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MKT 475 Week 11 Quiz – Strayer University New

MKT/475 Week 11 Quiz – Strayer

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Quiz 10 Chapter 15

Strategic Marketing Implementation and Control

True/False Questions

1. The analytical dimension of marketing planning process is concerned with the organizational structure in which planning is carried out, along with the associated information resources and corporate culture.

2. Internal marketing involves developing programs to win line management support for new strategies.

3. External marketing involves changing the attitudes and behavior of employees working at key points of contact with customers.

4. Internal marketing goals include promoting the external marketing strategy.

5. The balanced scorecard method is used to implement marketing plans.

6. The balanced scorecard method formally includes an assessment of the strategy component across all aspects of the business unit at the same time.

7. A benefit of the balanced scorecard methodology is that it is feasible for any business unit level strategy and provides a means to link performance evaluation to strategy implementation.

8. The second step in marketing evaluation and control is determining performance metrics and standards.

9. When monitoring a firm’s effectiveness of marketing activities, external information sources must be excluded.

10. Marketing metrics should be chosen to reflect issues most closely linking marketing investments with value chain requirements.

Multiple Choice Questions

11. The _____ indicates marketing objectives and the strategy and tactics for accomplishing the objectives, and guides implementation and control. 
A. strategic marketing plan
B. traditional marketing design
C. integrated marketing communications
D. market positioning strategy

12. Which of the following techniques guides short-term marketing activities?
A. Strategic marketing plan
B. Annual marketing plan
C. Situation analysis
D. Positioning strategy

13. Which of the following marketing planning process dimensions is concerned with an organization’s structure, associated information resources, and corporate culture?
A. Analytical process dimension
B. Behavioral process dimension
C. Organizational process dimension
D. Cognitive process dimension

14. Which of the following marketing planning process dimensions is concerned with managerial perceptions, participation, and strategic assumptions?
A. Analytical process dimension
B. Cognitive process dimension
C. Organizational process dimension
D. Behavioral process dimension

15. Which of the following marketing planning process dimensions is concerned with techniques, procedures, systems, and planning models?
A. Analytical process dimension
B. Cognitiveprocess dimension
C. Organizational process dimension
D. Behavioral process dimension

16. Which of the following is true about internal marketing?
A. It positions the marketing strategy in the customer marketplace.
B. Its goals include promoting the external marketing strategy.
C. It aims at providing superior external customer service to support internal strategy.
D. Its aim is to better align internal market objectives with external capabilities.

17. Which of the following is true about internal marketing?
A. It positions the marketing strategy in the customer marketplace.
B. It involves changing the attitudes and behavior of customers at key points of contact with employees.
C. It is aimed at the potential customers within the company.
D. It is targeted at particular market segments and niches.

18. _____ is a formalized management control system that implements a given business unit strategy by means of activities across four areas: financial, customer, internal business process, and learning and growth (or innovation).
A. Benchmarking
B. Internal strategy-organization fit
C. Strategic marketing audit
D. Balanced scorecard method

19.Which of the following is true of the balanced scorecard method?
A. It translates aggregate and broadly defined strategies to very specific actions.
B. It provides a means to link customer satisfaction with value orientation.
C. It is not feasible for business unit level strategies.
D. It does not assess the strategy component across all aspects of the business unit.

20. The _____ approach allows consideration of specific activities which will accomplish the objective, but also formally includes an assessment of the strategy component across all aspects of the business unit at the same time. 
A. vertical assessment
B. balanced scorecard
C. strategic marketing audit
D. benchmarking

21. Which of the following is the initial step in setting up a strategic marketing evaluation program?
A. Obtaining and analyzing information for performance-gap identification
B. Selecting performance criteria and choosing relevant marketing metrics
C. Conducting strategic marketing audit
D. Assessing performance and taking necessary action

22. Which of the following is the strategic marketing audit used for?
A. To translate broadly defined marketing strategy into very specific actions
B. To provide a means to link performance evaluation to strategy implementation
C. To ensure that activities in one area do not interfere with activities in another area
D. To initiate a formal strategic marketing planning program

23. The results of the _____ provide the basis for selecting performance criteria and choosing relevant marketing metrics to assess actual performance against plans and tactical intent.
A. strategic marketing audit
B. integrated marketing communications
C. balanced scorecard
D. customer relationship analysis

24. _____ use both internal and external information sources to provide a structure for monitoring the effectiveness of marketing activities and strategies.
A. Marketing segmentation strategies
B. Balanced scorecard methods
C. Marketing metrics
D. Salesforce strategies

25. The choice of the most relevant marketing metrics should be made in the light of the need to:
A. track performance relative to alliances.
B. track performance relative to suppliers.
C. track performance over investment capabilities.
D. measure performance relative to strategy.

26. Which of the following is a danger of using a marketing dashboard?
A. The dashboard contains metrics only relevant to assessing past performance.
B. The dashboard contains metrics which only give insight into present performance.
C. The dashboard contains metrics which only give insight into future developments.
D. The dash board contains only metrics related to the main business drivers.

27. Which of the following approaches is a quality control technique useful in determining when operating results are fluctuating normally or instead are disorderly?
A. Value chain analysis
B. Statistical process-control methods
C. Benchmarking
D. Data-control processes

28. _____ is/are used to analyze and improve results in marketing performance measures such as the number of orders processed, customer complaints, and territory sales.
A. Value chain analysis
B. Benchmarking
C. Quality-control charts
D. Cluster analysis

29. A _____ indicates when the process is experiencing normal variation and when the process is out of control.
A. data-control process
B. value chain analysis
C. BCG matrix
D. control-chart analysis

30. Which of the following is true of a control-chart analysis?
A. It cannot be used to detect randomness in operating results.
B. Its control boundaries are set using historical data.
C. It can only be used to establish average and upper limits of the measure.
D. It can only be used to establish average and lower limits of the measure.

Essay Questions

31. What are the core tasks of a CMO?

32. Explain the dimensions of the marketing planning process.

33. Discuss factors that influence the implementation of a marketing strategy.

34. Discuss how organizational designs help implement a strategic marketing plan.

35. What guiding points should be considered when selecting relevant marketing metrics?

MGT 510 Midterm and Final Exam – Strayer University NEW

MGT/510 Midterm and Final Exam – Strayer NEW

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Chapters 1 Through 15

Chapter 1 Multinational Management in a Changing World

MULTIPLE CHOICE

1. Businesses of all sizes are increasingly looking for global opportunities because
a. Trade barriers are falling.
b. Money is flowing more freely across countries.
c. The world is becoming one interconnected economy.
d. All of the above.

AACSB Analytic, Strategy

PTS: 1

2. Globalization is
a. The trend of businesses expanding beyond their domestic boundaries.
b. Increasing average temperature over the globe.
c. The increased use of global satellite communication systems.
d. A strategy of developing unique products for each nation in the world.

AACSB Reflective thinking, Environmental influence

PTS: 1

3. Which of the following would not be considered a basic source of globalization?
a. Similar customer needs
b. Falling of trade barriers
c. Advances in communication technology
d. Differentiation among countries

AACSB Reflective Thinking, Environmental influence

PTS: 1

4. Multinational management is
a. A strategy of developing similar strategies for different countries.
b. The trend of business expanding beyond local boundaries.
c. The formulation and design of management systems to successfully take advantage of international opportunities and respond to international threats.
d. None of the above

AACSB Reflective thinking, Strategy

PTS: 1

5. According to the text, the multinational company
a. Is required to be a public corporation.
b. Is any company that engages in any business function across borders.
c. Must sell overseas to be a true multinational.
d. Must be large.

AACSB Reflective thinking, Strategy

PTS: 1

6. Which of the following is not a classification of economic systems noted in the text?
a. Domestic economies
b. Transition economies
c. LDCs
d. Emerging markets

AACSB Reflective thinking, Environmental influence

PTS: 1

7. Transition economies are
a. Mature economies with substantial per capita GDP and international trade.
b. Led by Hong Kong, Singapore, South Korea, and Taiwan.
c. Countries changing from government-controlled or communistic economies to a more free market capitalism.
d. None of the above

AACSB Reflective thinking, Environmental influence

PTS: 1

8. Emerging markets include
a. OECD countries.
b. Brazil, China, Russia, India.
c. Korea, Japan and USA.
d. Hungary, Poland, Slovakia.

AACSB Reflective thinking, Environmental influence

PTS: 1

9. Developing economies are
a. Mature economies with substantial per capita GDP and international trade.
b. Hong Kong, Singapore, and Taiwan.
c. Countries in the process of changing their economies from government-controlled to a more free market capitalism.
d. None of the above

AACSB Reflective thinking, Environmental influence

PTS: 1

10. Emerging markets are defined as those that are:
a. Growing rapidly.
b. Transitioning from a communist-controlled economy to capitalism.
c. Seen to have impact only sporadically.
d. Enjoying a mature economy.

AACSB Reflective thinking, Environmental influence

PTS: 1

11. Major regional trade agreements include all of the following EXCEPT
a. EU.
b. NAFTA.
c. APEC.
d. PROTEC.

AACSB Reflective thinking, Legal responsibilities

PTS: 1

12. The economic agreement that links the US, Canada, and Mexico in an economic bloc that allows freer exchange of goods and services is known as the
a. EU.
b. OPEC.
c. APEC.
d. None of the above

AACSB Reflective thinking, Legal responsibilities

PTS: 1

13. The World Trade Organization:
a. Is a major trading company.
b. Succeeded the GATT agreements.
c. Collects duties for member countries.
d. Is a consulting group for companies who wish to engage in international trade.

AACSB Reflective thinking, Legal responsibilities

PTS: 1

14. Examples of developed economies would include:
a. The U.S. and Japan.
b. Hungary and Poland.
c. Argentina and Brazil.
d. Hong Kong and Singapore.

AACSB Reflective thinking, Creation of value

PTS: 1

15. According to your text, FDI means
a. Foreign development initiatives.
b. Various investment policies of the U.S. government.
c. A foreign company has an ownership position in a company in another country.
d. A type of international negotiation strategy.

AACSB Reflective thinking, Legal responsibilities

PTS: 1

16. The two forms of risk discussed in the text include
a. Exchange rate risk and corruption risk.
b. Business risk and social risk.
c. Sales risk and employment risk.
d. Economic and political risk.

AACSB Reflective thinking, Environmental influence

PTS: 1

17. Economic risks discussed in the text include
a. Anything a government might do or not do that might adversely affect a company.
b. The likelihood of losing money if one invests in stocks.
c. Exchange and interest rates.
d. Expropriating of foreign firms by the local government without any compensation.

AACSB Reflective thinking, Environmental influence

PTS: 1

18. Anything that a government might do to affect a multinational adversely is known as
a. Exchange rate risk.
b. Business risk.
c. Sales risk.
d. Political risk.

AACSB Reflective thinking, Leadership

PTS: 1

19.. A global product or service is
a. Adapted for each country’s unique needs.
b. A similar product or service for all customers throughout the world.
c. A product or service that requires bilingual customers.
d. Products developed for use outside the country.

AACSB Reflective thinking, Creation of value

PTS: 1

20. Which of the following statements about the Internet and Information Technology is true?
a. The Internet is benefiting companies worldwide.
b. Electronic communications does not allow companies to communicate with locations around the world.
c. Information technology is not encouraging a borderless financial market.
d. Information technology does not allow the sharing of information around the world.

AACSB Technology, Information technology

PTS: 1

21. The free market reforms in emerging countries are creating a potential group of
a. new competitors.
b. old competitors.
c. subsidized firms.
d. government companies.

AACSB Analytic, Environmental influence

PTS: 1

22. Which of the following statements is true about privatization?
a. Developing nations have the highest rate of privatization.
b. The leading privatizers in the world do not face competition.
c. Privatization is the sale of private business to government investors.
d. Privatization is absent in transition economies.

AACSB Analytic, Legal responsibilities

PTS: 1

23. Global customers:
a. Search for government-controlled enterprises.
b. Provide reduced government trade protection.
c. Search the world for their supplies without regard to national boundaries.
d. Encourage large firms to sell to them.

AACSB Reflective thinking, Strategy

PTS: 1

24. Global trade has this important effect on developing new competitors.
a. It facilitates the transfer of technology, allowing former assemblers to become creators.
b. It facilitates the transfer of knowledge, allowing former builders to become assemblers.
c. It reduces competition.
d. It reduces rivalry.

AACSB Reflective thinking, Creation of value

PTS: 1

25. Global standards for products
a. Are virtually impossible in technical industries.
b. Refer to having one product standard for all countries.
c. Puts companies at a strategic disadvantage.
d. All of the above

AACSB Reflective thinking, Creation of value

PTS: 1

26. According to the experts cited in your text, the next generation of global managers will need all of the following, EXCEPT:
a. Emotional intelligence
b. The ability to work with people from different cultural backgrounds
c. Poor negotiation skills
d. A local mindset

AACSB Reflective thinking, Leadership

PTS: 1

27. A global mindset requires managers to think globally but
a. act locally.
b. have emotional intelligence.
c. understand national cultures.
d. need accomplished negotiation skills.

AACSB Reflective thinking, Leadership

PTS: 1

28. The strategic approach to multinational management
a. Involves the development of one strategy for all countries.
b. Focuses on the skills and aptitudes that the next generation of global managers will need.
c. Is concerned with developing strategies that deal with operating in more than one country and culture.
d. None of the above

AACSB Reflective thinking, Strategy

PTS: 1

29. Which of the following statements about globalization is false?
a. Globalization is a simple evolutionary process.
b. Not all economies of the world are benefiting equally from globalization.
c. Terrorism, wars and SARS has limited and even reversed the effects of globalization.
d. All of the above statements are false.

AACSB Reflective thinking, Environmental influence

PTS: 1

30. Aggressive multinational companies from emerging markets are
a. expanding beyond their own borders.
b. staying within their own national borders.
c. help transition from a communist to a capitalist system.
d. unable to compete with western companies.

AACSB Reflective thinking, Strategy

PTS: 1

31. The set of technical standards developed by the International Organization for Standardization are known as
a. ISO 92.
b. ISO 14000.
c. ISO 9001: 2000.
d. None of the above

AACSB Reflective thinking, Legal responsibilities

PTS: 1

32. One of the major reasons why global companies seek to develop standard products is because
a. A standard product allows the company to save money because the same product can be sold anywhere.
b. A company can be more responsive to local cultural conditions.
c. It allows the company to invest more in research and development.
d. All of the above

AACSB Reflective thinking, Creation of value

PTS: 1

33. Emerging markets are
a. Located mostly in Africa and South America.
b. Similar to developed economies.
c. Those countries between developed and developing countries that present tremendous opportunities.
d. have free trade areas.

AACSB Reflective thinking, Environmental influence

PTS: 1

34. Which of the following statements regarding the European Union is true?
a. The European Union no longer exists.
b. The European Union includes Venezuela.
c. The European Union has a common currency.
d. All of the above are true.

AACSB Reflective thinking, Environmental influence

PTS: 1

35. Future trends indicate that _____ matters more than size of the company.

a. location
b. price
c. flexibility
d. a high standard

AACSB Reflective thinking, Strategy

PTS: 1

36. According to the text, all of the following includes factors that will shape the future business environment EXCEPT
a. Blurring of industry barriers.
b. Finding your niche.
c. Ability to find cheap labor.
d. Emphasis on innovation and the learning organization.

AACSB Reflective thinking, Strategy

PTS: 1

37. The best definition of multinational management includes which of these factors:
a. The formulation of strategies and management systems.
b. Designed to take advantage of international opportunities.
c. And to respond to international threats.
d. All of the above.

AACSB Reflective thinking, Strategy

PTS: 1

38. Multinational companies are defined by all of these factors EXCEPT:
a. Engaging in business beyond its domestic borders.
b. They may be of any size.
c. They may be corporations.
d. They must be public corporations.

AACSB Reflective thinking, Strategy

PTS: 1

39. The largest company in the world is:
a. Wal-Mart Stores.
b. BP.
c. Royal Dutch Shell.
d. Chevron.

AACSB Reflective thinking, Strategy

PTS: 1

40. The European Union consists of:
a. 25 member nations, with the 26th scheduled to become a member in 2013.
b. 26 member nations, with the 27th scheduled to become a member in 2013.
c. 27 member nations, with the 28th scheduled to become a member in 2013.
d. 25 member nations, with no others scheduled to become a member in 2013.

AACSB Reflective thinking, Strategy

PTS: 1

ESSAY

1. Discuss how any company can become a multinational company. What are some of the options available to companies that allow them to use international markets and locations competitively?

2. Discuss some reasons why reductions in world trade barriers are driving the world toward a global economy.

3. Discuss at least two major forces that are driving the world toward a global economy.

4. How is the Internet and Information technology helping companies deal with a global economy? How is the Internet and Information technology helping small companies and even companies from poorer nations?

5. What is corporate social responsibility? Why are firms trying to become socially responsible?

6. Discuss the differences between foreign trade and foreign direct investment.

7. What are some of the reasons why globalization and free trade are being criticized? Do you think that free trade is helping all countries? Why or why not?

8. Look at the information on the world’s leading exporters discussed in the text. Do you think these trends will continue in the future? Why?

9. Discuss the characteristics of a next generation of multinational managers. How can you develop those characteristics through education and experience?

10. Why should multinational management be studied? What are some of the elements of a strategic approach to multinational management?

Chapter 2 Culture and Multinational Management

MULTIPLE CHOICE

1. All the following is true about culture EXCEPT
a. Culture is the shared belief, norms, and values that guide everyday life of a group.
b. Culture is passed from generation to generation through norms, values, and beliefs.
c. Culture is always directly observable.
d. Culture is very pervasive in societies.

AACSB Reflective thinking, Individual dynamics

PTS: 1

2. The correct definitions of the levels of culture include all of these EXCEPT:
a. The national culture, dominant within the political boundaries of a nation-state.
b. The business culture, unique to each business.
c. The organizational culture, shared by members of an organization.
d. The occupational culture, shared by those in the same occupation.

AACSB Analytic, Individual dynamics

PTS: 1

3. Cultural values:
a. Represent our understandings about what is true.
b. Prescribe and proscribe behavior.
c. Tell us what is good and beautiful and what are legitimate goals in life.
d. Provide solutions to problems of adaptation to the environment.

AACSB Analytic, Individual dynamics

PTS: 1

4. All of the following are dimensions of Hofstede’s Model of National Culture EXCEPT:
a. Power avoidance.
b. Uncertainty avoidance.
c. Masculinity.
d. Long-term orientation.

AACSB Analytic, Individual dynamics

PTS: 1

5. International management may be influenced by which of the following levels of culture?
a. National
b. Business
c. Organization
d. All of the above

AACSB Analytic, Individual dynamics

PTS: 1

6. Aspects of the business culture in China include all of these EXCEPT:
a. Business moves more slowly.
b. One should respect Chinese business etiquette.
c. It is important to praise individuals who excelled.
d. The Chinese value harmony and order.

AACSB Analytic, Individual dynamics

PTS: 1

7. Organizational culture refers to the
a. Set of important understandings that members of an organization share.
b. Expected ways of behaving for people in the same occupational group.
c. Values and beliefs pertaining to doing business with a specific company.
d. None of the above

AACSB Reflective thinking, Individual dynamics

PTS: 1

8. Occupational cultures
a. Are the norms, values, beliefs, and expected ways of behaving for people in the same occupational group.
b. Are the set of important understandings that members of an organization share.
c. Are norms, values, and beliefs that pertain to all aspects of doing business in a country.
d. Are the dominant cultures within a country.

AACSB Reflective thinking, Individual dynamics

PTS: 1

9. Some people believe that the norms, values, and beliefs of their own culture represent the only correct ways of dealing with the world. This is called
a. High power distance.
b. Stereotyping.
c. Androgyny.
d. Ethnocentrism.

AACSB Reflective thinking, Individual dynamics

PTS: 1

10. Cultural relativism represents
a. The belief that all cultures are valid and ethical responses to the problems of living.
b. The belief that some cultures are relatively better than others.
c. The belief that your own culture is the best.
d. The degree of similarity between business and national cultures.

AACSB Reflective thinking, Individual dynamics

PTS: 1

11. A new expatriate manager located in India reports to you that all of her subordinate local managers lack initiative and will only do what she tells them to do. You realize that most Indian managers expect superiors to tell them what to do. You advise her of this, but also caution the new manager to avoid:
a. Rationalization.
b. Stereotyping.
c. Uncertainty avoidance.
d. Ethnocentrism.

AACSB Reflective thinking, Individual dynamics

PTS: 1

12. On which of Hofstede’s value dimensions does the U.S. rank highest?
a. Masculinity
b. Individualism
c. Patriotism
d. Power distance

AACSB Reflective thinking, Individual dynamics

PTS: 1

13. High power distance countries have norms, values, and beliefs such as
a. It is best to exercise power privately.
b. Everyone has a place, some are high and some are low.
c. A leader should develop his or her subordinates.
d. Leaders are made and not born.

AACSB Reflective thinking, Leadership principles

PTS: 1

14. Countries high on uncertainty avoidance have norms, values, and beliefs such as
a. Debates help you find the truth.
b. Deviant people should be tolerated.
c. Lack of rules in the workplace is good.
d. Experts and authorities are usually correct.

AACSB Reflective thinking, Individual dynamics

PTS: 1

15. Which of the following best describes U.S. culture with regard to individualism?
a. Lower than many European nations
b. Highest observed so far
c. About the same as Japan
d. Slightly above average

AACSB Reflective thinking, Individual dynamics

PTS: 1

16. An emphasis on leadership styles that appeal to duty and commitment to group goals are found primarily in countries with
a. Low masculinity.
b. Low uncertainty avoidance.
c. Short term orientations.
d. High collectivisim (low individualism).

AACSB Reflective thinking, Leadership principles

PTS: 1

17. Training for conformity and obedience, with valuations based on compliance and trustworthiness characterize countries with
a. Low power distance.
b. High power distance.
c. High individualism.
d. Short term orientations.

AACSB Reflective thinking, Individual dynamics

PTS: 1

18. Cultures with high power distance values probably have
a. Participative leadership.
b. Decentralized decision making.
c. Large wage differences between management and workers.
d. Managers selected by educational achievement.

AACSB Analytic, Individual dynamics

PTS: 1

19. Seniority tends to dominate evaluation and promotion in
a. Short term oriented cultures.
b. Cultures high on uncertainty avoidance and low on individualism.
c. Ethnocentric cultures.
d. Doing rather than being cultures.

AACSB Reflective thinking, Individual dynamics

PTS: 1

20. People from ________ countries would probably feel most comfortable with an autocratic (theory X) task- directed style of leadership.
a. High masculinity
b. High power distance
c. High uncertainty avoidance
d. All of the above

AACSB Reflective thinking, Individual dynamics

PTS: 1

21. A culture which has dominant values of success, money, and material things is probably
a. Low on power distance.
b. Low on individualism.
c. High on masculinity.
d. High on long term orientation.

AACSB Analytic, Individual dynamics

PTS: 1

22. In countries that rank high on Hofstede’s masculinity index
a. People prefer a short working day to get home to their families.
b. People feel more comfortable in small organizations.
c. Theory X management is rejected strongly.
d. Work is central to life and job recognition is very important.

AACSB Reflective thinking, Individual dynamics

PTS: 1

23. In a universalistic culture, the right way to treat people is based on
a. Personal relationships.
b. Principles of harmony within the group.
c. Abstract principles such as rules of law and religion.
d. Accepting the use of emotions.

AACSB Reflective thinking, Individual dynamics

PTS: 1

24. Which of the 7d cultural dimensions represents the extent to which an individual’s personal life is involved in his/her work relationships?
a. Neutral versus affective
b. Achievement versus ascription
c. Time orientation
d. Specific versus diffuse

AACSB Analytic, Individual dynamics

PTS: 1

25. The achievement versus ascription dimension addresses
a. The extent to which an individual’s life is involved with work.
b. The manner by which a society gives status.
c. The way a culture deals with the past, present, and future.
d. The belief people have in controlling their fate.

AACSB Reflective thinking, Individual dynamics

PTS: 1

26. Expressions of anger, laughter, gesturing, and emotional outbursts are considered acceptable in
a. Specific cultures.
b. Diffuse cultures.
c. Neutral cultures.
d. Affective cultures.

AACSB Analytic, Individual dynamics

PTS: 1

27. Which of the following statements is true regarding a future oriented society?
a. Managers and workers do not necessarily believe that hard work can lead to future success.
b. People believe they can control nature.
c. Organizational change is considered necessary and beneficial.
d. Individuals cannot influence the future.

AACSB Analytic, Individual dynamics

PTS: 1

28. In countries where it is believed that nature dominates people,
a. Managers are less likely to be fatalistic.
b. Managers emphasize planning and scheduling.
c. Managers actively try to change situations.
d. Managers believe that they must accept situations rather than changing them.

AACSB Analytic, Individual dynamics

PTS: 1

29. The ability to interact effectively in multiple cultures is known as
a. Trustworthiness.
b. Cultural intelligence.
c. Cultural relativism.
d. None of the above

AACSB Reflective thinking, Individual dynamics

PTS: 1

30. Discussing cultural paradoxes, the text indicates that although the US scores very high on individualism, it also has the highest percentage of
a. unmotivated population.
b. uncaring seniors.
c. homeless people.
d. charity giving in the world.

AACSB Analytic, Individual dynamics

PTS: 1

31. A cultural paradox is defined as:
a. Group situations define cultural prescriptions.
b. Individual situations define cultural prescriptions.
c. Group situations contradict cultural prescriptions.
d. Individual situations contradict cultural prescriptions.

AACSB Reflective thinking, Individual dynamics

PTS: 1

32. When hiring for managerial jobs in high power distance countries, preference is generally given to individuals
a. having a high social class or a degree from an elite university.
b. from all social classes.
c. based on their qualifications and skills.
d. All of the above

AACSB Analytic, Individual dynamics

PTS: 1

33. The range of feelings outwardly expressed in society refers to the cultural dimension of ________.
a. Uncertainty avoidance
b. Universalism vs. particularism
c. Neutral vs. affective
d. Diffuse vs. specific

AACSB Reflective thinking, Individual dynamics

PTS: 1

34. Preference for involvement in multiple areas of personal and work life simultaneously are more likely in
a. Specific cultures.
b. Diffuse cultures.
c. Neutral cultures.
d. Affective cultures.

AACSB Analytic, Individual dynamics

PTS: 1

35. Which of the following cultural dimensions is NOT included in Hofstede’s model of national culture?
a. Power distance
b. Individualism
c. Masculinity
d. Neutrality

AACSB Reflective thinking, Individual dynamics

PTS: 1

36. US firms often outsource customer service to workers in a foreign country. To minimize difficulties, such workers receive cross-cultural training which may include:
a. Training workers to reduce or eliminate an accent.
b. Educating workers regarding US culture.
c. Requiring workers to speak only English while on duty.
d. All of the above

AACSB Reflective thinking, Individual dynamics

PTS: 1

37. Which of the following cultural dimension represents the extent to which individuals are expected to be fair, altruistic, caring and generous?
a. Performance orientation
b. Individualism
c. Humane orientation
d. Power distance

AACSB Reflective thinking, Individual dynamics

PTS: 1

38. According to the text, which of the following two dimensions are not considered by Hofstede and is unique to the GLOBE cultural dimensions framework?
a. Power distance and humane orientation
b. Long-term orientation and uncertainty avoidance
c. Masculinity and Individualism
d. Humane orientation and performance orientation

AACSB Reflective thinking, Individual dynamics

PTS: 1

39. Cultural paradoxes represent
a. Cases where situations in reality seem to contradict cultural prescriptions.
b. The assumption that all people within a culture behave, feel and act the same.
c. The belief that a person’s culture is superior.
d. The belief that one’s culture is inferior.

AACSB Reflective thinking, Individual dynamics

PTS: 1

40. According to research discussed in the text, which of the following may help managers become more culturally intelligent?
a. Exposure to new cultural experiences in other countries
b. Learning to trust each people from individualistic cultures
c. Having a short term orientation
d. All of the above are true

AACSB Reflective thinking, Individual dynamics

PTS: 1

ESSAY

1. Define national culture, business culture, occupational, and organizational culture.

2. Describe three management implications of high individualism versus collectivism (low individualism).

3. What are country clusters? Explain with an example.

4. What are cultural paradoxes? Give one example.

5. Describe some characteristics of cultures high on power distance. Compare the management implications with cultures low on power distance.

6. Describe some characteristics of cultures high on collectivism. Compare the management implications with cultures low on collectivism.

7. Describe some characteristics of cultures high on masculinity. Compare the management implications with cultures low on masculinity.

8. Discuss four of the 7d cultural dimensions. What are some implications of these dimensions for international management?

9. Why do the rankings on some cultural dimensions such as individualism differ between the 7d and Hofstede models?

10. Discuss the GLOBE cultural framework. How is this cultural framework different from Hofstede’s framework?

Chapter 3 The Institutional Context of Multinational Management

MULTIPLE CHOICE

1. The national context of a society is made up of
a. The national and business cultures of that society.
b. The social institutions of that society.
c. The national cultures and social institutions of that society.
d. The national cultures of that society.

AACSB Reflective thinking, Environmental influence

PTS: 1

2. A complex of positions, roles, norms, and values organizing relatively stable patterns of human resources to sustain viable social structures refers to which of the following?
a. Entrepreneurship
b. Social institutions
c. Comparative advantage
d. Strategy of the multinational company

AACSB Reflective thinking, Environmental influence

PTS: 1

3. According to the model discussed in the text, the national context does which of the following?
a. Creates a resource pool
b. Influences the business environment and helps create induced factor conditions
c. Does not influence the business environment
d. Does not help create induced factor conditions

AACSB Reflective thinking, Environmental influence

PTS: 1

4. An economic system where production activities are decentralized to private owners who carry out these activities to make a profit is known as a
a. Capitalist economy.
b. Command economy.
c. Socialist economy.
d. Mixed economy.

