Chapter 2

U.S. Government assistance is available to lead the entrepreneur in compliance with environmental law through the a. Small Business Administration. b. Department of Energy. c. Department of Commerce. d. Interior Department.

a. Small Business Administration.

Skimming is an unethical business practice involving a. failure to report all income on tax returns. b. employees taking cash from the cash register. c. sales associates offering gifts and inducements to purchasers. d. managers of competing firms agreeing to charge high prices.

a. failure to report all income on tax returns

Garner developed a code of ethics for his growing business because: a. he wanted to define the ethical expectations for all his employees. b. he wanted to have a legal defense should any of his people violate the law. c. he wanted to create an informal channel of communication for discussions about ethical issues. d. he wanted to give his suppliers a formal document dictating how they should behave.

a. he wanted to define the ethical expectations for all his employees

Of all the concerns regarding Internet use, the greatest is: a. how users' personal information is being protected. b. whether the content of a website is truthful. c. how soon a Web customer will receive an order. d. hacking.

a. how users' personal information is being protected

While unethical practices do exist, it is good that the great majority of small firms strive to achieve the highest standards of ____ in their quest for profits. a. integrity b. relativism c. synchronous behavior d. congruity

a. integrity

The price of integrity is high, but the potential payoff is incalculable because it is impossible to compute a. the price of a clear conscience. b. the cost of environmental destruction. c. the value of ethical imperialism. d. the profit margin on good deeds.

a. the price of a clear conscience.

After issues related to customers and competitors, the second most common category of ethical issues that challenge small businesses is concerned with a. the treatment of employees. b. international relations. c. public relations. d. harmful production processes.

a. the treatment of employees.

Damon landed his first contract as an entrepreneur then submitted to the local newspaper a news release that gave the impression this was just one of a series of contracts and that business was booming. Damon has: a. told a legitimacy lie. b. inflated his income. c. evaded taxes. d. violated the law.

a. told a legitimacy lie.

An example of an employee acting unethically towards his or her employer is: a. Taking a vacation b. Taking unjustified sick leave c. Working overtime d. Taking a 15 minute break

b. Taking unjustified sick leave

An example of a small business that actually benefits from the growing interest in environmentalism would be a. a fast-lube and oil change center. b. a producer of ethanol from farm waste. c. a self-service car wash. d. an asbestos removal service.

b. a producer of ethanol from farm waste.

Ethical issues a. seldom involve legal issues. b. are questions of right and wrong. c. are always clearly defined. d. often resolve themselves.

b. are questions of right and wrong.

The type of tax most likely to be a problem for entrepreneurs is: a. federal income tax. b. employee payroll taxes. c. state withholding tax. d. state sales tax.

b. employee payroll taxes.

Clark, the owner of DEF LLC, bragged about hiding company income from the IRS but was surprised when he learned his sales manager was accepting kickbacks from customers. Clark should have remembered: a. kickbacks are common in his industry. b. lapses in integrity can easily be passed down from superiors to subordinates. c. his sales manager could alert the IRS and Clark could be prosecuted for tax evasion. d. bragging nearly always leads to trouble.

b. lapses in integrity can easily be passed down from superiors to subordinates.

Members of a community will react _____ to a business they trust. a. negatively b. positively c. indifferently d. indecisively

b. positively

PRO factors include a. products, resources, and outputs. b. products, representatives, and organizations c. people, resources, and outputs. d. performance, relationships, and options.

b. products, representatives, and organizations

24. A person understating income or claiming personal expenses as business expenses is guilty of _____. a. bait and switch b. skimming c. scaling

b. skimming

A firm's employees would be considered __________________ in the business. a. investors b. stakeholders c. customers d. stockholders

b. stakeholders

In drawing up a code of ethics, a small business owner should adopt a code a. provided by the Ethics Resource Center of Washington, D.C. b. that outlines ethical principles and gives examples. c. that outlines ethical principles but avoids examples. d. suggested by the Better Business Bureau.

b. that outlines ethical principles and gives examples.

Of all the possible stakeholders, the three primary ones are a. the government, the community, and the customers. b. the customers, the employees, and the owners. c. the creditors, the investors, and the employees. d. the suppliers, the customers, and society at large.

b. the customers, the employees, and the owner

In a small business, the most important key to ethical performance is a. a code of ethics. b. the personal integrity of the founder or owner. c. a training program based on the code of ethics. d. the amount of legislation affecting the organization.

b. the personal integrity of the founder or owner.

An effective way for an entrepreneur to establish legitimacy is: a. to hire experienced employees from competitors. b. to insist on professional behavior from all customer-contact employees. c. to communicate the company's mission clearly and frequently. d. to out-perform the competition by underbidding and over-promising.

b. to insist on professional behavior from all customer-contact employees.

The purpose of the Better Business Bureau is: a. to provide an outlet for customer complaints about a business. b. to promote ethical conduct on the part of all businesses in a region. c. to report relevant information to law enforcement agencies. d. to impose penalties on companies that engage in unethical business practices.

b. to promote ethical conduct on the part of all businesses in a region.

