of the nonmarket environment of regulatory agencies. Explain the powers of the President as compared to the powers of the Congress. Give specific examples.

2)

There are several types of market imperfections. Explain the natural monopoly problem, the different manifestations of this phenomenon, and its results.

3)

One of the major types of market imperfections pertains to the concept of public goods.

Explain this type by giving examples. What can the government do to correct or to deal with such an imperfection in the market?

4)

Write short notes explaining and analyzing the following types of market imperfections: a) Externalities b) Asymmetric information c) Moral hazard of the imperfections d) Public Goods e) Natural Monopoly

5)

The newly elected U.S. President has appointed you to be his Special Assistant for Economic Affairs. He or she requested that you prepare a concise report on the topic of “The political economy of regulation.” The President asked you to elaborate on such concepts as cross-subsidization and cost-based regulation. You were further directed to make specific recommendations to alleviate some of the major problems in the area of federal regulations of business. Speculate on regulation in the 21st century.

6)

Discuss in some detail the constitutional basis for regulation referring to specific laws and court rulings.

7)

Discuss, analyze and critique the cases of telecommunications, electric power, and auctions. Be specific and use relevant concepts from the chapter in your analysis.

8)

Outline the important issues in the FCC and Broadband Regulation case. What is your critical analysis of the case?

9)

Outline the important issues in the case of FCC Media Ownership Rules. What are the political and economic implications in this case?

10)

What are the main issues in the case of Enron Power Marketing, Inc. and the California Market? Did EPM do anything wrong?

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Chapter 11: Environmental Management and Sustainability True/False Questions: 1)

The Environmental Protection Agency (EPA) has estimated that compliance with existing environmental regulation would cost each person in the United States nearly $250 annually.

(ANSWER: F, p. 337) 2)

The EPA estimated that in the year 2004, it would cost a total of $950 billion annually to comply with all environmental regulations.

(ANSWER: F, p. 337) 3) Social efficiency is gained when collective well-being is minimal.

(ANSWER: F, p. 340) 4)

The key to environmental issues, according to your author, is that pollution that is costly to prevent should be prevented.

(ANSWER: F, p. 340) 5)

Command-and-control regulation is a no-nonsense instrument that imposes uniform controls and standards on similar source of pollution, resulting in lowerthan-efficient abatement costs.

(ANSWER: F, p. 340) Coase’s theorem pertains to market imperfections, including externalities and public goods.

(ANSWER: T, p. 340) 6)

7) Social efficiency is one of the key standards used in Coase’s theorem.

(ANSWER: T, p. 340) In the case of toxic risk from an oil refinery, Coase’s theorem states that in the absences of transactions costs that would preclude the bargaining leading to private agreements, the socially efficient outcome can be realized if the entitlement is assigned to either of the two parties.

(ANSWER: T, p. 341) 8)

9)

The Coase theorem states that, in the absence of transaction costs that would not impede the bargaining over public agreements, the socially efficient outcome can be realized if and only if the entitlement is assigned to all parties.

(ANSWER: F, p. 341)

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10)

The Coase theorem implies that when bargaining between two parties to an externality is possible, social efficiency can be achieved.

(ANSWER: T, p. 343) 11)

From a Coasean perspective, social efficiency is a problem only when there are no impediments to bargaining.

(ANSWER: F, p. 343) 12)

A market is a logical extension of a decentralized system in which entitlements are assigned and can be traded..

(ANSWER: T, p. 343) 13)

Because of the very low transaction costs that would be connected with private bargaining, automobile emissions are controlled through government regulations.

(ANSWER: F, p. 343) 14)

A tradable permits system has been adopted to reduce greenhouse gasses emissions to achieve the goals specified in the Kyoto Protocol on global climate change.

(ANSWER: T, p. 344) 15) Cap-and-trade systems are also called tradable permit systems.

(ANSWER: T, p. 344) 16)

One control of an externality in a market-based system is providing incentives for abatement by internalizing the cost of the harm done by the pollutants.

(ANSWER: T, p. 344) 17) A tradable permit system is said to be inferior to an emissions tax..

(ANSWER: F, p. 344) 18)

Emission tax systems are considered superior to tradable permits because the amount of abatement is known in advance with a tax system.

(ANSWER: F, p. 344) 19) China and India are two countries that are leading the way in reducing global warming.

(ANSWER: F, p. 346) 20) The Kyoto Protocol deals with global climate change.

(ANSWER: T, p. 346) 21) The Clinton administration signed the Kyoto Protocol on global climate change.

(ANSWER: T, p. 346) 22)

Those who signed the Kyoto Protocol agreed to use an emissions trading system to improve the social efficiency of achieving their commitments.

(ANSWER: T, P. 346)

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23) The Kyoto Protocol had strong support in the U.S. Senate.

(ANSWER: F, p. 346) 24)

With the growing scientific evidence indicating global climate change, the George W. Bush administration made the political and economic choice to support the Kyoto Protocol.

(ANSWER: F, p. 347) 25)

The U.S. under the Bush administration has adopted an involuntary approach to greenhouse gasses reduction.

(ANSWER: F, p. 347) 26)

The Environmental Protection Agency (EPA) is an independent department with a cabinet level secretary of Environmental Affairs.

(ANSWER: F, p. 349) 27)

Because federal environmental regulation is a major undertaking, the budget for the EPA was $53 billion in 2005 and covered over 34, 000 employees.

(ANSWER: F, p. 349) 28)

The EPA administrative process for enforcement of environmental laws includes the filing of a complaint and a hearing before a district federal court.

(ANSWER: F, p. 350) 29)

The Food Quality Protection Act is under the jurisdiction of the Department of Agriculture, not the EPA. (ANSWER: F, p. 350) 30) EPA regulation has usually been command-and-control.

(ANSWER: T, p. 351)

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Multiple Choice Questions: 31)

What percentage of the GDP in 2004 did the EPA estimate that it would cost to comply with existing environmental regulations? a) 2.1 b) 3.4 c) 4.7 d) 5.9 (ANSWER: A, p. 337) 32)

When is social efficiency attained? a) Aggregate well-being is minimal b) Aggregate well-being is total c) Aggregate well-being is maximal d) Aggregate economic costs are minimal (ANSWER: C, p. 340) Coase’s Theorem pertains to _______, including ______ and ________. a) Perfections; ethics; public goods b) Imperfections; costs; private goods c) Imperfections; externalities; private goods d) Imperfections; externalities; public goods (ANSWER: D, p. 340) 33)

34)

What are the keys to incentive-based approaches to meeting environmental goals? a) Imposes a cost and leaves it to individual polluters to decide how best to respond b) Imposes a fine and leaves it to government to decide the regulations c) Imposes sanctions of a certain limit and lets the individual polluters decide how to manage it within government guidelines d) Imposes a cost and dictates the incentives for managing the situation (ANSWER: A, p. 340) 35)

From the Coasean perspective, social efficiency is a problem because of _________to bargaining, which are referred to as ____________costs. a) Complexities; inherent b) Impediments; transactions c) Impediment; business d) Complexities; transactions (ANSWER: B, p. 343) 36)

Why does government regulate automobile emissions? a) Exorbitant costs b) Unwillingness of business to cooperate at all c) Government’s mandate to regulate all common goods d) Disagreement on the effects of automobile pollution as a problem (ANSWER: A, p. 343)

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37)

What approach has become an effective means of achieving environmental goals at the least cost to society? a) Command-and-control b) Incentive or markets c) Common goods d) International agreements (ANSWER: B, p. 343) 38)

Cap-and-trade systems are also called. a) market systems b) tradable permit systems c) incentive systems d) governmental systems (ANSWER: B, p. 344) 39)

_________ systems cap the total allowed emissions of a particular pollutant, issues permits for that amount, and allows the permits to be traded. a) Market incentive b) Kyoto Protocol c) Cap-and-trade d) Coase’s systems (ANSWER: C, p. 344) 40)

What is the Kyoto Protocol concerned with? a) Trade and pollution b) Japanese cars and air pollution c) Global climate change d) Global ocean dumping (ANSWER: C, p. 344) 41)

The Kyoto Protocol called for country-specific reductions in carbon dioxide emissions by: a) 2005. b) 2010. c) 2008. d) 2006.

(ANSWER: B, p. 346) 42)

Which of the following countries rejected the Kyoto Protocol? a) Russia b) India c) China d) Australia (ANSWER: D, p. 347)

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43)

The EPA was established in which decade? a) 1950’s b) 1960’s c) 1970’s d) 1980’s (ANSWER: C, p. 349) 44)

How many employees did the EPA employ in 2008? a) Over 4,500 b) Over 9,800 c) Over 17,000 d) Over 25,000 (ANSWER: C, p. 349) 45)

The federal government can seek both criminal and civil convictions of polluters from: a) Firms only. b) Firms, investors and customers. c) Firms and individuals. d) Individuals only.

(ANSWER: C, p. 350) 46)

What is the name of the account that was established to clean up toxic waste disposal sites? a) Toxic Waste Cleanup Fund b) Superfund c) SuperiorFund d) ToxWasteFund (ANSWER: B, p. 352) Two complaints in terms of government’s demands for cleaning up toxic wastes are: a) Time and cost. b) Litigation costs and new standards for cleanup. c) Litigation costs and retroactive liability. d) Retroactive liability and time.

(ANSWER: C, p. 353) 47)

48)

Most of the costs of environmental protection are borne by _______? a) Private parties b) Government c) Business d) All of the above (ANSWER: A, p. 353)

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49)

What is NIMBY? a) Not In My Best Year b) Not In My Backyard c) Not In Money By Years d) Not Involved More By Yards (ANSWER: B, p. 358) 50)

The NIMBY movement is often directed toward a) refuse disposal sites b) toxic waste sites c) facilities that may emit toxins d) all of the above (ANSWER: D, p. 358)

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Essay and Review Questions: 1)

Choose an environmental issue you have concerns about and apply Coase’s theorem to it.

Be specific in your use of the issue and the theorem.

2)

Discuss the strategy of the EPA and activists during the Republican control of Congress starting in 1995 and beyond.

3)

Prepare a speech to give to the Sierra Club and Greenpeace on why the U.S. should not sign the Kyoto Protocol.

4)

Explain to the city of Las Vegas and the state of Nevada why it is a good idea to take all nuclear waste in the rest of the country to the site of the nuclear dumpsite at Yucca Mountain, 90 mile from Las Vegas.

5)

Explain and analyze the tradable permits system to the residents of Los Angels County, California.

6)

Discuss, explain and analyze the control of an externality such as emissions in a marketbased system including all three components. Use details in your analysis.

7)

Why is the Kyoto Protocol such as controversial agreement? Who is against it and why?

Explain your stance on global climate change.

8)

Briefly analyze the case of Environmental Activism at Home Depot.

9)

Write a persuasive essay on how other companies can emulate Cummins in using regulation as an opportunity.

10)

What were the main issues in the Emerging Nanotechnology Regulation: Samsung’s SilverCare Washing Machine case?

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Chapter Twelve: Law and Markets True/False Questions: 1) Government is the cornerstone of a free enterprise system.

(ANSWER: F, p. 374) 2)

A good factor concerning a market is that there are no uncertainties or risks because everyone knows the rules and follows them.

(ANSWER: F, p. 374) 3)

Statutes enacted by legislatures and through decisions made by judges establish laws.

(ANSWER: T, p. 374) 4)

The law is not the principal means of reducing uncertainty and improving reliance in exchanges.

(ANSWER: T, p. 374) 5)

Common law originated in the 13 colonies as a way of resolving disputes and setting law that was much more flexible than the statutory approach.

(ANSWER: F, p. 375) 6)

On the European continent, in South America, and elsewhere, civil law is used rather than common law.

(ANSWER: T, p. 375) 7) Commercial law is a product of the 20th century.

(ANSWER: F, p. 376) 8) Property is a set of rights to control a tangible or intangible thing.

(ANSWER: T, p. 376) 9) Property allows persons to reach mutually beneficial agreements.

(ANSWER: T, p. 376) 10)

The economic efficiency rationale for property has two aspects: property rules to facilitate bargaining and property rules to provide incentives to create assets.

(ANSWER: T, p. 376) 11)

Incentives can be very clear such as in the case of a house and intellectual property.

(ANSWER: F, p. 376)

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12) All means of establishing appropriability are private.

(ANSWER: F, p. 377) 13)

Firms may keep their intellectual property assets proprietary such as Microsoft and its Windows XP code or Coca Cola and the formula for Coke.

(ANSWER: T, p. 377) 14)

The basic tradeoff in the protection of intellectual property is between the benefits to society from the use of the idea or invention and the incentives for their creation.

(ANSWER: T, p. 377) 15)

In the appropriability of rents, if the cost of replication is moderate and intellectual property rights are tight, there is strong appropriability.

(ANSWER: T, p. 378) 16) The issue with Napster is that the founders charged too much for their products.

(ANSWER: F, p. 378) 17)

There are only two types of protections for intellectual assets: patents and licensing copyright.

(ANSWER: F, p. 378) 18)

Licensing makes the invention available to others and thus increases the benefits to society from the invention.

(ANSWER: T, p. 381) 19) A copyright can be claimed even without a filing with the government..

(ANSWER: T, p. 381) 20) A trademark provides social and private value.

(ANSWER: T, p. 382) 21)

A franchise is almost anything that is unique and of value or potential value to a company.

(ANSWER: F, p. 383) 22) In a contract both parties seek assurances.

(ANSWER: T, p. 383) 23) Contracts are also entered into to induce reliance.

(ANSWER: T, p. 383) 24) Contracts must be written rather than oral.

(ANSWER: F, p. 384)

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25)

The courts have three remedies when dealing with breach of contract situations: damages, specific performance and utilitarian.

(ANSWER: F, p. 385) 26)

Court awards of damages take place ex post, and anticipation of those awards provides ex ante incentives to fulfill promise while leading the flexibility to reach contract when it is efficient to do so.

(ANSWER: T, p. 386) 27)

Liquidated damages are unlimited in terms of compensation and other related damages for harm and are intended as penalties for particular actions such as fraud.

(ANSWER: F, p. 386) 28) Torts are civil wrongs—wrongs done by one person to another.

(ANSWER: T, p. 386) 29)

The law of torts, especially in the arena of product liability, is the principal and most comprehensive source of intuitional guidance.

(ANSWER: T, p. 387) 30) Social efficiency requires balancing the costs of injuries and the cost of care.

