BAM 406

Business and Society
Text: Business and Its Environment
6th Edition, 2010 ISBN-10: 0136083927

Authors: Publisher:

David P. Baron

Pearson Prentice Hall

700 North Main Street, Santa Ana, CA 92701
07/09

Phone: 714-547-9625

Fax: 714-547-5777

Study Guide

Business and Society
Message From the President

W

elcome to California Coast University. I hope you will find this course interesting and useful throughout your career.

This course was designed to meet the unique needs of students like you who are both highly motivated and capable of completing a degree program through distance learning. Our faculty and administration have been involved in distance learning for almost thirty years and understand the characteristics common to successful students in this unique educational environment. This course was prepared by CCU faculty members who are not only outstanding educators, but who have real world experience as well. They have prepared these guidelines to help you successfully complete your educational goals and to get the most from your distance learning experience. Again, we hope that you will find this course both helpful and motivating. We send our best wishes as you work toward the completion of your degree. Sincerely,

Thomas M. Neal President

iii

All rights reserved. No part of this book may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying, recording, or by any information storage and retrieval system without written permission from the publisher, except for the inclusion of brief quotation in review. Copyright © 2008 by California Coast University First Printing 2002

The Study Guide The Study Guide was designed to help you understand the material in the textbook and master the course content. To successfully complete the examinations. government. and private arena. and government regulatory models will all be discussed. 3 Semester Units of Credit Upon successful completion of this course. and regulations of business within the public. Understand the role of the media. Know the term “corporate citizenship” and describe the framework for corporate citizenship. reacts to. and special interest groups in the corporate marketplace today. Business and Its Environment 6th Edition. you will need the textbook. Each Study Guide chapter corresponds to a chapter in the textbook. pluralistic social system model. or you may purchase the textbook from other sources. Socioeconomic model. lobbyists. Discuss the politics. Several Internet sources are included in the Student Handbook. students will be able to: • • • • Understand the strategy and environment of the market and nonmarket environment. economics. power-responsibility model. cost-benefit model.Business and Society Syllabus Course Number Course Title Catalog Description BAM406 Business and Society This course discusses how business functions in. Units of Credit Course Goals Learning Resources Textbook: Supplementary Material vi . You may rent the textbook from the Library. 2010 David P. Baron Pearson Prentice Hall ISBN-10: 0136083927 All course examinations are based on the contents of the textbook required for this course. and affects it social environment.

To Access the CoastConnection Learning Resource Center • • • Log on to http://www. along with cutting edge research in your areas of interest. Organized by general subject areas. The preceding instructions should be helpful as you complete this portion of your course. general information on a variety of subjects. The Student Resource Center is available on-line through the California Coast University student web portal called “CoastConnection”. Through this. Please feel free to contact your respective academic department with additional questions. additional reading and on-line resources related to this course. we hope you will find additional tools to assist you with your educational and professional goals.Calcoast.Business and Society Syllabus Unit Examination Answer Sheets Test Item Challenge Form CCU Library Information Request For Help Form Final Examination Scheduling Form Instructional Methods Student Resource Center To enhance your educational experience. you will find a description for each web site. you will find an extensive array of on-line resources: from the basics of how to write a paper. Students wishing to access an even more comprehensive listing of on-line resources are encouraged to visit CoastConnection via the online Student Resource Center. tutorials on how to use the Internet. vii . At this site. Additional Reading and On-line Resources To help you to further understand this subject material. are listed in the syllabus of this course. we have developed a comprehensive Student Resource Center. along with a web link to directly access the web sites you are interested in.edu Log on to Coast Connection using your student ID number (if you do not have a password. you will need to request one) Click on the heading “Student Learning Resource Center”.

Grades are based on the percentage of points you earned out of a total of 500 points: Four Unit Examinations 100 points each Final Examination 100 points 100 points total 20% of your grade 400 points total 80% of your grade Students are required to receive a passing grade on all examinations. After completing the course. such as a glossary and/or reference section.Business and Society Syllabus Instructional Methods The chapter assignments and course examinations have been designed by the faculty to provide you with “a book that teaches”. Before Beginning Your Course In order to successfully complete this course. Become familiar with the contents of the textbook. viii . Your Course Grade Your grades on course examinations are determined by the percentage of correct answers. that will help you as you complete your examination. There is no penalty for guessing. beginning with the Table of Contents. you will have thorough and complete exposure to the course material. Authors often include supplementary material at the end of the text. The University uses the following grading system: A B C D F = = = = = 90% – 100% correct 80% – 89% correct 70% – 79% correct 60% – 69% correct 59% and below correct Your grade in this course will be based on the number of points you earn. we recommend that you do the following before beginning: • • Be sure that you have the correct edition of the course textbook.

As you identify your areas of relative strength and weakness. Calcoast. generally from beginning to end. Read and Review the Chapter ix . These important summaries were prepared to give you an overview of the content to be learned. Although there are various ways to proceed through the course. Review the Self Test After you have reviewed the Study Guide summaries. Overview. These additional resources may be found at www. These sites can enrich your understanding of the course material. The site’s address is generally printed on the introductory pages of the textbook or is sometimes found on the back cover. We recommend that you visit the website for your text if you have access to the Internet. Key Terms. and Summary sections in the Study Guide. you will become more aware of the material you will need to learn in greater depth. Each chapter in the Study Guide corresponds to a chapter in the textbook and contains: Chapter Objectives A Chapter Overview Key Terms A Chapter Summary Self Tests The most efficient way to complete this course is to read the materials in both the Study Guide and textbook in the sequence in which it appears. • Mastering the Course Content The Study Guide contains several components selected and developed by the faculty to help you master the content of this course.Business and Society Syllabus • Many textbook publishers have developed excellent websites to accompany their textbooks. successful students typically use the following approach: Read the Summaries Before reading a chapter of your textbook. To enhance your educational experience and help you to further understand this subject matter. we have developed a comprehensive listing of online resources related to this course. look at the items on the Self Test. review the corresponding Learning Objectives.edu under the heading: Coast Connection Student Resource Center.

As you read. Check Your Mastery of Each Chapter When you feel that you have mastered the concepts presented in the chapter. Writing Assignments x . complete the Study Guide Self Test without referring to the textbook or your notes. Your results will help you identify any areas you need to review. Correct your Self Test using the Answer Key provided in the Study Guide. Unit Examinations usually consist of 25 objective (multiple choice or true/false) test questions as well as comprehensive writing assignments selected to reflect the Learning Objectives identified in each chapter. It is recommended that you check your answers against the material in your textbook for accuracy.Business and Society Syllabus Once you have the scope and organization of the chapter in mind. Once you have completed your Examination. This will allow you to proceed at your own pace. we recommend that you thoroughly review the textbook chapters and other materials covered in the Unit. and are not timed. Unit Examinations may be found approximately every four to six chapters throughout your Study Guide. Unit Examinations are open-book. turn to the corresponding chapter in the text and read the material carefully. We recommend that you complete your examination by first circling the correct answer on the Unit Examination in your Study Guide. Keep the Learning Objectives and Self Test questions in mind as you read. and write notes in the Study Guide margins. do not require a proctor. These notes will help you study for the Unit and Final Examinations. transfer your answers to the actual answer sheet that will be submitted for grading. Each course contains four Unit Examinations and a Final Examination. following the suggestions in the “Mastering the Course Content” section of the Syllabus. highlight important concepts and information in your Study Guide. Completing the Unit Examinations Before beginning your examination.

Use a standard essay format for response to all questions (i. All online responses must be submitted as a MS Word Document file only. and grammar. The written assignment affords the student an opportunity to demonstrate a level of subject mastery beyond the objective Unit Examinations. Begin each Written Examination by identifying the question number you are answering followed by the actual question itself (in bold type). including an introduction. middle paragraphs. student number and course number and title on each page of your Written Examination (this is for your protection in case your materials become separated). Always read your answers and proof for content. The comprehensive Written Examination materials are found immediately following each Unit Examination.Business and Society Syllabus Each Unit examination includes a written component. or other types of questions that require problem-solving solutions.e. misspellings. which reflects his/her ability to analyze. • • • • • • • • Key Point xi . Written Examination Instructions • Always include your name. four to five paragraphs with three to five sentences per paragraph. synthesize. You might consider starting with questions you feel most comfortable answering. Carefully read and analyze each question. Outline your answer as this will help you organize your thoughts and provide a framework for your essay response. evaluate and apply his/her knowledge. This will help you build confidence as you develop your answers. Responses should be no fewer than 300 words and no more than 500 words in length. All responses must be typed double-spaced. This assignment may be in the form of written examination questions. case study problems. using a standard font and 12 point type size for ease of reading and grading. and conclusion).

you might argue that two alternatives could be correct. or the Final Examination) and the specific question number you are challenging. or inventions of another. Put written answers into your own words. a typographical error might make a question difficult to answer. Plagiarism consists of taking and using the ideas. Mail. Unit Test 1. It is our hope you find these examinations to be a stimulating and challenging addition to your learning. based on the material you read. • • xii . Challenges to examination items may only be submitted by regular U. you may receive credit for it by providing a brief written answer to the question. Challenging Examination Items We make every effort to ensure that all examination items are fair and can be answered by reading and understanding the material in your textbooks. identify the Examination you are working on (i. 4. There are no provisions to allow students to submit challenges via the Internet. without giving credit to that person and presenting it as one’s own. If you encounter a problem with a test item. Using the Test Item Challenge Form. you will need to do the following: • For each test item (question) you wish to challenge.. However. Take your time. and then answer it in a few sentences. This is an offense that the University takes very seriously (see page 18 of the student handbook). problems sometimes arise in the selection or interpretation of test items. An example of a correctly prepared essay response may be found by visiting the Student Web Portal via Coast Connection. 3. rather than a multiple choice response. writings. To receive challenge item credit. fill in the bubble in the F column on the answer sheet for that particular question.e. For example. Completion of the Written Examinations allows you an opportunity to demonstrate a more thorough and comprehensive understanding of the subject matter. Be as thorough and complete as possible.S. or that the correct answer is not among the choices. 2. Occasionally. Do not simply cut and paste your answers from the Internet or Wikipedia and do not copy your answers from the textbook. Write out the question.Business and Society Syllabus All work must be free of any form of plagiarism.

You may submit your examination for grading either by regular mail or electronically through the Coast Connection Student Portal. you will be given credit. You will receive a new grade report with any updates to the examination. If your Unit Examination contains any challenge items. we cannot give you credit for the answer.Business and Society Syllabus • Provide a page reference from the textbook to support your answer.S. It will help us further validate and correct any possible errors in the testing materials. If you follow the Test Item Challenge procedure. you must mail them. You should allow an additional week for the review and scoring of your examination. it may not be submitted electronically. • The information you provide is important to us. your challenges and any other work papers to your answer sheet and submit them by U. Preparing Your Answer Sheet Unit Examinations are submitted for grading four times during the course. CA 92701 Submitting Unit Examinations via the Internet xiii . your challenge will be reviewed and if correct. Mail to the Testing Department. If you do not provide a page reference. Staple the form. Submitting Unit Examinations by Mail Send your completed Unit Examination along with any written assignments to the following mailing address: California Coast University Testing Department 700 North Main Street Santa Ana.

If you are having difficulty accessing the Student Portal. your grade report will be mailed to you. The objective portion of the Unit Examination may be completed and submitted online. you were given the total number of proctored Final Examinations required for your degree program. and if you have Internet access. If this course requires a proctored Final Examination. Examinations with test item challenges require special handling. you may also check your grades on the Coast Connection Student Portal. please contact the Testing Department and a duplicate grade report will be sent to you. At the time you enrolled or reinstated into your program. Grades are normally posted and available for review within 5 business days. Written Examinations or other assignments connected with that Unit may be submitted using the essay submission icon on the Student Portal. Receiving Your Unit Examination Grades After your examination is scored. About the Final Examination The University requires that all Final Examinations except Associate and Bachelors level elective courses be completed under the supervision of a Proctor. please review the following information.Business and Society Syllabus Students may access the online testing features via the Coast Connection Student Portal. Students from foreign countries: Allow 4–6 weeks to receive your grade report by mail. If you do not receive a grade report within two weeks (or three weeks if you challenge test items). or you may arrange to have your grade e-mailed to you. contact Student Services. Besides receiving a grade report. All assignments for each Unit must be submitted prior to starting on the next Unit. Most students receive their grades by regular mail within two weeks after the University receives their examinations. and take additional time. Proctors xiv . typically 5 business days.

you may also check your grades on the Coast Connection Student Portal. Your designated Proctor will verify your identity and that you have completed the Final Examination without any outside assistance. You may not have assistance from another person. you may use your Textbook and any notes you have taken during the completion of your Unit Examinations. mail to the following mailing address: California Coast University Testing Department 700 North Main Street Santa Ana. A Proctor can be any reputable person other than a relative. Scheduling a Final Examination When it is time to take your Final Examination. if you challenge any Final Examination items. your grade report will be mailed to you. Grades are normally posted and available for review within 5 business days.S. indicate whether this Final Examination will be sent to you or your designated Proctor. in fact. The Final Examination may be submitted by mail or electronically via the Coast Connection Student Portal.Business and Society Syllabus The purpose of the proctored Final Examination is to verify that you are. It is also to verify that you are completing the Final Examination without the aid of any outside assistance. or you may arrange to have your grade e-mailed to you. CA 92701 Receiving Your Final Course Grade After your Final Examination is scored. your Proctor will need to submit the examination by U. Your Final Examination will then be mailed to you or to your designated Proctor. based upon your degree requirements. please complete and submit the enclosed Final Examination Scheduling Form. and if you have Internet access. Besides receiving a grade report. the person who is enrolled in the course of study. xv . you or your Proctor will submit your Final Examination directly to the University for grading. During the proctored Final Examination. Please submit this form at the end of Unit Test 4. current CCU student or CCU graduate. Submitting Your Final Examination After you have completed your Final Examination. Remember. On this form.