AACSB Reflective thinking, Environmental influence

PTS: 1

5. Which of the following statements is NOT TRUE regarding the experiences countries go through as they undertake market transitions from socialism to a more market based economy?
a. Drastic measures have to be taken to turn around formerly inefficient companies.
b. Managers’ thinking have to be changed so that they can understand management functions.
c. Financial systems have to be left unregulated to accurately reflect market prices.
d. More workers have to be hired as companies find that they are understaffed.

AACSB Reflective thinking, Environmental influence

PTS: 1

6. A society that is characterized by dominance of the manufacturing or secondary sectors is a/an
a. Industrial society.
b. Pre-industrial society.
c. Post-industrial society.
d. Market society.

AACSB Reflective thinking, Environmental influence

PTS: 1

7. Which of the following statements is TRUE regarding post-industrial societies?
a. Post-industrial societies are characterized by the dominance of manufacturing sectors.
b. Post-industrial societies tend to favor economic achievement.
c. Post-industrial societies tend to emphasize quality of life over economic achievement.
d. All of the above are true.

AACSB Reflective thinking, Environmental influence

PTS: 1

8. Which of the following are key social institutions that are the most likely to influence the business environment of a country?
a. Economic system
b. Level of industrialization
c. Religion
d. All of the above

AACSB Reflective thinking, Environmental influence

PTS: 1

9. Which of the following systems encourage the pursuit of collective goals such as social equality and solidarity?
a. Economic system
b. Market economy
c. Command economy
d. Capitalist economy

AACSB Reflective thinking, Environmental influence

PTS: 1

10. According to the text, which of the following statements regarding workers in formerly socialist economies is NOT TRUE?
a. Workers in formerly socialist economies are very trusting of each other
b. Workers in formerly socialist economies are generally reluctant to cooperate and work with each other
c. Workers in formerly socialist economies tend to favor personal relationships as key to success as opposed to their work performance
d. All of the above are true

AACSB Reflective thinking, Environmental influence

PTS: 1

11. Which of the following societies tend to determine occupations based on ascription (family background) and social status?
a. Industrial societies
b. Postindustrial societies
c. Socialist societies
d. Pre industrial societies

AACSB Reflective thinking, Environmental influence

PTS: 1

12. Which of the following four religions are practiced by 71% of the world’s population?
a. Jainism, Hinduism, Islam and Christianity
b. Hinduism, Christianity, Islam, and Sikhism
c. Christianity, Hinduism, Islam and Buddhism
d. Judaism, Christianity, Buddhism, and Islam

AACSB Reflective thinking, Environmental influence

PTS: 1

13. Which of the following religions is most practiced around the world?
a. Christianity
b. Buddhism
c. Hinduism
d. Islam

AACSB Reflective thinking, Environmental influence

PTS: 1

14. Which of the following religions has strict gender roles and also prohibits multinationals from paying or receiving interest on transactions?
a. Islam
b. Buddhism
c. Christianity
d. Jainism

AACSB Reflective thinking, Environmental influence

PTS: 1

15. Which religion is considered to be timeless and eternal as it not based on a single founder or event?
a. Jainism
b. Christianity
c. Hinduism
d. None of the above

AACSB Reflective thinking, Environmental influence

PTS: 1

16. Which of the following religions is based on the idea that craving and desires produce suffering but that it also possible to reach a stage where there is no longer any suffering?
a. Christianity
b. Judaism
c. Hinduism
d. Buddhism

AACSB Reflective thinking, Environmental influence

PTS: 1

17. The cultural and economic changes that occur because of how production is organized and distributed in society refers to which concept?
a. religion
b. education
c. industrialization
d. dominant economic type

AACSB Reflective thinking, Environmental influence

PTS: 1

18. In industrial societies, occupational placement is based on universalistic criteria such as
a. Age.
b. Religion.
c. Ascription.
d. Achievement.

AACSB Reflective thinking, Environmental influence

PTS: 1

19. A multinational manager carefully considers the list of festivals that are celebrated in a country in order to allow for holidays for his/her employees. Which social institution is most likely being considered here?
a. Industrialization
b. Market transition
c. Education
d. Religion

AACSB Analytic, Environmental influence

PTS: 1

20. Pre industrial societies tend to have
a. Poor infrastructure and support.
b. Adequate infrastructure.
c. Favorable business conditions.
d. Government support.

AACSB Reflective thinking, Environmental influence

PTS: 1

21. An increased emphasis on quality of life over achievement oriented norms is typical of
a. Pre-industrial societies.
b. Industrial societies.
c. Post-industrial societies.
d. None of the above

AACSB Reflective thinking, Environmental influence

PTS: 1

22. A multinational Human Resource Manager’s decision to promote an individual results in wide discontent in the foreign subsidiary. The manager finds that although the promoted individual’s performance is exemplary, most employees feel that the promotion should have gone to another individual who comes from an important family. The foreign subsidiary is most likely located in a/an
a. Industrial society.
b. Pre-industrial society.
c. Capitalist society.
d. Post-industrial society.

AACSB Reflective thinking, Environmental influence

PTS: 1

23. In which of the following societies would people most likely prefer non-monetary incentives?
a. Industrial society
b. Pre-industrial society
c. Post-industrial society
d. None of the above

AACSB Reflective thinking, Motivation concepts

PTS: 1

24. High rankings on the materialist index of some countries (e.g., Hungary, India, Brazil) suggest that individuals in these countries are
a. Favor non material incentives.
b. Achievement oriented.
c. Motivated by non-monetary rewards.
d. Hinduism.

AACSB Reflective thinking, Environmental influence

PTS: 1

25. When industrialization is inwardly oriented, local industries are promoted to satisfy the
a. Need to export.
b. Local population.
c. Requirements of multinational companies.
d. Domestic market and preserve foreign exchange.

AACSB Analytic, Environmental influence

PTS: 1

26. When industrialization is outward oriented, foreign exchange is
a. Encouraged and exporting is promoted.
b. Discouraged and exporting is not favored.
c. Not welcomed.
d. Used to fund governments in power.

AACSB Reflective thinking, Environmental influence

PTS: 1

27. The famous German Sociologist, Max Weber, argued that the Protestant work ethic
a. Led to the emergence of capitalism in Western Europe.
b. Led to the decline of capitalism in Western Europe.
c. Led to an acute distaste for the accumulation of wealth.
d. Led to the rise of socialism in Eastern Europe.

AACSB Analytic, Environmental influence

PTS: 1

28. One important issue relevant to multinationals, is the extent to which educational systems encourage students to
a. Be innovative and creative.
b. To expect a more ethical atmosphere.
c. Passively accept what is taught.
d. None of the above

AACSB Reflective thinking, Environmental influence

PTS: 1

29. When multinationals pay low wages or use child labor, they often receive
a. Support and praise.
b. Imprisonment.
c. Negative publicity.
d. Social responsibility.

AACSB Reflective thinking, Environmental influence

PTS: 1

30. According to the text, all of the following statements regarding education and educational systems around the world are TRUE except
a. Universal education enrolment is a goal of most countries.
b. Educational levels give an indication of the skill and productivity in any society.
c. The focus of educational systems around the world are fairly similar in terms of whether these systems emphasize academic or vocational aspects.
d. All of the above statements are true.

AACSB Analytic, Environmental influence

PTS: 1

31. The educational attainment scores
a. Are fairly similar for most countries.
b. Give an idea of the abundance of engineers for research and development purposes.
c. Reflect the mean years of schooling of people in any society.
d. All of the above are true of educational attainment scores.

AACSB Reflective thinking, Environmental influence

PTS: 1

32. Which of the following is not an implication of educational systems as they apply to multinationals?
a. Educational level gives an indication of the skill and productivity of workers in any society.
b. Educational systems have implications for how labor force issues are approached and policies implemented.
c. Educational levels can be gauged to give an idea of what multinationals can expect.
d. All of the above are true

AACSB Analytic, Environmental influence

PTS: 1

33. In societies with high social inequality, resources are controlled by
a. A majority of people.
b. Very few people.
c. The Government.
d. Religious institutions.

AACSB Reflective thinking, Environmental influence

PTS: 1

34. When a society expects that while men should work outside, and women ideally stay at home, this exhibits which of the following features?
a. Need for domestic products
b. Open societies
c. Growing levels of industrialization and economic development
d. Strict division of society by gender

AACSB Reflective thinking, Environmental influence

PTS: 1

35. Postindustrial societies are typically characterized by the dominance of
a. Service and manufacturing sectors.
b. Service sectors.
c. Manufacturing sectors.
d. Agricultural sectors.

AACSB Reflective thinking, Environmental influence

PTS: 1

36. The degree to which people have privileged access to resources and positions within societies is
a. An indication of social inequality.
b. The same around the world.
c. Has no implications for multinationals.
d. All of the above

AACSB Reflective thinking, Environmental influence

PTS: 1

37. Which of the following statements about the GINI index is FALSE?
a. The GINI index represents the extent of inequality in people’s income within a society
b. Ranges from 0 to 100
c. Is scaled so that 0 represents no inequality while 100 represents perfect inequality
d. Is scaled so that 100 represents no inequality while 0 represents perfect inequality

AACSB Reflective thinking, Environmental influence

PTS: 1

38. The movement from a socialist economy to a free market economy is also known as which of the following?
a. Market transition
b. Dominant economic type
c. Rapid industrialization
d. Government regulation

AACSB Analytic, Environmental influence

PTS: 1

39. The index of economic freedom may be used by multinationals to understand the nature of
a. market transitions
b. national culture
c. national context
d. governmental intervention

AACSB Reflective thinking, Environmental influence

PTS: 1

40. Which of the following has important implications for multinationals?
a. Religion
b. Education and economic systems
c. Industrialization and inequality
d. All of the above

AACSB Reflective thinking, Environmental influence

PTS: 1

ESSAY

1. Define social institutions. How do social institutions affect individuals and organizations?

2. Define national context. Explain how national context influences organizations.

3. What are the three major types of economic systems? What are the effects of economic systems on how organizations are structured in societies?

4. What are some implications of the market transitions that many formerly communist societies are experiencing? What are some major challenges facing multinationals as they try to motivate workers in these transition economies?

5. Compare and contrast pre-industrial, industrial and post-industrial societies. Discuss the implications for multinationals of any one of these three types of economies.

6. What are some major philosophies of each of the world’s major religions? Pick two religions and discuss how they affect the business environment.

7. How does the educational system influence the business environment in any country?

8. What is social inequality? What implications does social inequality have for multinationals?

Chapter 4
Managing Ethical and Social Responsibility Challenges in Multinational Companies

MULTIPLE CHOICE

1. International business ethics
a. Present problems similar to domestic business ethics.
b. Pertain to the rules and values that determine actions that companies should follow when dealing with other companies.
c. Pertain to those unique ethical problems faced by managers conducting business across countries.
d. None of the above

AACSB Ethics, Ethical responsibilities in organizations and societies

PTS: 1

2. Which of the following statements is NOT TRUE regarding social responsibility?
a. Social responsibility is not linked with business ethics.
b. Refers to the idea that businesses have certain responsibilities to society beyond making profits.
c. Means that a company has to take into consideration various stakeholders when making decisions.
d. Is concerned with the ethical consequences of policies and procedures of the company as an organization.

AACSB Ethics, Ethical responsibilities in organizations and societies

PTS: 1

3. The ethical philosophies that consider actions as good or bad regardless of their outcomes are
a. The teleological ethical theories.
b. Utilitarianism.
c. Deontological theories of ethics.
d. None of the above

AACSB Ethics, Ethical responsibilities in organizations and societies

PTS: 1

4. Utilitarianism, as a form of ethical philosophy,
a. Argues that what is good or moral comes from acts that produce the greatest good for the greatest number of people.
b. Argues that actions by themselves have a good or bad morality regardless of their consequences.
c. Is one form of deontological ethical theory.
d. Is a moral language proposed by Donaldson.

AACSB Ethics, Ethical responsibilities in organizations and societies

PTS: 1

5. Which of the following statements are true about teleological ethical theories?
a. The morality of an act comes from its consequences.
b. Utilitarianism is one of the most popular teleological theory.
c. Actions by themselves have a good or bad morality regardless of their consequences.
d. All of the above are true.

AACSB Ethics, Ethical responsibilities in organizations and societies

PTS: 1

6. Stealing a loaf of bread to feed a hungry family can be justified by which ethical theory?
a. Social responsibility ethical theory
b. Deontological ethical theory
c. Moral languages
d. Utilitarianism

AACSB Ethics, Ethical responsibilities in organizations and societies

PTS: 1

7. Moral languages
a. Are a form of deontological ethical theory.
b. Focus on the consequences of actions rather than their worth.
c. Describe the ways people think about general issues.
d. Are used to explain ethical choices.

AACSB Ethics, Ethical responsibilities in organizations and societies

PTS: 1

8. Moral languages include all of the following EXCEPT
a. Virtue and vice.
b. Self-control.
c. Avoiding harm.
d. Being ethical.

AACSB Ethics, Ethical responsibilities in organizations and societies

PTS: 1

9. Multinationals that provide fair wages to their local employees are following which type of moral language?
a. Avoiding harm
b. Ethical behavior
c. Rights and duties
d. Social contract

AACSB Ethics, Ethical responsibilities in organizations and societies

PTS: 1

10. According to the text, the United Nations Declaration of Human Rights is an example of which of the following?
a. Convenient imperialism
b. Transnational ethics
c. European codes
d. Moral language

AACSB Ethics, Ethical responsibilities in organizations and societies

PTS: 1

11. Written ethical codes may include which of the following?
a. Contracts
b. International laws
c. Laws of a country
d. All of the above

AACSB Ethics, Ethical responsibilities in organizations and societies

PTS: 1

12. Which of the following statements about bribes or questionable payments are true?
a. Bribes to expedite government actions or to gain business advantages are common in international business.
b. Most countries have formal laws forbidding bribes or questionable payments.
c. Enforceability of ethics varies in different countries.
d. All of the above

AACSB Ethics, Ethical responsibilities in organizations and societies

PTS: 1

13. The reason to know provisions of the FCPA is that it
a. Is the easiest to enforce and observe.
b. Probably encourages foreign bribery.
c. Is a tricky component for US companies.
d. Emphasizes the reasonable person concept.

AACSB Ethics, Ethical responsibilities in organizations and societies

PTS: 1

14. According to the FCPA, U.S. managers are criminally liable
a. Only for bribes that they pay directly to a foreign official.
b. Only for bribes paid in the U.S. and not in other countries where it is common practice in business dealings.
c. For all bribes by employees or agents of the U.S. company even if the U.S. managers do not know about them.
d. For bribes paid by foreign agents, if managers know about them.

AACSB Ethics, Ethical responsibilities in organizations and societies

PTS: 1

15. Which of the following payments would the Foreign Corrupt Practices Act allow?
a. Payments made under duress to avoid injury or violence
b. Small payments to encourage officials to do their legitimate and routine jobs
c. Payments that are considered lawful in the country
d. All of the above are allowed

AACSB Ethics, Ethical responsibilities in organizations and societies

PTS: 1

16. Ethical dilemmas are usually
a. Easy to resolve.
b. Clear and unambiguous.
c. Unclear and ambiguous.
d. Removed with a formal code of ethics.

AACSB Ethics, Ethical responsibilities in organizations and societies

PTS: 1

17. Proscriptive rules in codes of conduct:
a. Tell multinational companies or managers what they should do.
b. Are forms of moral language.
c. Tell multinational companies or managers what they cannot do.
d. All of the above

AACSB Ethics, Ethical responsibilities in organizations and societies

PTS: 1

18. Ethical convergence
a. Is similar to ethical relativism.
b. Refers to basic universal moral principles.
c. Is a form of ethical universalism.
d. Refers to the growing pressures for multinational companies to follow the same rules in managing ethical behavior and social responsibility.

AACSB Ethics, Ethical responsibilities in organizations and societies

PTS: 1

19. Pressures for ethical convergence include all of the following EXCEPT
a. The growth of international trade and trading blocs.
b. Increased interaction between foreign trading partners.
c. The need to have unique norms and values to manage their employees differently.
d. All of the above are true

AACSB Ethics, Ethical responsibilities in organizations and societies

PTS: 1

20. Prescriptive rules in codes of conduct
a. Tell multinational companies or managers what they should do.
b. Are forms of moral language.
c. Tell multinational companies or managers what they cannot do.
d. All of the above

AACSB Ethics, Ethical responsibilities in organizations and societies

PTS: 1

21. Ethical relativism
a. Argues that one should impose the home country’s ethical system everywhere.
b. Implies that ethics are relative to the type of philosophy used.
c. Means that each society’s view of ethics must be considered legitimate.
d. Means that the same ethical principles are universal.

AACSB Ethics, Ethical responsibilities in organizations and societies

PTS: 1

22. The argument that there are basic moral principles that transcend cultural and national boundaries is supported by
a. Ethical relativism.
b. Moral languages.
c. Ethical universalism.
d. None of the above

AACSB Ethics, Ethical responsibilities in organizations and societies

PTS: 1

23. When companies use the logic of ethical relativism to behave any way they please, this is known as
a. Prescriptive ethical management.
b. Proscriptive ethical management.
c. Convenient relativism.
d. Universal ethics applications.

AACSB Ethics, Ethical responsibilities in organizations and societies

PTS: 1

24. When companies use the logic of moral universalism and impose their views on the rest of the world, ________________ occurs.
a. Ethical divergence
b. Ethical convenience
c. Cultural imperialism
d. None of the above

AACSB Ethics, Ethical responsibilities in organizations and societies

PTS: 1

25. The form of analysis where the prime interest is what is the best decision for a company’s profit is
a. Legal analysis.
b. Ethical analysis.
c. Social responsibility analysis.
d. None of the above

AACSB Ethics, Ethical responsibilities in organizations and societies

PTS: 1

26. In an economic analysis
a. The manager considers the best decision for a company’s profits.
b. The manager focuses on meeting the laws of a country.
c. The manager goes beyond profits and analyzes the ethical consequences of decisions.
d. None of the above

AACSB Ethics, Ethical responsibilities in organizations and societies

PTS: 1

27. When facing an ethical question, the manager who uses legal analysis criteria
a. Is primarily interested in the decision that is best for the company’s profits.
b. Focuses on only meeting the laws of the country in which the company is operating.
c. Focuses on meeting the needs of other constituents beyond stakeholders.
d. Focuses on doing the right things.

AACSB Ethics, Ethical responsibilities in organizations and societies

PTS: 1

28. In an ethical analysis of a problem, a manager must
a. Focus on meeting the laws of the country in which the company is operating.
b. Focus on what is the best decision for a company’s profits.
c. Focus on the decisions with the best consequences.
d. None of the above

AACSB Ethics, Ethical responsibilities in organizations and societies

PTS: 1

29. The first duty of a multinational manager faced with a decision is
a. To consider whether the decision makes business sense.
b. To consider whether the decision meets the legal standard in the country.
c. To consider whether the decision is ethical.
d. To refer to the written codes of ethics.

AACSB Ethics, Ethical responsibilities in organizations and societies

PTS: 1

30. Ethical decision making of multinational managers preferably should
a. Be based solely on home country ethical principles.
b. Go beyond legal constraints and respect the local cultural norms.
c. Be primarily profitable for the multinational.
d. None of the above

AACSB Ethics, Ethical responsibilities in organizations and societies

PTS: 1

31. A multinational manager decides that it would be unethical to close a foreign plant as employees in that plant are not being treated with dignity. Which ethical theory is the manager using to reach that conclusion?
a. Teleological ethical theory
b. Utilitarian ethical theory
c. Deontological ethical theory
d. None of the above

AACSB Ethics, Ethical responsibilities in organizations and societies

PTS: 1

32. A multinational manager decides to allow hiring of children for a foreign plant as such practices are accepted in the country. Which ethical principle is she basing her decision on?
a. Ethical universalism
b. Convenient ethical universalism
c. Ethical relativism
d. None of the above

AACSB Ethics, Ethical responsibilities in organizations and societies

PTS: 1

33. A multinational manager is considering closing a plant in China as wages have increased considerably in China. The manager considers the implications of laying off people and closing the plant on the profits of the company. Which form of analysis is the manager doing?
a. Legal analysis
b. Profit making analysis
c. Ethical analysis
d. None of the above

AACSB Ethics, Ethical responsibilities in organizations and societies

PTS: 1

34. Which act was proposed by the Securities Exchange Commission in reaction to the accounting scandals at companies like Enron and Worldcom?
a. Sarbanes-Oxley
b. WTO
c. Corruption Perception Index
d. The Ethisphere Institute

AACSB Ethics, Ethical responsibilities in organizations and societies

PTS: 1

35. Which of the following statements regarding the Foreign Corrupt Practices Act (FCPA) is NOT TRUE?
a. Bribes or payments made under duress to avoid injury or violence are acceptable.
b. Small payments to encourage officials to do their legitimate and routine jobs are acceptable.
c. Payments or gifts to foreign government officials for the sake of gaining or retaining business are acceptable.
d. In an unstable political environment, payments made to local officials to avoid harassment of employees are acceptable.

AACSB Ethics, Ethical responsibilities in organizations and societies

PTS: 1

36. Which of the following statements is TRUE regarding cultural relativism as an approach in international business ethics?
a. What is right or wrong depends on the culture.
b. A guide for what is legal and appropriate is the local culture.
c. Companies should follow the moral norms of the local culture.
d. All of the above statements are true.

AACSB Ethics, Ethical responsibilities in organizations and societies

PTS: 1

37. Deontological ethical theories
a. Argue that the morality of an act comes from this consequences.
b. Would provide justification for closing a plant and laying off workers to reduce costs.
c. Is most typically represented by cost and benefit analyses.
d. Argue that actions by themselves have a good or bad morality irrespective of the consequences.

AACSB Ethics, Ethical responsibilities in organizations and societies

PTS: 1

38. According to the text, which of the following is NOT a consequence of corruption?
a. Companies typically make up the bribe by increasing the contract price.
b. Companies use poorer quality materials to make up for the bribe.
c. Companies devote some of the bribe to socially responsible causes.
d. Corruption can also result in collusions among firms.

AACSB Ethics, Ethical responsibilities in organizations and societies

PTS: 1

39. The world seems to be moving towards transnational ethics because:
a. Globalization dramatically increases contact among people from different ethical and cultural systems.
b. This contact creates pressure for the development of new transnational agreements regarding business practices.
c. International trade and trading blocs such as the EU and NAFTA are growing.
d. All of these reasons.

AACSB Ethics, Ethical responsibilities in organizations and societies

PTS: 1

40. Which of the following ethical dilemmas is addressed by the Sarbanes Oxley Act?
a. Competition
b. Auditor responsibility and independence
c. Sourcing of cheap labor
d. Company strategy

AACSB Ethics, Ethical responsibilities in organizations and societies

PTS: 1

ESSAY

1. Discuss some of the issues that make international business ethics more complex than domestic business ethics.

2. Do laws always reflect a community’s ethics? Give an example to explain your answer.

3. Discuss the difference between teleological and deontological theories of ethics. Give examples of how an international manager might appeal to either type of theory when faced with the opportunity to offer a bribe.

4. How do social institutions and culture affect the practice of business ethics in different countries?

5. Compare and contrast ethical relativism and ethical universalism. What are some of the dangers of adopting either ethical relativism or ethical universalism when making decisions?

6. Describe the U.S. FCPA, what makes it challenging for U.S. firms, and how they deal with that challenge.

7. What are moral languages? How can moral languages help multinational become more ethical?

8. Discuss some of the pressures for ethical convergence. What are some implications for multinational management?

9. Compare and contrast prescriptive codes of ethics with proscriptive codes.

Chapter 5
Strategic Management in the Multinational Company: Content and Formulation

MULTIPLE CHOICE

1. Generic strategies
a. Occur when a company can outmatch its rivals in attracting and maintaining its customers.
b. Represent basic ways that domestic and multinational companies keep and achieve competitive advantage.
c. Are all based on finding ways to provide superior value to the customer.
d. None of the above

AACSB Reflective thinking, Strategy

PTS: 1

2. Which of the following is a primary generic strategy?
a. Cross country subsidizing
b. Low Cost
c. Competitive pricing
d. Critical success factors

AACSB Reflective thinking, Strategy

PTS: 1

3. Differentiation leads to higher profits by
a. Charging a higher price than competitors.
b. Offering the customer better value.
c. Offering a product with more features and quality.
d. All of the above

AACSB Reflective thinking, Strategy

PTS: 1

4. A low cost strategy leads to higher profits by
a. Charging a higher price than competitors.
b. Offering the customer products with more features.
c. The cost savings that firms achieve.
d. Adding unique features to products.

AACSB Reflective thinking, Strategy

PTS: 1

5. __________ strategies achieve higher profits by charging higher prices.
a. Low cost
b. Differentiation
c. Competitive advantage
d. Generic

AACSB Reflective thinking, Strategy

PTS: 1

6. The value chain
a. Represents a generic strategy.
b. Represents all the activities that a firm uses to market and deliver its products.
c. Represents all the activities that a firm uses to design, produce, market, deliver, and support its products.
d. None of the above

AACSB Reflective thinking, Strategy

PTS: 1

7. Upstream activities in the value chain are concerned, in part, with
a. The primary activities.
b. The support activities.
c. Input logistics.
d. After market service.

AACSB Reflective thinking, Strategy

PTS: 1

8. Support activities include
a. Research and development.
b. Service repair.
c. Output logistics.
d. None of the above

AACSB Reflective thinking, Strategy

PTS: 1

9. Sales and dealing with distribution channels refer to _________ activities in the value chain.
a. Upstream
b. Support
c. Secondary
d. Downstream

AACSB Reflective thinking, Strategy

PTS: 1

10. Capabilities that lead to competitive advantage must be
a. Valuable, rare, and easy to copy.
b. Fairly substitutable.
c. Valuable, rare, and hard to copy.
d. None of the above

AACSB Reflective thinking, Strategy

PTS: 1

11. Competitive strategies
a. Are examples of basic generic strategies.
b. Are moves multinationals and other companies use to defeat competitors.
c. Can be low cost or differentiation.
d. All of the above

AACSB Reflective thinking, Strategy

PTS: 1

12. Offensive strategies
a. Are examples of basic generic strategies.
b. Are direct targeting/attacking of rivals.
c. Are attempts to reduce the risk of being attacked.
d. Are used to convince other firms to seek other targets.

AACSB Reflective thinking, Strategy

PTS: 1

13. Defensive strategies include
a. Direct attacks, end-run offensive, and acquisitions.
b. The generic strategies.
c. Counter-parries.
d. None of the above

AACSB Reflective thinking, Strategy

PTS: 1

14. Strategies used to attempt to reduce the risk of being attacked are
a. Defensive competitive strategies.
b. Offensive competitive strategies.
c. Generic strategies.
d. None of the above

AACSB Reflective thinking, Strategy

PTS: 1

15. Counter-parry
a. Is an example of an offensive strategy.
b. Is an example of a generic strategy.
c. Is fending off a competitor’s attack in one country by attacking the competitor in another country.
d. None of the above

AACSB Reflective thinking, Strategy

PTS: 1

16. Corporate level strategies
a. Are similar to the generic strategies.
b. Pertain to the operation of corporate divisions.
c. Are concerned with how single business companies choose strategies.
d. Are concerned with how companies choose their mixtures of different businesses.

AACSB Reflective thinking, Strategy

PTS: 1

17. Business level strategies
a. Include only the generic strategies.
b. Pertain to the operation of multiple businesses.
c. Are concerned with how single business companies choose strategies.
d. Are concerned with how companies choose their mixtures of different businesses.

AACSB Reflective thinking, Strategy

PTS: 1

18. In related diversification
a. Companies acquire businesses in any country.
b. Companies acquire businesses in any industry.
c. Companies acquire businesses that are similar in some way to their core business.
d. None of the above

AACSB Reflective thinking, Strategy

PTS: 1

19. Acquisition of mixtures of businesses in any industry is
a. Low cost strategy.
b. Unrelated diversification.
c. Related diversification.
d. A business level strategy.

AACSB Reflective thinking, Strategy

PTS: 1

20. This is considered to be a popular and controversial way to address internal cost inefficiencies.
a. Insourcing
b. Outsourcing
c. Related diversification
d. Unrelated diversification

AACSB Reflective thinking, Strategy

PTS: 1

21. Market size, ease of entry and exit, and economies of scale are all examples of
a. Defensive strategies.
b. Key success factors.
c. Dominant economic characteristics.
d. Differentiation.

AACSB Reflective thinking, Strategy

PTS: 1

22. Key success factors are
a. Examples of defensive strategies.
b. Important characteristics of a company or its product that lead to success in an industry.
c. Similar to generic strategies.
d. The economic characteristics of countries that lead to success.

AACSB Reflective thinking, Strategy

PTS: 1

23. The acronym SWOT stands for
a. Strategies with organizational timelines.
b. Selection, withdrawal, opportunities, and timeliness.
c. Strengths, weakness, opportunities, and threats.
d. Strategies, winning, organizations, and tender offers.

