Chapter 3 Topic 2

. When talking with Shane, a sales manager, she remarked that typically, her employees sincerely and
positively overstate their job performance and abilities. This is an example of the ____ effect. 
 

A.  overstatement
B.  motivated blindness
C.  holier-than-thou
D.  cheating
E.  fudging

With the "holier-than-thou" effect, science writer Benedict Carey suggests, "people tend to be overly
optimistic about their own abilities and fortunes—to overestimate their standing in class, their sincerity,
their discipline."

2. Alonzo, the president of the student class and honor society, has been very busy and did not study for
the history test. Although Alonzo is very confident, he realizes that he probably will not do well on the
exam and has talked himself into cheating because he feels it is worth it to maintain his strong GPA,
which he will need to be accepted by a good college. He tells his friend, "I don't usually do this, but I
really have to do it." The cause of Alonzo's behavior is ____. 
 

A.  the holier-than-thou effect

B.  the deception effect
C.  the cheating requirement
D.  a depression disorder
E.  motivated blindness

Motivated blindness is the tendency to overlook information that works against our best interest.
"People who have a vested self-interest, even the most honest among us, have difficulty being
objective," says one report. "Worse yet, they fail to recognize their lack of objectivity." Motivated
blindness enables us to behave unethically while maintaining a positive self-image. Most students
rationalize their behavior by saying, "I don't usually do this, but I really have to do it." They would
rather cheat, that is, than show their families they got an F.

 
4 What mechanism is used to provide a systematic assessment of an organization's triple bottom line? 
 

A.  sustainability program

B.  code of ethics
C.  diversity program
D.  financial audit
E.  social audit

Success in these areas can be measured through a social audit, a systematic assessment of a company's
performance in implementing socially responsible programs, often based on predefined goals.

6. The marketing director informed his employees that he feels the company needs to improve its
relationship with the distributors of the company's products to increase market share because they are
part of the ______ environment of the company. 
 

A.  strategic
B.  focused
C.  outlying
D.  external
E.  task

Distributors are part of an organization's task environment, and therefore one of its external
stakeholders.

7. Patsy, a nurse, has decided to start a home health care service to assist with the medical, meal
preparation, and light housecleaning needs of older adults. To grow her business, Patsy is focusing her
marketing efforts on the older adult population; as she does this, she is involved with the _____
environment. 
 

A.  task
B.  general
C.  internal
D.  natural capital
E.  strategic allies

Age is part of the demographic force, and demographic forces are part of an organization's general
environment.

 
8. Don was recently promoted, and his salary increase includes retirement investment options, so he has
decided to get involved with an ESOP. This means Don ____. 
 

A.  will be on the company's board of directors

B.  will participate in an Externship Supervisors' Oversight Plan
C.  will be buying shares of his company's stock
D.  is now part of the company's external stakeholders
E.  is in charge of an investment group

With an Employee Stock Ownership Plan (ESOP), employees buy company stock to become owners.

10. Warm Hearts is a nonprofit organization that brings warm meals to older adults and runs errands for its
clients; the board of that nonprofit is called the _____. 
 

A.  overall board

B.  nonprofit trustees or the directors
C.  strategic board
D.  daily oversight committee
E.  board of trustees or board of regents

In nonprofit organizations, such as universities or hospitals, the board may be called the board of
trustees or board of regents.

11. Marie and Marti are partners who solely own M and M Florist. As owners, they can ____. 
 

A.  claim only limited liability

B.  avoid claiming any legal responsibility for M and M
C.  claim limited partnership
D.  claim an organization as their legal property
E.  decide not to pay their stockholders

The owners of an organization consist of all those who can claim it as their legal property.

 
 

13. Rebecca and Donna, owners of Fine Coffee and Pastry Shop, are concerned because Panera Bread is
opening a new store just one mile from their shop. Rebecca and Donna know that Panera will be
offering similar products; therefore, Panera Bread will be a ____ to Rebecca and Donna. 
 

A.  competitor
B.  competitive ally
C.  strategic ally
D.  distributor
E.  internal stakeholder

Competitors are people or organizations that compete for customers or resources.

14. The plant manager of a factory that produces tires told Sal, the purchasing manager, to approach the
suppliers of the plant to discuss discounts. A supplier to that factory ____. 
 

A.  competes for customers or resources

B.  helps Sal's company sell its goods and services to customers
C.  joins forces with Sal's plant to achieve advantages neither can perform as well alone
D.  rescinds tax breaks when firms don't deliver promised jobs
E.  provides raw materials, services, equipment, labor, or energy

A supplier is a person or an organization that provides supplies like raw materials, services, equipment,
labor, or energy to other organizations.

