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DSST Business Ethics study materials
DSST Business Ethics study resources

DSST Business Ethics practice questions

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Question 1Moral philosophies and business ethics

In business ethics, the term 'moral philosophy' most directly refers to which of the following?

  1. The financial analysis managers use to rank investment projects
  2. The body of statutes a legislature enacts to regulate commercial contracts
  3. The set of customs a particular firm follows when greeting new clients
  4. The systematic study of principles that guide judgments about right and wrong conduct Correct answer.

Explanation

Moral philosophy is the branch of inquiry that examines the principles, values, and reasoning used to judge conduct as right or wrong. It supplies the theoretical frameworks, such as utilitarianism and deontology, that business ethics applies to commercial decisions. The other choices describe law, etiquette, or finance rather than ethical theory.

Question 2Moral philosophies and business ethics

A manager argues that an action is right because it produces the greatest good for the greatest number of people. This reasoning is most characteristic of which moral theory?

  1. Ethical egoism
  2. Kantian deontology
  3. Utilitarianism Correct answer.
  4. Virtue ethics

Explanation

Utilitarianism is a consequentialist theory that evaluates actions by their outcomes, specifically by whether they maximize overall welfare or utility. The manager's appeal to 'the greatest good for the greatest number' is the classic utilitarian formula. Deontology, virtue ethics, and egoism each use a different criterion of rightness.

Question 3Moral philosophies and business ethics

Which feature most clearly distinguishes a Kantian deontological approach from a utilitarian approach to a business decision?

  1. Deontology measures the decision against the customs of the local community
  2. Deontology weighs the total happiness produced by each available option
  3. Deontology asks which character traits a virtuous manager would display
  4. Deontology evaluates the action against duties and respect for persons regardless of outcome Correct answer.

Explanation

Deontology holds that certain acts are right or wrong in themselves, judged by duties, rules, and respect for rational persons rather than by consequences. Utilitarianism, by contrast, evaluates options by their aggregate outcomes. This contrast between duty-based and consequence-based reasoning is the core distinction.

Question 4Moral philosophies and business ethics

A company weighs a plant closure by asking which choice will produce the largest net benefit for employees, shareholders, and the surrounding town combined. Which moral framework is being applied?

  1. Act utilitarianism Correct answer.
  2. Ethical relativism
  3. Kantian respect for persons
  4. Virtue ethics

Explanation

Act utilitarianism assesses each specific action by whether it maximizes total welfare across all affected parties. Summing benefits and harms for employees, shareholders, and the town is exactly that calculation. The other frameworks use duties, cultural norms, or character rather than aggregate outcomes.

Question 5Moral philosophies and business ethics

A Kantian would object to a manager who makes a promise to a supplier intending never to keep it, primarily because:

  1. the maxim of making deceptive promises cannot be consistently universalized Correct answer.
  2. the manager lacks the virtue of generosity toward suppliers
  3. the supplier belongs to a different cultural community with different norms
  4. the promise reduces total economic efficiency in the supply chain

Explanation

Kant's universalizability test asks whether the maxim behind an action could be willed as a universal law without contradiction. A maxim permitting deceptive promises would destroy the institution of promising if universalized, so it fails the test. This duty-based objection does not depend on efficiency, culture, or generosity.

Question 6Moral philosophies and business ethics

The 'veil of ignorance' thought experiment, used in business ethics to design fair rules, is associated with which philosopher?

  1. John Stuart Mill
  2. Adam Smith
  3. John Rawls Correct answer.
  4. Aristotle

Explanation

John Rawls proposed the veil of ignorance as a device for choosing principles of justice without knowing one's own position in society. Because choosers cannot tailor rules to their own advantage, they are led toward fair principles. Mill, Aristotle, and Smith are associated with other frameworks.