0 (B) on a 4. Undergraduate students need an Overall Grade Point Average of 2. all students must maintain a required Overall Grade Point Average in order to graduate. Graduate students need an Overall Grade Point Average of 3. please contact the Testing Department and a duplicate grade report will be sent to you.0 (C) on a 4. All students must receive a passing grade in all of their courses. If you did not pass a course.0 scale. Your Overall Grade Point Average In addition to receiving a passing grade for each course.Business and Society Syllabus Most students receive their grades by regular mail within two weeks after the University receives their examinations. This is known as a Second Grade Option. a new Study Guide will be sent to you and you must repeat the course. and grade reports are generally received within three weeks after the University receives the Final Examination. Final Examinations with Test Item Challenges require special handling. xvi . The fee for this option is $250. Be sure to keep a copy of all work you submit to the University. you may repeat a course. Please contact the Testing Department regarding this option. A = 4 grade points B = 3 grade points C = 2 grade points D = 1 grade point F = 0 grade points Second Grade Option If you receive a passing grade in a course and you wish to improve that grade.0 scale. If you do not receive a grade report within two weeks (or three weeks if you challenge test items). Students from foreign countries: Allow 4–6 weeks to receive your grade report by mail.

the easiest way to get help is to e-mail or phone the University.. You may also use one of the Request for Help forms included at the back of each Study Guide. California 92701 Phone: (714) 547-9625 • Fax: (714) 547-5777 Test Answer Sheet Fax Line: (714) 547-1451 E-mail: help@calcoast.m. Santa Ana.edu Don’t forget: You are not alone! We are here to help you achieve your dream! M BA xvii 4 06 .Business and Society Syllabus If you have any questions about how to proceed through the course or regarding any California Coast University policies and procedures.m. to 4:00 p. Pacific Standard Time. California Coast University 700 North Main Street. University office hours are Monday through Friday from 8:30 a.

Understand the importance of responsible nonmarket action 2. Compare and contrast an integrated market strategy and nonmarket strategy. Evaluate the role of activist organizations 3.Business and Society Syllabus Learning Objectives The learning objectives for this course are listed below: Chapter 1 1. Recognize the patterns of crisis development 3. Analyze the nonmarket environment 2. Chapter 3 1. Utilize a crisis management program Chapter 6 1. Examine vote recruiting as a majority building strategy xviii . Utilize strategy and negotiation when dealing with activist organizations Chapter 5 1. Understand the nature of political competition 3. Identify the nature and causes of crises 2. Analyze nonmarket action in public politics 2. Assess the role of the news media in nonmarket issues 2. Recognize and understand the concept of positioning 3. Recognize how moral concerns can motivate nonmarket action Chapter 7 1. Anticipate changes in the nonmarket environment 3. Examine the differences between private and public politics 2. Differentiate between the various generic nonmarket strategies 3. Examine the nonmarket issue life cycle Chapter 2 1. Understand the recourse options in disputes with the media Chapter 4 1. Recognize the importance of the news media 3. Analyze nonmarket issues and the formulation of nonmarket strategies. 2.

Examine regulatory commissions and agencies 3. the Clayton Act and the Federal Trade Commission Act 2.Business and Society Syllabus Chapter 8 1. Explain how antitrust laws are enforced 3. Analyze the Coase theorem as it relates to social efficiency 2. Evaluate the economic efficiency rationale as it relates to bargaining and intellectual property 2. Recognize the importance of privacy as it relates to the internet 3. Discuss some of the political explanations for regulation Chapter 11 1. Differentiate between the three new industrial organization approaches to antitrust thought Chapter 10 1. which include the Sherman Act. Examine the antitrust statutes. Evaluate the effectiveness of grassroots campaigns 3. Examine the economics of online markets 2. Identify the four major periods of regulatory change 2. Discuss the importance of coalition building within nonmarket strategies Chapter 9 1. Recognize the importance of cap –and-trade systems 3. Recognize the importance of lobbying as a non market strategy 2. Discuss tax policy in regards to internet purchases xix . Identify the components of a contract 3. Examine product liability as a branch of the common law of torts Chapter 13 1. Understand the role of politics within environmental protection Chapter 12 1.

. . . . . . Unit 1 Examination. . . . . . . . . . . . . . . . . . . . . Chapter 3: The News Media and Nonmarket Issues. . . Chapter 12: Law and Markets. . 116-125 126-134 135-143 144 114-115 Unit 4 Examination . . . . . . . . . . and Politics . . . . . Chapter 2: Integrated Strategy. . . . . . . Unit 1 Examination Instructions . . . . . . . . . . . . . . . . . . . . . . . . . . . Chapter 9: Nonmarket Strategies for Government Arenas . . . . . . Chapter 5: Crisis Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Chapter 10: Regulation: Law. . . . . Unit One Chapter 1: Market and Nonmarket Environments . . . . . . . . Unit 2 Examination Instructions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i-xxi 1-08 09-17 18-27 28 29-33 34-35 36-44 45-52 53-61 62-70 71 72-76 77-78 79-87 88-97 98-107 108 Unit 3 Examination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Unit 2 Essay Examination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Chapter 13: Information Industries and Nonmarket Issues . . . . . . . . . Chapter 6: Nonmarket Analysis for Business. . . . . . . Chapter 9: Antitrust: Economics. . . . . . . . . . . . . . . . . . Unit Three Chapter 8: Implementing Nonmarket Strategies in Governmental Arenas. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 145-149 Unit 4 Essay Examination . . . . . 150-151 xx . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Unit 1 Essay Examination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Unit 3 Examination Instructions . . . Unit Two Chapter 4: Private Politics. . . . . . . . . . . . . . . Unit 2 Examination . . . . . . . . . . . . . . . . . . . . . . . . . . . . Unit 4 Examination Instructions . . Law. . . . . . and Politics. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109-113 Unit 3 Essay Examination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Unit Four Chapter 11: Environmental Management and Sustainability. . . . . . . . Economics. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Business and Society Table of Contents Syllabus . . . .

. . . Test Item Challenge Form .Business and Society Table of Contents Final Examination Instructions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Forms Request for Help Form . . . . . . 152 153 154-155 156-157 xxi . . . . . . . . . . . Final Examination Scheduling Form . . . . . . .

Anticipate changes in the nonmarket environment. 6th Edition. Analyze the nonmarket environment. Instructions to Students • Read pages 1-32 of your textbook • Reference: Business and Its Environment by: David P. 1 .Business and Society Objectives Chapter Number One Market and Nonmarket Environments Learning Objectives Upon successful completion of this chapter. Baron. you should be able to: 1. Examine the nonmarket issue life cycle. 2. 3.

which illustrates the broad range of nonmarket issues with which the company must deal. The chapter also includes a case The Nonmarket Environment of Google. i. 2 . and information. The emphasis of the approach maintained throughout the book is on nonmarket strategy. actions by managers to improve the performance of their firms in both their market and nonmarket environments..Business and Society Overview The nonmarket environment is characterized by the four I’s: issues. This characterization is illustrated in some detail for the automobile industry. The chapter presents the nonmarket issue life cycle and explores the origins of nonmarket issues. interests. institutions.e.

Check your answers at the end of this chapter. Market component: Nonmarket component: Information: 3 .Business and Society Key Terms The key terms listed below are terms you should be familiar with. Write your definition below each item.

such as arbitration mechanisms. This chapter presents a characterization of the pattern of development of a nonmarket issue and discusses the causes of change in the nonmarket environment and how issues are placed on the nonmarket issue agenda. from the point of view of a firm dealing with an issue in its environment. The roles of institutions and interest groups should also be noted. but are also private. but in conjunction with. however. the appropriate level of analysis is organizational.e. management is in the center of Figure 1-1. That is. Nonmarket component. suppliers. although they are not considered in detail until subsequent chapters. and the preferences of those concerned with the issue. can be important resources. or collections of private organizations as in the case of the news media (considered in Chapter 3). 4 . that the focus of the book is how firms and their managers can participate effectively and responsibly in influencing the development of those issues. The unit of analysis is thus the conjunction of a nonmarket issue and the firm. Information.. In discussing nonmarket issues and the nonmarket environment. It would be useful to emphasize that institutions are not only formal and public.Business and Society Summary The field of business and its environment focuses on the nonmarket environment of business and its interrelationships with the market environment. It is important to emphasize.is composed of the social. it is important to emphasize the role of managers both in addressing the issues and in formulating strategies. such as Congress and NHTSA. the consequences of alternative courses of action.refers to what interests and institutional officeholders know about an issue. Specialists. i. but managers ultimately must make the decisions. In part because managers are at the center of decision-making. markets and contracts. such as lawyers and consultants. political. The nonmarket issue life cycle in Figure 1-2 is a useful framework for thinking about where an issue presently is and how it could develop. Key Terms Market component -includes those interactions between firms. and customers that are governed by markets and contracts. and legal arrangements that structure interactions outside of.

a) b) c) d) Size. which has had to deal with public concerns on a continuing basis? a) b) c) d) Google McDonald’s Nike Toyota 2) All but which one of the following makes public institutions different from markets.Business and Society Self Test Multiple Choice Questions (Circle the correct answer) 1) Of the following companies. human resources The market. bottom line 5) Which of the following was not an environmental pressure brought about because of the Exxon Valdez oil spill? a) b) c) d) Liability for damages Increased human resource coordination More stringent regulations Direct public pressure 5 . a) b) c) d) Due process Majority rule Bottom line concerns Collective action 3) Successful management needs which of the following? a) b) c) d) Frameworks for analyzing nonmarket issues Principles for reasoning about them Approaches for formulating strategies All are correct 4) Firms typically deal with nonmarket issues in ___________ to their potential impacts on _________. performance Finance. success Proportion.

which of the following institutions is not a major player? a) b) c) d) The Environmental Protection Agency The U. 20%. 10) The Clean Air Act authorized the EPA to grant _____ a waiver allowing it to set more stringent auto pollution standards than federal standards. a) b) c) d) California Texas New Jersey Michigan 6 . 40%.Business and Society Self Test 6) Which of following is not one of the four I’s of the nonmarket environment: a) b) c) d) Issues Interests Information Innovation 7) In the agricultural biotechnology industry. S. Department of Agriculture The Central Intelligence Agency The Congress 8) Which of the following are parts of the framework for understanding the life cycle of nonmarket issues for the automobile industry? a) b) c) d) Safety Fuel economy International trade All of the above 9) a) b) c) d) Bills were introduced in Congress to raise the Corporate Average Fuel Economy standard by 10%. 30%.

suppliers. and customers that are governed by markets and contracts. Information: refers to what interests and institutional officeholders know about an issue. political. and legal arrangements that structure interactions outside of. Nonmarket component: is composed of the social.Business and Society Answer Keys Key Term Definitions Market component: includes those interactions between firms. the consequences of alternative courses of action. and the preferences of those concerned with the issue. but in conjunction with. 7 . markets and contracts.

b 6. d 4.Business and Society Answer Keys Answers to Self Test 1. d 9. c 3. c 8. a 8 . d 7. c 2. d 10. b 5.

2. Instructions to Students • Read pages 33-65 of your textbook • Reference: Business and Its Environment by: David P. Baron.Business and Society Objectives Chapter Number Two Integrated Strategy Learning Objectives Upon successful completion of this chapter. Recognize and understand the concept of positioning. Compare and contrast an integrated market strategy and nonmarket strategy. 3. Analyze nonmarket issues and the formulation of nonmarket strategies. 9 . you should be able to: 1. 6th Edition.

This chapter extends that perspective by focusing on the integration of those strategies with market strategies. as illustrated in Figure 2-2. The influence of private politics as illustrated in Figure 2-3 is considered in more depth in Chapter 4.Business and Society Overview This chapter reinforces the point made in Chapter 1 that managers are responsible for the formulation and implementation of nonmarket strategies. One natural focal point for this integration is the relationship between market opportunities and the importance of nonmarket strategies. 10 . as illustrated in Figure 2-1.

Business and Society Key Terms The key terms listed below are terms you should be familiar with. Business Strategy: Market strategy: Nonmarket strategy: 11 . Write your definition below each item. Check your answers at the end of this chapter.

This framework will be elaborated on in the following chapters. The chapter includes a discussion of a Google’s integrated strategy directed at opening opportunities for its products. Google has also pressed forward on its campaign to obtain access to the white spaces. but in the first several parts of the book those interests are assumed primarily to be profits. This is tempered by normative considerations based on ethics principles. and deciding. The second is normative in the sense of ethics principles. the perspective is that of a firm and its managers attempting to further the interests of the firm. No attempt is made to define the firm’s interest. The latter involves choosing a strategy to deal with an issue or a developing policy to guide managers in dealing with issues. Two other factors are public sentiment and ethics. or thinking ahead. Also. 12 . or what might be called private social welfare. For example. The stages are intended both to correspond to managerial decision-making processes and to distinguish between analysis. The framework presented in Figure 2-4 provides a framework for addressing nonmarket issues. the evaluation of claimed rights requires the application of applying ethics principles. The first is that of choosing the alternative that is best in terms of the firm’s objectives. It is important that students understand that the perspective taken to the issues addressed in the book is not that of public policy chosen by a benevolent government. whereas the choice stage is normative in two senses. Some of those issues are identified by government as considered in Part II of the book and others by the news media as considered in Chapter 3. In 2008 Google petitioned the FCC to prevent Verizon Wireless from excluding a G-phone and other devices. and some are initiated by activists as considered in Chapter 4. Another way of thinking about the stages is that the analysis stage is positive in the sense of prediction and explanation. so at this point in the development it is primarily used to identify the stages in the framework. but as importantly it affects the set of issues that the firm faces. the perspective is not that of doing good. Instead.Business and Society Summary The principal factor restricting the pursuit of market opportunities is government policies. The section on positioning provides a foundation for nonmarket strategy.

4) Opportunities can be controlled by ______ at one extreme and _____ at the other extreme.Business and Society Self Test Multiple Choice Questions (Circle the correct answer) 1) What serves as a guide to a firm’s actions in its market and nonmarket environments? a) b) c) d) A business strategy The stock market Shareholders’ annual voting Employee demands 2) 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) b) c) d) Money Customers Value Stakeholders 3) The importance of nonmarket strategies is related to the control of a firm’s a) b) c) d) Threats. the regulation of telecommunications is being replaced by what? a) b) c) d) International competition Market competition Globalization of the industry Privatization 13 . Plans. a) b) c) d) Competitors. Opportunities. markets Markets. customers Customers. People. buyers 5) In the United States. suppliers Government.

administration Issue identification. enforcement Legislation. administration 10) The most effective means of integrating nonmarket strategies and market strategies is to what? a) b) c) d) Consider both strategies Consider only nonmarket strategies Consider only market strategies Consider neither but come up with new strategies 14 . Nike found itself reacting to what rather than shaping the development of the issue? a) b) c) d) The government only Their own culture Others’ actions None are correct 9) Nonmarket issue life cycle and strategy ranges from what to what on the continuum of time? a) b) c) d) Issue identification.Business and Society Self Test 6) Which of the following industries has the least government control? a) b) c) d) 7) a) b) c) d) Local communications service Biotechnology Automobile Consumer electronics What can be crucial for the success of a nonmarket strategy? Timing Marketing Consumer involvement None of the above 8) In terms of strategy and nonmarket issue life cycle. enforcement Interest group formation.

