Law Business and Society Tony McAdams 12th Edition- Test Bank
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Sample Test
Law, Business and Society, 12e (McAdams)
Chapter 3 The Corporation and Public Policy:
Expanding Responsibilities
1) The business community in America influences the electoral
and law-making processes.
Answer: TRUE
Explanation: Critics argue that big money enables the
business community to disproportionately influence the electoral and law-making
processes. In recent decades, the corporate community has taken an increasingly
direct role in the political process.
Difficulty: 1 Easy
Topic: Corporate Power
Learning Objective: 03-01 Recognize the interdependent
relationship between business and the larger society.; 03-02 Discuss whether
business should play a more or less active role in politics, education, and
other public-sector activities.
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
2) Corporations cannot lawfully solicit campaign contributions
from employees, shareholders, and others.
Answer: FALSE
Explanation: Corporations can solicit contributions from
employees, shareholders, and others. That money is then put in a fund,
carefully segregated from general corporate accounts, and disbursed by the
political action committees in support of a political agenda preferred by
officers, managers, or shareholders.
Difficulty: 1 Easy
Topic: The Corporate State—Politics
Learning Objective: 03-02 Discuss whether business should
play a more or less active role in politics, education, and other public-sector
activities.
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
3) Labor unions can lawfully use members’ dues to establish
political action committees.
Answer: FALSE
Explanation: Corporations, labor unions, special interest
groups, and others can lawfully establish political action committees (PACs) to
solicit and disburse voluntary campaign contributions. That is, corporations
can solicit contributions from employees, shareholders, and others.
Difficulty: 1 Easy
Topic: The Corporate State—Politics
Learning Objective: 03-02 Discuss whether business should
play a more or less active role in politics, education, and other public-sector
activities.
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
4) Corporate funds cannot lawfully be given directly to
candidates for the United States Congress.
Answer: TRUE
Explanation: Corporate funds cannot lawfully be given
directly to candidates for federal office. However, corporations, labor unions,
special interest groups, and others can lawfully establish political action
committees (PACs) to solicit and disburse voluntary campaign contributions.
Difficulty: 1 Easy
Topic: The Corporate State—Politics
Learning Objective: 03-02 Discuss whether business should
play a more or less active role in politics, education, and other public-sector
activities.
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
5) Lobbying is not confined to the business community.
Answer: TRUE
Explanation: Lobbying is not confined to the business
community. Lobbying also often serves the very useful role of efficiently
educating busy politicians about the vast array of issues they must address but
cannot possibly master without assistance.
Difficulty: 1 Easy
Topic: The Corporate State—Politics
Learning Objective: 03-02 Discuss whether business should
play a more or less active role in politics, education, and other public-sector
activities.
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
6) A union’s Political Action Committee (PAC) must support all
different political agendas advocated by each union member.
Answer: FALSE
Explanation: Corporations (as well as labor unions,
special interest groups, and others) can lawfully establish political action
committees (PACs) to solicit contributions from employees, shareholders, and
others. That money is then put in a fund, carefully segregated from general
corporate accounts, and disbursed by the PAC in support of a political agenda
preferred by the organization.
Difficulty: 1 Easy
Topic: The Corporate State—Politics
Learning Objective: 03-02 Discuss whether business should
play a more or less active role in politics, education, and other public-sector
activities.
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
7) The outsourcing of good, high-paid factory jobs from the
United States to less developed nations has fundamentally challenged and
changed life in the country.
Answer: TRUE
Explanation: The outsourcing of good, high-paid factory
jobs from the United States to less developed nations has fundamentally
challenged and changed life in this country. In general, it can be seen that
concerns about corporate domination of American life are now being applied to
the entire globe.
Difficulty: 1 Easy
Topic: The Corporate State—Economics
Learning Objective: 03-04 Discuss concerns about
globalization.
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
8) Churches now routinely employ standard business practices
including advertising, promotional giveaways, and marketing campaigns.
Answer: TRUE
Explanation: Churches now routinely employ standard
business practices such as advertising, promotional giveaways, and marketing
campaigns. Religion, in some sense, has become a product.
Difficulty: 1 Easy
Topic: The Corporate State—Economics
Learning Objective: 03-03 List some of the critics’
primary complaints about the alleged abuse of corporate power in contemporary
America.
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
9) Although business has enjoyed a central and favored role in
American life, it need not assume a measure of the burden for the welfare of
the total society.
Answer: FALSE
Explanation: Business has enjoyed a central and favored
role in American life. As such, it must assume a measure of the burden for the
welfare of the total society. Indeed, businesspeople themselves now generally
endorse businesses’ responsibility to help solve society’s problems.
Difficulty: 1 Easy
Topic: The Corporate State—Social Issues and Institutions
Learning Objective: 03-05 Make a tentative assessment regarding
the proper role of business in society.
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
10) Business was largely exempt from any affirmative duty for
the resolution of social problems until the 1950s when business scholars and
critics began to encourage a broader conception of corporate duty.
Answer: TRUE
Explanation: Business was largely exempt from any
affirmative duty for the resolution of social problems until the 1950s when
business scholars and critics began to encourage a broader conception of
corporate duty. Now in the 21st century, expectations for business in society
have been radically altered.
Difficulty: 1 Easy
Topic: The Corporate State—Social Issues and Institutions
Learning Objective: 03-05 Make a tentative assessment
regarding the proper role of business in society.
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
11) Renewed corporate community engagement, in conjunction with
the growing influence of business values throughout American life, has led in
recent decades to the development of the doctrine of corporate social
responsibility.
Answer: FALSE
Explanation: The business community is intensely
criticized. That broadly shared perception of business misdeeds or
indifference, in conjunction with the growing influence of business values
throughout American life, has led in recent decades to the development of the
doctrine of corporate social responsibility (CSR—sometimes also referred to as
corporate citizenship).
Difficulty: 1 Easy
Topic: Corporate Social Responsibility
Learning Objective: 03-06 Explain the concept of corporate
social responsibility.