Question 7Moral philosophies and business ethics

Under Rawlsian justice, the difference principle permits inequalities in income only when they:

  1. benefit the least advantaged members of society Correct answer.
  2. are approved by a majority vote of shareholders
  3. result from seniority rather than from performance
  4. match the average wage in comparable industries

Explanation

Rawls's difference principle allows social and economic inequalities only if they work to the greatest benefit of the least advantaged group. The test is whether the worst-off are better off under the inequality than under an alternative arrangement. Majority approval, market averages, and seniority are not the Rawlsian criterion.

Question 8Moral philosophies and business ethics

A manager who asks 'What would an honest and fair-minded person do in this situation?' is reasoning primarily within which tradition?

  1. Ethical egoism
  2. Act utilitarianism
  3. Virtue ethics Correct answer.
  4. Social contract theory

Explanation

Virtue ethics centers on the character of the agent and asks what a person possessing virtues such as honesty and fairness would do. Framing the question around the traits of a good person rather than around outcomes, rules, or agreements is the hallmark of this tradition. The other theories use different decision criteria.

Question 9Moral philosophies and business ethics

According to Aristotle, a virtue such as courage in a business leader is best understood as:

  1. a mean between two vices, such as cowardice and recklessness Correct answer.
  2. a rule that must be applied identically in every case
  3. a feeling that cannot be cultivated through practice
  4. a calculation of expected profit from each option

Explanation

Aristotle treats virtue as a habitual disposition to choose the mean relative to the situation, lying between excess and deficiency. Courage, for example, sits between cowardice and recklessness. Virtues are cultivated through repeated practice rather than being fixed rules or profit calculations.

Question 10Moral philosophies and business ethics

A sales director decides whether to offer a large gift to a government official. She reasons that the practice is acceptable because it is customary in that country. This reasoning exemplifies:

  1. Kantian universalizability
  2. utilitarian welfare maximization
  3. cultural relativism Correct answer.
  4. Rawlsian justice as fairness

Explanation

Cultural relativism holds that the moral standard for an action is the prevailing norm of the relevant culture or society. Justifying a gift by its local custom is the standard relativist move. The other frameworks test universalizability, fairness to the least advantaged, or aggregate welfare.

Question 11Moral philosophies and business ethics

Which criticism is most commonly leveled against cultural relativism as a guide for multinational business conduct?

  1. It requires calculating aggregate utility for every decision
  2. It demands too much impartiality from managers
  3. It insists that all firms adopt a single global code
  4. It leaves no independent basis for criticizing harmful local practices Correct answer.

Explanation

A standard objection to cultural relativism is that, by making local norms the final standard, it removes any footing for condemning practices that are harmful even where accepted. This makes it difficult to ground criticism of abuses such as bribery or unsafe labor conditions. The other options describe different theories or the opposite of relativism.

Question 12Moral philosophies and business ethics

The 'trolley problem' is used in business ethics instruction primarily to:

  1. illustrate the tension between consequentialist and duty-based intuitions Correct answer.
  2. prove that utilitarian reasoning is always correct
  3. show that moral judgments are purely matters of taste
  4. demonstrate the superiority of virtue ethics over rules

Explanation

The trolley problem is a thought experiment designed to probe the conflict between outcome-based reasoning and duty- or rights-based intuitions. It does not settle which theory is correct but exposes where they diverge. Instructors use it to develop moral reasoning about trade-offs and the use of persons.

Question 13Moral philosophies and business ethics

A firm adopts a rule: 'Never use another person merely as a means to an end.' This rule most directly reflects which principle?

  1. Ethical egoism
  2. Utilitarian aggregate welfare
  3. Kant's respect-for-persons principle Correct answer.
  4. Cultural relativism

Explanation

Kant's second formulation of the categorical imperative requires treating humanity, whether in oneself or others, always as an end and never merely as a means. The firm's rule restates that principle directly. Utilitarianism, egoism, and relativism each use a different standard.

Question 14Moral philosophies and business ethics

A manager evaluating a decision by asking whether the underlying rule could be adopted by everyone without contradiction is applying which test?

