Chapter 1-4
1.1
Test Preparation Questions
Business Ethics advocates that when corporate organisations commit moral or immoral acts
the following should happen
a. Human individuals should be held responsible because they are the primary carriers of moral
duties and moral responsibilities.
b. Corporate organisations should be held responsible in the secondary sense.
c. A &B
d. None of the above
1.2
What is utilitarianism?
a. Utilitarianism is a general term for any view that holds that actions and policies should be
evaluated on the basis of the benefits and cost they will impose on individuals.
b. Utilitarianism is a general term for any view that holds that actions and policies should
be evaluated on the basis of the benefits and costs they will impose on society.
c. The views that hold that in any situation, the “right” action or policy is the one that will produce
the lowest net benefits or the greatest net cost to society.
d. None of the above.
1.3 Immanuel Kant’s principle, called categorical imperative, requires that everyone be treated as:
a.
b.
c.
d.
1.4
A free and equal person
A dependent employee
An indentured person
A non-resident employee
Ethical violations destroy:
a.
b.
c.
d.
1.5
Nothing
Jobs
Trust
profits
According to John Locke, humans know that they have a right to liberty as a result of:
a.
b.
c.
d.
The principle of alienation
Communitarianism
The free market
The law of nature
1.6
Which of the following refers to the ability of a person or a country to produce a particular
good at a lower opportunity cost than another country? Select correct option.
a.
b.
c.
d.
1.7
Choose the right types of Justice
a.
b.
c.
d.
1.8
Absolute advantage
Comparative advantage
Resource efficiency
Natural advantage
Capital and puritan
Justice, fairness and socialism
Distributive, retributive and compensatory
Distributive, compensatory and fairness
One of the main views that societies can adopt on oligopoly power is:
1
a.
b.
c.
d.
1.9
Do-something view
Trust view
Regulation view
All of the above
According to Adam Smith, what should a government that hopes to advance the public
welfare do?
a.
b.
c.
d.
1.10
a.
b.
c.
d.
Institute welfare and healthcare systems
Regulate markets thoroughly
Regulate markets only when necessary
Nothing
In Karl Marx’s view, how many sources of income do market or capitalist economies offer?
4
3
2
1
1.1 According to the principle of utilitarianism, an action is moral if:
a. It produces the greatest benefits for the person who does it.
b. It produces more happiness than another action that might have been taken.
c. It is based on the moral virtues.
d. It produces the greatest net benefits or the lowest net cost to the society.
1.2.
Which statement reflects the "punishment and obedience orientation" stage (stage
one) of moral development?
a.
b.
c.
d.
I don't steal because I don't want to be spanked.
I don't steal because my friends don't steal.
I don't steal because it would harm society as a whole.
I don't steal because it wouldn't be fair to everyone else if I did.
1.4 If Toyota raises the prices of its new models of pickup trucks by 4 percent and General
Motors and Ford follow by raising prices by a similar amount, then this is evidence of:
a.
b.
c.
d.
a monopoly.
an oligopoly
pure competition
monopolistic competition.
1.5 Fish Delish is chain of food stores whose major product is fish. Fish Delish would sell a franchise
license to a person only if the person also agreed to purchase a certain number of cookers, fryers,
and other supplies. This is an example of:
a.
b.
c.
d.
Tying arrangement
Exclusive dealing arrangement
Retail price maintenance agreement
Manipulation of supply
2
1.7
In Karl Marks’ view, how many sources of income do Capitalist systems offer?
a.
b.
c.
d.
1.8
2
0
4
1
Which statement is not true of Kant's categorical imperative:
a. We should act only on maxims that can be universally accepted and acted upon.
b. The inability to universalize the maxim of an act may sometimes be ignored if the act in
question will produce the greatest good for the greatest number.
c. Universalization of maxims prohibits us from giving our personal point of view privileged
status over the points of view of others.
d. Our fundamental ethical duty is to treat other human beings as autonomous persons who
may choose their own ends and purposes, not simply as means for the ends of others.
1.10
Kevin and his friends dislike their seventh-grade math teacher. They decide to scratch
his car in the school parking lot. Kevin knows that this is wrong but doesn't want his
friends to think he is not part of their group. According to Kohlberg, what stage of
moral reasoning is Kevin in?
a.
b.
c.
d.
