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Q:
(p. 344) As business firms grow in size and market power, they have increasingly lost the ability to dominate marketplace transactions with their customers.
Q:
(p. 342) Consumer advocacy groups in the United States actively promote and speak for the interests of millions of consumers.
Q:
(p. 355) Quality management emphasizes high quality and customer satisfaction through continuous improvement of a company's product or service at the final stages of the production process.
Q:
(p. 353) One reason for business efforts to reform product liability laws is the increasing cost of insuring against liability suits.
Q:
(p. 342) The Latin phrase, caveat emptor, meaning "let the seller beware" has put sellers on alert to look after their own interests.
Q:
(p. 351) The doctrine of strict liability extends only to the retailer who is involved in selling the product, not the manufacturer.
Q:
(p. 355 - 358) Because of the movement towards quality management, companies are now focusing on the customer. How does this occur? How could a specific industry be even more socially responsible to its customers? Explain.
Q:
(p. 351 - 355) In your opinion, do U.S. product liability laws need to be changed? If so, how? If not, why not? Investigate proposed changes in product liability laws over the last several years and evaluate them.
Q:
(p. 350) In the "consumer self-help" approach to protecting consumer privacy rights, new government regulations will protect the consumer online.
Q:
(p. 350 - 351) How do new technologies increasingly enable businesses to collect and use vast amounts of personal data about their customers and potential customers? Explain. Do you think these trends benefit consumers or not, and why?
Q:
(p. 348) The Environmental Protection Agency's mission is to assure the safety and effectiveness of a wide range of consumer products including pharmaceutical drugs and foods.
Q:
(p. 347 - 348) The Department of Agriculture has authority over genetically modified food and some chemicals that may affect consumers.
Q:
(p. 347 - 349) Outline some of the major government agencies responsible for consumer related issues. What is the major mission of each?
Q:
(p. 347) The Children's Online Privacy Protection Act limits the collection of information online from and about children under the age of 13.
Q:
(p. 350) Online shoppers have always been concerned that:
A. They receive online ads for products similar to the ones they bought earlier on the Web.
B. Their favorite Web sites provide a large variety of products and services.
C. The government might become overly involved in protecting consumer privacy.
D. Information they reveal in the course of a sales transaction might be misused.
Q:
(p. 344) Consumer advocates argue that consumers are entitled to five core rights. What are they? Explain each.
Q:
(p. 345) Deceptive advertising is still legal in most countries.
Q:
(p. 349) The major federal consumer protection agencies are authorized by law to:
A. Intervene directly into the very center of free market activities, if that is considered necessary to protect consumers.
B. Substitute government-mandated standards for decision making by private buyers and sellers.
C. Intervene in the market by influencing consumers to buy one product or service rather than another.
D. Both A and B, but not C
Q:
(p. 343) The consumer movement exists because consumers want to be treated fairly and honestly in the marketplace. Outline and explain the additional reasons for the existence of the consumer movement.
Q:
(p. 344) Consumers make less rational choices when they have accurate information about a product.
Q:
(p. 357) Businesses can take a number of measures to respond voluntarily to consumer demands. Which of the following is an example of such a measure?
A. Product liability law reform.
B. Consumer call centers.
C. Consumer advocacy groups.
D. Alternative dispute resolution policies.
Q:
(p. 348) Which of the following is a mission of the Food and Drug Administration?
A. To assure the safety and effectiveness of a wide range of consumer products.
B. To prohibit unfair or deceptive advertising.
C. To ensure that packaging and labels contain all the necessary information.
D. Inspection of meat, poultry, seafood, and produce.
Q:
(p. 348) The main responsibility of the National Highway Traffic Safety Administration is to:
A. Set a uniform national speed limit.
B. Set airline safety standards.
C. Set motor vehicle safety standards.
D. Safeguard consumers from altered odometers.
Q:
(p. 356) In some cases, businesses have banded together to agree on how they will treat their customers. This is called:
A. Code of regulation.
B. Consumer affairs doctrine.
C. Voluntary industry codes of conduct.
D. Industry action standards.
Q:
(p. 347) Which agency(ies) was (were) created during the great wave of consumer regulations in the 1960s and early 1970s?