A U.S. manager is upset with the company's overseas representative for paying a small "access fee" to a local customs official to ensure the expedited release of a customer order. The manager's belief such payments are wrong reflects a sense of _____. a. cultural insensitivity b. ethical elitism c. ethical imperialism d. cultural integrity

c. ethical imperialism

A small computer retailer makes every effort to satisfy customer needs both before and after the sale. However, this retailer regards social problems as being beyond the scope of his business. This firm's management has recognized a. some degree of social responsibility in its commitment to customers. b. the existence of social responsibilities but having failed to do anything about them. c. ethical obligations to customers but not social responsibilities. d. social responsibility as the domain of big business.

c. ethical obligations to customers but not social responsibilities.

Many types of socially responsible actions can be consistent with a firm's long-term profit resulting in some degree of _____ being earned by such behavior. a. money b. respect c. goodwill d. management expertise

c. goodwill

A code of ethics becomes increasingly appropriate and necessary as a small business a. expands its credit sales and acquires more customers who buy on credit. b. begins to market products in other countries. c. grows larger, with a consequent lessening of the owner's personal influence. d. increases borrowing to the extent that one-third of its assets are financed by borrowing.

c. grows larger, with a consequent lessening of the owner's personal influence.

When evaluating alternatives, the entrepreneur will select one that is truthful, beneficial to all parties, fair, and a. exploitable. b. publishable c. profitable d. repeatable.

c. profitable

A band who fails to record the cash they collected for admission to their shows could be charged with what illegal practice? a. cash diversion b. tax evasion c. skimming d. payroll tax avoidance

c. skimming

Floyd would like to be able to monitor his employees' Internet activity because: a. his customers cannot view his company website if his employees are surfing the Web. b. employees have to share Internet access and he wants to be fair to everyone. c. such activity hinders workplace productivity. d. his data plan allows only 5 gigabytes of access every month and overage charges are expensive.

c. such activity hinders workplace productivity

The most important influence on ethics in a small business is a. the accountant or bookkeeper who keeps honest financial records. b. the salesperson who quotes a fair price to customers. c. the founder or owner whose values are put into practice. d. the existence of a written code of ethics.

c. the founder or owner whose values are put into practice

Entrepreneurs must reconcile their social obligations with _____. a. their family commitments. b. their personal schedule. c. the need to earn profits. d. their religious beliefs.

c. the need to earn profits.

Bernard praises his employees as often as he catches someone doing something right. He often hosts family get-togethers for his few employees. Bernard knows: a. a little money spent on his people will be returned many times over in profits. b. happy employees make for satisfied customers. c. this will lead to his employees being more engaged and productive. d. it's a waste of time and money but he enjoys the camaraderie.

c. this will lead to his employees being more engaged and productive.

The most widely recommended principle for ethical behavior is to do what a. is best for yourself. b. will yield the most profits. c. you would want others to do for you. d. will reduce product prices.

c. you would want others to do for you.

​Refusing to pay a bribe even though it is a common practice in the country one is doing business in is an example of: a. ​cultural relativism b. ​social entrepreneurship c. ​integrity d. sustainability

c. ​integrity

The owner of LMN Company has been asked to sponsor a Little League team by donating money to buy team shirts. In return, the team will print the company name on the shirts. To which stakeholder group does this team belong? a. Owners b. Customers c. Employees d. Community

d. Community

Annabelle often shops for clothing and household goods online while at work. Which of the following best describes this situation? a. Abusive behavior b. Lying to employees c. Improper use of company resources d. Inappropriate Internet use at work

d. Inappropriate Internet use at work

An ethical business not only treats customers and employees honestly, but also acts as a good citizen in the community. These broader obligations of citizenship are called a. community commitment. b. philanthropy. c. environmentalism. d. social responsibilities.

d. social responsibilities.

Abner sometimes shorts the customer when weighing out bulk merchandise, believing the practice leads to higher profits so it is acceptable. We could infer that a. Abner lacks integrity. b. Abner is not an entrepreneur. c. Abner cheats on his taxes. d. Abner is skimming.

a. Abner lacks integrity.

Perhaps the greatest benefit of integrity in business is the _____ it generates. a. trust b. profit c. reputation d. sales

a. trust

The term for when an employee steals money from a firm is a. cheating. b. fraud. c. embezzlement. d. promotion.

c. embezzlement.

An example of an industry especially vulnerable to efforts to protect the environment is the _____ industry. a. glass manufacturing b. military construction c. restaurants d. asbestos removal

d. asbestos removal

When a company delivers an excellent product with excellent service, ______________ are likely to follow. a. profits and a good reputation b. customer satisfaction and profits c. healthy sales and profits d. customer satisfaction and healthy sales

d. customer satisfaction and healthy sales

. The saying "When in Rome, do as the Romans do" reflects a philosophy of _____. a. ethical insensitivity b. ethical elitism c. ethical imperialism d. ethical relativism

d. ethical relativism

In order to make an ethical decision, the key to problem definition is to a. go with the obvious solution. b. look at the surface of the problem. c. find the most cost effective solution. d. identify the root of the problem.

d. identify the root of the problem.