Market strategy: is a concerted pattern of actions taken in the market environment to create value by improving the economic performance of the firm. 15 .Business and Society Answer Keys Key Term Definitions Business Strategy: guides a firm in its market and nonmarket environments and has both market and nonmarket components. Nonmarket strategy: is a concerted pattern of actions taken in the nonmarket environment to create value by improving overall performance.

c 3. d 7. a 2. a 16 .Business and Society Answer Keys Answers to Self Test 1. b 6. a 10. c 9. a 8. c 5. d 4.

Business and Society Notes 17 .

3. Recognize the importance of the news media. Baron. Assess the role of the news media in nonmarket issues. 6th Edition. Understand the recourse options in disputes with the media. you should be able to: 1. 18 .Business and Society Objectives Chapter Number Three The News Media and Nonmarket Issues Learning Objectives Upon successful completion of this chapter. 2. Instructions to Students • Read pages 66-89 of your textbook • Reference: Business and Its Environment by: David P.

politicians. 19 . and the public and to provide a framework for understanding when the media will cover an issue and how the issue will be treated. It is intended to sensitize students to the types of issues the news media brings to the attention of activists.Business and Society Overview This chapter considers the role of the news media in the life cycle of a nonmarket issue.

Business and Society Key Terms The key terms listed below are terms you should be familiar with. Check your answers at the end of this chapter. Societal significance perspective: Media Strategies: 20 . Write your definition below each item.

the scene that stirs people up. … she was working from a prepared script. Predicting coverage and treatment requires a theory. Shortly before the November 2004 election CBS News aired on 60 Minutes a segment on President Bush’s National Guard record. the emotional hook which will cause the ratings to jump.” On some issues. and Dan Rather was forced to admit that the documents were false. An independent investigation commissioned by CBS lead to the firing of Mary Mapes. (now part of British Petroleum). Inc. the story may already be “in the can. The news media has a difficult job obtaining information often under considerable time pressure. As the Alar example illustrates. there could be nothing more deadly in the vicious ratings game than a long discussion of the facts and figures of an extremely complicated economic program. in other words.” as indicated in the following episode. The segment was quickly shown to be based on faked documents. the media can also act as an advocate for a particular group or for a particular resolution of an issue. He was subsequently terminated by CBS. strategy of GM for managing its aftermath. Swearingen. The revelations of faked stories have become sufficiently common that suspicions about news coverage linger. and three others. Dan Rather had earlier announced his retirement from CBS News and was spared disciplinary action. On many issues. It also suggests that a substantial component of the business community is suspicious of the news media and views it as hostile. Media coverage can also make it more difficult for management to address the issue if the firm’s actions are under close and continuing scrutiny. The theory can be illustrated through examples from the previous chapters. easy answer. but it can accelerate their development and broaden the set of actors who take an interest in them. and managers need to understand the possible avenues of recourse. and ultimately successful. From time to time. particularly if it is acting in its role as a “protector of the right of the public to know. And. hoping to goad me into giving her a few outrageous answers that would fit into that script. reporters seek interviews for balance. and for those that are likely to be covered. the objective is to be able to predict which issues involving a firm are likely to be covered by the news media. or to have both sides of an issue telling their story. 21 . His role in the segment was widely derided. the news media can intentionally or inadvertently play a role in the nonmarket strategy of an interest group. Because of the importance of the news media in the nonmarket environment. however. and visual messages and that complexity and detail are difficult for it to handle. chairman of Amoco. I suppose. A lecture could address the difficulty of this task. and the chapter presents a theory based on two explanatory variables—intrinsic audience interest and societal significance. The show. The General Motors Like a Rock? (A) chapter case deal with a faked media story and a courageous. controversy.” This statement illustrates that television seeks short.Business and Society Summary The media does not create nonmarket issues. how they will be treated. John E. the producer of the segment. What is required for television is the quick. described his interview with a major television network on the issue of natural gas price regulation: “That interview lasted for about an hour and forty minutes. managers need to understand the objectives of the news media and journalists and how to interact with them in an effective manner. From the perspective of nonmarket issues and their development. Furthermore. A lecture can also emphasize the broad set of roles of the news media in society and its important role in a democracy. as the Alar example illustrates. the media can substantially expand an issue. was already in the can…. a dispute between a firm and the news media develops. In such cases. easy to understand. from the point of view of the television producer.

(In 1999 the judge ordered the case retried because of the possibility that the plaintiff had misclassified evidence that the defendant could have used in its defense. as a result of an article in The Wall Street Journal.7 million.Business and Society Summary As an example of the courts reducing a libel damages award. The judge lowered the damages to $22. a jury had awarded $222.) 22 . The amount exceeded Dow Jones’ annual profit.7 million in damages to MMAR Group Inc.

firms and their managers must _______ which issues will attract media coverage and how the media will treat them.Business and Society Self Test Multiple Choice Questions (Circle the correct answer) 1) Which of the following roles does the news media play in nonmarket issues? a) b) c) d) Identification of nonmarket issues Nonmarket actions associated with the nonmarket issues The progress of nonmarket issues through life cycles All are media roles 2) Media coverage can do all but which of the following? a) b) c) d) Alert the public to nonmarket issues Raise concerns about the policies and practices of firms Increase the costs of nonmarket actions by interests Provide information 3) The National Resources Defense Council campaign on Alar used which of the following media strategies? a) b) c) d) The use of political entrepreneurship Repetitious use of its message about Alar The hiring of a communications firm to work with the media All of the above were used 4) Because of the importance of the news media. a) b) c) d) create control anticipate announce 5) Treatment of information takes several forms. Which of the following is not included? a) b) c) d) A straightforward presentation of facts and description of events Advocacy of a course of action An interpretation of the facts and events A biased assessment of the information 23 .

the ____ the audience interest. the more proximate the consequences. a) b) c) d) greater lesser more constant more unconnected 9) 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 10) The special role that the media has in a democracy is what? a) b) c) d) The duty of not taking sides The duty of serving the people’s right to know The duty of serve the government’s perceptive The duty to print what they want 24 .Business and Society Self Test 6) Advocacy journalism is usually restricted to which page of the newspaper? a) b) c) d) Editorial Front Business Sunday insert 7) The Intrinsic Audience Interest Theory of news coverage is based on which of the following premise(s)? a) b) c) d) The news media organizations are owned by for non-profit firms That coverage and treatment decisions are governed by revenue considerations That coverage increases with audience interest That the explanatory power of the theory comes primarily from the supply side 8) According to the intrinsic audience interest theory.

Business and Society Answer Keys Key Term Definitions Societal significance perspective: views coverage and treatment as a reflection of the news media’s perception of the significance of an issue to society. 25 . Media Strategies: guide transactions with the media and communication with stakeholders and the public.

c 3. a 7. d 6.Business and Society Answer Keys Answers to Self Test 1. c 5. c 8. a 9. d 2. b 26 . d 10. d 4.

Business and Society Notes 27 .

Additional detailed information on completing the examination. how to challenge test items and how to submit your completed examination may be found in the Syllabus for this course. Your grade on the examination will be determined by the percentage of correct answers. 28 . either multiple choice or true/false as well as a writing assignment.Business and Society Unit 1 Examination Instructions The Unit Examination The Unit Examination contains 25 questions. we recommend that you thoroughly review the textbook chapters and other materials covered in each Unit and following the suggestions in the “Mastering the Course Content” section of the course Syllabus. There is no penalty for guessing. The University utilizes the following grading system: A B C D F = = = = = 90% – 100% correct 80% – 89% correct 70% – 79% correct 60% – 69% correct 59% and below correct 4 3 2 1 0 grade grade grade grade grade points points points point points Completing Unit One Examination Before beginning your examination. This Unit Examination consists of objective test questions as well as a comprehensive writing assignment selected to reflect the Learning Objectives identified in each chapter covered so far in your textbook. writing standards. If you have additional questions feel free to contact Student Services at (714) 547-9625.

Business and Society Unit 1 Examination Multiple Choice Questions (Enter your answers on the enclosed answer sheet) 1) Which of the following represent types of interests? a) b) c) d) Advocacy groups Special interest Activist groups All of the above 2) Which of the following is not an organized interest group that directly impacts the automobile industry? a) b) c) d) United Auto Workers Trial lawyers American Association of Automobile Manufacturers Oil industry 3) Which of the following is not a primary public institution in the nonmarket environment? a) b) c) d) Legislatures The executive branch The World Court Administrative agencies 4) 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) b) c) d) 5) a) b) c) d) United Auto Workers Newspapers from advocates of some position Lobbying None is correct Which one of the following makes up the Administrative and regulatory agencies arena in which nonmarket issues for the automobile industry are addressed? Congress Environmental Protection Agency European Union All of the above 29 .

administration Issue identification. enforcement Interest group formation. administration 30 . Nike found itself reacting to what rather than shaping the development of the issue? a) b) c) d) The government only Their own culture Others’ actions None are correct 10) Nonmarket issue life cycle and strategy ranges from what to what on the continuum of time? a) b) c) d) Issue identification. enforcement Legislation.Business and Society Unit 1 Examination 6) a) b) c) d) 7) a) b) c) d) Which auto company was targeted by the environmental groups seeking to mobilize the public to support greater fuel economy? General Motors Daimler Chrysler Ford Toyota Which of the following is not a source of nonmarket issues? Moral concerns Institutional change Interest group activity Crash of the stock market 8) 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) b) d) d) Fraud on the market Fraud on the nonmarket The common factor Collective deception 9) In terms of strategy and nonmarket issue life cycle.

market strategy.Business and Society Unit 1 Examination 11) The most effective means of integrating nonmarket strategies and market strategies is to what? a) b) c) d) Consider both strategies Consider only nonmarket strategies Consider only market strategies Consider neither but come up with new strategies 12) ______ is a foundation for market or competitive strategy because it is a source of competitive advantage. 14) What was the primary concern for eBay in its positioning for a certain type of space? a) b) c) d) Market Consumer Legal Moral 15) The collection of diverse interests. and preferences of the individuals in society is known as what? a) b) c) d) Public individualiality Common sense Public sentiment Public wants and demands 31 . a) b) c) d) Timing Lobbying Positioning Marketing 13) Nonmarket positioning is influenced by a firm’s a) b) c) d) finances. customers. viewpoints. competition.

Which of the following companies has been lobbied heavily to increase its commitment to its own causes? a) b) c) d) Xerox GM Microsoft Starbucks 20) Firms deploy nonmarket capabilities to do what? a) b) c) d) Add value Beat the competition Create new markets Try new strategies 32 . relying instead on its aggressive approach to markets? a) b) c) d) Legal Public sentiment Political Nonmarket 19) Positioning can also have its perils. One way that it solidified its positioning relative to the natural environment was to what? a) b) c) d) Move away from oil production and distribution of gasoline Change its symbol and slogan Join the Green Party Appoint only environmentalists to its Board of Directors 17) Law-making and rule-making take place in what type of space? a) b) c) d) Social Legal Political Commercial 18) What space has Microsoft largely ignored.Business and Society Unit 1 Examination 16) BP managed its environment in many ways.

Business and Society Unit 1 Examination 21) Which of the following are parts of the framework for the analysis of nonmarket issues? a) b) c) d) Screening Analysis Choice All of the above 22) The societal significance perspective of news media coverage assumes the following roles. “What is news on television often depends on _____________?” a) b) c) d) what the editor wants covered where your reporters and cameramen are what the month is what you covered last 33 . the president and the Congress from themselves 23) Using the Audience Interest/Societal Significance continuum. which of the following rates highest on both? a) b) c) d) Poverty Environmental protection International trade The economy 24) Which of the following makes an issue more newsworthy? a) b) c) d) The degree of urgency A celebrity being involved with an issue If the issue contains controversy or conflict All are correct answers 25) According to well-known journalist Edwin Newman. 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.

where. and other information on how to complete this assignment. what. How well did MIP integrate the market and nonmarket components of its business strategy? 3) Discuss and critique the news media as an industry. 2) Identify and analyze the issues. interests and information—that characterize the nonmarket environment. length. develop an analysis of the fast food industry using McDonald’s as your primary focus.Business and Society Unit 1 Examination Written Assignment for Unit One Be sure to refer to the course syllabus for instructions on format. institutions. and market explored in the case of Molecular Insight Pharmaceuticals. and why of a story? Who and what controls the media in the 21st century and why? 34 . legal. Please answer ONE of the following: 1) Using the fours I’s—issues. political. 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.

Business and Society You Can Do It You have just completed Unit 1 of this course. You are off to a great start! Keep up the good work! 35 .

36 . Evaluate the role of activist organizations. 3. Utilize strategy and negotiation when dealing with activist organizations.Business and Society Objectives Chapter Number Four Private Politics Learning Objectives Upon successful completion of this chapter. 2. Examine the differences between private and public politics. you should be able to: 1. Instructions to Students • Read pages 90-119 of your textbook • Reference: Business and Its Environment by: David P. 6th Edition. Baron.

37 .Business and Society Overview This chapter introduces the concept of private politics and distinguishes it from public politics. activist organizations. and business interests. The private and public politics terminology is maintained throughout the book. Private politics is typically initiated by NGOs. which is the focus of Part II of the book.

