International Business Exam

Which of the following statements is true about caste system?

A caste system is a rigid form of social stratification. The most rigid system of stratification is a caste system. A caste system is a closed system of stratification in which social position is determined by the family into which a person is born, and change in that position is usually not possible during an individual's lifetime.

Which of the following exemplifies privatization?

A country sells its postal services to a consortium of companies that runs it as a profit making venture without any state funding. Privatization transfers the ownership of state property into the hands of private individuals, frequently by the sale of state assets through an auction.

A _____ eliminates trade barriers between member countries and adopts a common external trade policy, but does not allow free movement of factors of production between member nations.

A customs union eliminates trade barriers between member countries and adopts a common external trade policy.

Contracts drafted under a common law framework tend to be

Contracts drafted under a common law framework tend to be very detailed with all contingencies spelled out. In civil law systems, however, contracts tend to be much shorter and less specific because many of the issues are already covered in a civil code. Thus it is more expensive to draw up contracts in a common law jurisdiction, and resolving contract disputes can be very adversarial in common law systems. But common law systems have the advantage of greater flexibility and allow for judges to interpret a contract dispute in light of the prevailing situation.

What is the concept of understanding how cultural differences across and within nations can affect the way business is conducted?

Cross-cultural literacy. By cross-cultural literacy, we mean an understanding of how cultural differences across and within nations can affect the way business is practiced.

Which of the following is the African grouping that started to implement a customs union in 2005?

EAC. In 2005 the EAC started to implement a customs union, although many tariffs remained in place until 2010.

The emerging role of the _____ in competition policy suggests the EU is increasingly willing and able to intervene and impose conditions on companies proposing mergers and acquisitions.

European Commission. The emerging role of the European Commission in competition policy suggests the EU is increasingly willing and able to intervene and impose conditions on companies proposing mergers and acquisitions.

A civil law system tends to be more adversarial than a common law system.

False. A civil law system tends to be less adversarial than a common law system, since the judges rely upon detailed legal codes rather than interpreting tradition, precedent, and custom.

A common feature of many right-wing dictatorships is that they support socialist or communist ideas.

False. A common feature of many right-wing dictatorships is an overt hostility to socialist or communist ideas.

The naive immoralist claims that a multinational's home-country standards of ethics are the appropriate ones for companies to follow in foreign countries.

False. A naive immoralist asserts that if a manager of a multinational sees that firms from other nations are not following ethical norms in a host nation, that manager should not either.

There is consensus that EU is what economists would call an optimal currency area.

False. According to critics, a drawback of the euro is that the EU is not what economists would call an optimal currency area.

In a free trade area, countries are not allowed to determine their own trade policies with nonmembers.

False. Each country is allowed to determine its own trade policies with regard to nonmembers. Thus, for example, the tariffs placed on the products of nonmember countries may vary from member to member.

Entrepreneurs and business-owners of high uncertainty avoidance cultures will be more willing to take risks and make changes.

False. Hofstede's uncertainty avoidance dimension measured the extent to which different cultures socialized their members into accepting ambiguous situations and tolerating uncertainty. Lower uncertainty avoidance cultures were characterized by a greater readiness to take risks and less emotional resistance to change.

According to the findings of the World Values Survey

As countries get richer, there seems to be a shift from survival values to well-being values. As countries get richer, there seems to be a shift from "traditional" to "secular rational" values, and from "survival values" to "well-being" values.

_____ are the accepted principles of right or wrong governing the conduct of businesspeople.

Business ethics. Business ethics are the accepted principles of right or wrong governing the conduct of businesspeople, and an ethical strategy is a strategy, or course of action, that does not violate these accepted principles.

What is the most widely practiced religion in the world?

Christianity is the most widely practiced religion in the world. The vast majority of Christians live in Europe and the Americas, although their numbers are growing rapidly in Africa.

Which of the following philosophies can be traced back to the ancient Greek philosopher Plato?

Collectivism

Since the demise of communism in the late 1980s, the number of command economies has risen dramatically.

False. In a command economy, the government plans the goods and services that a country produces and all businesses are state owned, the rationale being that the government can direct the businesses to make investments that are in the best interests of the nation as a whole. Since the demise of communism in the late 1980s, the number of command economies has fallen dramatically.

In a command economy, certain sectors of the economy are left to private ownership and free market mechanisms, while other sectors have significant state ownership and government planning.

