Moral Issues in Business 12th Edition by William H. Shaw -Test Bank

Moral Issues in Business 12th Edition by William H. Shaw -Test Bank

Chapter 6—Consumers

MULTIPLE CHOICE

1. The case of MacPherson v. Buick Motor Car in 1916 changed product liability law. As a result of it, the courts

a.

permitted consumers to sue manufacturers with whom they had no contractual relationships.

b.

adopted the principle of caveat emptor.

c.

permitted consumers to sue the retailer from whom they had purchased the product.

d.

adopted the principle of strict liability.

ANS: A PTS: 1 REF: p. 262

2. According to the legal doctrine of strict product liability,

a.

the producer of a product is responsible for any injury the consumer suffers.

b.

consumers must assume all risk whenever they buy a product.

c.

product liability presupposes negligence by more than one party.

d.

a manufacturer need not be negligent to be held liable for a defective product.

ANS: D PTS: 1 REF: p. 263

3. Which statement is accurate in its description of consumer protection?

a.

The Consumer Product Safety Commission has the power to order recalls.

b.

Statistics show that, in fact, safety regulations rarely succeed in increasing safety.

c.

Critics agree that the cost of safety regulations and product recalls are negligible.

d.

Safety regulations permit people to choose to save money by purchasing riskier (but less expensive) products.

ANS: A PTS: 1 REF: p. 264

4. Legal paternalism is the doctrine that the law

a.

may justifiably restrict the freedom of the individual for his or her own good.

b.

may justifiably forbid lawsuits against those who act paternalistically.

c.

should encourage business to develop a paternal sense of responsibility for consumers.

d.

should only restrict people’s freedom in order to protect other people.

ANS: A PTS: 1 REF: p. 265

5. “Puffery” is an example of which of the following deceptive or misleading advertising techniques?

a.

ambiguity

c.

psychological appeals

b.

exaggeration

d.

concealed facts

ANS: B PTS: 1 REF: p. 284

6. For years Bayer aspirin advertised that it contained “the ingredient doctors recommend most.” This is an example of

a.

ambiguity.

c.

exaggeration.

b.

psychological appeals.

d.

concealed facts.

ANS: D PTS: 1 REF: p. 282

7. The case of FTC v. Standard Education was important in the legal transition

a.

toward the principle of caveat emptor.

b.

toward something like the ignorant consumer standard.

c.

toward the reasonable-person standard.

d.

that removed power from the Federal Trade Commission (FTC).

ANS: B PTS: 1 REF: p. 287

8. In deciding whether an ad is deceptive, today the FTC basically follows

a.

the reasonable consumer standard.

b.

the ignorant/gullible consumer standard.

c.

a “modified” ignorant-consumer standard.

d.

none of these choices.

ANS: C PTS: 1 REF: p. 287

9. Harvard business professor Theodore Levitt has

a.

drawn an analogy between advertising and art.

b.

proven the possibility of effective subliminal advertising.

c.

argued that the process of production today creates the very wants it then satisfies.

d.

invented the concept of “puffery”.

ANS: A PTS: 1 REF: p. 290

10. According to Galbraith’s “dependence effect,”

a.

production depends upon wants.

b.

advertising depends on the wants of the consumer.

c.

producers use advertising to shape consumer wants.

d.

advertising depends on consumerism.

ANS: C PTS: 1 REF: p. 290

11. Advertising

a.

makes the market more efficient.

b.

maximizes consumer well-being (thanks to the invisible hand).

c.

can’t be restricted without violating the moral rights of advertisers.

d.

subsidizes the media.

ANS: D PTS: 1 REF: p. 292

12. Critics of advertising generally agree that

a.

advertising rarely gives consumers much useful information.

b.

brand loyalty increases price competition.

c.

restrictions on advertising violate the moral rights of advertisers.

d.

advertising can only influence us if we want it to.