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
12) The idea of social responsibility is a movement in which
decision makers take actions to protect and improve the welfare of society as a
whole along with their own interests.
Answer: TRUE
Explanation: The sweeping notion of corporate social
responsibility is not readily reduced to a brief definition, but Davis and
Blomstrom some years ago captured the core ingredients: “The idea of social
responsibility is that decision makers are obligated to take actions which
protect and improve the welfare of society as a whole along with their own
interests.”
Difficulty: 1 Easy
Topic: Corporate Social Responsibility
Learning Objective: 03-06 Explain the concept of corporate
social responsibility.
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
13) According to Milton Friedman, the firm that maximizes its
profits is necessarily maximizing its contribution to the society.
Answer: TRUE
Explanation: Milton Friedman, employing free-market
reasoning, believed a firm that maximizes its profits is necessarily maximizing
its contribution to society. Furthermore, he argued that any dilution of the
profit-maximizing mode—such as charitable contributions—is a misuse of the
stockholders’ resources.
Difficulty: 1 Easy
Topic: Corporate Social Responsibility
Learning Objective: 03-06 Explain the concept of corporate
social responsibility.
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
14) When managers are pushed to adopt a bigger and broader
conception of social responsibility, the chances of establishing a sustainable,
enduring global community where resources are not dangerously depleted or
damaged are maximized.
Answer: TRUE
Explanation: Managers are being pushed to adopt a bigger,
broader conception of social responsibility, an approach that will produce a
sustainable, enduring global community where the resources are not dangerously
depleted or damaged. The triple bottom-line/sustainability approach employs
free-market principles and recognizes the necessity for financial success but
also argues that social and environmental responsibilities are of equal
importance.
Difficulty: 1 Easy
Topic: Corporate Social Responsibility
Learning Objective: 03-07 Explain the triple
bottom-line/sustainability approach to corporate citizenship.
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
15) Triple bottom-line advocates call for managerial practices
that respect and measure a firm’s social and environmental performance more than
the firm’s financial performance.
Answer: FALSE
Explanation: Triple bottom-line advocates specifically
call for managerial and accounting practices that respect and measure a firm’s
social and environmental performance just as the firm’s financial performance
is respected and measured. The goal is to ensure the long-term viability, or
sustainability, of the organization and the total society.
Difficulty: 1 Easy
Topic: Corporate Social Responsibility
Learning Objective: 03-07 Explain the triple bottom-line/sustainability
approach to corporate citizenship.
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
16) The primary goal of the triple bottom-line approach is to
employ free market principles that allow for financial success as well as
social and environmental success.
Answer: TRUE
Explanation: The goal of the triple bottom-line approach
is to ensure the long-term viability, or sustainability, of an organization and
the total society. Triple bottom-line advocates specifically call for
managerial and accounting practices that respect and measure a firm’s social
and environmental performance just as the firm’s financial performance is
respected and measured.
Difficulty: 1 Easy
Topic: Corporate Social Responsibility
Learning Objective: 03-07 Explain the triple
bottom-line/sustainability approach to corporate citizenship.
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
17) Social Accountability Accreditation Services accredits
companies that meet the Social Accountability 8000 standards in the area of
increased financial accountability.
Answer: FALSE
Explanation: Social Accountability Accreditation Services
in New York City accredits companies that meet the SA8000 standards in the
areas of child labor, forced labor, health and safety, freedom of association,
discrimination, disciplinary practices, working hours, collective bargaining
wages, and management systems.
Difficulty: 1 Easy
Topic: Stakeholder Approach
Learning Objective: 03-09 Contrast the stakeholder and
shareholder approaches to corporate social responsibility.
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
18) According to shareholder advocates, maximizing the financial
interests of the shareholders of a corporation, would satisfy a corporation’s
social duties.
Answer: TRUE
Explanation: Corporations are increasingly considering
what scholars have labeled the stakeholder model of social responsibility. To
stakeholder advocates, simply maximizing the interests of the primary
stakeholders, that is, the shareholders, would not satisfy the corporation’s
social duties.
Difficulty: 1 Easy
Topic: Stakeholder Approach
Learning Objective: 03-09 Contrast the stakeholder and
shareholder approaches to corporate social responsibility.
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
19) An alternative and arguably more “progressive” corporate
approach to stakeholders emphasizes the dominant goal of controlling all the
stakeholder relationships.
Answer: FALSE
Explanation: An alternative and arguably more
“progressive” approach to stakeholders involves a collaborative strategy in
which stakeholder relationships are regarded as being mutually defined,
cooperative, and reciprocal. The firm endeavors to understand and balance the
interests and needs of all stakeholders with the view that this collaborative
effort results in enhanced firm performance over the long term while building a
healthier society.
Difficulty: 1 Easy
Topic: Stakeholder Approach
Learning Objective: 03-09 Contrast the stakeholder and
shareholder approaches to corporate social responsibility.
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
20) The garment factory collapse in Dhaka, Bangladesh,
illustrates all the following concerns except
1. A)
American corporations’ opportunity to find cheap, powerless labor abroad.
2. B)
the outsourcing of good, high-paid factory jobs from the United States to
less-developed countries.
3. C)
people purchasing less technologically advanced goods.
4. D)
real wages for blue-collar workers remaining almost unchanged for 35 years.
Answer: C
Explanation: The garment factory tragedy illustrates the
critics’ worry that global free trade is merely an opportunity for America’s
giant corporations to exploit cheap, powerless labor abroad. Further, the
outsourcing of good, high-paid factory jobs from the United States to less
developed nations has wounded the American working class.
Difficulty: 1 Easy
Topic: The Corporate State—Economics
Learning Objective: 03-04 Discuss concerns about
globalization.
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
21) Which of the following is a highly controversial 5–4 ruling
by the U.S. Supreme Court in the 2010 Citizens
United case?
1. A) It
held that limiting corporate campaign contributions violated corporate free
speech rights.