Public politics: Private politics: 38 .Business and Society Key Terms The key terms listed below are terms you should be familiar with. Check your answers at the end of this chapter. Write your definition below each item.

in the same sense that a firm chooses market and nonmarket strategies to improve its performance. A generic strategy used by activists is presented in Figure 4-2 and can be used to analyze the activist strategies in these cases as well. Private politics is also viewed as competition. In response to these challenges. the interest group acts on behalf of its members. are members of informal networks of organizations that at times coordinate their actions. Proactive self-regulation and corporate social responsibility do not mean that a firm will not be targeted. Some prefer to refer to themselves as advocates. This may be referred to as self-regulation.Business and Society Summary The participants in private politics are viewed as strategic. 39 . Activists are important for the variety of reasons indicated in the chapter and especially because they play a central role in identifying and shaping the development of nonmarket issues. That is. Activists may also be acting in their own self-interest and in the interests of their members. In addition to characterizing the NGO/activist component of the nonmarket environment and highlighting actions that take place outside of public institutions. but they generally claim that they are acting on behalf of others as well. such as environmental interest groups. Figure 4-1 can be used to assess a company’s susceptibility and can be applied in the chapter cases. some firms take proactive measures by changing their practices to avoid being targeted. typically through public politics. as Starbucks has learned. Activist/NGO challenges to firms are intended to obtain changes in the practices of individual firms and their industries. however. An interest group is defined as a collection of individuals or organizations that benefit from the nonmarket actions of the group. and that competition often centers around a campaign. Firms that are targeted can fight a campaign or bargain with the activist to end it. the chapter also addresses approaches for dealing with activists and their campaigns. Some activist groups. The susceptibility of a company to a challenge by activists depends on a variety of factors including the seriousness of the issue and on characteristics of the company itself and its policies. albeit forced self-regulation. When the firm changes its practices as a result of a campaign it is also exercising self-regulation.

which takes place in the shadow of public institutions b) It includes direct and indirect pressures. a) b) c) d) symbolic. boycotts and attempts to affect public opinion c) It is intended to force firms to take action d) All the above are reasonable descriptions 2) Activist groups play the following roles. which of the following statements best describes private collective action? a) It is a nonmarket action. but many attract considerable media and public attention. political consumer-driven. real political. 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 3) Boycotts are sometimes more ________than______ .Business and Society Self Test Multiple Choice Questions (Circle the correct answer) 1) In general. symbolic 4) Firms argue what about the impact of boycotts? a) b) c) d) They have tremendous impact They do not have any significant effect on their performance They have a fair amount of affect They have no impact whatsoever 5) Which companies are the most susceptible to boycotts? a) b) c) d) Consumer products Products with low switching costs A brand name that can be damaged All are correct 40 . socially concerned real.

Department of Health Services regulations 7) What are the two basic strategies of activists? a) b) c) d) Putting direct pressure on firms and working through public institutions Putting indirect pressure on firms and direct pressure on government Putting little pressure on firms and lots of indirect pressure on government Putting pressure on firm boards of directors and working with public entities 8) Activist groups use their standing with all of the following except? a) b) c) d) Courts Legislatures Administrative organizations Boards of Directors 9) 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) b) c) d) Boycotts Lawsuits Lobbying Legislation 10) An important component of a private politics campaign is selection of a a) b) c) d) Court Target Boycott Strategy 41 . employees d) Both corporations were out of compliance with several U.Business and Society Self Test 6) The Health Care Reform Project released a report attacking Pizza Hut and McDonald’s.S. 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.

42 . and NGOs over the resolution of issues outside of government institutions. activists.Business and Society Answer Keys Key Term Definitions Public politics: The competition between firms and other interests over the resolution of nonmarket issues in the context of the institutions of government. Private politics: The competition between firms and individuals. interest groups.

b 10.Business and Society Answer Keys Answers to Self Test 1. b 43 . a 8. d 2. d 9. c 7. a 4. d 6. c 3. b 5.

Business and Society Notes 44 .

Utilize a crisis management program.Business and Society Objectives Chapter Number Five Crisis Management Learning Objectives Upon successful completion of this chapter. Instructions to Students • Read pages 120-152 of your textbook • Reference: Business and Its Environment by: David P. 6th Edition. Identify the nature and causes of crises. you should be able to: 1. 2. Baron. Recognize the patterns of crisis development. 3. 45 .

with a focus on those that become public knowledge either because the company makes it public or because an outside party makes it public. 46 . This chapter considers the origins and nature of crises.Business and Society Overview Dealing with a crisis is an altogether too common challenge for firms and their management.

root cause analysis. but when not all possible crises can be avoided. preparedness. The framework has five components: avoidance. If a crisis occurs. Having a crisis management team and a crisis management plan can be crucial in dealing with a crisis in a responsible manner and in mitigating adverse consequences. Effective communication can be crucial at this stage. attention should turn to root cause analysis. or episodes. response. based on the nonmarket issue life cycle that both reminds a reader about the origins and development of crises and provides an approach to managing in an environment in which crises can occur. A response thus depends on the nature and details of the crisis. Once a crisis has developed and an effective response has been implemented. and resolution. there can be a myriad of things that are not covered by the plan. preparedness becomes paramount.Business and Society Summary The development of crises and the factors that resolve it are the focus. Its objective is to assess how likely the readjustment is to create a crisis. Avoidance is the most important. but since the details of the crisis matter. the plan should be implemented. The chapter provides a framework. The chapter cases are intended to develop sensitivity to possible crises of management’s creation and to provide opportunities to make decisions as a crisis unfolds. 47 . The Merck and Vioxx case is organized similarly and focuses on whether the company should take Vioxx off the market as new evidence is developed on its side effects. that require a sequence of decisions. That analysis both helps identify problems that need to be corrected before the crisis can be resolved and lays a foundation for measures to avoid future crises. The Buffalo Savings Bank case focuses on readjusting home mortgage interest rates upward during difficult economic times. The case is presented in segments. The Mattel case provides an opportunity to make managerial decisions as a crisis involving lead paint on toys unfolds.

a) b) c) d) Strategies Successes Crises Dilemmas 2) Many firms. internal audit standards. have taken measures to reduce the likelihood of a crisis.Business and Society Self Test Multiple Choice Questions (Circle the correct answer) 1) _____ happen even to firms that take measures to avoid them. even those that have not experienced a crisis. and developed a) b) c) d) root cause analysis. crisis response plans. formulated management preparedness plans. a) b) c) d) Crisis Insolvency Bankruptcy Liquidation 5) Which of the following is true of a crisis? a) b) c) d) It is typically unexpected It can escalate quickly It can damage a firm’s operating performance All are true of a crisis 48 . 3) Which one of the following is NOT a component of crisis management? a) b) c) d) Root cause analysis Preparedness Avoidance Succession 4) What term is defined as follows: a situation in which harm to people or property either has occurred or is imminent. management succession plans.

Business and Society

Self Test

6) In 1982, _____ people died from swallowing Tylenol capsules injected with cyanide. a) b) c) d) eighteen two sixteen seven

7) Which of the following is NOT a stage in crisis management? a) b) c) d) Identification Reconciliation Escalation Intervention

8) The first stage in the life cycle of a crisis is: a) b) c) d) reconciliation escalation identification intervention

9) In what stage do some crises explode as a result of media coverage, government actions, or company actions? a) b) c) d) reconciliation identification intervention escalation

10) An important factor influencing the development of the public phase of a crisis is: a) b) c) d) media coverage company’s admittance of fault company’s denial of fault the economy of the nation

49

Business and Society

Answer Keys
Key Term Definitions Crisis: a situation in which harm to people or property either has occurred or is imminent. Intervention: involves actions by the company or government to deal with the crisis.

50

Business and Society

Answer Keys
Answers to Self Test 1. c 2. c 3. d 4. a 5. d 6. d 7. b 8. c 9. d 10. a

51

Business and Society Notes 52 .

Business and Society

Objectives

Chapter Number Six
Nonmarket Analysis for Business

Learning Objectives Upon successful completion of this chapter, you should be able to: 1. 2. 3. Analyze nonmarket action in public politics. Understand the nature of political competition. Recognize how moral concerns can motivate nonmarket action.

Instructions to Students
• Read pages 153-184 of your textbook • Reference: Business and Its Environment by: David P. Baron, 6th Edition.

53

Business and Society

Overview

This chapter develops a parsimonious approach to the analysis of political behavior. The approach combines the institutional knowledge provided in the Appendix with the analysis of interests and provides the foundations for the formulation and implementation of political strategies as considered in Chapters 7 and 8, respectively. Nonmarket action can take the form of private politics as considered in Chapter 4 or can be directed to government institutions. This chapter and the other chapters of Part II focus primarily on public politics and on legislative institutions and in particular Congress.

54

Business and Society

Key Terms

The key terms listed below are terms you should be familiar with. Write your definition below each item. Check your answers at the end of this chapter. Interests: Substitutes:

55

Two points worth emphasizing about the distributive politics spreadsheet are that it pertains to a specific alternative and that it pertains to interest groups and not institutions. The costs of nonmarket action include the direct costs of activities and other costs such as the cost of organizing for political action. The moral motivations of collective action are also briefly considered and are developed in more detail in Part V of the book.Business and Society Summary The underlying theory is that of distributive politics in which nonmarket action is motivated by the benefits it can yield. This assessment can be summarized in the distributive politics spreadsheet presented in Figure 6-3. 56 . The notion of the supply and demand of nonmarket action is more than a metaphor and. along with characteristics of the institutions and the preferences of institutional officeholders. The nature of this competition is characterized in a highly simplified manner in Figure 6-2. which is a general perspective for assessing the political economy of nations. in contrast. The assessment of the costs of political action includes the assessment of the likely effectiveness of that action. The demand depends on the aggregate and per capita consequences likely to result from an alternative and any substitutes that allow the interest to offset some of those costs. The building blocks of the framework are an interest’s demand for nonmarket action on an issue and the cost of taking that action. Public policy analysis. are the principal determinants of the outcome. so interests may compete on issues. The underlying framework is based on the concept of structured pluralism. provides technical information about alternatives. At a minimum. The perspective is that private interests are the principal force affecting political outcomes on nonmarket issues. The supply side focuses on the cost of individual and collective action. The perspective taken in the chapter is that most nonmarket issues addressed in the arenas of government institutions are contested and that the competition over those issues. in principle. The concept of substitutes is developed in the chapter and is applied in the Tobacco Politics case. can be used to predict the amount of action generated. This perspective also recognizes the pluralistic nature of interests. The spreadsheet and the analysis that underlies it are specific to the particular nonmarket alternative in question. This perspective is applied in Chapter 14 to the political economy of Japan. This characterization is used in a number of the subsequent chapters and in several cases. which depends on the numbers participating in the political action and their coverage of legislative districts. This is particularly the case on issues characterized by distributive politics. whereas interests provide politically-relevant information. Distributive consequences and moral motivations are one side—the demand side—of the nonmarket action calculus. the approach is used to provide an assessment of the amount of the nonmarket action likely to be generated on an issue. The results of the assessment of the demand and cost of nonmarket action by the affected interests can be summarized in a distributive politics spreadsheet.

Business and Society Self Test Multiple Choice Questions (Circle the correct answer) 1) Which of the following most clearly describes what results from a pluralism of interests and the political actions taken to further those interests? a) b) c) d) Public policies Supreme Court decisions Executive vetoes Elections 2) Nonmarket action is transformed into outcomes by public institutions. These institutions include all of the following. except which? a) b) c) d) Administrative agencies Regulatory commissions International accords The Boy Scouts of America 3) Public policy reflects which of the following? a) b) c) d) Nonmarket interests Institutional features Information All of the above are reflected 4) On what two dimensions can interests be characterized? a) b) c) d) Moral and distributive Legal and ethical Self-interest and legal Redistributive and deconstructionist 5) Most issues have distributive consequences as measured by all of the following except which? a) b) c) d) Benefits and costs Surpluses and rents Leases and rents Profits and losses 57 .

and availability of goods and services jobs and wages sales. For example. profits. which of the following are relevant? a) b) c) d) prices.Business and Society Self Test 6) 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 7) Aligned interests such as in the environmental area allow for specialization. For firms. and market value none of the above is relevant 58 . qualities. the Wilderness Society emphasizes: a) b) c) d) a broad environmental and political agenda open lands toxic waste issues litigation 8) What is Greenpeace’s approach to drawing attention to environmental issues? a) b) c) d) peaceful assembly confrontational letter campaigns exclusive lobbying 9) Which of the following is not an institution established by the executive branch of the federal government to serve an interest group? a) b) c) d) the First Reformed Church of America the Export-Import Bank the Small Business Administration the Department of Agriculture 10) The demand for nonmarket action originates from the anticipated effects of that action on the consequences of a political alternative.

Substitutes: when the benefits from nonmarket action can be obtained through other means. firms. The other refers to the magnitudes of their stakes. One refers to those individuals. and organizations with a stake in an issue.Business and Society Answer Keys Key Term Definitions Interests: has a dual use in nonmarket analysis and strategy formulation. 59 .

d 3. b 8. a 2. d 7. b 9. a 5. c 60 . c 6.Business and Society Answer Keys Answers to Self Test 1. a 10. d 4.

Business and Society Notes 61 .

you should be able to: 1. 3. Examine vote recruiting as a majority building strategy. 6th Edition. 2. Understand the importance of responsible nonmarket action. Instructions to Students • Read pages 185-219 of your textbook • Reference: Business and Its Environment by: David P.Business and Society Objectives Chapter Number Seven Nonmarket Strategies for Government Arenas Learning Objectives Upon successful completion of this chapter. Baron. Differentiate between the various generic nonmarket strategies. 62 .

63 .Business and Society Overview This chapter focuses on the formulation of strategies for participating effectively and responsibly in the politics of nonmarket issues. The focus is on legislative issues. but the framework and approach are applicable more generally.