ANS: A PTS: 1 REF: p. 281

13. Caveat emptor means

a.

strict product liability

b.

due care

c.

let the buyer beware

d.

the customer and manufacturer meet as equals

ANS: C PTS: 1 REF: p. 263

14. Before the case of MacPherson v. Buick Motor Car in 1916, the law based a manufacturer’s liability for injuries due to a defective product on

a.

the principle of strict liability.

b.

the direct contractual relationship between the producer and the consumer.

c.

the principle of the reasonable person.

d.

whether or not the manufacturer exercised due care.

ANS: B PTS: 1 REF: p. 262

15. Due care is

a.

based on the principle of caveat emptor.

b.

based on the principle “let the buyer beware.”

c.

the idea that consumers and sellers do not meet as equals and that consumer’s interests are particularly vulnerable to being harmed by the manufacturer.

d.

based on the principle of absolute liability.

ANS: C PTS: 1 REF: p. 263

16. Which statement is true from an ethical perspective?

a.

The argument for strict liability is basically utilitarian.

b.

Strict liability is identical with absolute liability.

c.

The concept of due care is identical with that of caveat emptor.

d.

The argument for due care is basically Kantian.

ANS: A PTS: 1 REF: p. 263

17. In 1972 Congress created one of the most important agencies for regulating product safety. This agency is the

a.

Securities and Exchange Commission.

b.

Federal Drug Administration Agency.

c.

Fair Packaging and Labeling Commission.

d.

Consumer Product Safety Commission.

ANS: D PTS: 1 REF: p. 264

18. Every year ____ of Americans require medical treatment from product related accidents.

a.

tens of thousands

c.

millions

b.

hundreds

d.

hundreds of thousands

ANS: C PTS: 1 REF: p. 262

19. People generally speak of two kinds of warranties. What are these two kinds of warranties?

a.

express and implied

c.

limited and unlimited

b.

positive and negative

d.

legal and moral

ANS: A PTS: 1 REF: p. 273

20. Which of the following is an example of price gouging?

a.

Selling World Series Tickets for $300.

b.

New York hotels that doubled or tripled their prices in the aftermath of the September 11, 2001, attacks.

c.

Having to pay above the seller’s original asking price for a home.

d.

Increasing the price of lawn movers in the spring and summer.

ANS: B PTS: 1 REF: p. 277

21. The consumer’s main source of product information is

a.

testimonials of other customers.

c.

word of mouth.

b.

billboards.

d.

the label and package.

ANS: D PTS: 1 REF: p. 278

22. The goal of advertising is

a.

to persuade people to purchase the product.

b.

to provide information about goods and services.

c.

to provide information about prices.

d.

to subsidize the media.

ANS: A PTS: 1 REF: p. 281

23. Terms like “can be,” “as much as,” and “help,” are examples of

a.

concealment of facts.

c.

ambiguity.

b.

truth in advertising.

d.

consumer confidence.

ANS: C PTS: 1 REF: p. 281

24. The terms “best, finest, and most” are examples of

a.

puffery.

c.

truth in advertising.

b.

psychological appeals.

d.

trust building statements.

ANS: A PTS: 1 REF: p. 284

25. Statistically, there is strong evidence that exposure to television advertising is strongly associated with

a.

criminal behavior.

b.

obesity in children under twelve.

c.

low ethical sensitivity in children under ten.

d.

liberal attitudes in children under nine.

ANS: B PTS: 1 REF: p. 289

TRUE/FALSE

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

ANS: T PTS: 1 REF: p. 262

2. 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 if the seller has not been negligent in permitting that defect to exist.

ANS: T PTS: 1 REF: p. 263

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

ANS: F PTS: 1 REF: p. 263

4. In his books The Affluent Society and The New Industrial State, John Kenneth Galbraith argues that consumer wants are never created by advertising or sophisticated sales strategies.

ANS: F PTS: 1 REF: p. 290

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

ANS: T PTS: 1 REF: p. 292

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

ANS: F PTS: 1 REF: p. 263

7. Deceptive advertising is always legal because we have freedom of speech.

ANS: F PTS: 1 REF: p. 286

8. The Federal Trade Commission (FTC) was established in 1914 to protect consumers against deceptive advertising.

ANS: T PTS: 1 REF: p. 286

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

ANS: T PTS: 1 REF: p. 286

10. Anti-paternalism is often defended on the assumption that individuals know their own interests better than anyone else, and that they are fully informed and able to advance those interests.