False. In a mixed economy, certain sectors of the economy are left to private ownership and free market mechanisms, while other sectors have significant state ownership and government planning.

In calculating GNI data in some countries, the official figures take into account the barter agreements that take place as part of daily business transactions.

False. In some countries, the "official" figures do not tell the entire store about gross national income. Large amounts of economic activity may be in the form of unrecorded cash transactions, or barter agreements. People engage in such transactions to avoid paying taxes.

It can be more costly to do business in a country where there are no laws and regulations with regard to product safety.

False. It can be more costly to do business in a country where local laws and regulations set strict standards with regard to product safety, safety in the workplace, environmental pollution, and the like (since adhering to such regulations is costly).

The emergence of single markets will make the business environment within each grouping less competitive.

False. Just as the emergence of single markets creates opportunities for business, it also presents a number of threats. For one thing, the business environment within each grouping will become more competitive.

Kantian ethics hold that the moral worth of actions or practices is determined by their consequences.

False. Kantian ethics hold that people should be treated as ends and never purely as means to the ends of others. People have dignity and need to be respected as such.

People who violate folkways are considered to be evil or bad.

False. People who violate folkways may be thought of as eccentric or ill-mannered, but they are not usually considered to be evil or bad. In many countries, foreigners may initially be excused for violating folkways.

"Not free" countries are characterized by some restrictions on political rights and civil liberties, often in the context of corruption, weak rule of law, ethnic strife, or civil war.

False. Political freedom of countries basically falls into three broad groupings: free, partly free, and not free. In "free" countries, citizens enjoy a high degree of political and civil freedoms. "Partly free" countries are characterized by some restrictions on political rights and civil liberties, often in the context of corruption, weak rule of law, ethnic strife, or civil war. In "not free" countries, the political process is tightly controlled and basic freedoms are denied.

_____ refers to a philosophy that a person should have freedom in his or her economic and political pursuits.

Individualism

Social Democrats

The communists believed that socialism could be achieved only through violent revolution and totalitarian dictatorship, whereas the social democrats committed themselves to achieving socialism by democratic means, turning their backs on violent revolution and dictatorship.

Building an organizational culture that places a high value on ethical behavior requires incentive and reward systems that reward people who engage in ethical behavior.

True. Building an organizational culture that places a high value on ethical behavior requires incentive and reward systems, including promotions that reward people who engage in ethical behavior and sanction those who do not.

Deregulation involves the establishment and operation of private enterprises.

True. Deregulation involves removing legal restrictions to the free play of markets, the establishment of private enterprises, and the manner in which private enterprises operate.

Most of the world's ethical systems are the product of religions.

True. Ethical systems refer to a set of moral principles, or values, that are used to guide and shape behavior. Most of the world's ethical systems are the product of religions.

GNI per person figures can be misleading because they don't consider differences in the cost of living.

True. GNI measures the total annual income received by residents of a nation. GNI per person figures can be misleading because they don't consider differences in the cost of living.

Hofstede's power distance dimension focused on how a society deals with the fact that people are unequal in physical and intellectual capabilities.

True. Hofstede's uncertainty avoidance dimension measured the extent to which different cultures socialized their members into accepting ambiguous situations and tolerating uncertainty. Lower uncertainty avoidance cultures were characterized by a greater readiness to take risks and less emotional resistance to change.

Expatriate managers may experience more than the usual degree of pressure to violate their personal ethics.

True. Home-country managers working abroad in multinational firms (expatriate managers) may experience more than the usual degree of pressure to violate their personal ethics.

In a market economy, a supply restriction occurs when a single firm monopolizes a market.

True. In a market economy, production is determined by the interaction of supply and demand and signaled to producers through the price system. For a market to work in this manner, supply must not be restricted. A supply restriction occurs when a single firm monopolizes a market.

In the early twentieth century, the socialist ideology split into two broad camps: communists and social democrats.

True. In the early twentieth century, the socialist ideology split into two broad camps, the communists and the social democrats.

One of the biggest dangers confronting a company that goes abroad for the first time is the danger of being ill-informed.

True. International businesses that are ill-informed about the practices of another culture are likely to fail. Doing business in different cultures requires adaptation to conform to the value systems and norms of that culture. Adaptation can embrace all aspects of an international firm's operations in a foreign country.