15. Every Saturday Mrs. Jones and hundreds of other shoppers visit ABC Market, a grocery store, to buy
food for their home or business. These shoppers are _____ to ABC. 
 

A.  suppliers
B.  community allies
C.  competitors
D.  customers
E.  partners

Customers are those who pay to use an organization's goods or services.

 
16. ABC Brothers' cleaning products and equipment are sold to consumers and commercial cleaning
companies in Best Supply's janitorial supply and equipment store. ABC relies heavily on Best Supply to
help sell its goods and services to customers. Best Supply is a(n) ____ for ABC Brothers' products. 
 

A.  competitor
B.  distributor
C.  customer
D.  subsidiary
E.  account ally

A distributor is a person or an organization that helps another organization sell its goods and services to
customers.

17. Ole McDonald, a successful farm equipment supply company in the Midwest, joined with A-Plus
Supply, a national hardware and home retailer, so Ole McDonald can open stores in other regions and
A-Plus can now offer a high-quality product in the farm community. This is an example of a ___
relationship. 
 

A.  distributor
B.  competitor
C.  customer
D.  supplier
E.  strategic allies

The term strategic allies describes the relationship of two organizations who join forces to achieve
advantages neither can perform as well alone.

18. Since the 1950s, the percentage of the U.S. labor force represented by unions has _____. 
 

A.  rapidly increased

B.  steadily increased
C.  fallen to nearly zero
D.  steadily declined
E.  remained unchanged

In recent years, the percentage of the labor force represented by unions has steadily declined (from 35%
in the 1950s to 11.3% in 2013).

 
19. Local communities are stakeholders of organizations because communities _____. 
 

A.  rely on the products the companies produce

B.  rely on the tax base from companies, and their employee payrolls, to thrive
C.  wish to join forces with organizations to create strategic alliances
D.  need the publicity of national organizations
E.  enjoy the changes that progress tends to bring

Local communities are obviously important stakeholders. Schools and municipal governments rely on
the organization for their tax base. Families and merchants depend on its employee payroll for their
livelihoods. In addition, everyone from the United Way to the Little League may rely on it for some
financial support.

 
20. The city government of Pleasantville promised significant tax breaks to a large retailer if it expanded its
presence, which would result in nearly 200 new local jobs. However, the retailer found another location
better for expansion. As a result, the city of Pleasantville instituted clawbacks by _____. 
 

A.  increasing the tax breaks

B.  forcing the retailer to pay large fines
C.  rescinding the tax breaks
D.  boycotting the retailer
E.  forcing the retailer to unionize

If a community gives a company tax breaks in return for the promise of new jobs and the firm fails to do
so, the community may do clawbacks, which means rescinding the tax breaks when firms don't deliver
promised jobs.

21. When individuals who want to start a new venture obtain many small amounts of money from many
people, this type of financing is called ____. 
 

A.  crowdfunding
B.  multifunding
C.  duplicating
D.  venture-funding
E.  angel-financing

During the Great Recession, even good customers found loans hard to get. There then emerged a new
kind of financing called crowdfunding, raising money for a project or venture by obtaining many small
amounts of money from many people ("the crowd").

 
22. Regulatory agencies that establish ground rules under which organizations may operate are known as
____. 
 

A.  whistle-blowers
B.  government moderators
C.  government regulators
D.  interest groups
E.  watch dogs

Government regulators establish ground rules under which organizations may operate.

23. Joe, a lobbyist who represents a certain industry, is meeting with several members of Congress to try to
exert political influence by contributing funds to the lawmakers' election campaigns. Joe also is
involved in a letter-writing campaign to promote his cause. Joe represents a ____. 
 

A.  government regulator

B.  task force
C.  focus group
D.  strategic alliance
E.  special-interest group

Special-interest groups are groups whose members try to influence specific issues. Special-interest
groups may try to exert political influence, as in contributing funds to lawmakers' election campaigns or
in launching letter-writing efforts to officials. Or they may organize picketing and boycotts—holding
back their patronage—of certain companies.

24. The mass media is considered part of an organization's _____. 

 

A.  general environment

B.  task environment
C.  internal stakeholders
D.  macroenvironment
E.  distribution network

No manager can afford to ignore the power of the mass media—print, radio, TV, and the Internet—to
rapidly and widely disseminate news both bad and good. Thus, most companies, universities, hospitals,
and even government agencies have a public relations person or department to communicate effectively
with the press. This is part of an organization's task environment.