  1. The universalizability test Correct answer.
  2. The virtue-of-the-mean test
  3. The difference principle
  4. The utilitarian calculus

Explanation

The universalizability test comes from Kant's categorical imperative: act only on a maxim that you could will to become a universal law. Asking whether everyone could act on the rule without contradiction is exactly this test. The other options name different theories and principles.

Question 15Moral philosophies and business ethics

Which statement best captures the central claim of ethical egoism?

  1. Each person ought to follow the customs of the surrounding community
  2. Each person ought to maximize total welfare for everyone affected
  3. Each person ought to act so as to maximize his or her own self-interest Correct answer.
  4. Each person ought to act only on maxims that can be universalized

Explanation

Ethical egoism is the normative view that the right action for an agent is the one that best serves that agent's own self-interest. It is a claim about what each person ought to do, not a claim that people are selfish in fact. The other options describe utilitarianism, relativism, and Kantianism.

Question 16Moral philosophies and business ethics

A critic argues that ethical egoism cannot serve as a business ethics because it offers no way to resolve conflicts of interest between parties. Which response would an egoist most plausibly make?

  1. Aggregate welfare should override individual interest in every dispute
  2. Local custom provides the standard for resolving any conflict
  3. Cooperation and reputation-building often serve each party's long-term self-interest Correct answer.
  4. Conflicts dissolve once everyone follows the categorical imperative

Explanation

An egoist can argue that cooperating, honoring contracts, and building a trustworthy reputation are typically in each party's long-term self-interest, so mutual accommodation can be rational for egoists. This is the standard reply that egoism does not require predatory behavior. The other responses invoke theories other than egoism.

Question 17Moral philosophies and business ethics

In utilitarian reasoning, an action is judged right when it:

  1. respects the dignity of every person regardless of consequences
  2. maximizes overall utility, summing benefits and harms across all affected parties Correct answer.
  3. conforms to the customs of the community where it occurs
  4. expresses the character of a virtuous agent

Explanation

Utilitarianism is a consequentialist theory holding that the right action is the one that produces the greatest net utility, calculated by summing benefits and harms across everyone affected. The other options describe Kantian, relativist, and virtue approaches respectively.

Question 18Moral philosophies and business ethics

A manager applies utilitarianism and concludes that laying off a small group will maximize total welfare. Which objection would a rights-based critic most likely raise?

  1. The decision did not follow the industry's customary practice
  2. The calculation may ignore the fact that the laid-off workers are being treated as mere instruments Correct answer.
  3. The decision was not approved by a majority of employees
  4. The calculation failed to include the shareholders' interests

Explanation

A rights-based or Kantian critic would argue that maximizing aggregate welfare can license sacrificing individuals, thereby treating them merely as means to the group's benefit. This objection targets the utilitarian method itself, not the accuracy of the calculation. Approval procedures and industry custom are separate governance or relativist concerns.

Question 19Moral philosophies and business ethics

A company's code of conduct states that employees must be treated as ends in themselves. This language is drawn most directly from:

  1. Aristotle's doctrine of the mean
  2. Bentham's hedonic calculus
  3. Mill's harm principle
  4. Kant's categorical imperative Correct answer.

Explanation

Treating persons as ends in themselves is Kant's second formulation of the categorical imperative, which forbids using rational beings merely as means. The phrase is a hallmark of Kantian deontology. The other options belong to different thinkers and frameworks.

Question 20Moral philosophies and business ethics

Which scenario best illustrates the application of the Rawlsian difference principle in corporate pay policy?

  1. Paying executives more only if the arrangement also improves the position of the lowest-paid workers Correct answer.
  2. Paying executives according to the customs of the country where the firm operates
  3. Paying executives whatever the market demands regardless of effects on other workers
  4. Paying all employees identical wages regardless of role or contribution

Explanation

The difference principle permits inequalities only when they benefit the least advantaged. A pay policy that raises executive compensation solely when it also improves the position of the lowest-paid workers satisfies that test. Market rates, strict equality, and local custom are not the Rawlsian criterion.

