Business and Society Ethics and

Stakeholder Management Canadian 1st

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Chapter 10—Business, Government, and Regulation

TRUE/FALSE

1. Government employs its contracting power to get business to do things it wants.

ANS: T

2. The ethical (belief) system of government is individualistic.

ANS: F

3. Part of the ethical (belief) system of business is that of trying to minimize the load of obligations
society imposes on the individual.

ANS: T

4. The Canadian government has traditionally removed itself from the affairs of private business in
Canada.

ANS: F

5. Government influences the public through regulation and other forms of persuasion.

ANS: F

6. Industrial policy and privatization are the two major issues concerning government regulatory
influence on business.

ANS: F

7. Privatization may be defined as any selective government measure that prevents or promotes changes
in the structure of an economy.

ANS: F

8. Some people believe that an industrial policy should be a means whereby the government of a country
provides help for older, declining industries.

ANS: T

9. The need to improve the competitiveness of Canada in world markets is cited as an argument against
an industrial policy.

ANS: F

10. Industrial policy can be viewed as a micro policy, while privatization is more of a macro issue oriented
toward international trade and world markets.

ANS: F

11. Privatization is taking place only in the countries of the Western Hemisphere.
 ANS: F

12. A recent study showed that a majority of the services studied were performed more efficiently by
private firms than by local governments.

ANS: T

13. Taxation is a regulatory function of government on business.

ANS: F

14. A public utility is an example of a natural monopoly.

ANS: T

15. Offering subsidies to business is one form of government influence on business.

ANS: T

16. The two types of government regulation are social and political.

ANS: F

17. The major goal of social regulation is the furtherance of societal objectives.

ANS: T

18. Although business bears direct costs of government regulation, some indirect costs, in the form of
higher prices, are absorbed by the consumer.

ANS: T

19. Canada has always maintained a clear industrial policy.

ANS: F

20. The intent of deregulation was to deregulate the industries, thus allowing for freer competition.

ANS: T

MULTIPLE CHOICE

1. Which of the following is not cited as roles of government in its relationship with business?
a. Government is a major purchaser of business's products and services.
b. Government is supposed to ensure a minimum level of profits for business.
c. Government is a financier.
d. Government directly manages large areas of private business.
ANS: B

2. Collectivistic ethic subordination of individual goals and self-interest to group goals and group
interests, maximizing the obligations assumed by the individual and discouraging self-interest refers to
 a. business beliefs.
b. government beliefs.
c. ethical beliefs.
d. individualistic beliefs.
ANS: B

3. Which of the following is a characteristic of the ethical (belief) system of government?

a. minimizing obligations assumed by the individual
b. emphasizing equality of individuals
c. encouraging self-interest
d. the individualistic ethic
ANS: B

4. All the following are factors in the ethical (belief) system of business except
a. of individuals the collectivist ethic.
b. maximum concession to self-interest.
c. minimizing the load of obligations society imposes on the individual.
d. emphasizes inequalities.
ANS: A

5. Which one of the following is not one of the six societal value changes that have shaped the course of
business/government relations?
a. youth movement
b. consumer protection movement
c. ecology movement
d. technological movement
ANS: D

6. The youth movement, the consumer protection movement, and the human rights movement are
a. movements that were initiated in the early twentieth century and have seen renewed
interest in the past two decades.
b. examples of what the role of government should be in our business society.
c. help redistribute resources to meet the social objectives of business.
d. societal value changes that have affected the business/government relationship.
ANS: A

7. Which of the following refers to advocating growth-oriented macroeconomic policies that would come
close to comprehensive planning?
a. Accelerationists
b. Adjusters
c. Targeters
d. Central planners
ANS: D

8. Which of the following is not true of the relationships among government, business, and the public?
a. Business influences the public by forming special-interest groups.
b. Business influences government through lobbying.
c. The public influences government through the political process of voting and electing
officials.
d. Government uses regulation to influence business.
 ANS: A

9. Which of the following schools of thought on industrial policy would advocate growth-oriented
macroeconomic policies that would come close to comprehensive planning?
a. adjusters
b. targeters
c. central planners
d. bankers
ANS: C