AACSB Reflective thinking, Strategy

PTS: 1

24. A strength is
a. A favorable condition in a company’s environment.
b. Distinctive capability, resource, skill, or other advantage that a company has vis-à-vis its competitors.
c. Represented by changes in the economic conditions in an industry.
d. None of the above

AACSB Reflective thinking, Strategy

PTS: 1

25. Weaknesses are
a. Lack of distinctive capabilities, resource, and skills that leads to competitive disadvantage compared to competitors.
b. Unfavorable conditions in a firm’s environment.
c. Relevant to both the internal and external environment of companies.
d. All of the above

AACSB Reflective thinking, Strategy

PTS: 1

26. BMW and Mercedes view their Japanese rivals moves into the upscale car market as a/an
a. Strength.
b. Weakness.
c. Opportunity.
d. Threat.

AACSB Reflective thinking, Strategy

PTS: 1

27. Matrix analyses
a. Help assess business portfolios.
b. Divide businesses into successes and failures.
c. Are less complicated for the multinational company.
d. All of the above

AACSB Reflective thinking, Strategy

PTS: 1

28. In the BCG Matrix, cash cows are
a. Businesses in a slow-growth industry where the company has a strong market share position.
b. Businesses in a fast growing industry where the company has a strong market share position.
c. Businesses in a slow-growth industry where the company has a weak market share position.
d. Businesses in a fast growing industry where the company has a weak market share position.

AACSB Reflective thinking, Strategy

PTS: 1

29. In the BCG matrix, the appropriate strategy for dogs should be
a. Invest and Expand.
b. Defend and Harvest.
c. Divest.
d. None of the above

AACSB Reflective thinking, Strategy

PTS: 1

30. In the BCG Matrix, Defend and Harvest are the most popular strategies for
a. Stars.
b. Dogs.
c. Cash cows.
d. Problem children.

AACSB Reflective thinking, Strategy

PTS: 1

31. Competitive advantage
a. Represent the basic ways that companies can provide superior value to customers.
b. Is one of the basic strategies.
c. Occurs when a company can outmatch its rivals in attracting and maintaining its customers.
d. Is best achieved using a low cost strategy.

AACSB Reflective thinking, Strategy

PTS: 1

32. The GE Portfolio matrix
a. Is the same as the Boston Consulting Group matrix.
b. Contains four cells based on industry and business strength.
c. Can be used to assess business level strategies.
d. Contains nine cells based on industry strength and business competitive position.

AACSB Reflective thinking, Strategy

PTS: 1

33. Capabilities
a. Are the inputs into a company’s production or service processes.
b. Are early activities in the value chain such as R&D and dealing with suppliers.
c. Are similar to distinctive competencies.
d. Represent the ability of companies to assemble and coordinate their resources in ways that lead to lower costs of differentiated outputs.

AACSB Reflective thinking, Strategy

PTS: 1

34. Favorable conditions in a firm’s external environment are known as
a. Strengths.
b. Capabilities.
c. Opportunities.
d. Distinctive competencies.

AACSB Reflective thinking, Strategy

PTS: 1

35. Which of the following more likely represents a threat to a multinational company like Toyota?
a. Higher prices charged by Toyota’s competitors.
b. Lower interest rates around the world that makes cars more affordable.
c. Toyota’s bad image among teenagers.
d. Kia and Hyundai’s entry in markets traditionally dominated by Toyota.

AACSB Reflective thinking, Strategy

PTS: 1

36. A company that has a limited product range, and sells to certain buyers in some geographical areas is said to have which of the following?
a. Broad competitive scope
b. Narrow competitive scope
c. Lack of competition
d. None of the above

AACSB Reflective thinking, Strategy

PTS: 1

37. Porter’s five forces help a multinational manager understand
a. The key success factors in an industry.
b. How to assess the attractiveness of the industries a company is involved in.
c. How to assess its unrelated diversification efforts.
d. The trends in its industry.

AACSB Reflective thinking, Strategy

PTS: 1

38. Which of the following forces is NOT one of the forces considered in Porter’s five forces analysis?
a. Degree of competition among existing competitors
b. Degree of governmental regulation in the industry
c. Threat of new entrants in the industry
d. Bargaining power of buyers in the industry

AACSB Reflective thinking, Strategy

PTS: 1

39. The degree to which competitors are confronted with alternatives for their products is referred to as which force in Porter’s five forces?
a. Threat of new entrants
b. Bargaining power of buyers
c. Degree of competition
d. None of the above

AACSB Analytic, Strategy

PTS: 1

40. The national context affects strategy through which of the following processes?
a. Encourage or discourage certain forms of businesses and strategies in each country
b. Factor conditions play a role in shaping each country’s unique resource base
c. Determine which resources are used, how they are used and which are developed
d. All of the above

AACSB Reflective thinking, Environmental influence

PTS: 1

ESSAY

1. Describe the low cost strategy as compared to the differentiation strategy.

2. Regarding low cost and differentiation strategies, when is each strategy appropriate?

3. Compare and contrast defensive and offensive strategies. Discuss when a multinational can use offensive strategies in one country and defensive strategies in another.

4. What is the value chain? How can an understanding of the value chain help a company be more successful in its generic strategy?

5. What is related diversification? When would you expect related diversification to be more profitable than unrelated diversification?

6. What is sustainable competitive advantage? What are some essential characteristics of company capabilities that can lead to sustainable competitive advantage?

7. Describe the SWOT analysis. Why is a SWOT analysis more complex for a multinational than for a domestic company?

8. Discuss some of the major issues a multinational manager needs to take into consideration when conducting an industry analysis.

9. What are key success factors? Discuss some KSFs that are most likely to vary by national context.

10. Discuss each of Porter’s five forces model. What information can a multinational obtain from Porter’s five forces industry analysis?

Chapter 6 Multinational and Entry-Mode Strategies: Content and Formulation

MULTIPLE CHOICE

1. According to the text, a fundamental dilemma faced by all multinationals is
a. The form of competitive strategy they should use.
b. How much they emphasize responding to differences in all the markets they operate.
c. How to fight their rivals.
d. None of the above

AACSB Reflective thinking, Strategy

PTS: 1

2. Responding to differences in the markets in all the countries in which a company operates is
a. The global-local dilemma.
b. The best strategy for success for a multinational.
c. The local-responsiveness solution.
d. The global solution.

AACSB Reflective thinking, Strategy

PTS: 1

3. The global solution to the global-local dilemma refers to
a. Conducting business similarly around the world.
b. Responding to differences in the global markets in which a company operates.
c. Customization of products to regional but not country differences.
d. None of the above

AACSB Reflective thinking, Strategy

PTS: 1

4. Conducting business similarly throughout the world, and locating company units wherever there is high quality and low cost is
a. The global-local dilemma.
b. The global integration solution.
c. The local responsiveness solution.
d. The multidomestic solution.

AACSB Reflective thinking, Strategy

PTS: 1

5. A multidomestic company gives strategic priority to
a. Providing a low cost product to local customers.
b. Adapting a product or service to local needs.
c. Having multiple locations for sources its raw materials.
d. Controlling the strategic options of local companies.

AACSB Reflective thinking, Strategy

PTS: 1

6. Which strategy attempts to balance advantages from three other multinational strategies?
a. Regional
b. Multidomestic
c. Transnational
d. International

AACSB Reflective thinking, Strategy

PTS: 1

7. Dispersing value-chain activities anywhere in the world where the company can do them best or cheapest refers to seeking
a. The global-local dilemma.
b. Comparative advantage of nations.
c. Competitive advantage of firms.
d. Locations advantages.

AACSB Reflective thinking, Strategy

PTS: 1

8. Comparative advantage is
a. Similar to competitive advantage.
b. A local responsiveness solution.
c. Where the company can produce the cheapest.
d. Advantages of nations over other nations.

AACSB Reflective thinking, Strategy

PTS: 1

9. Comparative advantages are
a. Cost or quality advantages particular to a nation.
b. Similar to competitive advantages.
c. Emphasized through multidomestic strategies.
d. None of the above

AACSB Reflective thinking, Strategy

PTS: 1

10. Selling global products and using similar marketing techniques worldwide is an example of a
a. Transnational strategy.
b. International strategy.
c. Multidomestic strategy.
d. Regional strategy.

AACSB Reflective thinking, Strategy

PTS: 1

11. A regional strategy refers to
a. Managing raw-material sourcing, production, marketing, and support activities within a particular region.
b. Selling global products and using similar marketing techniques worldwide.
c. Dispersing value-chain activities anywhere in the world where the company can do them best or cheapest.
d. None of the above

AACSB Reflective thinking, Strategy

PTS: 1

12. Global companies usually seek to
a. Provide unique products for all countries of the world.
b. Take advantage of different factor costs among countries.
c. Manufacture their products in every country.
d. Focus only on downstream activities in the value chain.

AACSB Reflective thinking, Strategy

PTS: 1

13. Common customer needs, global sources of raw material, and favorable trade policies all lead to
a. An increased focus on local markets.
b. More use of the multidomestic strategy.
c. More use of the local solution to the global-local dilemma.
d. A greater likelihood that companies select global strategies.

AACSB Reflective thinking, Strategy

PTS: 1

14. Having one set of products for North American countries and another set of products for Europe illustrates which strategy?
a. Multidomestic
b. Regional
c. Transnational
d. Global

AACSB Reflective thinking, Strategy

PTS: 1

15. Globalization drivers
a. Fall into four categories: market, costs, governments, and competition.
b. Are conditions in an industry that favor transnational or international strategies over multidomestic or regional strategies.
c. Indicate the degree of globalization of an industry.
d. All of the above

AACSB Reflective thinking, Strategy

PTS: 1

16. Asking diagnostic questions such as are there economies of scale, are there cheaper sources of raw materials, are there global sources of low-cost raw materials provide information regarding which globalization driver?
a. Global markets
b. Costs
c. Competition
d. Governments

AACSB Reflective thinking, Strategy

PTS: 1

17. Entry-mode strategies
a. Include multidomestic and transnational strategies.
b. Are options multinationals have to enter foreign markets and countries.
c. Are only processes by which firms fill overseas orders like domestic orders.
d. None of the above

AACSB Reflective thinking, Strategy

PTS: 1

18. Using intermediaries or go-between firms to provide the knowledge and contacts necessary to sell overseas is usually associated with
a. Direct exporting.
b. Franchising.
c. Indirect exporting.
d. Licensing.

AACSB Reflective thinking, Strategy

PTS: 1

19. A company that treats and fills overseas orders like domestic orders is an example of a
a. Indirect exporter.
b. Export management company.
c. Aggressive exporter.
d. Passive exporter.

AACSB Reflective thinking, Strategy

PTS: 1

20. International franchising
a. Is a comprehensive licensing agreement where the franchisor grants to the franchisee the use of a whole business operation.
b. When multinationals make a project fully operational and train local managers and workers before the owner takes control.
c. The use of intermediaries or go-between firms to provide the knowledge and contacts necessary to sell overseas is.
d. None of the above

AACSB Reflective thinking, Strategy

PTS: 1

21. When multinationals make a project fully operational and train local managers and workers before the owner takes control, they are using which entry-mode strategy?
a. Licensing
b. Franchising
c. Turnkey
d. Direct export

AACSB Reflective thinking, Strategy

PTS: 1

22. When a firm from another country has an equity (or ownership) position in a separate company, it is engaging in
a. An international cooperative alliance.
b. A turnkey operation.
c. A contract manufacturer.
d. FDI.

AACSB Reflective thinking, Strategy

PTS: 1

23. Foreign direct investment
a. Is an entry-mode strategy.
b. Means that a multinational owns, in part or in whole, an operation in another country.
c. Symbolizes the highest rate of internationalization.
d. All of the above

AACSB Reflective thinking, Strategy

PTS: 1

24. Major drawbacks of licensing include
a. The risk of losing the capital investment.
b. The risk of the local government changing international trade policies.
c. The loss of control and the possibility of creating a new competitor.
d. All of the above

AACSB Reflective thinking, Strategy

PTS: 1

25. Companies should license if
a. They want to control all aspects of operation.
b. Their product is older or a soon-to-be replaced technology.
c. They have the necessary resources to export or invest directly.
d. There are no tariffs or quotas.

AACSB Reflective thinking, Strategy

PTS: 1

26. If a company seeks a strategic alliance with another firm, it is a
a. Low cost strategy.
b. Franchising agreement.
c. Competitive agreement.
d. Cooperative agreement.

AACSB Reflective thinking, Strategy

PTS: 1

27. Advantages of foreign direct investment include
a. Increased capital investment.
b. Greater control of product and marketing strategy.
c. Greater exposure to financial risks.
d. The lower costs of using expatriates managers.

AACSB Reflective thinking, Strategy

PTS: 1

28. If management believes that it must control foreign sales, customer credit, and the eventual sale of the product, then the company should choose which of the following entry-mode strategies?
a. Indirect exporting
b. Licensing
c. Direct exporting
d. Franchising

AACSB Reflective thinking, Strategy

PTS: 1

29. When deciding on an entry-mode strategy, cultural distance is
a. The physical distance between two countries.
b. Not the distance between an organization’s culture and the local national culture.
c. Similar to the geographic distance.
d. None of the above

AACSB Reflective thinking, Strategy

PTS: 1

30. As entry-mode strategies, direct and indirect exporting have
a. High levels of control and low levels of risk.
b. Similar levels of risk and control as FDI.
c. Low levels of risk and control.
d. Are among the most risky.

AACSB Reflective thinking, Strategy

PTS: 1

31. Which of the following strategies gives top priority to seeking location advantages and to gaining operation efficiencies from worldwide operation?
a. Multidomestic strategy
b. Regional strategy
c. Transnational strategy
d. International strategy

AACSB Reflective thinking, Strategy

PTS: 1

32. If strategists in a firm believe that centralizing key activities such as R&D is necessary to reduce coordination costs and to achieve economies of scale, they are more likely to choose
a. An international strategy.
b. A transnational strategy.
c. A local strategy.
d. None of the above

AACSB Analytic, Strategy

PTS: 1

33. What dictates the choice of a multinational entry-mode strategy?
a. Strategic competition
b. Strategic reason to be in the market
c. Companies want to share risks and costs of developing technology
d. Companies want to achieve economies of scale

AACSB Reflective thinking, Strategy

PTS: 1

34. If a company believes that it needs to control foreign sales, customer credit, and sale of product to the customer, it is more likely to choose
a. Indirect exporting.
b. Rely on foreign intermediaries for export purposes.
c. Direct exporting.
d. None of the above

AACSB Reflective thinking, Strategy

PTS: 1

35. To deal with political risk, various private and government agencies offer
a. Insurance.
b. Assurance.
c. Investment.
d. All of the above are true.

AACSB Reflective thinking, Strategy

PTS: 1

36. A company pursuing a regional strategy
a. Has worldwide products and a worldwide value chain.
b. Sells the same product using only minor modification in marketing and product offerings.
c. Is similar to a company pursuing an international strategy.
d. Attempt to gain location advantages of more global transnational combined with some of the local-adaptation advantages of the multidomestic company.

AACSB Reflective thinking, Strategy

PTS: 1

37. Which of the following statements regarding exporting is FALSE?
a. Exporting is the easiest of entry-mode strategies.
b. Export can be of the passive form where overseas orders are treated like domestic orders.
c. Export can be indirect where companies rely on intermediaries to sell overseas.
d. Because it is the easiest form of going international, exports are not as important to the US economy.

AACSB Reflective thinking, Strategy

PTS: 1

38. Foreign direct investment
a. Exists when two or more firms have an ownership position in a separate company.
b. Requires at least three separate companies to combine resources.
c. Exists when two or more companies agree to cooperate in any value-chain activity.
d. The above statements are all true for equity international joint ventures.

AACSB Reflective thinking, Strategy

PTS: 1

39. Which of the following refers to the negative impact of political decisions or events on a multinational’s profitability?
a. Economic risk
b. Local government risk
c. Political risk
d. Control risk

AACSB Reflective thinking, Strategy

PTS: 1

40. Which of the following is NOT a factor considered when assessing political risk?
a. The durability of the political system
b. The role of the government, unions and the media in political stability
c. The profitability
d. The reliability of the rule of law

AACSB Reflective thinking, Strategy

PTS: 1

ESSAY

1. Describe the global-local dilemma. When is each solution most appropriate?

2. What are globalization drivers?

3. Discuss the conditions when a transnational or international firm is likely to outcompete a multidomestic or regional strategist. Contrast this with the opposite situation where the multidomestic is most likely to be successful.

4. Contrast the transnational and international strategies in their approach to location advantages.

5. You work for a small company that has an innovative low-cost production method for laser disks. A Japanese firm approaches your CEO to license the technology. The CEO asks you to write a report detailing the risks and potential benefits of this deal. What will you include in the report and why?

6. You work for a small company that has an innovative low-cost production method for laser disks that allow it to produce at very low cost. A Belgian firm approaches your CEO and offers to export your disks to Belgium for a commission. The CEO asks you to write a report detailing the risks and potential benefits of this deal. What will you include in your report and why

7. Under what conditions would a regional strategy be best for a multinational? Explain.

8. Discuss some key issues to consider when choosing an entry-mode strategy.

9. Discuss some general strategic considerations regarding multinational strategy when choosing a entry-mode strategy.

10. What is political risk? Discuss some of the aspects of political risk assessment. How can multinationals use political risk assessment?

Chapter 7 Small Businesses and International Entrepreneurship:
Overcoming Barriers and Finding Opportunities

MULTIPLE CHOICE

1. Small businesses differ from large businesses when going international primarily in
a. The available participation strategies.
b. The strategies they can use to go international.
c. Their founder’s or entrepreneur’s influence.
d. The available multinational strategies.

AACSB Reflective thinking, Creation of value

PTS: 1

2. Definitions of small businesses discussed in the text include the following EXCEPT
a. Number of employees.
b. Sales revenue.
c. Industry.
d. Type of product or service.

AACSB Reflective thinking, Creation of value

PTS: 1

3. An entrepreneur
a. Creates new ventures that seek profit and growth.
b. Is seldom the primary force behind a company’s decision to go international.
c. Can accurately predict the risks and uncertainties of his/her ventures.
d. Faces less uncertainty than a multinational.

AACSB Reflective thinking, Creation of value

PTS: 1

4. When a company sets up a sales branch in a foreign country, it is at what stage of the internationalization of the small entrepreneurial business?
a. Stage 1
b. Stage 2
c. Stage 3
d. Stage 4

AACSB Reflective thinking, Creation of value

PTS: 1

5. During the second stage (Export Management) of the small business model of internationalization, the company
a. Fills international orders only.
b. Specifically seeks export sales.
c. Seeks increased sales from licensing.
d. Sets up a local sales office in another country.

AACSB Reflective thinking, Creation of value

PTS: 1

6. A global start-up is
a. A company that goes global from day one of its life.
b. A company that starts a global strategy after exporting.
c. A company that skips the first stage of the Small Business Model of Internationalization.
d. None of the above

AACSB Reflective thinking, Creation of value

PTS: 1

7. One of the major advantages of being involved in Stage 5 (Production Abroad) of the stages of internationalization for small businesses is that it
a. Allows the company to cut the costs of direct investment.
b. Allows the company to avoid developing a globally integrated network.
c. Allows the company to gain local advantages such as product adaptation or production effectiveness.
d. Almost insures that the company will survive and prosper.

AACSB Reflective thinking, Creation of value

PTS: 1

8. Global start-ups occur when
a. Companies have consistent licensing agreements.
b. Companies start exporting as soon as they receive their first order.
c. Companies begin as multinationals.
d. Companies move rapidly through the stages of internationalization.

AACSB Reflective thinking, Creation of value

PTS: 1

9. Which of the following has helped to level the playing field for small businesses wanting to go international?
a. Technology and e-commerce
b. Sources of venture capital
c. Having a headquarters located near a major customer
d. The existence of trade shows

AACSB Reflective thinking, Creation of value

PTS: 1

10. The liabilities of size for small businesses imply that
a. Small businesses can grow as a result of going international.
b. Being small often means it may be more difficult to obtain necessary resources.
c. Small size creates only limited liability.
d. Small and new businesses can only succeed by exporting.

AACSB Reflective thinking, Creation of value

PTS: 1

11. Small business barriers to internationalization include all of the following EXCEPT
a. Small size means limited financial and personnel resources for international operations.
b. Top managers with limited international experience.
c. Positive attitudes of top managers about becoming multinationals.
d. Lack of sufficient scale to produce goods or services as efficiently as large companies.

AACSB Reflective thinking, Creation of value

PTS: 1

12. Although large businesses have more resources, small businesses have the advantage of:
a. size.
b. time.
c. speed.
d. a global culture.

AACSB Reflective thinking, Creation of value

PTS: 1

13. A small business global culture occurs when
a. Small businesses face global competition.
b. Key decision makers view competition as more domestic than global.
c. Organizations have managerial and worker values that view strategic opportunities as global and not just domestic.
d. Managers give priority to the relevance of national boundaries when conducting international business.

AACSB Reflective thinking, Creation of value

PTS: 1

14. The development of a global culture is affected by all of the following characteristics of the key decision makers EXCEPT
a. Ability to perform well at the domestic level.
b. International experience.
c. Perceived psychological distance to foreign markets.
d. Overall attitudes toward international strategies.

AACSB Reflective thinking, Creation of value

PTS: 1

15. All of the following are true about small business CEOs EXCEPT
a. Opening new markets is often the personal responsibility of the CEO.
b. They want to take a break from the daily management of their businesses by going overseas.
c. New international ventures may threaten their family life.
d. Their attitudes towards internationalization is a major factor in international success.

AACSB Reflective thinking, Creation of value

PTS: 1

16. Small businesses can potentially have more advantages than larger businesses in the global economy because
a. Small companies can change quickly to take advantage of opportunities in new markets.
b. Larger companies have more slack resources to absorb risk.
c. Small companies require a lot of travel from their CEOs.
d. Small companies have more access to resources.

AACSB Reflective thinking, Creation of value

PTS: 1

17. The small business advantage refers to
a. The energy and creativity entrepreneurs can put in their multinational operations.
b. The ease by which small companies can become global start-ups.
c. The speed by which entrepreneurs can react to changing conditions and capture significant sales before larger companies can react.
d. The number of venture capitalists willing to invest in successful small businesses.

AACSB Reflective thinking, Creation of value

PTS: 1

18. It is now easier to overcome the barriers to small business internationalization because of all of the following reasons EXCEPT
a. There are more government programs that support small business exporting and sales.
b. Trade agreements (such as NAFTA) are making international trade less complex.
c. Larger organizations are increasingly more willing to share their global expertise with smaller ones.
d. There is a wealth of information regarding international opportunities such as those available on the World Wide Web.

AACSB Reflective thinking, Creation of value

PTS: 1

19. Which of the following is not one of the questions to consider when a small business decides to go international?
a. Do we have a global product or service?
b. Do we have partners with which to go international?
c. Do we have the managerial, organizational, and financial resources to go international?
d. Is there a profitable market for our products or service?

AACSB Reflective thinking, Creation of value

PTS: 1

20. A strategic competitive advantage for breaking into the established pattern of commercial activity is a/an
a. Low cost strategy.
b. Differentiation Strategy.
c. Entry wedge.
d. Participation strategy.

AACSB Reflective thinking, Creation of value

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21. According to the text, which of the following participation strategies do small businesses emphasize?
a. Importing
b. Licensing
c. Foreign direct investment
d. Exporting

AACSB Reflective thinking, Creation of value

PTS: 1

22. The more common techniques of making international contacts used by small businesses include all of the following EXCEPT
a. Trade shows.
b. Seeking advice from foreign companies.
c. Government sponsored trade missions.
d. Catalogue expositions.

AACSB Reflective thinking, Creation of value

PTS: 1

23. An entry wedge is
a. A strategic competitive advantage for breaking into the established pattern of commercial activity.
b. A competitive opening in an industry.
c. A strategy used by only new companies.
d. None of the above

AACSB Reflective thinking, Creation of value

PTS: 1

24. First mover advantages occur when
a. A company can begin business as a global start-up.
b. A company adopts global strategies faster than competitors.
c. Company moves quickly into a new venture and establishes the business before other firms can react.
d. A company changes production technology.

AACSB Reflective thinking, Creation of value

PTS: 1

25. Technological leadership, as a source of first mover advantage refers to
a. A company beginning business as a global start-up.
b. A company that adopts global strategies faster than competitors.
c. A company that moves quickly into a new venture.
d. A company that is the first to use a new technology.

AACSB Reflective thinking, Creation of value

PTS: 1

26. First mover advantage includes all of the following EXCEPT
a. Technological leadership.
b. First access to natural and other resources.
c. Better ability to forecast market conditions.
d. Switching costs.

AACSB Reflective thinking, Creation of value

PTS: 1

27. Copycat businesses
a. Follow the “me too” strategy.
b. Adapt existing products or services to attract customers.
c. Find a niche or slight innovation to gain market share from existing businesses.
d. All of the above

AACSB Reflective thinking, Creation of value

PTS: 1

28. Successful strategies for copy cats include all of the following EXCEPT
a. Being the first to change to a new standard.
b. Transferring the location.
c. Seeking abandoned or ignored market.
d. Selling products at a global level.

AACSB Reflective thinking, Creation of value

PTS: 1

29. Future Tech International sells high tech products in Latin America, a market traditionally ignored by many high tech companies. What successful copycat strategy does this move represent?
a. Acquiring existing businesses
b. Becoming a dedicated distributor
c. Seeking abandoned or ignored markets
d. Being the first to change to a new standard

AACSB Reflective thinking, Creation of value

PTS: 1

30. Switching costs are
a. Expenses involved when a customer switches to a competitor’s product.
b. Forms of copycat strategies.
c. The costs incurred by a company when adopting a global standard.
d. None of the above

AACSB Reflective thinking, Creation of value

PTS: 1

31. The United Nations and Organization for Economic Cooperation and Development
a. Defines a small business as those having less than 500 employees.
b. Defines a small business as those with less than 100 employees.
c. Defines a small business based on industry and sales revenue.
d. All of the above

AACSB Reflective thinking, Creation of value

PTS: 1

32. When a small business uses significant resources to seek increased sales from exporting, it is what stage of internationalization?
a. Stage 1 – Passive exporting
b. Stage 2 – Export management
c. Stage 3 – Export department
d. Stage 4 – Sales branch

AACSB Reflective thinking, Creation of value

PTS: 1

33. International sales intensity represents
a. A significant size barrier to internationalization.
b. The amount of international sales as a proportion of total sales.
c. The amount of local sales as a proportion of international sales.
d. Is more relevant for larger businesses.

AACSB Reflective thinking, Creation of value

PTS: 1

34. All of the following are first mover advantages EXCEPT
a. First mover advantages gives the company first access to natural resources.
b. First mover advantages gives the company first access to social resources.
c. First mover advantages reduce switching costs.
d. All of the above are first mover advantages.

AACSB Reflective thinking, Creation of value

PTS: 1

35. The discovery, evaluation and exploitation of market opportunities refers to which of the following?
a. Entrepreneurship
b. International entrepreneurship
c. Small business
d. International opportunities

AACSB Reflective thinking, Creation of value

PTS: 1

36. Which of the following statements about small businesses in the US is FALSE?
a. Small businesses represent about 99.7% of all employing firms.
b. Small businesses generate about 15% of all new jobs annually.
c. Small businesses employ almost 41% of all high tech workers.
d. Small businesses represent almost 97% of identified exporters.

AACSB Reflective thinking, Creation of value

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37. When demand for a small business is so high in a foreign country that it justifies setting up a local branch, which of the following stages of internationalization is the small business at?
a. Export management
b. Passive exporting
c. Production abroad
d. None of the above

AACSB Reflective thinking, Creation of value

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38. A multinational manager is studying the data on total entrepreneurial activity ratings by country. She is most likely doing this in order to
a. Assess the level of entrepreneurship in a country.
b. Understand available industries.
c. Assess small business failure.
d. Understand opportunities for new ventures.

AACSB Analytic, Creation of value

PTS: 1

39. Many multinationals rely on the support and assistance provided by which of the following when entering a new country?
a. Customers
b. Entrepreneurs and small businesses
c. World Bank
d. Trade Shows

AACSB Reflective thinking, Creation of value

PTS: 1

40. Which of the following is NOT a common customer contact technique used by small firms to get find customers?
a. Trade shows
b. Industry advisory boards
c. Government sponsored trade missions
d. Catalog expositions

AACSB Reflective thinking, Creation of value

PTS: 1

ESSAY

1. Why are small businesses important for most economies?

2. What are the advantages of a small business going international through incremental stages rather than as a global start-up?

3. Describe the Small Business Stage Model.

4. Discuss some of the advantages that the Internet can offer small businesses when going international.

5. Identify two or three small business barriers to internationalization. If you were a recently hired manager of a small business facing great opportunities in a foreign market, how would you go about overcoming these barriers.

6. Imagine a small business manager asks you, a recent business college graduate, to help her decide whether she should enter the export market. What questions would you ask her and why?

7. How do small businesses and entrepreneurs affect national economic growth and development? Explain why multinationals consider entrepreneurship levels in the country when making their location choices.

8. Discuss ways that a small business manager can make the contacts necessary to implement an exporting strategy.

9. Consider three of the suggested strategic moves for copycat businesses. Which of these strategies might be most successful when expanding into the international market as opposed to the domestic market?

10. What is the first mover advantage? What are the most common sources of first mover advantages? How can a small business benefit from first mover advantage?

Chapter 8 Organizational Design for Multinational Companies

MULTIPLE CHOICE

1. The manner in which organizations structure subunits and use coordination and control mechanisms to achieve their strategic goals is the
a. Organizational structure.
b. Organizational culture.
c. Degree of formalization.
d. Organizational design.