Question 21Moral philosophies and business ethics

A manager who consistently practices honesty and fairness until these become second nature is best described, in Aristotelian terms, as:

  1. conforming to local custom
  2. cultivating virtues through habituation Correct answer.
  3. following a universal law of reason
  4. maximizing aggregate utility

Explanation

Aristotle holds that virtues are acquired by repeated practice until they become stable dispositions of character. Practicing honesty and fairness until they become second nature is precisely habituation into virtue. The other options describe Kantian, utilitarian, and relativist ideas.

Question 22Moral philosophies and business ethics

A multinational firm faces bribery that is customary locally but illegal at home. A Kantian analysis would most likely conclude that the firm should:

  1. pay the bribe because refusing harms the firm's own self-interest
  2. pay the bribe if doing so maximizes total welfare across all stakeholders
  3. refuse, because the maxim permitting bribery cannot be universalized without undermining fair administration Correct answer.
  4. pay the bribe because local custom defines morality there

Explanation

Kantian analysis tests the maxim behind the act: if bribery were universalized, the practice of impartial administration would collapse, so the maxim cannot be consistently willed as universal law. The duty to refrain therefore holds regardless of local custom. The other options appeal to relativism, utilitarianism, or egoism.

Question 23Moral philosophies and business ethics

The branch of ethics that examines the meaning of moral terms and the logic of moral judgments, rather than prescribing conduct, is called:

  1. applied ethics
  2. metaethics Correct answer.
  3. descriptive ethics
  4. normative ethics

Explanation

Metaethics analyzes the nature of moral language, truth, and justification, asking what it means to call something right or wrong. Normative ethics prescribes principles of conduct, and applied ethics addresses concrete domains such as business. Descriptive ethics reports what people actually believe.

Question 24Social responsibilities of a business

A company publicly commits to reducing its packaging waste by 30 percent within two years and publishes yearly progress data. This commitment is best described as an example of:

  1. A marketing segmentation strategy
  2. A philanthropic donation program
  3. Voluntary corporate social responsibility reporting Correct answer.
  4. Statutory compliance with securities disclosure rules

Explanation

CSR reporting is voluntary disclosure of environmental and social performance beyond what law requires. Publishing measurable targets and progress demonstrates accountability to stakeholders rather than mere legal compliance or charity.

Question 25Social responsibilities of a business

Which group is best classified as a primary stakeholder of a manufacturing firm?

  1. A passerby who never buys the firm's products
  2. A distant competitor in another region
  3. A journalist writing a feature about the industry
  4. An employee on the assembly line Correct answer.

Explanation

Primary stakeholders are those whose ongoing participation is essential to the firm's survival and operations, such as employees, customers, suppliers, and investors. Employees directly depend on and sustain the business relationship.

Question 26Social responsibilities of a business

Under the stakeholder theory of the firm, the primary purpose of managing a business is to:

  1. Minimize regulatory scrutiny by avoiding public disclosure
  2. Expand market share regardless of social consequences
  3. Maximize quarterly earnings for shareholders above all other considerations
  4. Create value for all legitimate stakeholders while balancing their interests Correct answer.

Explanation

Stakeholder theory holds that the firm should create value for everyone affected by or affecting it, balancing competing claims rather than privileging one group absolutely. Shareholder primacy and market-share maximization are rival views.

Question 27Social responsibilities of a business

A firm adopts a policy of paying all suppliers within 30 days even when contracts permit 90 days. Which social responsibility rationale best explains this choice?

  1. It lowers the firm's tax liability in the current period
  2. It eliminates the need for supplier contracts entirely
  3. It guarantees the firm the lowest possible unit prices
  4. It reduces the working-capital burden on smaller suppliers who depend on prompt payment Correct answer.

Explanation

Prompt payment policies reflect responsibility toward suppliers as stakeholders, particularly small businesses for whom delayed payment creates cash-flow stress. The rationale is fairness and economic sustainability across the supply chain.