(ANSWER: T, p. 388)

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Multiple Choice Questions: 31)

The cornerstone of the free market system is what? a) The government b) Business c) Markets d) Competition (ANSWER: C, p. 374) 32)

What is another name for common law? a) Judge-made b) Jury-made c) Public-made d) Citizen-made (ANSWER: A, p. 375) 33)

In which of the following countries is common law not used? a) United States b) France c) United Kingdom d) Canada, except Quebec (ANSWER: B, p. 375) 34)

In the United States, the common law prevails in all but which of the following? a) Property b) Contract c) Criminal d) Torts (ANSWER: C, p. 376) 35)

________ is a set of rights to control a tangible or intangible thing. a) Property b) Common law c) Civil law d) Contract (ANSWER: A, p. 376) 36)

In the appropriability of rents, if the cost of replication is high, and intellectual property rights are _______, you have weak appropriability. a) Tight b) Loose c) Flexible d) Redoubled (ANSWER: B, p. 378)

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37)

In terms of appropriability of rents, if the cost of replication is low and the intellectual property rights are tight, there is ___________ appropriability. a) Weak b) Moderate c) Strong d) Flexible (ANSWER: B, p. 376) 38)

Changing ____________ can dramatically alter the costs of replication of intellectual creations, as in the case of Napster. a) People b) Tastes c) Technology d) Management (ANSWER: C, p. 378) What is defined in the following? “A ______ may be granted for an invention of ‘any new and useful process, machine, manufacture, or composition of matter, or any news and useful improvement thereof.’” a) License b) Patent c) Contract d) Copyright (ANSWER: B, p. 380) 39)

40)

What must you do to claim a copyright? a) File with the government b) You can claim it even if you do not file with the government c) File with local government d) File on your income tax (ANSWER: B, p. 381) 41)

A trademark produces what two values? a) Economic and political b) Economic and social c) Economic and public d) Social and private (ANSWER: D, p. 382)

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42)

Contracts are entered into to induce _______, which refers to a change in behavior by a party. a) Assurances b) Reliance c) Common law d) Exchanges (ANSWER: B, p. 383) 43)

Which two of the following are ex ante concepts? a) Conditions and statutes b) Reliance and inducements c) Duress and unconsionability d) Duress and contracts (ANSWER: C, p. 385) 44)

Which industry highlighted in your text seems to struggle mightily with contract problems around research findings? a) Dairy b) Automobile c) Record d) Biotechnology (ANSWER: D, p. 384) 45)

What ex ante approach is based on the principle that more complete contracts can be more efficient? a) Liquidated damages b) Duress damages c) Consequential damages d) Expectation damages (ANSWER: A, p. 386) 46)

What are torts? a) Civil rights b) Civil wrongs c) Civil damages d) Private wrong through public statutes (ANSWER: B, p. 386) 47)

All of the following are the basic elements of a tort except: a) An injury b) An action that causes harm c) The breach of duty owed to the injured party d) The breach of utilitarian ethics (ANSWER: D, p. 386)

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48)

Which of the following requires the balancing of the costs of injuries and the costs of care? a) Political efficiency b) Social efficiency c) Economic efficiency d) Technological efficiency (ANSWER: B, p. 387) What is defined as ‘the ability of an individual to control a particular resource or to take an action’? a) Entitlement or right b) Freedom of choice c) Justice-as-fairness d) Justice and freedom (ANSWER: A, p. 389) 49)

50)

What branch covers products liability? a) Common law of justice b) Common law of torts c) Common law d) Common law of statutes (ANSWER: B, p. 392)

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Essays and Review Questions: 1)

Discuss, analyze and critique the politics of products liability.

2)

What is a tort and why is it an important part of the law?

3)

What is common law? Where did it develop? Why is it an important aspect of the legal system?

4)

Discuss, analyze and critique the concept of property in all its forms. In that analysis, include the following concepts: bargaining, incentives and appropriability. Focus in on intellectual property and use the Napster situation as an example in terms of licensing, patents, copyrights and trademarks.

5)

Discuss and analyze contracts using the concepts presented in your text.

Be specific and be sure to define your terms, including the what, when, where, how, and why.

6)

What are the issues in Genentech and the City of Hope? Do you think the biotech industry will continue to have such issues and how would you recommend the industry and the society manage them?

7)

Apply the law of torts to the Product Safety Problem.

8)

What are the relationships among the following concepts: entitlements, liability, social efficiency, and regulation?

9)

Discuss, analyze and critique the development of products liability law using specific examples in your analysis.

10)

You are to deliver a speech to new business owners on the law and markets. Write a brief speech outlining the major issues as you see them.

Give specific examples and be sure to define your terms.

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Chapter Thirteen: Information Industries and Nonmarket Issues True/False Questions: 1)

Information industries have been a major source of growth in the past two decades.

(ANSWER: T, p. 413) 2)

The Internet is a network and has the same economies as traditional products and services.

(ANSWER: F, p. 413) 3) Substantial commercial activity has migrated to the Internet.

(ANSWER: T, p. 413) 4)

The goal of Microsoft is to garner about 30-35% of the market share of the businesses it is in.

(ANSWER: F, p. 414) The property stating “the value of the product to each user increases the more people that use it” is called ‘network externalities.’

(ANSWER: T, p. 415) 5)

6) Complementary products require compatibility.

(ANSWER: T, p. 415) 7) A standard can be either open or mandatory.

(ANSWER: F, p. 415) 8)

The greater the use of a system, the greater is the incentive for software developers to write to an establish system, such as Windows.

(ANSWER: T, p. 415) 9) The issue of tipping happened in the VHS-Betamax rivalry.

(ANSWER: T, p. 416) 10) The possibility of tipping leads to a weak first-mover advantage..

(ANSWER: F, p. 417) 11)

Technologies other than the Internet do not raise privacy issues, such s the Global Positioning System.

(ANSWER: F, p. 418)

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12)

Web sites collect anonymous data by tracking browsing using donuts deposited on personal computers.

(ANSWER: F, p. 418) 13) One of the basic principles of the Internet is the right to know.

(ANSWER: T, p. 419) 14) A principle of the Internet is to be free from arbitrary treatment..

(ANSWER: T, p. 419) 15)

A number of bills were signed into law regulating privacy issues on the Internet in the 2000 Congressional session.

(ANSWER: F, p. 421) 16)

There is a good deal of legislation protecting all sorts of privacy rights, such as the Video Protection Act of 1988, but none on the issue of Internet privacy rights.

(ANSWER: T, p. 421) 17)

Self-regulation by companies has been relied on rather than statutory laws to manage privacy issues.

(ANSWER: T, p. 421) 18) eBay does not have a strong privacy component in its dealings with users.

(ANSWER: F, p. 422) 19)

Confidence in the Internet is a public good, but the provision of that public good is subject to a free-rider problem.

(ANSWER: T, p. 423) 20)

The European Union and the U.S. have the same policies towards personally identifiable information (PII) that is op-out.

(ANSWER: F, p. 423) 21)

Some Internet companies infringe on the privacy of users who anticipated that the information they provided would remain private..

(ANSWER: T, p. 423) 22) TRUSTe is a company that leads in Internet privacy standards..

(ANSWER: F, p. 423) 23)

In 1998, Congress passed the Internet Tax Freedom Act, which imposed a 3-year tax moratorium prohibiting states from enacting any new tax on Internet access and any tax that singled out the Internet.

(ANSWER: T, p. 423)

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24)

The moratorium passed by Congress on Internet taxation banned any type of tax collection.

(ANSWER: F, p. 424) 25)

Internet sales are of great concern to states that will lose the sale taxes from sales over the Internet.

(ANSWER: T, p. 424) 26)

Some public policy analysts argue that the Internet is only a private good and that it should be heavily taxed.

(ANSWER: F, p. 424) 27)

The business model of some Internet companies focuses on developing a community of users who interact with each other as well as with the company.

(ANSWER: T, p. 425) 28) Facebook is an example of an Internet community.

(ANSWER: T, p. 425) eBay’s set of norms was a way to accomplish order for its community so that buyers and sellers could trust each other and realize the gains from trade.

(ANSWER: T, p. 425) 29)

30) One problem with a feedback mechanism is that a reputation can be exploited.

(ANSWER: T, p. 427)

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Multiple Choice Questions: 31)

In the past ______ decades, the information industry has grown significantly. a) Two b) Three c) Four d) Five (ANSWER: A, p. 413) 32)

Because the Internet is a network with economies that are quite different from those of markets for physical goods, network externalities and complementary goods that make _______and _______important characterize a number of lines of business. a) Contracts; trust b) Compatibility; standardization c) Compatibility; trust d) Standardization; contracts (ANSWER: B, p. 413) 33)

The _____ _____ of information raises the issue of appropriability of rents from the investment of developing information. a) Private rights b) Public goods c) Public rights d) Private property (ANSWER: B, p. 413) What is deposited on a user’s personal computer to track browsing? a) A donut b) A spy c) A cookie d) A cake (ANSWER: C, p. 413) 34)

What is described in the following: “The property that the value of the product to each user increases the more people that use it?” a) Positive externality b) Entropy c) Stasis d) Network externalities (ANSWER: D, p. 415) 35)

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36)

Network externalities yield _________returns on the demand side of the market. a) Decreasing b) Increasing c) Immeasurably decreasing d) Vastly increasing (ANSWER: B, p. 415) 37)

A standard can either be ____ or _____. a) Open; closed b) Open; proprietary c) Closed; proprietary d) Closed; public (ANSWER: B, p. 415) 38)

What type of market indicates that a single winner takes most of the market? a) Closed b) Open c) Competitive d) Tipped (ANSWER: D, p. 416) 39)

An example of the tipped market was the rivalry between ____ and ______. a) Betamax and VHS b) IBM and Sun c) eBay and amazon d) GE and Whirlpool (ANSWER: A, p. 416) 40)

In the U.S., privacy and the Internet has been largely managed by ______. a) Government regulation b) Courts c) Lawsuits d) Self-regulation by companies (ANSWER: D, p. 418) 41)

What is the leading online advertising services firm? a) DoubleClick b) Ads-are-Us c) MonsterBoard d) WebDesign (ANSWER: A, p. 418)

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42)

What is the stance of most business concerning legislating privacy rules for the Internet? a) Support strongly b) Opposed generally c) Neutral d) Lobbying for legislative passage (ANSWER: B, p. 421) 43)

What are some of the components of self-regulation? a) Policies and practices of companies b) Certification by independent nongovernmental organizations c) Personal protection by individuals d) All are components (ANSWER: D, p. 422) What describes the European Union’s approach to Internet privacy? a) Enacted a directive (law) that strongly protected privacy for personally identifiable information b) Decided to follow the lead of the US and not pass legislation c) Is considering strong legislation d) Believes that privacy is an individual matter (ANSWER: A, p. 423) 44)

45)

Confidence in the Internet is a public good, but the provision of that public good is subject to a _________ problem. a) network externality b) standardization c) free-rider d) customization (ANSWER: C, p. 423) 46)

Why do online retailers fight tax collection for their items? a) It is too much of a bother b) They do not want to do the state’s work c) It would be prohibitively expensive they contend d) It would be too complex (ANSWER: C, p. 424) 47)

According to eBay, what is the key to its success? a) Hard work b) Privacy c) Trust d) Money (ANSWER: C, p. 422)

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eBay’s ______ lives in the shadow of public order. a) Public ordering b) Private ordering c) Flexible ordering d) Traditional ordering (ANSWER: B, p. 425) 48)

49)

eBay wanted what type of communication and put out guidelines to that effect? a) Open and honest b) Closed and honest c) Flexible and honest d) One way and honest (ANSWER: A, p. 425) 50)

Who has pressed for sales tax being collected on the Internet by those retailers on the Internet? a) States and bricks-and-mortar retailers b) Federal, state and local governments c) Locals and wholesale companies d) States and local governments only (ANSWER: A, p. 424)

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Essays and Review Questions: 1)

Write an essay describing the evolving information industry and some of the nonmarket issues that arise.

2)

What are the economics of the ‘Winner-Take-Most Markets?’ Use Microsoft as the case to discuss. Use specific concepts and events in your critical analysis.

3)

What are the basic issues in Internet privacy? How does the U.S. differ from the EU in its treatment of the issue? Choose which approach you agree with and explain your position.

4)

Discuss the elements in self-regulation and the Internet. Use the eBay policy and core values in explaining self-regulation.

5)

Describe, discuss and analyze the Internet and tax policy. What is your stance and how would you convince Congress that you are right?

6)

What is an online community? How are they developed and why? Who is a part of such a community and why? Use eBay as an example.

7)

What are the major issues in the case of DoubleClick and Internet Privacy?

Describe the “who, what, where, when, and why of the case. What role did government play? What was the strategy by DoubleClick to restore consumer and public confidence? What are the individual privacy rights issues?

8)

Discuss the management of eBay in-depth. How might it serve as a model for other online companies?

9)

What do you think the future of the Internet will be and why do you take that position?

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Chapter Fourteen: The Political Economy of Japan True/False Questions: Japan is a relatively heterogeneous country, which makes it harder to structure political and social behavior.

(ANSWER: F, p.451) 1)

Japanese society’s homogeneity and tradition combine to create a system in which consultation and consensus are easier to achieve and maintain than in many western nations such as the United States.

(ANSWER: T, p.451) 2)

3)

Interests are rarely in conflict in Japan and the willingness to sacrifice for the sake of tradition is as strong as ever.

(ANSWER: F, p.451) 4)

The pluralism of interests in Japan is sufficiently diverse that interests are increasingly difficult to bring into agreement, and change is continual if not rapid.

(ANSWER: T, p.451) 5) The political economy of Japan is quite simple.

(ANSWER: F, p.452) 6) The organization of business in Japan differs from that in the United States due to short-term relationships, many of which are supported by patterns of interlocking ownership among firms.

(ANSWER: F, p.452) 7) The Japanese economy has been strong since the 1990’s.

(ANSWER: F, p.453) 8) Japan’s economy began to grow in 2003, and deflation stopped.

(ANSWER: T, p.454) 9)

In 2001, Japan experienced both a sluggish economy and deflation with public debt reaching 245 percent of its GDP. (ANSWER: F, p.453)

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10)

Japan faces many problematic issues: an aging population, retirement and health care cost borne by a shrinking workforce, a low birth rate, and a dwindling population.

(ANSWER: T, p. 453) 11)

Japanese banks compete with the government-run, huge postal savings system which the banks view as unfair competition given the low interest rates and high loan rates that the postal savings system offers.

(ANSWER: F, 454) 12)

The Japanese governmental system was patterned after the British parliamentary system with uniquely Japanese characteristics and an overlay of American-style organizations.

(ANSWER: T, p.455) 13)

The principal institution of Japanese government is the Diet (Parliament), composed of two houses with equal power.

(ANSWER: F, p.455) 14)

An enduring and strong aspect of Japanese politics has been its stability and lack of political scandals, especially in the 1990’s.

(ANSWER: F, p.455) 15)

The Japanese government is of the cabinet form with the cabinet assuming collective responsibility for policy.

(ANSWER: T, p.455) 16)

To maintain constituency support, many of the members of the Diet keep a koenkai, a locally based organization that serves to organize and mobilize support for the member.

(ANSWER: T, p.456) 17)

In Japan, a personal relationship between a member of the Diet and his constituents is very important. Such relationships require the member to attend weddings and funerals, give gifts to constituents, hold parties, and to organize excursions for constituents.

(ANSWER: T, p.456) 18) A Diet member represents constituents’ interests only in the Diet.

(ANSWER: F, p.456) 19)

Members of the Diet participate in groups called koenkai that intermediate between interest groups and the bureaucracy.

(ANSWER: F, p.456)

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20)

Despite its name, the LDP or Liberal Democratic Party is conservative in its orientation.

(ANSWER: T, p.457) 21)

Japan has a strong regulatory ministry in the bureaucracy called The Ministry of Regulatory Matter.

(ANSWER: F, p.458) 22)

In Japan, it is the most able graduates who seek a position in the bureaucracy, which adds to the prestige and expertise of their executive branch.

(ANSWER: T, p.459) 23)

In Japanese government, the Ministry of Internal Affairs and Communication (MIC) gets first choice among the successful candidates that apply for a position.

(ANSWER: F, p.459) 24)

The Japanese judicial system is patterned after the civil code systems of continental Europe, rather than the adversarial system found in the United Kingdom and the United States.