2. B) It
allowed corporations to coordinate organizational fund spending with parties or
candidates.
3. C) It
held that limiting organizational funds for candidates standing for elections
is unlawful.
4. D) It
allowed corporations to lawfully donate corporate funds to parties.
Answer: A
Explanation: The role of conventional political action
committees (PACs) in the political process has receded in importance following
a momentous U.S. Supreme Court decision in the 2010 Citizens United case.
The Supreme Court’s highly controversial 5–4 ruling held that federal laws
limiting corporate campaign contributions violated corporate free speech
rights.
Difficulty: 1 Easy
Topic: The Corporate State—Politics
Learning Objective: 03-02 Discuss whether business should
play a more or less active role in politics, education, and other public-sector
activities.
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
22) Which of the following is an impact of the Supreme Court’s
highly controversial 5–4 ruling in the 2010 Citizens United case?
1. A) The
decision has permitted corporations and labor unions to coordinate
organizational fund spending with parties or candidates.
2. B)
The decision has recognized political spending as a direct acceptance of
liberty guaranteed by the First Amendment
3. C)
The decision has opened the door to gushers of personal and corporate money
funneled through Independent Expenditure political action committees.
4. D)
The decision has restricted corporations and labor unions from spending
unlimited organizational funds for candidates.
Answer: C
Explanation: Citizens
United and other court decisions have allowed rapid changes in
the nature of the national political process by opening the door to gushers of
personal and corporate money funneled through Independent Expenditure political
action committees, which are usually called Super PACs, and nonprofit 501(c)4
Social Welfare Organizations. The latter groups, such as volunteer fire
departments, must be designed to serve the common good if they want to maintain
their preferred Internal Revenue Service status which exempts them from paying
federal income taxes on the money they raise.
Difficulty: 2 Medium
Topic: The Corporate State—Politics
Learning Objective: 03-02 Discuss whether business should
play a more or less active role in politics, education, and other public-sector
activities.
Bloom’s: Understand
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
23) Which of the following statements is true of political
action committees (PACs)?
1. A)
PACs can only contribute to national elections, and not state elections.
2. B)
Corporations cannot solicit contributions from employees and shareholders.
3. C)
The money disbursed by PACs is part of the general corporate accounts.
4. D)
PACs are only supposed to collect voluntary contributions.
Answer: D
Explanation: Corporate funds cannot lawfully be given
directly to candidates for federal office. However, corporations, labor unions,
special interest groups, and others can lawfully establish political action
committees (PACs) to solicit and disburse voluntary campaign contributions.
Difficulty: 2 Medium
Topic: The Corporate State—Politics
Learning Objective: 03-02 Discuss whether business should
play a more or less active role in politics, education, and other public-sector
activities.
Bloom’s: Understand
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
24) Which of the following statements is true of corporate
funds?
1. A)
Although political action committees’ contributions are voluntary, corporate
employees often feel pressured to participate.
2. B)
Corporations cannot solicit contributions from employees, shareholders, and
others.
3. C)
Corporations cannot lawfully establish political action committees to solicit
and disburse voluntary campaign contributions.
4. D)
Corporate funds can lawfully be given directly to candidates for federal
office.
Answer: A
Explanation: Corporations, labor unions, special interest
groups, and others can lawfully establish political action committees (PACs) to
solicit and disburse voluntary campaign contributions. Although PAC
contributions are voluntary, corporate employees often feel pressured to
participate.
Difficulty: 2 Medium
Topic: The Corporate State—Politics
Learning Objective: 03-02 Discuss whether business should
play a more or less active role in politics, education, and other public-sector
activities.
Bloom’s: Understand
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
25) Which of the following statements is true of lobbying in the
United States?
1. A) It
is illegal for lobbyists to approach politicians.
2. B) It
is confined to the business community.
3. C) It
has a negligible effect on political decisions.
4. D) It
is an essential ingredient in big business strategy.
Answer: D
Explanation: Lobbying is an essential ingredient in big
business strategy. Lobbying often serves the very useful role of efficiently
educating busy politicians about the vast array of issues they must address but
cannot possibly master without assistance.
Difficulty: 2 Medium
Topic: The Corporate State—Politics
Learning Objective: 03-02 Discuss whether business should
play a more or less active role in politics, education, and other public-sector
activities.
Bloom’s: Understand
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
26) Which of the following is an argument put forth by the
liberal wing of the Supreme Court in the CitizensUnited case?
1. A)
Treating corporations as people in cases of political contributions would allow
these organizations to further corrupt the political process.
2. B)
Limiting corporate campaign contributions would violate corporate free speech
rights.
3. C)
The growing influence of the business community would saturate and dominate all
corners of American life.
4. D) By
outsourcing of good, high-paid factory jobs from the United States,
corporations are fundamentally challenging and changing life in the home
country.
Answer: A
Explanation: Previous high court rulings had frequently
recognized that First Amendment rights extend to corporations and that
corporations are persons for some legal purposes. The four dissenters, from the
“liberal” wing of the Court, argued that corporations and unions, in many other
ways, are not treated as people and doing so in the case of political
contributions could allow those organizations to dominate and further corrupt
the political process.
Difficulty: 2 Medium
Topic: The Corporate State—Politics
Learning Objective: 03-02 Discuss whether business should
play a more or less active role in politics, education, and other public-sector
activities.
Bloom’s: Understand
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
27) Traditional humanist values include all the following
except:
1. A)
faith in growth.
2. B)
meaningful service to society.
3. C)
cooperation.
4. D)
individual dignity.
Answer: A
Explanation: Critics contend values commonly associated
with businesspeople (competition, profit-seeking, reliance on technology, faith
in growth) have overwhelmed traditional humanist values (cooperation,
individual dignity, human rights, meaningful service to society). Warmth,
decency, and value of life have been debased in the name of wealth, efficiency,
and productivity.
