According to Freeman’s chapter on “Managing for Stakeholders,” which groups are considered primary stakeholders?

Customers, suppliers, employees, ﬁnanciers, communities and managers

Which scenario highlights the “slippery slope” in unethical behavior?

Incremental acceptance of questionable bad practices

Both Adam Smith and Friedrich Hayek argue that markets function efficiently when:

People act in self-interest; dispersed knowledge -> decentralized choices

What ethical dilemma arises from overvaluing outcomes?

Rewarding unethical decisions with good results

What is one example of 'motivated blindness'?

Overlooking a subordinate's unethical actions to preserve personal beneﬁts

Why does Freeman argue in “Managing for Stakeholders” that focusing solely on shareholders is ﬂawed?

It fails to create stakeholder value and risks facing regulatory backlash

Which of the following is most true of a perfectly competitive market?

no single buyer or seller can influence the market price

Which of the following is a key argument made by Friedrich Hayek in favor of markets?

Decentralized decisions outperform central planning by dispersed knowledge

What is Freeman’s perspective on the role of ethics in business?

Ethics should be central to how businesses create value

What is one key diﬀerence between Creating Shared Value (CSV) and Corporate Social Responsibility (CSR)?

CSV aligns addressing societal challenges with proﬁt maximization.

What key principle diﬀerentiates ethics from law?

Ethics focus on what is morally right

What is a primary government role in addressing public goods issues?

Ensuring access for all through direct provision

According to Kantian ethics, what is essential for an action to be deemed ethical?

Following universalizable rules

What does Freeman mean by the “logic of values”?

Businesses succeed because they innovate and create value for stakeholders

Which of the following is NOT a reason Friedman argues businesses shouldn't have social responsibilities beyond profit?

Businesses take everything people love and crushed it between their ﬁngers

Which of the following best characterizes the role that prices play in an efficient market?

They find where quantity supplied meets quantity demanded

What is a primary critique Friedman has of business leaders who promote social responsibility?

They alienate shareholders by disregarding their interests

What was a signiﬁcant shift in the Business Roundtable's 2019 Statement on Corporate Purpose?

Replacing shareholder primacy with a commitment to all stakeholders

Which of the following is a key beneﬁt of adopting a Creating Shared Value approach according to Porter and Kramer?

Lower costs and enhanced proﬁtability while addressing societal issues

Which issue arises in a market due to adverse selection?

A market skewed towards high-risk participants

Which of the following best describes the “stakeholder mindset”?

Viewing stakeholder interests as shared and creating value for all at once

What does Pareto optimality signify in a market context?

No consumer/producer can be better off without someone else worse off

What is Friedman’s view on the role of government in addressing social problems?

Government imposes taxes and determines expenditures to address issues

What example illustrates shared value by redeﬁning productivity in the value chain?

Walmart reducing packaging to lower costs and minimize waste

What is the role of leadership in managing for stakeholders?

To set a clear ethical example and create value for all stakeholders

How does a Pigouvian tax help manage negative externalities?

By equating private costs with social costs

What is a matching market?

a market in which prices are not sufficient to determine transactions

What does Aristotle’s virtue ethics prioritize?

Rational pursuit of personal excellence

What does Friedman mean when he refers to “imposing taxes” in the context of corporate social responsibility

Executives using corp funds for social causes without shareholder approval

What issue arises when self-driving cars are programmed purely on utilitarian principles?

They may prioritize societal value over passenger safety, reducing sales

Social contract theory implies what about societal rules?

They are based on collective agreements

According to the Business Roundtable Statement on the Purpose of a Corp, what is the modern commitment of businesses?

Serving all stakeholders, including customers, employees, and communities.

What does Friedman argue is the potential danger of businesses focusing on social responsibilities

It diverts attention from innovation and product development

How does Friedman view actions such as corporate donations to community amenities?

They are justified if serving the corporation's long-term goals

How does stakeholder capitalism diﬀer fundamentally from Milton Friedman's view?

It integrates societal issues as a strategic business opportunity

How do businesses contribute to the eﬃcient allocation of resources in a market?