 
25. The macroenvironment includes these forces: _______. 
 

A.  economic, technological, sociocultural, diversity

B.  diversity, microenvironment, sociocultural, demographic, political-legal
C.  globalism, technological, sociocultural, demographic, microenvironment
D.  economic, technological, sociocultural, demographic, political-legal, international
E.  international, demographic, diversity, family, culture, technology

Beyond the task environment is the general environment, or macroenvironment, which includes six
forces: economic, technological, sociocultural, demographic, political-legal, and international.

26 The macroenvironment is also known as the ______. 

 

A.  economic environment

B.  diversity source
C.  microenvironment
D.  international arena
E.  general environment

The macroenvironment is also known as the general environment, which includes six forces: economic,
technological, sociocultural, demographic, political-legal, and international.

 
27. Americans driving less and young people having less interest in cars are examples of trends in society
known as ____ forces. 
 

A.  diversity
B.  financial
C.  political
D.  sociocultural
E.  legal

Sociocultural forces are influences and trends originating in a country's, a society's, or a culture's human
relationships and values that may affect an organization.

 
28. New developments in methods for transforming resources into goods or services are _____ forces. 
 

A.  sociocultural
B.  technological
C.  demographic
D.  political-legal
E.  media

Technological forces are new developments in methods for transforming resources into goods or
services.

30. When a food distributor looks at changing the products it markets in the southern states because of an
increasing percentage of customers from Central and South America, it is looking at the ____ forces. 
 

A.  economic
B.  demographic
C.  technological
D.  political
E.  legal

Demographic forces are influences on an organization arising from changes in the characteristics of a
population, such as age, gender, or ethnic origin.

 
31. Changes in the way politics shape laws and laws shape the opportunities for and threats to an
organization are ____ forces. 
 

A.  political-legal
B.  demographic
C.  financial
D.  socio-cultural
E.  technological

Political-legal forces are changes in the way politics shape laws and laws shape the opportunities for
and threats to an organization. As for legal forces, some countries have more fully developed legal
systems than others. American companies may be more willing to use the legal system to advance their
interests, as in suing competitors to gain competitive advantage.

32. Changes in the economic, political, legal, and technological global system that may affect an
organization are ______ forces. 
 

A.  local
B.  demographic
C.  international
D.  technological
E.  internal stakeholder

International forces are changes in the economic, political, legal, and technological global system that
may affect an organization.

33. Joe, owner of ABC Electronics, just discovered that his trusted friend Paul, his accountant for over 30
years, has been mishandling the company books and stealing from the company bank account. Joe must
decide whether to publicly ignore his friend's actions and avoid bad publicity for the firm, an example of
____. 
 

A.  a whistle-blower
B.  a synergy factor
C.  corporate governance
D.  a social audit
E.  an ethical dilemma

An ethical dilemma is a situation in which you have to decide whether to pursue a course of action that
may benefit you or your organization, but that is unethical or even illegal.

 
34. Ethics are _____. 
 

A.  influences arising from changes in the characteristics of a population

B.  a type of written code for an organization
C.  standards of right and wrong that influence behavior
D.  behavior accepted as "right"
E.  rules to be enforced in an organization

Ethics are the standards of right and wrong that influence behavior.

35. The relatively permanent and deeply held underlying beliefs and attitudes that help determine a person's
behavior are known as ____. 
 

A.  morals
B.  norms
C.  ethical advantages
D.  values
E.  fairness factors

Values are the relatively permanent and deeply held underlying beliefs and attitudes that help determine
a person's behavior, such as the belief that fairness means hiring according to ability, not family
background.

36. To increase profitability, top management of a national retailer needs to decide if it will close several
stores. Management knows that by closing the locations, it will save the company millions of dollars
and benefit many stockholder groups and individuals, compared to keeping those stores open and
benefiting fewer people. This logic is an example of the ___ approach. 
 

A.  individual
B.  majority
C.  utilitarian
D.  justice
E.  moral-rights

Ethical behavior in the utilitarian approach is guided by what will result in the greatest good for the
greatest number of people. Managers often take the utilitarian approach, using financial performance
such as efficiency and profit as the best definition of what constitutes "the greatest good for the greatest
number."

 
37. Local livestock farmers could allow the runoff of manure nutrients into a stream that feeds a local lake
because this helps farmers in the short term. However, farmers will act ethically in the short run to avoid
harming others in the long run because this is also in the farmer's best long-term interests, is reflected by
the _____ approach to deciding ethical dilemmas. 
 

A.  individual
B.  group
C.  moral-rights
D.  utilitarian
E.  justice

Ethical behavior in the individual approach is guided by what will result in the individual's best long-
term interests, which ultimately are in everyone's self-interest. The assumption here is that you will act
ethically in the short run to avoid others harming you in the long run.