10. Which one of the following is not correct?

a. Government is one of the largest purchasers of goods and services produced in the private
sector.
b. Government influences the behavior of business through the use of subsidies in a variety
of ways.
c. Government is seeking to augment the rights and powers of buyers in relation to sellers.
d. Government is a major competitor of business.
ANS: C

11. The targeters school of thought on industrial policy could best be described as a group that would
a. advocate growth-oriented macroeconomic policies that would come close to
comprehensive planning.
b. pinpoint a select group of sectors or industries to turn them into engines for growth.
c. offer adjustment assistance to declining industries.
d. try to pinpoint industries that promise to become strong
e. international competitors and position them to move rapidly into world markets.
ANS: B

12. Which of the following is cited as an argument against industrial policy?

a. the use of industrial policy by other world governments like Japan, France, and Italy
b. Canada already has an "unofficial" industrial policy
c. the declining competitiveness of Canada in world markets
d. foreign industrial policy successes have been overrated
ANS: D

13. Which of the following is not one of the four reasons for regulation?
a. controlling natural monopolies
b. controlling negative externalities
c. achieving social goals
d. none of the above
ANS: D

14. Privatization generally is

a. industrial policy aimed at private business.
b. the process of turning over to the private sector some function or service that was
previously handled by some government body.
c. government's influence on the private sector of business.
d. government's providing a service to the public.
ANS: B
15. Which of the following is not a way in which government can influence business in a non-regulatory
sense?
a. Government is one of the largest purchasers of goods and services produced in the private
sector.
b. Government is a major competitor of business.
c. Agencies such as the CRTC and LCBO.
d. Government provides loans and loan guarantees.
ANS: C

16. The softwood lumber dispute involved

a. Allegations of Canadian government subsidies to the lumber industry
b. Protectionism
c. Retaliatory tariffs
d. all of the above
ANS: D

17. Regulation is
a. the act of governing, directing according to rule, or bringing under the control of law or
constituted authority.
b. taxation and moral suasion.
c. operating domestic business activities.
d. offering adjustment assistance to declining United States industries.
ANS: A

18. A natural monopoly exists when

a. only natural resources are used for production.
b. only man-made resources are used for production.
c. economies of scale are so great that the largest firm in the industry has the lowest costs
and is able to drive out competitors.
d. a part of an industry in the private sector is not regulated by the government.
ANS: C

19. The purpose of deregulation is

a. reduced level of regulation.
b. increase competition.
c. lower prices.
d. all of the above
ANS: D

20. All the following were cited in the text as reasons or justifications for government regulation except
a. to control negative externalities.
b. to control natural monopolies.
c. to accelerate privatization.
d. to control excess profits.
ANS: C

21. Costs experienced by the public as a consequence of negative externalities are

a. production costs.
b. exposure costs.
 c. social costs.
d. natural costs.
ANS: C

22. Examples of social regulation includes

a. Employment equity regulations.
b. The Competition Bureau.
c. taxes.
d. tarrifs.
ANS: A

23. Which of the following is one of the major types of government regulation discussed in the text?
a. economic
b. ethical
c. political
d. moral
ANS: A

24. Controlling or influencing market variables is the main purpose of

a. non-regulatory acts of government.
b. social regulations.
c. industrial policy.
d. economic regulations.
ANS: D

25. Which of the following is a type(s) of regulation?

a. economic
b. social
c. ethical
d. both a and b
ANS: D

26. All the following are purposes of economic regulation except

a. controlling or influencing prices (maximums and minimums).
b. controlling or influencing entry to and exit from markets.
c. controlling or influencing types of services that can be offered.
d. controlling business's impacts on people (employees, consumers).
ANS: D

27. Which of the following is not cited in the text as an induced effect of government regulation?
a. diminished new investments in plant and equipment
b. adverse effects on small business
c. bureaucratic organization structures
d. fewer resources available for product and process research and development
ANS: C

28. In a market where the economics of scale are so great that the largest firm has the lowest costs and
thus is able to drive out its competitors refers to
a. natural monopolies.
 b. regulation.
c. externalities.
d. deregulation.
ANS: A

29. Deregulation is intended to

a. Reduce competition
b. Increase competition
c. Support big business
d. Increase taxes
ANS: B

30. Which of the following are considered as induced costs of regulation?

a. Innovation is affected
b. Small business is adversely affected
c. New investments in plant and equipment are affected
d. All of the above
ANS: D