Question 28Social responsibilities of a business

A retail chain discovers that one of its overseas factories uses child labor. The most defensible first step under a social responsibility framework is to:

  1. Continue sourcing while privately donating to a children's charity
  2. Conduct due diligence, suspend sourcing if confirmed, and require remediation Correct answer.
  3. Immediately terminate the contract without further investigation
  4. Publicly deny any knowledge until media inquiries force a response

Explanation

Responsible supply-chain management requires investigation, corrective action, and remediation rather than denial or abrupt abandonment that can harm the very workers affected. Due diligence followed by suspension and remediation is the recognized approach.

Question 29Social responsibilities of a business

The triple bottom line framework evaluates corporate performance across which three dimensions?

  1. Profit, product, and promotion
  2. Price, place, and packaging
  3. Production, payroll, and patents
  4. People, planet, and profit Correct answer.

Explanation

The triple bottom line measures social (people), environmental (planet), and economic (profit) performance. It broadens accountability beyond financial results alone.

Question 30Social responsibilities of a business

A company's code of conduct prohibits bribing foreign officials. This prohibition most directly reflects which social responsibility concern?

  1. Workplace diversity
  2. Anti-corruption and fair competition Correct answer.
  3. Environmental sustainability
  4. Consumer product safety

Explanation

Anti-bribery rules address corruption, which distorts markets and undermines fair competition. Laws such as the Foreign Corrupt Practices Act make this a legal as well as ethical obligation.

Question 31Social responsibilities of a business

A manager argues that because a decision is legal, it is therefore ethical. This reasoning is flawed because:

  1. Ethical standards never overlap with legal requirements
  2. Legality sets a minimum standard, while ethics may demand more than the law requires Correct answer.
  3. Legal compliance always produces the greatest social harm
  4. Ethics and law are identical in every jurisdiction

Explanation

Law establishes a floor of acceptable conduct, but ethical obligations can exceed legal requirements. Equating the two ignores cases where lawful conduct still harms stakeholders.

Question 32Social responsibilities of a business

Which action best exemplifies corporate philanthropy as distinct from CSR strategy?

  1. Auditing suppliers for labor compliance
  2. Publishing an annual sustainability report
  3. Donating funds to a local disaster-relief organization Correct answer.
  4. Redesigning a production process to cut emissions

Explanation

Philanthropy involves voluntary charitable giving of money or resources, often separate from core operations. Process redesign, supplier audits, and reporting are integrated CSR activities tied to business practices.

Question 33Social responsibilities of a business

A firm's community relations manager wants to justify a long-term investment in local workforce training. Which argument most directly supports this as a social responsibility initiative?

  1. It guarantees immediate reductions in operating costs
  2. It avoids the need to comply with labor regulations
  3. It shifts training costs entirely onto taxpayers
  4. It builds community skills that support local economic health and a future labor pool Correct answer.

Explanation

Workforce training can be justified as community investment that strengthens local economic capacity and creates a sustainable talent pipeline. The benefit is shared between the community and the firm over time.

Question 34Social responsibilities of a business

The concept of 'sustainable development' as used in business ethics refers to:

  1. Maintaining the same product line indefinitely
  2. Meeting present needs without compromising the ability of future generations to meet theirs Correct answer.
  3. Maximizing short-term output regardless of resource depletion
  4. Sustaining profits by externalizing all environmental costs

Explanation

Sustainable development, as defined in the Brundtland Commission report, balances present needs with intergenerational equity. It requires firms to consider long-term environmental and social impacts.

Question 35Social responsibilities of a business

A company faces pressure to relocate a plant to a region with weaker environmental rules. Which consideration is most consistent with a socially responsible decision process?

  1. Relocate only if the move is invisible to the public
  2. Delegate the decision entirely to the lowest bidder
  3. Select the location with the lowest regulatory burden regardless of impact
  4. Assess environmental and community impacts across all candidate locations using consistent standards Correct answer.