38. With recent reports of identity theft, Mr. Jones, the CEO of a construction company, is concerned about
his employees' privacy, and because of recent accidents on the job, he is also worried about the safety of
his workers. Mr. Jones's concerns with privacy and health and safety are outlined in the _____ approach
to deciding ethical dilemmas. 
 

A.  individual rights

B.  justice
C.  impartial
D.  utilitarian
E.  moral rights

Ethical behavior in the moral-rights approach is guided by respect for the fundamental rights of human
beings, such as those expressed in the U.S. Constitution's Bill of Rights. We would all tend to agree that
denying people the right to life, liberty, privacy, health and safety, and due process is unethical.

39. The justice approach to deciding ethical dilemmas is guided by _____. 

 

A.  increasing profits and workplace diversity

B.  respect for the fundamental rights of human beings
C.  respect for impartial standards of fairness and equity
D.  respect for society and the environment
E.  what will result in the individual's best long-term interests

The justice approach is guided by respect for impartial standards of fairness and equity.

 
40. When Bernard Madoff used money from newer investors to pay off older ones, this was an example of
____. 
 

A.  illegal lobbying

B.  insider trading
C.  an ethical dilemma
D.  a Ponzi scheme
E.  an ethical climate

Financier Bernard Madoff, who confessed to a $50 billion Ponzi scheme, used cash from newer
investors to pay off older ones.

41. Greg, the president of an IT company, purchased a large number of shares of company stock before the
news of a new revolutionary computer processor was made public that will cause company profits to
increase considerably. This action by Greg could be considered an example of _____. 
 

A.  a Ponzi scheme

B.  internal information
C.  ethical behavior
D.  information abuse
E.  insider trading

Insider trading is the illegal trading of a company's stock by people using confidential company
information.

 
42 The Sarbanes-Oxley Act of 2002 established requirements for ____, and for noncompliance, penalties
of ______. 
 

A.  proper financial record keeping for private companies; as much as 25 years in prison
B.  proper financial record keeping for government organizations; as much as 25 years in prison
C.  code of ethics guidelines for organizations; as much as 2 million dollars
D.  proper financial record keeping for public companies; as much as 25 years in prison
E.  all corporate financial records to be made public; as much as 2 million dollars

The Sarbanes-Oxley Act of 2002 established requirements for proper financial record keeping for public
companies and penalties of as much as 25 years in prison for noncompliance.

 
43. Jane, a successful store manager, leads her employees by encouraging them and showing that she
genuinely believes in them, and she encourages group and team efforts. Jane manages at Kohlberg's
_____ level of personal moral development. 
 

A.  unconventional
B.  nonconventional
C.  conventional
D.  postconventional
E.  preconventional

Kohlberg has proposed three levels of personal moral development: preconventional, conventional, and
postconventional. At level 2, the conventional level follows expectations of others. People whose moral
development has reached this level are conformist but not slavish, generally adhering to the expectations
of others in their lives. Level 2 managers lead by encouragement and cooperation and are more group
and team oriented. Most managers are at this level.

 
44. Don has managed several restaurants for over 50 years and is close to retirement. With his maturity, his
decisions are sound, based on solid, proven values. Don tends to be an independent thinker who focuses
on empowering his employees. Don manages at Kohlberg's ______ level of personal moral
development. 
 

A.  conventional
B.  nonconventional
C.  unconventional
D.  preconventional
E.  postconventional

Kohlberg has proposed three levels of personal moral development: preconventional, conventional, and
postconventional. Only about a fifth of American managers reach level 3, the postconventional level,
when managers are guided by internal values. It is the farthest along in moral development, and Level 3
managers are independent souls who follow their own values and standards, focusing on the needs of
their employees and trying to lead by empowering those working for them.

45. The employees of Mom's Pizza, a local pizza restaurant, feel that the owners and managers really try to
follow the ethical policies outlined in their company's code of ethics. Pete, a cook, said that "Just today,
Joe, our manager, called our supplier to let them know we received an extra case of tomatoes that we
did not pay for. And they do this type of thing almost every day." Mom's Pizza maintains a(n) _____. 
 

A.  dilemma-free climate

B.  profitable climate
C.  ethical climate
D.  holier-than-thou atmosphere
E.  synergy environment

An ethical climate represents employees' perceptions about the extent to which work environments
support ethical behavior. It is important for managers to foster ethical climates because they
significantly affect the frequency of ethical behavior.