(ANSWER: T, p.462) 25) Japan has twice the number of lawyers as the USA. (ANSWER: F, p. 462) 26)

Although Japan has an anti-monopoly law, some segments of its construction industry operate under an illegal system of bid rigging, price fixing and market allocation know as keiretsu.

(ANSWER: F, p.462) 27) The economy of Japan is based on Confucian capitalism.

(ANSWER: F, p. 462) 28)

Japanese culture emphasizes harmony and the role of formal and informal hierarchical relationships.

(ANSWER: T, p. 462) 29) In Japan, harmony is the key in political relationships.

(ANSWER: T, p.463) 30)

The Japanese governmental bureaucracy tends to maintain very distant relationships with business.

(ANSWER: F, p.463)

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Multiple Choice Questions: Japan’s cultural homogeneity is due to all of the following except: a) Isolation prior to 1941. b) Its resistance to immigration. c) Relatively small regional differences. d) A uniform national education system.

(ANSWER: A, p. 451) 31)

32)

Culturally, Japan is relatively a) homophobic. b) pluralistic. c) heterogeneous. d) homogeneous.

(ANSWER: D, p.451) 33)

The political economy of Japan is: a) Simple. b) Confrontational. c) Complex. d) Recent.

(ANSWER: C, p.452) In the end of the 1990’s, the principal systemic level issues in Japan’s political economy center on all except which of the following? a) Deregulation of the economy b) Decentralizing the education system c) Political reform and stability d) A sluggish economy (ANSWER: B, p.452) 34)

35)

Interests in Japan can be characterized by which of the following? a) Totally uniform in all aspects b) Always divided c) No conflict d) Pluralistic (ANSWER: D, p. 452)

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36)

If Japanese businesses disagree on a trade issue, they: a) Are more likely to contest the issue in public. b) Are more likely to seek consensus within business and industry associations. c) Force a confrontation with the government. d) Debate the issue in the Diet.

(ANSWER: B, p.454) 37)

Japan has activist and public interest groups. How are they when contrasted with their counterparts in the U.S.? a) There are more of them, less active and more aggressive b) There are less of them, less active and more cautious c) There are less of them, more active and more cautious d) There are more of them, more active and more cautious (ANSWER: B, p.454) 38)

The Japanese governmental system is characterized as: a) Molded after the British parliamentary system. b) Possessing a set of uniquely Japanese characteristics. c) Being an overlay of American style institutions. d) All the above.

(ANSWER: D, p.455)

39)

In Japan, the lower house of the Diet has most of the legislative powers. It can do all the following, except: a) Enact legislation by a two-thirds majority, even if the upper house disapproves it. b) Formally elect the Prime Minister. c) Vote no confidence in the Prime Minister, thus forcing him/her to resign or call for new elections. d) Call for the emperor's resignation.

(ANSWER: D, p. 455) Japan’s lower house, the House of Representatives, has how many members? a) 100 b) 250 c) 360 d) 480 (ANSWER: D, p.455) 40)

41)

What are the principal institutions of the Japanese government? a) The Diet b) The Electoral and Party systems c) The Bureaucracy d) All are correct (ANSWER: D, p. 455)

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42)

To maintain constituent support, many Diet members maintain a local organization called _________ that mobilizes and organizes support of members. a) Kanban b) Kaizan c) Koenkai d) Karaoke (ANSWER: C, p.456) 43)

All of the following fit the description of the Japanese parties except: a) Parties play an important role in governing the parliamentary system. b) A majority party resolves a variety of matters. c) A majority tries to settle matters prior to their submission to the legislature. d) Heated debate is likely on legislative matters the parties disagree on.

(ANSWER: D, p.457) 44)

By the time a bill is introduced into the Diet, all of the following are accurate except: a) Consensus has been developed within the policy-making apparatus of the governing bodies. b) The bureaucracy does not yet support it. c) The bureaucracy does support it. d) The cabinet gives its approval.

(ANSWER: B, p.457) 45)

Which of the following statements is not a description of the bureaucracy in Japan? a) The dominant force in the government b) Well respected with much sought after positions c) Known for its low prestige and lack of expertise d) Known for its influence that is based on its high prestige and expertise (ANSWER: C, p.458) 46)

The status conferred on the bureaucracy is due to all of the following factors except which of the following? a) Its expertise b) Its neutrality on business interests c) Its dedication to national issues d) The economic success that Japan has enjoyed (ANSWER: B, pp.458)

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47)

The career path of a group of new appointees to a ministry in Japan would follow the following steps with the exception of which step? a) The group would be assigned several jobs during their career for similar periods of time b) After about thirty years, one will become vice minister and the others would descend to other careers in the private sector or universities or run for office c) Throughout the process, some members may be in a position of hierarchical superiority to another member of the same group d) After two years, the vice minister may become a special advisor to the minister or run for office (ANSWER: C, p. 460) 48)

The following ranking of ministries that interact with business depicts their relative power. The most powerful in this regard is: a) Ministry of Labor and Defense Agency b) Ministry of International Trade and Industry (MITI) and the Ministry of Finance c) Ministry of Foreign Affairs d) The Science and Technology Agency.

(ANSWER: B, p.458) 49)

Which of the following is not a characteristic of the Japanese judicial system? a) It is patterned after the adversarial system of the USA b) It has no common law c) Its civil laws are contained in codes and are strictly applied d) It is fashioned after the civil code systems of Continental Europe (ANSWER: A, p. 462) 50)

Political Exchange is a basic characteristic of the Japanese political system.

Which of the following practices is included in the Political Exchange? a) Clientistic exchange b) Reciprocal patronage c) United financial support d) All the above are examples of the political exchange practices in Japan (ANSWER: D, p. 464)

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Essay and Review Questions: 1)

State and explain some of the basic characteristics of the Japanese society and its culture. Draw some comparisons with the United States.

2)

Outline the features and components of the Japanese political system. Highlight the interaction among its different parts and the influence of cultural traits on the functioning of the system.

3)

The bureaucracy in Japan has its unique characteristics and functions. Describe these characteristics, the career path of a bureaucrat from the time of appointment to a ministry through retirement and beyond. Compare this with the USA’s bureaucratic system.

4)

Political Exchange in the Japanese political system has its uniqueness and functionality. Describe in some detail the framework of the concept, its four forms and the maze of inter-relationships and inter-dependencies.

5)

Many Americans marvel at the success of the Japanese economy and political system. They are also concerned with the recent setbacks in the Japanese economy. Write an essay describing the basic features of the systems, both its strengths and limitations. Draw a pattern of similarities and a pattern of differences with the American systems. Which of the Japanese characteristics are adaptable in the USA? Explain your reasoning when assessing the applicability of these features.

6)

You are an exchange student at Tokyo (Todai) University. You are asked by your friends in the United States and Germany to explain what the Japanese educational system, business climate, political environment, family structure, and peer relationships are like. Please send an international E-mail to all of your friends, answering their questions with comparisons to their countries.

7)

You have an internship with a state senator from California. She has asked you to do an analysis on the business-government relations in Japan and what the issues are for California businesses breaking into the Japanese marketplace. Please draft an analysis and set of recommendations for the senator and include what you think the future of trade with Japan will be.

8)

Compare and contrast the bureaucracies of the United States and Japan. Why do you think the roles, values, and attitudes towards them are so different? What are some of the similarities? Which would you prefer to work in and why?

9)

Compare and contrast the case of The Breakup of Nippon Telephone and Telegraph with the break up of AT&T. Be sure to analyze the process of decisionmaking, the role of government and the courts, and function of interest groups.

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10)

What are the relevant issues in the case of The Privatization of Japan Post?

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Chapter Fifteen: The Political Economy of the European Union True/False Questions: 1)

The European Union (EU) has enacted legislation to establish a single market with about 100 billion consumers.

(ANSWER: F, p.481) 2)

The European Union legislation allows for a free movement of people, goods, services and capital among its country members.

(ANSWER: T, p.481) 3) Bulgaria and Romania are the newest members of the EU. (ANSWER: T, p.481) 4)

The Treaty of Rome was a papal document that blessed the original formation of the European Union.

(ANSWER: F, p. 481) 5) Among the members of the EU are Austria, Denmark, and Ireland.

(ANSWER: T, p. 482) 6)

The 2000 Treaty of Nice provides a road map for the enlargement of the Union and in 2004 the EU admitted as may as 10 new members, including Cypress and Slovenia.

(ANSWER: T, p.482) 7)

Europeans labeled many of their economic problems in the 1970’s and 1980’s by a disease name, “Eurosclerosis.”

(ANSWER: T, p.482) 8)

The EU took two approaches to the removal of internal barriers to trade: harmonization and standardization.

(ANSWER: F, p.483) 9)

The members of the EU have coordinated and brought into line their various tax and fiscal approaches.

(ANSWER: F, p.483) 10)

The Maastricht Treaty is an example of the total harmonization of the European Union since all nations that signed the timetable for a common European currency supported all of its provisions.

(ANSWER: F, p. 483)

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11) Six member states agreed to establish a joint defense policy.

(ANSWER: F, p. 483) 12) One of the strongest supporters of the Maastricht Treaty has been Great Britain.

(ANSWER: F, p.483) 13) The European Commission is located in Berlin.

(ANSWER: F, p. 484) 14) Political integration is less difficult than monetary union.

(ANSWER: F, p.483) 15)

There are four principal institutions of the European Union that include the European Parliament and the European Court of Justice.

(ANSWER: T, p.484) 16)

The European Commission has twenty commissioners who are obliged to serve the interests of their own countries first and the Union second.

(ANSWER: F, p.484) 17)

Belgium, Greece, Hungary and Portugal have the largest voting weights on the Council of Ministers.

(ANSWER: F, p. 485) 18) The Council of Ministers is the principal legislative body of the European Union.

(ANSWER: T, p.485) 19)

The Council of Ministers can take three types of actions, such as regulations, that are legally binding on the member states and are enforced by the Commission.

(ANSWER: F, p.486) 20)

The European Parliament has 785 members directly elected by voters in the member states for five-year terms.

(ANSWER: T, p.486) 21)

The European Court of Justice can make decisions by majority vote, but dissenting opinions are not issued.

(ANSWER: T, p.487) 22) The EU has four basic procedures—consultation, co-decision, assent, and dissent.

(ANSWER: F, p.488) 23)

In both the USA and EU, the vast majority of the antitrust enforcement is done through private litigation.

(ANSWER: F, p. 490)

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24) Antitrust enforcement in the EU is done by the DG for competition.

(ANSWER: T, p.492) 25)

Mergers are regulated by the European Commission that bases its decisions on competition and shareholder value.

(ANSWER: F, p.493) 26) State-owned monopolies are a thing of past history within the European Union.

(ANSWER: F, p. 494).

27)

Compared to Japan and the U.S., the EU states provide considerably more subsidization for their firms.

(ANSWER: T, p.494) 28) There is no monitoring of state-aid; it is a private matter in each country.

(ANSWER: F, p.494) 29)

One reason that labor costs are high in the EU is that the labor force is well educated and highly skilled.

(ANSWER: T, p.495) 30)

Workers in both France and Germany worked much longer hours than their counterparts in the US. (ANSWER: F, p.495)

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Multiple Choice Questions: 31)

The European Union (EU) has enacted legislation establishing a single market to serve: a) About 500 million consumers. b) About 240 million people. c) About 170 million citizens of the 15-national countries. d) Over one billion citizens in the 15-nations comprising EU. (ANSWER: A, p.481)

32)

All of the following nations are members of the European Union except: a) Belgium. b) Spain. c) Norway. d) Sweden.

(ANSWER: C, p. 481) 33)

Which of the following countries has had the voters reject membership in the EU twice? a) Luxembourg b) Norway c) Portugal d) Italy (ANSWER: B, p.481) 34)

When did the Europeans recognize the need to increase trade and encourage political cooperation? a) After World War I b) After World War II c) The start of Third Reich d) After Vietnam (ANSWER: B, p.481) 35) VAT stands for what? a) Value Attendance Tariff b) Value Added Tax c) Victory At Tunis d) None are correct (ANSWER: B, p. 483)

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35)

What two approaches did the EU take to remove the internal barriers to trade? a) Harmonization and mutual recognition b) Harmonization and differentiation c) Mutual respect and total sameness d) State aids and deliberation (ANSWER: A, p.483)

37)

Through the Maastricht Treaty, the EU has agreed to: a) Establish the principle that each country in the EU would keep its currency and central bank. b) Leave each country the freedom to determine its exchange rate for its currency. c) Allow each country to decide the convertibility of its currencies in terms of international trade. d) Establish a common currency and an independent central bank.

(ANSWER: D, p.483) 38)

Which of the following is not one of the principal institutions of the European Commission? a) Council of Advisors b) Council of Ministers c) European Parliament d) European Court of Justice (ANSWER: A, p. 484) 39)

The Maastricht Treaty was signed in what year? a) 1992 b) 1945 c) 2000 d) 1996 (ANSWER: A, p.483) 40)

Who elects the members of the European Parliament? a) The voters of all the member nations vote for all representatives b) Voters in the member states c) The Court appoints the representatives d) The Commission (ANSWER: B, p.486) 41)

What committee represents labor, business, farmers, trades and other interests? a) Political and Labor b) Economic and Human Resources c) Economic and Social d) Labor and Social (ANSWER: C, p.487)

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42)

The European Court of Justice is located where? a) London b) Luxembourg c) Paris d) Brussels (ANSWER: B, p. 487) The Economic and Monetary Union is patterned after which country’s central bank? a) Sweden b) United Kingdom c) France d) Germany (ANSWER: D, p. 488) 43)

44)

What constitutes the centerpiece of competition policy? a) Antitrust law b) Social law c) Social justice law d) None of the above is the centerpiece (ANSWER: A, p. 490) 45)

__________ are subsidies paid by member state governments to industries or government-owned companies. a) Local aid b) State subsidies c) State grants d) EU loans (ANSWER: B, p. 494) 46)

What document provides a vision for the free circulation of labor and the rights to fair wages, improvement of living and working conditions, social security, free association and collective bargaining, vocational training and education, equal treatment for men and women, information, consultation and participation for workers, health protection and safety in the workplace, protection for children adolescents, and the elderly and protection for the disabled? a) Economic Charter b) Fairness Charter c) Social Democracy Charter d) Social Charter (ANSWER: D, p.494)

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47)

Compared to Europe, in the USA: a) Workweeks are longer. b) Paid vacations are shorter. c) Labor empowerment and protection is weaker. d) All the above are valid observations about the USA. (ANSWER: D, p.495) 48)

According to the OECD report, on an average Americans worked ____ hours in 2003. a) 1500 b) 1340 c) 1260 d) 1777 (ANSWER: D, p.495) 49)

In terms of nonmarket issues, which of the following is not seen as a problem at the EU level? a) Further political integration b) Tax policies to attract business c) Further reforms of the common agricultural policy d) Defense (ANSWER: B, p.496)

50)

What is the largest national interest organization in the EU that represents large companies? a) European Roundtable of Industrialists b) Commerce United c) Business of the EU d) Corporate Industrialists (ANSWER: A, p.499)

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Essay and Review Questions: 1)

Many students of international business do not understand the concept of the European Union, its components, the basic characteristics of its nation members or the demographics thereof. You have been asked to explain the EU. Write the outline of your lecture, giving some examples of the importance of the EU to the USA.