Giving the impression a business is something it is not a. is ingenious and resourceful. b. is illegal. c. is acceptable so long as no one is hurt by the transactions. d. is a way to manipulate customers.

d. is a way to manipulate customers

The ethical influence of a leader of a small business is a. relatively minor. b. overpowered by profit concerns of stockholders. c. less important than the views of others within the firm. d. more pronounced than that of a leader of a large corporation.

d. more pronounced than that of a leader of a large corporation.

A baker looking for new retail space has returned from a seminar on environmentalism and wishes to act responsibly in this area. Which action will best accomplish this purpose? a. Looking into leasing a LEED certified space b. Reducing product prices c. Eliminating undesirable processing odors d. Increasing service to customers

a. Looking into leasing a LEED certified space

Karl Eller reports in his book, Integrity Is All You've Got, which of the following characterizes entrepreneurial businesses with integrity? a. The entrepreneur with integrity gives the company a competitive edge. b. The management of these companies understand the bottom line so that is still their singular focus. c. For the most part, founders with integrity are stressed to balance growing the business and following their principles. d. A solid financial performance needs to be achieved so that customers will know about the company's integrity.

a. The entrepreneur with integrity gives the company a competitive edge.

A digital ID tag that is electronically sent to the customer's computer when other requested materials are downloaded from a Web site is known as a. a cookie. b. a saucer. c. an inverted collector. d. a contact signature.

a. a cookie.

Naked Sports Gear's dedication to its customers, employees, and the environment is an example of: a. a sustainable small business. b. ethical relativism. c. social entrepreneurship. d. ethical imperialism.

a. a sustainable small business.

Entrepreneurs often come up short on their tax commitments because of a single-minded focus on their product or service and/or _____. a. casual accounting systems b. low-cost accounting software c. incompetent in-house accountant d. cash-basis accounting systems

a. casual accounting systems

Providing inaccurate or misleading financial information to stakeholders can: a. damage critical relationships. b. reduce profits. c. increase profits. d. enhance critical relationships.

a. damage critical relationships.

Candace sells the muffins in her bakery at a higher price than the big-box grocery but she has a steady stream of customers willing to pay what she asks. Candace also supports local charities. What would likely happen if she lowered her prices and stopped her charitable contributions? a. Nothing b. Customers would go elsewhere. c. Business would increase. d. Income taxes would decrease.

b. Customers would go elsewhere.

To be classified as a social entrepreneurship, a business must have a triple bottom line. a. True b. False

b. False

The application of U.S. standards to ethical issues that are clouded by cultural differences abroad is sometimes categorized as _____. a. overly idealistic. b. ethical imperialism. c. USA arrogance. d. situation ethics.

b. ethical imperialism.

Entrepreneurs should think carefully about their community commitments because "doing good" may add to a small company's a. bottom line. b. financial burden. c. payroll. d. local profile.

b. financial burden.

If Floyd elects to monitor the personal email accounts of his employees at work, he should: a. install screening software to avoid hiring another IT employee. b. first develop a carefully worded and legally sound policy and make sure all employees are aware of it. c. consult an attorney before terminating an employee for viewing personal email at work. d. block access to all personal email servers from company computers.

b. first develop a carefully worded and legally sound policy and make sure all employees are aware of it.

An eBay retailer selling counterfeit Gucci and Louis Vuitton handbags is in violation of laws related to a. Internet fraud. b. intellectual property. c. bait-and-switch marketing. d. ethical imperialism.

b. intellectual property.

Because a firm has considerable discretion in reporting performance results, financial reports can sometimes be _____ without technically being illegal. a. inaccurate b. misleading c. unreliable d. bellicose

b. misleading

If a student copies a favorite CD and gives it away to a friend to use, the student is engaged in the theft of _____ property. a. collective b. intangible c. intellectual d. real

c. intellectual

Milton Friedman argues that businesses a. should avoid social responsibility whenever it is possible to do so. b. should be required to use their resources meet their social responsibilities. c. can only earn profits if they do so in a socially responsible manner. d. are justified in being socially responsible only if doing so increases the firm's value.

d. are justified in being socially responsible only if doing so increases the firm's value.

Environmentalism poses the greatest threat to small a. medical waste disposal businesses. b. drugstores. c. movie theaters. d. auto repair shops.

a. medical waste disposal businesses.

When Evelyn hired a new sales manager, she issued a press release emphasizing the new hire's education and industry experience because: a. she wanted to introduce the sales manager to the community. b. this was her first new hire and she wanted everyone to know her business was expanding. c. She had stolen the sales manager from a competitor and wanted to gloat publicly. d. she wanted to bolster the sales manager's credibility.

d. she wanted to bolster the sales manager's credibility.