A code of ethics is a formal statement of the ethical priorities that a business follows.

True. Many companies now draft a code of ethics, which is a formal statement of the ethical priorities a business adheres to. Often, the code of ethics draws heavily upon documents such as the UN Universal Declaration of Human Rights, which itself is grounded in Kantian and rights-based theories of moral philosophy.

The movement toward regional economic integration has been most successful in Europe.

True. Nowhere has the movement toward regional economic integration been more successful than in Europe.

During the late 1980s and early 1990s, a wave of democratic revolutions swept the world.

True. The political economy of many of the world's nation-states has changed radically since the late 1980s. First, during the late 1980s and early 1990s, a wave of democratic revolutions swept the world.

While a nation as a whole may benefit significantly from a regional free trade agreement, certain groups within the country may lose.

True. While a nation as a whole may benefit significantly from a regional free trade agreement, certain groups within the country may lose.

It may be more costly to do business in relatively primitive or undeveloped economies because of the lack of infrastructure and supporting businesses.

True. With regard to economic factors, one of the most important variables is the sophistication of a country's economy. It may be more costly to do business in relatively primitive or undeveloped economies because of the lack of infrastructure and supporting businesses.

From an international business perspective, some argue that what is ethical

depends on one's cultural perspective. From an international business perspective, some argue that what is ethical depends on one's cultural perspective.

The role of the government in a market economy involves

encouraging vigorous free and fair competition among private producers. The role of government in a market economy is to encourage vigorous free and fair competition between private producers. Governments do this by outlawing restrictive business practices designed to monopolize a market (antitrust laws serve this function in the United States).

This refers to a set of moral principles, or values, that are used to guide and shape behavior.

ethical system. Most of the world's ethical systems are the product of religions.

The belief in the superiority of one's own culture is known as

ethnocentrism. Ethnocentrism is a belief in the superiority of one's own ethnic group or culture. Hand in hand with ethnocentrism goes a disregard or contempt for the culture of other countries.

During the late 1980s and early 1990s, totalitarian governments collapsed and were replaced by democratically elected governments that were typically _____ than their predecessors had been.

more committed to free market capitalism. During the late 1980s and early 1990s, totalitarian governments collapsed and were replaced by democratically elected governments that were typically more committed to free market capitalism than their predecessors had been.

The ethical obligations of a multinational corporation toward employment conditions, human rights, corruption, and environmental pollution are

not always clear-cut. The ethical obligations of a multinational corporation toward employment conditions, human rights, corruption, and environmental pollution are not always clear-cut.

The benefits, costs, and risks associated with doing business in a country are a function of that country's

political, economic, and legal systems. The benefits, costs, and risks associated with doing business in a country are a function of that country's political, economic, and legal systems.

United Nations has developed the Human Development Index (HDI) to measure the

quality of human life in different nations. Amartya Sen's influential thesis has been picked up by the United Nations, which has developed the Human Development Index (HDI) to measure the quality of human life in different nations.

In the case of command economies, deregulation involves _____.

removing price controls. Deregulation in these cases involved removing price controls, thereby allowing prices to be set by the interplay between demand and supply; abolishing laws regulating the establishment and operation of private enterprises; and relaxing or removing restrictions on direct investment by foreign enterprises and international trade.

The _____ committed themselves to achieving socialism without resorting to violent revolution and dictatorship.

social democrats

Moral imagination refers to

standing in the shoes of a stakeholder and asking how a proposed decision might impact that stakeholder. Stakeholder analysis involves a certain amount of what has been called moral imagination. This means standing in the shoes of a stakeholder and asking how a proposed decision might impact that stakeholder.

Which of the following is a feature of right-wing totalitarianism?

Provision of partial individual economic freedom along with restricted individual political freedom.

_____ is the extortion of income or resources of property holders by public officials such as politicians and government bureaucrats.

Public action to violate property rights occurs when public officials, such as politicians and government bureaucrats, extort income, resources, or the property itself from property holders.

_____ can be seen as an attempt to achieve additional gains from the free flow of trade and investment between countries beyond those attainable under global agreements.

Regional economic integration. Regional economic integration can be seen as an attempt to achieve additional gains from the free flow of trade and investment between countries beyond those attainable under global agreements.

Right-wing totalitarianism

Right-wing totalitarianism generally permits some individual economic freedom but restricts individual political freedom, frequently on the grounds that it would lead to the rise of communism.