A. Consumer Product Safety Commission.
B. National Highway Traffic Safety Administration.
C. National Transportation Safety Board.
D. All of the above.
Q:
(p. 355) One alternative to product liability lawsuits is called:
A. Limited resolution.
B. Punitive damages reform.
C. Alternative dispute resolution.
D. Consumerism.
Q:
(p. 354 - 355) Consumer groups have generally opposed the idea of product liability reform using which of the following arguments?
A. Punitive damages should be limited.
B. Strict liability should be retained.
C. The burden of proof should be shifted to consumers.
D. Losers should be made to pay some of the other side's legal bills.
Q:
(p. 347) Which of the following departments was established in 1914 and has been given additional powers to protect consumers over the years, including in the area of online privacy?
A. Federal Trade Commission.
B. Food and Drug Administration.
C. Consumer Product Safety Commission.
D. Antitrust Division of the Department of Justice.
Q:
(p. 347) Which of the following limits the collection of information online from and about children under the age of 13?
A. Federal Juvenile Safety Bill.
B. Parents for the Safety of Children Act 2000.
C. The "Do Not Collect" Bill of 2003.
D. The Children's Online Privacy Protection Act.
Q:
(p. 354) Under proposals to establish uniform federal standards for determining liability:
A. Plaintiffs would be discouraged from proceeding to trial.
B. Companies would not have to go through repeated trials on the same charges in different states.
C. Judges rather than juries would determine the original amount of punitive damages.
D. Consumers would have to prove that a manufacturer knew or should have known that a product design was defective.
Q:
(p. 353) Many companies have argued that the evolution of strict liability has:
A. Unfairly burdened them with excess costs.
B. Decreased liability insurance rates.
C. Increased corporate revenues and dividends.
D. Changed top management's attitude about the consumer.
Q:
(p. 347) Before deregulation, government agencies frequently:
A. Held prices artificially high, shielding businesses from competition.
B. Held prices artificially low, shielding consumers from selection.
C. Encouraged overseas trade, shielding businesses from competition.
D. Discouraged overseas trade, shielding consumers from selection.
Q:
(p. 344 - 347) Manufacturers making false or misleading claims about a competitor's product is:
A. Illegal but ethical.
B. Illegal and unethical.
C. Legal but unethical.
D. Legal and unethical.
Q:
(p. 351 - 352) According to the doctrine of strict liability, which of the following statements is not true?
A. It is not necessary for consumers to prove negligence or breach of warranty by the producer.
B. The consumer's own negligence is not an acceptable defense by the manufacturer.
C. Manufacturers can be held liable if a product is inherently dangerous.
D. This doctrine extends only to those involved in supplying parts for the final product.
Q:
(p. 351) The burden of responsibility for product performance has shifted to the producer, under the legal doctrine of:
A. Strict liability.
B. Product liability.
C. Consumer liability.
D. Supplier liability.
Q:
(p. 337) In your opinion, how is the relationship between the modern corporation and shareholders changing? Explain and justify your argument.
Q:
(p. 331) Which of the following is not an example of fulfilling social objectives through stock ownership?
A. Selling stock of companies that did business in South Africa when it had a policy of racial discrimination.
B. Divesting from Chinese companies that made products by forced labor.
C. Selling stock of companies with a below-market rate of return.
D. Not investing in Burmese companies that had been accused of human rights abuses.
Q:
(p. 351) When businesses adopt voluntary policies for protecting the privacy of individuals' information disclosed during electronic transaction, this is called:
A. Industry self-regulation.
B. Privacy legislation.
C. Consumer self-help.
D. Business privacy regulation.
Q:
(p. 334 - 336) What is insider trading? Explain how the courts have defined this practice.
Q:
(p. 331) The social objectives of investing in stocks include eliminating from investment portfolios companies that:
A. Pollute the environment.
B. Discriminate against employees.
C. Make dangerous products like tobacco or weapons.
D. All of the above.
Q:
(p. 350) An identifying marker placed on a user's computer hard drive during visits to some Web sites is called a:
A. Spy.
B. Virus.
C. Cookie.
D. Firewall.
Q:
(p. 329 - 330) Why have U.S. institutions become more active as investors? How has this trend spread to other countries?