Law and Order Orientation
Social Contract Orientation
Punishment and Obedience Orientation
Interpersonal Concordance Orientation
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SECTION B
Question 3
3.1
Judy was a twelve-year-old girl. Her mother promised her that she could go to a special rock
concert coming to their town if she saved up from baby-sitting and lunch money to buy a ticket
to the concert. She managed to save up the N$20 for the ticket. Her mother changed her
mind and told Judy that she had to spend the money on new clothes for school. Judy was
disappointed and decided to go to the concert anyway. She bought a ticket and told her
mother that she had only been able to save five dollars. That Saturday she went to the
performance and told her mother that she was spending the day with a friend. A week passed
without her mother finding out. Judy then told her older sister, Louise, that she had gone to
the performance and had lied to her mother about it. Louise decided to tell their mother what
Judy did.
a) According to Kohlberg, what stage of moral reasoning is Louise in?
Stage 1 or stage 3
(1)
b) Give reasons for your answer in (a)
(2)
Stage 1 because at this stage, Louise reasons for doing the right thing are to avoid
punishment or defer to the superior physical power of authorities. There is little
awareness that others have needs similar to one’s own.
or
Stage 3
Because good behaviour at this early conventional stage is living to the expectations
of those for whom one feels loyalty, affection, and trust, such as family and friends.
Question 4
Telecom/Leo merger approved
Namibia Economist 2012-05-03
By Admin
The Namibia Competition Commission (NaCC) has approved the proposed merger between Telecom
Namibia Ltd and Powercom (Pty) Ltd but the merger comes with conditions set on the structure and
coordinated behaviour.
The conditions are centered on two competition specific concerns, namely the extent to which the
post-merger market situation will result and the extent of a possible collusive or coordinated behaviour
that would likely prevent or lessen competition. According to the commission’s chief executive and
secretary to the commission, Mihe Gaomab II, the approval conditions were in the interest of
preventing any collusive or coordinated behaviour that would undermine the free and spirited
competition for all entities in that sector, including Telecom and MTC.
One of the approval conditions state that from the effective date of the implementation of the merger,
the merging parties should put in place a separate and independent shareholding structure for
Telecom Namibia Ltd and that of MTC. This separation of the holding structure must be effected
within a period of two years from the date of this notice determination, the commission ruled.
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Another condition set by the Commission states that in the two year period, no person who is a
director of Telecom Namibia or an employee of Telecom Namibia may serve as a director of either
Namibia Post and Telecommunications Holdings (NPTH) or MTC and likewise, no person who is a
director of MTC or any employee of MTC may serve as a director of either NPTH or Telecom
Namibia. This meant that the current NPTH Chief Executive Officer, Frans Ndoroma, who is also the
managing director of Telecom Namibia, as well as the head of Legal Services and company secretary
of Telecom Namibia, Patience Kangueehi-Kanalelo are to resign from their respective positions at
NPTH with immediate effect.
“The set conditions are therefore imposed to mitigate the negative impact that the merger may have
on competition in the relevant market/mobile telecommunication market,”Gaomab II stated. NPTH
holds shares in both Telecom Namibia and MTC. Although the NaCC approved the merger, the deal
can only be sealed once the Communications Authority of Namibia (CRAN) approves it.
The NaCC received a merger notification on 9 January 2012 on the proposed acquisition of
Powercom, trading as Leo, by Telecom Namibia. Powercom is the second licensed cellular company
and is partnership with NamPower and Telenor, a Norwegian company.
Source: https://economist.com.na/1559/markets/telecom-leo-merger-approved/
4.1
The case study above indicates that a certain unethical market structure might develop due to
a merger of Telecom and Leo being approved. What is this market structure and give reasons for your
answer?
Oligopoly
4.2
Identify what anticompetitive practices that could result from the merge of the two companies
above.
•
•
•
•
•
•
•
4.3
What measures were put in place to prevent those anticompetitive practices?
•
•
•
4.4
Price fixing
Manipulation of supply
Market allocation
Bid rigging
Tying arrangements
Price discrimination
Predatory price
the merging parties should put in place a separate and independent shareholding
structure for Telecom Namibia Ltd and that of MTC
no person who is a director of Telecom Namibia or an employee of Telecom Namibia
may serve as a director of either Namibia Post and Telecommunications Holdings
(NPTH) or
MTC and likewise, no person who is a director of MTC or any employee of MTC may
serve as a director of either NPTH or Telecom Namibia
What other measures can the public do in cases like this.
•
•
•
Do-nothing view
Antitrust view
The regulation view
5
Discuss the two formulations of Kant’s Categorical Imperative
3.