Difficulty: 1 Easy
Topic: The Corporate State—Social Issues and Institutions
Learning Objective: 03-05 Make a tentative assessment
regarding the proper role of business in society.
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
28) Free markets are more efficient decision makers than
government rules. Which of the following is a result of the efficient decisions
made by free markets?
1. A)
Gains have been made with increased global standards of living.
2. B)
National boundaries are becoming stronger.
3. C)
Financial assets have stopped flowing freely across national boundaries.
4. D)
Less developed countries have seen their standards of living decrease.
Answer: A
Explanation: With the triumph of capitalism, in its
various permutations, the world has come to understand that free markets
usually are more efficient decision makers than government rules. As a result,
national boundaries are receding in importance, technology is shrinking the globe,
multinational companies are treating the world as one big marketing
opportunity, less developed countries are trying to improve their living
standards by connecting to that market, financial assets are flowing freely and
almost instantaneously from one edge of the globe to another, and the world is
becoming one highly greased, interconnected mass market.
Difficulty: 2 Medium
Topic: The Corporate State—Economics
Learning Objective: 03-04 Discuss concerns about
globalization.
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
29) Which of the following statements is false of large American
corporations?
1. A)
Expanding corporate power may make working life change for the better.
2. B)
The colossal size of corporations threatens America’s economy rather than
strengthening it.
3. C)
Large corporations have could morph into “mini-states” that fill the void if
governments cannot provide essential services.
4. D)
The colossal size of corporations permits continuing abuse of the American
public.
Answer: A
Explanation: One of the critics’ concerns about expanding
corporate power is the fear that working life may change for the worse.
Difficulty: 2 Medium
Topic: The Corporate State—Economics
Learning Objective: 03-03 List some of the critics’
primary complaints about the alleged abuse of corporate power in contemporary
America.
Bloom’s: Understand
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
30) According to critics, which of the following is the impact
of a concentrated economic structure?
1. A)
The government has been able to regulate powerful companies without much
trouble.
2. B)
Companies and industries are no longer fully responsive to market commands.
3. C)
Concentrated structure has helped increase meaningful competitiveness in the
American market.
4. D) A
significant decrease in complaints about the corporate role in pollution have
resulted.
Answer: B
Explanation: To the critics, a big portion of the
corporate power problem is attributable to the structure of the economy, a
structure they believe to be so concentrated that many industries and companies
are no longer fully responsive to market commands. Further, those industries
and companies are so powerful that the government cannot meaningfully regulate
them, the critics say.
Difficulty: 2 Medium
Topic: The Corporate State—Economics
Learning Objective: 03-03 List some of the critics’
primary complaints about the alleged abuse of corporate power in contemporary
America.
Bloom’s: Understand
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
31) Which of the following statements is true about advertising
in schools?
1. A) It
is likely to discourage critical thinking.
2. B) It
is likely to discourage materialism.
3. C) It
is likely to celebrate reliable values.
4. D) It
is likely to advocate criminal behavior.
Answer: A
Explanation: Critics worry that advertising in school
settings encourages materialism, celebrates dubious values, and discourages
critical thinking. Faced with public resistance to increased school funding,
administrators in many school districts are selling ad space on school buses,
websites, buildings, textbook covers, and even report cards.
Difficulty: 2 Medium
Topic: The Corporate State—Economics
Learning Objective: 03-03 List some of the critics’
primary complaints about the alleged abuse of corporate power in contemporary
America.
Bloom’s: Understand
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
32) Which of the following does not describe the historical view
of business responsibilities through the first half of the twentieth century?
1. A)
Businesses were largely exempt from any affirmative duty of the resolution of
social problems.
2. B)
Businesses were expected to give close accounting attention to their social and
environmental performance as well as financial performance.
3. C)
The conception of corporate duty was narrow.
4. D)
The duty of businesses was the production and distribution of the best products
and services at the lowest possible prices.
Answer: B
Explanation: Historically, business was expected to
concentrate on one goal—the production and distribution of the best products
and services at the lowest possible prices. Business was largely exempt from
any affirmative duty for the resolution of social problems until the 1950s when
business scholars and critics began to encourage a broader conception of
corporate duty. Profit-seeking was central and essential while the sometimes
awkward ingredient of social responsibility was not a consideration.
Difficulty: 2 Medium
Topic: Introduction
Learning Objective: 03-06 Explain the concept of corporate
social responsibility.
Bloom’s: Understand
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
33) According to the free market view, which of the following is
considered the best measure of social responsibility?
1. A)
Social and environmental performance
2. B)
Profit maximization
3. C)
Triple bottom line/sustainability
4. D)
Long-term company interest
Answer: B
Explanation: The free-market view holds that profit
maximization is the best measure of social responsibility. The triple
bottom-line/sustainability movement calls for a revolutionary re-visioning of
corporate goals and practices such that profit maximization is only one of
three key measures of success.
Difficulty: 2 Medium
Topic: Corporate Social Responsibility
Learning Objective: 03-06 Explain the concept of corporate
social responsibility.
Bloom’s: Understand
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
34) Which of the following falls under the “desired” category of
Carroll’s Social Responsibility Pyramid?
1. A)
Economic responsibilities
2. B)
Legal responsibilities
3. C)
Ethical responsibilities
4. D)
Philanthropic responsibilities
Answer: D
Explanation: Philanthropic responsibilities fall under the
“desired” category of Carroll’s Social Responsibility Pyramid. In striving for
profitable, lawful, ethical conduct, a company may also choose to engage in
discretionary philanthropic (charitable) efforts—money, time, facilities,
programs—to build a better community.
Difficulty: 1 Easy
Topic: Corporate Social Responsibility
Learning Objective: 03-06 Explain the concept of corporate
social responsibility.; 03-07 Explain the triple bottom-line/sustainability
approach to corporate citizenship.
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
35) Which of the following is a view professed by Nobel
prize–winning economist Milton Friedman?
1. A)
Socially responsible behavior, within reasonable bounds, is simply the “right
thing” to do.