2)

Trace the evolution of the European Union from its inception after World War II to the present. Include in your essay the origins of the Single European Act (SEA), its mandates, and the approaches taken by the EU to remove the internal barriers to trade.

3)

Write a brief description of the functions of each of the four principal institutions of the European Community. Describe the structure of each in terms of organization and membership among the different member countries.

4)

The European Union’s nation members have agreed on specific policies to govern and/or regulate certain aspects of their economies and politics. Write detailed notes on each of the following policies. Give examples and outline any issues still under debate.

5)

What political, social, economic, and organizational impacts will new member admittance have on the existing members of the EU? How would you suggest that the new members be integrated into the existing structure? Are you for the expansion of the EU? Why or why not?

6)

You are a member of the United Kingdom’s delegation of European Union matters. How would you describe the positions of your country and why it has taken those positions? Do you think that the United Kingdom will continue to be a member and why or why not? Do you think the EU will be able to accomplish its goals with contention from member countries?

7)

Compare and contrast the institutions of the EU with the American political system. Be specific and use relevant examples in your analysis.

8)

Describe, discuss, analyze and critique the case of Aldeasa and the EU Duty Free Abolition (A).

9)

What are the key issues in the case of The European Union Carbon Tax and The European Union Data Protection Directive? Compare and contrast the two cases.

10)

Discuss and analyze the role of the emerging economic blocks such as the EU on the world economy as well as what the future might look like.

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Chapter Sixteen: China: History, Culture and Political Economy True/False Questions: 1) The population of China is 750,000 and stable.

(ANSWER: F, p. 517) 2) China joined the World Trade Organization in 2001.

(ANSWER: T, p. 517) China’s real growth in GDP has averaged nearly 12% annually since the opendoor policy began in 1978.

(ANSWER: F, p. 517) 3)

4)

China is an ancient country, with an organized rural society well over 10,000 years old.

(ANSWER: T, p. 518) 5) The governmental bureaucracy is more recent in China.

(ANSWER: F, p. 518) 6) By the early 1900’s, China was very modernized and well influenced by the West.

(ANSWER: F, p. 519) 7) Dr. Sun Yat-sen founded the Republic of China in 1911.

(ANSWER: T, p. 519) 8) Japan is one of China’s largest trading partners.

(ANSWER: F, 522) 9)

Deng Xiaoping assumed the leadership of China after the deaths of Mao and foreign minister Zhou Enlai and began many reforms and modernizations.

(ANSWER: T, p. 521) 10)

An important factor in understanding Chinese social and economic organizations is the country’s rich cultural heritage.

(ANSWER: T, p. 523) 11) The teachings of Confucianism are a key to understanding the Chinese.

(ANSWER: T, p. 523) 12) The family structure of a hierarchy is key in Chinese politics.

(ANSWER: T, p. 523)

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13)

Taoian behavioral norms display a strongly particularistic, as opposed to universal, inclination.

(ANSWER: F, p. 524) 14) Formal ties in China are called guanxi.

(ANSWER: F, p. 526) 15) Confucianism has a strong focus on group cohesion and solidarity.

(ANSWER: T, p. 526) 16)

The importance of guanxi is such that individuals must concern themselves with acquiring it.

(ANSWER: T, p. 526) 17)

Taoism has often been linked with the development and operation of capitalism in China and other Asian countries.

(ANSWER: F, p. 527) 18)

Commercial and political successes were closely linked in imperial China and still are.

(ANSWER: T, p. 527) 19) The Politburo is responsible for the ongoing administration of the CCP. (ANSWER: T, p. 529) 20)

In the CCP, democratic decision-making is its primary characteristic in accordance to the principles of democratic centralism.

(ANSWER: F, p. 529) 21) China’s paramount executive body is the Local Council.

(ANSWER: F, p. 530) 22) China has no tradition of an independent judiciary.

(ANSWER: T, p. 531) 23)

The state-owned enterprise, or SOE, represents the single most important type of company in China.

(ANSWER: T, p. 532) 24)

Private enterprises have flourished in the reform era, although their role in industrial production remains relatively small.

(ANSWER: T, p. 532) 25) SOE’s are the primary suppliers of social services.

(ANSWER: T, p. 532)

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26) SOE’s are incredibly efficient and effective.

(ANSWER: F, p. 533) In 1979 China established four “Special Economic Zones” to allow direct foreign investment.

(ANSWER: T, p. 533) 27)

28) Joint ventures are illegal in China.

(ANSWER: F, p. 533) 29) No foreign company is allowed wholly foreign-owned status in China.

(ANSWER: F, p. 533) 30) China is recognized as the leader for human rights in Asia.

(ANSWER: F, p. 535)

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Multiple Choice Questions: 31)

How many companies have set up operations in China? a) About 175 b) About 570 c) Thousands d) Tens of thousands (ANSWER: C, p. 517) 32)

What is the approximate population of China? a) 367 million b) 625 million c) 879 million d) Over 1.3 billion (ANSWER: D, 517) 33)

Ethnic Chinese are also known as the a) Wong b) Han c) Tsui d) Qin (ANSWER: B, p. 518) 34)

people.

Which of the following is not one of the three important schools that shaped Chinese philosophy? a) Daoism b) Shintoism c) Legalism d) Confucianism (ANSWER: B, p. 518) 35)

What are the periods of rule called in China? a) Dynasties b) Periods c) Segments d) Realms (ANSWER: A, p. 518) 36)

What is a danwei system? a) Social unit b) Economic unit c) Work unit d) Labor division (Answer: C, p. 521)

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Deng’s economic reforms were called the “Four Modernizations.” Which of the following is not one of them? a) Agriculture b) Industry c) Infrastructure d) Defense (ANSWER: C, p. 521) 37)

38)

All of the following except which one are elements of Confucianism? a) Hierarchy b) Moral Rectitude c) Deference d) Pride (ANSWER: D, p. 523) 39)

Which of the following is the basic theme of Confucian ethics? a) Self-awareness b) Self-cultivation c) Self-flagellation d) Self-consciousness (ANSWER: B, 523) 40)

The objectives of self-cultivation are two interrelated concepts: ren and li.

Translated into English they mean what? a) Life and harmony b) Humanity and harmony c) Humanity and propriety d) Property and humanity (ANSWER: C, p. 524) 41)

Regarding non-household matters, the family is to defer to which of the following? a) State b) Head of a house c) Head of a clan d) None are correct (ANSWER: A, p. 525) 42)

Informal personal ties in China are referred as what? a) Li b) Ren c) Guanxi d) Xoani (ANSWER: C, p. 526) 43)

Which of the following best defines China’s framework of operating as a nation?

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a) Democratic b) Structured pluralism c) Uniform d) Unitary (ANSWER: B, p. 527) 44)

Which of the two pairs of institutions in China are the relatively weaker in comparison? a) The Bureaucracy and the Judiciary b) The Bureaucracy and the Legislature c) The Party and the Bureaucracy d) The Legislature and the Judiciary (ANSWER: D, p. 528) 45)

Nominally, the highest authority in China is the National Party Congress. When not in session, authority passes to what institution? a) Central Committee b) Politburo c) National Party Congress d) People’s Liberation Army (ANSWER: A, p. 529) 46)

An SOE in China is a what? a) State Ordered Enterprise b) State Ordained Enterprise c) State Owned Enterprise d) State Operated Enterprise (ANSWER: C, p. 532) 47)

There were how many joint ventures operating in China in the mid-1990’s? a) 1000 b) 10,000 c) Over 100,000 d) 500,000 or more (ANSWER: C, p. 533) International concern about China’s human rights have centered on which of the following? a) Criminal justice system b) Persecution of ethnic and religious minorities c) Little tolerance of political dissidents d) All are correct.

(ANSWER: D, p.535) 48)

49)

In a report by Transparency International, China was ranked about where among 179 countries in terms of corruption, a problem as economic activity grew?

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a) 10th b) 20th c) 35th d) 72nd (ANSWER: D, p. 538) What has been China’s principal environmental concern? a) Global warming b) Domestic pollution c) Changes in water levels d) Changes in agricultural land (ANSWER: B, p. 539) 50)

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Essays and Review Questions: 1)

Compare and contrast the China of old with the new China. Choose any period to represent the old China. Use specific references in your analysis.

2)

You have been sent by your company to run a branch of your company’s operation in China. You are female, 32 years of age, possess an MBA from Harvard, are not married, are of African-American descent, love to take risks such as sky diving, and you are 5’ 11’. Discuss what issues, realities and problems you might face with both your employees and with the Chinese society.

3)

Trace the roots of Chinese economic theory and apply those ideas to modern day China.

4)

Compare and contrast the USA and China in terms of politics, family, business, relationships, religion, history, technology, social dealings, futures and political systems.

5)

You are asked to show a delegation of Chinese around your company. Your company is Levi-Strauss, which left China due to its human rights policies. How would you handle the situation?

6)

You are doing a project comparing the average American family to the average Chinese family. What differences and similarities might you note? How would this analysis impact employment in either country?

7)

Describe the likely scenario for China in the year 2010.

8)

China is an ancient land with quite set ideas and ways of proceeding. You are to figure out how you could help China become more democratic if it so chooses.

9)

Describe the social and cultural heritage of China and how it impacts business.

10)

Discuss and analyze the key issues in the cases of Wugang and the Reform of State-Owned Enterprises and Google in China.

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Chapter Seventeen: Emerging Markets True/False Questions: More than half of the world’s population lives in emerging market countries..

(ANSWER: F, p.549) 1)

Ninety percent of the world’s population growth will be in emerging market countries over the next thirty years.

(ANSWER: T, p.549) 2)

3) Emerging market countries are all alike, so making generalizations is easy..

(ANSWER: F, p.549) 4)

The principles of nonmarket strategy for operating in democracies cannot simply be transported to emerging markets..

(ANSWER: T, p.549) 5)

Opportunities for successful participation in an emerging markets economy depend not only on the characteristics of the particular markets in which a firm would participate but also on the characteristics of the country..

(ANSWER: T, p.549) 6)

According to the Freedom House classification of individual freedoms, Azerbaijan would be a country that is at the bottom of the “Not Free” group.

(ANSWER: F, p.550) 7)

Hong Kong and Singapore had the highest scores in the Heritage Foundation/Wall Street Journal Index of Economic Freedom.

(ANSWER: T, p.550) According to the Index of Economic Freedom, “A systematic analysis of the 10 freedoms has demonstrated again this year that economic freedom is the key to creating an environment that allows a vicious cycle of entrepreneurship, innovation, and sustained economic growth and development to flourish.”

(ANSWER: F, p.550) 8)

9) The 2008 Index of Economic Freedom covered 257 countries.

(ANSWER: F, p.550) 10) Corruption has a corrosive effect on a country and its people.

(ANSWER: T, p.550) 11)

Corruption distorts social activity.

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(ANSWER: F, p. 550) 12) Corruption is typically hard to observe, difficult to measure, and hard to eradicate.

(ANSWER: T, p.550) 13)

The best known measure of the extent of corruption in a country is the Index of Economic Freedom.

(ANSWER: F, p. 550) Transparency International’s Corruption Perceptions Index (CPI) is based on objective data.

(ANSWER: F, p.550) 14)

In 2007, the United States headed the list of Transparency International’s Corruption Perceptions Index as the least corrupt country.

(ANSWER: F, p.550) 15)

Zimbabwe was one of the countries that scored very low on CountryWatch’s political risk index..

(ANSWER: T, p.551) 16)

17) In CountryWatch’s political risk index, economic risk is one of the criteria used.

(ANSWER: T, p.551) Venezuela came last in IMD of Switzerland’s assessment of competitiveness of countries.

(ANSWER: T, p.551) 18)

19)

Culture can be important, not only shaping the opportunities and risks in a country but also for the likelihood that a company can implement its market strategy.

(ANSWER: T, p.551) 20)

Lincoln Electric found that its system of piece-rate compensation worked well only in India and Poland.

(ANSWER: F, p.551) 21) Opportunities in emerging markets are of two basic types.

(ANSWER: T, p. 551) 22)

One type of opportunity in emerging markets is to use a country to export goods to better developed countries and markets.

(ANSWER: T, p.551) According to McKinsey & Co., India’s middle class is projected to increase from 50 million to 125 million by 2025.

(ANSWER: F, p. 551) 23)

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24)

A firm with superior know-how can also acquire a local firm supplying the domestic market and operate it more efficiently or better serve the market.

(ANSWER: T, p.552) 25)

Most of the emerging market countries share the same opposition to genetically modified (GM) agriculture found in much of Europe.

(ANSWER: F, p. 553) 26)

The traditional business approach to addressing problems of poverty and illness involved voluntary donations to those in need.

(ANSWER: T, p.553) 27) The fair trade movement was begun to improve the lives of poor farmers and workers trapped by nonmarket conditions.

(ANSWER: F, p.554) 28)

The fair trade system attempts to intervene directly on both the demand and supply sides of the market by coordinating the flow of consumer revenue to participating producers.

(ANSWER: T, p. 554) 29) The fair trade movement began in the U.S. in 1988.

(ANSWER: F, p.554) 30) Whole Foods Markets participates in the fair trade program.

(ANSWER: F, p. 556)

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Multiple Choice Questions: What percent of the world’s population lives in emerging market countries? a) 65 b) 50 c) 60 d) 75 (ANSWER: D, p.549) 31)

What percent of the world’s population growth is expected from emerging market countries over the next thirty years? a) 60 b) 70 c) 80 d) 90 (ANSWER: D, p.549) 32)

Which one of these countries fell in the “Not Free” group in Freedom House’s index of individual freedoms? a) Chile b) Peru c) Brazil d) Turkmenistan (ANSWER: D, p.549) 33)

34)

Which of these countries had the highest score in the Heritage Foundation/Wall Street Journal Index of Economic Freedom? a) United States b) United Kingdom c) Hong Kong d) Germany (ANSWER: C, p.550) 35)

Which one of these was NOT considered in developing the Heritage Foundation/Wall Street Journal Index of Economic Freedom?: a) Business freedom b) Government size c) property rights d) All of the above were considered (ANSWER: D, p.550)

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36)

_______ has a corrosive effect on a country and its people a) Corruption b) Bilateral trade c) Exports d) Imports (ANSWER: A, p. 550) 37)

In this chapter the CPI is an acronym for a) Consumer Price Index b) Consumer Perceptions Index c) Corruption Perceptions Index d) Corruption Preference Index (ANSWER: C, p.550) In 2007, the country that headed TI’s CPI list was a) Denmark b) United States c) Australia d) Canada (ANSWER: A, p.550) 38)

Which country had the highest score in CountryWatch’s index of political risk? a) Austria b) United States c) Australia d) Germany (ANSWER: A, p.551) 39)

Which country led in overall competitiveness in IMD’s assessment? a) Germany b) Australia c) United Kingdom d) United States (ANSWER: D, p.551) 40)

41) In the case of Lincoln Electric, which were the two countries where its piece-rate compensation approach worked? a) China and Poland b) Singapore and Hong Kong c) Australia and New Zealand d) Germany and France (ANSWER: A, p.551) 42)

About how many consumers are there at the “bottom of the pyramid?” a) 200 million b) 100 million

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c) 250 million d) 4 billion (ANSWER: D, p.553) 43) The fair trade movement was begun to improve the lives of poor farmers and workers trapped by _____ conditions. a) political b) social c) nonmarket d) market (ANSWER: D, p. 554) 44)

The fair trade system attempts to intervene directly on both the ____ and the ____ sides of the market. a) production, distribution b) branded, non-branded c) demand, supply d) regulated, unregulated (ANSWER: C, p.554) 45)

The fair trade movement began in a) Australia b) the United Kingdom c) the United States d) the Netherlands (ANSWER: D, p.554) 46)

How many wings did the fair trade system have? a) 1 b) 2 c) 3 d) 4 (ANSWER: B, p. 555)

47)

Which of the following companies does NOT participate in the fair trade program? a) Dunkin Donuts b) Procter & Gamble c) Whole Foods Markets d) Kraft (ANSWER: C, p. 556)

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48)

Which of the following statements are true about risks in emerging markets? a) Risks are greater in magnitude in emerging markets b) Foreign risks arise from a broader range of factors than do domestic risks c) Risks can depend on the country of origin d) All of the above (ANSWER: D, p.558) 49)

Which one of the following is NOT a factor in assessing foreign risks? a) Business practices b) Ethnic differences c) Religious differences d) Ideology differences (ANSWER: A, p. 558)

50)

Which one of the following is NOT a type of risk in emerging markets? a) Political megalomania b) Price control c) Coups d) Business competition (ANSWER: D, pp. 559-560)

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Essay and Review Questions: 1)

You are the newly appointed VP of International Markets for a consumer products organization. Write a brief note identifying the attractiveness as well as challenges of moving into emerging markets for the company.