Business and Society Key Terms The key terms listed below are terms you should be familiar with. Lobbying: involves the strategic provisioning of two types of information – technical and political. Write your definition below each item. 64 . Check your answers at the end of this chapter. Vote recruitment: votes are recruited by interest groups and by public officeholders. Agenda-setting strategies: focus first on recruiting the agenda setter and then on building support for the alternative on the agenda.

and informational. The basic strategies can be used alone or can be combined. The chapter is primarily concerned with formulating nonmarket strategies and illustrating nonmarket strategy formulation through examples. The first is that firms and their managers do it. The concept of pivotal voters is important and is well-illustrated by the Federal Express (A) case. For issues considered in regulatory and administrative institutions. The perspective taken is that strategy formulation is the responsibility of managers and not of consultants or advisors. Three basic responses can be given. informational strategies are often the centerpiece. These strategies are illustrated by the China and Most Favored Nation Status example. majority building. A lecture could emphasize this point and focus on the components of strategy formulation as illustrated by the examples presented in the chapter. The rent chain can be important in the implementation of the three basic types of political strategies: representational.Business and Society Summary At about this point in the book. so it is worth studying how they do it. you may begin to wonder whether political action by firms is a “good” thing. although as indicated in Chapter 10 representational and majority-building strategies are frequently used to pressure regulatory agencies through the legislature. although they can provide important inputs to the process and can assist in implementation. Second. The links to nonmarket analysis and institutional knowledge should be emphasized to make it clear that the material in Part II is an integrated whole rather than a collection of independent components. The discussion of strategy formulation is general and builds on the treatments of institutional characteristics and nonmarket analysis from the two previous chapters. 65 . The concept of a rent chain is important as a foundation for nonmarket strategies and should be emphasized in a lecture. Informational strategies are implemented by lobbying and public advocacy as considered in Chapter 8. Informational strategies are often a component of a broader strategy encompassing representation and majority building for issues considered in legislatures. One aspect of the nonmarket strategy formulation process that might be emphasized is the importance of developing nonmarket assets such as the rent chain. nonmarket action by firms is legal and constitutionally protected. Majority building strategies involve vote recruitment and agenda setting. the appropriate limits within the realm of legal activities is in the domain of ethics. Third. The second section of Chapter 7 raises these issues and provides a partial response.

Business and Society Self Test Multiple Choice Questions (Circle the correct answer) 1) Strategy formulation and its implementation in nonmarket environments differs from strategies that are formulated and implemented in a market environment. business supports political alternatives that are contrary to public interest b) In reality. These include which of the following? a) Due to the for-profit goals of firms. a policy to ban smoking cigarettes or imposing high taxes on tobacco products should include considering the following interests. 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 2) Nonmarket activities of business have been criticized on a number of grounds. business does not have too much power c) Business does not manipulate the political process d) Business goals are always congruent with public interests 3) From the pluralist point of view. except which? a) b) c) d) The interests of smokers and their families Cigarettes companies and their employees Farmers who grow tobacco on marginal lands The effect on the ozone level 4) Firms have been granted rights to participate in political processes irrespective of which of the following? a) b) c) d) The interests they represent When they incorporated The number of shareholders Their type of product 5) Which amendment protects the right of the corporation to make expenditures and participate in the political competition on a state ballot proposition? a) b) c) d) First Second Tenth Sixteenth 66 .

a) b) c) d) Cheating Lobbying Manipulation Abusing 9) Which of the following industry cases represented the concern that business political activity goes beyond interests and power and centers on manipulation? a) b) c) d) The dairy industry The fast food industry The pharmaceutical industry The fashion industry 10) Nonmarket analysis involves the following activities. 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 7) In Austin v.Business and Society Self Test 6) The Supreme Court ruled that collective corporate action. except which of the following? a) b) c) d) Identifying the interests affected by an issue Analyzing the demand for and the supply of political action Identifying the institutional arenas in which the issue will be addressed Analyzing the financial statements of the firm 67 . Michigan Chamber of Commerce (1990). the Supreme Court did what concerning corporations making independent expenditures on behalf of a candidate? a) b) c) d) Upheld their right to do so Denied them the right to make independent contributions Sent the case back to the Michigan Supreme Court None is correct 8) _______ can take two basic forms: one involves misrepresentation and the other involves exploiting institutional features.

Business and Society Answer Keys Key Term Definitions Lobbying: involves the strategic provisioning of two types of information – technical and political. Vote recruitment: votes are recruited by interest groups and by public officeholders. Agenda-setting strategies: focus first on recruiting the agenda setter and then on building support for the alternative on the agenda. 68 .

b 7.Business and Society Answer Keys Answers to Self Test 1. a 5. c 9. a 6. d 4. b 8. d 69 . a 3. c 10. c 2.

Business and Society Notes 70 .

Business and Society Unit 2 Examination Instructions The Unit Examination The Unit Examination contains 25 questions. Your grade on the examination will be determined by the percentage of correct answers. we recommend that you thoroughly review the textbook chapters and other materials covered in each Unit and following the suggestions in the “Mastering the Course Content” section of the course Syllabus. The University utilizes the following grading system: A B C D F = = = = = 90% – 100% correct 80% – 89% correct 70% – 79% correct 60% – 69% correct 59% and below correct 4 3 2 1 0 grade grade grade grade grade points points points point points Completing Unit Two Examination Before beginning your examination. There is no penalty for guessing. If you have additional questions feel free to contact Student Services at (714) 547-9625. Additional detailed information on completing the examination. writing standards. 71 . This Unit Examination consists of objective test questions as well as a comprehensive writing assignment selected to reflect the Learning Objectives identified in each chapter covered so far in your textbook. either multiple choice or true/false as well as a writing assignment. how to challenge test items and how to submit your completed examination may be found in the Syllabus for this course.

which of the following is the guide line for engaging in a fight? a) b) c) d) Fight all out Win at any cost Fight when you are right and can win—but be careful Fighting never gains an advantage 4) When confronted with a private nonmarket action. evaluate Welcoming. a natural reaction is to be _______. a) b) c) d) Defensive. deny Defensive. but a better response is to _______the claims and demands the activists make. what is a low-cost method of getting information out to the public that they want to be distributed? a) b) c) d) Use the news media Use television spots Use nationwide lobbying of legislatures Go with a lawsuit 2) Which of the following is not one of Greenpeace’s campaigns? a) b) c) d) Ancient rain forests Climate Toxics River dumping in the Amazon 3) In terms of addressing the activist environment. reject 5) What was Environmental Defense’s (ED) concern about McDonald’s? a) b) c) d) Sourcing supplies from old growth forests Practice of harvesting old timber Practice of solid waste disposal All of the above 72 . accept Offensive.Business and Society Unit 2 Examination Multiple Choice Questions (Enter your answers on the enclosed answer sheet) 1) In terms of an activists’ generic strategy.

Business and Society Unit 2 Examination 6) All of the following were the threats against OnBank except? a) b) c) d) Direct action against the bank Required regulatory approval The reporting of lending data by census track Bringing in a union 7) Why was Royal Dutch/Shell such a formidable company for Greenpeace to take on? a) b) c) d) It is well-regarded in the British Isles and it has a history of fighting all comers It is the largest corporation in Europe and the third largest in the world It is the third largest corporation in Europe and the sixth in world It is regarded as the best oil company in the world and consumers back it in all issues 8) What was one of Greenpeace’s principal strategies used against Royal Dutch/Shell? a) Attracting public attention through high profile. a) b) c) d) Reconciliation Settlement Intervention Postponement 73 . a) b) c) d) Lesser Greater Biased Unbiased 10) __________ involves actions by the company or government to deal with the crisis. 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 9) ______ 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) b) c) d) operating tactical strategic nonmarket 12) Which of the following is NOT a component of crisis management? a) b) c) d) Response Avoidance Root cause analysis All are components 13) Which is the most important component of a crisis management program? a) b) c) d) Preparedness Resolution Avoidance Reconciliation 14) The second most important component of a crisis management program is a) b) c) d) auditing preparedness root cause analysis budgeting 15) One aspect of an avoidance strategy is a) b) c) d) budgeting auditing strategizing confronting 16) Which step of a crisis management program deals with identifying the cause of the crisis? a) b) c) d) Root cause analysis Pareto analysis Avoidance analysis Confrontation analysis 74 .Business and Society Unit 2 Examination 11) Resolution involves turning the crisis into a manageable ________ issue.

Business and Society Unit 2 Examination 17) On some issues. which of the following represents the concept presented? a) b) c) d) Substitutes The unfairness of taxing foreign companies located in the United States The benefits of taxation to foreign businesses The no-way-out policy 19) When the benefits from supporting a political alternative are concentrated and the benefits from opposing it are widely distributed. the benefits from nonmarket action can be obtained through other means. the supporters would have: a) b) c) d) stronger incentive to take political action than the opponents weaker incentive to take political action than the opponents it is better for them not to take any action none of the above actions is advisable 20) When the benefits from supporting a political alternative are widely distributed but the benefits for opposing it are concentrated. the public referendum in California. 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 21) Proposition 13. referred to as: a) b) c) d) complements substitutes benefits legalistic 18) In the case of the unitary tax and the location of foreign firms. is an example of what at work? a) b) c) d) Political entrepreneurship Congressional redistricting Federal mandates Failed public policy 75 .

nonprofit nonprofit.Business and Society Unit 2 Examination 22) Nonmarket assets include which of the following? a) b) c) d) Reputation of firm Reputation of top management Personal relationships with institutional officeholders All are assets 23) The value chain includes all but which one of the following? a) b) c) d) Inbound logistics Marketing & sales Suppliers Operations 24) Analogous to the _____ chain for market strategies is the ____ chain for nonmarket strategies? a) b) c) d) rent. value profit. profit value. rent 25) Each of the following is seen as an asset to a firm except: a) b) c) d) the firm’s reputation the firm’s access to institutional actors the experience of the firm the stakeholders’ views of the firm 76 .

strategies and membership. 77 . and other information on how to complete this assignment.Business and Society Unit 2 Examination Written Assignment for Unit Two Be sure to refer to this course syllabus for instructions on format. Use examples to show the benefits derived from nonmarket action activities. Explain and give relevant examples of their motivation. length. 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) Explain the sources for the demand for nonmarket action. Please answer ONE of the following: 1) Activist groups may have damaging effects on an industry and on consumers of services. Be specific in your analysis.

Take a break and reward yourself for a job well done! 78 .Business and Society You Can Do It With Unit 2 complete. you are half way through the course.

Business and Society Objectives Chapter Number Eight Implementing Nonmarket Strategies in Governmental Arenas Learning Objectives Upon successful completion of this chapter. 3. Discuss the importance of coalition building within nonmarket strategies. Evaluate the effectiveness of grassroots campaigns. you should be able to: 1. Baron. 2. Recognize the importance of lobbying as a non market strategy. 79 . Instructions to Students • Read pages 220-264 of your textbook • Reference: Business and Its Environment by: David P. 6th Edition.

and the regulation of lobbying. Lobbying is the most important activity in informational strategies. what makes it effective. 80 . focusing on the types of activities firms use. and the text addresses its nature.Business and Society Overview This chapter addresses the implementation of nonmarket strategies. what enables it.

Business and Society Key Terms The key terms listed below are terms you should be familiar with. Lobbying: Technical information: Political information: Mobilization: 81 . Write your definition below each item. Check your answers at the end of this chapter.

so information is provided about the “market for contributions” and the laws governing those contributions. The politics of Internet taxation are likely to continue for some time.Business and Society Summary Whereas lobbying in an informational or representational strategy is typically done behind the scenes. Coalition building is an important part of many representational strategies and is intended to leverage the political action of a firm. grassroots campaigns are highly visible and orchestrated efforts to provide information but more importantly to apply pressure on government officials. Pickle (D-TX) and his staff coined the slogan.S. The treatment of electoral strategies highlights aspects of the debate on the importance of campaign contributions. Grassroots strategies are most effective when they are tied to the constituency connection. From a public policy perspective taxes should be levied on electronic commerce and on mail order sales—provided the costs of administering them are not too large. exporters that used leasing for their exports were imperiled. Coalition formation is a component of the chapter case Internet Taxation.” With the coining of this slogan. How effective these campaigns are is unclear. The text attempts to dispel some popular myths about campaign contributions. Communications and public advocacy strategies can be useful in representational strategies. not from the perspective of candidates in elections but from the perspective of the contributor. The companies that would be taxed obviously emphasize those very real costs. From time to time a firm may have to resort to the courts to deal with an issue. 82 . For example. but judicial strategies can be both costly and time consuming and the outcome uncertain. but the most important communication in informational strategies probably takes place in the context of lobbying. and the proponents of taxing e-commerce must find a means to reduce those costs. in response to the abuse by tax-exempt entities of the leasing provisions of the Economic Recovery Tax Act of 1981 discussed in Chapter 6. Representative J. The Internet taxation issue is complex. The states are working on this. “Those who don’t pay taxes shouldn’t get tax breaks. the tax benefits to U.J. but what is clear is that firms have increased their use of grassroots campaigns in recent years. The framing of an issue may be important to the extent that the issue can be strategically characterized. and the politics are distributive and can be analyzed using the conceptual material in Part II of the book. but the task is complex. This is a topic that may be of more interest to students than to firms.

Business and Society Self Test Multiple Choice Questions (Circle the correct answer) 1) Which of the following are strategy implementation strategies? a) b) c) d) Lobbying Grassroots and constituency Coalition building All are correct 2) Which of the following is not a legitimate route of access to regulatory and administrative agencies? a) b) c) d) Campaign contributions Constituency connection Bribery Personal relationships 3) Where does lobbying traditionally take place? a) b) c) d) In committee Behind the scenes In the press In full chamber 4) According to the Center for Responsive Politics. Make straightforward presentations. 83 . and real estate Communications/electronics 5) All of the following are principles of effective lobbying except: a) b) c) d) Know the officeholder’s interests. Explore opportunities to build coalitions. insurance. Time lobbying to the phases of the firm’s budget. which of the following spent the most in business lobbying expenses in 2007? a) b) c) d) Transportation Health Finance.

a) b) c) d) democratization centralization decentralization apportionment 8) When legislation is being drafted or rewritten. lobbying often centers on which of the following? a) b) c) d) Committee staff Executive branch Clerk of the House Members 9) In 1995.Business and Society Self Test 6) What happened in Congress in the early 1970s gave additional powers to subcommittees? a) b) c) d) Centralization of the structure Decentralization of the structure More members were added to all committees Members were given less power 7) Congressional ______ in the early 1970s gave additional autonomy to subcommittees and thereby increased the number of influential positions substantially. 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 10) Which of the following is the least expensive of the grassroots activities? a) b) c) d) Organizing people Letter writing campaigns Actual trips to Washington to lobby All of these are equally expensive 84 .

Mobilization: involves providing information to stakeholders on the significance of an issue and helping to reduce their costs of participation. Political information: pertains to the impact of an alternative on the constituents or policy interests of an officeholder.Business and Society Answer Keys Key Term Definitions Lobbying: is the strategic communication of politically relevant information to government officeholders. 85 . Technical information: consists of data and predictions about the consequences of alternative policies.

c 6. b 10. b 4. a 9. b 86 . b 5. c 3. b 7.Business and Society Answer Keys Answers to Self Test 1. d 2. c 8.