ANS: T PTS: 1 REF: p. 266

11. Economists can prove, if we grant them enough assumptions, that free-market buying and selling lead to optimal results. One of those assumptions is that everyone has full and complete information, on the basis of which they then buy and sell.

ANS: F PTS: 1 REF: p. 292

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

ANS: T PTS: 1 REF: p. 282

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

ANS: F PTS: 1 REF: p. 281

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

ANS: F PTS: 1 REF: p. 287

15. 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.

ANS: T PTS: 1 REF: p. 263

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

ANS: T PTS: 1 REF: p. 262

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

ANS: F PTS: 1 REF: p. 265

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

ANS: T PTS: 1 REF: p. 287-288

19. The FTC now follows the “modified” gullible consumer standard, and it protects consumers from ads that mislead significant numbers of people.

ANS: T PTS: 1 REF: p. 287

20. Business’s responsibility for understanding and providing for consumer needs derives from the fact that citizen-consumers are dependent on business to satisfy their needs.

ANS: T PTS: 1 REF: p. 262

21. Puffery is illegal.

ANS: F PTS: 1 REF: p. 284

22. Strict liability is the same thing as absolute liability.

ANS: F PTS: 1 REF: p. 263

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

ANS: T PTS: 1 REF: p. 266

24. Businesses are never legally responsible for accidents that occur exclusively as a result of product misuse.

ANS: F PTS: 1 REF: p. 264

25. “Weasel words” are words used to evade or retreat from a direct or forthright statement.

ANS: T PTS: 1 REF: p. 282

SHORT ANSWER

1. What is the importance of the 1916 case of MacPherson v. Buick Motor Car?

ANS:

See referenced page.

PTS: 1 REF: p. 262

2. What is due care?

ANS:

See referenced page.

PTS: 1 REF: p. 263

3. What is the doctrine of caveat emptor?

ANS:

See referenced page.

PTS: 1 REF: p. 263

4. What is the importance of Greenman v. Yuba Power Products?

ANS:

See referenced page.

PTS: 1 REF: p. 263

5. What is an argument for strict product liability?

ANS:

See referenced page.

PTS: 1 REF: p. 263

6. Regulations often benefit consumers, but not always. Name one reason that regulations can sometimes harm consumers.

ANS:

See referenced pages.

PTS: 1 REF: p. 264-265

7. Give an example of manipulative pricing.

ANS:

See referenced pages.

PTS: 1 REF: p. 274-275

8. Give an example of labeling or packaging that would be deceptive or misleading.

ANS:

See referenced page.

PTS: 1 REF: p. 279

9. Give an example of deceptive ambiguity in advertising.

ANS:

See referenced pages.

PTS: 1 REF: p. 281-282

10. What is subliminal advertising?

ANS:

See referenced page.

PTS: 1 REF: p. 286

ESSAY

1. Defend the position that advertisers must use imagination and artistic content to address human needs.

ANS:

See referenced page.

PTS: 1 REF: p. 290

2. Defend the position that advertising manipulates human needs and can create artificial ones.

ANS:

See referenced pages.

PTS: 1 REF: p. 290-292

3. Why then is there concern about the ethics of advertising? If the consumer is responsible to make the decision, is there anything to justify restricting the advertiser? Justify and explain your answers.

ANS:

See referenced pages.

PTS: 1 REF: p. 289-292

4. Should cigarette sales be legal? Justify your answer and consider possible objections to it.

ANS:

See referenced pages.

PTS: 1 REF: p. 265-266

5. Thomas L. Carlson argues that there are four rules that must be followed for a sale to be ethical. What are they, and what objections can be raised against them?

ANS:

Review through chapter.

PTS: 1 REF: Reading 6.1