Q:
(p. 330) The activism of institutional investors in other countries has been spearheaded by:
A. U.S.-based pension and mutual funds that in recent years acquired large stakes in foreign countries.
B. Foreign institutions that were granted new rights by their governments.
C. Managers who have become active in proxy battles in the Netherlands, Austria, and Hong Kong.
D. The rising number of individual investors of public service companies.
Q:
(p. 325 - 329) Do you think U.S. executives are compensated too highly? Why or why not?
Q:
(p. 330) A reason for institutions becoming more assertive in promoting the interests of their member investors is:
A. It is difficult for institutions to sell their holdings.
B. Their members want them to.
C. Institutions have greater flexibility in selling stocks.
D. Institutions have nominated members on the finance committee of the board of directors.
Q:
(p. 328) Which of the following is not an argument for high executive compensation?
A. High salaries provide an incentive for innovation and risk-taking.
B. High salaries are necessary to attract and retain top talent.
C. Inflated executive pay helps U.S. firms compete with foreign rivals.
D. Well-paid managers are being compensated for outstanding performance.
Q:
(p. 324) Describe a current trend in corporate governance, providing a real example.
Q:
(p. 323 - 324) What are the key features of effective boards of directors?
Q:
(p. 328) Which of the following arguments opposes the idea of high executive pay?
A. High salaries provide an incentive for innovation and risk taking.
B. Not many individuals are capable of running today's large, complex organizations.
C. Top athletes and entertainers make a lot of money, so top executives should, too.
D. High salaries divert resources that could be used to invest in the business.
Q:
(p. 319 - 320) Identify and provide an example for each of the five major legal rights afforded to stockholders.
Q:
(p. 327) The main reason that American executives are paid so much is:
A. Pay is set by the compensation committees of the board, largely comprised of other CEOs who have an interest in pushing compensation up.
B. Qualified individuals are scarce, because most current CEOs were born during the "baby bust" years of the Great Depression.
C. High executive compensation in other nations puts upward pressure on the salaries of U.S. executives.
D. Most executives are paid based on their performance, and rising compensation reflects the excellent performance of their firms.
Q:
(p. 325) The "agency problem" arises when:
A. Owners manage their company on their own behalf.
B. There is no separation of ownership and control in a company.
C. Managers act in their own interest, rather than in the interest of shareholders.
D. Shareholders act in their own interest, rather than in the interest of the board.
Q:
(p. 335) Which of the following is not an instance of "insider trading"?
A. An auditor using nonpublic information about the company to invest in its stock.
B. A marketing executive briefing stock analysts on the company's sales performance.
C. The CEO's cousin buying stock after the CEO mentioned a pending offer to buy the company.
D. A stock broker passing an "inside tip" to a client, but not trading for his or her own account.
Q:
(p. 324) Between 2002 and 2004, the proportion of global companies that formally evaluated their board members:
A. Decreased from 90 to 35 percent.
B. Increased from 35 to 90 percent.
C. Remained constant for all industries.
D. None of the above.
Q:
(p. 334) The Securities and Exchange Commission outlaws:
A. Any manipulative or deceptive device used to trade stocks.
B. Compensating company executives with stock options.
C. Trading in stocks by institutions.
D. Buying stock in a company for which you work.
Q:
(p. 334) In response to concerns about the lack of transparency in financial accounting, Congress passed a new law called the:
A. U.S. Corporate Sentencing Guidelines.
B. McCain-Feingold Act.
C. Sarbanes-Oxley Act.
D. Securities and Exchange Act.
Q:
(p. 319) Investors may receive an economic benefit from the ownership of stock by receiving:
A. Interest.
B. Dividends.
C. Capital gains.
D. Both B and C, but not A.
Q:
(p. 323) Which of the following is a key feature of effective boards of directors?
A. Hold regular meetings without the CEO present.
B. Fill all important positions on the board with managers with insider knowledge of the firm.
C. Combine the duties of the board chairman and the chief executive.
D. Ensure that no outside members are included on the board.
Q:
(p. 333) Reports filed with the SEC provide information on a company's:
A. Sales and earnings.
B. Depreciation by line of business.
C. Details of foreign operations.
D. All of the above.
Q:
(p. 318) Institutional investors are sometimes referred to as:
A. Main Street investors.
B. Wall Street investors.
C. Inside investors.
D. Outside investors.
Q:
(p. 322) How are directors (members of corporate boards) selected?