(
This question required you to mention Kant two formulations and to discuss them.
Most of you did not discuss you have just copied the two formulation.
o
First Formulation: "Act only on that maxim through which you can at the same time
will that it should become a universal law."
o
Second Formulation: "Act in such a way that you treat humanity, whether in your own
person or in the person of another, always at the same time as an end and never
simply as a means."
Section B:
1.
Discuss the basis of the moral rights according to a utilitarian and Immanuel
Kant view.
o
o
2.
Fully discuss the idea that human beings have a "natural right" to liberty and a
"natural right" to private property, as claimed by John Locke (1632-1704).
o
o
o
o
3.
Utilitarian view moral rights as to what is right or wrong for the majority of community.
Immanuel Kant view moral rights as to what is right for the individual.
John Locke defended the claim that men are by nature free and equal against claims
that God had made all people naturally subject to a monarch.
He argued that people have rights, such as the right to life, liberty, and property,
which have a foundation independent of the laws of any particular society.
John Locke defends that an individual can mixes the labor of this body, which is his
property and not the community property.
John Locke reason that God has given the earth to all human beings in common.
Discuss the difference between a negative and a positive right.
A negative right is placing duty to others to refraining from interfering while positive rights
places duty to have something provided for them.
Five detained in rotten meat scandal in
China
By PTI |Posted 23-Jul-2014
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Beijing: As part of a probe into a new food scandal in China, five persons, including the
quality manager of a company that allegedly supplied expired meat to global fast food chains
like McDonald's, KFC and Starbucks, were detained today.
Zhang Hui, manager of Shanghai Husi Food Co Ltd's quality department, confessed during
investigations that the company has been conducting the malpractice for years under tacit
approval of senior managers. The quality manager of the company was among the five
detained by the Shanghai police, state-run Xinhua news agency reported. The company
produced 5,108 crates of meat products, including McNuggets, pork patties and beef steaks
using out-of-date or mouldy materials, according to the bureau and Shanghai's food and drug
administration, which are jointly investigating the case.
The products were sold to brands including McDonald's, KFC, Pizza Hut, Burger King, 7Eleven, Taiwanese-owned Dicos and Starbucks, investigators said. About 100 tonnes of the
Husi products have been sealed up, said Xu Wei, a spokesman for the Shanghai municipal
government. Shanghai-based Dragon TV aired a news programme on Sunday claiming that
Shanghai Husi, a unit of US-based OSI Group LLC, had supplied products tainted with
reprocessed expired meat to a string of fast food chains and restaurants across China.
The TV report prompted Shanghai authorities to suspend production, while cities and
provinces across China on Monday moved to seal Husi supplies at local fast food chains. The
food and drug administration of Chengdu, capital of Sichuan Province, sealed 9.6 tonnes of
Husi products at warehouses and outlets of McDonald's, KFC and Dicos, a Chinese chain
owned by Taiwan's Ting Hsin International Group. Meanwhile, Starbucks has also withdrawn
products from its shelves in the wake of the scandal that has shaken China's fast food
industry. Mainland fast-food chain Dicos also said it had taken breakfast sandwiches off its
menu because its 'Ham' had been sourced from the meat processing firm. Other provinciallevel regions, including Guangdong, Guangxi and Inner Mongolia, have also reported sealing
the products and ordered companies to stop selling products supplied by Husi.
- See more at: http://www.mid-day.com/articles/five-detained-in-rotten-meat-scandal-inchina/15472181#sthash.LdEAOpB9.dpuf
Source:
http://www.mid-day.com/articles/five-detained-in-rotten-meat-scandal-inchina/15472181
2.1 With reference to the case explain how the prisoners dilemma is convincing us that ethics is
needed in business.
(6)
The unethical behaviour of Shanghai Husi Food Co Ltd is going to cost them more because as
it is now this will and is already costing them customers (no customers will trust them again),
there might be law suits against the company and this will cost them a lot. Secondly, there is
widespread bad publicity about their company and this will not only keep customers away but
also potential investors. Thus, had they acted in line with the prisoners dilemma by being
ethical and cooperating with their customers none of that would have happened. Their gain
was for a short time only.
NOTE: The student’s discussion should centre around the points identified above.
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2.2 In this course, you learned that Business Ethics investigate three types of business issues. Clearly
state which issue or issues is or are addressed in this case. Substantiate your answer.