by identifying and exploiting market opportunities through competition

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SM131 Exam 3 SP25

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Questions 46

Answers

1
Which concept emphasizes outcomes over rules in ethical decision-making?
Virtue ethics
Deontology
Utilitarianism
Social Contract Theory
2
According to Freeman’s chapter on “Managing for Stakeholders,” which groups are considered primary stakeholders?
Only shareholders and ﬁnanciers
Government regulators and environmental activists
Customers, suppliers, employees, ﬁnanciers, communities and managers
Employees, suppliers and shareholders exclusively
3
Which scenario highlights the “slippery slope” in unethical behavior?
Incremental acceptance of questionable bad practices
Playing hopscotch in the rain
Embracing radical transparency
Sudden lawbreaking
4
Both Adam Smith and Friedrich Hayek argue that markets function efficiently when:
central planners determine production quotas
People act in self-interest; dispersed knowledge -> decentralized choices
prices are regulated by the government
corporations control all aspects of production
5
What ethical dilemma arises from overvaluing outcomes?
Rewarding unethical decisions with good results
Enhancing compliance programs
Penalizing ethical decisions with poor outcomes
Prioritizing decisions over results
6
What is one example of 'motivated blindness'?
A random failure to notice things
Overvaluing transparency
Overlooking a subordinate's unethical actions to preserve personal beneﬁts
Strict adherence to regulations
7
Which term describes a market with a small number of firms dominating the market share?
Free Market
Monopoly
Perfect Competition
Oligopoly
8
Why does Freeman argue in “Managing for Stakeholders” that focusing solely on shareholders is ﬂawed?
It leads to unnecessary complexity in decision-making
It increases cost for customers
It fails to create stakeholder value and risks facing regulatory backlash
It reduces overall proﬁts by focusing too narrowly on short term goals
9
Which of the following is most true of a perfectly competitive market?
no single buyer or seller can influence the market price
all firms sell differentiated products
there are only a few sellers with price control
firms engage in constant price wars
10
Which of the following is a key argument made by Friedrich Hayek in favor of markets?
Decentralized decisions outperform central planning by dispersed knowledge
price controls help regulate markets efficiently
markets enable a central authority to control prices
central planning is more effective in mobilizing resources
11
Which ethical perspective emphasized maximizing utility for society as a whole?
Virtue ethics
Social contract theory
Utilitarianism
Deontology
12
What is Freeman’s perspective on the role of ethics in business?
Ethics should be central to how businesses create value
Ethics is separate from business operations
Ethics should only be considered in interactions with external stakeholders
Ethics are unnecessary for successful business leadership
13
What is one key diﬀerence between Creating Shared Value (CSV) and Corporate Social Responsibility (CSR)?
CSR integrates social goals into core business strategies.
CSV aligns addressing societal challenges with proﬁt maximization.
CSR emphasizes long-term proﬁtability.
CSV is a philanthropic endeavor separate from business operations.
14
What key principle diﬀerentiates ethics from law?
Laws are entirely subjective
Laws always deﬁne ethics
Ethics focus on what is morally right
Ethics are solely about compliance
15
What is a primary government role in addressing public goods issues?
Privatizing all public goods
Limiting public goods to wealthy consumers
Maximizing private profits on public goods
Ensuring access for all through direct provision
16
According to Kantian ethics, what is essential for an action to be deemed ethical?
Conforming to cultural norms
Following universalizable rules
Achieving the greatest happiness
Being economically viable
17
Which government intervention aims to lower transaction costs in markets?
Raising taxes on corporations
Providing subsidies to small businesses
Creating patent protections
Standardizing contracts
18
What does Freeman mean by the “logic of values”?
Businesses operate solely to meet shareholder expectations
Businesses succeed because they value eﬃciency over all else
Businesses succeed because they innovate and create value for stakeholders
Businesses thrive by eliminating ethical considerations from decisions
19
What ethical theory emphasizes fairness in distributing societal goods?
Social Justice Theory
Virtue Ethics
Utilitarianism
Deontology
20
Which of the following is NOT a reason Friedman argues businesses shouldn't have social responsibilities beyond profit?
Executives are not elected officials and should not be policymakers
Social responsibilities distract from a business's main goal of proﬁt
Businesses take everything people love and crushed it between their ﬁngers
Businesses lack the expertise to address social issues eﬀectively
21
Which of the following best characterizes the role that prices play in an efficient market?
they discourage innovation
They find where quantity supplied meets quantity demanded
They alert the BoD if the CEO is violating the principal-agent problem
They signal to regulators if the firm is exploiting its workers
they prevent competition
22
What is a primary critique Friedman has of business leaders who promote social responsibility?
They alienate shareholders by disregarding their interests
They are hypocritical and lack commitment to their stated goals.
They prioritize short-term proﬁts over long-term growth
They reinforce beliefs that profit-seeking is immoral, prompting regulation
23
Which of the following is an NOT example of a firm that competes in a platform market
Uber
Apple
Amazon
Coca Cola
24
What was a signiﬁcant shift in the Business Roundtable's 2019 Statement on Corporate Purpose?
Introducing annual stakeholder trivia nights
Moving from stakeholder inclusivity to shareholder exclusivity