2)

Examine the factors used in developing various indices – individual freedoms, competitiveness, etc. --- and state whether you agree or disagree with the factors used.

3)

Discuss the topic of international trade from the perspective of emerging markets.

4)

Was Whole Foods Market right in not participating in the fair trade program?

5)

What were the key issues in the Tesco PLC in India case?

6)

Assume that you are working for a large conglomerate and your organization is looking at getting into microfinance. Using the Social Entrepreneurship: Banco Compartamos case, make an argument either for or against microfinance as a business opportunity.

7)

Select a country in the emerging markets and prepare a detailed risk assessment of the country.

.

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Chapter Eighteen: The Political Economy of International Trade Policy True/False Questions: The Smith-Hatch Act of 1930 contributed to the depth and duration of the great depression by increasing tariffs dramatically.

(ANSWER: F, p.574) 1)

2)

Trade policy consists of agreements among countries, domestic laws pertaining to international trade, and procedures for administering those laws and resolving disputes.

(ANSWER: T, p.574) 3) International trade is a result of cultural and social forces.

(ANSWER: F, p.574) 4)

A number of regional trade agreements such as the North American Free Trade Agreement (NAFTA) and the treaties that brought about the European Union have reduced barriers and increased trade.

(ANSWER: T, p.574) 5)

International trade policy consists primarily of the agreements among countries. It has nothing to do with domestic laws.

(ANSWER: F, p.574) 6)

The competitive theory of international trade is based on the gains from trade and the advantage that can be demonstrated when two countries either determine the level of their trade through bargaining or trade goods in a competitive market.

(ANSWER: F, p.575) 7)

The law of competitive advantage is valid if there are differences in the price of labor, namely wages between two or more countries.

(ANSWER: F, p.575) 8)

According to the comparative advantage law, the United States, with its high cost of labor, would be better off concentrating on labor-intensive industry.

(ANSWER: F, p.576) 9)

With its abundance of labor and low wages, China would be better off specializing in capital-intensive industries in order to benefit from the law of comparative advantage.

(ANSWER: F, p.576)

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10)

The assumptions of perfectly competitive markets are prerequisites for the validity of the economic theory of comparative advantage.

(ANSWER: T, p.578) 11)

The economic theory of international trade and the law of comparative advantage project a decrease in the aggregate welfare if governments interfere in international or domestic markets.

(ANSWER: T, p. 578) 12)

The domestic politics of international trade are asymmetric due to the magnitude and concentration of the consequences of trade liberalization.

(ANSWER: T, p.580) 13)

There is compelling evidence that a strategic trade policy, which allows government intervention in domestic and international markets, is warranted under conditions of imperfect competition.

(ANSWER: T, pp. 579) 14) The domestic politics of international trade are typically symmetric.

(ANSWER: F, p.580) 15)

At the conclusion of World War I, a group of countries led by the United States established the International Trade Organization (ITO).

(ANSWER: F, p.581) 16)

After World War II, the US Senate approved the International Trade Organization by the 2/3 margin it required to be ratified.

(ANSWER: F, p.581) 17)

The focus of the Tokyo Round of GATT was agriculture, a set of issues that were addressed and settled.

(ANSWER: F, p.581) 18)

The central principle of the WTO agreements is manifested in the most favored nation (MFN) requirement that each signatory accord all the other signatories the most favorable terms for trade provided to any country.

(ANSWER: T, p.582) 19)

The General Agreement on Trade in Services (GATS) covers all services and provides for MFN and national treatment.

(ANSWER: T, p.582) 20)

TRIPS, or Trade Reasonable Interest Program Standards, provides narrow protection, but is included in the WTO dispute settlement systems over property rights.

(ANSWER: F, p.582)

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21) The automotive industry has been the sector with the greatest distortions in trade.

(ANSWER: F, p. 583) 22)

The Kennedy Round of GATT negotiations incorporated provisions allowing domestic laws to include antidumping measures.

(ANSWER: T, p.584) 23)

A major achievement of the Uruguay Round was to establish the WTO Deregulation Systems Body (DSB) to hear disputes and issue binding orders to resolve them.

(ANSWER: F, p. 584) 24)

To continue to improve world trade, the EU does not give favor to overseas territories and former colonies of its member nations.

(ANSWER: F, p.585) 25)

Unfortunately, the Uruguay Round and the follow-up agreements were not successful and the WTO dispute settlement process has been unproductive.

(ANSWER: F, p. 586) 26) In 2004, the United States concluded a free trade agreement with Costa Rica.

(ANSWER: F, p.588) 27) Latin America has four regional trading areas.

(ANSWER: T, p.588) The U.S .Constitution gives the President the power “to regulate commerce with foreign nations” and to “lay and collect duties.”

(ANSWER: F, p. 588) 28)

29)

The major components of U.S. trade law are embodied in the Trade Act of 1974 and the Tariff Act of 1930.

(ANSWER: T, p.589) 30)

The politics of protectionism is client-centered and, in the case of the WTO negotiations and NAFTA, the politics of protectionism is embedded in minority politics.

(ANSWER: F, p. 589)

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Multiple Choice Questions: 31)

The United States has supported reductions in tariffs and trade barriers at least since the: a) Establishment of the United Nations in 1945. b) Korean War of the 1950's. c) Vietnam War of the 1960's. d) Smoot-Hawley Act of 1930.

(ANSWER: D, p.574) 32)

After World War II, the reductions in trade barriers were primarily the result of which country’s dominance? a) Great Britain b) Sweden c) USSR d) United States (ANSWER: D, p.574) 33)

Trade policy consists of what? a) United Nations charter and regulations b) International agreements among the countries involved c) Domestic laws pertaining to international trade d) Both international agreements among countries and domestic laws pertaining to international trade (ANSWER: D, p.574) 34)

The competitive theory of international trade is based on what? a) Capitalism and Adam Smith’s theories b) Gains from domestic production c) Gains from trade d) Gains from investments (ANSWER: C, p.575) 35)

Gains from international trade are possible when: a) One country can produce Good A more efficiently than another country, which can produce another good more efficiently than the first country can. b) One country is absolutely more efficient than the other in producing both goods c) The law of comparative advantage applies d) All of the above conditions would generate gains (ANSWER: D, p.576)

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36)

In the United States, with its high cost of labor, the law of comparative advantage would be beneficial for the USA under what conditions? a) USA imports labor intensive goods from China b) USA imports capital-intensive goods from Japan c) Both labor-intensive goods from China and capital-intensive goods from Japan are imported d) Stop producing capital-intensive goods locally (ANSWER: A, pp. 576) 37)

The theory of competitive advantage is built on which of the following assumptions? a) Incomplete information b) Differentiated goods c) Perfectly competitive markets d) Only consumers act as if they were price-takers (ANSWER: C, p.578) 38)

What is the politics of international trade driven by? a) Domestic politics b) International trade agreements c) International political in fights d) Results of prior relationships such as war (ANSWER: A, p.579) 39)

If the costs from trade policy are widely distributed and the benefits from trade policy are widely distributed, the results are what? a) Trade liberalization and entrepreneurial politics b) Protectionism and client politics c) Trade policy and majoritarian politics d) Interest group politics and protectionism (ANSWER: A, p.580) 40)

Approximately how many countries are members of the WTO? a) 45 b) 87 c) 103 d) 152 (ANSWER: D, p.581) 41)

The central principle of the WTO agreements is embodied in which requirement? a) Most Favored Nation b) Advanced Nation Status c) Developed Nation Status d) Democratic Free Nation Status (ANSWER: A, p.582)

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42)

In which sector has there been the greatest distortion in trade? a) Transportation b) Steel c) Electronics d) Agriculture (ANSWER: D, p.583)

43)

Which of the following is not a regional trading area in Latin America? a) Central American Common Market b) Caricom c) Mercour d) Belladonna (ANSWER: D, p. 588) 44)

In US trade policy, all but which of the following are the institutional arenas? a) The Office of the President b) The cabinet departments c) The Supreme Court d) The regulatory agencies (ANSWER: C, p.589) 45)

What are the two kinds of conditions that protection applies to? a) Predatory trade practices and undue competition b) Predatory trade practices and countries that have horrible human rights policies c) Relative efficiency and unfair labor laws d) Predatory practices and relative efficiency (ANSWER: D, p.590) 46)

Who bears the cost of protectionism? a) Businesses b) Consumers c) Governments d) National trade organizations (ANSWER: B, p. 591)

What was the focus of ‘unfair’ dumping when there was a worldwide overcapacity of this product, causing the loss of 325,000 jobs in the U.S.? a) Rice b) Corn c) Steel d) Cars (ANSWER: C, p. 592) 47)

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48)

Which of the following is not a member of the North American Free Trade Agreement? a) Mexico b) Canada c) Costa Rica d) U.S. (ANSWER: C, p.594) 49)

Which of the following is the only correct statement about the provisions of NAFTA? a) It is a free trade agreement b) It is a market integration agreement c) It covers the movement of people d) It covers the harmonization of domestic laws (ANSWER: A, pp. 594)

50)

What are the two commissions that were established by NAFTA to monitor environmental and labor developments? a) War on Polluters and Free Labor Movement b) Negotiation on the Environment and the Union Cooperation c) Retaliation for Dumping on the Environment and Labor Movement d) Environmental Cooperation and Labor Cooperation (ANSWER: D, p. 595)

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Essay and Review Questions: 1)

Explain diagrammatically the international trade policy process. Trace a trade situation through the process.

2)

Compare the competitive theory and the strategic trade theory. What are: premises of each? Similarities? Differences. How might these premises change in the 21st century by 2010?

3)

Discuss the topic of international trade from the perspective of the developing nations.

4)

Despite the efforts of GATT and the other Rounds of discussions among the member countries, there remain some serious issues up for debate. Describe the four basic outstanding issues, such as: a) Trade in services b) Intellectual property rights c) Agriculture d) Steel What could and should be done about each of these issues?

5)

NAFTA has now been operating for a number of years. Other nations from Central and South America will be joining soon. What impact would the expansion of NAFTA have on domestic and international politics?

6)

Evaluate the future of international trade until the year 2010. What do you think will be the continuing issues and why? What countries do you think will be the leaders and why? What will be the role of the United States, China, and others?

7)

Describe, discuss, critique and evaluate the U.S. trade policy in some detail, including Sections 201, the Escape Clause, Section 301, Presidential Retaliation and Section 731, Antidumping.

8)

Discuss and analyze the case Cemex and Antidumping. What are the major issues?

What trade agreement is involved? How would you describe the U.S. Cement industry? Compare and contrast Mexico’s cement industry to the U.S.’s. What legal issues are involved? What were Cemex’s market and nonmarket strategies?

How would you resolve the problems and why?

9)

Discuss the Compulsory Licensing, Thailand, and Abbott Laboratories case covering who, what, where, when, and why.

10)

Describe, analyze, evaluate and critique the case, Sophis Networks and Encryption Export Controls (A). Apply the knowledge and skill you have learned from the chapter in your analysis.

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Chapter Nineteen: Corporate Social Responsibility True/False Questions: Successful performance for firms requires only respect for the laws of the country and effective responses to the needs of the customers.

(ANSWER: F, p.619) 1)

2)

The stance a company takes on social responsibility is voted on by its shareholders.

(ANSWER: F, p.619) 3)

An individual firm may have earned a reputation for operating in a manner consistent with society’s interests, but reputations can be fragile.

(ANSWER: T, p.620) 4) Public trust in large firms is typically high.

(ANSWER: F, p.620) 5)

Because of the trust gap, one criticism can negate several positive accomplishments by a firm (ANSWER: T, p.621) 6)

Economic theory identifies the maximization of stakeholder value as the objective that provides the strongest incentives.

(ANSWER: F, p.621) 7)

Milton Friedman argued that the social responsibility of business is to maximize profits.

(ANSWER: T, p. 621) 8)

Any conception of the social responsibility of business must include compliance with just laws.

(ANSWER: T, p. 625) 9) Corporate social activities may not be costly (ANSWER: T, p.625)

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10)

In principle, managerial capitalism could be more efficient than market capitalism.

(ANSWER: T, p.627) 11)

A firm interacts with a number of constituencies, including employees, suppliers, customers, the communities in which it operates, and with the public in general.

(ANSWER: T, p.627) 12) Market capitalism is typically less efficient than managerial capitalism.

(ANSWER: F, p.627) Stakeholders are those constituents who have a “stake” in their relationship with the firm.

(ANSWER: T, p.627) 13)

14)

In principle, managerial capitalism could be more profitable than market capitalism.

(ANSWER: F, p.627) 15)

To summarize Milton Friedman: the business of business is business, within the laws and with the maximization of profits.

(ANSWER: T, p.621) 16)

To Friedman, a corporation is a voluntary association of groups to maximize the value of their property and to further the economic well being of society as a whole.

(ANSWER: F, p.622) 17)

The Business Roundtable is made up of social responsibility vice presidents of the major corporations employing about 10 million in the US. (ANSWER: F, p.628) 18)

From the viewpoint of the Business Roundtable, shareholders such as employees have primary claim on corporate attention and customers have a secondary claim.

(ANSWER: F, p.628)

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19)

For most corporations, input from shareholders concerning social responsibility is part of the decision process and, in fact, several boards have a variety of shareholders on their boards of directors.

(ANSWER: F, p.629) 20)

Some business leaders argue that there are societal objectives that can be achieved only through corporate action.

(ANSWER: T, p.629) 21)

Many businesses do not support a notion of corporate social responsibility as voluntary self-regulation.

(ANSWER: F, p. 630) 22)

Corporate social responsibility focuses on the responsibility of a firm for social performance.

(ANSWER: T, p.630) 23)

Just like corporate social responsibility, corporate social performance is always motivated by moral considerations.

(ANSWER: F, p.630) 24)

There seems to be a slightly negative correlation between corporate social performance (CSP) and corporate financial performance (CFP), proving Friedman right in his views.

(ANSWER: F, p.635) 25)

Individuals as employees could reward a firm through higher productivity motivated by the social activities of the firm.