Which of the following is a more attractive place to do business?

A nation with a market-based economic system. Other things being equal, a nation with democratic political institutions, a market-based economic system, and strong legal system that protects property rights and limits corruption is clearly more attractive as a place in which to do business than a nation that lacks democratic institutions, where economic activity is heavily regulated by the state, and where corruption is rampant and the rule of law is not respected.

Which of the following accounts for about 55 percent of the world's GNP and 49 percent of world trade?

APEC. Collectively, the APEC member states account for about 55 percent of the world's GNP, 49 percent of world trade, and much of the growth in the world economy.

Collectivisim

Advocacy of collectivism can be traced to the ancient Greek philosopher Plato (427-347 BC), who in "The Republic" argued that individual rights should be sacrificed for the good of the majority and that property should be owned in common.

The practice of "gift-giving" between the parties to a business negotiation is considered right and proper behavior in many Asian cultures, while some Westerners view the practice as a form of bribery. What is this an example of?

An ethical dilemma. The practice of "gift-giving" between the parties to a business negotiation is considered right and proper behavior in many Asian cultures, while some Westerners view the practice as a form of bribery, and therefore unethical, particularly if the gifts are substantial. This is a business-oriented example of an ethical dilemma.

The Convention on Combating Bribery of Foreign Public Officials in International Business Transactions obliges member states to make facilitating payments made to expedite routine government action a criminal offense.

False. The Convention on Combating Bribery of Foreign Public Officials in International Business Transactions obliges member states and other signatories to make the bribery of foreign public officials a criminal offense. The convention excludes facilitating payments made to expedite routine government action from the convention.

The ultimate controlling unit within the EU is the European Parliament.

False. The European Council represents the interests of member states. It is clearly the ultimate controlling authority.

The value systems and norms of a country have little influence on the costs of doing business in that country.

False. The value systems and norms of a country influence the costs of doing business in that country. The costs of doing business in a country influence the ability of firms to establish a competitive advantage in the global marketplace.

Trade diversion occurs when high-cost domestic producers are replaced by low-cost producers within the free trade area.

False. Trade creation occurs when high-cost domestic producers are replaced by low-cost producers within the free trade area.

Identify the most popular form of regional economic integration, accounting for almost 90 percent of regional agreements.

Free trade areas. In a free trade area, all barriers to the trade of goods and services among member countries are removed. Free trade agreements are the most popular form of regional economic integration, accounting for almost 90 percent of regional agreements.

To achieve full economic union, the European Union introduced a common currency, the euro, controlled by a central EU bank. Although most member states have signed on, _____ remains an important holdout.

Great Britain. To achieve full economic union, the EU introduced a common currency, the euro, controlled by a central EU bank. Although most member states have signed on, Great Britain remains an important holdout.

Which of the following is true about planned economies?

In a planned economy, the state owns all means of production. In a planned economy, the state owns all means of production. Consequently, entrepreneurial individuals have few economic incentives to develop valuable new innovations, because it is the state, rather than the individual, that captures most of the gains.

Which of the following is a disadvantage of a high degree of managerial mobility between companies?

Lack of loyalty and commitment to an individual company. Although moving from company to company may be good for individual managers who are trying to build impressive résumés, it is not necessarily a good thing for American companies. The lack of loyalty and commitment to an individual company, and the tendency to move on for a better offer, can result in managers who have good general skills but lack the knowledge, experience, and network of interpersonal contacts that come from years of working within the same company.

_____ help establish the culture of an organization and set the example that others follow.

Leaders. Leaders help to establish the culture of an organization, and they set the example that others follow.

The creation of a single market through regional economic integration offers significant opportunities. Which of the following is one of these opportunities?

Markets that were formerly protected from foreign competition are increasingly open. The creation of a single market through regional economic integration offers significant opportunities because markets that were formerly protected from foreign competition are increasingly open.

Which of the following aspects of Protestantism paved the way for the subsequent emphasis on individual economic and political freedoms?

The emphasis on individual religious freedom. Protestantism gave individuals significantly more freedom to develop their own relationship with God. This emphasis on individual religious freedom may have paved the way for the subsequent emphasis on individual economic and political freedoms and the development of individualism as an economic and political philosophy.

Which of the following is true about the economic risks of doing business in a country?