2. B) A
strong bottom line, in many cases, requires considerations beyond the
immediate, short-run, profit-maximizing interests of a firm.
3. C)
Any dilution of the profit-maximizing mode—such as charitable contributions—is
a misuse of the stockholders’ resources.
4. D) In
the environmental domain, sustainability will require attention to energy
efficiency, waste minimization, recycling, and the total ecological agenda.
Answer: C
Explanation: Milton Friedman, employing free-market
reasoning, believed the firm that maximizes its profits is necessarily
maximizing its contribution to society. Furthermore, he argued that any
dilution of the profit-maximizing mode—such as charitable contributions—is a
misuse of the stockholders’ resources.
Difficulty: 2 Medium
Topic: Corporate Social Responsibility
Learning Objective: 03-06 Explain the concept of corporate
social responsibility.
Bloom’s: Understand
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
36) Which of the following statements is true of shared value
advocates?
1. A)
They believe that an entrepreneurial, profit-seeking, and capitalist approach
is the most beneficial way to correct social problems.
2. B)
They believe that nonprofit organizations are the most powerful institutions
for creating shared value among the members of the society.
3. C)
They expect businesses to recognize that they must transcend philanthropy, good
citizenship, and sustainability to create products and services that create
economic and social value.
4. D)
They agree that capitalism enhances an economic competitiveness because of its
ability to maximize shared social norms.
Answer: C
Explanation: Shared value advocates see businesses as the
most powerful institutions for social change, but they also expect those
businesses to recognize that their goal must be creating shared value rather
than merely profit. Low-cost cell phones, for example, can be profitable while
serving poorer populations.
Difficulty: 2 Medium
Topic: Corporate Social Responsibility
Learning Objective: 03-06 Explain the concept of corporate
social responsibility.; 03-08 Discuss whether socially responsible business is
“good business.”
Bloom’s: Understand
AACSB: Analytical Thinking
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37) Which of the following falls under the “expected” category
of Carroll’s Social Responsibility Pyramid?
1. A)
Legal responsibilities
2. B)
Ethical responsibilities
3. C)
Philanthropic responsibilities
4. D)
Economic responsibilities
Answer: B
Explanation: Ethical responsibilities fall under the
“expected” category of Carroll’s Social Responsibility Pyramid. Socially
responsible business practice necessarily begins at the foundation of the
pyramid with the duty to make a profit in a lawful fashion. At the same time,
the socially responsible firm moves (up the pyramid) beyond the fundamental
demands of economics and law to pursue the ethical course of action—that
behavior which is best suited to the demands of virtue and moral principle.
Difficulty: 1 Easy
Topic: Corporate Social Responsibility
Learning Objective: 03-06 Explain the concept of corporate
social responsibility.; 03-07 Explain the triple bottom-line/sustainability
approach to corporate citizenship.
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38) Which of the following statements is true of Carroll’s
Social Responsibility Pyramid?
1. A) A
company’s primary responsibility involves engagement in philanthropic
endeavors.
2. B) A
firm’s economic responsibilities should be limited to breaking even, and all
profit should be invested in the community.
3. C) A
company’s social responsibility begins with making a lawful profit.
4. D) A
socially responsible firm would focus primarily on its discretionary and
ethical responsibilities and would minimize its focus on economic gain.
Answer: C
Explanation: Socially responsible business practice
necessarily begins at the foundation of the pyramid with the duty to make a
profit in a lawful fashion. At the same time, the socially responsible firm
moves (up the pyramid) beyond the fundamental demands of economics and law to
pursue the ethical course of action—the behavior best suited to the demands of
virtue and moral principle. In striving for profitable, lawful, ethical
conduct, that company may also choose to engage in discretionary philanthropic
(charitable) efforts—money, time, facilities, programs—to build a better
community.
Difficulty: 1 Easy
Topic: Corporate Social Responsibility
Learning Objective: 03-06 Explain the concept of corporate
social responsibility.; 03-07 Explain the triple bottom-line/sustainability
approach to corporate citizenship.
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39) An organization that contributes resources to the community
and strives to improve the quality of life for the community is most likely
fulfilling the discretionary ________ of Carroll’s Social Responsibility
Pyramid.
1. A)
legal responsibilities
2. B)
economic responsibilities
3. C)
ethical responsibilities
4. D)
philanthropic responsibilities
Answer: D
Explanation: An organization that contributes resources to
the community and strives to improve the quality of life for the community is
most likely fulfilling the discretionary philanthropic responsibilities of
Carroll’s Social Responsibility Pyramid. Socially responsible business practice
necessarily begins at the foundation of the pyramid with the duty to make a
profit in a lawful fashion. At the same time, the socially responsible firm
moves (up the pyramid) beyond the fundamental demands of economics and law to
pursue the ethical course of action—that behavior which is best suited to the
demands of virtue and moral principle.
Difficulty: 1 Easy
Topic: Corporate Social Responsibility
Learning Objective: 03-06 Explain the concept of corporate
social responsibility.; 03-07 Explain the triple bottom-line/sustainability
approach to corporate citizenship.
Bloom’s: Remember
AACSB: Analytical Thinking
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40) From a profit maximization point of view, the only
responsible and moral course of behavior is to
1. A)
use its profits to maximize social good.
2. B)
use a portion of profits for social benefits.
3. C)
dilute the profit-maximizing mode in an effort to promote worker well-being.
4. D)
engage in activities that reap the highest return possible .
Answer: D
Explanation: From a profit maximization point of view, the
only responsible and moral course of behavior is to reap the highest return
possible, within the law. Nobel prize–winning economist Milton Friedman was the
most prominent advocate of the profit maximization view.
Difficulty: 1 Easy
Topic: Corporate Social Responsibility
Learning Objective: 03-06 Explain the concept of corporate
social responsibility.