(ANSWER: T, p.635) 26) Accountability is not an issue for firms that adopt social responsibilities.

(ANSWER: F, p. 637) 27) Many firms now conduct their own assessments of social performance.

(ANSWER: T, p.637) 28) It is impossible to perform a social audit of a firm’s social responsibility efforts.

(ANSWER: F, p. 637) 29)

Boards of Directors cannot be held personally liable for the mistakes the corporation makes as the court ruled in Smith v. van Gorkom (1985).

(ANSWER: F, p.638) 30)

A number of investment funds, led by CalPers, have brought pressure to bear on firms for improved financial performance by filing shareholder resolutions, threatening to sell their shares, and directly pressuring management.

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(ANSWER: T, p.640) Multiple Choice Questions: 31)

Successful performance requires firms to give serious consideration to all of the following factors, except: a) Respect and abiding by the laws. b) Responsiveness to their customers demands. c) Protecting shareholders interests. d) Accepting all interest groups demands.

(ANSWER: D, p.619) 32)

The public trust in large firms is a) high b) steady c) low d) increasing (ANSWER: C, p.620) 33)

From the efficiency perspective, Adam Smith concluded what? a) The surest way to achieve well-being is to place resources in the hands of a responsible government b) Markets are the best means of directing scarce resources to society's needs c) It is better to rely on the good will of individuals d) The corporate form is not important to achieve economic efficiency (ANSWER: B, p. 621) 34)

According to Adam Smith, when markets are competitive, the pursuit of market value maximization results in which of the following? a) Economic efficiency b) No trade deficit c) A level competitive field d) High valuation on money (ANSWER: A, p.621) 35)

Which of the following best describes the relationship of market capitalism with managerial capitalism? a) They coexist b) They are in constant conflict c) They are contrary to each other d) They are the same (ANSWER: A, p.627)

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36)

Managerial capitalism may be more efficient than market capitalism. Why is this? a) It allows the accumulation of resources by not distributing the earnings to shareholders b) It allows for the allocation of retained earnings without borrowing from the capital markets c) Managers may keep information within the company, the divulgence of which may hurt the corporation d) Each one of the above arguments favors managerial capitalism as being more efficient (ANSWER: D, p.627) 37)

The reliance on managers for the allocation of resources is called a) market capitalism b) corporate social responsibility c) managerial capitalism d) managerial altruism (ANSWER: C, p. 627) 38)

The reliance on markets to direct the allocation of resources is called a) market capitalism b) corporate social responsibility c) managerial capitalism d) managerial altruism (ANSWER: A, p. 627) 39)

Milton Friedman argues that the responsibility of business is to: a) Conduct the business in accordance with the owners’ desires. b) Make as much money as possible. c) Conform to the basic rules of society both embodied in law and in ethical customs. d) All the above are considered as business responsibilities according to Friedman.

(ANSWER: D, p.621)

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40)

The role of government, according to Milton Friedman, is what? a) To impose taxes and determine expenditure b) The judiciary is to mediate disputes c) To equate social and private costs when private bargaining does not result in economic efficiency d) Friedman considers all the above as appropriate role of the government from his perspective (ANSWER: D, p. 663) 41)

According to Milton Friedman, the objective of a corporation is the maximization of its a) taxes b) profits c) trust d) capital (ANSWER: B, p. 621) 42)

The following represents the Business Roundtable Statement on social responsibility with one exception. The exception is what? a) Business is to serve public interest as well as private profit b) The corporation is both an economically and socially viable entity c) Shareholders are principals, not only the providers of risk capital d) The corporation is an entity whose existence depends on society's support (ANSWER: C, p.629) 43)

CFP is the acronym for a) Corporate Functional Performance b) Chairman of Finance Policy c) Corporate Financial Performance d) Corporate Functional Policy (ANSWER: C, p. 635) 44)

_______ continues to be an issue for firms that adopt social responsibilities. a) Profit b) Management c) Morality d) Accountability (ANSWER: D, p. 637)

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45)

An approach for dealing with social accountability is demonstrated through which of the following? a) Polling of customers b) Placing shareholders on the board of directors c) Conducting independent social audits d) Opening company trade secrets to shareholders (ANSWER: C, p.637) 46)

The common law standard used by the courts to judge the discharge of obligations of the board of directors is called what? a) Business assessment evaluation b) Business judgment rule c) Business common sense ethical standards d) Business rights and rules (ANSWER: B, p. 638)

47)

The Business Roundtable has recommended a number of changes to corporate governance on boards of directors. Which of the following is not recommended? a) Focus on strategic decisions and the social impacts of these decisions b) Severely limit the numbers of outside board members c) Place more women and minorities on boards d) Select, regularly evaluate, and if necessary, replace the chief executive officer (ANSWER: B, p. 639) 48)

Increasingly, ________ investors are an important force in the market for control. a) Individual b) Investment clubs c) Institutional d) Union (ANSWER: C, p. 640) 49)

The market for control supervises the actions of management and directors through all but which of the following mechanisms? a) Mergers b) Acquisitions c) Lawsuits d) Hostile takeovers (ANSWER: C, p.640)

50)

CalPERS is an example of a(n) a) institutional investor b) Business Roundtable member c) corporate social responsibility auditor d) all of the above (ANSWER: A, p. 640)

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Essay and Review Questions: 1)

Review and explain the classical view of the role of business in society. What are the premises of this school of thought? What are the good aspects and flaws of this approach?

2)

What is the role of business in the society according to the social responsibility perspective? What is the role of government according to this approach? What is the individual’s role?

3)

Milton Friedman has his own school of thought concerning the role of business in society. Discuss and analyze his premises and the implications for corporations.

What is the role of government according to Friedman? Outline the inherent contradictions in his arguments.

4)

Discuss, giving examples, the Business Roundtable statement on social responsibility and its stakeholders’ cornerstone. Which concept do you advocate: the classical, Friedman's or the stakeholders? Explain your reasons.

5)

FOR A TERM PAPER OR CLASS PROJECT: The topic is corporate governance.

First, review some of the views concerning the functions and responsibilities of board members and directors.

Second, select a corporation in your area. Write a detailed report on its structure, the composition of its Board, and the specific duties of the board members according to the corporate charter, the discretionary power of top management, the social responsibilities of the corporations and how the board has assumed them.

Third, state and discuss your recommendations for this corporation to improve their performance regarding their assumed social responsibilities.

6)

The Board of Directors of VTB has selected your consulting firm to prepare an independent social audit of its company and to explain the concept of social responsibility and how you go about preparing a social audit to a group of Japanese and German business representatives. Using what you know of these two countries, develop a contrast and compare presentation for the Board and your visitors.

7)

Using the concepts presented in the chapter, discuss, analyze and evaluate the case of The Collapse of Enron: Governance and Social Responsibility.

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8)

The newspapers and business magazines are full of stories of corporate fraud, misuse of corporate power, boards of directors not doing there jobs and a host of other issues addressed in this chapter. Using what you know about the Enron’s, WorldCom’s, and other indicted companies, analyze and discuss the social responsibility concerns here from the perspective of Friedman and the Business Roundtable. Be specific in your response.

9)

What are the most important issues in this chapter? Describe, analyze and critique the most important issues and take a stance from your own perspective on what our nation needs to do about corporate social responsibility.

10)

Analyze the case of Playing by the Rules?.

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Chapter Twenty: Ethics Systems: Utilitarianism True/False Questions: The content of corporate social responsibility is provided by ethics..

(ANSWER: T, p. 653) 1)

2) A single ethics framework encompasses all the moral intuitions of people.

(ANSWER: F, p.653) 3) Unilateralism is one of the ethical systems used.

(ANSWER: F, p.653) 4) Ethics and its application in management constitute a broad and deep subject.

(ANSWER: T, p.653) 5) The principal consequentialist ethics system is utilitarianism.

(ANSWER: T, p.653) 6) Ethics and its application in management constitute a narrow subject.

(ANSWER: F, p.653) 7) Ethics has several managerial roles.

(ANSWER: T, p.653) 8)

One of the managerial functions provided by studying ethics is that it presents and analyzes different principles for evaluating managerial alternatives and formulating policies.

(ANSWER: T, p.653) 9)

Ethics, as a systematic approach to moral judgments based on reason, is based on moral standards that are dependent on the declarations of governments and its other authoritative bodies and agencies.

(ANSWER: F, p.654) 10)

Moral philosophers have proposed an array of ethics systems without arriving at consensus on a single system..

(ANSWER: T, p.654) 11)

The focus of ethics is on issues and concerns that involve direct mutual advantage, such as insider trading.

(ANSWER: F, p.654)

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12)

Business ethics is the application of ethics principles to issues that happen in the conduct of business.

(ANSWER: T, p.655) 13) Business ethics is a separate discipline.

(ANSWER: F, p.655) 14)

Ethics is principled reasoning while casuistry is an approach to moral practice that seeks to balance competing considerations by making exceptions to principles in specific cases.

(ANSWER: T, p. 656) 15)

In the appropriate method for applying ethics, one first generates decision alternatives.

(ANSWER: F, p. 657) 16)

The concern of moral philosophy is with inducing moral principles and standards from axioms or self-evident principles.

(ANSWER: F, p. 659) 17)

Utilitarianism is an ethical system whereby the social benefits of the selected alternatives exceed their social costs.

(ANSWER: T, p. 660) 18)

Utilitarianism focuses on the number of people who are better or worse off because of an action, that is, the greatest good for the greatest number.

(ANSWER: F, p. 660) 19) Utilitarianism principles basically coincide with self-interest.

(ANSWER: F, p. 660) 20)

A role of government is to provide institutions that align private and societal wellbeing.

(ANSWER: T, p. 661) 21)

Because utilitarianism combines the preferences of individuals, it does not take into account unselfish preferences.

(ANSWER: F, p. 662) 22) Utilitarianism also takes into account altruistic preferences.

(ANSWER: T, p. 662) 23)

Utilitarianism may be applied in two forms: act utilitarianism and role utilitarianism.

(ANSWER: F, p.664)

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24)

Act utilitarianism focuses on a general rule of behavior to be followed by all individuals in all similar situations.

(ANSWER: T, p.664) 25)

In a specific situation where deceiving rather than dealing with a person honestly would bring benefits that exceed costs, act utilitarianism would dictate that you not be dishonest.

(ANSWER: F, p. 664) 26)

Rule utilitarianism encourages an individual to think beyond the specific situation and entertain a more general set of situations with similar characteristics.

(ANSWER: T, p.664) The “rule utilitarianism” centers on the evaluation of the consequences of a particular action in a particular situation.

(ANSWER: F, p. 664) 27)

28) Rights may be classified as intrinsic or instrumental.

(ANSWER: T, p.666) 29) Utilitarianism is a consequentialalist system.

(ANSWER: T, p.667) 30)

One criticism of utilitarianism is that it does not give enough attention to intrinsic rights and liberties.

(ANSWER: T, 667)

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Multiple Choice Questions: 31)

The content of corporate social responsibility is provided by: a) law. b) rules. c) values. d) ethics (ANSWER: D, p.653) 32)

Which of the following is NOT an ethics system? a) Commensalism b) Utilitarianism c) Rights d) Justice.

(ANSWER: A, p.653) 33)

The principal consequentialist ethics system is: a) commensalism. b) rights. c) justice. d) utilitarianism (ANSWER: D, p.653) 34)

Ethics has a number of applied roles in management. Which of the following are among those roles? a) Basis of decision making b) Basis for policy making c) Basis for evaluating moral claims d) All of the above are correct (ANSWER: D, p. 653) 35)

Ethics is a systematic approach to moral reasoning based on all but which one of the following? a) Reason b) Emotion c) Analysis d) Reflection (ANSWER: B, p. 654)

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36)

Which of the following statements is the most accurate concerning business ethics? a) Business ethics is the same as personal ethics b) Business ethics is a separate discipline c) Business ethics is not a separate discipline d) Business ethics is an oxymoron (ANSWER: C, p. 655) 37) In terms of ethics and private interests, which of the following is most true? a) Ethical behavior is always rewarding b) Ethical behavior does not always make an individual or business better off c) Ethical behavior is its own best reward d) Ethical behavior is universal (ANSWER: B, p. 655) 38)

Ethics involves an inquiry into whether a proposition has ___ _____. a) International roots b) Moral status c) Moral history d) Historical perspective (ANSWER: B, p. 655) 39)

In principle, what is ethics independent of in making decisions such as to provide delivery service in a high crime area? a) Racial analysis b) Ethical principles c) Politics d) Personal values (ANSWER: C, p. 655) 40)

What is defined by the following: an approach to moral practice that seeks to balance competing considerations by making exceptions to principles in particular cases? a) Utilitarianism b) Kantianism c) Balanced reasoning d) Casuistry (ANSWER: D, p. 656) 41)

The first step in the methodology of appropriately applied ethics is what? a) Managerial decision-making b) Evaluate alternatives c) Make decision d) Identify decision alternatives (ANSWER: D, p.657)

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42)

What is moral philosophy concerned with? a) Deducing moral standards and principles from axioms b) Deducing moral universal ideas from situations c) Inducing moral standards from principles of action d) Inducing moral ideas from standards (ANSWER: A, p.659) 43)

What does political philosophy focus on? a) Traditional politics b) Business politics c) Societal politics d) Institutional politics (ANSWER: D, p. 659) 44)

Utilitarianism is best understood as a special form of what moral philosophy? a) Consequentialist b) Subsequentialist c) Universalism d) Revisionist (ANSWER: A, p. 660) 45)

In a consequentialist system, an alternative is moral under what conditions? a) Everyone is better off with the alternative b) If it produces a better outcome than the alternatives c) If it is a good idea for society d) If the organization likes the alternative best (ANSWER: B, p. 660) 46)

What is nearly the direct opposite of utilitarianism? a) The common good b) The organizational best interest c) National interest d) Self-interest (ANSWER: D, p. 661) 47)

Utilitarianism, as a system of ethics, is based on which of the following premise(s)? a) It is equivalent of serving one's self-interest b) It focuses on the number of people who benefit, and who would be worse off by taking a certain action c) It advocates the greatest good for the greatest number d) Consequences are to be evaluated in terms of the aggregated preferences of individuals.

(ANSWER: D, p.662)

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“Act utilitarianism” centers on which of the following? a) General rules of behavior b) Evaluation of consequences for general acts c) Evaluation of consequences of a particular action in a particular situation d) Acts that are mutually advantageous to society (ANSWER: C, p.664) 48)

49)

utilitarianism focuses on a general rule of behavior to be followed by all individuals in all similar situations. a) Aristotelian b) Batch c) Method d) Rule (ANSWER: D, p. 664) 50)

_______ utilitarianism focuses on the consequences of a particular action in a particular situation and prescribes the action that yields the greatest aggregate well-being for everyone affected by that action. a) Act b) Method c) Platonic d) Millian (ANSWER: A, p. 664)

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Essay and Review Questions: 1)

Explain in some detail to a student who has never studied ethics or philosophy what ethics is and is not. What is an appropriate methodology of ethical analysis?

Differentiate ethics from other areas. such as values. Give some specific examples.

2)

Discuss the ethical principles guiding American business in the 21st century. What are the problems? How might the information provided in this chapter assist managers and shareholders who want to rebuild or revitalize ethics in business?

What should and/or can be the role of government in providing ethical guidance to business?