 
46. A formal written set of ethical standards guiding an organization's actions is a(n) ____. 
 

A.  moral compass

B.  business plan
C.  dilemma document
D.  ethical plan
E.  code of ethics

A code of ethics consists of a formal written set of ethical standards guiding an organization's actions.
Most codes offer guidance on how to treat customers, suppliers, competitors, and other stakeholders.
The purpose is to clearly state top management's expectations for all employees. Most codes prohibit
bribes.

47. Phillip said to a dear friend, "I am fed up with my company's continual disregard for human life and the
environment. They just continue to secretly dispose of hazardous chemicals into a nearby stream. I don't
know how they get away with it! I am going to tell somebody today." Phillip's decision to tell somebody
about his company's actions is an example of a(n) ______. 
 

A.  preconventional manager

B.  ethics officer
C.  backstabber
D.  invisible hand
E.  whistle-blower

A whistle-blower is an employee who reports organizational misconduct to the public, such as health
and safety matters, waste, corruption, or overcharging of customers.

 
 
48. After more than 100 years in business, Don, the president of a successful family-owned company, wants
to give back to the people of the community for the many years of success that they have given to my
father and me. He decides to donate a significant portion of profits to a charity every year. What Don's
company is doing is an example of ___. 
 

A.  corporate social responsibility

B.  corporate governance
C.  responsibility code of ethics
D.  economic responsibility
E.  legal responsibility

Corporate social responsibility (CSR) is the notion that corporations are expected to go above and
beyond following the law and making a profit to help society.

 49. Sustainability is economic development that ____. 

 

A.  meets future needs without compromising present needs

B.  generates greater profitability
C.  produces greater diversity
D.  meets present needs without compromising the ability of future generations to meet their own needs
E.  is a idea of Frank and Lillian Gilbreth that proposes how to cut costs but increase efficiency

Sustainability is meeting the needs of the present without compromising the ability of future generations
to meet their own needs.

50. Business scholar Archie Carroll suggested that first and primary responsibility of an organization in the
global economy is to ___. 
 

A.  be a good global corporate citizen, as defined by the host country's expectations
B.  be profitable consistent with expectations for international business
C.  be ethical in its practices
D.  obey the law of host countries as well as international law
E.  have a green attitude

Making a profit consistent with expectations for international business is at the bottom of Carroll's
global corporate social responsibility pyramid. These priorities are illustrated in the pyramid in Figure
3.2.

 
51 Mr. Jones, a wealthy businessman who made his fortune in the oil industry, understands the importance
of a college education, so he has given over $10 million over the last several years to colleges and
universities. This is an example of _____. 
 

A.  philanthropy
B.  sustainability
C.  a servant leader
D.  mentoring
E.  corporate governance

Philanthropy is defined as making charitable donations to benefit humankind.

52. According to researcher Daniel Pink, when employees feel a sense of purpose—when their work has
meaning—workers _____. 
 

A.  will continue to work past the age of 90

B.  tend to focus on short-term happiness
C.  sell more product
D.  eliminate all company fraud
E.  are more efficient, loyal, and creative

Workers are more efficient, loyal, and creative when they feel a sense of purpose—when their work has
meaning, says Daniel H. Pink. When employers make profits their primary focus, employees develop
negative feelings toward the organization.

53. Corporate governance is the system ____. 

 

A.  of governing an industry, such as the trucking industry, to protect customers

B.  that protects citizens against unethical state government
C.  of governing a company so that the interests of corporate owners and other stakeholders are
protected
D.  of monitoring an industry, such as attorneys, to ensure ethical practices
E.  of monitoring corporate political donations

Corporate governance is the system of governing a company so that the interests of corporate owners
and other stakeholders are protected.

 
54. On an organization's board of directors, inside directors ____; outside directors _____. 
 

A.  are supposed to be elected from outside the organization; may be members of the firm
B.  must work for the company; are also members of the firm
C.  may be members of the firm; are supposed to be elected from outside the firm
D.  are always retired executives; typically are employees
E.  must work for the organization; are paid members of the organization

Inside directors may be members of the firm; outside directors are supposed to be elected from outside
the firm.

55. For organizations' board of directors, and in particular, their oversight of the CEO, the biggest complaint
appears to be _____. 
 

A.  the lack of interest in company matters

B.  the lack of corporate social responsibility
C.  the focus on profit above employee satisfaction
D.  the independence of the directors
E.  the ethical code of management

The biggest complaint concerns the independence of the directors. Inside directors may be members of
the firm, but outside directors are supposed to be elected from outside the firm. However, in some
companies, the outside directors have been handpicked by the CEO, making oversight difficult.