Replacing shareholder primacy with a commitment to all stakeholders
Eliminating the focus on corporate governance
25
Which of the following is a key beneﬁt of adopting a Creating Shared Value approach according to Porter and Kramer?
Maximizing quarterly earning regardless of societal impact
Reducing employee beneﬁts to increase competitiveness
Lower costs and enhanced proﬁtability while addressing societal issues
Completely separating business goals from societal goals
26
Which issue arises in a market due to adverse selection?
Firms avoiding competitive strategies
Firms not investing in innovation
A market skewed towards high-risk participants
Customers having full transparency
27
Which of the following best describes the “stakeholder mindset”?
Viewing stakeholder interests as shared and creating value for all at once
Prioritizing shareholders above all other stakeholders in decisions
Trade-oﬀ interests of one stakeholder for another to achieve short-run gain
Managing stakeholders separately to avoid conﬂicts
28
Which bias makes people lenient towards unethical behaviors when intermediaries are involved?
Outcome bias
Indirect Blindness
Motivated blindness
Ethical fading
29
What often undermines utilitarian decision-making in businesses?
Favoring short term beneﬁts
Comprehensive stakeholder analysis
Inconsistent application
Strict ethical adherence
30
What does Pareto optimality signify in a market context?
No consumer/producer can be better off without someone else worse off
Monopolistic pricing strategies
Maximum profit for producers
Minimum prices for consumers
31
What is Friedman’s view on the role of government in addressing social problems?
Government should delegate social responsibilities to corporations
Government imposes taxes and determines expenditures to address issues
Gov should have little involvement and let businesses handle social issues
Government and corporations should collaborate equally on social issues
32
What example illustrates shared value by redeﬁning productivity in the value chain?
Starbucks oﬀering free coﬀee for every cup returned.
Tesla inventing a coﬀee-powered car.
Amazon implementing drone deliveries purely for novelty.
Walmart reducing packaging to lower costs and minimize waste
33
What is the role of leadership in managing for stakeholders?
To prioritize personal values over organizational goals
To focus on achieving ﬁnancial results above all else
To set a clear ethical example and create value for all stakeholders
To limit interactions with stakeholders to avoid conﬂicts
34
How does a Pigouvian tax help manage negative externalities?
By providing tax exemptions to companies
By encouraging companies to increase production
By equating private costs with social costs
By subsidizing harmful activities
35
What is a matching market?
a market where transactions depend on price controls
a market where goods are matched with government quotas
A market where deals fail, requiring government-mandated solutions.
a market in which prices are not sufficient to determine transactions
36
What does Aristotle’s virtue ethics prioritize?
Fulﬁlling social contracts
Rational pursuit of personal excellence
Strict adherence to rules
Maximizing happiness
37
What cognitive limitation often prevents people from recognizing their unethical behavior?
Motivated Blindness
Rational Awareness
Ethical Transparency
Cognitive Equilibrium
38
What does Friedman mean when he refers to “imposing taxes” in the context of corporate social responsibility
Companies voluntarily paying higher taxes to support social programs
Business lobbying for increased taxation on competitors
The government requiring companies to pay more taxes for social spending
Executives using corp funds for social causes without shareholder approval
39
What issue arises when self-driving cars are programmed purely on utilitarian principles?
They may prioritize societal value over passenger safety, reducing sales
They might actually join NASCAR races
They rely on emotional reasoning
They are prone to technical failures
40
Social contract theory implies what about societal rules?
They are static
They are based on collective agreements
They depend on religious law
They must beneﬁts businesses exclusively
41
According to the Business Roundtable Statement on the Purpose of a Corp, what is the modern commitment of businesses?
Serving all stakeholders, including customers, employees, and communities.
Prioritizing the interests of CEOs.
Maximizing shareholder proﬁts exclusively
Eliminating environmental sustainability
42
What does Friedman argue is the potential danger of businesses focusing on social responsibilities
It creates excessive competition within industries
It diverts attention from innovation and product development
It undermines a foundation of a free society by expanding collectivism
It leads to increased consumer prices and reduced wages
43
How does Friedman view actions such as corporate donations to community amenities?
They are justified if serving the corporation's long-term goals
They should only be carried out under government mandate
They are inherently unethical and should be avoided
They are always examples of true social responsibility
44
How does stakeholder capitalism diﬀer fundamentally from Milton Friedman's view?
It suggests businesses should focus only on proﬁt maximization.
It denies the importance of shareholder returns
It avoids any considerations for societal impacts
It integrates societal issues as a strategic business opportunity
45
How do businesses contribute to the eﬃcient allocation of resources in a market?
by collaborating with other businesses to avoid innovation
by identifying and exploiting market opportunities through competition
by restricting access to certaingoods and services
by interacting with govs to encourage regulation that increase market power
46
What approach is recommended for addressing market power by promoting competition?
Setting up tariffs
Subsidizing monopolies
Antitrust enforcement
Removing intellectual property rights

SM131 Exam 3 SP25 Flashcards | StudBud