3)

Utilitarianism has a relatively long history that goes back to Jeremy Bentham and John Stuart Mill. Explain the concept, its premises and assumptions, its two forms and applications. What are the basic criticisms of this concept? Give relevant examples.

4)

On an ethical issue such as abortion, war, racism, or the death penalty, apply a cost/benefit analysis. Be specific in your analysis.

5)

After reviewing all the ethical systems and classifications, what is your ethical system? What are its specific premises and assumptions? What are some applications to specific managerial issues or situations that you may encounter in your career as a manager? What are some of the problems with your conceptualization?

6)

Explain and analyze why utilitarianism is not as it is often described: the greatest good for the greatest number.

7)

You are new in your job as the Human Resource director of a medium sized company. You have inherited the job from someone who held it for 30-plus years and was not trained in human resources. On the first day of the job, you have a steady stream of people with complaints about sexual harassment, unequal pay issues, racial slurs, gender discrimination and a host of other issues. Discuss and analyze the practical application of ethics to such matters.

8)

Write a new guide to ethical behavior in the 21st century for individuals, businesses and society.

9)

What are the primary ethical issues in the case of Pricing the Norplant System?

How would the utilitarians look at the issue and why? Which perspective would you take and why? Use specific examples.

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10)

You are a staff assistant in a large corporation’s human resources management department. You have been given the assignment to research using the Norplant system as being potentially covered under the company’s health insurance policy.

Explore the ethical issues involved and make recommendations to management.

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Chapter Twenty One: Ethics Systems: Rights and Justice True/False Questions: 1)

Consequentialist ethics systems focus on the good and evaluate the good in terms of individuals’ preferences for consequences.

(ANSWER: T, p. 681) 2)

Basic liberties such as freedom of speech and rights such as equal opportunity are fundamental concepts that express considerations of freedom, autonomy, and basic equality.

(ANSWER: T, p. 681) 3) Ethics systems are classified as teleological or theoretical.

(ANSWER: F, p. 681) 4)

Teleological or consequentialist systems hold that moral right takes precedence over the good and can be evaluated by considerations independent of, or in addition to, consequences.

(ANSWER: F, p. 681) 5)

Both teleological and deontological systems are ultimately concerted with the evaluation of actions.

(ANSWER: T, p. 682) 6)

If you apply both teleological and deontological systems to the same situation, while different in approach, the same evaluations of actions will happen.

(ANSWER: F, p. 682) 7) Rights may be derived form moral principles only.

(ANSWER: F, p. 682) 8) Rights can be established by private agreements, such as contracts.

(ANSWER: T, p. 682) 9) Rights are only positive.

(ANSWER: F, p. 682) 10) Both moral rights and legislated rights can be enforced.

(ANSWER: F, p. 682) 11) Rights and entitlements evolve over time as a driver of change.

(ANSWER: F, p. 683)

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12) Kantian maxims are also referred to as moral rules.

(ANSWER: T, p. 683) 13)

The foundations of Kantian maxims and his theory of morality are freedom and inductive logic.

(ANSWER: F, p. 683) The key to understanding Kantian approaches is to remember that the “good” is emphasized over the “right.”

(ANSWER: F, p. 684) 14)

15)

Because Kant was concerned with the irrationality of humans, he reasoned that even though maxims should be universal, it was impossible given humans irrationality.

(ANSWER: F, p. 684) 16) The moral rights of Kantian ethics are extrinsic.

(ANSWER: F, p. 684) A categorical imperative under a Kantian system would be as follows: “Treat individuals always as autonomous ends, and so never solely as means.”

(ANSWER: T, p. 684) 17)

18) Rights consistent with Kant’s system include freedoms of speech and conscience.

(ANSWER: T, p. 685) 19)

Using the ethical approach of Kant, the employer who fires people based on race or some other arbitrary reason other than performance would be unethical.

(ANSWER: T, p. 685) 20) Rights may be instrumental or extrinsic.

(ANSWER: F, p. 685) 21)

Claims that people have economic rights to housing or food are claims about instrumental rights intended to improve their well-being.

(ANSWER: T, p. 686) 22) Intrinsic rights require extensive justification if they are to prevail.

(ANSWER: F, p. 686) 23)

Instrumental rights are not to be respected because they do not contribute to achieving better consequences.

(ANSWER: F, p. 686)

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24)

One difference between intrinsic and instrumental rights is that in one people must be treated as ends and in the other they can be treated as a means.

(ANSWER: T, p. 687) 25)

A fundamental criticism of deontological systems is that they fail to explain why a principle or right should be respected.

(ANSWER: T, p. 687) A criticism of Kant’s system is that it clearly indicates whether or when one right has priority over another, such as the right to privacy in the workplace.

(ANSWER: F, p. 687) 26)

27) A granted right is established by moral consensus or by government.

(ANSWER: T, p. 689) 28) A granted right is accompanied by a clear assignment of the corresponding duty..

(ANSWER: T, p. 689) 29)

An example of having no moral standing and having a claimed right is to label genetically engineered foods.

(ANSWER: F, p. 689) 30) Rights analysis is a component of managerial decision-making.

(ANSWER: T, p. 691)

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Multiple Choice Questions: 31)

Which of the following is not part of the methodology of rights analysis? a) Identify the rights claimed and their claimed moral bases b) Determine which claimed right satisfies moral standards c) Identify trends in moral philosophy d) Choose the action that does best in terms of established priorities (ANSWER: C, p. 691) 32)

Which of the following best summarizes what Kant would say about conflicts among rights? a) Intrinsic rights established under the categorical imperative do not conflict b) Extrinsic rights are the central issue in settling conflicts c) Individuals have not claim on rights d) Rights are only important if individuals all agree to them (ANSWER: A, p. 685) 33)

In applying Kantian reasoning to the insurance industry, which is the most accurate among the following statements? a) All insurances agencies must insure everyone b) No insurance agencies should insure the poor c) Individuals have no granted right to life insurance so insurance companies need not provide insurance to everyone d) Insurance is a right for all (ANSWER: C, p. 691) 34)

Because moral and granted rights can be in conflict in managerial settings, what do companies need to do? a) Prioritize them b) Survey shareholders c) Set fluid boundaries d) Have the Board of Directors set all policy (ANSWER: A, p. 692) 35)

What are the possible bases for rights? a) Moral only b) Moral and legal c) Legal only d) None of the above is correct (ANSWER: B, p. 692)

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36)

What are the two rights that are protected when the right to privacy is claimed on moral basis in terms of integrity tests? a) Fair opportunity and liberty b) Liberty and human dignity c) Employer rights and liberty d) Fair opportunity and human dignity (ANSWER: B, p. 692) 37)

If the right to hire is granted on moral/legal ground in terms of the interests of rights protected in integrity tests, what are the actions consistent with the right? a) Test where honesty is important to job performance b) Test all prospective employees c) Do not test at all d) Test only on the basis of age (ANSWER: A, p. 692) 38)

___________ justice is concerned with whether and how a person should be compensated for an injustice. a) Personal b) Compensatory c) Constitutional d) Religious (ANSWER: B, p. 699) 39)

What best describes the support for equal employment opportunity? a) Few support it, but strongly and vocally b) Almost all ethical systems support it c) Only half of the ethical systems support it d) There is little ethical support for it (ANSWER: B, p. 694) 40)

In terms of concern about illegal discrimination in an employment relationship, what is the focus primarily on? a) Calculated discrimination b) Unintentional racism c) Employment practices and policies d) Intentional racism and sexism (ANSWER: C, p. 695)

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41)

Which of the following best describes what the courts can look at in discrimination suits? a) Only Title 7 of the 1964 Civil Rights Act b) Title 7 and prior laws that can even go back to the 1800’s c) Title 7 and Affirmative Action d) Title 7 and Title 9 of the 1964 Civil Rights Act (ANSWER: B, p. 695) 42)

What act bans discrimination on the basis of disability in virtually all aspects of employment? a) Rehabilitation Act of 1973 b) The Americans with Handicaps Act of 1987 c) The Americans with Disabilities Act of 1990 d) There is no such act (ANSWER: C, p. 696) 43)

What does liberalism emphasize? a) Liberty of groups b) The liberty of society c) The liberty of individuals d) International liberty (ANSWER: C, p. 697) According to Nozick’s conclusion about rights, what is just is whatever results from what? a) Voluntary actions of individuals b) Voluntary acts of government c) Legislative mandates d) National ethical debates (ANSWER: A, p. 697) 44)

45)

What are justice theories concerned with? a) How different individuals stand relative to each other on dimensions b) How individuals relate in society in relationship to the moral laws c) How groups relate relative to each other on dimensions d) How societies relate to one another on different dimensions (ANSWER: A, p. 698) 46)

There are three principal categories of justice theories. Which of the following is not one of them? a) Distributive b) Retributive c) Redistributive d) Compensatory (ANSWER: C, p. 698)

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47)

What is the theory of distributive justice concerned with? a) The distribution of the rewards and burdens of social interaction b) The distribution of rights and wrongs in society c) The redistribution of rights to those once deprived of them d) The distribution of goods in society in a fair and equitable manner (ANSWER: A, p. 698) 48)

What is compensatory justice concerned with? a) Justice tolerance b) Justice intolerance c) Whether and how a person should be compensated for an injustice d) None are correct (ANSWER: C, p. 699) Rawls’s theory of justice is based on all but which of the following theorist’s ideas on social contract? a) Kant b) Rousseau c) Locke d) Descartes (ANSWER: D, p. 700) 49)

50)

Rawls provides a theory of ______ justice. a) Distributive b) Compensatory c) Retributive d) Attributive (ANSWER: A, p. 700)

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Essays and Review Questions: 1)

What is ethics? Why is it important to individuals, organizations, managers and society? What does ethics mean to you?

2)

Compare and contrast Kant and Rawls.

3)

Apply Rawls’s and Kant’s theories to Affirmative Action. Take a position and argue it after you have explained what would come about depending on whose theory you applied to AA.

4)

Using the information supplied in the case of Genetic Testing in the Workplace, prepare a report to your Human Resources department on how to ethically handle the situation depending on what the ethical principles of the firm are.

5)

What are the key issues in the case of Citigroup and Subprime Lending?

6)

What do the concepts of rights and justice mean to you? Why do you think the way you do and how does it impact your day-to-day existence? How will it impact what type of work you do and where you work or will it not impact your work?

7)

Explain the following: ethics systems are classified as teleological or deontological. Use specific examples in your explanation.

8)

Describe, analyze, and critique Kantian maxims or moral rules.

9)

Develop a new ethical theory for the 21st century.

10)

Discuss the application of the ethical theories presented in this chapter to both equal employment opportunity and affirmative action. Use specifics in your analysis.

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Chapter Twenty-Two: Implementing Ethics Systems True/False Questions: Corporate statements of social responsibility and codes of ethics are rare.

(ANSWER: F, p.720) 1)

2)

The positive application of ethics includes the formulation of policies to be used in the screening stage.

(ANSWER: F, p.720) 3) All codes and statements of responsibility are little more than public relations..

(ANSWER: F, p.720) 4) Many companies have established the position of “ethics officer.”

(ANSWER: T, p.720) 5)

Some codes of ethics and statements of responsibility are little more than public relations.

(ANSWER: T, p.720) 6)

Although nonmarket action is often motivated by self-interest, on many issues it is motivated by moral concerns.

(ANSWER: T, pp.722) 7) Moral concerns are the same as self-interest.

(ANSWER: F, p.722) 8)

The link between moral concerns and nonmarket action is mediated by the cost of taking individual and collective action..

(ANSWER: T, p.723) 9) Moral concerns are not the same as self-interest.

(ANSWER: F, p.722) 10) Although it is difficult to assess the cost of generating individual and collective action, it is reasonable to expect the cost to be higher when people with similar concerns are involved.

(ANSWER: F, p.723) 11)

One frequently used approach to implementing corporate social responsibility is the “triple bottom line.”

(ANSWER: T, p.724)

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12)

The social responsibilities of business are identified by ethics principles and reasoning based on those principles.

(ANSWER: T, p.724) Wal-Mart’s credo is one of the oldest and best-followed statements of commitment in American business.

(ANSWER: F, p.730) 13)

14)

One approach to measuring corporate social performance is the balanced scorecard.

(ANSWER: T, p.725) 15)

Some companies have extended the balanced scorecard to include financial and corporate performance.

(ANSWER: F, p.725) Citibank’s balanced scorecard includes four components instead of the traditional two.

(ANSWER: F, p.725) 16)

17) BP’s concept of social responsibility was well received by activists groups.

(ANSWER: F, p.727) 18)

Wal-Mart belatedly recognized that it had focused on only one primary stakeholder—its shareholders.

(ANSWER: F, p. 728) 19) When you think of The Body Shop, think profiteering.

(ANSWER: F, p.732) 20)

Codes of conduct help to guide behavior in the conduct of their duties in corporations.

(ANSWER: T, p. 733) 21)

In such a competitive world, even Proctor & Gamble is justified in allowing its employees to obtain information by going through the trash of the competitors such as Unilever PLC. (ANSWER: F, p.734)

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22) Some companies, such as Enron, use the Golden Rule as a guide to their basic principles of behavioral conduct for employees.

(ANSWER: F, p.734) 23)

As part of its principles, Cummins Engine states that it neither practices nor condones any activity that will not stand the most rigorous public ethical examination.

(ANSWER: T, p. 735) 24) Paternalism refers to actions taken to harm a person .

(ANSWER: F, p. 735) 25) Paternalism is a moral wrong.

(ANSWER: T, p.735) 26)

Unethical behavior has a number of sources; some are idiosyncratic to the particular individuals involved.

(ANSWER: T, p.738) 27) Paternalism can be a difficult issue in the implementation of ethics principles.

(ANSWER: T, p.735) 28) Paternalism is seen as a moral right.

(ANSWER: F, p.735) 29) Unbridled political action in campaigns is ethical because it is seen as a necessity for survival from one political leader to another.

(ANSWER: F, p.736) 30)

Utilitarianism views political rights as instrumental and calls for their exercise only to minimize aggregate well-being.

(ANSWER: F, p. 736)

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Multiple Choice Questions: 31)

Which of the following is true regarding statements of social responsibility and codes of ethics? a) They have become commonplace b) They are rare c) They are found more in Europe than in the U.S. d) All of the above (ANSWER: A, p.720) 32)

In the Conference Board Survey, what percentage of the members of boards of directors participated in creating codes of ethics? a) 14 b) 62 c) 78 d) 47 (ANSWER: C, p.720) 33)

Implementation of ethical systems requires all of the following measures, except: a) Providing guidance for the types of situations likely to be encountered by employees b) Developing and supporting personal integrity c) Developing corporate financial standards d) None of the above (ANSWER: C, p.720) 34)

Although nonmarket action is often motivated by self-interest, on many issues it is motivated by: a) Public interest. b) Selfishness. c) Civil rights. d) Moral concerns.