AACSB Reflective thinking, Strategy

PTS: 1

2. The functional structure is considered most efficient when
a. An organization gets too large.
b. When customers need special functions.
c. When the organization is in the mature phase of the life cycle.
d. When organizations have few products.

AACSB Reflective thinking, Strategy

PTS: 1

3. All of the following statements are true about the functional structure EXCEPT
a. In the functional structure, departments perform separate business functions such as marketing or manufacturing.
b. The functional structure is the simplest of organizations.
c. In small organizations, the functional structure is the least efficient of all structures.
d. Because functional subunits are separated from each other, coordination among the units can be difficult.

AACSB Reflective thinking, Strategy

PTS: 1

4. One of the major reasons why companies choose a functional structure is because
a. It allows adapting products to country tastes.
b. It enables responding to the needs of different types of customers.
c. It helps balance the strategy with the organization design.
d. It helps achieve efficiency.

AACSB Reflective thinking, Strategy

PTS: 1

5. All of the following statements are true about product structures EXCEPT
a. The product structure is the most efficient of all structures.
b. Product organizations must still perform some functional tasks of a business.
c. The structure builds a department or subunit around a product .
d. Managers choose product structures when they believe that a product or a group of products is sufficiently unique to require focused efforts on one type of product or service.

AACSB Reflective thinking, Strategy

PTS: 1

6. The least efficient of the following structural options is
a. Product structure.
b. Functional structure.
c. Vertical structure.
d. Graphic structure.

AACSB Reflective thinking, Strategy

PTS: 1

7. Organizations that are designed with mixtures of structures that are the best to implement their strategies are
a. Product structures.
b. Geographic structures.
c. Hybrid structures.
d. Functional structures.

AACSB Reflective thinking, Strategy

PTS: 1

8. When exports become a significant percentage of company sales and a company wishes greater control over its export operations, managers often create a separate
a. Export department.
b. Functional department.
c. Product department.
d. Liaison office.

AACSB Reflective thinking, Strategy

PTS: 1

9. The structure adopted by companies in the early stage of internationalization is usually
a. Replica.
b. Network.
c. Export department.
d. Transnational subsidiary.

AACSB Reflective thinking, Strategy

PTS: 1

10. The type of subsidiary that supports a multinational firm strategy based on location advantages is a/an
a. Export department.
b. Minireplica subsidiary.
c. Transnational subsidiary.
d. International division.

AACSB Reflective thinking, Strategy

PTS: 1

11. The minireplica subsidiary
a. Copies the structure and strategy of companies located in the same country.
b. Mostly copies the structure and strategy of the parent company.
c. Replicates only minor parts of the parent’s production technology.
d. Copies the structure of small foreign firms.

AACSB Reflective thinking, Strategy

PTS: 1

12. Transnational subsidiaries
a. Look pretty much like a domestic division of the parent company.
b. Often have different structures and functions in each location.
c. Exist near the border to facilitate exporting.
d. Serve mostly to coordinate international currency exchange.

AACSB Reflective thinking, Strategy

PTS: 1

13. The international division differs from the export department in that
a. The international division is usually larger and has greater responsibilities.
b. The international division has more extensive staff with international expertise.
c. Top management expects the staff of the international division to perform functions such as negotiating licensing and joint venture agreements, translating promotional material, or providing expertise on different national cultures and social institutions.
d. All of the above are true.

AACSB Reflective thinking, Strategy

PTS: 1

14. Which of the following are considered to be the structural building blocks for running a multinational?
a. International division
b. Metanational
c. Mini replica
d. Foreign subsidiaries

AACSB Reflective thinking, Strategy

PTS: 1

15. Adopting strategies that include both concerns for local adaptation needs and concern for the economic and product development benefits of globalization is possible with the
a. Worldwide product structure.
b. Worldwide geographic structure.
c. Hybrid structure.
d. None of the above

AACSB Reflective thinking, Strategy

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16. The worldwide geographic structure is usually considered best to implement a _____ strategy.
a. Multidomestic or regional
b. Transnational
c. International
d. Indirect exporting

AACSB Reflective thinking, Strategy

PTS: 1

17. The worldwide product structure is usually considered best to implement a/an _____ strategy.
a. Multidomestic or regional
b. Transnational
c. International
d. Indirect exporting

AACSB Reflective thinking, Strategy

PTS: 1

18. The most balanced structural solution to the national responsiveness versus global efficiency dilemma is
a. The transnational network structure.
b. The worldwide product structure.
c. Worldwide geographic structure.
d. The matrix structure.

AACSB Reflective thinking, Strategy

PTS: 1

19. All of the following statements are true about the worldwide matrix structure EXCEPT
a. To balance the benefits produced by geographic and product structures and to coordinate a mixture of product and geographic subunits, some multinationals create a worldwide matrix structure.
b. Unlike most hybrid organizations, the worldwide matrix structure is a symmetrical organization.
c. It has unequal lines of authority for product groups and for geographic divisions.
d. The matrix structure works well only when there are near equal demands from the environment for local adaptation and for product standardization with its associated economies of scale.

AACSB Reflective thinking, Strategy

PTS: 1

20. Which of the following structures best support strategies that emphasize global products and rationalization?
a. The functional structure
b. The matrix structure
c. The geographic structure
d. The product structure

AACSB Reflective thinking, Strategy

PTS: 1

21. A __________ helps link the organization horizontally.
a. Control system
b. Coordination system
c. Cultural system
d. Centralized operations

AACSB Reflective thinking, Strategy

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22. The type of vertical control mechanism most often associated with a profit center is
a. Bureaucratic.
b. Output.
c. Cultural.
d. Decision making.

AACSB Reflective thinking, Strategy

PTS: 1

23. The type of control system favored by the transnational is
a. Bureaucratic.
b. Output.
c. Cultural.
d. Decision making.

AACSB Reflective thinking, Strategy

PTS: 1

24. _________ mean/means that management locates subsidiaries anywhere in the world where they can benefit the company.
a. Dispersed subunits
b. Specialized operations
c. Interdependent relationships
d. None of the above

AACSB Reflective thinking, Strategy

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25. __________ help link the organization vertically, up and down the organizational hierarchy.
a. Coordination systems
b. Dispersed subunits
c. Control systems
d. Subunits

AACSB Reflective thinking, Strategy

PTS: 1

26. Output control systems
a. Focus on managing behaviors, not outcomes, within the organization.
b. Represent the level in the organizational hierarchy where managers have the authority to make decisions.
c. Assess the performance of a unit based on results, not on the processes used to achieve those results.
d. Use the organizational culture to control the output and attitudes of employees.

AACSB Reflective thinking, Strategy

PTS: 1

27. Which of the following types of control system uses budgets, statistical reports, standard operating procedures, and centralized decision making to manage organizational processes?
a. Profit center
b. Bureaucratic control system
c. Decision-making control
d. Cultural control system

AACSB Reflective thinking, Strategy

PTS: 1

28. A permanent unit of the organization designed to focus the efforts of different subunits on particular problems is a
a. Task force.
b. Full-time integrator.
c. Liaison.
d. Team.

AACSB Reflective thinking, Strategy

PTS: 1

29. Temporary groups created to solve a particular organizational problem such as entering a new market are
a. Teams.
b. Liaisons.
c. Taskforces.
d. Full time integrators.

AACSB Reflective thinking, Strategy

PTS: 1

30. Which of the following is NOT true regarding the use of control options by most multinationals?
a. Most multinationals use several types of coordination mechanisms.
b. Multinationals with export departments have very high need for coordination.
c. Matrix and transnational structures have very high needs for coordination.
d. For transnational networks, teams are increasingly virtual with members seldom meeting face-to-face.

AACSB Reflective thinking, Strategy

PTS: 1

31. All of the following are TRUE about product structures EXCEPT
a. Product structure organizations must still perform functional tasks of a business.
b. In product structures, functional areas are concentrated in separate subunits.
c. Product structures are required when products or service are sufficiently unique to require different functional support.
d. All of the above are true.

AACSB Reflective thinking, Strategy

PTS: 1

32. Subunits of a multinational company located in other countries than the parent company’s headquarters is known as
a. Functional divisions.
b. Foreign functional divisions.
c. Foreign subsidiaries.
d. International minireplica.

AACSB Reflective thinking, Strategy

PTS: 1

33. The basic issue (s) that need to be considered for organizational design are
a. Division of work.
b. Coordination.
c. Control.
d. All of the above

AACSB Reflective thinking, Strategy

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34. A large, entrepreneurial multinational that is able to tap into hidden pockets of innovation, technology, and market know-how scattered around the world, especially in emerging markets is known as
a. A transnational.
b. A minireplica subsidiary.
c. A metanational.
d. A foreign subsidiary.

AACSB Reflective thinking, Strategy

PTS: 1

35. Which of the following control systems uses the organizational culture to control behaviors and attitudes of employees?
a. Cultural control systems
b. Decision-making control systems
c. Bureaucratic control systems
d. Output control systems

AACSB Reflective thinking, Strategy

PTS: 1

36. Which of the following is NOT one of the questions asked when designing an organization?
a. How should work be divided among the organization’s subunits?
b. How should the work be coordinated among the various subunits?
c. How should the work of the various subunits be controlled?
d. How many subunits should the multinational have?

AACSB Reflective thinking, Strategy

PTS: 1

37. Which of the following control systems focuses on managing behaviors of employees rather than outcomes?
a. Bureaucratic control systems
b. Budgets and standard operating procedures
c. Cultural control systems
d. None of the above

AACSB Reflective thinking, Strategy

PTS: 1

38. Which of the following represents the strongest coordination mechanism?
a. Task forces
b. Teams
c. Liaison roles
d. Direct contact

AACSB Reflective thinking, Strategy

PTS: 1

39. Knowledge that usually resides within employees and is dependent on the organization’s culture and context is
a. Explicit knowledge.
b. Knowledge management.
c. Tacit knowledge.
d. None of the above

AACSB Reflective thinking, Strategy

PTS: 1

40. Which of the following statements regarding explicit knowledge is FALSE?
a. Explicit knowledge can be easily codified.
b. Explicit knowledge can be found in records and other information repositories.
c. Explicit knowledge can be easily transferred from employee to employee.
d. Explicit knowledge usually resides within employees and is dependent on the organization’s context and culture.

AACSB Reflective thinking, Strategy

PTS: 1

ESSAY

1. Discuss some of the advantages of a functional structure over the product or geographic structure. When is it necessary to adopt a geographic or product structure?

2. What are some advantages of a worldwide product structure over a worldwide geographic structure? What type of company would most likely choose each type?

3. What are hybrid structures? What are the costs and benefits of having a hybrid structure?

4. Describe the use of export management as a design structure to go international. When does it become necessary to use an international division? What are some of the problems associated with international divisions?

5. What is a minireplica subsidiary? How is a minireplica subsidiary different from a transnational subsidiary?

6. Compare and contrast bureaucratic control with output control.

7. What is cultural control? Why is it the favored control mechanism for transnational-network structures?

8. Describe some functions of coordination mechanisms. Pick two coordination systems and describe how they work.

9. What are control systems? Pick two control systems and describe how they work.

10. What is the transnational-network structure? Discuss some costs and benefits of having a transnational network structure. Under what situation would a transnational-network be appropriate?

11. What is knowledge management? Distinguish between the types of knowledge.

Chapter 9 International Strategic Alliances: Management and Design

MULTIPLE CHOICE

1. There are several issues to consider in picking a partner for a strategic alliance. One of these is
a. Go for the biggest partner possible because they have the most assets.
b. Seek strategic complementarity.
c. Make sure your partner will be dependent on you and not vice versa.
d. All of the above

AACSB Reflective thinking, Group dynamics

PTS: 1

2. According to the text, all of the following are true about strategic alliances EXCEPT
a. They are inherently unstable and provide significant management challenges.
b. Estimates of failure rates range from 30 to 60 percent.
c. They are among the most popular choice to go international.
d. They are used mostly as a means to share technology.

AACSB Reflective thinking, Group dynamics

PTS: 1

3. The most important decision in setting up a strategic alliance is usually about
a. Working out the proportions of ownership.
b. Decision on the proper management structure.
c. Developing a detailed contract.
d. Selecting the right partner.

AACSB Reflective thinking, Group dynamics

PTS: 1

4. In operations alliances, multinational companies
a. Use research and development to merge different technical skills.
b. Share the risk of developing new or costly technology.
c. Gain access to new markets.
d. Combine manufacturing to reach a profitable volume of activity.

AACSB Reflective thinking, Group dynamics

PTS: 1

5. The anchor partner in a strategic alliance refers to
a. A partner that is very stable and anchors the relationship.
b. The strongest partner in the relationship.
c. The partner who initiates the relationship.
d. A partner that fails to deliver their share of funding.

AACSB Reflective thinking, Group dynamics

PTS: 1

6. The best level of dependency recommended for a strategic alliance is
a. Balanced.
b. Home country dominated.
c. Host country dominated.
d. It does not matter if there are more than two companies.

AACSB Reflective thinking, Group dynamics

PTS: 1

7. The elephant-and-the-ant complex refers to
a. Difficulties that come with two different size organizations in a strategic alliance.
b. Problems that arise when one side feels inferior to the other.
c. Strategic alliances between developed and developing countries.
d. An unbalanced management structure.

AACSB Reflective thinking, Group dynamics

PTS: 1

8. An agreement not legally binding between companies to cooperate on any value-chain activity is a (an)
a. Formal international cooperative alliance.
b. International joint venture.
c. Informal international joint venture.
d. International cooperative alliance.

AACSB Reflective thinking, Group dynamics

PTS: 1

9. When a large number of companies form a joint venture, the international joint venture is a
a. Multi-partner joint venture.
b. Consortium.
c. Informal cooperative alliance.
d. Equity joint venture.

AACSB Reflective thinking, Group dynamics

PTS: 1

10. All of the following are typically part of a negotiated joint venture agreement EXCEPT
a. Management loyalty.
b. Equity contributions.
c. Provisions for dissolving the IJV.
d. Contracts for the IJV.

AACSB Reflective thinking, Group dynamics

PTS: 1

11. In the split control management structure
a. Companies share all decision making.
b. Managers of the strategic alliance split from and act independently from their parent companies.
c. Partners divide decision making control by functional areas.
d. Each company takes a turn providing the operational managers.

AACSB Reflective thinking, Group dynamics

PTS: 1

12. In the independent control management structure
a. Strategic alliance managers have nearly complete autonomy for operational decisions.
b. Partners act independently of each other except when necessary.
c. Partners focus only on their special areas of expertise.
d. None of the above

AACSB Reflective thinking, Group dynamics

PTS: 1

13. When partners share strategic decision making but make decisions independently at the functional level (e.g., marketing, production), they are using which of the following management structures?
a. Dominant partner
b. Independent management structure
c. Rotating management
d. Split-control management structure

AACSB Reflective thinking, Group dynamics

PTS: 1

14. If partners have similar technologies or know-how and they contribute this knowledge equally to the alliance, they prefer
a. A shared management structure.
b. A split management structure.
c. A dominant management structure.
d. A rotating management structure.

AACSB Reflective thinking, Group dynamics

PTS: 1

15. Strategic alliance partners prefer a dominant management structure
a. If partners have similar technologies or know-how and they contribute this knowledge equally to the alliance.
b. If partners have different technologies or know-how and they contribute this knowledge equally to the alliance.
c. If partners have different technologies or know-how and they contribute this knowledge differently to the alliance.
d. If the alliance has more strategic importance to one partner.

AACSB Reflective thinking, Group dynamics

PTS: 1

16. Which management structure is popular in developing countries?
a. Dominant
b. Shared
c. Split
d. Rotating

AACSB Reflective thinking, Group dynamics

PTS: 1

17. As their management team gains more expertise, mature joint ventures move to what type of structure?
a. Independent
b. Interdependent
c. Local partner dominance
d. Shared

AACSB Reflective thinking, Group dynamics

PTS: 1

18. Equity in a strategic alliance implies
a. Labor skills.
b. Ownership.
c. Domination.
d. None of the above

AACSB Analytic, Group dynamics

PTS: 1

19. Suggested ways to build and sustain commitment in strategic alliances include
a. Go slowly.
b. Be the dominant partner.
c. Keep your goals secret so your partner does not get nervous about your intentions.
d. Use extensive written documentation.

AACSB Reflective thinking, Group dynamics

PTS: 1

20. When applied to a strategic alliance relationship, the concept of trust includes
a. Confidence that the partner will deliver.
b. Confidence that the partner will behave with good will.
c. Confidence that the partner will engage in fair exchange.
d. All of the above

AACSB Reflective thinking, Group dynamics

PTS: 1

21. The confidence that the partner will behave with goodwill and trust is
a. Commitment.
b. Credibility trust.
c. Benevolent trust.
d. Calculative commitment.

AACSB Reflective thinking, Group dynamics

PTS: 1

22. Trust in strategic alliance relationships
a. Usually builds in cycles.
b. Either exists at the beginning of the relationship or will never be there.
c. Can really only evolve with partners from similar cultures.
d. Can never exist in high technology relationships since the risk of losing the technology is too great.

AACSB Reflective thinking, Group dynamics

PTS: 1

23. In strategic alliance relationships, high levels of trust often
a. Retard organizational functioning due to excessive emotional reactions.
b. Cause excessive loyalty to the strategic alliance.
c. Are irrelevant if the strategic alliance is projected to have a high financial return.
d. Facilitate the exchange of tacit knowledge.

AACSB Reflective thinking, Group dynamics

PTS: 1

24. The best method of assessing strategic alliance performance is
a. Total sales revenue.
b. ROI.
c. ROA.
d. There is no one best method.

AACSB Reflective thinking, Group dynamics

PTS: 1

25. Indirect strategic benefits for entering a strategic alliance include
a. Immediate improved performance on profit ratios.
b. Learning a new market.
c. Developing management loyalty.
d. None of the above

AACSB Reflective thinking, Group dynamics

PTS: 1

26. __________ means that companies rely on each other to contribute to the relationship.
a. Shared management
b. Balanced management
c. The norm of reciprocity
d. Mutual dependency

AACSB Reflective thinking, Group dynamics

PTS: 1

27. Contracts for strategic alliances may include _____________ if the relationship dissolves before the negotiated time.
a. Penalties for early termination of the contract by each side
b. Restrictions on future business growth
c. A promise to try future joint ventures
d. All of the above

AACSB Reflective thinking, Group dynamics

PTS: 1

28. In dealing with cross-cultural communication in a strategic alliance, managers should expect
a. Communication difficulties to disappear when operational managers are fluent in each other’s language.
b. Slower communication and more errors.
c. No communication problems if all managers were educated in the US.
d. No communication difficulties if all parties agree on a common language of the strategic alliance.

AACSB Analytic, Group dynamics

PTS: 1

29. Understanding a new market and developing a new technology may be used as performance criteria for which of the following?
a. Organizational learning
b. Management processes
c. Competitive advantage
d. Commitment

AACSB Reflective thinking, Group dynamics

PTS: 1

30. Strategic complementarity in a strategic alliance means that
a. Both sides must have similar strategic objectives for the strategic alliance to succeed.
b. Objectives can be different if they are not in conflict.
c. Cultural differences must be dealt with first.
d. Parent companies must leave the strategic alliance management to develop their own strategic goals.

AACSB Reflective thinking, Group dynamics

PTS: 1

31. Which of the following type of strategic alliances allows the multinational to combine manufacturing or assembly activities to achieve a profitable volume of activity?
a. Operations alliances
b. Output alliances
c. Upstream-downstream alliances
d. Marketing alliances

AACSB Reflective thinking, Group dynamics

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32. All of the following are true about international joint venture (IJV) EXCEPT
a. An IJV is a separate legal entity owned by parent companies from different countries.
b. IJVs can have more than two partners.
c. IJVs require that companies have equal ownership to form the venture.
d. IJVs require legal contracts that bind partners.

AACSB Reflective thinking, Group dynamics

PTS: 1

33. If strategic alliance partners have different technologies or know-how and they contribute this knowledge equally, they often prefer
a. Shared management structure.
b. Dominant management structure.
c. Split management structure.
d. Rotating management structure.

AACSB Reflective thinking, Group dynamics

PTS: 1

34. The psychological identification with a relationship in a strategic alliance and the pride of association with the partner and the alliance is known as
a. Calculative commitment.
b. Credibility trust.
c. Benevolent trust.
d. Attitudinal commitment.

AACSB Reflective thinking, Group dynamics

PTS: 1

35. The confidence that a strategic alliance partner has the intent and ability to meet their obligations and make their promised contribution to a strategic alliance is known as
a. Credibility trust.
b. Benevolent trust.
c. Calculative trust.
d. Attitudinal trust.

AACSB Reflective thinking, Group dynamics

PTS: 1

36. According to the text, which of the following is NOT a key criterion used in picking an alliance partner?
a. Pick a partner who provides strategic complementarity.
b. Pick a partner who provides financial security.
c. Pick a partner who has complementary skills.
d. Pick a partner who provides the right level of mutual dependency.

AACSB Reflective thinking, Group dynamics

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37. According to the text, which of the following DOES NOT represent a form of strategic alliance?
a. Informal cooperative alliances
b. Formal cooperative alliances
c. International joint ventures
d. Informal partnerships

AACSB Reflective thinking, Group dynamics

PTS: 1

38. Which of the following statements regarding international joint ventures is FALSE?
a. International joint ventures usually have two or more partners.
b. International joint ventures are usually not legally binding.
c. International joint ventures with a large number of partners are known as consortiums.
d. Companies do not need equal ownership to form an international joint venture.

AACSB Reflective thinking, Group dynamics

PTS: 1

39. The confidence that a partner has the intent and ability to meet its obligations and make its promised contribution to the strategic alliance is known as
a. Calculative trust.
b. Calculative commitment.
c. Credibility trust.
d. Benevolent trust.

AACSB Reflective thinking, Group dynamics

PTS: 1

40. Which of the following describes the situation where companies stay in a strategic alliance despite strong evidence that the alliance won’t work?
a. Calculative commitment
b. Credibility commitment
c. Attitudinal commitment
d. Escalation of commitment

AACSB Reflective thinking, Group dynamics

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ESSAY

1. What are the characteristics of a good partner in a strategic alliance? Why do these partner traits help make a strategic alliance successful?

2. What are some of the common value chain links companies use to gain strategic benefits from alliances? Pick two of these links and describe some of the benefits partners gain from pursuing these links.

3. Under what conditions should a firm choose one of the various management structures available for a strategic alliance?

4. What are the different kinds of commitment needed in a strategic alliance? Explain.

5. What are some of the difficulties of assessing IJV or ICA performance? How do these differ for companies with different strategic goals?

6. What are the different management structures possible for strategic alliances? Pick two of these management structures and discuss when they are most appropriate.

7. Compare and contrast the three main types of strategic alliances.

8. Discuss some of the things multinational managers can do to build and sustain trust and commitment.

9. If an alliance fails to meet strategic goals, what two options do top managers have to choose from to resolve the situation? How can an alliance be improved?

Chapter 10 Multinational e-Commerce: Strategies and Structures

MULTIPLE CHOICE

1. Ebay is a prime example of which form of e-commerce?
a. Business to business transactions (B2B)
b. Business to consumer transactions (B2C)
c. Consumer to business transactions (C2B)
d. Consumer to consumer transactions (C2C)

AACSB Technology, Information technologies

PTS: 1

2. An Internet host that allows users to send encrypted data so that those outside the connection cannot see the information is a
a. A secure server.
b. An internet host.
c. A computer that has its own Internet Protocol address.
d. A computer that has its own World Wide Web address.

AACSB Technology, Information technologies

PTS: 1

3. Secure servers and internet hosts are two indicators of the
a. Internet infrastructure.
b. Web influence.
c. global presence of e-commerce.
d. Internet security.

AACSB Technology, Information technologies

PTS: 1

4. Traditional internet metrics do not quantify the use of new internet devices and features, including:
a. Smart phones.
b. Cloud-computing.
c. Social networking.
d. All of the above.

AACSB Technology, Information technologies

PTS: 1

5. Companies such as manufacturers that sell directly to consumers (Dell), and companies that provide online shipping services (FedEx, UPS) are all examples of which of the following?
a. Web customers
b. B2B
c. C2B
d. B2C

AACSB Technology, Information technologies

PTS: 1

6. Which of the following is NOT one of the necessary steps to ensure a successful E-Commerce strategy?
a. Building on current business models and experimenting with new e-commerce models
b. Allocating resources to the e-commerce business
c. Making sure that the entire firm is prepared to embrace the e-commerce model
d. Training all upper level management in computer programming

AACSB Technology, Information technologies

PTS: 1

7. The brick and mortar part of the company refers to
a. The degree of interaction between traditional business operations and the company’s e-commerce system.
b. The company’s traditional business operations.
c. The company’s management information systems.
d. The extent of computer use in the company.

AACSB Technology, Information technologies

PTS: 1

8. Independent operations between the brick and mortar part of a company and its e-commerce system offer which of the following benefits?
a. The independent operation can move faster and be more entrepreneurial when freed from corporate bureaucracy and it can seek funding from deep pockets of venture capitalists.
b. The independent operation can benefit from cross-promotion of shared products, shared customer information, increased large-quantity purchase leverage, and economies of scale by using the same distribution channels.
c. The brick and mortar part of the company can transfer learning to the e-commerce system of the company.
d. Independent operations can facilitate synergy between the brick and mortar part and the e-commerce system.

AACSB Technology, Information technologies

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9. According to the text, which of the following is NOT one of the management challenges companies will face as they develop their e-commerce businesses?
a. Attracting, retaining, and developing employees in the e-commerce unit
b. Deciding which e-commerce functions to outsource
c. Finding funds to develop the e-commerce business
d. Finding ways to provide individuals with growth opportunities and job fulfillment to encourage employee retention in the e-commerce business

AACSB Technology, Information technologies

PTS: 1

10. Which of the following strategies is a pure e-business least likely to be concerned with when facing e-commerce challenges?
a. Developing information and management systems to respond to rapid growth
b. Attracting and retaining e-commerce-capable talent
c. Altering HR programs to suit the different skill requirements of e-commerce employees
d. Maintaining rapid decision making, creativity, innovation, and flexibility

AACSB Technology, Information technologies

PTS: 1

11. Which of the following statements regarding globalizing through the Internet is not true?
a. A company that globalizes through the Internet does not have to be concerned with the global-local dilemma.
b. A company that globalizes through the Internet still faces the same challenges that a brick and mortar company faces.
c. A company that globalizes through the internet must still address the traditional problems of multinational business (i.e., currencies, local laws, infrastructure for delivery).
d. A company that globalizes through the Internet must still decide whether to go global or to require localization to national or regional levels.

AACSB Technology, Information technologies

PTS: 1

12. According to the text, which of the following areas is not one of the areas that e-commerce companies work in?
a. Moving bits or computerized information
b. Moving money in payment flows
c. Providing Internet services
d. Moving physical products

AACSB Technology, Information technologies

PTS: 1

13. Which of the following businesses poses the highest degree of difficulty in e-commerce?
a. Portals and infomediaries
b. Businesses such as Travelocity, and those that sell digital music, and software
c. Businesses that rely on a physical infrastructure
d. Brick and mortar companies

AACSB Technology, Information technologies

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14. According to the text, the degree of difficulty in conducting global e-commerce businesses is primarily dependent on
a. The financial requirements.
b. The availability of management talent.
c. The infrastructure requirements.
d. The telecommunications infrastructure requirements.

AACSB Technology, Information technologies

PTS: 1

15. Which of the following types of companies are more likely to face challenges when they decide to enter the international market through the Internet?
a. Large multinational firms that already have an existing global presence.
b. Large multinationals firms that already have existing international operations.
c. Smaller firms and firms new to international commerce.
d. Small firms that already have an existing global presence.

AACSB Technology, Information technologies

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16. The major opportunities of e-commerce globalization include all of the following EXCEPT
a. Cost reduction.
b. Efficiencies.
c. Speed of access and convenience.
d. Access to new sources of financing.

AACSB Technology, Information technologies

PTS: 1

17. Which of the following is NOT one of the major threats to e-commerce globalization?
a. Cost of site construction, maintenance and upgrades
b. Cost of training in top managers in computer programming
c. Easily copied e-commerce models
d. Traditional cross-border transaction and other cross-cultural complexities

AACSB Technology, Information technologies

PTS: 1

18. According to the text, which of the following is NOT one of the factors to take in consideration when picking a country to start an e-business?
a. Internet population of at least 5%
b. Countries with market inefficiencies, such as formerly state-controlled markets
c. Countries that participates in at least one free trade agreement
d. Countries that have remarkable education systems

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PTS: 1

19. According to the text, where is the greatest potential for e-commerce businesses?
a. North America
b. The European Union
c. South America
d. Asia

AACSB Technology, Information technologies

PTS: 1

20. Which of the following statements does not accurately describe the most likely form of organizing a multinational e-business?
a. A multinational e-business is three-tiered mixing global and local functions.
b. Corporate headquarters of the business provides the vision, strategy and leadership that drive the marketing of products worldwide.
c. Local subsidiaries of the business take charge of the functions better done locally in each country.
d. Corporate headquarters of the business provides the vision, strategy and leadership and also takes charge of the local strategies in each country.