A. Shareholders elect the directors from a list of candidates.
B. The company's CEO appoints the directors.
C. The nominating committee elects the directors.
D. Shareholders with the greatest proportional ownership in the company become directors.
Q:
(p. 333) The mission of the Securities and Exchange Commission (SEC) is to:
A. Protect shareholders' rights by making sure that stock markets are run fairly.
B. Protect companies from hostile takeovers.
C. Ensuring that institutional investors do not take control of company management.
D. Ensuring that the federal treasury receives its share of the revenues from stock trading.
Q:
(p. 318) Which of the following is not true about institutional investors?
A. Institutions invest the funds of individuals by purchasing shares of stock in corporations.
B. The proportion of institutional ownership of stock in the U.S. has declined slowly since the 1960s.
C. Through institutions over one-half of the U.S. population has an indirect ownership in corporations.
D. Institutions accounted for 62 percent of the value of all equities owned in the U.S. in 2005.
Q:
(p. 322) What was a major contributor to the collapse of Enron in 2001?
A. The company's top executives made bad investments.
B. Several failed merger attempts with other firms.
C. Lax oversight by the company's audit committee.
D. The bear market of the early 2000s.
Q:
(p. 322) Which of the following is not a function of board committees?
A. The executive committee works closely with top managers on business matters.
B. The audit committee reviews the company's financial reports.
C. The compensation committee administers and approves salaries and benefits.
D. The finance committee works closely with the human resources department to fund employee salaries.
Q:
(p. 317) Which of the following statements is not true about stockholders?
A. They are the legal owners of business corporations.
B. They own equal shares of company assets.
C. They are the part owners of the company.
D. Managers pay close attention to their needs and interests.
Q:
(p. 337) Stockholders have become an increasingly powerful and vocal stakeholder group in corporations.
Q:
(p. 321) The board committee that administers and approves salaries and benefits of high-level managers in a company is called the:
A. Executive committee.
B. Human resources committee.
C. Nominating committee.
D. Compensation committee.
Q:
(p. 321) In 2007, median compensation for directors at the largest U.S. corporations was (rounded to the nearest $10):
A. $172,300.
B. $193,240.
C. $182,300.
D. $205,000.
Q:
(p. 335) In U.S. vs. O'Hagen, the court ruled that someone who traded on the basis of inside information when he or she knew the information was confidential was guilty of misappropriation.
Q:
(p. 330) The activism of institutional shareholders has often worsened company performance.
Q:
(p. 321) Which of the following is true about corporate boards?
A. Corporate boards average 10 members.
B. About half of the directors are "outside" directors.
C. Only one-third of all companies have at least one woman on their board.
D. Three-quarters of all companies have at least one ethnic minority board member.
Q:
(p. 321) The paramount duty of the board of directors of a public corporation is to:
A. Ensure the company is profitable.
B. Select and oversee competent and ethical management to run the company.
C. Audit the firm's financial statements for transparency.
D. Make certain that employees are dealt with in a fair and equitable manner.
Q:
(p. 330) Institutional investors have little incentive to hold their shares and organize to change management policy.
Q:
(p. 329) Shareholders must rely exclusively on the board of directors.
Q:
(p. 321) The directors of a company are a central factor in corporate governance because they:
A. Exercise formal legal authority over company policy.
B. Have the highest stake in the performance of the company.
C. Have a moral responsibility to fulfill the needs of both the company's employees and customers.
D. Inherited the business from their predecessors.
Q:
(p. 320) Corporate governance involves the exercise of control over a company's:
A. Finance and accounting departments.
B. Entire operations.
C. Manufacturing facilities.
D. Marketing and human resources departments.
Q:
(p. 329) Most boards now staff their compensation committees exclusively with outside directors and permit them to hire their own consultants.
Q:
(p. 299 - 301) Who should be entrusted with guarding against minors accessing adult-oriented Web sites?
Q:
(p. 320) Which of the following is not a legal right of stockholders?
A. To vote on members for the board of directors.
B. To vote on major mergers and acquisitions.
C. To vote on changes in the corporate charter and proposals.
D. To vote on who will become chief executive officer (CEO).