(ANSWER: D, p. 722) 35)

The link between moral concerns and nonmarket action is ______ by the cost of taking individual and collective action. a) Moderated b) Mediated c) Subjugated d) Controlled (ANSWER: B, p. 723)

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36)

Which petroleum company presented in the text has taken an active role in working with Greenpeace and others on the issue of global warming? a) Shell b) Exxon c) British Petroleum d) Sunoco (ANSWER: C, p.727) 37)

The spread of codes of ethics and statements of social responsibility is likely due to three factors, excluding which of the following? a) Belief by management that their firms should be accountable for conduct beyond profit maximization b) Defensive motivation to avoid nonmarket action by interest groups and others c) Defend against and pre-empt government regulation d) Offensive image advantage must be established (ANSWER: D, p.724) 38)

Which of the following shareholders is ranked as first priority in the Johnson & Johnson Credo? a) Stockholders b) Shareholders in general c) Medical personnel d) Employees (ANSWER: C, p.731) 39)

The Business Roundtable identifies the following components of an ethics and standards of conduct program. Which item is not one of the recommended components? a) Fundamental Honesty and Adherence to the law b) Employment practices c) Protection of the environment d) Individual Codes of conduct (ANSWER: D, p.733) All of the following are part of The Business Roundtable’s set of topics to be covered by company codes of ethics and standards of conduct except: a) Conflicts of interest. b) Financial reporting. c) Supplier relationships. d) Stock options.

(ANSWER: D, p.733) 40)

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The Cummins Engine Company’s basic principle is a version of which of the following? a) Greek philosophy b) Roman ethics c) Golden Rule d) Way of Tao (ANSWER: C, p.734) 41)

42)

Paternalism refers to actions or rules of behavior taken to benefit a person without that person's consent. Thus, which of the following cases would be considered paternalistic? a) An American citizen for whom somebody else made a decision on his/her behalf without consent b) An individual who was denied the opportunity to make choices that would further his/her interests c) One's action does not have that person's past, present or immediately forthcoming consent d) All the above actions are considered paternalistic (ANSWER: D, p. 735) 43)

Who in this list has the right to engage in nonmarket activity in the U.S.? a) Firms b) Interest groups c) Individuals d) All are correct answers (ANSWER: D, p. 736) 44)

Paternalism is a _____ wrong. a) political b) moral c) corporate d) systemic (ANSWER: B, p. 794) 45)

Which among the following can be sources of unethical behavior? a) Idiosyncrasies of people b) Functions of the managerial setting c) Policies of a firm d) All are correct (ANSWER: D, p. 738)

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46)

Unethical behavior can result from too _____a focus on duties imposed by the _____. a) Broad; company b) Narrow; law c) Narrow; company policy d) Broad; law (ANSWER: B, p. 738) 47)

______ provides minimum restraints on behavior. a) The law b) A conscience c) Reading ethical tracts d) None are correct (ANSWER: A, p. 739) 48)

What is rarely a sufficient insurance of ethical behavior? a) Personal integrity b) Interpersonal values c) Constitutional rights d) Conscience (ANSWER: A, p. 739) 49)

What are the two principal causes of unethical behavior? a) Conscience and upbringing b) Intolerance and bad genes c) Ignorance and conscience d) Temptation and pressure (ANSWER: D, p. 738) 50)

Which of the following companies has had a great deal of problems with racism by employees toward customers? a) McDonald’s b) Denny’s c) Levi Strauss d) Johnson & Johnson (ANSWER: B, p. 740)

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Essay and Review Questions: 1)

Develop an approach, or a framework, for the analysis of moral determinants of nonmarket behavior. Apply your approach to a specific issue of your choice.

Explain the outcomes or action suggested based on your analysis.

2)

Managers do suffer from many tensions in the implementation of ethics principles. State and explain five of these tensions, their sources and their implications for decision-making. Give specific examples.

3)

Select four corporations and discuss their programs for implementing their respective social responsibilities. Critique some of their practices and assess their effectiveness in reaching their professed goals.

4)

You have been assigned the honor of writing the document outlining the ethical principles and code of conduct for XYZ International Corporation. Using the outline suggested by the Business Roundtable group, write the documents. Make sure to include the policies and procedures to guarantee compliance with your code.

5)

Select, describe and explain five sources of unethical behavior that you have noticed in your career as a manager or line employee. How did you deal with such behavior? What was the outcome of each? Write your own code of ethics by which you abide.

6)

Compare and contrast the ethical approaches of BP, Levi-Strauss, H-P and Cummins. Be specific in your analysis.

7)

Describe, discuss, analyze and evaluate the case of Denny’s and Customer Service. Use concepts from the chapter to frame your analysis.

8)

What are the ethical and moral issues facing the U.S. in the 21st century? What are the management issues? How would you address these issues? Give specifics in your analysis.

10)

Develop an ethical code of conduct for your university or place of employment.

Be specific and draw from points in the chapter to support your arguments.

11)

You are a human resources and ethics consultant to Denny’s. How would you approach the company in terms of such human resources issues as hiring, firing, training, performance evaluations, and diversity? Develop an approach using the information and concepts in the chapter.

12)

Discuss what you think it would be like to be the Ethics and Social Responsibility Officer in Silicon Valley or New York City.

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Chapter Twenty-Three: Ethics Issues in International Business True/False Questions: 1) In an age of globalization, it is lucky that all ethical systems are compatible.

(ANSWER: F, p. 749) 2)

The World Bank (2004) reported that from 1980 to 2003, per capita real gross domestic product in many countries in sub-Saharan Africa increased substantially.

(ANSWER: F, p.749) 3) Ethical systems are not intended to be universally applicable.

(ANSWER: F, p.749) 4)

Interactions among nations and foreign firms are regulated by one set of international law.

(ANSWER: F, p.750) 5)

International law consists of several components, including national laws pertaining to foreign persons and entities, intergovernmental treaties and actions of international bodies such as the United Nations.

(ANSWER: T, p. 750) 6)

Examples of treaties and agreements include the Sarbanes-Oxley Act, and the required government approval for the acquisition by a foreign firm of any U.S. firm essential to national defense.

(ANSWER: F, p.750) 7)

International law differs from domestic law because sanctions may not be credible and enforcement is often left to individual nations.

(ANSWER: T, p.750) 8)

Corruption is a fact in many nations and therefore, practices within a country pose both legal and ethical dilemmas.

(ANSWER: T, p.751) 9)

Corporations that operate in countries other than where they have their headquarters are subject to the laws of both their home country and their host countries.

(ANSWER: T, p.751) 10)

Since the laws of the host country generally govern business of foreign companies in that country, these laws may be contrary to the laws applied in the home country where a company is domiciled.

(ANSWER: T, p.751) 1

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11)

In the 1980’s Pakistan was the model for ethical behavior and remains as such in the 21st century.

(ANSWER: F, p.751) 12)

A way to define cultural relativism is that appropriate behavior in a country or its laws and customs rule culture.

(ANSWER: T, p.752) 13) Ethical principles are supposed to be universal rather than culturally determined.

(ANSWER: T, p.752) 14)

Ethics requires that firms as well as individuals not simply accept existing customs or prevailing practices in a country.

(ANSWER: T, p.751) 15)

Donaldson identifies two fundamental conflicts between moral absolutes and local traditions and context: the conflict of relative development and the conflict of cultural traditions.

(ANSWER: T, p. 752) 16)

Donaldson concludes that not all intercultural comparisons of values are meaningless.

(ANSWER: F, p.752) 17)

Levi Strauss solved its dilemma in Bangladesh by leaving the country, a moral victory for child labor.

(ANSWER: F, p.753) 18)

According to Donaldson, among the guidelines for ethical leadership is the exercise of moral imagination.

(ANSWER: T, p.752) 19)

Among the minimal set of rights that Donaldson notes is the freedom of physical movement.

(ANSWER: T, p. 752) 20)

Issues are more complex when people do not have the means to protect their rights and advance their interests.

(ANSWER: T, p.752) Facebook’s “Human Rights Production Standards” is highly regarded and followed by companies such as Nike.

(ANSWER: F, p.754) 21)

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22)

Levi Strauss got embroiled in a labor problem involving slavery in Saipan and revised its Global Sourcing Guidelines due to this problem.

(ANSWER: T, p 754) 23)

Poverty, lack of education, and inadequate health care situations make operating in developed nations difficult.

(ANSWER: F, p.755) 24)

Under the principles of Calabresi and Melemad, when a decision needs to be made, you need to ask yourself which party is in the best position to induce others to take actions that will improve the difference between social benefits and costs.

(ANSWER: T, p. 755) 25)

Distributive justice principles call for relieving the economic burdens of the poor rather than contributing to their burdens.

(ANSWER: T, p.756) 26)

The Clinton administration was heavily involved in looking into the abuses in foreign sweatshops used by American companies and the current Bush administration has also vigorously followed this approach given the administration’s great support of labor and employees over employers.

(ANSWER: F, p.758) 27)

IBM has been roundly criticized for not joining the Fair Labor Association that monitors labor practices abroad.

(ANSWER: F, p.759) 28)

The Caux Round Table Principles of Business set forth both obligations and values derived from the western concept of human dignity and the Chinese concept of kyosei, or acting in the common good.

(ANSWER: F, p.761) 29) A bribe is intended to corrupt the behavior of the recipient.

(ANSWER: T, p.761) 30) From the perspective of utilitarian analysis, bribery is good because it does not distort economic activities away from those that produce the greatest well-being.

(ANSWER: F, p.761)

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Multiple Choice Questions: 31)

The capability of different countries to deal with ethical issues and concerns is limited by what? a) The United Nations charters b) The World Bank regulations c) Its poverty, corruption, legal system and society d) The International Monetary Fund regulations (ANSWER: C, p.749) 32)

Ethical systems are intended to be what? a) Tailored to each country b) Compatible with each country's culture c) A function of the country's social and moral systems d) Universal—that is, they apply to all countries (ANSWER: D, p.749) 33)

Treaties and agreements regulating interactions among nations include: a) USA Foreign Corrupt Practices Act (FCPA). b) International Monetary Fund or IMF. c) The required US government approval for the acquisition by a foreign firm of a U.S. firm essential to national security. d) Official boycott by the USA of Cuba.

(ANSWER: B, p.750) 34)

Actions of international bodies include all of the following except which of the following? a) UN response to Iraq’s invasion of Kuwait b) Law of the Heavens c) UN Convention on Contracts for the International Sale of Goods d) Law of the Seas (ANSWER: B, p.750) 35)

International law compares to domestic law in which of the following ways? a) Same as b) Different from c) Totally resemble each other d) Only a few countries differ from Anglo-Saxon common law (ANSWER: B, p.750)

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36)

What country estimated that bribes amounted to $200 million annually? a) China b) Taiwan c) Brazil d) Indonesia (ANSWER: D, p.751) According to Sen, about countries and cultures “hide more than they reveal”? a) Stories b) Specific evaluations c) Generalizations d) None are correct answers (ANSWER: C, p. 752) 37)

38)

Which of the following is not among the minimal set of rights proposed by Donaldson? a) Freedom of physical movement b) Fair trial c) Minimal education d) Right to join a union (ANSWER: D, p. 753) 39)

Some ethics issues arise not from the actions of individuals and firms, but instead from what? a) The edicts of rulers b) Local laws c) International treaties d) The policies of countries (ANSWER: D, p. 754) Which country’s one-child-per-family law is viewed by many people as violating basic human rights? a) Bangladesh b) India c) Switzerland d) China (ANSWER: D, p.754) 40)

Using Kant’s moral rules applied to the Lockheed payment problem, all of the following are conclusions except which of the following? a) Bribery is not reversible b) Bribery treats the recipient of the bribe as an end c) The rules of bribery are not universalizable d) Bribery treats the recipient as a means (ANSWER: B, p. 762) 41)

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42)

The Lockheed vice president used the following arguments to justify the bribe of 12 million dollars paid to the Japanese in 1977, except which one? a) They would provide Lockheed workers with jobs b) The action was legal under the American law at that time c) The action was legal under the Japanese law at that time d) The action was an acceptable practice in Japan.

(ANSWER: C, p.763) 43)

Which of the following factors contributes to the complexity of doing business in developing countries? a) Ethical issues faced in host countries are different b) There are basic cultural differences c) The laws, practices, and ethical principles may be conflicting with those available in home countries d) Each of the above is a contributing factor (ANSWER: D, p.755) 44)

Increasingly, American companies seek foreign cheaper labor, but there is not always smooth sailing. Many issues, such as child labor, need to be monitored and managed. Which of the following is a group deeply concerned with monitoring these issues? a) Union of Needletrade, Industrial and Textile Employees (UNITE) b) Union of Child Labor Advocates c) Ethics in Developing Nations Association d) There are no such bodies (ANSWER: A, p. 758) Standards of compliance concerning labor in suppliers’ factories are monitored by what? a) Fair Labor and Standards Work Group b) World Health Organization c) World of Workers’ United d) Fair Labor Association (ANSWER: D, p. 759) 45)

46)

The Foreign Corruption Practices Act (FPCA) makes bribery of foreign officials, political parties, candidates for office and public international organizations what? a) A moral affront b) Criminal offense c) Civil offense d) Unethical (ANSWER: B, p. 766)

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47)

The Omnibus Trade and Competitiveness Act of 1988 amended the FCPA in all of the following ways except which one? a) Altered some language about third parties b) A payment to a foreign individual became illegal under the act if it was illegal in the foreign country c) If a payment were illegal in a foreign nation, the defendant could not use it as legality in his or her defense d) Language was clarified to indicate that payments securing performance of routine government actions were not illegal (ANSWER: C. p. 766)

48) What concepts of higher order standards do Cummins guides meet? a) Kantian and utilitarianism b) Kantian and Cartesian c) Utilitarianism and relativism d) None of the above (ANSWER: A, p. 768) 49)

What is the rule for a corrupt payment in the Cummins guidelines? a) If it influences the agent’s decisions b) If it is not known to the principal c) Both a and b d) Neither a nor b (ANSWER: C, p. 768) 50) The United States estimated that its companies lost ______ of dollars a year in sales because of bribes paid by companies from other countries. a) billions b) millions c) thousands d) None are correct (ANSWER: A, p. 770)

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Essay and Review Questions: 1)

Cite and explain relevant international laws and agreements that affect international business. Give specific examples.

2)

Donaldson argued that all intercultural comparisons are meaningless. Others argue that understanding and comparing cultures is a must for the USA to be competitive in a global economy. Debate both points of view. What do you think?

Explain your reasoning giving some examples.

3)

For many managers who venture overseas to do business in the global marketplace, the challenge of facing some questionable practices and different ethical principles can be overwhelming. Give some specific examples of these challenges.

4)

You are a new representative with Reebok. You are given the assignment to explain Reebok’s international policies over the last years. Write a history, explanation and analysis to share with stockholders.

5)

FOR POSSIBLE CLASS PROJECT OR EXTRA ASSIGNMENT: Select one developing country to study carefully and act as the resident expert on that country.

Write a detailed report including at least these aspects: a) Basic demographic and economic information b) The importance of this country to the U.S.A. c) The cultural traits of the citizens of the country d) The business practices of doing business in the country e) The potential conflict between norms and practices in this country and in the USA f) Your code of conduct to do business successfully in that country without breaking any USA laws or regulations.

6)

Discuss, analyze and explain the issues and concerns in the case, Complications in Marnera.

7)

Discuss, analyze, evaluate, and critique the issues in the evolving case of Corporate American Ethics in the 21st Century.

8)

What are the ethical issues marketing infant formula in developing countries?

Who has the responsibility in this case? What are the principles that should guide marketing? What are the ethical complexities in the situation? What role are research and science playing? Is there a parallel case you can cite which might raise similar problems?

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9)

Select an issue of interest to you that involves ethical issues in international business. Using the chapter as a framework and guide, prepare an analysis for an industry of your choice.

10)

Discuss, analyze, evaluate, and critique case of Siemens: Anatomy of Bribery.

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