AACSB Technology, Information technologies

PTS: 1

21. Which of the following is not one of the necessary electronic capabilities required for successful online presence?
a. Software to process pricing in multiple currencies
b. Ability to provide support in English in the various service centers
c. Systems that check regulatory compliance with local and international laws
d. Fraud protection

AACSB Technology, Information technologies

PTS: 1

22. E-commerce enablers are
a. Software that provide electronic payment models in addition to credit cards.
b. Systems that calculate and show purchase information on international shipping, duties, and local taxes such as VAT.
c. Companies that provide services and software that translate Web sites, calculate shipping, value-added taxes, duties, and other charges unique to each country.
d. Equity partners in multinational businesses.

AACSB Technology, Information technologies

PTS: 1

23. Multinational e-commerce enablers exist because
a. Many companies including very large ones, do not have the internal resources or abilities to conduct all e-commerce functions.
b. There is a shortage of employees with e-commerce skills.
c. It is extremely difficult for a brick and mortar company to develop an e-commerce strategy.
d. It is more beneficial to have a strategic partner when conducting multinational e-commerce.

AACSB Technology, Information technologies

PTS: 1

24. MNC’s face rising pressures to maintain the __________ of their customers.
a. Data
b. Privacy
c. Support
d. Repeat business

AACSB Technology, Information technologies

PTS: 1

25. Cost reduction, technology and efficiencies are considered to be the ________ of e-commerce.
a. Attractions
b. Challenges
c. Deterrents
d. Keys

AACSB Technology, Information technologies

PTS: 1

26. Which of the following is not true regarding e-commerce?
a. Refers to the selling of goods and services over the Internet
b. Includes products that are delivered offline such as UPS shipping a book purchased through Amazon.com
c. Does not include goods and services delivered online, such as downloaded computer software
d. Includes goods and services delivered online, such as downloaded computer software

AACSB Technology, Information technologies

PTS: 1

27. Which of the following statements is NOT true regarding Business-to-Business transactions (B2B)?
a. B2B is not as important as business-to-consumer (B2C) e-commerce businesses.
b. B2B allows instant information sharing between business customers and suppliers.
c. B2B allows suppliers to know what their customers want and allows businesses to know price, availability and product characteristics immediately.
d. B2B transactions make up more than 70 % of all current e-commerce business.

AACSB Technology, Information technologies

PTS: 1

28. Channel conflicts, cost of site construction and maintenance are considered to be _____ of e-commerce.
a. Attractions
b. Challenges or deterrents
c. Linking services
d. Supporting software

AACSB Technology, Information technologies

PTS: 1

29. Which of the following services is not provided by e-commerce enablers?
a. Services and software that translate Websites
b. Software that calculate shipping, value-added, and duties
c. Receiving customers purchased goods and storing, packaging, and shipping to the customer
d. Training programs to understand the local culture

AACSB Technology, Information technologies

PTS: 1

30. E-commerce potential is substantial in South America because
a. Of the Mercosur trade group.
b. Of trade with the U.S.
c. Because of the demographic characteristics.
d. Of the ASEAN trade group.

AACSB Technology, Information technologies

PTS: 1

31. Price comparison websites which searches online stores around the world to provide price comparisons and shipping and delivery information represents which form of e-commerce?
a. B2B (business-to-business)
b. B2C (business-to-consumer)
c. C2C (consumer-to-consumer)
d. C2B (consumer-to-business)

AACSB Technology, Information technologies

PTS: 1

32. Which of the following is NOT one of the ways to modify a website to make it global?
a. All company websites should first show the corporate website in the home country.
b. Provide a prominent list of languages used by the company’s web site
c. Provide the firm’s privacy statements in all local languages
d. Provide a culturally-sensitive website

AACSB Technology, Information technologies

PTS: 1

33. Which of the following is NOT a benefit of integrated brick-and-mortar and internet businesses?
a. The integrated operation can benefit from shared customer information.
b. The integrated operation can move faster and be more entrepreneurial.
c. The integrated operation can benefit from cross-promotion of shared products.
d. The integrated operation can benefit from economies of scale by using the small distribution channels.

AACSB Technology, Information technologies

PTS: 1

34. Which of the following does NOT represent a necessary component of the ideal multinational e-business?
a. Corporate headquarters which represents the global core in charge of providing a common vision and strategy
b. Managers at headquarters having worldwide responsibility for their shared functional areas responsibility
c. Local subsidiaries which actually deliver the goods and also taking charge of functions best done locally
d. All of the above are necessary aspects of the multinational e-business

AACSB Technology, Information technologies

PTS: 1

35. The internet has enabled the emergence of a new form of multinational, known as
a. Internet Service Providers.
b. Virtual enablers.
c. Internet businesses.
d. Born-globals.

AACSB Technology, Information technologies

PTS: 1

36. The retail sale of toys from the Wal-Mart website represents which form of transaction?
a. B2C
b. B2B
c. C2C
d. C2B

AACSB Technology, Information technologies

PTS: 1

37. Having systems in place to ensure that collected information is accurate and reliable represents which form of information security?
a. Confidentiality
b. Availability
c. Integrity
d. Authentication

AACSB Technology, Information technologies

PTS: 1

38. Confidentiality
a. Is ensuring that collected information is available to authorized users.
b. Is ensuring that collected private information is protected and safeguarded.
c. Is ensuring the privacy of online shoppers.
d. Is ensuring that systems are in place to ensure that only legitimate individuals are using systems.

AACSB Technology, Information technologies

PTS: 1

39. Southeast Asian countries represent opportunities for e-commerce growth due to
a. Spanish language websites.
b. Membership in ASEAN.
c. Global demand.
d. Internet economy.

AACSB Technology, Information technologies

PTS: 1

40. A new trend is that multinationals are using _______________ to their advantage.
a. Tall hierarchical web structures
b. Tacit knowledge
c. User Generated Content
d. None of the above

AACSB Technology, Information technologies

PTS: 1

ESSAY

1. What is e-commerce? What are the main types of e-commerce transactions? Discuss some of the reasons why B2B transactions make up a significant percentage of current e-commerce business?

2. Discuss some of the basic steps to building a successful e-commerce strategy.

3. What is a brick and mortar part of a company? What are some benefits of integrating the brick and mortar part of an organization with their Internet business? Why do some companies such as Barnes and Nobles still choose to have their Internet division operate independently from their brick and mortar part?

4. What are some of the major factors a company needs to take into consideration when setting up a global e-business? Why do companies with already established international brick and mortar units have an advantage in setting up global e-business compared to firms with no international presence?

5. What are some of the major factors to take into consideration when picking a country for setting up an e-commerce business? Why do trading blocks such as Mercosur, ASEAN, and the European Union present significant potential for e-commerce businesses?

6. Discuss the three-tiered ideal organizational structure of a multinational e-corporation. What are some of the essential functions served by the headquarters of the multinational e-corporation? Why should company headquarters not be responsible for local strategies?

7. What are e-commerce enablers? Why are e-commerce enablers becoming increasingly popular? Discuss some of the essential services provided by e-commerce enablers.

8. Discuss some of the technical capabilities that are needed for multinational e-commerce.

9. Discuss some of the major problems companies face when they try to globalize their Web sites. What can companies do to face these challenges?

10. What is e-commerce security? Discuss the four key aspects of information security. What can a multinational do to ensure that its e-commerce system is secure?

Chapter 11 International Human Resource Management

MULTIPLE CHOICE

1. The process by which companies choose people to fill vacant position is
a. Recruitment.
b. Compensation.
c. Selection.
d. Training and development.

AACSB Reflective thinking, HRM

PTS: 1

2. Inpatriates are
a. Employees who come from a different country where he/she is working.
b. Expatriate workers who come from neither the host nor the home country.
c. Local workers who come from the host country where the unit is located.
d. Employees from foreign country who work in the country where the parent company is located.

AACSB Reflective thinking, HRM

PTS: 1

3. Home country nationals are
a. Expatriate employees who come from the parent’s home country.
b. Employees who come from a different country where he/she is working.
c. Expatriate employees which come from the parent’s home country.
d. Employees from foreign country who work in the country where the host company is located.

AACSB Reflective thinking, HRM

PTS: 1

4. Expatriates are
a. Local workers who come from the host country where the unit is located.
b. Employees who come from a different country from where he or she is working.
c. The more talented local managers.
d. None of the above

AACSB Reflective thinking, HRM

PTS: 1

5. Expatriate workers who come from neither the host nor home country are
a. Host country nationals.
b. Parent country nationals.
c. Neither country nationals.
d. Third country nationals.

AACSB Reflective thinking, HRM

PTS: 1

6. One reason for US expatriate managers failure is
a. Personality of the manager.
b. Lack of technical proficiency.
c. Lack of motivation.
d. All of the above choices.

AACSB Reflective thinking, HRM

PTS: 1

7. All of the following are benefits that companies obtain by using expatriates EXCEPT
a. Receiving important strategic information.
b. Increased coordination and control of international operations.
c. Timely information on the local markets.
d. Reduced turnover for key international managers.

AACSB Reflective thinking, HRM

PTS: 1

8. All of the following are benefits of international assignments EXCEPT
a. International assignments help managers acquire skills necessary to develop successful strategies in a global context.
b. Expatriate assignments help a company coordinate and control operations dispersed geographically and culturally.
c. International assignments provide companies access to preferential quotas and duties.
d. Global assignments provide important strategic information.

AACSB Reflective thinking, HRM

PTS: 1

9. International cadre are
a. A group of managers who specialize in international careers.
b. Managers who are hired on a temporary basis to solve international problems.
c. Experts on international operations who work as part of the headquarters staff.
d. A group in charge of training managers for expatriate assignments.

AACSB Reflective thinking, HRM

PTS: 1

10. Key expatriate success factors include all of the following EXCEPT
a. Professional or technical skill.
b. Experience in at least two cultures different from the assignment country.
c. Stress tolerance.
d. Favorable family situation.

AACSB Reflective thinking, HRM

PTS: 1

11. A person with good relational abilities has
a. The capacity to adapt to strange situations.
b. The flexibility to modify their behavior.
c. A sensitivity to cultural norms and values.
d. All of the above

AACSB Reflective thinking, HRM

PTS: 1

12. Evidence on training for international assignments suggests
a. Cross-cultural training reduces expatriate failure rates.
b. Cross-cultural training makes people feel more comfortable but there are no bottom line effects on performance.
c. US firms invest the most in this activity.
d. It only beneficial for long term assignments.

AACSB Reflective thinking, HRM

PTS: 1

13. Which of the following is NOT true regarding low training rigor?
a. Low training rigor usually includes briefings concerning company operations.
b. Low training rigor usually lasts for a short period.
c. Low training rigor usually includes lectures and videos on the local culture.
d. Low training usually lasts over two months.

AACSB Analytic, HRM

PTS: 1

14. Which of the following is NOT one of the issues that make expatriate performance appraisals difficult?
a. Unreliable data
b. Refusal of host company to provide performance information regarding expatriate
c. Time differences and distance separation
d. Complex and volatile environments

AACSB Reflective thinking, HRM

PTS: 1

15. Suggestions to improve expatriate performance appraisals include
a. Using the same standards as the home country to improve fairness.
b. Giving up on performance appraisal since they often fail in the international setting.
c. Evaluation only at the end of the assignment since it takes a long time to learn about another culture.
d. Using multiple evaluators with varying periods of evaluation.

AACSB Reflective thinking, HRM

PTS: 1

16. The main objective of the balance sheet approach to international compensation is
a. To match home and host county purchasing power.
b. To make sure you reward international managers for their hardship.
c. To save costs in inexpensive countries.
d. To provide headquarters’ accountants with consistent information on salaries.

AACSB Reflective thinking, HRM

PTS: 1

17. Adjusting wages to local lifestyles and costs of living refers to which expatriate compensation system?
a. The balance-sheet method
b. The host-based compensation system
c. The global pay system
d. The headquarters-based compensation system

AACSB Reflective thinking, HRM

PTS: 1

18. The use of worldwide job evaluations, performance appraisals methods, and salary scales to determine pay is the
a. The global pay system.
b. The balance sheet approach.
c. The multi-local pay system.
d. The headquarters-based system.

AACSB Reflective thinking, HRM

PTS: 1

19. Experts on repatriation suggest
a. That managers will experience no problems if they return to their home cultures.
b. Reverse culture shock can occur regarding national and organizational culture.
c. There are difficult problems with repatriation but few solutions at this time.
d. People may feel uncomfortable for a while but work performance will not suffer.

AACSB Reflective thinking, HRM

PTS: 1

20. Difficulties that managers face in coming back to their home countries and reconnecting with their home organizations is known as the
a. Repatriation problem.
b. Reverse culture shock.
c. Low home re-adaptation index.
d. Expatriation problem.

AACSB Reflective thinking, HRM

PTS: 1

21. According to the text, which of the following is NOT one of the strategies used to allow successful repatriation of expatriates?
a. Provide a strategic purpose for the repatriation
b. Allow the expatriate to return when he/she is ready to do so
c. Provide training and preparation for the return
d. Establish a team to aid the expatriate

AACSB Reflective thinking, HRM

PTS: 1

22. Studies of women expatriates suggest that all of the following statements are true about international assignments in traditional cultures EXCEPT
a. Women typically do not succeed in expatriate assignments.
b. Women have some challenges in international assignments.
c. Women have some advantages in international assignments.
d. Opportunities for women expatriates are expected to grow in global companies.

AACSB Reflective thinking, HRM

PTS: 1

23. The text suggests several strategies that US women may use to succeed in traditional cultures. These include
a. Emphasize nationality, not gender.
b. Develop close contact with local government officials.
c. Not being overly aggressive in negotiation.
d. Proving that women can also be successful at international assignments.

AACSB Reflective thinking, HRM

PTS: 1

24. All of the following explain why there may be more international assignments for women in the future EXCEPT
a. Legal and social pressures for equal opportunity in North America.
b. Acute shortage of men willing to take international assignments.
c. Globalization creates opportunities to hire skilled women from any country.
d. More federal funds to train women for international assignments.

AACSB Reflective thinking, HRM

PTS: 1

25. Companies with a global HRM orientation
a. Usually provide significant extra pay for expatriate assignments.
b. Evaluate their managers by headquarters’ country standards.
c. Focus primarily on language training as preparation for expatriate assignments.
d. Use similar pay and benefit packages for all international assignments.

AACSB Reflective thinking, HRM

PTS: 1

26. Companies with ethnocentric HRM orientations
a. Use similar pay and benefit packages worldwide.
b. Select home country nationals for key positions.
c. Emphasize extensive training in the company culture before allowing a manager to go international.
d. Often use international experience as a technical qualification for high level management.

AACSB Reflective thinking, HRM

PTS: 1

27. Host country nationals may have limited career development in a company with a (an)
a. Ethnocentric, Regio or polycentric HRM orientation.
b. Only an ethnocentric HRM orientation.
c. Regiocentric or global HRM orientation.
d. Only a polycentric HRM orientation.

AACSB Reflective thinking, HRM

PTS: 1

28. Using more local managers to reduce the costs of training expatriate managers is a benefit usually associated with
a. A global HRM orientation.
b. A polycentric or regiocentric HRM orientation.
c. An ethnocentric HRM orientation.
d. A geocentric orientation.

AACSB Reflective thinking, HRM

PTS: 1

29. Companies with a multi-local strategy are most likely to have a
a. A global HRM orientation.
b. A polycentric HRM orientation.
c. Either a ethnocentric or regiocentric HRM orientation.
d. A geocentric orientation.

AACSB Reflective thinking, HRM

PTS: 1

30. Extra money paid to expatriates for particularly difficult posting due to issues such as high risk or poor living conditions is known as
a. Foreign service premiums.
b. Hardship allowance.
c. Relocation allowances.
d. Home-leave allowances.

AACSB Reflective thinking, HRM

PTS: 1

31. Which of the following statements is NOT TRUE regarding women expatriates compared to male expatriates?
a. Women expatriates have more difficulty being taken seriously early in their careers.
b. Women expatriates have more pressures to balance work and family compared to male expatriates.
c. Women expatriates have poorer relational and communication skills than male expatriates.
d. Women expatriates have more pressures to worry about their spouses than male expatriates.

AACSB Reflective thinking, HRM

PTS: 1

32. Which of the following is NOT one of the strategies discussed in the text to help repatriation of expatriates?
a. Provide a strategic purpose for the repatriation
b. Establish a team to help with the repatriation
c. Provide support for the expatriate and family on reentry
d. Provide vacation to help the expatriate get readjusted at home

AACSB Reflective thinking, HRM

PTS: 1

33. The two aspects to consider when evaluating the possibility of hiring expatriates are the high cost and
a. Skills in multinational management.
b. High success rate.
c. High failure rate.
d. None of the above

AACSB Reflective thinking, HRM

PTS: 1

34. All of the following are possible steps that can be taken by multinationals to remove barriers faced by female expatriates EXCEPT
a. Provide opportunities for interpersonal networks with other female expatriates.
b. Provide mentors.
c. Identify and remove sources of barriers.
d. Provide more appropriate performance appraisal systems for female expatriates.

AACSB Reflective thinking, HRM

PTS: 1

35. International Human Resource Management
a. Is no different from domestic HRM.
b. Is the application of HRM to international settings.
c. Is the orientation to hiring international employees.
d. Is the selection and compensation of expatriates.

AACSB Reflective thinking, HRM

PTS: 1

36. Third-country nationals are
a. Workers who come from the host-country where the unit is located.
b. Foreign workers who work in a country where the parent company is located.
c. Workers who come from neither the host nor the host-country.
d. None of the above

AACSB Reflective thinking, HRM

PTS: 1

37. Employees who are sent on frequent but short-term international assignments are known as
a. Flexpatriates.
b. Inpatriates.
c. Shortpatriates.
d. Expatriates.

AACSB Reflective thinking, HRM

PTS: 1

38. Which of the following statements about flexpatriates is FALSE?
a. Flexpatriates are those workers who travel on short notice for shorter duration.
b. Flexpatriate assignments usually last longer than expatriate assignments.
c. Flexpatriates provide flexibility as the company can send someone on numerous and much shorter duration assignments.
d. All of the above are true.

AACSB Reflective thinking, HRM

PTS: 1

39. Which of the following best describes emotional intelligence, one of the factors key to the success of an expatriate?
a. The ability to adapt to new and strange situations
b. The motivation to accept international assignments
c. The ability to being aware of oneself and to understand and relate to others
d. None of the above

AACSB Reflective thinking, HRM

PTS: 1

40. Which of the following factors is not necessarily included in an expatriate’s compensation package?
a. Local market cost of living
b. Housing
c. Adjustments for taxes
d. All of the above are included in an expatriate’s compensation package

AACSB Reflective thinking, HRM

PTS: 1

ESSAY

1. Identify the components of HRM and describe how they differ for IHRM.

2. Describe the types of nationals employed by multinational firms. Explain when each type would be used.

3. Discuss and contrast the four IHRM orientations. Describe how each can support a multinational strategy.

4. Contrast the positive and negative issues for using short term flexpatriates and international cadre members as expatriate managers. Consider both the organization’s perspective and the career implications for the individual manager.

5. Discuss the options available for expatriate compensation. Consider how these options might be used for a transnational and a multidomestic company.

6. Discuss how multinational companies can deal with the repatriation problem. Why is it necessary to deal with this issue?

7. What are some advantages women have in expatriate positions? Discuss some challenges that are faced by women in international assignments.

8. Discuss any three of the key expatriate success factors and their implications for selection.

Chapter 12 HRM in the Local Context: Knowing When and How to Adapt

MULTIPLE CHOICE

1. Differences in HRM policies and practices among countries stem from
a. Education and training of the labor force.
b. Laws and cultural expectations for selection practices.
c. Laws and traditions regarding labor practices.
d. All of the above

AACSB Reflective thinking, HRM

PTS: 1

2. An enduring system of relationships among people, such as education or the political system represent which aspect of the national context of a country?
a. National culture
b. Business culture
c. Social institutions
d. Managerial culture

AACSB Reflective thinking, HRM

PTS: 1

3. An abundant level of iron ore deposits in a country represents which of the following?
a. Country institutions
b. Natural factor conditions
c. Induced factor conditions
d. Resource pool

AACSB Analytic, HRM

PTS: 1

4. Which recruitment strategy do US managers see as most effective?
a. Newspaper and online advertising
b. College or university recruiting
c. Employee referrals
d. Personal contacts

AACSB Reflective thinking, HRM

PTS: 1

5. The US belief in the benefits of open and public advertising reflects the
a. US individualistic cultural values.
b. US preference for in-group members.
c. US collectivist cultural values.
d. US preference for hiring friends and relatives.

AACSB Reflective thinking, HRM

PTS: 1

6. All of the following are true about US selection practices EXCEPT
a. US selection practices focus on individual achievements and not on group affiliations.
b. US selection practices favor hiring of relatives and friends.
c. The aim of the typical US selection practice is to gather information of a candidate’s job qualifications.
d. US selection practices are governed by laws and regulations.

AACSB Reflective thinking, HRM

PTS: 1

7. Selection in collectivist cultures
a. Favors performance-related backgrounds and qualifications.
b. Is similar to US selection practices.
c. Gives preference to the in-group members.
d. Gives preference to individuals with technical skills.

AACSB Reflective thinking, HRM

PTS: 1

8. Managerial selection and recruitment in Korea and Japan are dominated by
a. High school and university ties.
b. Club membership.
c. Performance-related backgrounds and qualifications.
d. All of the above

AACSB Reflective thinking, HRM

PTS: 1

9. Backdoor recruitment in collectivist cultures may not always be used by foreign multinationals because
a. Such procedures will not work as well as newspaper advertisements.
b. The multinationals may not have access to the appropriate contacts.
c. It is almost always better to use expatriates in these situations.
d. They prefer to rely on internal job postings.

AACSB Reflective thinking, HRM

PTS: 1

10. The practice of recruiting friends or relatives of those already employed is which form of recruiting?
a. Front gate recruiting
b. Walk-ins
c. Backdoor recruiting
d. Internal recruiting

AACSB Reflective thinking, HRM

PTS: 1

11. All of the following are true about US training and development practices EXCEPT
a. The most popular training topics are management development and computer training.
b. Most training programs reach a majority of the workers.
c. Because of global competition, demand for training will increase.
d. There are increased pressures on businesses to supplement basic educational training.

AACSB Reflective thinking, HRM

PTS: 1

12. The dual-system in Germany refers to
a. The combination of selection and recruitment in one process.
b. The unification of management practices from Eastern and Western Germany.
c. The combination of in-house apprenticeship training with part-time vocational school training.
d. Academic preparation at the high school level.

AACSB Reflective thinking, HRM

PTS: 1

13. A study of compensation practices in ten countries revealed that
a. Pay incentives are important.
b. Pay should be contingent on group performance.
c. Incentives should be significant amount of pay.
d. All the above are true

AACSB Reflective thinking, HRM

PTS: 1

14. The Japanese system of life-time or permanent employment
a. Applies more to workers than to managers.
b. Is easier to implement in smaller Japanese companies.
c. Is likely to produce a satisfied and less motivated Japanese workforce.
d. Applies equally to men and women.

AACSB Analytic, HRM

PTS: 1

15. According to a study of ten countries on nine compensation practices
a. There was universal consensus on all nine as being necessary.
b. There was universal consensus on eight as being necessary.
c. There was universal consensus that seniority considerations are necessary.
d. None of the above are true

AACSB Reflective thinking, HRM

PTS: 1

16. All of the following are true about the US performance appraisal system EXCEPT
a. It represents cultural values that espouse links among individual rights, duties, and rewards.
b. It attempts to be rational, logical, and legal.
c. It focuses primarily on the ability to function well in groups.
d. Research shows that it works well in all national contexts.

AACSB Reflective thinking, HRM

PTS: 1

17. Which of the following is most true about the typical US compensation system?
a. Most companies take into account external and internal factors to determine compensation.
b. Most companies develop formal and systematic policies to determine compensation levels.
c. Raises in pay are determined mostly by merit.
d. All of the above are true.

AACSB Reflective thinking, HRM

PTS: 1

18. Which of the following describes one potential way a Japanese supervisor can communicate negative feedback for poor work performance to his/her subordinate?
a. By simply ignoring the subordinate
b. With formal appraisal systems
c. By discussing the poor performance openly
d. By providing the negative feedback in writing

AACSB Reflective thinking, HRM

PTS: 1

19. Japanese compensation systems base pay raises mostly on
a. Marital status and family size.
b. Seniority.
c. Merit.
d. Position.

AACSB Reflective thinking, HRM

PTS: 1

20. Patterns of labor relations in countries are affected by
a. Cultural factors.
b. Historical factors such as the level of technology development.
c. Ideological reasons.
d. All of the above

AACSB Reflective thinking, HRM

PTS: 1

21. Union membership density refers to
a. The number of unions in any country.
b. The proportion of workers who belong to unions in a country.
c. The proportion of white collar workers/professional who belong to unions in a country.
d. The proportion of unions to companies in a country.

AACSB Reflective thinking, HRM

PTS: 1

22. All of the following are true about unions in England, Germany, France, and the U.S. EXCEPT
a. British unions developed with strong government interference.
b. German unions developed in harmony with the government and corporations.
c. French unions started much later and developed more slowly than did British or German unions.
d. US union membership has declined significantly since the 1940s.

AACSB Reflective thinking, HRM

PTS: 1

23. An organization of all people from a company regardless of occupation or location is a (an)
a. Craft union.
b. Enterprise union.
c. Ideological union.
d. Industrial union.

AACSB Reflective thinking, HRM

PTS: 1

24. A craft union
a. Represents one occupational group in one company.
b. Represents all people in one organization regardless of occupation or location.
c. Represents all workers based on some particular ideology.
d. Represents one occupational group such as plumbers.

AACSB Reflective thinking, HRM

PTS: 1

25. A union representing one occupational group in one company is
a. An enterprise union.
b. A craft union.
c. A local union.
d. A trade union.

AACSB Reflective thinking, HRM

PTS: 1

26. Which of the following is FALSE about recruitment and selection processes in collectivist cultures?
a. Companies prefer to hire directly out of school.
b. There is a preference for family and friends.
c. Personal information is considered important for selection.
d. Technical skills are considered crucial for selection.

AACSB Reflective thinking, HRM

PTS: 1

27. The group of employees, found in Germany, that shares plant-level responsibility with managers over issues such as working conditions is
a. An enterprise union.
b. A craft union.
c. A works council.
d. An ideological union.

AACSB Reflective thinking, HRM

PTS: 1

28. Major components of the legal requirements for a US performance appraisal system include
a. Evaluations must relate clearly to the job.
b. Evaluations are not required when all workers are the same gender.
c. All testing must be quantitative.
d. Older workers need not have performance appraisals.

AACSB Reflective thinking, HRM

PTS: 1

29. In most collectivist cultures, performance appraisals
a. Follow similar patterns to the US legal requirements.
b. Are often communicated subtly, such as by a manager ignoring a worker.
c. Favor and open and honest dialogue regarding performance.
d. Are more formal than in individualistic cultures.

AACSB Reflective thinking, HRM

PTS: 1

30. The practice in Germany, whereby management surrenders a traditionally reserved share of control to workers refers to
a. Co-determination.
b. Co-selection.
c. Veto power.
d. Joint planning.

AACSB Reflective thinking, HRM

PTS: 1

31. All of the following statements regarding Induced-factor conditions resources are true EXCEPT
a. Induced-factor conditions resources arise from cultural and institutional pressures.
b. Good examples of induced factor conditions are the high cultural value placed on education in many Asian societies creating a well-trained workforce.
c. Induced-factor conditions include those resources that occur naturally such as coal and gas reserves.
d. All of the above are true.

AACSB Reflective thinking, HRM

PTS: 1

32. Which of the following is not one of the factors affecting national differences in human resource management as discussed in the text?
a. Types of jobs favored by applicants
b. Education and training of the labor pool
c. Laws and cultural expectations regarding fair wages and promotion criteria
d. All of the above are factors

AACSB Reflective thinking, HRM

PTS: 1

33. Which of the following is NOT one of the factors determining the resource pool of a country as discussed in the text?
a. The quantity, quality, and accessibility of raw material
b. The quantity, quality and cost of personnel available
c. The training and development system available
d. The cost and amount of capital available to firms

AACSB Reflective thinking, HRM

PTS: 1

34. Which of the following is NOT one of the recruitment steps?
a. Managers determine the jobs that are available.
b. Managers determine the types of skills and people that are necessary for these jobs.
c. Managers generate a pool of applicants for the job.
d. Managers choose a person who fits the job.

AACSB Reflective thinking, HRM

PTS: 1

35. All people in a particular industry, regardless of occupational group is most likely represented by
a. An enterprise union.
b. A local union.
c. A craft union.
d. An industry union.

AACSB Reflective thinking, HRM

PTS: 1

36. Which of the following statements regarding selection in collectivistic cultures is FALSE?
a. In selecting employees, employers prefer trustworthiness and loyalty.
b. Older male recruits are usually preferred because they can be easily molded to fit the company’s culture.
c. Selection often relies on referrals from family or friends.
d. All of the above are TRUE.

AACSB Reflective thinking, HRM

PTS: 1

37. The measure that considers the proportion of workers who belong to unions is known as
a. Union-membership scope.
b. Craft union density.
c. Union-membership density.
d. Trade union density.

AACSB Reflective thinking, HRM

PTS: 1

38. A union representing all workers belonging to one religious orientation in a company is known as
a. An ideological union.
b. A craft union.
c. A local union.
d. An ideological union.

AACSB Reflective thinking, HRM

PTS: 1

39. Which of the following statements about management development in the U.S. is false?
a. Management development in the U.S. is the responsibility of the firm rather than the individual.
b. U.S. companies can rely on senior-level managers to identify promising candidates for management development and training.
c. U.S. companies rely on direct assessment approaches such as assessment centers to identify individuals with managerial potential.
d. All of the above is true.