Business and Society Notes 87 .

Instructions to Students • Read pages 265-301 of your textbook • Reference: Business and Its Environment by: David P. which include the Sherman Act. 88 . Differentiate between the three new industrial organization approaches to antitrust thought. Examine the antitrust statutes. Law. Baron. Explain how antitrust laws are enforced. you should be able to: 1. 3.Business and Society Objectives Chapter Number Nine Antitrust: Economics. and Politics Learning Objectives Upon successful completion of this chapter. 6th Edition. the Clayton Act and the Federal Trade Commission Act. 2.

Instead of trying to condense this subject. the chapter focuses on four aspects of it. its enforcement. 89 . and some underlying economics concepts. Antitrust is a broad and deep subject to which entire courses are devoted.Business and Society Overview This chapter addresses elements of antitrust law.

Check your answers at the end of this chapter.Business and Society Key Terms The key terms listed below are terms you should be familiar with. Horizontal practice: Vertical practices: 90 . Write your definition below each item.

and the fourth is the politics of antitrust. The following describes a Supreme Court decision pertaining to the right to sue under the antitrust laws and to the illegality of certain price fixing practices. These cases are typically filed by a firm against one of its competitors or by a distributor or supplier against a firm. The courts have ruled that price fixing is a per se violation of Section 1 of the Sherman Act. This case has finally been resolved as the last complaints by the states have been resolved. A federal Court of Appeals panel overturned that decision and held that USA Petroleum could sue since “price-fixing of any kind distorts in a basic way the competitive process the antitrust laws were meant to protect. ‘“The antitrust 91 . The first is the law and its enforcement. Toys ‘R’ Us agreed to donate $27 million toys and $13. One point that can be emphasized is that the vast majority of antitrust cases are private (do not involve the government as a plaintiff). The chapter case ‘The Microsoft Antitrust Case’ is an important case for the software. These suits are encouraged by the opportunity to collect treble damages. however.000 a month.5 million in cash to be used for toys and educational materials for children in all 50 states. Antitrust law continues to evolve through court decisions even when no new legislation is enacted. The case includes the decision up to the balking by the states. USA Petroleum. The chapter case ‘The Staples-Office Depot Merger?’ deals with an important horizontal merger case in which the government effectively used price data and internal company records to define the relevant market and identify the likely effect of a merger on prices. Writing for the 7-2 majority.Business and Society Summary Antitrust can be broken down into four parts. The second is schools of thought about the role of antitrust and its application. A federal district court in California rejected USA Petroleum’s right to sue under the Clayton Act. Some legal scholars believe that treble damages generate lawsuits that have the effect of discouraging competition. and Washington. the attorneys general of 44 states filed an antitrust lawsuit against Toys ‘R’ Us alleging that it conspired with Mattel and Little Tikes to limit the quantities of popular toys distributed to warehouse and price clubs. Nevada. Internet. As an example of a vertical practices case. The third is elements of the economics of antitrust. USA Petroleum filed an antitrust suit alleging that ARCO conspired with its dealers to fix prices at a low level. The chapter case Price Fixing in the Airways considers price fixing on fuel surcharges for freight transport. claimed that ARCO’s new policy caused it to lose $800. in May 1990 overturned the Court of Appeals in ruling that USA Petroleum did not have standing to sue on the basis that a price-fixing conspiracy was a per se violation of the Sherman Act. The three schools of thought are the traditional or structural school. and the new industrial organization (IO) approach. which competed with ARCO in California. holding that a suit could be brought only if the prices were predatory. and USA Petroleum sought to sue under Section 4 of the Clayton Act which allows private suits in the case of violations of the antitrust laws. The availability of bar code data is likely in the future to play a role in horizontal mergers of retailers. In 1982. Justice Brennan said. the Chicago school. ARCO adopted a new pricing policy in which it eliminated its credit cards and lowered the prices it charges its retailers for gasoline. The case identifies the reasoning of the court about the conduct of a dominant company in an industry in which there are network externalities. and e-commerce industries.” The Supreme Court.

’” 92 . they cannot give rise to antitrust injury. Low prices benefit consumers regardless of how those prices are set. they do not threaten competition. and so long as they are above predatory levels. Hence.Business and Society Summary injury requirement cannot be met by broad allegations of harm to the ‘market’ as an abstract entity….

Conduct of market participants. Foreign policy.Business and Society Self Test Multiple Choice Questions (Circle the correct answer) 1) The antitrust acts were the result of political pressures by whom? a) b) c) d) The Populist movement Farmers concerned about the railroad’s pricing practices The distribution of power between farmers and railroads All of the above were political pressures to enact antitrust laws 2) Antitrust laws are concerned with the following. Performance of the markets. except: a) b) c) d) Structure of the markets. a) b) c) d) Democratic Whig Populist No Nothings 4) Which of the following is not an example of a law pertaining to antitrust acts? a) b) c) d) Robinson-Patman Act The Federal Trade Commission Act The Wagner Price Fixing Act The Clayton Act 5) What percentage of suits filed under the federal antitrust laws do private litigants bring? a) b) c) d) 10 34 67 Over 90 6) Section 1 of the Sherman Antitrust Act pertains to which of the following? a) b) c) d) Unilateral monopoly conduct Unreasonable restraints of trade with a focus on joint conduct Unfair pricing standards Market domination in advertising 93 . 3) Antitrust policy had its origins in the___________ movement of the 1870’s.

Business and Society Self Test 7) The Robinson-Patman Act was intended to achieve which of the following goal(s)? a) b) c) d) Protect farmers from unfair competition from railroads Make price fixing illegal Prohibit deceptive acts and practices Protect small businesses and merchants from their larger competitors such as supermarkets 8) Which of the following are not vertical practices? a) b) c) d) Boycotts Tying Price discrimination Exclusive dealing 9) The Department of Justice can enforce antitrust laws only through which means? a) b) c) d) Lawsuits filed in federal court Lawsuits filed in state court Lawsuits filed in even years Lawsuits that have legitimate standing 10) Which of the following must confirm members of the FTC? a) b) c) d) House of Representatives Senate Both a and b Neither a nor b 94 .

Business and Society Answer Keys Key Term Definitions Horizontal practice: is one that involves activities in the same industry Vertical practices: are those involving firms in a supply arrangement or a channel of distribution. 95 .

c 9. b 7. b 96 .Business and Society Answer Keys Answers to Self Test 1. a 10. c 5. b 3. c 4. d 2. d 8. d 6.

Business and Society Notes 97 .

Examine regulatory commissions and agencies. 3. you should be able to: 1.Business and Society Objectives Chapter Number Ten Regulation: Law. Economics. Instructions to Students • Read pages 302-336 of your textbook • Reference: Business and Its Environment by: David P. Identify the four major periods of regulatory change. Baron. Discuss some of the political explanations for regulation. 6th Edition. and Politics Learning Objectives Upon successful completion of this chapter. 2. 98 .

Chapter 11 is devoted to environmental protection and regulation. and its politics. 99 . its economic rationales.Business and Society Overview This chapter introduces the general framework of government regulation including its legal foundations.

Check your answers at the end of this chapter. Write your definition below each item. Theory of market imperfections: Political theory: Natural monopoly: 100 .Business and Society Key Terms The key terms listed below are terms you should be familiar with.

The first is whether Congress will restrict regulation by passing legislation to limit regulatory taking without compensation. and from activists’ strategies. The explanations for regulation and the forms it takes are of two types. Regulatory commissions and agencies have one of the two different structures as described in the text. and the other was the explosion of social regulation focusing on safety. One was deregulation in a number of industries. This is one explanation for the deregulation movement. health. in principle. Perhaps the principal explanation for the difference in regulation in the United States and Europe is that European countries do not have due process requirements. government is itself characterized by imperfections.Business and Society Summary The period beginning in the late 1960s has been characterized by two seemingly contradictory movements. The second explanation is found in market imperfections that. It should be stressed that although regulation. Voters in Oregon approved a ballot initiative that requires compensation for regulatory takings. regulation can make performance worse than it would have been in the absence of regulation. from the evolving preferences of the public. particularly the effect of due process requirements on the speed with which regulatory agencies make decisions. The Court of Appeals decision mentioned in the chapter has raised this issue. The politics of regulation are largely distributive and can be analyzed and understood through the framework developed in Part II of the book. These two movements are not really contradictory and stem from new thinking and changing political forces. Coupled with political pressures that can distort policy away from efficiency. (It should be emphasized that the firms and labor unions in the regulated industries opposed deregulation primarily because of the threat increased competition posed to their rents. the Supreme Court could conclude that the Constitution requires compensation for the loss of value due to regulation.) The courts also played an important role in certain industries such as telecommunications as the regulators had blocked entry and the courts ruled that entry could not be blocked under the statutes. can result in economic inefficiency. and hence many regulatory decisions are made in the administrative agencies (ministries) and largely out of the sight of the public. and the environment. By 2008 little had happened on this issue other than at the state level. It is useful to point out that independent commissions are considerably more independent of the presidency than are the single administrator agencies. but both are subject to a set of political and legal influences illustrated in Figure 10-2. One must note due process requirements and their influence on the way regulations are promulgated. 101 . The political economy perspective focuses on the demand for and the opposition to regulation. It has taken some moderate steps in this direction. Two important regulatory issues are likely to be addressed at the beginning of the century. Administrative law is perhaps less interesting but is also quite important. Deregulation resulted from concerns about industry efficiency and reflected an inability of industries to mount sufficient political power to block the deregulation. where some states adopted measures similar in spirit to but weaker than that adopted in Oregon. can improve economic efficiency. The Congress has a substantial influence on all regulatory agencies. The social regulation movement resulted from new concerns about the environment and the role of government in protecting the health and safety of individuals. The second is whether the courts will limit the delegation to agencies without specific policy guides by Congress. Echelon and the Home Automation Standard (A) case and the discussion in the manual illustrate the nature of the environment of a regulatory agency. Similarly. in the absence of regulation.

Externalities provide the economic efficiency rationale for market-like regulatory mechanisms for environmental protection as considered in Chapter 11. efficiency-generating mechanisms. electric power. 102 . and current developments can serve as the basis for a lecture. and natural gas.Business and Society Summary The literature on market imperfections and the appropriate response to them is extensive and provides material for a lecture that goes into more detail than could be provided in the text. Deregulation is continuing in a number of industries such as telecommunications. The success of the FCC auctions of the radio spectrum indicates that regulators are turning to decentralized.

Business and Society Self Test Multiple Choice Questions (Circle the correct answer) 1) Regulation is government intervention in economic activity using all but which of the following? a) b) c) d) Commands Controls Incentives Market manipulation 2) Which of the following statements is applicable to regulation? a) b) c) d) Is not implemented through judicial institutions Is not implemented through independent commissions Cannot be appealed to courts They take place through confidential hearings 3) The courts have a central role to play in regulatory matters. They become involved in all of these except: a) b) c) d) Interpreting regulations Due process requirement Determining constitutionality Introducing regulatory legislation 4) How many major periods of regulatory change has the United States experienced? a) b) c) d) Two Four Six Eight 5) The major focus of the second phase of regulation in the progressive era and the New Deal was? a) b) c) d) Labor and economic regulation Deregulation Social regulation Political regulation 103 .

These include: a) b) c) d) Appointment of the agencies administrators Directing the review of regulations Policy expertise of cabinet agencies The President can use all these measures to influence the regulatory process and outcomes 104 . Ames McDonald v. Madison 8) The following are all examples of federal regulatory agencies and commissions except: a) b) c) d) National Labor Relations Board Environmental Protection Agency The Federal Reserve System The Senate Foreign Relations Committee 9) Which Act provides for the public notice and comment on rule making prior to rules being promulgated? a) b) c) d) The Administrative Procedures Act of 1946 The Public Hearing Act of 1964 The Common Sense Act of 1988 The Rules and Policies Act of 1935 10) There are many ways through which the President influences the regulatory process. FTC Mayberry v.Business and Society Self Test 6) 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 7) 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) b) c) d) Munn v. Illinois Smith v.

Natural monopoly: results when costs are decreasing in the scale of output or in the scope of the set of goods a firm produces. 105 .Business and Society Answer Keys Key Term Definitions Theory of market imperfections: predicts that regulation will be instituted to correct market imperfections. Political theory: predicts that interest groups seek regulation to serve their interests.

b 5. a 6. a 10. d 9. d 4. d 2. a 7. d 106 . a 3.Business and Society Answer Keys Answers to Self Test 1. b 8.

Business and Society Notes 107 .

Your grade on the examination will be determined by the percentage of correct answers. The University utilizes the following grading system: A B C D F = = = = = 90% – 100% correct 80% – 89% correct 70% – 79% correct 60% – 69% correct 59% and below correct 4 3 2 1 0 grade grade grade grade grade points points points point points Completing Unit Three Examination Before beginning your examination. writing standards. how to challenge test items and how to submit your completed examination may be found in the Syllabus for this course. This Unit Examination consists of objective test questions as well as a comprehensive writing assignment selected to reflect the Learning Objectives identified in each chapter covered so far in your textbook. If you have additional questions feel free to contact Student Services at (714) 547-9625. Additional detailed information on completing the examination. we recommend that you thoroughly review the textbook chapters and other materials covered in each Unit and following the suggestions in the “Mastering the Course Content” section of the course Syllabus. either multiple choice or true/false as well as a writing assignment. 108 . There is no penalty for guessing.Business and Society Unit 3 Examination Instructions The Unit Examination The Unit Examination contains 25 questions.