Explanation

Consistent impact assessment across locations prevents 'pollution havens' and reflects responsibility to communities and the environment. It applies uniform standards rather than exploiting regulatory gaps.

Question 36Social responsibilities of a business

Which statement best captures the 'iron law of responsibility' as applied to business?

  1. Firms must accept every social cause proposed by the public
  2. Firms that use power irresponsibly eventually lose that power to others, including government Correct answer.
  3. Responsibility increases only when profits decline
  4. Legal mandates always precede voluntary responsibility

Explanation

The iron law of responsibility holds that those who do not use power responsibly risk losing it. Society may transfer authority to government or other institutions when business fails to act responsibly.

Question 37Social responsibilities of a business

A firm's board establishes a committee to oversee ethical risk and reports its findings to shareholders. This primarily strengthens which element of governance?

  1. Board accountability and oversight Correct answer.
  2. Product pricing strategy
  3. Supply-chain logistics
  4. Marketing reach

Explanation

Board-level ethics oversight and reporting to shareholders strengthen accountability and governance. It ensures ethical risk is monitored at the highest level of the organization.

Question 38Social responsibilities of a business

A whistleblower reports accounting irregularities through a confidential internal hotline. Which program feature most improves the likelihood that such reports are taken seriously?

  1. Requiring employees to sign a waiver of retaliation claims
  2. Limiting reports to anonymous submissions only
  3. Independence of the reporting channel from the accused's chain of command Correct answer.
  4. A policy of forwarding all reports to the accused manager first

Explanation

Effective whistleblower programs keep reporting channels independent of the accused party and protect reporters from retaliation. Independence prevents conflicts of interest that could suppress legitimate concerns.

Question 39Social responsibilities of a business

A firm markets a product by emphasizing its environmental benefits while omitting significant negative impacts. This practice is best described as:

  1. Greenwashing Correct answer.
  2. Philanthropy
  3. Stakeholder engagement
  4. Fair trade

Explanation

Greenwashing is misleading marketing that overstates or selectively presents environmental benefits. It violates transparency obligations to consumers and regulators.

Question 40Social responsibilities of a business

A manager must choose between a supplier with lower costs and higher emissions and one with higher costs and lower emissions. Which framework helps structure this trade-off among competing stakeholder interests?

  1. A policy of ignoring environmental criteria entirely
  2. A stakeholder impact analysis weighing effects on customers, communities, and investors Correct answer.
  3. A random selection method
  4. A simple lowest-cost bid comparison

Explanation

Stakeholder impact analysis identifies affected parties and weighs benefits and harms to make a defensible trade-off. It makes the competing considerations explicit rather than reducing the decision to cost alone.

Question 41Social responsibilities of a business

A firm adopts a policy of paying a living wage to all direct employees. The strongest social responsibility justification is that it:

  1. Guarantees higher shareholder dividends
  2. Reduces reliance on public assistance among workers and supports human dignity Correct answer.
  3. Increases executive bonuses
  4. Eliminates the need for workplace safety programs

Explanation

A living wage supports basic human dignity and reduces the burden on public services when workers cannot meet basic needs. It reflects responsibility to employees as key stakeholders.

Question 42Social responsibilities of a business

Which of the following best illustrates a conflict between shareholder interests and broader social responsibility?

  1. Investing in pollution controls that raise short-term costs but reduce long-term harm Correct answer.
  2. Hiring qualified employees through a competitive process
  3. Paying taxes as required by law
  4. Providing accurate financial statements to investors

Explanation

Pollution controls may reduce near-term profits, creating tension between shareholder returns and environmental responsibility. The other options describe actions that satisfy both legal duties and stakeholder expectations.

Question 43Social responsibilities of a business

A company sets up a foundation that funds local education but continues to source materials from suppliers using forced labor. Which critique is most accurate?

  1. The philanthropy fully offsets the supply-chain harm
  2. Forced labor is acceptable if the foundation is well funded
  3. The foundation's existence removes the firm's legal duties
  4. The philanthropic gesture does not cure the core labor violation Correct answer.