AACSB Reflective thinking, HRM

PTS: 1

40. Which of the following statements regarding union membership is FALSE?
a. Union membership in the U.S. has stayed the same over the past 30 years.
b. In many major industrialized countries, union membership is still greater than 50%.
c. South Africa has doubled in size in union membership.
d. Europe still has a high proportion of workers who are union members.

AACSB Reflective thinking, HRM

PTS: 1

ESSAY

1. Describe and discuss the major factors in the national context that affect a nation’s HRM practices.

2. What are some of the recruitment strategies used by U.S. companies? Why is open and public advertisements seen as the most effective recruitment strategies? Why would such strategies not work in more collectivist cultures?

3. Some U.S. politicians have called for the development of a German-type apprenticeship training system in the U.S. If you were a manager of a U.S. Fortune 500 multinational company, how would you respond to this proposal and why? What are the current challenges facing the German system now?

4. You have been given the assignment to set up a training program for first level managers in a formerly government-owned eastern European company. How would you go about developing a curriculum? Why?

5. Compare and contrast the appraisal and compensation systems in the U.S. and more collectivist culture nations. Discuss legal and cultural problems that multinational managers might face using a collectivist approach to these systems in the U.S. and using a U.S. approach in more collectivist cultures.

6. Contrast the different types of unions and discuss the challenges each type may pose to a multinational manager.

7. Define and describe union membership density as it has been historically and is now. Why is it important to multinational managers?

8. How is feedback on performance given in collectivist societies, especially for managers?

Chapter 13 International Negotiation and Cross-Cultural Communication

MULTIPLE CHOICE

1. International negotiation
a. Is the process of making business deals across national and cultural boundaries.
b. Is less complex than domestic negotiation.
c. Can be successful regardless of ease of communication.
d. All of the above

AACSB Communication, Leadership principles

PTS: 1

2. All of the following are true about international negotiation EXCEPT
a. International negotiations are more complex than domestic negotiations.
b. Differences in national cultures and differences in political, legal, and economic systems often separate potential business partners.
c. Most successful international negotiators use their home country negotiation styles.
d. All of the above are true.

AACSB Communication, Leadership principles

PTS: 1

3. The Whorf hypothesis
a. Suggests that language determines the nature of culture.
b. Suggests that nonverbal communication determines cultural patterns.
c. Culture comes first and requires the development of certain concepts and thus certain words.
d. None of the above

AACSB Communication, Leadership principles

PTS: 1

4. High context languages
a. Are languages in which people state things directly and explicitly.
b. Include most northern European languages including German, English, and the Scandinavian languages.
c. Are languages in which people state things indirectly and implicitly.
d. Are languages where the words provide most of the meaning.

AACSB Communication, Leadership principles

PTS: 1

5. Languages in which people state things directly and explicitly where the words provide most of the meaning are
a. Moral languages.
b. High context languages.
c. Low context languages.
d. None of the above

AACSB Communication, Leadership principles

PTS: 1

6. Which of the following statements is true regarding high context languages?
a. Most Northern European languages, including German, English, and the Scandinavian languages are high context languages.
b. Words provide most of the meaning in high context languages.
c. In high context languages, what is left unsaid is often as important as what is said.
d. All of the above are true.

AACSB Communication, Leadership principles

PTS: 1

7. The degree of formal communication refers to
a. Whether people speak directly or indirectly.
b. Communication without words.
c. Communication through formal body movements.
d. None of the above

AACSB Communication, Leadership principles

PTS: 1

8. Nonverbal communication
a. Is part of face-to-face communication.
b. Occurs through such things as body posture, facial expression, hand gestures, and the use of personal space.
c. May also create (purposefully or not) situations that make a negotiator uncomfortable.
d. All of the above

AACSB Communication, Leadership principles

PTS: 1

9. Kinesics is
a. Communicating through body movements.
b. A form of verbal communication.
c. Focuses on how people use space to communicate.
d. The type of touching that is deemed appropriate in different cultures.

AACSB Communication, Leadership principles

PTS: 1

10. Proxemics
a. Refers to the use of body movements to communicate.
b. Represents the degree of formality in communication styles.
c. Means communicating with and without words.
d. Focuses on how people use space to communicate.

AACSB Communication, Leadership principles

PTS: 1

11. Touch
a. Is related to proxemics and is a basic form of human interaction.
b. Refers to communication through body movements.
c. Represents the degree of directness in communication.
d. Is similar to kinesics.

AACSB Communication, Leadership principles

PTS: 1

12. Attribution
a. Is the process by which we interpret the meaning and intent of spoken words or nonverbal exchanges.
b. Is communication through body movements.
c. Focuses on how people use space to communicate.
d. A form of verbal communication.

AACSB Communication, Leadership principles

PTS: 1

13. When communicating with nonnative speakers, which of the following would make communication harder and less accurate?
a. Strictly following basic rules of grammar
b. Using words that have numerous alternative meanings
c. Using slang
d. Using most common words with their most common meanings

AACSB Communication, Leadership principles

PTS: 1

14. Gathering of extensive information on the negotiation issues, on the setting in which the negotiation will take place, and on the firm and people involved occurs in which stage of the steps in international negotiation?
a. Preparation
b. Building the relationship
c. Persuasion
d. Concession

AACSB Communication, Leadership principles

PTS: 1

15. In the relationship building stage of the International Negotiation Process
a. The negotiator focuses seriously on business issues.
b. Usually takes place at the formal negotiation place.
c. Is not as important as the other steps.
d. None of the above

AACSB Communication, Leadership principles

PTS: 1

16. All of the following are true about the steps in the Negotiation Process EXCEPT
a. Although each international negotiation is unique and may combine two or more steps or repeat some, the negotiation process involves five steps leading to the final step, an agreement.
b. The negotiation steps include preparation, building the relationship, exchanging information and the first offer, persuasion, and the agreement.
c. Most experts agree that the process of international negotiation includes several steps.
d. All of the above are true.

AACSB Communication, Leadership principles

PTS: 1

17. At the __________ stage in the negotiation, both parties exchange the specifics of their needs for the agreement.
a. Exchanging Information and the First Offer
b. Building the relationship
c. Persuasion
d. Concession

AACSB Communication, Leadership principles

PTS: 1

18. All of the following are true about the Exchanging Information and the First Offer Step of the International Negotiation process EXCEPT
a. Both parties exchange information on their needs for the agreement.
b. Parties exchange information that is task-related.
c. Both sides usually present their final offer.
d. Both sides present offers that often differ from what they hope to achieve eventually.

AACSB Communication, Leadership principles

PTS: 1

19. In the _____ stage, each side in the negotiation attempts to get the other side to agree to its position.
a. Exchanging Information and the First Offer
b. Building the relationship
c. Persuasion
d. Concession

AACSB Communication, Leadership principles

PTS: 1

20. All of the following is true about the persuasion stage EXCEPT
a. Each side in the negotiation attempts to get the other side to agree to its position.
b. It is the heart of the negotiation processes.
c. Numerous tactics are available to international negotiators to persuade the other side.
d. The emphasis and mix of tactics do not vary by the cultural background of the negotiators.

AACSB Communication, Leadership principles

PTS: 1

21. Dirty Tricks in International Negotiations refer to
a. The most common tactics in international negotiations that people use to gain an upper hand.
b. Negotiation tactics that pressure opponents to accept unfair or undesirable agreements or concessions.
c. Face-to-face communication that is not oral.
d. None of the above

AACSB Communication, Leadership principles

PTS: 1

22. Deliberate deception, one example among some common ploys in international negotiations, refers to
a. Negotiators presenting flagrant untruths either in the facts they present or in their intentions for the negotiation.
b. Negotiators waiting to the last minute before the international negotiation team plans to go home.
c. Negotiators making an agreement then reveal that it must be approved by senior managers or the government.
d. One negotiator acting agreeable and friendly while his or her partner makes outrageous or unreasonable demands.

AACSB Communication, Leadership principles

PTS: 1

23. Negotiators who make an agreement and then reveal that it must be approved by senior managers or the government is an example of which type of dirty trick?
a. Escalating authority
b. Good guy, bad guy routine
c. You are wealthy and we are poor
d. Old friends

AACSB Communication, Leadership principles

PTS: 1

24. If negotiators are using deliberate deception as a dirty tricks, the best way to deal with the deception is
a. Not to make any concessions.
b. To ignore the ploy and focus on the agreement.
c. To not reveal your negotiation plans.
d. To point out directly what you believe is happening.

AACSB Communication, Leadership principles

PTS: 1

25. All of the following are true about the final agreement EXCEPT
a. The final agreement is the signed contract, agreeable to all sides.
b. Successful negotiations do not necessarily result in the final agreement.
c. The final agreement must be consistent with the chosen legal system or systems.
d. All of the above are true.

AACSB Communication, Leadership principles

PTS: 1

26. The sequential approach to concession-making
a. Is very popular in Asian cultures.
b. Is similar to the holistic approach.
c. Implies that concession making begins only after all participants discuss all issues.
d. Implies that negotiators expect each side to give and take on individual issues in sequence.

AACSB Communication, Leadership principles

PTS: 1

27. All of the following are true about the holistic concession-making approach EXCEPT
a. Is very popular in Asian cultures.
b. Each side makes very few, if any, concession during discussions of each point in potential agreement.
c. Implies that concession making begins only after all participants discuss all issues.
d. Implies that negotiators expect each side to give and take on individual issues in sequence.

AACSB Communication, Leadership principles

PTS: 1

28. In competitive negotiation
a. Negotiators seek out mutually satisfactory ground that is beneficial that allows both companies to win.
b. Competitive negotiators view the negotiation as a win-win game.
c. Competitive negotiators use dirty tricks and any plot that leads to their advantage.
d. Competitive negotiators search for possible win situations where the outcome of the negotiation is mutually satisfactory to both sides.

AACSB Communication, Leadership principles

PTS: 1

29. __________ negotiators search for possible win-win situations where the outcome of the negotiation is mutually satisfactory to both sides.
a. Problem-solving
b. Concession-making
c. Competitive
d. None of the above

AACSB Communication, Leadership principles

PTS: 1

30. All of the following are personal characteristics of the successful international negotiator EXCEPT
a. Be a competitive negotiator.
b. Can tolerate ambiguous situations.
c. Has stamina, good sense of humor.
d. Is flexible, creative, curious, and can empathize.

AACSB Communication, Leadership principles

PTS: 1

31. Olfactics
a. Is the use of smells as a means of nonverbal communication.
b. Refers to communication through eye contact or gazing.
c. Communication through the use of space.
d. Communication through body contact.

AACSB Communication, Leadership principles

PTS: 1

32. Communication through eye contact or gaze is known as
a. Proxemics.
b. Haptics.
c. Oculesics.
d. Olfactics.

AACSB Communication, Leadership principles

PTS: 1

33. Which of the following is NOT one of the suggestions for proper use of interpreters?
a. Spend time with the interpreter so that he/she can understand your accent.
b. Insist on minimization of interruptions and have the interpreter translate after you end each statement.
c. Go over technical and other complex issues with your interpreter.
d. Request that your interpreter apologizes for your inability to speak the local language.

AACSB Communication, Leadership principles

PTS: 1

34. Which phase of the negotiation process consists of an evaluation of the success of the completed negotiation?
a. The post relationship building phase
b. The agreement phase
c. The post agreement phase
d. The performance feedback phase

AACSB Communication, Leadership principles

PTS: 1

35. Which one of the following is NOT one of the personal success characteristics of successful international negotiators as discussed in the text?
a. Tolerance of ambiguity and curiosity
b. Focus on achieving negotiation goals without making concessions
c. Flexibility, creativity, and sense of humor
d. All of the above are personal success characteristics

AACSB Communication, Leadership principles

PTS: 1

36. Haptics
a. Refers to communication through body contact.
b. Refers to communication through smell.
c. Refers to communication through eye contact.
d. None of the above

AACSB Communication, Leadership principles

PTS: 1

37. Which of the following represents one possible solution to the “Old Friends” dirty trick?
a. Ignore the ploy and focus on mutual benefits.
b. Keep a psychological distance that reflects the true nature of the relationship.
c. Walk out of negotiations.
d. Reveal when you plan to leave negotiations.

AACSB Communication, Leadership principles

PTS: 1

38. Which of the following regarding proxemics is FALSE?
a. Proxemics focuses on how people use space to communicate.
b. North Americans are more comfortable with a personal bubble of space of 20 inches.
c. Latin and Arab cultures prefer closer spacing than North Americans.
d. North Americans prefer closer spacing than the Latin and Arab cultures.

AACSB Communication, Leadership principles

PTS: 1

39. Which of the following statements regarding interpreters is FALSE?
a. The interpreter’s role is to provide a simultaneous translation of a foreign language while a person is speaking.
b. Good interpreters have the technical knowledge and vocabulary to deal with such details common in business transactions.
c. Interpreters are not needed if some of the negotiators can understand both languages.
d. All of the above are true.

AACSB Communication, Leadership principles

PTS: 1

40. Which of the following statements regarding formal communication is FALSE?
a. U.S. Americans have the highest degree of formal communication.
b. Compared to the U.S., most other business cultures acknowledge rank and titles when addressing each other.
c. There is more formality of dress for both genders for most other cultures compared to the U.S.
d. All of the above are true.

AACSB Communication, Leadership principles

PTS: 1

ESSAY

1. Discuss the steps in the negotiation process. Which step is at the heart of the process and why?

2. Compare and contrast the two basic negotiation strategies. Which would you prefer to use, and why?

3. What is the difference between a high- and a low-context language? Discuss some of the potential problems a person with a low-context language may face when negotiating with people from a high-context language.

4. Provide an example of how nonverbal negotiation tactics may be interpreted differently by people of varying cultural backgrounds.

5. What is the Whorf hypothesis? Explain.

6. Identify some cultural differences in body movements (kinesics). How might these influence a negotiation session?

7. Identify and describe some common dirty tricks in international negotiation. What can be done to counteract these dirty tricks?

8. Describe several forms of nonverbal communication. If you were a negotiator, how might you prepare for differences in these forms?

9. What are interpreters? What can managers do to ensure appropriate use of interpreters?

Chapter 14 Motivation in Multinational Companies

MULTIPLE CHOICE

1. People’s expectations from work (such as work providing necessary income or work providing satisfactory experiences) refer to
a. Functions of work.
b. Work centrality.
c. Importance of work.
d. Work motivation.

AACSB Reflective thinking, Motivation concepts

PTS: 1

2. Conclusions from the World Values Survey and the European Values Survey on functions of work reveal that
a. People across the world assign the same degree of importance to work functions.
b. People across the world rate income as the most important work function.
c. People from different nations do not assign the same magnitude of importance to work functions.
d. Workers saw the most important function of work as providing contact with other people.

AACSB Reflective thinking, Motivation concepts

PTS: 1

3. The importance of work refers to
a. how central work is in an individual’s life.
b. The degree of obligations to work in the life of an individual.
c. The functions that work plays in people’s lives.
d. People’s expectations from work.

AACSB Reflective thinking, Motivation concepts

PTS: 1

4. The concept of work centrality refers to
a. The reasons why people work.
b. The degree of importance of work in the life of an individual.
c. The functions that work plays in people’s lives.
d. Goals that people hope to achieve from working.

AACSB Reflective thinking, Motivation concepts

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5. All the following are true about work centrality EXCEPT
a. High levels of work centrality may lead to dedicated workers and more effective organizations.
b. Higher levels of work centrality closely match average number of hours worked in a country.
c. High levels of work centrality in Japan have been physically and psychologically stressing to middle-aged managers.
d. It represents the function of work in an organizational culture.

AACSB Reflective thinking, Motivation concepts

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6. All of the following statements about work in different countries are true EXCEPT
a. Regardless of country, money has the highest priority for why people work.
b. All people hope to receive certain benefits from work.
c. In some societies, work is very central and absorbs more of a person’s life.
d. People from different countries have different goals for their jobs.

AACSB Reflective thinking, Motivation concepts

PTS: 1

7. Motivation refers to
a. A feeling of deficit or lacking.
b. Goal-directed behaviors to satisfy human needs.
c. The use of work to satisfy many needs.
d. Consequences of a person’s behavior that discourages the behavior.

AACSB Reflective thinking, Motivation concepts

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8. Reactions to a person’s behavior that encourage the person to continue the behavior is
a. Goal-directed behavior.
b. Punishment.
c. Reinforcement.
d. Need.

AACSB Reflective thinking, Motivation concepts

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9. The national context affect motivation through all of the following EXCEPT
a. Cultural values and norms.
b. Social institutions that lead to different types of organizations.
c. The existence of strong organizational cultures.
d. National differences in work centrality.

AACSB Reflective thinking, Motivation concepts

PTS: 1

10. Need theories of motivation are based on the assumption that
a. Motivation is a function of the individual’s beliefs of what happens if one works hard.
b. Motivation is a result of the outcomes of one’s past behaviors.
c. Motivation is a function of why people work.
d. People can satisfy basic human needs in the work setting.

AACSB Reflective thinking, Motivation concepts

PTS: 1

11. All of the following statements about Maslow’s hierarchy of needs are true EXCEPT
a. People have six basic type of needs.
b. People have basic needs that follow a hierarchy from lower level to higher level needs.
c. People first seek to satisfy lower level needs and then move to higher level needs.
d. All of the above are true.

AACSB Reflective thinking, Motivation concepts

PTS: 1

12. All of the following statements are true about hygiene factors EXCEPT
a. Hygiene factors bring people to neutral states of motivation.
b. Hygiene factors include good benefits and good working conditions.
c. Hygiene factors can motivate workers similarly to motivating factors.
d. Hygiene factors include those characteristics that allow people to fulfill lower level needs.

AACSB Reflective thinking, Motivation concepts

PTS: 1

13. Which of the following motivation theory suggests that only some people have the need to win in competitive situation or to exceed excellence standards?
a. Expectancy theory
b. Motivator-hygiene theory
c. Achievement-motivation theory
d. Reinforcement theory

AACSB Reflective thinking, Motivation concepts

PTS: 1

14. When applying need theories in a cross-national context, managers should
a. Ignore the differences in needs between nations and apply the models uniformly.
b. Take into consideration the particular needs that people seek to satisfy in different countries.
c. Give the same magnitude of importance to work needs and apply these motivational tools.
d. Understand work centrality and then provide the same rewards to satisfy needs.

AACSB Reflective thinking, Motivation concepts

PTS: 1

15. Which types of motivation theories explain motivation arising from satisfaction of needs and values combined with an individual’s beliefs regarding the work environment?
a. Needs theories
b. Work centrality theories
c. Process and reinforcement theories
d. Work functions theories

AACSB Reflective thinking, Motivation concepts

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16. Expectancy theory proposes that
a. Motivation is solely determined by the satisfaction of needs.
b. Motivation is determined by the workers’ perceptions of fairness at work.
c. Motivation is a result of an individual’s preferences and belief that his/her effort will lead to some valued results.
d. Motivation is a purely automatic process.

AACSB Reflective thinking, Motivation concepts

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17. In a cross-national context, expectancy theory prescribes that managers
a. Should specify the hierarchy of needs of workers.
b. Identify and eliminate potential sources of inequity at work.
c. Identify valued outcomes and convince workers that their efforts will lead to these outcomes.
d. Punish workers for not achieving organizational goals.

AACSB Reflective thinking, Motivation concepts

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18. The theory based on the idea that employees compare their inputs and outcomes to other persons in the work setting to determine if they are being fairly treated is
a. Needs difference theory.
b. Expectancy theory.
c. Equity theory.
d. Reinforcement theory.

AACSB Reflective thinking, Motivation concepts

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19. All of the following statements are true EXCEPT
a. Equity norms prevail in individualistic cultures.
b. Equality norms prevail over equity norms in collectivist cultures.
c. Equity norms prevail in collectivist cultures.
d. All of the above are true.

AACSB Reflective thinking, Motivation concepts

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20. Principles of goal-setting theory include all of the following EXCEPT
a. Set clear and specific goals.
b. Provide incentives to achieve goals.
c. Give feedback on goal attainment.
d. Assign do-your-best types of goals.

AACSB Reflective thinking, Motivation concepts

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21. Setting goals for work groups is recommended in
a. Individualistic cultures.
b. Collectivist cultures.
c. High power distance cultures.
d. Goal setting for groups works equally well in all cultural settings.

AACSB Reflective thinking, Motivation concepts

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22. All of the following are true about the operant-conditioning model EXCEPT
a. Behavior is a function of its consequences.
b. People will stop behaviors that have unpleasant consequences.
c. People will continue behaviors they like irrespective of the nature of consequence.
d. People will continue behaviors that have pleasant consequences.

AACSB Reflective thinking, Motivation concepts

PTS: 1

23. Which motivation theory proposes that if a pleasurable consequence follows a behavior, then the behavior will continue and if an unpleasant consequence follows a behavior, the behavior will stop?
a. Needs theory
b. Expectance theory
c. Equity theory
d. Reinforcement theory

AACSB Reflective thinking, Motivation concepts

PTS: 1

24. Applying reinforcement at a cross-national level is challenging because
a. It is hard to identify the organizational rewards that can be used as reinforcers.
b. It is hard to understand how work values influence potential rewards.
c. It is hard to know which type of reinforcer is more applicable in different cultures.
d. All of the above

AACSB Reflective thinking, Motivation concepts

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25. All of the following statements about the US job characteristics model are true EXCEPT
a. The model suggests that work is more motivating when managers enrich core job characteristics.
b. The model suggests that enriching job characteristics is motivating for all types of individuals.
c. The model assumes that one critical state for motivation to occur is if the worker believes his/her work to be meaningful.
d. The model assumes that only some people will respond well to enriched jobs.

AACSB Reflective thinking, Motivation concepts

PTS: 1

26. The sociotechnical systems approach to job design
a. Gives priority to the technical efficiency of workers.
b. Attempts to mesh both modern technology and social needs of workers.
c. Has no major differences with the US job characteristics model.
d. Focuses on designing each worker’s task for job enrichment.

AACSB Reflective thinking, Motivation concepts

PTS: 1

27. A crucial difference between the US job characteristics model and the European STS approach is
a. The US model focuses on core job characteristics, while the European model focuses on tasks.
b. The US model focuses on individuals, while the European model focuses on work teams.
c. The US model focuses on work teams, while the European model focuses on individuals.
d. There are no differences between the US job characteristics model and the European STS approach.

AACSB Reflective thinking, Motivation concepts

PTS: 1

28. Social loafing
a. Is the social process of sharing.
b. Occurs when people prefer to work in groups.
c. Means that everyone’s work is easier in groups.
d. Occurs when people put out less effort when working in groups.

AACSB Reflective thinking, Motivation concepts

PTS: 1

29. Some of the detrimental effects of social loafing can be reduced if
a. Individuals are held responsible for performance.
b. Groups are held responsible for performance.
c. The group leader is held responsible for performance.
d. None of the above

AACSB Reflective thinking, Motivation concepts

PTS: 1

30. In individualistic cultures, performance drops off with the use of teamwork because
a. Of social loafing.
b. Workers believe that the group will make up any slack in their personal efforts.
c. Workers do not feel responsible for group outcomes.
d. All of the above

AACSB Reflective thinking, Motivation concepts

PTS: 1

31. A manager gives bonuses to high performing foreign employees hoping that they will continue performing at a high level. This manager is using which motivational principle?
a. Extinction
b. Goal-directed
c. Reinforcement
d. Punishment

AACSB Analytic, Motivation concepts

PTS: 1

32. An expatriate finds that one of his subordinates regularly jokes about a minority group in the country. She decides to ignore the jokes hoping that the subordinate will eventually stop such jokes. Which aspect of reinforcement theory is she using?
a. Avoidance
b. Extinction
c. Punishment
d. Operant conditioning

AACSB Analytic, Motivation concepts

PTS: 1

33. Hygiene factors include
a. The size of desks and color of offices.
b. Interesting tasks in the job.
c. Challenges in the job.
d. All of the above

AACSB Reflective thinking, Motivation concepts

PTS: 1

34. Which of the following is NOT one of the reasons discussed to explain why people engage in social loafing in individualistic cultures?
a. When working in groups, people in individualistic cultures often feel less pressure to work and less responsible for work outcomes.
b. Workers in groups in individualistic cultures often believe that the group will make up any slack in their personal efforts.
c. People in individualistic cultures often give priority to their own work over the group.
d. All of the above are reasons to explain social loafing in individualistic cultures.

AACSB Reflective thinking, Motivation concepts

PTS: 1

35. Which of the following theories is NOT considered as one of the needs theories?
a. Equity theory
b. Achievement motivation theory
c. Maslow’s hierarchy of needs
d. Motivator-hygiene theory

AACSB Reflective thinking, Motivation concepts

PTS: 1

36. The need to maximize personal achievement refers to which type of need in Maslow’s hierarchy of needs
a. Physiological needs.
b. Self esteem needs.
c. Self actualization needs.
d. Security needs.

AACSB Reflective thinking, Motivation concepts

PTS: 1

37. Esteem needs refer to
a. Basic survival needs such as food, water and shelter.
b. Safety and avoidance of pain and life-threatening situations.
c. Being loved and having friendship.
d. Focus on respect and feelings of self-worth.

AACSB Reflective thinking, Motivation concepts

PTS: 1

38. According to the text, those who are underrewarded are likely to
a. Return their rewards.
b. Reduce their inputs.
c. Increase their inputs.
d. None of the above

AACSB Reflective thinking, Motivation concepts

PTS: 1

39. According to equity theory, equity conscious people are most likely those
a. Who behave consistently with equity theory.
b. Who are more likely to tolerate situations where they are underrewarded.
c. Are more likely to experience satisfaction if underrewarded.
d. None of the above

AACSB Analytic, Motivation concepts

PTS: 1

40. Which of the following refers to the aspect of a job where the person can complete a whole piece of work from beginning to end?
a. Feedback
b. Task significance
c. Task variety
d. Task identity

AACSB Reflective thinking, Motivation concepts

PTS: 1

ESSAY

1. Why is it necessary to understand the meaning of work in different cultures before planning work motivation strategies?

2. Compare and contrast the need theories of motivation to the process theories of motivation. How can these theories be applied in multinational management?

3. Describe Vroom’s Expectancy Theory. What are some implications for multinational management?

4. What are the three major principles of allocating rewards? Discuss how each principle works. Why is equality preferred in more collectivistic cultures while individualistic cultures favor equity?

5. Discuss some of the implications of the operant-conditioning model for multinational management.

6. Explain why performance drops off when teams are used in individualistic cultures. Explain the significance of social loafing in the process. How can social loafing be reduced?

7. Compare and contrast the Job Diagnostics Design Approach to the European Sociotechnical Systems Approach to job design.

8. Discuss equity theory. What are the implications for multinationals?

Chapter 15 Leadership and Management Behavior in Multinational Companies

MULTIPLE CHOICE

1. All the following statements are true about leadership EXCEPT
a. Leadership is influencing group members to achieve organizational goals.
b. Excellent leaders motivate their employees to achieve more than minimal organizational requirements.
c. Companies can achieve success with or without good leaders.
d. Leading in a multinational company is an even greater challenge than in a domestic one.

AACSB Reflective thinking, Leadership principles

PTS: 1

2. Some of the characteristics of the new breed of global leaders include
a. The skills and abilities to interact with and manage people from the diverse cultural backgrounds that populate their multinational companies.
b. Sufficiently flexible to operate comfortably in pluralistic cultural environments.
c. Knows at least one foreign language and understands the complexities of interaction with people from other cultures.
d. All of the above

AACSB Reflective thinking, Leadership principles

PTS: 1

3. Trait models of leadership
a. Evolved from the debate regarding whether leaders are born or made.
b. Focuses on the behaviors leaders use to manage their employees.
c. Assumes that different styles and different leaders are more appropriate for different situations.
d. Includes Maslow’s Hierarchy of Needs theory.

AACSB Reflective thinking, Leadership principles

PTS: 1

4. The idea that leaders are born with unique characteristics that make them different form ordinary people is the
a. Task centered leadership theory.
b. A contingency theory of leadership.
c. The great-person theory.
d. The leadership behaviors theory.

AACSB Reflective thinking, Leadership principles

PTS: 1

5. All of the following are true about trait leadership theories EXCEPT
a. Using trait theory, one can conclude that successful business, political, religious, and military leaders were born with unique characteristics that made them quite different from ordinary people.
b. Leadership theorists identified an exact list of leadership traits.
c. The great person theory of leadership assumes that leaders are born.
d. All of the above are true.

AACSB Reflective thinking, Leadership principles

PTS: 1

6. The type of leadership that includes behaviors that focus on completing tasks by initiating structure is known as
a. Task-centered leadership.
b. Person-centered leadership.
c. Autocratic leadership.
d. Democratic leadership.

AACSB Reflective thinking, Leadership principles

PTS: 1

7. Person-centered leaders
a. Focus on completing tasks by initiating structure.
b. Give specific directions to subordinates so that the subordinates can feel comfortable completing tasks.
c. Show a concern for subordinates’ feelings and taking subordinates’ ideas into account.
d. Make all major decisions themselves.

AACSB Reflective thinking, Leadership principles

PTS: 1

8. Leaders who do not allow employees to share in the decision- making are
a. Democratic leaders.
b. Autocratic leaders.
c. Participative leaders.
d. Consultative leaders.

AACSB Reflective thinking, Leadership principles

PTS: 1

9. The leadership style that falls midway between autocratic and democratic styles is the
a. Person-centered leader.
b. Subordinate-oriented leader.
c. Consultative leader.
d. Task-oriented leader.