Business and Society

Unit 3 Examination

Multiple Choice Questions (Enter your answers on the enclosed answer sheet) 1) Business grassroots strategy is built on corporate stakeholders as identified by what? a) b) c) d) Rent chain Money Partisan politics Median voters

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

3) Business coalitions are made up of three types except which of the following? a) b) c) d) Peak organizations Industry organizations Ad hoc coalitions stakeholder groups

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

5) Trade associations serve a variety of _____ and ______ functions. a) b) c) d) market, corporate market, nonmarket corporate, nonmarket corporate, stakeholder

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

109

Business and Society

Unit 3 Examination

7) Campaign contributions are made for all but which of the following reasons? a) b) c) d) Influence legislative voting Obtain access to present or future officeholders Affect outcome of elections Help a CEO with his/her political future

8) In which of the following venues do managers testify? a) b) c) d) Regulatory agencies Congressional committees Courts All are correct

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

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

11) Private antitrust suits appear to be going in which of the following directions? a) b) c) d) Increasing substantially Decreasing substantially Doubling in numbers year to year Almost disappearing

12) The Clayton Act has a provision for ____ damages and this provides a _____ incentive to file suits. a) b) c) d) quadruple; strong treble; strong seven times; strong only twice; weak

110

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Unit 3 Examination

13) 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) b) c) d) Defendant is irrational Defendant is unethical Prosecution is out to get the defendant The defendant committed the act, but it was not unreasonable to do so

14) Which of the following characteristics is not part of the Structural school of thought regarding the purpose of antitrust policy? a) b) c) d) International and global Government is to protect society from economic power Competition is the best protector of consumers and economic efficiency Market is fragile and prone to failure

15) Under the structural or traditional approach, it believed that in concentrated industries collusion is _____________. a) b) c) d) unlikely given likely very rare

16) 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 17) The Congress exerts great influence on the regulatory agencies through which of the following means? a) b) c) d) Using its budgetary and oversight authorities Appointing the regulatory agencies administrators Using the Office of Management and Budget (OMB) Using the independent commissions

111

Business and Society Unit 3 Examination 18) Which of the following is a cause of market imperfection? a) b) c) d) Pure competition Asymmetric information Government has no intervention in the economy Complete free trade 19) In the case of a natural monopoly. economic theory recommends that government set the price of goods and services to be: a) b) c) d) Equal to total cost of production Equal to average cost of production Equal to marginal cost of production Equal to the competitors’ price 20) Which one of the following activities could be considered a nonpecuniary externality? a) b) c) d) Effect of a firm’s new plant on the demand and price of labor The increase in the oil price after the oil shock of the 1970’s Generating pollution by driving a car All the above have nonpecuniary externalities 21) Which of the following is not a public good? a) b) c) d) National defense Radio broadcasting Bridges and roads Buying a TV set from the army’s surplus store 22) What term below refers to behavior induced when people do not bear full consequences for their actions? a) b) c) d) Moral hazard Transaction costs Asymmetric information Free entry and exit into the market 23) 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) b) c) d) Interest group Capture Flexible Jurassic 112 .

a) b) c) d) Market imperfection Free-riding Moral hazard Cross-subsidization 113 .Business and Society Unit 3 Examination 24) Capture theory predicts that regulation will be found where there is/are market ______. a) b) c) d) perfection shifts imperfections regularities 25) ______ occurs when one group of customers pays more and another group pays less than the cost of providing their service.

Compare the basic premises and/or assumptions of the three antitrust schools of thought. 3) There are several types of market imperfections. Please answer ONE of the following: 1) There has been much talk about electoral reform. 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.Business and Society Unit 3 Examination Written Assignment for Unit Three Be sure to refer to this course syllabus for instructions on format. length. the pattern and purposes of campaign contributions. 114 . and its results. Write a report describing some of the electoral strategies. What do you think should be done to reform the system? 2. Explain the natural monopoly problem. the different manifestations of this phenomenon. and other information on how to complete this assignment. the election finance laws.

Business and Society You Can Do It Unit 3 is done! You’re close to the finish line and we’re cheering you on to victory! 115 .

Understand the role of politics within environmental protection. Instructions to Students • Read pages 337-373 of your textbook • Reference: Business and Its Environment by: David P. 6th Edition. 116 . 2. Analyze the Coase theorem as it relates to social efficiency. you should be able to: 1. Recognize the importance of cap –and-trade systems. 3. Baron.Business and Society Objectives Chapter Number Eleven Environmental Management and Sustainability Learning Objectives Upon successful completion of this chapter.

Environmental protection. has very high costs. however. and environmental protection has broad public support reflecting the substantial widely distributed benefits resulting from that protection. and those costs provide restraints on government regulation.Business and Society Overview Environmental issues are very important. 117 .

Command-and-control regulation: Incentive Approaches: Caps and trade systems: NIMBY movement: 118 .Business and Society Key Terms The key terms listed below are terms you should be familiar with. Write your definition below each item. Check your answers at the end of this chapter.

Chaired by David T.Business and Society Summary The costs of environmental protection are largely borne by private parties rather than by government budgets. Texas in 1937. Environmental taxes have now been used for CFCs and some other pollutants. The residents. Inc. 119 . The performance of the Superfund would be a good subject for a lecture on the difficulty of administering a cleanup program. Buzzelli. In addition. however. as with a liability rule. by making small cash payments. an externality resulted. Recognition of the high costs of environmental protection has brought increasing attention to achieving regulatory objectives in a socially-efficient manner. and the head of an environmental research organization. When it was built there were no homes near the refinery. health. Dow Chemical Company has formed a Corporate Environmental Advisory Committee which reviews its plans for production and product planning four times a year. Fina. Environmental cooperation with NGOs appears to be a more productive approach to resolving certain environmental issues. decided to undertake a political campaign to force Fina to buy their entire subdivision. many of the significant regulatory actions by the EPA have been challenged in court by one or more of the sides of an issue. built a refinery in Port Arthur. but subsequently a subdivision grew up next to the refinery. General Motors and the Environmental Defense Fund signed a working accord in mid-1992. The Coase theorem applies to environmental issues. Citizen opposition to certain forms of environmental regulation has developed in some situations. and safety. an amount that was more than its quarterly earnings. use of children to dramatize the claimed hazards. Its broad authority. The political strategy involved lobbying. This case also includes a simple discussion of how such a system works. As another example of the point in the text that an externality is reciprocal. which means that there are a variety of incentive mechanisms for achieving efficiency. Fina dealt with emissions. This provides incentives for additional regulation. When the subdivision was built. The chapter case Environmental Justice and Pollution Credits Trading Systems addresses a challenge to these systems. Fina eventually agreed to buy the 211 homes for a cost up to as much as $10 million. such as those that ate the paint on cars. Firms are increasingly giving higher status to internal environmental management units and are experimenting with approaches to environmental control. and even a media strategy orchestrated for the local TV stations. however. a dean of environmental programs at a major university. and the McDonald’s example and the other examples in the chapter illustrate the approach. a vice-president for environment. so the politics of environmental protection involve powerful interests on both sides of the issues. The Coase theorem applies to efficiency and not to distribution. and the Superfund is a good example of a widelycriticized program due to litigation costs and the high cost of cleanup for what some people argue yields only small benefits. The Environmental Protection Agency has the principal regulatory authority for the administration of a wide set of environmental laws. to the residents of the Fairlea subdivision. Regulation is subject to government failure as discussed in Chapter 10. is limited by the procedural requirements discussed in Chapter 10. Fina responded to the externality caused jointly by the subdivision and its refinery by removing one side of the externality. The Envirotest Systems Corporation (A) case in Chapter 2 illustrates an environmental revolt. and one feature of environmental regulation is that there remains uncompensated damages. Tradable permits systems are being used more extensively as discussed in the case. the Committee includes a former administrator of the EPA.

120 . Weiss said.’ Mr. Dow’s actions were not entirely applauded by the environmental interest groups. which he said routinely lobbies against laws aimed at reducing emissions. Weiss.Business and Society Summary Dow has also had its plant managers form local environmental advisory committees. a legislative affairs director of the Sierra Club. ‘The company’s engineers have realized they can save money by reducing pollution. Daniel J.’” Through its Responsible Care program the chemical industry has attempted to improve its environmental performance. but unfortunately that does not extend to their policymakers. ‘They still use political money and their contacts to block legislation. said Dow is a leading member of the Chemical Manufacturers Association.

public goods Imperfections. costs.9 2) When is social efficiency attained? a) b) c) d) Aggregate well-being is minimal Aggregate well-being is total Aggregate well-being is maximal Aggregate economic costs are minimal 3) Coase’s Theorem pertains to _______.4 4. externalities.Business and Society Self Test Multiple Choice Questions (Circle the correct answer) 1) What percentage of the GDP in 2004 did the EPA estimate that it would cost to comply with existing environmental regulations? a) b) c) d) 2. business Complexities. which are referred to as ____________costs.1 3. inherent Impediments. private goods Imperfections. transactions Impediment. social efficiency is a problem because of _________to bargaining. ethics. externalities. transactions 6) Why does government regulate automobile emissions? a) b) c) d) Exorbitant costs Unwillingness of business to cooperate at all Government’s mandate to regulate all common goods Disagreement on the effects of automobile pollution as a problem 121 . public goods 4) 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 5) From the Coasean perspective. including ______ and ________. a) b) c) d) Complexities.7 5. a) b) c) d) Perfections. private goods Imperfections.

Business and Society Self Test 7) What approach has become an effective means of achieving environmental goals at the least cost to society? a) b) c) d) Command-and-control Incentive or markets Common goods International agreements 8) Cap-and-trade systems are also called. issues permits for that amount. a) b) c) d) Market incentive Kyoto Protocol Cap-and-trade Coase’s systems 10) What is the Kyoto Protocol concerned with? a) b) c) d) Trade and pollution Japanese cars and air pollution Global climate change Global ocean dumping 122 . a) b) c) d) market systems tradable permit systems incentive systems governmental systems 9) _________ systems cap the total allowed emissions of a particular pollutant. and allows the permits to be traded.

123 . and allows the permits to be traded. Incentive Approaches: take into account the benefits and costs of attaining environmental objectives and achieve those objectives by aligning the social and private costs of pollution and its abatement.Business and Society Answer Keys Key Term Definitions Command-and-control regulation: where regulators order engineering controls. particularly as they involve possible risks to persons or property. Caps and trade systems: caps the total allowed emissions of a particular pollutant. NIMBY movement: focuses on local environmental concerns. such as scrubbers for electric power plants. or require the best available technology for pollution abatement. issues permits (entitlements) for that amount.

b 9. d 4. a 2. a 7. b 6. c 124 . a 5. b 8. c 3. c 10.Business and Society Answer Keys Answers to Self Test 1.

Business and Society Notes 125 .

6th Edition. Examine product liability as a branch of the common law of torts. Baron. Identify the components of a contract. Instructions to Students • Read pages 374-412 of your textbook • Reference: Business and Its Environment by: David P. you should be able to: 1. 126 . Evaluate the economic efficiency rationale as it relates to bargaining and intellectual property. 2. 3.Business and Society Objectives Chapter Number Twelve Law and Markets Learning Objectives Upon successful completion of this chapter.

Business and Society Overview This chapter introduces a set of concepts from the law pertaining to markets. The topics include the common law. 127 . property with an emphasis on intellectual property. contracts. and torts with a focus on products liability.

Business and Society Key Terms The key terms listed below are terms you should be familiar with. Common law countries: Property: Patent: 128 . Write your definition below each item. Check your answers at the end of this chapter.

The two sides then settled out of court. forces that firm to bear the costs of the hazards associated with its product. and distorted incentives that lead to inefficient levels of care. It centers on pure accidents. The British judge wrote.” A British newspaper applauded the decision. The case of a woman who spilled coffee from McDonald’s while she was driving and successfully sued for damages has been followed by additional coffee lawsuits in the United States. Intellectual property is also the central focus of the Chapter 13 case eBay and Database Protection case. however.” The original McDonald’s case arose when a 79-year old woman driving a car with an open cup of coffee between her legs was burned and required skin grafts. The Calabresi and Melamed principles are important for reasoning about how in the presence of transactions costs entitlements should be assigned for social efficiency objectives. but the distributive consequences and the transactions costs of the various assignments can differ substantially. The liability system. “It’s wise judges like him that might. As indicated in Figure 12-4. and the Chapter 1 case The Nonmarket Environment of the Pharmaceutical Industry identifies the incentives inherent in the pharmaceutical industry. It is important that students understand that. Product safety is costly. “I am quite satisfied that McDonald’s was entitled to assume the consumer would know that the drink was hot. The Coase theorem provides a perspective on the socially efficient means of addressing the safety issue. and the two costs are those associated with taking care and those resulting from the injuries and property damage. The jury awarded $2. Absent the liability system. The latter motivates much of the politics of intellectual property. a firm that produces a hazardous problem could have an incentive to free-ride on the quality image for the product class. For example. and a judge later reduced it to $480. 129 .7 million. One point that might be discussed in a lecture is that the liability system deals with the free-rider problem. and benefit. in the absence of transactions costs.Business and Society Summary Property is a central underpinning of markets. just might. and the chapter case Patent Games: Plavix considers one episode.000. such as stirring and blowing. efficiency can result from any of the assignments of entitlements and their protection discussed in Chapter 11. a firm might be able to produce a product that does not meet the standards. sell it at a lower price. and intellectual property is perhaps the most challenging aspect of the law of property. and there are numerous commonplace ways of speeding up cooling. Intellectual property law has both efficiency and distributive effects. stop this country sliding into the absurd compensation culture that has gripped America for years. In April 2002 a judge in the United Kingdom dismissed 36 cases of individuals suing over alleged burns from fast food restaurant coffee. market imperfections that lead to injuries. The product safety problem is an important one for most firms. a producer must take into account in its ex ante decisions the ex post consequences of the use of its products. if the industry had voluntary product safety standards.

and intellectual property rights are _______. a) b) c) d) Property Common law Civil law Contract 6) In the appropriability of rents. except Quebec 4) In the United States.Business and Society Self Test Multiple Choice Questions (Circle the correct answer) 1) The cornerstone of the free market system is what? a) b) c) d) The government Business Markets Competition 2) What is another name for common law? a) b) c) d) Judge-made Jury-made Public-made Citizen-made 3) In which of the following countries is common law not used? a) b) c) d) United States France United Kingdom Canada. you have weak appropriability. if the cost of replication is high. a) b) c) d) tight loose flexible redoubled 130 . the common law prevails in all but which of the following? a) b) c) d) Property Contract Criminal Torts 5) ________ is a set of rights to control a tangible or intangible thing.

manufacture. as in the case of Napster. or composition of matter. a) b) c) d) weak moderate strong flexible 8) Changing ____________ can dramatically alter the costs of replication of intellectual creations.Business and Society Self Test 7) In terms of appropriability of rents.’” a) b) c) d) license patent contract copyright 10) What must you do to claim a copyright? a) b) c) d) File with the government You can claim it even if you do not file with the government File with local government File on your income tax 131 . a) b) c) d) people tastes technology management 9) What is defined in the following? “A ______ may be granted for an invention of ‘any new and useful process. there is ___________ appropriability. or any news and useful improvement thereof. machine. if the cost of replication is low and the intellectual property rights are tight.

that is. Property: is the set of rights to control a tangible or intangible thing. a patent grants a monopoly to the inventor. and precedents. the arguments provided.Business and Society Answer Keys Key Term Definitions Common law countries: typically have an adversarial system of litigation in which each party advocates its side of the dispute and judges and juries render decisions based on the evidence. Patent: establishes a property right that allows the holder to exclude others from using the invention. 132 .

a 3. b 133 . b 7. b 8. c 9. b 4. b 10. c 2.Business and Society Answer Keys Answers to Self Test 1. a 6. c 5.