(8)
Systematic
Corporate and
Individual issues
NOTE: The students should use evidence from the cases to support their answer and they
should be discursive.
2.3 It is alleged in the cases that Shanghai Husi Food Co Ltd has been supplying “rotten” meat to its
clients. You are required to identify the basic ethical principles that were violated in the article.
(NOTE: The principles should be the ones discussed in this course, failure to do that will not attract
marks).
(8)
The following are the violated principles
• Utilitarianism
• Rule Utilitarianism
• Rights:
o Kantian rights
o Negative and Positive rights
o Contractual rights
• Justice
• Ethics of Care
NOTE: Award 1 marks for each principle identified
2.4 It is stated in the cases that Shanghai Husi Food Co Ltd has been shut down by authorities and that
five employees have been arrested in connection with an ongoing probe into allegations that a
Shanghai Husi Food Co Ltd has been selling expired beef and chicken to its clients. In your view
who should be held morally responsible for the wrong actions committed by business
organisations? Should it be business organisations or individuals within organisations?
(6)
Individuals are agents that act on behalf of companies. If they are not held responsible there
will be nothing that will compel them to avoid unethical practices as they themselves as
individuals will not be held responsible. As a result, companies will continue with unethical
practices which is harmful to the stake holders and the society at large.
On the other hand, companies should also be held responsible or otherwise they will force their
employees to engage in wrongful acts knowing that the individual employees will be the lambs
to be sacrificed for the company’s wrong deeds.
Therefore, both companies and individuals should be held responsible as this will discourage
unethical behaviour in organisations.
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NOTE: Only award full marks to the students that have said that both individuals and
companies are to be held responsible of course provided they have given good convincing
arguments. Students can also use the case as a base for their answer.
Hint: Your discussions should be based on materials discussed in this course.
Question 3
[12 Marks]
Read the case below and answer the questions that follow.
Drug Company Monopolies and Profits?
Drug companies in the United States are granted a patent on any new pharmaceutical drug they
develop, which gives them a monopoly on that drug for 20 years. Not surprisingly, high monopoly
profits (i.e., profits well beyond the average rate of profits in other industries) are characteristics of
the pharmaceutical industry. In a 2003 study entitled The Other Drug War II, Public Citizen’s Congress
Watch noted that during the 1970s and 1980s, drug companies in the Fortune 500 had average profits
rates (i.e., as a percent of revenues) that were double the average for all other industries in the
Fortune 500. During the 1990s drug company profits rates averaged 4 times the average profits rates
of all other industries, and during the first 5 years of the twenty-first century, drug company profit
rates were about 3 times the rates of other industries.
According to the U.S. Census Bureau’s Quarterly Financial Reports, in the first quarter of 2007 and
2008, average drug company profit rates were about 3 times the average of other manufacturing
companies. In the first quarter of 2009, average drug company profit rates were close to 7 times the
average for all other manufacturing companies, and in the first quarter of 2010, they averaged close
to 3 times the average for other manufacturing companies. Drug companies say they need these
profits to cover the costs of research for new drugs. But while drug companies put only 14 percent of
their revenues into research, they siphon off 17 percent of their revenues into dividends they hand
out to shareholders and plough 31 percent into advertising and administration. A study of drug
manufacturing costs (see www.rense.com/general54/preco.htm) found that prescription drugs have
markups of 5,000%, 30,000% and 500,000%” over the cost of their ingredients.
The ingredients in 100 tablets of Norvasc, which sold for $220, cost 14 cents; of Prozac, which sells for
$247,11 cents; of Tenormin, which sells for $140,13 cents; of Xanax, which sells for $136,3 cents, and
so on.
Source: Velasquez M G, Business Ethics Concepts and Cases 7th Ed., page 218
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3.1 Identify the type of market structure observed in the case study above.
(1)
Monopoly
3.2 What makes it possible to have the market structure identified above in the pharmaceutical drug
industry?
(2)
Patent rights that are given by the state to drug companies and this serve as a barrier for other firms
to enter.
3.3
With reference to the case, what are the ethical weaknesses of the market structure
identified in 4.1? Motivate your answer.
(9)
•
•
•
Violation of capitalist justice
Economic inefficiency
Lack of respect for negative rights
NOTE: Each weakness carries a weight of 3 marks.
Award 1 mark for the weakness and 2 marks for applying the weakness to the case or analysing the
weakness with reference to the case.
Hint: Your discussions should be based on materials discussed in this course.
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