Bloom’s: Remember
AACSB: Analytical Thinking
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41) A firm that adopts the triple bottom-line approach
1. A)
focuses on the legal, economic, and ethical responsibilities of Carroll’s
Social Responsibility Pyramid and does not consider discretionary
responsibilities.
2. B)
considers its social and environmental responsibilities as important as its
financial responsibilities.
3. C)
does not follow free-market principles in its approach to shareholder values.
4. D)
believes there is only one social responsibility of business—to use its
resources to engage in activities designed to increase its profits.
Answer: B
Explanation: Triple bottom-line advocates specifically
call for managerial and accounting practices that respect and measure a firm’s
social and environmental performance just as the firm’s financial performance
is respected and measured. According to sustainability advocates, corporations
giving close attention to both social and economic duties have a powerful
competitive advantage that will contribute to organizational and societal sustainability.
Difficulty: 2 Medium
Topic: Corporate Social Responsibility
Learning Objective: 03-07 Explain the triple
bottom-line/sustainability approach to corporate citizenship.; 03-08 Discuss
whether socially responsible business is “good business.”
Bloom’s: Understand
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42) Which of the following statements is true of the triple
bottom-line approach?
1. A)
The only responsible and moral course of behavior is to reap the highest return
possible, within the law.
2. B)
Financial success is necessary, but social and environmental responsibilities
are of equal importance, and corporations paying attention to those social and
economic duties will contribute to both organizational and societal sustainability.
3. C)
The goal of business is to ensure the short-term viability of an organization’s
plans as organizational priorities change with time.
4. D)
Businesses have only one social responsibility—to use their resources and
engage in activities designed to increase their profits, so long as they stay
within the rules of the game, which is to say, engage in open and free
competition, without deception or fraud.
Answer: B
Explanation: The triple bottom-line/sustainability
approach employs free-market principles and recognizes the necessity for
financial success but also argues that social and environmental
responsibilities are of equal importance. According to sustainability
advocates, corporations giving close attention to both social and economic
duties have a powerful competitive advantage that will contribute to
organizational and societal sustainability.
Difficulty: 2 Medium
Topic: Corporate Social Responsibility
Learning Objective: 03-07 Explain the triple
bottom-line/sustainability approach to corporate citizenship.
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43) Digi V, an electronics company, focuses on striking a
balance between its profits and its responsibility toward the environment. It
uses biodegradable substances to manufacture its products and over the years
has attracted many loyal customers who are concerned about the environment. The
strategy used by Digi V is an example of the
1. A)
monopolistic approach.
2. B)
shareholder approach.
3. C)
profit maximization approach.
4. D)
triple bottom-line approach.
Answer: D
Explanation: The strategy used by Digi V is an example of
the triple bottom-line approach. The triple bottom-line advocates specifically
call for managerial and accounting practices that respect and measure the
firm’s social and environmental performance just as the firm’s financial
performance is respected and measured.
Difficulty: 2 Medium
Topic: Corporate Social Responsibility
Learning Objective: 03-07 Explain the triple bottom-line/sustainability
approach to corporate citizenship.
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44) Which of the following best defines the stakeholders of a
corporation?
1. A)
All those who stand to gain from the corporation’s success
2. B)
All those who have invested financially in the corporation’s activities
3. C)
All the groups that may significantly affect the corporation’s performance or
be affected by it
4. D)
All those whose livelihood depends directly on the corporation itself
Answer: C
Explanation: Corporations are increasingly considering
what scholars have labeled the stakeholder model of social responsibility.
Under that model, the corporation identifies all the groups—stockholders,
customers, employees, communities, governments, unions, schools, and the
like—that may significantly affect the firm’s performance or be affected by it.
Difficulty: 1 Easy
Topic: Stakeholder Approach
Learning Objective: 03-09 Contrast the stakeholder and
shareholder approaches to corporate social responsibility.
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45) Which of the following statements is true of a company that
adopts the stakeholder approach?
1. A)
For a company adopting the stakeholder approach, profit depends on the
interplay between the corporation, government, and society.
2. B)
For a company adopting the stakeholder approach, the only stakeholders are
shareholders, officers, and employees.
3. C)
For a company adopting the stakeholder approach, its branches around the globe
comprise its principal method of profit maximization.
4. D)
For a company adopting the stakeholder approach, the only concern is to fulfill
the categories of economic and legal responsibilities of Carroll’s Social
Responsibility Pyramid by earning a profit in a lawful fashion.
Answer: A
Explanation: For a company adopting the stakeholder
approach, profit depends on the interplay between the corporation, government,
and society. A. G. Lafley, Procter & Gamble executive chair and two-time
former CEO, has personally embraced the stakeholder practice and recognizes
that profit now rests not merely in providing the best product or service at
the lowest price, but also in understanding and dealing with the complex
interplay among the corporation, government, and society. Thus, today’s manager
is likely to be increasingly involved in identifying and addressing social
issues and stakeholder concerns.
Difficulty: 2 Medium
Topic: Stakeholder Approach
Learning Objective: 03-09 Contrast the stakeholder and
shareholder approaches to corporate social responsibility.
Bloom’s: Understand
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46) Which of the following is the first global standard which
measures companies’ social and environmental records?
1. A)
The North American Free Trade Agreement
2. B)
The International Organization of Standardization 9000
3. C)
The Social Accountability 8000
4. D)
The Environmental Auditing Standards
Answer: C
Explanation: Assessing the success of social
responsibility efforts is very difficult, but various measurement systems have
emerged including, most prominently, Social Accountability 8000 (SA8000), the
first global standard measuring companies’ social and environmental records.
Social Accountability Accreditation Services in New York City accredits
companies that meet the SA8000 standards in the areas of child labor, forced
labor, health and safety, freedom of association, discrimination, disciplinary
practices, working hours, collective bargaining wages, and management systems.
Difficulty: 1 Easy
Topic: Stakeholder Approach
Learning Objective: 03-09 Contrast the stakeholder and
shareholder approaches to corporate social responsibility.
