Test bank business ethics concepts and cases chapter 41

1.

What is the moral justification for free markets? How do anticompetitive practices in
general draw this justification into question?

2.

In a perfectly free competitive market, no buyer or seller has the power to significantly
affect the price of a good.
a.
True
b.
False

3.

Which of the following are characteristics of a perfectly free economy?
a.
There are numerous buyers and sellers, none of whom has a substantial share of the market.
b.
All buyers and sellers can freely and immediately enter or leave the market.
c.
Every buyer and seller has full and perfect knowledge of what every other buyer and seller is doing,
including knowledge of the prices, quantities, and quality of all goods being bought and sold.
d.
All the above
e.
B&C

4.

What seven features are necessary to ensure perfectly competitive free markets? Why is
each feature necessary? What else do free competitive markets require besides these
seven features?

5.

What is the equilibrium point? How is it achieved? Why are prices above or below the equilibrium
point unjust?

6.

In a perfectly free economy, all buyers and sellers are utility maximizers: Each tries to get
as much as possible for as little as possible.
a.
True
b.
False

7.

When a buyer purchases a good, each additional item of a certain type is less satisfying
than the earlier ones. This is known as:
a.
The principle of increasing marginal utility.
b.
The principle of gross marginal utility.
c.
The principle of diminishing marginal utility.
d.
The principle of consumer awareness.

8.

Define the principles of diminishing marginal utility and increasing marginal costs. How are they
relevant to the equilibrium point?

9.

How do market systems achieve perfect efficiency?

10.

Efficiency comes about in perfectly competitive free markets when:
a.
Firms are motivated to invest resources in industries with a high consumer demand and move away
from industries where demand is low.
b.
Firms are encouraged to minimize the resources they consume to produce a commodity and to use
the most efficient technologies.
c.
Commodities are distributed among buyers such that buyers receive the most satisfying commodities
they can purchase, given what is available to them and the amount they have to spend.
d.
All the above
e.
A&B


11.

In a monopoly, there is only one seller, but other sellers can enter the market.
a.
True
b.
False

12.

In what three ways do perfectly competitive free markets establish perfect morality? What
difficulties remain with the morality of such markets?

13.

What is a monopoly? How do they come about? In what ways do they threaten the
morality of the market system?

14.

Monopolistic markets and their high prices and profits violate capitalist justice because the
seller charges more than the goods are worth. Thus, the prices the buyer must pay are
unjust.
a.
True
b.
False

15.

The common definition of price fixing is:
a.

When companies agree to set prices artificially high.
b.
When companies agree to limit production.
c.
When a company sells a buyer certain goods only on condition that the buyer also purchases other
goods from the firm.
d.
When companies agree to allocate markets.

16.

What is an oligopoly? How do they come about? How are they related to monopolies?

17.

What types of unethical market practices are common in oligopolies? Why do they occur?
How can they best be prevented?

18.

When a company sells a buyer certain goods only on condition that the buyer also
purchases other goods from the firm, this is known as:
a.
Manipulation of supply.
b.
Exclusive dealing arrangements.
c.
Price discrimination.
d.
Tying arrangement.

19.

Proponents of the Antitrust view argue that prices and profits in highly concentrated
industries are higher than they should be. By breaking up large corporations into smaller
units, they claim, higher levels of competition will emerge in those industries.
a.
True
b.
False

20.

Why are bribes immoral? How can you tell if a payment made in a business transaction is
a bribe or not?

21.

What are the three views on public policy in the face of highly concentrated oligopolistic
industries? Which view is correct?


22.

Because Microsoft Corporation's market share is only 92 percent of the market in
operating systems (Windows) and 94 percent of the market in integrated office suite
software (MS Office), Microsoft is not considered a monopoly.
a.
True
b.

False

23.

A survey of major corporate executives indicated that 60 percent of those sampled believed
that many businesses engage in price fixing.
a.
True
b.
False

24.

When companies get together to fix prices, the result is ______________.
a.
A consortium of suppliers.
b.
An oligopoly.
c.
A monopoly.
d.
None of the above.

25.

As in the ADM case, all that companies have to do to fix price is to agree on the price for
which the companies will sell the product.
a.
True
b.

False

26.

The most obvious failure of monopoly markets lies in the high prices they allow the
monopoly companies to charge, violating capitalist justice.
a.
True
b.
False


Test Name: chapter 4
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.

18.
19.
20.
21.
22.
23.
24.
25.
26.

a.True
d.All the above
a.True
c.The principle of diminishing marginal utility.
d.All the above
b.False
a.True
a.When companies agree to set prices artificially high.
d.Tying arrangement.
a.True
b.False
a.True
c.A monopoly.
b.False
a.True