Chapter 5 Corporations

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Question #1

Most business observers agree with Berle and Means that, because stock ownership in large corporations is so dispersed, actual control of the corporation has passed to management.

A False

B True

Question #2

The case of First National Bank of Boston v. Bellotti sharpened the legal distinction between corporations and individuals.

A False

B True

Question #3

Adherents of the broad view of corporate responsibility claim that modern business is intimately integrated with the rest of society and that, as a result, although society expects businesses to pursue their economic interests, businesses have other responsibilities as well.

A True

B False

Question #4

Which of the following do proponents of the broader view of corporate social responsibility believe?

A The modern corporation is not a social institution.

B Businesses have other obligations besides making a profit.

C Corporations should not internalize their externalities.

D Moral responsibility arises from social power.

Question #5

Corporations differ from partnerships and other forms of business association in two ways. One of these is that

A they are formed simply by an agreement entered into among their members.

B they are regulated by the Federal Trade Commission.

C their shareholders are entitled to their share of the company’s profits as soon as they are ascertained or determined.

D they must be publicly registered or in some way officially acknowledged by the law.

Question #6

“Limited liability” means that members of a corporation are financially liable for corporate debts only up to the extent of their investments.

A True

B False

Question #7

According to law professor Christopher D. Stone, the relationship between corporate management and its shareholders is identical with the relationship between you and an investment advisor.

A True

B False

Question #8

Momentum for the corporate organization of business in the United States really gained momentum after which war?

A World War I

B French and Indian War

C Civil War

D Revolutionary War

Question #9

Melvin Anshen suggests that there is an relationship between business and society which he termed as

A “social contract.”

B “share the wealth.”

C “one for all and all for one.”

D “the rich get richer and the poor get poorer.”

Question #10

Adam Smith proposed that in our pursuit of economic interests we are led by

A the moral compass within each of us.

B our gut instincts.

C an invisible hand to promote general good.

D the trends of the economy.

Question #11

In his essay “Social Responsibility and Economic Efficiency,” Kenneth Arrow has argued that ethical behavior in the business world comes only at the expense of economic efficiency.

A True

B False

Question #12

Which of the following is one of the three arguments in favor of narrow corporate social responsibility discussed in this chapter?

A visible-hand

B let-government-do-it

C business-can-handle-it

D society-lacks-the-expertise

Question #13

Those with a broader view concerning business obligations believe that with great power comes

A too many limits.

B great social responsibility.

C more money.

D more power.

Question #14

According to Keith Davis, in addition to considering potential profitability, a business must weigh the long-range social costs of its activities as well. Only if the overall benefit to society is positive should business act.

A True

B False

Question #15

Which of the following contributed to the more relaxed incorporation procedures of modern times?

A The idea that incorporation is a by-product of the people’s right to associate, not a gift from the state.

B The thought that laissez-faire is a losing proposition..

C The move from mercantilist thinking to a belief in Benjamin Franklin’s invisible hand.

D The idea that incorporation is a gift from the state.

Question #16

Externalities are the unintended consequences (whether negative or positive) that an economic transaction between two parties can have on some third party.

A False

B True

Question #17

Recent studies have shown that neither corporate moral codes nor corporate culture affect whether individuals inside the corporation behave morally or immorally.

A False

B True

Question #18

Milton Friedman’s perspective is that the only responsibility of a business is to

A make money for its owners.

B give jobs to the hard workers.

C pay taxes to keep the government operating.

D provide social benefit for the messes.

Question #19

Legally a corporation is a thing that can endure beyond the natural lives of its members and that has incorporators who may sue and be sued as a unit and who are able to consign part of their property to the corporation for ventures of limited liability.

A True

B False

Question #20

The courts and the general public typically find the idea of corporate responsibility

A ambiguous and useless.

B a waste of time.

C useful and intelligible.

D contradicting.

Question #21

In the corporate world, the board of directors will frequently

A write the policies and procedures.

B rubber stamp the policies and recommendations of the management.

C hire and fire people for key management positions.

D be there just for show.

Question #22

Corporations are limited-liability companies which means that

A corporate shareholders are immediately entitled to any profits or the company is liable.

B corporations must be “publicly held” and thus traded on the stock market.

C corporate shareholders are liable for corporate debts only up to the extent of their investments.

D corporations are always for-profit; that profit can be limited but often is not in reality.

Question #23

The first corporations

A were profit-making associations.

B emerged in the 19th century.

C were towns, universities, and ecclesiastic orders.

D were government owned.

Question #24

A common point of contention among philosophers and business theorists with regard to corporations is

A whether if corporations are moral agents, then they have a right to do whatever is in their self-interest.

B whether modern corporations no longer utilize a CID structure.

C whether corporations are moral agents.

Question #25

The invisible-hand argument against broadening corporate responsibility says that business’s appetite for profit should be controlled by the hand of the government.

A False

B True

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Chapter 5 Corporations

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