The inflation rate in a country is an indicator of the economic risks of doing business in a country. One visible indicator of economic mismanagement tends to be a country's inflation rate. Another is the level of business and government debt in the country.

Individualism

The opposite of collectivism, individualism refers to a philosophy that an individual should have freedom in his or her economic and political pursuits.

Many of the national markets of Eastern Europe, Latin America, Africa, and Asia may still be underdeveloped, but they are potentially enormous. Which of the following is a risk to businesses moving into these regions?

There is no guarantee that democracy will thrive in many of the world's newer democratic states. Many of the national markets of Eastern Europe, Latin America, Africa, and Asia may still be underdeveloped, but they are potentially enormous. Just as the potential gains are large, so are the risks. There is no guarantee that democracy will thrive in many of the world's newer democratic states, particularly if these states have to grapple with severe economic setbacks. Totalitarian dictatorships could return, although they are unlikely to be of the communist variety.

Which of the following is a reason for the spread of democracy?

Totalitarian regimes failing to deliver economic progress to the vast bulk of their populations. In many countries the economic advances of the past quarter century have led to the emergence of increasingly prosperous middle and working classes who have pushed for democratic reforms. Entrepreneurs and other business leaders, eager to protect their property rights and ensure the dispassionate enforcement of contracts, are another force pressing for more accountable and open government.

_____ occurs when high-cost domestic producers are replaced by low-cost producers within the free trade area.

Trade Creation. Trade creation occurs when high-cost domestic producers are replaced by low-cost producers within the free trade area. Trade diversion occurs when lower-cost external suppliers are replaced by higher-cost suppliers within the free trade area.

Country A and Country B entered into a free trade agreement recently. After this, Country A starts importing heavy machinery from Country B. Country A used to domestically produce such machinery at a higher cost. Which of the following has occurred in this scenario?

Trade creation. Trade creation occurs when high-cost domestic producers are replaced by low-cost producers within the free trade area.

Which of the following happens when higher-cost external producers are replaced by lower-cost external producers within the free trade area?

Trade creation. Trade creation occurs when high-cost domestic producers are replaced by low-cost producers within the free trade area. It may also occur when higher-cost external producers are replaced by lower-cost external producers within the free trade area.

Which of the following statements is true about trademarks?

Trademarks are designs and names by which businesses differentiate their products. Trademarks are designs and names, often officially registered, by which merchants or manufacturers designate and differentiate their products (e.g., Christian Dior clothes).

A mudarabah contract of Islamic banks is similar to a profit-sharing scheme.

True. A mudarabah contract is similar to a profit-sharing scheme. Under mudarabah, when an Islamic bank lends money to a business, rather than charging that business interest on the loan, it takes a share in the profits that are derived from the investment.

Indulgence refers to

a society that allows relatively free gratification of basic and natural human drives related to enjoying life and having fun. Hofstede again presented results and theoretical rationale to support the indulgence versus restraint dimension. Indulgence refers to a society that allows relatively free gratification of basic and natural human drives related to enjoying life and having fun. Restraint refers to a society that suppresses gratification of needs and regulates it by means of strict social norms.

Values are

abstract ideas about what a group believes to be good, right, and desirable. Values refer to abstract ideas about what a group believes to be good, right, and desirable. Put differently, values are shared assumptions about how things ought to be.

In a pure command economy

all businesses are owned by the state. In a pure command economy, the government plans the goods and services that a country produces, the quantity in which they are produced, and the prices at which they are sold. In addition, in a pure command economy, all businesses are state owned, the rationale being that the government can then direct them to make investments that are in the best interests of the nation as a whole rather than in the interests of private individuals.

The Foreign Corrupt Practices Act was amended to

allow for "facilitating payments." The Foreign Corrupt Practices Act outlawed the paying of bribes to foreign government officials to gain business. Some U.S. businesses immediately objected that the act would put U.S. firms at a competitive disadvantage (there is no evidence that has occurred). The act was subsequently amended to allow for "facilitating payments."

An American executive of a multinational home-furnishings chain finds that one of the company's production units in Philippines employs children to work in its factories. However, most of the children employed at the factory are orphans who will be sold as forced labor or pushed into prostitution, if they lose their jobs. The executive finds that all the available alternatives seem ethically unacceptable. In this example, the American executive faces

an ethical dilemma. Ethical dilemmas are situations in which none of the available alternatives seems ethically acceptable.

