Lec 5

Question 1

What are the 5 Central Principles of Business Ethics?

Answer 1

1. Do not use physical coercion or threat of physical harm to attain business objectives
2. Do not use fraud or improper deception
3. Honor all the terms of your contract
4. Treat all parties with equal respect for their autonomy
5. Personal ethical responsibility is inalienable

Question 2

What is fraud?

Answer 2

Intentional misrepresentation of fact designed to induce someone to take a detrimental action he or she would not otherwise take.

Question 3

What is Improper deception?

Answer 3

Forms of trickery that do not amount to outright lying are similarly intended to induce someone to take a detrimental action he or she would not otherwise take

Question 4

What is a contract?

Answer 4

A binding agreement with another party or parties that one enters into voluntarily

Question 5

How business ethics shouldn’t be used and why?

Answer 5

The wrong way is to plan business first and then check for ethics. In this way its more likely to overlook ethical issues. It increases temptation to ignore ethics.

Question 5

Is ethics an add on?

Answer 5

Ethics is never an add-on, but something that’s always part of the conversation. We should incorporate these principles into strategic decisions in business.

Question 5

What is market failure?

Answer 5

A market failure occurs when the allocation of goods and services is not as efficient as it could be. Market failures are socially inefficient outcomes.

Question 6

What are some examples of market failures?

Answer 6

• Monopoly or lack of competition
• Missing or incomplete markets
• Information failures
• Anti-competitive practices

Question 7

What is one of the primary functions of legal regulation of the markets?

Answer 7

To prevent market failures

Question 7

What are the 10 specific obligations of the Market Failure Approach (MFA)

Answer 7

1. Minimize negative externalities
2. Compete only through price quality
3. Reduce information asymmetries between firms and customers
4. Do not exploit diffusion of ownership
5. Avoid erecting barriers to entry
6. Do not use cross-subsidization to eliminate competitors
7. Do not oppose regulation aimed at correcting market imperfections
8. Do not seek tariffs or other protectionist measures.
9. Treat price levels as exogenously determined
10. Do not engage in opportunistic behaviour towards customers or other firms.