AACSB Reflective thinking, Leadership principles

PTS: 1

10. All of the following are true about the Japanese Performance-Maintenance (PM) theory of leadership EXCEPT
a. The Performance-Maintenance (PM) theory of leadership represents a Japanese perspective on leadership.
b. PM theory has two dimensions, the performance function (P) and the maintenance function (M), which are the basic aspects of the theory.
c. The maintenance function (M) is similar to task-centered leadership.
d. PM theory suggests that groups perform best when both P and M are present.

AACSB Reflective thinking, Leadership principles

PTS: 1

11. Contingency theories
a. Look for leadership behaviors that work in all countries.
b. Focus on which leadership traits or behaviors define excellent in Japan.
c. Assume that different styles and different leaders are more appropriate for different situations.
d. None of the above

AACSB Reflective thinking, Leadership principles

PTS: 1

12. All of the following are true about Fiedler’s Leadership Effectiveness theory EXCEPT
a. Fiedler proposed that managers tend to be either task or person-centered leaders.
b. The success of leadership styles depends on three characteristics of the work situation.
c. Effective leadership occurs when the leadership style matches the situation.
d. Task-centered leadership works best in mixed conditions.

AACSB Reflective thinking, Leadership principles

PTS: 1

13. Path-Goal Theory
a. Is a popular US contingency theory.
b. Identifies four types of leadership styles that a manager might choose depending on the situation.
c. Key contingency or situational factors that determine the choice of the best leadership styles are: the nature of the subordinates and the characteristics of the subordinates’ tasks.
d. All of the above

AACSB Reflective thinking, Leadership principles

PTS: 1

14. Which of the following is NOT one of the leadership styles of the path-goal theory of leadership?
a. Directive style
b. Supportive style
c. Task-oriented style
d. Participative style

AACSB Reflective thinking, Leadership principles

PTS: 1

15. Consulting with subordinates, asking for suggestions, encouraging participation in decision making, represent which leadership style in path-goal theory?
a. Directive style
b. Supportive style
c. Participative style
d. Achievement-oriented style

AACSB Reflective thinking, Leadership principles

PTS: 1

16. Key leadership suggestions based on path-goal theory include all of the following EXCEPT
a. When subordinates have high achievement needs, successful leaders adopt the achievement-oriented style.
b. When subordinates with have high social needs, they respond best to the supportive leadership style.
c. When the subordinate’s job is unstructured, the theory suggests using a supportive style.
d. When the subordinate’s job is highly structured, the theory suggests using instrumentality.

AACSB Reflective thinking, Leadership principles

PTS: 1

17. The National Context Contingency Model of Leadership
a. Assumes that successful leaders need not modify their behaviors or develop particular leadership traits to succeed in different nations.
b. Includes two contingencies: the characteristics of subordinates and the nature of the work setting.
c. Includes factors related to the national culture and social institutions.
d. Only B and C are correct

AACSB Reflective thinking, Leadership principles

PTS: 1

18. All of the following are true about leadership traits in various national settings EXCEPT
a. People from different cultural backgrounds prefer certain traits.
b. In Germany, a desired leadership trait is modesty.
c. In France, leaders are considered different based on social class distinctions between cadres and non-cadres.
d. In the US, assertiveness is valued as a leadership trait.

AACSB Reflective thinking, Leadership principles

PTS: 1

19. U.S. managers’ favored influence tactics include the following EXCEPT
a. Assertiveness.
b. Reasoning.
c. Aggressiveness.
d. Bargaining.

AACSB Reflective thinking, Leadership principles

PTS: 1

20. Building support for ideas and networking and using friendships involve the use of which influence tactics?
a. Assertiveness
b. Friendliness
c. Sanctioning
d. Coalitions

AACSB Reflective thinking, Leadership principles

PTS: 1

21. All of the following statements regarding subordinates expectations in different countries are true EXCEPT
a. In counties with high power distance values, including many of the Latin and Asian countries, subordinates expect autocratic leadership.
b. In low power distance countries, such as Sweden and Norway, subordinates expect the leader to be more like them.
c. Weak masculinity norms often lead to the acceptance of more authoritarian leadership.
d. Strong uncertainty avoidance norms may cause subordinates to expect the leader to provide more detail in directions.

AACSB Reflective thinking, Leadership principles

PTS: 1

22. When managers use rewards or punishment to influence their subordinates, they are engaging in
a. Rewards oriented leadership.
b. Transformational leadership.
c. Transactional leadership.
d. Charismatic leadership.

AACSB Reflective thinking, Leadership principles

PTS: 1

23. Transformational leadership
a. Means that managers use rewards or punishments to influence their subordinates.
b. Is similar to transactional leadership.
c. Succeeds because subordinates respond to the leader with high levels of performance, personal devotion, and excitement.
d. Is one leadership style of Fieldler’s leadership theory.

AACSB Reflective thinking, Leadership principles

PTS: 1

24. Behaviors and characteristics of transformation leaders include the all of the following EXCEPT
a. Articulates a vision.
b. Breaks from the status quo.
c. Uses rewards or punishments to influence subordinates.
d. Provides goals and a plan.

AACSB Reflective thinking, Leadership principles

PTS: 1

25. The attribution approach to leadership
a. Emphasizes the leader’s attributions regarding the causes of subordinates’ behaviors.
b. Focuses on using rewards or punishments to influence the attributes of subordinates.
c. Is similar to the trait approach, except that it focuses on a person’s attributes.
d. Represents one key aspect of transformational leadership.

AACSB Reflective thinking, Leadership principles

PTS: 1

26. Explaining a person’s behavior based on factors outside the person and beyond the person’s control (e.g., natural disasters, illness, faulty equipment, etc.) is a/an
a. Internal attribution.
b. External attribution.
c. Fundamental attribution error.
d. Attribution effect.

AACSB Reflective thinking, Leadership principles

PTS: 1

27. According to the text, if a leader perceives the cause of a subordinate’s behavior based on an internal attribution, then most leaders will
a. Tend to correct or reward the worker.
b. Modify the work environment.
c. Do nothing.
d. Use transformational leadership.

AACSB Reflective thinking, Leadership principles

PTS: 1

28. The fundamental attribution error
a. Is a tendency for managers to believe that most people act because of internal motivations.
b. Is a tendency for managers to believe more often that people behave in certain ways because of outside factors, such as poor working conditions.
c. Occurs most often in Asian cultures.
d. Concerns primarily external attributions.

AACSB Reflective thinking, Leadership principles

PTS: 1

29. According to the text, all of the following statements about leadership styles in different cultures are true EXCEPT
a. In high power distance countries, leaders generally behave more autocratically.
b. In high uncertainty avoidance national cultures both leaders and subordinates often feel more comfortable when the leader initiates structure.
c. In low uncertainty avoidance countries leaders tell subordinates exactly what to do.
d. In high power distance countries, person-centered leadership works best in large groups.

AACSB Reflective thinking, Leadership principles

PTS: 1

30. The recommended leadership style for a country low on power distance and low on uncertainty avoidance is
a. The democrat – supportive, participative, and achievement.
b. The master – directive and supportive.
c. The professional- directive, supportive, and participative.
d. The boss- directive.

AACSB Reflective thinking, Leadership principles

PTS: 1

31. Which of the following statements is NOT TRUE regarding leadership in various cultures?
a. In countries with high power distance, subordinates expect leaders to be more like them.
b. Strong masculinity norms often lead to the acceptance of more authoritarian leaders.
c. In countries with high uncertainty avoidance, subordinates expect detail and directions to perform their tasks.
d. All of the above are true.

AACSB Reflective thinking, Leadership principles

PTS: 1

32. A multinational manager discovers that his leadership style is more effective when he displays visible sign of status (e.g chauffeur driven cars) and he behaves as an authoritarian leader. The manager is most likely leading in which of the following cultures?
a. A feminine culture
b. A high uncertainty avoidance culture
c. A low power distance culture
d. A high power distance culture

AACSB Analytic, Leadership principles

PTS: 1

33. Which of the following is NOT one of the behaviors/characteristics of transformational leader as discussed in the text?
a. Takes risk
b. Demonstrates high ethical and moral standards
c. Articulates a vision
d. All of the above applies to transformational leaders

AACSB Reflective thinking, Leadership principles

PTS: 1

34. An expatriate finds that if she gives specific directions to her subordinates, productivity is much higher. Which leader behavior is she displaying?
a. Consultative leader behavior
b. Democratic leader behavior
c. Task-centered leader behavior
d. Person-centered leader behavior

AACSB Reflective thinking, Leadership principles

PTS: 1

35. According to the Global Leadership and Organizational Behavior Effectiveness (GLOBE) study, which of the following leadership styles represents the leader who is modest and has a compassionate orientation?
a. Team-oriented leader
b. Self-protective leader
c. Participative leader
d. None of the above

AACSB Reflective thinking, Leadership principles

PTS: 1

36. Which statement regarding fundamental attribution errors is true?
a. In Western nations, people tend to make external attributions.
b. In Eastern nations, people tend to make internal attributions.
c. In Western nations, people tend to make internal attributions.
d. In Eastern nations, people tend to make external attributions.

AACSB Reflective thinking, Leadership principles

PTS: 1

37. According to the Global Leadership and Organizational Behavior (GLOBE) studies, which of the following leadership style characterizes a leader who is self-centered, status conscious and procedural?
a. The autonomous leader
b. The participative leader
c. The humane style leader
d. The self-protective leader

AACSB Reflective thinking, Leadership principles

PTS: 1

38. Which of the following statements regarding the autonomous leader is FALSE according to the Global Leadership and Organizational Behavior (GLOBE) studies?
a. Autonomous leaders are independent, individualistic and unique.
b. Autonomous leaders act in self-interested manner.
c. Germanic and Eastern European countries have the highest scores on autonomous leadership.
d. Autonomous leadership is seen as very effective in most cultures.

AACSB Reflective thinking, Leadership principles

PTS: 1

39. Which of the following examples characterize the use of assertiveness as an influence tactics?
a. Example behaviors include being friendly and humble.
b. Example behaviors include using logical arguments.
c. Example behaviors include using threats and punishments.
d. Example behaviors include being forceful and directive.

AACSB Reflective thinking, Leadership principles

PTS: 1

40. The recommended leadership style for a country high on power distance and low on uncertainty avoidance is
a. The boss – directive.
b. The professional – directive, supportive and participative.
c. The master – directive and supportive.
d. The democrat – supportive and participative.

AACSB Reflective thinking, Leadership principles

PTS: 1

ESSAY

1. Define leadership. How might people from different national cultures define leadership? What are the implications of these definitions for multinational leaders working in these countries?

2. Pick a national culture with which you are familiar. For this culture, identify leadership traits and behaviors that would be detrimental to organizational effectiveness.

3. From the perspective of the subordinates, discuss why culturally inappropriate leadership behaviors might be de-motivating.

4. Why do multinational managers need to understand subordinate expectations in order to lead effectively? Which leadership style works the best in countries with high power distance? Why?

5. Discuss five preferred influence tactics that U.S. managers favor. Discuss how these tactics might work in other countries.

6. Discuss whether transformational leadership qualities are culture free. That is, are transformational leaders similar regardless of cultural background or are there different types of transformational leaders for each cultural group?

7. What is attribution theory? How can leaders use attribution theory to help them be good leaders?

8. What is the fundamental attribution error? What are some implications for leadership in multinationals?

9. Compare and contrast U.S. and Japanese perspectives on leadership behavior.

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Chapter 1 Through 12
Chapter 1

WHAT IS RESEARCH?

Multiple-Choice Questions

*1. To be considered true research, a project must:
a. gather together a body of existing information and communicate it in a clear and
concise way.
b. uncover obscure or esoteric information and bring it to the consideration of the broader research community.
c. gather and interpret information in a systematic fashion so as to increase understanding of some phenomenon.
d. produce definitive conclusions regarding the subject of study.

**2. Which of the following examples illustrates research the way it is defined in your textbook?
a. Sally is writing a paper about the effects of the Harry Potter books on the reading habits of fourth graders in the United States and United Kingdom. She goes to a research library to find information to include in her paper.
b. Ian wants to know why the population of songbirds has declined in recent years in the Sutton Wilderness Area. He carefully collects soil and water samples, systematically surveys the entire area for predators, and then sits down to make sense of his findings.
c. Leonard is starting a woodworking business and is not sure how to calculate the cost of his labor so he can be both profitable and fair to the customers. He asks several established business owners how they calculate labor changes.
d. Bill is doing a report on the sonnets of Shakespeare. He carefully reads a number of sonnets and then carefully reads scholarly reviews of those same sonnets written by various Shakespeare scholars. He synthesizes all of this information in his report.

*3. Which of the following is defined as an organized body of concepts and principles intended to explain a particular phenomenon?
a. Theory
b. Inference
c. Hypothesis
d. Interpretation

*4. Which of the following is defined as a reasonable guess, or a logical supposition, for explaining the phenomenon under investigation?
a. Theory
b. Inference
c. Hypothesis
d. Interpretation
*5. The process of formal research begins with the identification of:
a. research hypotheses.
b. a feasible research plan.
c. available participants.
d. a research problem.

*6. The purpose of formal research is to:
a. prove or disprove the study hypotheses.
b. support or fail to support the study hypotheses.
c. identify alternative hypotheses.
d. move beyond the need for hypotheses.

*7. Assumptions come into play:
a. in regard to nearly every aspect of every research study.
b. in qualitative research but not in quantitative research.
c. when research is not well thought out.
d. rarely, if ever.

*8. Well-designed research manages to minimize or avoid:
a. assumptions.
b. predictions.
c. theory.
d. bias.

*9. Researchers ______ their phenomenon of interest on the basis of data analysis.
a. make inferences about
b. know facts about
c. define
d. identify

*10. A primary function of the methodology is to:
a. guide and control the acquisition of data.
b. extract meaning from the data that have been gathered.
c. both a and b
d. neither a nor b

*11. Three of the following come into play as the researcher analyzes the data. Which one does NOT?
a. The study hypothesis/hypotheses
b. Preferences for certain outcomes
c. The logical reasoning process
d. Assumptions

*12. A well-designed and well-conducted study:
a. answers questions of importance in the field.
b. raises questions of importance to the field.
c. answers some questions and raises other questions.

*13. Reading the professional literature in the field of interest:
a. will enhance an individual’s ability to design and conduct high-quality research.
b. will stifle creativity and constrain the individual to the status quo.
c. will make little difference to the quality and impact of the individual’s work.
d. is necessary only for the leaders in the field.

*14. One indication that a piece of information is of high quality is that the information:
a. is found on the Internet.
b. is found in a juried (or refereed) research report.
c. resulted from a project that received corporate funding.
d. is the firsthand account of a personal experience.

Essay Questions

15. Your chapter states: “Research is, by its nature, cyclical or, more exactly, helical.” Explain why “cyclical” is an appropriate description of the research process. Then explain why “helical” is a better description.

16. Describe an example of the word research being used inappropriately. Be clear about how your example deviates from the definition of research offered in the chapter.

17. Graduate professors like to insist that the completion of thesis or dissertation research is not merely an “academic exercise” or final hurdle to obtaining the desired degree. Explain at least one personal benefit that the individual derives from completing a high- quality thesis or dissertation. Then explain at least one societal benefit that follows from the individual’s completion of a high-quality thesis or dissertation.

18. In the most rigorous tests of hypotheses, the researcher sets out to fail to support the hypothesis. Why is the attempt to fail to support a more rigorous test of the hypothesis than an attempt to support it?

Chapter 2

TOOLS OF RESEARCH

Multiple-Choice Questions

*1. A ______ is a specific mechanism or strategy the researcher uses to collect,
manipulate, or interpret data.
a. research tool
b. research methodology
c. statistical test
d. theory

*2. Research methodology refers to:
a. the general approach the researcher takes to conducting a research project.
b. a specific device the researcher uses to collect data.
c. the specific theoretical basis of the research project.
d. the statistical tests to be employed in a research project.

**3. Sam wants to find high-quality research reports related to attribution theory that have been published in professional journals. Sam’s best approach would be to:
a. consult the library catalog.
b. consult an online or electronic database.
c. search the World Wide Web.
d. browse the shelves in the library.

**4. Sonya is a college freshman who has just been assigned her first research paper, and she doesn’t know how to get started finding information. Sonya should:
a. search the World Wide Web.
b. consult an online or electronic database.
c. consult a reference librarian.
d. browse the shelves in the library.

*5. ______ allows a researcher to receive news in an area of special interest and discuss that news with others.
a. A search engine
b. E-mail
c. A list server
d. A Web browser

*6. ______ allows researchers to personally correspond practically instantly with other users around the world.
a. A search engine
b. E-mail
c. A list server
d. A Web browser

**7. John wants to begin using e-mail. Which of the following steps is NOT necessary for John to get started as an email user?
a. Request an e-mail account
b. Obtain necessary software from the e-mail provider and load it onto a computer
c. Learn to use a Web browser to explore the Internet
d. Learn how to access and use the e-mail provider’s services

*8. Three of the following statements about measurement in the research setting are accurate. Which one is NOT accurate?
a. The purpose of measurement is to systematically limit the data in a way that makes it quantifiable.
b. Measurement is applied by researchers only to insubstantial phenomena.
c. Measurement is a tool that aids researchers in interpreting their observations.
d. Systematic measurement assists researchers in obtaining objectivity in their researcher.

*9. An ordinal scale of measurement:
a. assigns a name to a category.
b. is tied to an absolute zero.
c. incorporates equal units of measurement.
d. communicates greater than and less than relationships.

*10. An interval level of measurement:
a. assigns a name to a category.
b. communicates rank-order information.
c. incorporates equal units of measurement.
d. is tied to an absolute zero.

*11. A ratio scale of measurement:
a. assigns a name to a category.
b. communicates rank-order information.
c. is especially appropriate for opinion data.
d. is tied to an absolute zero.

**12. The main difference between an interval and a ratio scale is that only one of them:
a. includes an absolute zero.
b. uses equal units of measurement.
c. supports the use of statistical analyses.
d. is used in research with human subjects.
**13. Professor Harris is constructing a demographic questionnaire for use in a research project. One question asks students to report how politically conservative they are. It includes a 7-point scale where 1 is “not at all conservative” and 7 is “extremely conservative.” This is an example of a/an:
a. nominal scale.
b. ordinal scale.
c. interval scale.
d. ratio scale.

**14. Professor Harris is constructing a demographic questionnaire for use in a research project. One question asks students to report their highest level of education by choosing from these options: “some high school,” “completed high school,” “some college,” or “completed 4-year college degree.” This is an example of a/an:
a. nominal scale.
b. ordinal scale.
c. interval scale.
d. ratio scale.

**15. Professor Harris is constructing a demographic questionnaire for use in a research project. One question asks students to report their age in years. This is an example of a/an:
a. nominal scale.
b. ordinal scale.
c. interval scale.
d. ratio scale.

**16. Professor Harris is constructing a demographic questionnaire for use in a research project. One question asks students to report whether they are currently living in an “urban,” “suburban,” or “rural” setting. This is an example of a/an:
a. nominal scale.
b. ordinal scale.
c. interval scale.
d. ratio scale.

*17. ______ refers to whether a measurement tool actually measures what it is intended to measure.
a. Validity
b. Reliability
c. Accountability
d. Robustness

*18. ______ refers to how consistently a measurement tool will yield the same result when the phenomenon under investigation does not change.
a. Validity
b. Reliability
c. Replicability
d. Dependability

**19. Kade has spent the past month carefully observing a group of third graders on the playground during recess, taking note of how the students interact with one another. On the basis of these observations, Kade is drawing conclusions about the interaction styles of boys and girls. This is an example of:
a. hypothetical logic.
b. deductive logic.
c. inductive logic.
d. propositional logic.

**20. Kimberly knows that teenagers often do not make good decisions in areas where they have little knowledge. She also knows that most teens have little knowledge about human sexuality. Therefore, Kimberly believes that teens are likely to make poor decisions about sexual activity. This is an example of:
a. inductive logic.
b. propositional logic.
c. transductive logic.
d. deductive logic.

Essay Questions

21. In your opinion, what is the one greatest advantage to society of the information revolution? What is the one greatest disadvantage? Support your answer.

22. Near the end of Chapter 2 the authors of your textbook include a relatively lengthy section on writing the research report. Why is it important that research results are carefully written up and made available to the scientific community?

23. Do recent technological advances (e.g., the World Wide Web, electronic databases) assure that future research will be of higher quality, or of greater utility, than past research? Support your answer.

Chapter 3

THE PROBLEM: THE HEART OF THE RESEARCH PROCESS

Multiple-Choice Questions

*1. Research problems, as defined in your textbook:
a. are identified by experts in the field, and not typically knowable by novices.
b. clearly and completely specify important questions that are currently unanswered in a particular field of inquiry.
c. are broad, general statements about the incomplete state of understanding in a particular field of inquiry.
d. can be addressed by compiling and synthesizing existing information in a way that sheds light on the issue of interest.

*2. Basic research is:
a. research intended to enhance basic knowledge about the physical, biological, psychological, or social world or to shed light on historical, cultural, or aesthetic phenomena.
b. large scale research performed under contract with a governmental agency such as the National Science Foundation (NSF), National Institute of Mental Health (NIMH), etc.
c. informal research conducted locally by a small staff with a small budget, the purpose of which is to pave the way for larger research initiatives.
d. research intended to address issues that have immediate relevance to current practices, procedures, and policies.

*3. Applied research is:
a. research intended to enhance basic knowledge about the physical, biological, psychological, or social world or to shed light on historical, cultural, or aesthetic phenomena.
b. large-scale research performed under contract with a governmental agency such as the National Science Foundation (NSF), National Institute of Mental Health (NIMH), etc.
c. informal research conducted by a small staff with a small budget, the purpose of which is to shed light on a problem of local interest.
d. research intended to address issues that have immediate relevance to current practices, procedures, and policies.

**4. Which of the following represents a well-written basic research problem?
a. “Which general education course is more interesting, U.S. History or World Music?”
b. “How do business teams of six or fewer members compare to teams of more than six members in terms of productivity?”
c. “How does the organization of mathematical information in long-term memory differ between 3-year-olds and 13-year-olds?”
d. “What is the ratio of native-born students to international students on the campuses of major U.S. state universities?”

**5. Which of the following represents a well-written applied research problem?
a. “How does the organization of mathematical information in long-term memory differ between 3-year-olds and 13-year-olds?”
b. “How do business teams of six or fewer members compare to teams of more than six members in terms of productivity?”
c. “Which general education course is more interesting, U.S. History or World Music?”
d. “What is the ratio of native-born students to international students on the campuses of major U.S. state universities?”

**6. Three of the following questions lend themselves well to formal research. Which one does NOT?
a. “How does the organization of mathematical information in long-term memory differ between 3-year-olds and 13-year-olds?”
b. “How do business teams of six or fewer members compare to teams of more than six members in terms of productivity?”
c. “Does message medium, print versus television, impact the effectiveness of public service health messages?”
d. “Which general education course is more interesting, U.S. History or World Music?”

*7. Three of the following are characteristics of a well-written research problem. Which one is NOT?
a. The problem statement includes jargon associated with the field.
b. The problem statement clearly delimits the object(s) of study.
c. The problem statement identifies the important factors to be investigated in the study.
d. The problem statement explicitly identifies assumptions.

*8. A common weakness of research problems is that they:
a. delimit the object(s) of study.
b. constrain the variables to be investigated.
c. implicitly rest on common assumptions.
d. incorporate a number of subproblems.

**9. “What proportion of workers hired by selected factories in the state of Oklahoma between 1995 and 2000 held four-year college degrees?”
The chief weakness of this research problem is that:
a. it lacks clarity or completeness in the problem statement.
b. it implies only description of the data, not interpretation.
c. it does not lead to the creation/discovery of new information.
d. studying the question as stated is not feasible.

**10. “What do underemployed U.S. workers (i.e., those workers who are employed, but not in positions for which they have specialized training or expertise) identify as the primary reason for their inability to find suitable employment?”
The chief weakness of this research problem is that:
a. it lacks clarity or completeness in the problem statement.
b. it does not lead to the creation/discovery of new information.
c. it implies only description of the data, not interpretation.
d. studying the question as stated is not feasible.

**11. “What is the correlation between an index of civic-mindedness and years of involvement in local organizations and charities among members of city councils of selected midsized cities in the northeastern United States?”
The chief weakness of this research problem is that:
a. it implies only description of the data, not interpretation.
b. it does not lead to the creation/discovery of new information.
c. it lacks clarity or completeness in the problem statement.
d. studying the question as stated is not feasible.

**12. “Among social workers in selected U.S. urban areas, are the personality characteristics of Need for Structure or In-Group Preference related to prejudicial social judgments about African Americans, Latino Americans, or Asian Americans?”
Which of the following is a well-stated subproblem that follows from this research problem?
a. Which group is more discriminated against by the public at large in each of the selected areas: African Americans, Latino Americans, or Asian Americans?
b. What is the most valid existing measure of In-Group Preference?
c. What is the relationship between an index of Need for Structure and an index of prejudice targeting attitudes about Asian Americans among the selected social workers?
d. Which analytic technique is best suited to addressing the research problem, multiple regression or path analysis?

*13. In regard to research questions and hypotheses, a high-quality research study will:
a. articulate only research questions, not hypotheses, so as not to constrain the possible findings.
b. articulate only hypotheses, not research questions, in order to preserve the scientific rigor of the investigation.
c. focus only on those questions that can support the correctness of current hypotheses or theoretical positions.
d. articulate either research questions or hypotheses depending on the nature of the study.

**14. Which of the following represents a null hypothesis?
a. Class A high school basketball teams who employ a sports psychologist will have a higher proportion of wins over the course of the season than comparable teams who do not employ a sports psychologist.
b. There will be no difference in rate of skill improvement between college gymnasts who practice meditation and those who do not.
c. Does incorporating relaxation exercises into the daily practice routine of college vocal majors enhance their performance confidence?
d. None of the above

**15. Which of the following represents a research hypothesis?
a. Class A high school basketball teams who employ a sports psychologist will have a higher proportion of wins over the course of the season than comparable teams who do not employ a sports psychologist.
b. There will be no difference in rate of skill improvement between college gymnasts who practice meditation and those who do not.
c. Does incorporating relaxation exercises into the daily practice routine of college vocal majors enhance their performance confidence?
d. None of the above

*16. The recommended order of tasks in preparing a research proposal is:
a. state the problem and subproblems, note the assumptions, note the delimitations, define the terms, note the research questions/hypotheses.
b. state the problem and subproblems, note the delimitations, note the research questions/hypotheses, note the assumptions, define the terms.
c. state the problem and subproblems, note the research questions/hypotheses, note the assumptions, define the terms, note the delimitations.
d. state the problem and subproblems, note the research questions/hypotheses, note the delimitations, define the terms, note the assumptions.

*17. Three of the following comprise the setting of the research problem. Which one does NOT?
a. A clear description of all measurement tools to be used in the research project
b. A clear statement of what the researcher will and will not do in the course of the study
c. A clear statement of the assumptions on which the research problem rests
d. A clear definition of all terms related to the research problem that might be misunderstood by a reader

Essay Questions

18. Why is it important that the researcher articulate, as clearly as possible, all assumptions that affect the research problem?

19. Your textbook authors recommend explicitly defining any term that might be misunderstood by someone reading the research proposal. If the research proposal is being written chiefly for use and review by researchers, why is such a step necessary?

20. Daphne has been a member of a research team studying interpersonal aggression among preschoolers for more than a year. In that time, her team has repeatedly employed a consistent set of techniques and procedures to study preschoolers as they interact in a number of settings. The procedures revolve around volunteer mothers bringing their children to the university child development lab for a “play session” that is the basis of the formal observations. Settings they have studied so far include: the university pre-school, affluent local day-care centers, and a pre-kindergarten program being offered in the neighborhood school district. All of these settings were fairly racially homogenous.

Daphne has just learned that a friend of a friend can help her gain research access, in the near future, to preschoolers in an unusually racially diverse though impoverished preschool setting. Daphne decides she has no time to prepare a formal research proposal before embarking on the study. “Besides,” she thinks, “this study should go just like all the others we’ve done.”

Is Daphne leaving herself open to problems in this situation, or is she safe moving ahead with no formal proposal, given how familiar she is with the study techniques and procedures?

Chapter 4

REVIEW OF THE RELATED LITERATURE

Multiple-Choice Questions

*1. Generally speaking, the best time to begin the literature review associated with a specific research project is:
a. after the research problem has been clearly articulated.
b. after the data have been collected, but before they are analyzed.
c. based on personal preference; there is no single best time.
d. before or during the formulation of the research problem.

*2. If you want to find information about books available in your local library, ______ will probably be your best resource.
a. the library catalog
b. government publications
c. an online database
d. the World Wide Web

*3. If you want to conduct a keyword or author search of research reports published in professional journals, ______ will probably be your best resource.
a. the library catalog
b. government publications
c. an online database
d. the World Wide Web

*4. If you want to find statistics on health care spending broken down by state, ______ will probably be your best resource.
a. the library catalog
b. government publications
c. an online database
d. the reference lists of important papers in your area

**5. If an important reference you want to include in your literature review is checked out to another library patron, you might:
a. obtain it through interlibrary loan.
b. obtain it by asking the library to recall the reference.
c. obtain it through an online document delivery service.
d. decide to make do without it.

**6. If an important recent research article that you want to include in your literature review is not owned by your library, you might:
a. cite it anyway for the benefit of the reader.
b. obtain it by asking the library to recall the reference.
c. obtain it through an online document delivery service.
d. decide to make do without it.