In Samuel Huntington's thesis, global terrorism is a product of the _____.

clash of value systems and ideology. In Huntington's thesis, global terrorism is a product of the tension between civilizations and the clash of value systems and ideology.

Historically, command economies were found in _____, where collectivist goals were given priority over individual goals.

communist countries. Historically, command economies were found in communist countries where collectivist goals were given priority over individual goals. Since the demise of communism in the late 1980s, the number of command economies has fallen dramatically.

An impediment to integration arises from

concerns over national sovereignty. Despite the strong economic and political arguments in support, integration has never been easy to achieve or sustain for two main reasons. First, although economic integration aids the majority, it has its costs. While a nation as a whole may benefit significantly from a regional free trade agreement, certain groups may lose. Moving to a free trade regime involves painful adjustments. A second impediment to integration arises from concerns over national sovereignty.

Innovation and entrepreneurial activity help increase economic activity by

creating new products and markets. Innovation and entrepreneurial activity help increase economic activity by creating new products and markets that did not previously exist. Moreover, innovations in production and business processes lead to an increase in the productivity of labor and capital, which further boosts economic growth rates.

Amazon.com was the earliest, major online bookstore, which allowed it to generate brand awareness and have a significant presence in the market. Amazon.com had a head start on later entrants to the online bookstore market. In this example, Amazon.com has _____.

first-mover advantages. First-mover advantages are the advantages that accrue to early entrants into a market. In the language of business strategy, early entrants into potential future economic stars may be able to reap substantial first-mover advantages, while late entrants may fall victim to late-mover disadvantages.

Countries with free market economies in which property rights are protected tend to have _____ than command economies or economies where property rights are poorly protected.

greater economic growth rates. Countries with free market economies in which property rights are protected tend to achieve greater economic growth rates than command economies or economies where property rights are poorly protected.

The lowering of trade and investment barriers among countries in a trade group has led to

increased price competition throughout the EU and NAFTA. The lowering of barriers to trade and investment among countries has led to increased price competition throughout the EU and NAFTA. Over time, price differentials across nations will decline in a single market.

The common law system

is based on tradition, precedent, and custom. This gives a common law system a degree of flexibility that other systems lack.

General Motors' stand against apartheid in South Africa was based upon what came to be known as _____.

the Sullivan principles. GM adopted what came to be called the Sullivan principles, named after Leon Sullivan, a black Baptist minister and a member of GM's board of directors. Sullivan argued that it was ethically justified for GM to operate in South Africa so long as two conditions were fulfilled. First, the company should not obey the apartheid laws in its own South African operations (a form of passive resistance). Second, the company should do everything within its power to promote the abolition of apartheid laws.

It has been argued that the success of Japanese enterprises in the global economy has been based partly on which of the following

the cooperation between a company and its suppliers on issues such as design, quality control, and inventory reduction. Some argue that the success of Japanese enterprises in the global economy has been based partly on their ability to achieve close cooperation between individuals within a company and between companies. The primacy of the value of group identification also discourages managers and workers from moving from company to company.

Hofstede's masculinity versus femininity dimension examined

the relationship between gender and work roles. Hofstede's masculinity versus femininity dimension looked at the relationship between gender and work roles.

Folkways are

the routine conventions of everyday life. Folkways are the routine conventions of everyday life. Generally, folkways are actions of little moral significance.

A legal system based on religious teachings is called a _____.

theocratic law system. A theocratic law system is one in which the law is based on religious teachings. Islamic law is the most widely practiced theocratic legal system in the modern world, although usage of both Hindu and Jewish law persisted into the twentieth century.

Newly privatized entities often have little incentive to restructure their operations to become more efficient when

they continue to receive subsidies from the state. Studies of privatization in central Europe have shown that the process often fails to deliver predicted benefits if the newly privatized firms continue to receive subsidies from the state and if they are protected from foreign competition by barriers to international trade and foreign direct investment.

As a philosophy for business ethics, utilitarianism focuses attention on the need to

weigh carefully all of the social benefits and costs of a business action. Utilitarian approaches to ethics hold that the moral worth of actions or practices is determined by their consequences. As a philosophy for business ethics, it focuses attention on the need to weigh carefully all of the social benefits and costs of a business action and to pursue only those actions where the benefits outweigh the costs.