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47) A company that adopts the shareholder approach to business
would be most likely to make ________ its top priority.
1. A)
profit
2. B)
employee welfare
3. C)
sustainability
4. D)
social responsibility
Answer: A
Explanation: Stakeholder theory and corporate social
performance have gained great credibility with academics and many managers.
Others, however, argue that profits and shareholders must remain the consuming
concerns of management, and that a skilled focus on the bottom line will,
incidentally but inevitably, result in the greatest good for society. That is,
the company that maximizes its profits necessarily does not only what is best
for its shareholders but also what is best for society generally.
Difficulty: 1 Easy
Topic: Shareholder Approach
Learning Objective: 03-09 Contrast the stakeholder and
shareholder approaches to corporate social responsibility.
Bloom’s: Remember
AACSB: Analytical Thinking
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48) Discuss political action committees (PACs) in the context of
corporations.
Answer: Corporate funds cannot lawfully be given directly
to candidates for federal office. However, corporations, labor unions, special
interest groups, and others can lawfully establish political action committees
(PACs) to solicit and disburse voluntary campaign contributions. That is,
corporations can solicit contributions from employees, shareholders, and
others. That money is then put in a fund, carefully segregated from general
corporate accounts, and disbursed by the PAC in support of a political agenda
preferred by officers, managers, or shareholders. Although PAC contributions
are voluntary, corporate employees often feel pressured to participate.
Difficulty: 2 Medium
Topic: The Corporate State—Politics
Learning Objective: 03-02 Discuss whether business should
play a more or less active role in politics, education, and other public-sector
activities.
Bloom’s: Understand
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49) Explain how globalization has brought new challenges,
particularly for the wealthy, powerful Western garment manufacturers who profit
from cheap labor in less developed countries.
Answer: When the Rana Plaza eight-story garment factory
collapsed outside Dhaka, Bangladesh, on April 24, 2013, more than 1,100 workers
were killed, but perhaps a new global awareness of sweatshop working conditions
and careless, if not abusive, international supply chains may have emerged. The
collapse was one in a long line of accidents and fires in the Bangladeshi
garment industry that provides desperately-needed jobs but is caught in a race
to the bottom to provide the globe’s cheapest labor. Our
tightly-interconnected, highly efficient global supply systems have brought
millions of jobs, substantial capital, and vital first steps on a path toward
prosperity for currently struggling nations such as Bangladesh. But
globalization of the garment industry and many others has also brought new
challenges, particularly for the wealthy, powerful Western manufacturers who
profit spectacularly from cheap labor in less developed nations. Major brands
such as Gap, H&M, and Walmart are among the many that are supplied by
garment factories in Bangladesh. Two apparel groups, a largely European
collective including H&M and an American group headed by Walmart and The
Gap, have made some progress toward justice.
Difficulty: 2 Medium
Topic: The Corporate State—Economics
Learning Objective: 03-04 Discuss concerns about
globalization.
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50) “The power of the business community has become so
encompassing that virtually all dimensions of American life have absorbed
elements of the business ethic.” Explain.
Answer: Values commonly associated with
businesspeople—competition, profit-seeking, reliance on technology, faith in
growth—have overwhelmed traditional humanist values—cooperation, individual
dignity, human rights, and meaningful service to society. Warmth, decency, and
value of life have been debased in the name of wealth, efficiency, and
productivity.
Difficulty: 2 Medium
Topic: The Corporate State—Social Issues and Institutions
Learning Objective: 03-05 Make a tentative assessment
regarding the proper role of business in society.
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51) Give a brief account of the corporate social responsibility
practice in the American way of life.
Answer: The business community is intensely criticized.
That broadly shared perception of business misdeeds or indifference, in
conjunction with the growing influence of business values throughout American
life, has led in recent decades to the development of the doctrine of corporate
social responsibility (CSR—sometimes also referred to as corporate
citizenship).The issue can be expressed in this way: Must business decision
making include consideration not merely of the welfare of the firm but of
society as a whole? For most contemporary readers, the answer is
self-evident—of course business bears a social responsibility. Business has
enjoyed a central and favored role in American life. As such, it must assume a
measure of the burden for the welfare of the total society. Indeed,
businesspeople themselves now generally endorse businesses’ responsibility to
help solve society’s problems. Similar philosophies such as the triple bottom
line, which refers to giving close accounting attention to social and environmental
performance as well as financial performance, and the sustainable
corporation—operating the business with a focus on environmentally sensitive
practices that will husband scarce resources and maintain a healthy community
now and in the future—have powerful appeal to many students and managers.
Difficulty: 2 Medium
Topic: The Corporate State—Social Issues and Institutions
Learning Objective: 03-05 Make a tentative assessment
regarding the proper role of business in society.
Bloom’s: Understand
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52) Why is there a growing need to move beyond corporate social
responsibility (CSR) to a business model labeled creating shared value (CSV)?
Answer: Michael Porter, highly influential professor and
corporate consultant, and others have recently been arguing for moving beyond
CSR to a business model labeled creating shared value (CSV). They see creating
shared value as a new form of capitalism that enhances economic competitiveness
while simultaneously advancing social returns. They argue that CSR has often
been treated merely as a necessary expense and a way to improve a firm’s
reputation.
According to Porter and others, moving beyond philanthropy, good
citizenship, and sustainability to integrating social value into the creation
of economic value is the most effective way of achieving social progress.
Nestlé, for example, strives to create shared value by making nutritious,
profitable products while protecting scarce water resources and helping coffee
growers secure financing and improve production. Nestlé and other shared value
advocates are identifying those opportunities where social and economic value
creation align, thus enabling them to achieve favorable sustainability results
for communities while also making money for shareholders.
Low-cost cell phones, for example, can be profitable while
serving poorer populations. Shared value advocates see businesses as the most
powerful institutions for social change, but they also expect those businesses
to recognize that their goal must be creating shared value rather than merely
profits.
