Ethics Chapter 6

A psychological appeal is one that aims to persuade by appealing primarily to reason and not to human emotional needs.

False

In his books The Affluent Society and The New Industrial State, John Kenneth Galbraith argues that consumer wants determine what gets produced.

False

In the 1960 case Henningsen v. Bloomfield Motors and the 1963 case Greenman v. Yuba PowerProducts, injured consumers were awarded damages based on their proving that the manufacturers of the defective products were negligent.

False

The FTC now follows the reasonable-consumer standard in all matters of advertising, sales and marketing.

False

The Fair Packaging and Labeling Act empowers representative agencies to rank and list all ingredients in the order of decreasing percentage of total contents.

False

____________________ requires the more than 20,000 food labels found on grocery store shelves to disclose the number of calories derived from fat and the amount of dietary fiber, saturated fat, cholesterol, and a variety of other substances.

Nutrition Labeling and Education Act

Some critics of consumer product safety regulations are concerned about the cost-effectiveness of safety regulations. They calculate the economic costs by:

comparing the number of lives saved with the cost of implementing the regulation.

Businesses' heightened responsibility for providing for consumers' needs derives from:

consumers' dependence on business for their survival and enrichment.

Contractual obligations to purchasers that arise from an explicit statement made by a seller are:

express warranties.

Contractual obligations to purchasers that can arise automatically through a transaction with a seller are:

implied warranties.

The doctrine that the law may justifiably be used to restrict the freedom of individuals for their own good is called:

legal paternalism.

Some "economy size" items sell for a higher per unit price than their smaller counterparts. This deceptive labeling practice is known as:

quantity surcharge.

Prior to 1916, injured consumers were limited to:

recovering damages only from the retailer of the product.

With regard to establishing product safety rules and resolving disputes, businesses generally prefer:

self-regulation, competition and voluntary safety standards.

The government agency responsible for regulating product safety was established pursuant to:

the Consumer Product Safety Act of 1972.

Which best characterizes advertising that the FTC currently seeks to prohibit?

Advertising that misleads a significant number of consumers in a vulnerable group.

According to FTC guidelines, which of the following would constitute price misrepresentation?

An object with a $100 price tag that never sold for more than $95 marked as "Formerly $100."

In a non-legal sense, ________ is the idea that sellers and buyers do not meet as equals in a way that makes consumers particularly vulnerable to being harmed by the manufacturer.

Due care

Business is right to insist that accidents occur exclusively as a result of product misuse and that it is thereby absolved of all responsibility.

False

Congress has now outlawed puffery.

False

Economists favor legal paternalism because it prevents individuals from balancing safety against price.

False

Legal paternalism is the doctrine that the law should not be used to restrict the freedom of individuals for their own good.

False

Strict liability is the same thing as absolute liability.

False

The doctrine of caveat emptor means that the law may be justifiably used to restrict the freedom of individuals for their own good.

False

When advertisers conceal facts, they suppress information that is favorable to their products.

False

The agency responsible for protecting consumers against deceptive marketing promotions and fraudulent commercial practices is the:

Federal Trade Commission (FTC).

Which of the following would not be covered under the Federal Food, Drug, and Cosmetic Act?

Household Soap

This law prevents sellers from disclaiming implied warranty of merchantability and the implied warranty of fitness for a particular purpose in the sale of consumer goods.

Magnuson-Moss Warranty Act

________ is when a seller takes advantage of a short-term situation in which buyers have few purchase options for a much-needed product by raising prices.

Price gouging

"Weasel words" are words used to evade or retreat from a direct or forthright statement.

True

Anti-paternalism gains plausibility from the view that individuals know their own interests better than anyone else and that they are fully informed and able to advance those interests.

True

Before the case of MacPherson v. Buick Motor Car in 1916, injured consumers could only recover damages from the retailer of the defective product.

True

Business's responsibility for understanding and providing for consumer needs derives from the fact that citizenconsumers are dependent on business to satisfy their needs.

True

Defenders of advertising claim that, despite criticisms, advertising enjoys protection under the First Amendment as a form of speech.

True

From the consumer's standpoint, one problem with implied warranties is that the law allows the seller to disclaim or limit the warranty in most circumstances.

True

One decisive case in the legal transition away from the reasonable-consumer standard in matters of advertising, sales and marketing was FTC v. Standard Education.

True

Statistics indicate that the faith consumers place in manufacturers is often misplaced.

True

Strict product liability is the doctrine that the seller of a product has legal responsibilities to compensate the user of that product for injuries suffered due to a defective aspect of the product, even though the seller has not been negligent in permitting that defect to occur.

True

Subliminal advertising is advertising that supposedly communicates at a level beneath our conscious awareness.

True

The Federal Trade Commission (FTC) was established over seventy-five years ago to protect consumers against deceptive advertising.

True

The controversy over legal paternalism pits the values of individual freedom and autonomy against social welfare.

True

The nonlegal concept of due care is the idea that consumers and sellers do not meet as equals and that the consumer's interests are particularly vulnerable to being harmed by the manufacturer, who has knowledge and expertise the consumer does not have.

True

A marketing promotion that is deceptive because it can be understood in more than one way is:

ambiguous.

Galbraith's "dependence effect" is the idea that:

due to increasing affluence, advertising creates new consumer wants rather than satisfying consumer needs.

When direct competitors agree to a set price schedule, it is:

horizontal price fixing.

The courts repudiated the doctrine of caveat emptor in the first part of the twentieth century, largely on the grounds of:

its unrealistic assumptions about consumers' knowledge, competence, and behavior.

A(n) ________ is aimed primarily at emotion, not reason, and is potentially the advertising technique of greatest moral concern.

psychological appeal

The statement by an automobile seller that "You will not find a better automobile at this price" is an example of

puffery.

The theory that holds manufacturers responsible for compensating users who have suffered injuries from defective products, irrespective of fault on the part of the manufacturer is called:

strict product liability.

The FTC now follows which standard in determining that a marketing promotion may be misleading?

the modified ignorant-person standard

General contractual obligations to purchasers that sellers assume are:

warranties.