Explanation

Philanthropy cannot substitute for correcting serious human rights abuses in operations or supply chains. Social responsibility requires addressing core harms, not offsetting them with charitable giving.

Question 44Social responsibilities of a business

A firm uses a materiality assessment to decide which social issues to prioritize in its CSR strategy. The purpose of this assessment is to:

  1. Identify issues most significant to the business and its stakeholders Correct answer.
  2. Determine the firm's advertising budget
  3. Select the lowest-cost supplier
  4. Rank employees by productivity

Explanation

Materiality assessment identifies the environmental, social, and governance issues that matter most to stakeholders and to business performance. It focuses CSR resources on the most relevant concerns.

Question 45Social responsibilities of a business

A firm publicly commits to a science-based emissions target and reports progress annually. This is most consistent with which responsibility principle?

  1. Caveat emptor
  2. Profit maximization at any cost
  3. Accountability and transparency to stakeholders Correct answer.
  4. Confidentiality of all environmental data

Explanation

Public targets paired with annual reporting reflect accountability and transparency, allowing stakeholders to evaluate performance. This is a core element of credible environmental responsibility.

Question 46Social responsibilities of a business

A manager argues that because a supplier is legally permitted to pay low wages in its country, the buying firm has no responsibility for those wages. Which response best reflects contemporary business ethics?

  1. The buying firm should always terminate all foreign suppliers
  2. The buying firm should ignore labor conditions entirely
  3. Legal minimums do not automatically satisfy ethical expectations, and buyers may be expected to promote fair labor standards Correct answer.
  4. Wage levels are irrelevant to corporate reputation

Explanation

Contemporary ethics holds that legal compliance is a floor, and firms may bear responsibility for labor conditions in their supply chains. Buyers are increasingly expected to promote fair standards beyond local legal minimums.

Question 47Regulation of business

Under the Securities Exchange Act of 1934, which agency has primary responsibility for enforcing federal securities laws and regulating the secondary trading markets?

  1. The Federal Trade Commission
  2. The Federal Reserve Board
  3. The Consumer Financial Protection Bureau
  4. The Securities and Exchange Commission Correct answer.

Explanation

The Securities Exchange Act of 1934 created the Securities and Exchange Commission and gave it authority over the secondary markets, broker-dealers, and reporting companies. The FTC and Federal Reserve regulate other areas, such as consumer protection and banking, not securities trading.

Question 48Regulation of business

Which law is most closely associated with requiring publicly traded companies to maintain internal accounting controls and to certify financial reports?

  1. The Sarbanes-Oxley Act Correct answer.
  2. The Fair Labor Standards Act
  3. The Sherman Antitrust Act
  4. The National Labor Relations Act

Explanation

The Sarbanes-Oxley Act of 2002 imposed internal control and CEO/CFO certification requirements on public companies after major accounting scandals. It targets corporate financial reporting integrity rather than competition, labor relations, or wages.

Question 49Regulation of business

A company dumps industrial waste into a river, harming downstream residents. Under the common-law doctrine of nuisance, the residents would most likely seek which remedy?

  1. A patent to protect the river water
  2. Criminal prosecution by the state for a felony
  3. An injunction or damages to stop the interference with their use of property Correct answer.
  4. A bankruptcy filing against the company

Explanation

Nuisance is a civil wrong involving unreasonable interference with another's use and enjoyment of land, and remedies typically include injunctions or money damages. Criminal prosecution, patents, and bankruptcy are unrelated legal mechanisms.

Question 50Regulation of business

Which federal statute primarily prohibits agreements that restrain trade and the abuse of monopoly power?

  1. The Equal Pay Act
  2. The Sherman Antitrust Act Correct answer.
  3. The Securities Act of 1933
  4. The Clayton Act only

Explanation

The Sherman Antitrust Act of 1890 is the core federal statute banning contracts, combinations, and conspiracies in restraint of trade and monopolization. The Clayton Act supplements it, but Sherman is the primary prohibition.