Difficulty: 2 Medium
Topic: Corporate Social Responsibility
Learning Objective: 03-06 Explain the concept of corporate
social responsibility.
Bloom’s: Understand
AACSB: Analytical Thinking
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53) Briefly explain the social responsibility continuum for
businesses in America.
Answer: The social role of business can be thought of as
an ideological continuum, corresponding roughly to the familiar American
political spectrum of conservative/Republican views on the right, moderates in
the middle, and liberal/Democrats on the left. On the right side of the
spectrum lies the free-market view where profit maximization is considered the
best measure of social responsibility. Across the middle lies a viewpoint that
is commonly thought of as the long-term company interest where profits are the
first consideration, but where satisfied workers, customers, and community members
are also of importance, within some reasonable limits, in order to secure the
firm’s long-term survival. On the left side of the spectrum lies the triple
bottom-line/sustainability movement that calls for a revolutionary re-visioning
of corporate goals and practices such that profit maximization is only one of
three key measures of success. Triple bottom-line advocates specifically call
for managerial accounting practices that measure and respect the firm’s social
and environmental performance just as the firm’s financial performance is
measured and respected. The goal is to ensure the long-term viability, or
sustainability, of the organization and the total society.
Difficulty: 2 Medium
Topic: Corporate Social Responsibility
Learning Objective: 03-06 Explain the concept of corporate
social responsibility.
Bloom’s: Understand
AACSB: Analytical Thinking
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54) Briefly explain the basic premise of the Social
Responsibility Pyramid developed by Professor A. Carroll.
Answer: Social responsibility, or corporate citizenship,
necessarily begins at the foundation of the pyramid with making a profit in a
lawful fashion; but simultaneously the socially responsible firm moves (up the
pyramid) beyond the fundamental demands of economics and law to pursue the
ethical course of action—that behavior which is best suited to the demands of
virtue and moral principle. In striving for profitable, lawful, ethical
conduct, that company may also choose to engage in discretionary philanthropic
(charitable) efforts—money, time, facilities, programs—to build a better
community. While the Social Responsibility Pyramid has been criticized and
revised, it remains a useful way of thinking about corporations’ expanding
duties.
Difficulty: 2 Medium
Topic: Corporate Social Responsibility
Learning Objective: 03-06 Explain the concept of corporate
social responsibility.; 03-07 Explain the triple bottom-line/sustainability
approach to corporate citizenship.
Bloom’s: Understand
AACSB: Analytical Thinking
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55) Compare, from a corporate social responsibility point of
view, the corporate policies of Walmart and Costco.
Answer: The shareholder/stakeholder debate is well
illustrated by the heated competition between massive retailers Walmart and
Costco. Each week Walmart saves money for millions of Americans by its
relentless focus on the bottom line, and hence, on the interests of its
shareholders. Costco, on the other hand, has drawn great praise from management
scholars for its close attention to worker welfare. Costco workers average just
under $21 per hour while Walmart pay averages about $13 an hour for full-time
employees. Both companies raised minimum wages in 2016 (Walmart to $10 per hour
or more and Costco to $13–$13.50), but Walmart also cut some workers’ hours,
and many Walmart workers still require food stamps and other public assistance.
About 88 percent of Costco workers have company-sponsored health insurance,
whereas Walmart reports “more than half” of its workers have company plans.
Reports vary, but Costco’s employee turnover rate is much lower than Walmart’s.
Twenty-eight percent of customers, according to a recent survey, view Walmart
unfavorably—about five times the negative sentiments felt for Costco.
Difficulty: 2 Medium
Topic: Shareholder Approach
Learning Objective: 03-09 Contrast the stakeholder and
shareholder approaches to corporate social responsibility.
Bloom’s: Understand
AACSB: Analytical Thinking
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Law, Business and Society, 12e (McAdams)
Chapter 5 Constitutional Law and the Bill of Rights
1) Articles I, II, and III, as well as the 14th Amendment,
address the relationship between the federal government and the states.
Answer: FALSE
Explanation: Articles IV and VI, as well as the 14th
Amendment, address the relationship between the federal government and the
states. Article VI provides in Clause 2 (the Supremacy Clause) for the
supremacy of federal law over state law.
Difficulty: 1 Easy
Topic: Structure and Purpose
Learning Objective: 05-01 Recognize the purposes of the
U.S. Constitution.
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2) The Constitution protects citizens from purely private concentrations
of power, such as large corporations.
Answer: FALSE
Explanation: The Constitution does not protect citizens
from purely private concentrations of power, such as large corporations. In
fact, corporations themselves are often entitled to the protections of the
Constitution.
Difficulty: 1 Easy
Topic: Structure and Purpose
Learning Objective: 05-01 Recognize the purposes of the
U.S. Constitution.
Bloom’s: Remember
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3) Congressional authority is not formally limited to certain
enumerated powers. That authority is allowed to expand or contract as society
demands.
Answer: FALSE
Explanation: Congressional authority is formally limited
to certain enumerated powers (Article I, Section 8), such as the authority to
regulate commerce. The 10th Amendment provides that all power not
expressly accorded to the federal government in the Constitution resides in the
states or the people.
Difficulty: 1 Easy
Topic: Structure and Purpose
Learning Objective: 05-01 Recognize the purposes of the
U.S. Constitution.; 05-02 Describe the separation of powers under the U.S.
Constitution.
Bloom’s: Remember
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4) The 10th Amendment provides that all power not expressly
accorded to the federal government in the Constitution resides in the states or
the people.
Answer: TRUE
Explanation: The 10th Amendment provides that all
power not expressly accorded to the federal government in the Constitution
resides in the states or the people. Certain constitutional checks or
restraints, including the Bill of Rights, limit how far Congress can reach even
within its enumerated powers.
Difficulty: 1 Easy
Topic: Structure and Purpose
Learning Objective: 05-01 Recognize the purposes of the
U.S. Constitution.
Bloom’s: Remember
AACSB: Analytical Thinking
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