Business and Society Notes 134 .

6th Edition. 3. Recognize the importance of privacy as it relates to the internet.Business and Society Objectives Chapter Number Thirteen Information Industries and Nonmarket Issues Learning Objectives Upon successful completion of this chapter. Baron. 135 . you should be able to: 1. Discuss tax policy in regards to internet purchases. 2. Instructions to Students • Read pages 413-450 of your textbook • Reference: Business and Its Environment by: David P. Examine the economics of online markets.

and online communities. tax policy. Internet privacy. 136 . The topics include the economics of winner-take-most markets.Business and Society Overview This chapter presents selected topics pertaining to information industries and in particular to the Internet and electronic commerce.

Business and Society

Key Terms

The key terms listed below are terms you should be familiar with. Write your definition below each item. Check your answers at the end of this chapter. Network externalities: Online communities:

137

Business and Society

Summary

The Internet is a powerful information network that has had major economic and social impacts. It allows communication of information among remote users, serves as a platform for online markets and provides opportunity to individuals and businesses. The economics of winner-take-most is intended to be used in conjunction with The Microsoft Antitrust Case in Chapter 9 and with the eBay cases in this chapter. The Google cases in Chapters 1 and 16 involve nonmarket issues associated with Internet services. The economic concepts presented in the chapter for understanding certain information industries can be illustrated by the case of eBay. eBay was in effect the first-mover in online auctions, and the network externalities were powerful. Demand-side economies of scale were present on both the buyers’ and the sellers’ sides of auctions. Those economies were stimulated very effectively through the development and support of trust. Trust allowed the community to grow, and collective lock-in helped retain that community. This allowed positive feedback to develop, and the market tipped in its favor. This effectively shut out competitors, although it is possible that Amazon.com or Yahoo! Auctions might eventually be able to successfully compete in the online auction marketplace. eBay expanded its scope through broadening the set of auctions it hosted and by allowing sellers to personalize their offerings. This strategy was successful in generating steady growth in revenue and profits. What eBay had not done was to take advantage of compatibility economies such as attracting complementary products. The chapter discusses its strategy to attract complementary products and programmers. To elaborate on the positive feedback, the first-mover in this market attracted some buyers and sellers. As importantly, it had more buyers and sellers than did other sites. The larger number of buyers attracted sellers, and the larger number of sellers attracted buyers. This allowed for positive feedback to develop, and the community grew. eBay also benefited from collective lock-in, since it was very difficult to coordinate a collective move to another auction site by the traders in a particular item. Moreover, any individual seller risked losing access to the large number of customers. The sellers were thus in a prisoners’ dilemma. The same is true of the buyers, although they have more flexibility to visit other auction sites, since they only bear search costs of doing so. Once positive feedback and collective lock-in occur, it is very difficult for competitors and new entrants to succeed.

138

Business and Society

Self Test

Multiple Choice Questions (Circle the correct answer) 1) In the past ______ decades, the information industry has grown significantly. a) b) c) d) two three four five

2) 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) b) c) d) contracts; trust compatibility; standardization compatibility; trust standardization; contracts

3) The _____ _____ of information raises the issue of appropriability of rents from the investment of developing information. a) b) c) d) private rights public goods public rights private property

4) What is deposited on a user’s personal computer to track browsing? a) b) c) d) A donut A spy A cookie A cake

5) 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) b) c) d) Positive externality Entropy Stasis Network externalities

139

a) b) c) d) decreasing increasing immeasurably decreasing vastly increasing 7) A standard can either be ____ or _____..Business and Society Self Test 6) Network externalities yield _________returns on the demand side of the market. public 8) What type of market indicates that a single winner takes most of the market? a) b) c) d) Closed Open Competitive Tipped 9) An example of the tipped market was the rivalry between ____ and ______. a) b) c) d) Government regulation Courts Lawsuits Self-regulation by companies 140 . a) b) c) d) open.S. closed open. proprietary closed. privacy and the Internet has been largely managed by ______. proprietary closed. a) b) c) d) Betamax and VHS IBM and Sun eBay and Amazon GE and Whirlpool 10) In the U.

Online communities: a community of users who interact with each other as well as with a company.Business and Society Answer Keys Key Term Definitions Network externalities: present when an individual’s demand for a product is positively related to the use by other individuals. 141 .

b 3. b 7. d 9.Business and Society Answer Keys Answers to Self Test 1. a 2. d 6. c 5. d 142 . a 10. b 8. b 4.

Business and Society Notes 143 .

If you have additional questions feel free to contact Student Services at (714) 547-9625. There is no penalty for guessing. Additional detailed information on completing the examination. Your grade on the examination will be determined by the percentage of correct answers. writing standards. The University utilizes the following grading system: A B C D F = = = = = 90% – 100% correct 80% – 89% correct 70% – 79% correct 60% – 69% correct 59% and below correct 4 3 2 1 0 grade grade grade grade grade points points points point points Completing Unit Four Examination Before beginning your examination. 144 . we recommend that you thoroughly review the textbook chapters and other materials covered in each Unit and following the suggestions in the “Mastering the Course Content” section of the course Syllabus. This Unit Examination consists of objective test questions as well as a comprehensive writing assignment selected to reflect the Learning Objectives identified in each chapter covered so far in your textbook.Business and Society Unit 4 Examination Instructions The Unit Examination The Unit Examination contains 25 questions. either multiple choice or true/false as well as a writing assignment. how to challenge test items and how to submit your completed examination may be found in the Syllabus for this course.

000 Over 25.Business and Society Unit 4 Examination Multiple Choice Questions (Enter your answers on the enclosed answer sheet) 1) The Kyoto Protocol called for country-specific reductions in carbon dioxide emissions by: a) b) c) d) 2005 2010 2008 2006 2) Which of the following countries rejected the Kyoto Protocol? a) b) c) d) Russia India China Australia 3) The EPA was established in which decade? a) b) c) d) 1950’s 1960’s 1970’s 1980’s 4) How many employees did the EPA employ in 2008? a) b) c) d) Over 4. investors and customers firms and individuals individuals only 6) What is the name of the account that was established to clean up toxic waste disposal sites? a) b) c) d) Toxic Waste Cleanup Fund Superfund SuperiorFund ToxWasteFund 145 .800 Over 17.500 Over 9.000 5) The federal government can seek both criminal and civil convictions of polluters from: a) b) c) d) firms only firms.

Business and Society Unit 4 Examination 7) Two complaints in terms of government’s demands for cleaning up toxic wastes are: a) b) c) d) time and cost litigation costs and new standards for cleanup litigation costs and retroactive liability retroactive liability and time 8) Most of the costs of environmental protection are borne by: a) b) c) d) private parties government business all of the above 9) What is NIMBY? a) b) c) d) Not In My Best Year Not In My Backyard Not In Money By Years Not Involved More By Yards 10) A trademark produces what two values? a) b) c) d) economic and political economic and social economic and public social and private 11) Contracts are entered into to induce _______. which refers to a change in behavior by a party. a) b) c) d) assurances reliance common law exchanges 12) Which two of the following are ex ante concepts? a) b) c) d) conditions and statutes reliance and inducements duress and unconsionability duress and contracts 146 .

Business and Society Unit 4 Examination 13) Which industry highlighted in your text seems to struggle mightily with contract problems around research findings? a) b) c) d) dairy automobile record biotechnology 14) What ex ante approach is based on the principle that more complete contracts can be more efficient? a) b) c) d) liquidated damages duress damages consequential damages expectation damages 15) What are torts? a) b) c) d) civil rights civil wrongs civil damages private wrong through public statutes 16) All of the following are the basic elements of a tort except: a) b) c) d) an injury an action that causes harm the breach of duty owed to the injured party the breach of utilitarian ethics 17) Which of the following requires the balancing of the costs of injuries and the costs of care? a) b) c) d) political efficiency social efficiency economic efficiency technological efficiency 147 .

a) b) c) d) network externality standardization free-rider customization 23) Why do online retailers fight tax collection for their items? a) b) c) d) it is too much of a bother they do not want to do the state’s work it would be prohibitively expensive they contend it would be too complex 148 .Business and Society Unit 4 Examination 18) What is the leading online advertising services firm? a) b) c) d) DoubleClick Ads-are-Us MonsterBoard WebDesign 19) What is the stance of most business concerning legislating privacy rules for the Internet? a) b) c) d) support strongly opposed generally neutral lobbying for legislative passage 20) What are some of the components of self-regulation? a) b) c) d) policies and practices of companies certification by independent nongovernmental organizations personal protection by individuals all are components 21) 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 22) Confidence in the Internet is a public good. but the provision of that public good is subject to a _________ problem.

Business and Society Unit 4 Examination 24) According to eBay. a) b) c) d) public ordering private ordering flexible ordering traditional ordering 149 . what is the key to its success? a) b) c) d) hard work privacy trust money 25) eBay’s ______ lives in the shadow of public order.

Please answer ONE of the following: 1) Why is the Kyoto Protocol such as controversial agreement? Who is against it and why? Explain your stance on global climate change. length. 3) Describe the evolving information industry and some of the nonmarket issues that arise. and other information on how to complete this assignment.Business and Society Unit 4 Examination Written Assignment for Unit Four Be sure to refer to this course syllabus for instructions on format. 2) Discuss. 150 . analyze and critique the politics of products liability.

We are confident you will do well. Now let’s sharpen our pencils for the Final Exam. 151 .Business and Society You Can Do It Congratulations! You have completed Unit 4.

Your Final Examination will then be mailed to you or to your designated Proctor. As you will notice. Proctor requirements. If you have additional questions feel free to contact Student Services at (714) 547-9625. directly to the University for grading. it will be time for you to take the Final Examination. The Final Examination may be submitted by mail or electronically via the Coast Connection student portal.Business and Society Final Examination Instructions About the Final Examination After you have successfully completed all of the Unit Examinations and the Essay Examination. 152 . based upon your degree requirements. On this form. Submitting Your Final Examination After you have completed your Final Examination. Please submit this form at the end of Unit Test 4. indicate whether this Final Examination will be sent to you or your designated Proctor. Scheduling a Final Examination When it is time to complete your Final Examination. how to challenge test items and how to submit your completed examination may be found in the Syllabus for this course. you or your Proctor will submit your Final Examination (depending on whether the Final Examination was proctored or unproctored). no Final Examination is included with your Study Guide. please complete and submit the enclosed Final Examination Scheduling Form. The Final Examination will be provided by Student Services only after you have submitted the Final Examination Scheduling Form. Additional Information Detailed information on completing the Final Examination.

__________________________________ Ext.D. Main Street. All questions will be answered promptly by mail or e-mail. Attention: Student Services. _________________________________________________ Today’s Date ____________________ Student Last Name _________________________________ Student First Name ______________________ Student Address ______________________________________________________________________________ City _____________________________________ State ______________________ Zip ___________________ Contact Phone No.Business and Society Request For Help Form Please state your questions or comments and mail this form to 700 N. CA 92701. Student I. or fax to (714) 547-5777. _____________________________________ Domestic Phone Numbers Only E-Mail Address _______________________________________________________________________________ Please Print Clearly Instructions: Please type or write legibly and state your question(s) clearly. 153 . Santa Ana.

mail to the Testing Department. 2. Provide a page reference from the textbook to support your answer. Staple the form. Unit Test 1. and then answer it in a few sentences. your challenges and any other work papers to your answer sheet and submit them by regular U. please feel free to attach an additional sheet of paper. 4. 6.. Write or summarize the question. _____________________________________________________________________________________________ 154 . 2.Business and Society Test Item Challenge Form Student Last Name _________________________________ Student First Name _______________________ Daytime Phone _____________________________________ Student ID _______________________________ E-Mail Address _______________________________________________________________________________ If your wish to challenge an examination item. 4. 3. Identify the specific question number you are challenging. or the Final Examination). Fill in the bubble in the F column on the answer sheet for the challenged item. 3. If you need additional space. 5.e.S. Identify the test you are working on (i. please be sure to include the following: 1.

Business and Society Test Item Challenge Form 155 .

please complete Student and Course Information only and submit this form with your Essay Examination. Date _____________________________ Student I. you were given the total number of proctored Final Examinations required for your degree program. Otherwise. If this Final Examination is to be proctored. ______________________________________________ Student Name ________________________________________________________________________________ Student Address ______________________________________________________________________________ City __________________________________________________ State _________________________________ Zip Code ________________ Country ____________________________________________________________ Student E-Mail Address ________________________________________________________________________ Daytime Telephone _____________________________ Evening Telephone _____________________________ Course Information: Course __________________ Course Name _______________________________________________________ Textbook Title _________________________________________________________________________________ Textbook Edition ________________________ Please send the Final Examination to: Proctor’s Name _______________________________________________________________________________ Proctor’s Relationship to Student ________________________________________________________________ Proctor’s Street Address: _______________________________________________________________________ City ______________________________ State _________________ Zip Code __________________________ Country __________________________________ Proctor’s E-Mail Address: ___________________________ Daytime Telephone _________________________ Evening Telephone _________________________________ Student’s Signature ________________________________________________________________________ 156 .Business and Society Final Examination Scheduling Form The University requires a certain number of Final Examinations to be completed under the supervision of a Proctor.D. please provide information on your designated Proctor. At the time you enrolled or reinstated your program.

Business and Society Notes 157 .