**7. If an important book that you want to include in your literature review is not owned by your library, your best move would probably be to:
a. obtain it through interlibrary loan.
b. obtain it by asking the library to recall the reference.
c. obtain it through an online document delivery service.
d. cite it anyway for the benefit of the reader.

*8. ______ is an example of a search engine.
a. Altavista
b. Books in Print
c. ERIC (Educational Resources Information Center)
d. Humanities Index

*9. ______ is an example of an electronic database.
a. Altavista
b. Books in Print
c. ERIC (Educational Resources Information Center)
d. Humanities Index

**10. Jane wants to search for information about the variety of attention disorders that are seen in childhood. Which of the following sets of keywords would best get Jane started on an effective and efficient search?
a. “attention disorders”
b. “ADHD,” “ADD,” and “children”
c. “disorders” and “children”
d. “attention disorders” and “children”

*11. If a researcher has completed a thorough search of the World Wide Web:
a. the literature search can be concluded.
b. it may also be fruitful to search an electronic database.
c. it may also be fruitful to search the Internet.
d. he/she will find largely redundant information on an electronic database.

*12. The main purpose of the review of the literature is to:
a. acknowledge the work of others by listing their findings prior to proposing your own project.
b. show how your study is superior to other work done in the area.
c. publicly demonstrate your mastery of the research literature in your area.
d. show how your study is related to, and extends, other work in the area.

*13. A well-structured literature review:
a. contains highly detailed descriptions of each work chosen for inclusion in the review.
b. begins with those studies most closely related to the research problem, then opens up to a broader perspective.
c. begins with broad/general information, then narrows the focus to those studies most closely related to the research problem.
d. contains general summaries of each work chosen for inclusion in the review.

*14. The review of the literature can be curtailed when:
a. you are no longer encountering new ideas or information.
b. all of the work done by top researchers in the area has been reviewed.
c. all published work related to a topic has been reviewed.
d. two to four weeks have been devoted to the search.

*15. A well-written literature review:
a. avoids evaluation or critique of the literature reviewed, so as not to bias the opinion of the reader.
b. emphasizes critique and synthesis of the work of others that is related to your own research problem.
c. avoids summarizing the work of others so that details of the original work are not lost in the reviewing process.
d. emphasizes detailed reporting of each piece of research included in the literature review.

*16. Typically, the literature review should:
a. include few or no works more than five years old to avoid having the work become prematurely obsolete.
b. be limited to work coming out of the very best labs and universities in the country.
c. give a broad overview of the area, without getting bogged down in the details of particular studies or theoretical perspectives.
d. emphasize how the studies being reviewed are related to the research problem under consideration.

Essay Questions

17. Describe three benefits of conducting a thorough review of existing literature before writing a research proposal.

18. Kirby is conducting a literature review in preparation for his study of “expectations regarding the sharing of financial and practical responsibilities among married and cohabiting couples in which both partners are between the ages of 20 and 29.” Conducting a keyword search on “couples” and “responsibility,” Kirby has generated a lengthy list of research articles. He decides to shorten the list of potential articles by eliminating all articles that were not published in prestigious research journals. He will include all the remaining articles in his literature review. What is your opinion of Kirby’s approach to selecting articles for the literature review? Explain.

19. You are reading a literature review written by a novice researcher in your field. You notice that the researcher seems to have relied heavily on the World Wide Web in preparing the literature review. Your hunch is supported when you glance at the reference page and find a long list of Internet addresses. What goes through your mind regarding the quality and adequacy of the literature review in this situation?

Chapter 5

PLANNING YOUR RESEARCH PROJECT

Multiple-Choice Questions

*1. A good research plan, according to your textbook, includes:
a. specific procedures and data sources, but does not lock the researcher into an analysis plan.
b. initial procedures and key data sources, but is also open to modification as the project progresses.
c. a specific plan regarding data sources and analyses, although information regarding the specific research sample is best left open.
d. includes specific sampling plan, procedures, data sources, and analysis plan.

*2. The basic format of the quantitative research process includes (in part), in chronological order:
a. pose the question, pose a hypothesis, search the literature, collect the data.
b. clearly state the research question, collect data, review the literature, write up the
findings.
c. review the literature, identify a question, collect data, analyze data.
d. pose a hypothesis, collect data, analyze data, review the literature.

*3. When considering general criteria for high-quality research projects, universality refers to the fact that:
a. the research design allows the researcher to control those factors that are central to the success of the project.
b. another researcher in the same field, using the same procedures under the same circumstances to research the same question, would obtain comparable results.
c. a well-designed research project could be carried out by any competent researcher; it does not rely on a specific individual.
d. the phenomena of interest must be quantified in some systematic way.

*4. When considering general criteria for high-quality research projects, replicability refers to the fact that:
a. the research design allows the researcher to control those factors that are central to the success of the project.
b. another researcher, using the same procedures under the same circumstances to research the same question, would obtain comparable results.
c. a well-designed research project could be carried out by a specific individual conducting research in the same field.
d. the phenomena of interest must be quantified in some systematic way.

*5. Three of the following accurately characterize data. Which one does NOT necessarily characterize data?
a. Data may be elusive.
b. Data can be volatile.
c. Data are ever changing.
d. Data reveal truth.

**6. Charlotte, an anthropologist, has been living in an Incan village for three years. During that time Charlotte has become expert in Incan weaving by observing and imitating the master weavers in the community. For Charlotte, observing weaving constitutes:
a. primary data.
b. secondary data.
c. informal data.
d. nonempirical data.

**7. Charlotte wrote a book about her experience as an anthropologist living in an Incan village for three years and becoming an expert weaver. Her book was widely read by other anthropologists, including Mira, who is an expert in Navaho weaving. For Mira, Charlotte’s book constitutes:
a. hearsay data.
b. secondary data.
c. informal data.
d. primary data.

**8. Sean, a high school wrestler, has agreed to participate in a study of cardiovascular conditioning. He is left somewhat confused when, at the first research session, he is asked to complete a questionnaire about commonly purchased grocery items. Sean’s confusion indicates a lack of ______ regarding the task.
a. construct validity
b. content validity
c. criterion validity
d. face validity

**9. A researcher decides to use a high school sample to test the relationship between her new measure of empathy and a well-established measure of interpersonal sensitivity. She finds that the two instruments are highly related, which supports the ______ of the new instrument.
a. predictive validity
b. content validity
c. criterion validity
d. face validity

**10. A researcher designed a new questionnaire to measure political conservatism. To test out his new instrument, he asks people leaving their polling place on election day to report their degree of political conservatism on a scale of 1 (low) to 10 (high) and then complete his questionnaire. Results show that people who identified themselves as political conservatives also had the highest scores on his questionnaire. This is an indication of the ______ of the new instrument.
a. criterion validity
b. content validity
c. face validity
d. predictive validity

**11. Dick and Jane are studying aggression among preschool children. Separately, they each watch a videotape of four children interacting in a playroom and then rate each child on the level of aggression displayed during the play session. They compare their completed ratings and are pleased to note they are highly similar. This is an example of ______ reliability.
a. interrater
b. internal consistency
c. equivalent form
d. test–retest

**12. Dr. Drive is testing a 10-question measure of achievement motivation. He notes that if his respondents agree with the first question, they tend to also agree with the other nine. Likewise, if his respondents disagree with the first question, they tend of disagree with the other nine. This is an indication of good ______ reliability.
a. interrater
b. internal consistency
c. equivalent form
d. test–retest

**13. Professor Pickle is studying civic-mindedness among senior citizens. She administers a survey of civic mindedness to a senior citizens group in early April, then again in early May. By comparing the two sets of scores, the professor can assess the ______ reliability of her measure of civic-mindedness.
a. interrater
b. internal consistency
c. equivalent form
d. test–retest

*14. Three of the following are associated with quantitative research methods. Which one is NOT?
a. The purpose is to explain or predict.
b. It is assumed that the findings will generalize to similar others.
c. Deductive reasoning is applied to data analysis and interpretation.
d. Statistical analyses are the primary source of findings.

*15. Three of the following are associated with qualitative research methods. Which one is NOT?
a. The purpose is to describe or explain.
b. No data are gathered as part of this approach.
c. Textual data are gathered from a small number of participants.
d. The study is context bound.

*16. Three of the following are techniques for strengthening the internal validity of a study. Which one is NOT?
a. Conduct the study in a controlled laboratory setting.
b. Conduct a double-blind experiment.
c. Make participants fully aware of your expected findings.
d. Build in opportunities for triangulation.

*17. Three of the following are techniques for strengthening the external validity of a study. Which one is NOT?
a. Conduct the study in a real-life setting.
b. Assure that you have a representative sample.
c. Replicate the study under a variety of relevant conditions.
d. Allow flexibility in procedures and instruments.

*18. Three of the following are techniques for strengthening the credibility or dependability of a qualitative study. Which one is NOT?
a. Spend extensive time in the field studying the phenomenon of interest.
b. Acquire rich and detailed descriptions of the phenomena being studied.
c. Exclude participants who have experiences or opinions that are very different from those of others in the study.
d. Ask participants to comment on the conclusions being drawn from the study.

*19. The requirement to keep information provided by research participants confidential applies:
a. to legal minors (children under the age of 18), but not adults.
b. only in cases where it is specifically requested by the participant.
c. to all persons under almost all conditions.
d. only in cases where participants divulge information that is potentially illegal.

*20. The altering of data is allowable:
a. when it is clear that the participant marked a response in error.
b. when the researcher suspects a participant of being careless.
c. when the researcher suspects a participant of misunderstanding the question.
d. under no circumstances.

**21. Dr. Davenport wants to conduct a study of whether high school students learn more efficiently while seated at a desk compared to in an easy chair. Participants will be seniors in local high school history classes. She hopes to publish her findings in the History Teacher Quarterly. Does Dr. Davenport need internal review board (IRB) approval for this study?
a. Yes
b. No
c. Only if the study is accepted for publication

**22. Dr. Davenport wants to conduct a study of whether high school students learn more efficiently while seated at a desk compared to in an easy chair. She knows there is a large research literature regarding similar influences on learning, and she wants to see if the findings hold true with a group of high school history students. Moreover, as a researcher she is uneasy with a lack of structure. You recommend that Dr. Davenport conduct a ______ study.
a. quantitative
b. qualitative

**23. Dr. Greenhill wants to know how it is that some early adolescents come to make a connection between their personal lifestyle and environmental problems, while others don’t. Furthermore, among those who see the connection, why do some become committed to environmentalism while others do not? Dr. Greenwald looks forward to probing the thoughts of young teens on these issues and trying to see the questions and issues through “14-year-old eyes.” You recommend that Dr. Greenhill conduct a ______ study.
a. quantitative
b. qualitative

Essay Questions

24. Professor Parsnip wants to know more about the mental process students go through as they learn about research methods. She also wants to know which instructional methods are most effective for teaching research methods to her students. Assume that Professor Parsnip decides to take a qualitative approach to studying these questions. State a specific research question related to her general research problem that lends itself well to a qualitative research approach. Then explain why your question is better addressed using a qualitative, rather than a quantitative, methodology.

25. Professor Parsnip wants to know more about the mental process students go through as they learn about research methods. She also wants to know which instructional methods are most effective for teaching research methods to her students. Assume that Professor Parsnip decides to take a quantitative approach to studying these questions. State a specific research question related to her general research problem that lends itself well to a quantitative research approach. Then explain why your question is better addressed using a quantitative, rather than a qualitative, methodology.

26. Sometimes students believe that taking the time to prepare a complete and carefully designed research proposal is something to be preached, but not really practiced. Identify at least two different problems related to research design that are commonly encountered when doing research. For each problem, explain how a complete and detailed research proposal would help the researcher avoid the problem.

Chapter 6

WRITING THE RESEARCH PROPOSAL

Multiple-Choice Questions

*1. According to the textbook, the most effective research proposals:
a. are a brief outline of the study you intend to conduct without an excess of detail.
b. justify the study to be conducted by explaining how it will contribute to the professional literature.
c. are detailed and straightforward explanations of the research problem and methodology.
d. include an autobiographical section that explains how the researcher became interested in the research topic.

*2. A proposal for a quantitative study typically includes these elements in this order:
a. a statement of the problem, a review of the literature, an explanation of the means for collecting data, a description of how the study will be conducted.
b. a review of the literature, a statement of the problem, an explanation of the means for collecting data, a description of how the study will be conducted.
c. a review of the literature, a statement of the problem, a description of how the study will be conducted, an explanation of the means for collecting data.
d. a statement of the problem, an explanation of the means for collecting data, a review of the literature, a description of how the study will be conducted.

*3. A proposal for a qualitative study typically includes these elements in this order:
a. an explanation of how the findings will fit with the larger literature, a statement of the purpose of the study and its guiding questions, a management plan, an explanation of theoretical and methodological grounding.
b. a statement of the purpose of the study and its guiding questions, an explanation of how the findings will fit with the larger literature, an explanation of theoretical and methodological grounding, a management plan.
c. a statement of the purpose of the study and its guiding questions, an explanation of theoretical and methodological grounding, an explanation of how the findings will fit with the larger literature, a management plan.
d. a statement of the purpose of the study and its guiding questions, an explanation of theoretical and methodological grounding, a management plan, an explanation of how the findings will fit with the larger literature.

*4. Proposals for ______ studies include a methodology section.
a. qualitative
b. quantitative
c. both quantitative and qualitative
d. neither quantitative or qualitative

*5. In ______ research proposal(s), the review of literature comes late in the document in conjunction with interpretation of data.
a. both quantitative and qualitative
b. neither quantitative or qualitative
c. a quantitative
d. a qualitative

*6. In ______ research proposal(s), a specific research problem is clearly stated at the outset
of the proposal.
a. both quantitative and qualitative
b. neither quantitative or qualitative
c. a quantitative
d. a qualitative

*7. In ______ research proposal(s), a specific plan for how the data will be handled is clearly laid out in the document.
a. both quantitative and qualitative
b. neither quantitative or qualitative
c. a quantitative
d. a qualitative

*8. In ______ research proposal(s), specific hypotheses regarding findings are often stated.
a. both quantitative and qualitative
b. neither quantitative or qualitative
c. a quantitative
d. a qualitative

*9. In regard to the style you will use for headings and subheadings in the research proposal:
a. there are no special formatting requirements unless the document is a thesis or dissertation.
b. all disciplines recognize the major formal styles, so it is a matter of personal choice.
c. the writer is free to show creativity as long as s/he is consistent throughout the document.
d. disciplines often dictate the use of specific formal styles, so you must find out what the expectations are.

*10. Experienced writers of research proposals typically:
a. plan to make revisions to the first draft of the proposal.
b. do not need to make revisions to the first draft of the proposal.
c. make revisions to the first draft of the proposal only if they are requested by a
reviewer.
d. may need to edit the first draft of the proposal for typos, but not content.

*11. When writing the proposal, you should assume that the reader:
a. will know which data analytic techniques are appropriate for your study without a detailed explanation.
b. is an expert in the area you are addressing and will be familiar with common issues, variables, instruments, etc.
c. can discern for him/herself what the importance of the study is.
d. knows nothing about the proposed project, so all the details must be thoroughly explained.

*12. When explaining how the data are to be analyzed and interpreted:
a. it is best to provide only a general plan as things will probably change over the course of the study anyway.
b. it is best to be as detailed as possible so all contingencies related to analysis and interpretation can be anticipated.
c. it is impossible to be highly detailed until one has the actual data in hand.
d. an overly specific plan may bias the analyses or interpretation, impairing the validity of the study.

*13. Research proposals that ______ are commonly judged to be of higher quality than proposals that do not.
a. favor straightforward vocabulary
b. employ complex sentence structure
c. favor a highly esoteric vocabulary
d. rely on the reader to draw inferences

*14. Three of the following are elements in the proposal revision process. Which one is NOT?
a. Reconsider the feasibility of what you are proposing to do.
b. Carefully assess the logic and organization of the information in the document.
c. Avoid breaks of 24 hours or more as the material will get too “cold” in your mind.
d. Seek feedback from knowledgeable others.

**15. The research proposal is best thought of as:
a. a general and flexible outline of how the research problem is to be investigated.
b. “Plan A,” with the expectation that “Plan B” or even “Plan C” will become necessary as the study unfolds.
c. a detailed and firm contract between the researcher and others who are involved in the research project (participants, supervisors, funding agencies, etc.)
d. a document that is written for others (internal review boards, funding agencies) and is of little value to the researcher.

Essay Questions

16. In regard to quantitative research proposals, novice researchers often find it very challenging and tedious to explain in detail how the data will be analyzed and interpreted in their study. Explain why it is essential that the researcher not cut corners in this section of the proposal.

17. Issues of feasibility are central to a well-planned research project. Discuss how feasibility issues come into play when deciding on the sampling plan.

18. Issues of feasibility are central to a well-planned research project. Discuss how feasibility issues come into play when choosing the measurement instruments or techniques.

19. There are unique challenges associated with conducting research on data that are already in existence (e.g., historical research). Discuss some of these unique challenges, pointing out pitfalls the researcher should be careful to avoid.

Chapter 7

QUALITATIVE RESEARCH

Multiple-Choice Questions

*1. In qualitative research the ______ is the most important instrument.
a. questionnaire
b. behavior checklist
c. researcher
d. participant

*2. In qualitative research, the fact that the research methodology may be vaguely described or very general in nature at the outset of the study indicates:
a. a normal and acceptable practice.
b. that the study is poorly designed.
c. that the researcher is inexperienced.
d. a common but unprofessional practice.

*3. Qualitative studies typically serve three of the following purposes. Which purpose do they NOT serve?
a. description of situations, processes, relationships, etc.
b. interpretation of information in order to gain new understanding
c. determining the final truth about a situation or phenomenon
d. evaluation of existing policies, practices, etc.

*4. In ______, a body of material is systematically examined for patterns, themes, or biases.
a. case study
b. ethnography
c. grounded theory
d. content analysis

*5. In ______, a particular group of individuals is studied in depth over a defined period of time.
a. case study
b. ethnography
c. phenomenology
d. grounded theory

*6. In ______, the researcher studies the deep meaning an event or situation holds for other people.
a. phenomenology
b. ethnography
c. grounded theory
d. content analysis
*7. In ______, a particular individual, program, or event is studied in depth over a defined period of time.
a. case study
b. ethnography
c. phenomenology
d. grounded theory

**8. Carl Compost has been living and working on a communal organic farm for the past six months. He wants to understand the political, environmental, and social perspectives shared by the members of the commune. Dr. Compost is probably employing a/an ______ methodology.
a. case study
b. ethnographic
c. phenomenological
d. content analysis

**9. Daniel Daring is an emerging playwright whose works have begun to stir great passions in the major U.S. cities where they are staged. Researcher Eugenia Edge is “shadowing” Mr. Daring for six months in an attempt to understand the artistic process. Dr. Edge is probably employing a ______ methodology.
a. case study
b. grounded theory
c. phenomenological
d. content analysis

**10. Helen Heartwell flew to New York City a few weeks after the September 11, 2001, bombing of the World Trade Center. She wanted to know how the victims of the attack were making sense of what had happened to them. Dr. Heartwell is probably employing a/an ______ methodology.
a. case study
b. grounded theory
c. phenomenological
d. ethnographic

**11. Richard Relic is carefully examining writings from the time of the U.S. Civil War to determine how each side characterized the position of their opponent. Dr. Relic is probably employing a ______ methodology.
a. case study
b. grounded theory
c. phenomenological
d. content analysis

*12. The constant comparative method of data analysis is most associated with:
a. ethnography.
b. phenomenology.
c. grounded theory.
d. content analysis.

*13. The technique of participant observation is most associated with:
a. case study.
b. ethnography.
c. grounded theory.
d. content analysis.

*14. ______ is most useful in situations where current theory regarding the subject of investigation is inadequate or nonexistent.
a. Case study
b. Ethnography
c. Grounded theory
d. Phenomenology

*15. When conducting observations to be used as data in a qualitative study, it is:
a. always necessary to obtain informed consent from those being observed.
b. not necessary to obtain informed consent if the observations are being conducted in a public place.
c. not necessary to obtain informed consent if the observer is in full view of those being observed.
d. only necessary to obtain informed consent if the study will be published.

*16. If you interview two people about the same event and their stories diverge at certain points, you can conclude that:
a. at least one of the interviewees is not being fully honest with you.
b. at least one of the participants was not paying attention to what was going on.
c. they didn’t really both witness the same event.
d. the meaning people draw from an event can vary from person to person.

*17. Three of the following are techniques that strengthen the objectivity of a qualitative study. Which one is NOT?
a. The researcher should intentionally look for evidence that contradicts his/her hunches or hypotheses.
b. The researcher should collect two or more different kinds of data (e.g., observations and interviews).
c. The researcher should acknowledge personal biases or presumptions in the research report.
d. The researcher should rely as much as possible on a single well-informed respondent.

Essay Questions

18. A goal of qualitative research is to uncover the “multiple truths” that characterize any complex phenomenon or situation. What does the term “multiple truths” refer to in this usage?

19. A fundamental pitfall in qualitative research is to confuse the actual observations with the interpretation of the observations. Why is it important that these two things remain distinctly separate?

20. Dr. D is conducting an interview with Amber, who works as a cocktail waitress. Here is an excerpt:

Dr. D: What shift do you typically work?
Amber: Night. I come in a around 7:00 p.m. and work until 2:00 a.m.
Dr. D: Cocktail waitressing has a bad reputation. How bad is it to work here?
Amber: Not so bad. Most of our customers are pretty nice guys. They’re
regulars and they don’t drink too much and get out of control. In fact, if
one customer is giving me a hard time, another often steps in and helps out.
Dr. D: As the evening progresses, the men give you more and more problems,
don’t they? What do you do about that?
Amber: I ignore it as long as I can. I get the manager to step in if they don’t
straighten up.

Do you notice any problems with the interviewing technique of Dr. D? Describe the problems you see in the excerpts and then explain what Dr. D should do differently.

Chapter 8

HISTORICAL RESEARCH

Multiple-Choice Questions

*1. Historical research is chiefly concerned with:
a. the study of history.
b. the meaning of past events.
c. creating an accurate chronology of past events.
d. determining an “official” interpretation of a historical event.

*2. Historical research may include:
a. qualitative, but not quantitative, methods.
b. quantitative, but not qualitative, methods.
c. both qualitative and quantitative methods.
d. neither qualitative or quantitative methods.

**3. To a historical researcher studying the lives of women pioneers in the late 1880s, letters written by Rebecca Adams, a pioneer woman on the Nebraska plains, to her sister in Philadelphia represent:
a. primary data.
b. secondary data.

**4. To a historical researcher studying the lives of women pioneers in the late 1880s, letters written by Deloris Adams of Philadelphia, describing the life of her sister, Rebecca Adams, a pioneer woman on the Nebraska plains, represent:
a. primary data.
b. secondary data.

**5. Professor McGrath is studying the history of African Americans in Oklahoma. Three of the following are primary data sources for Professor McGrath. Which one is NOT?
a. Census reports from the all-Black town of Taft
b. Photographs of Taft
c. Diaries of a school teacher in one of the first integrated schools in Taft
d. Articles from the Taft newspaper published in the late 19th century

*6. In historical research, bias:
a. generally does not exist to a problematic degree.
b. is less of a problem than in other forms of research.
c. is impossible for the researcher to detect.
d. can be used as an advantage to the researcher.

*7. In regard to bias in historical research, the researcher:
a. must be vigilant in regard to bias in secondary data, but it is not a problem with primary data.
b. must be vigilant in regard to bias in primary data, but it is not a problem with secondary data.
c. must be vigilant in regard to bias in both primary and secondary data.
d. can assume that the various biases will cancel each other out without special steps being taken by the researcher.

**8. Perry Prose is in possession of a letter allegedly written by President Theodore Roosevelt during his time in office. He has taken the letter to a number of experts, who have examined the paper, ink, handwriting, and content of the letter in an attempt to establish its authenticity. Dr. Prose is attempting to establish ______ regarding the validity of the letter.
a. external evidence
b. internal evidence

**9. Fran Freedom is trying to determine what the phrase “with liberty and justice for all” from the Pledge of Allegiance meant at the time it was penned. She suspects there were actually some limits on “all.” Dr. Freedom is attempting to establish ______ regarding the validity of the letter.
a. external evidence
b. internal evidence

**10. The information to the right is an example of:
a. ex post facto research.
b. a historiography.
c. a historic method.
d. a chronology.

*11. ______ is/are an appropriate focus of historical research.
a. Concepts
b. Ideas
c. People
d. all of the above

*12. Historical researchers can count on authoritative sources such as the Anglo-Saxon Chronology or the Cambridge Ancient History as accurate and complete accounts of history.
a. True
b. False

*13. In writing a historical research report, it is best to:
a. avoid mentioning alternative interpretations of events proposed by other scholars.
b. leave most of the interpretation of data to the reader rather than impose your own
point of view.
c. point out the weaknesses in the arguments or assertions you are making.
d. discuss the weaknesses, but not the strengths, of arguments put forth by other
scholars.

*14. A historical research report may differ from other research reports in that presentation of data and interpretation of data:
a. are confined to separate sections of the paper.
b. may not be included.
c. may be intertwined in a technical style of scientific writing.
d. may be intertwined in a flowing narrative style.

Essay Questions

15. One of the most challenging aspects of conducting historical research is systematically organizing the hundreds or thousands of notes that are collected in the course of the research project. Describe one method for handling this organizational challenge, including mention of both the strengths and weaknesses of the approach.

16. Conducting rigorous historical research involves more than reading historical documents, taking notes, and organizing those notes. Explain.

17. The authors recommend that chronological data be arrayed in a time line as part of the interpretative process. What type of information can be revealed by this technique?

18. The authors recommend that chronological data be plotted on a map as part of the interpretative process. What type of information can be revealed by this technique?

Chapter 9

DESCRIPTIVE RESEARCH

Multiple-Choice Questions

*1. Observational research, as a form of descriptive research,
a. focuses on rich narrative description of the phenomenon of interest.
b. involves counting or rating of behavior in as objective a manner as possible.
c. relies on open-ended techniques that can respond to the evolving situation.
d. allows the researcher to gather behavioral data in a relatively quick and easy
manner.

*2. Three of the following procedures or techniques are integral to observational research. Which one is NOT?
a. Pilot studies are used to test instruments and procedures.
b. Observers are carefully trained to follow specific criteria when recording the
observation data.
c. Multiple observers may independently rate the same behavior.
d. Observation instruments are intentionally general so as not to constrain the
observer.

*3. Correlational research allows the researcher to answer questions such as:
a. what is the relationship between Variable A and Variable B?
b. does change in Variable A cause change in Variable B?
c. is there a significant difference between scores on Variable A and scores on Variable B?
d. does change in Variable B causes change in Variable A?

**4. The scatterplot to the right indicates a ______ relationship between Variable A and Variable B.
a. weak
b. moderate
c. strong
d. indeterminate

**5. A researcher wishes to study developmental changes in people’s preference for action movies. The researcher locates 50 people at each of the following ages: 15, 20, 25, 30, 35, 40, 45, and 50 years. She asks them to rate their preference for action movies in relation to other sorts of movies. This is an example of a ______ design.
a. longitudinal
b. nested
c. cross-sectional
d. panel

**6. A researcher wishes to study developmental changes in the music people prefer to listen to. The researcher locates 50 people who are about 20 years old. She sends these people a questionnaire every year for the next 10 years asking about the types of music they prefer to listen to. This is an example of a ______ design.
a. longitudinal
b. nested
c. cross-sectional
d. panel

*7. Among survey methods, _____ generally generate the highest response rate, and ______ generally generate the lowest response rate.
a. face-to-face interviews; telephone interviews
b. telephone interviews; questionnaires
c. face-to-face interviews; questionnaires
d. questionnaires; telephone interviews

*8. Advantages of questionnaires include all of the following EXCEPT:
a. large numbers of people can be contacted for a relatively low cost.
b. data can be gathered from a large number of people in a relatively short period of
time.
c. participants may feel more confident about their anonymity and therefore respond more honestly.
d. because questions are in written form, they are less likely to be misunderstood by respondents.

*9. Regarding the length of questionnaires to be used in survey research, which of the following statements is most accurate?
a. Including a large number of items on the survey assures that you will get useful data for all of your trouble.
b. Keeping the survey short makes it more likely people will be willing to complete it.
c. A relatively lengthy survey communicates your seriousness about the research endeavor so people will be more willing to complete it.
d. Shorter surveys produce data that are ambiguous and therefore not useful.

**10. “How unhappy are you with your current salary?”
This question violates which rule of good survey writing?
a. It is not quantifiable.
b. It makes an unwarranted assumption.
c. It fails to keep the respondent’s task simple.
d. It uses technical language that may not be known to all.

*11. The typical return rate for a survey mailed to strangers is about:
a. 80%
b. 65%
c. 50%
d. 35%

*12. In descriptive research, the researcher typically studies a______, then draws conclusions about the______.
a. sample; population
b. population; sample
c. sample; sample
d. population; population

**13. Polly Petunia is Chief Horticulturalist for the Southwest region, encompassing Arizona, New Mexico, and Texas. She wants to survey amateur gardeners in her region to determine what, if any, water conservation practices they employ in their home gardening. Polly sends her survey to 150 randomly selected gardeners in each state. Polly is using:
a. purposive sampling.
b. proportional stratified sampling.
c. systematic sampling.
d. stratified random sampling.

**14. Paul Pollster, a political psychologist, wants to determine whether rates of voter participation in his home state vary between rural, urban, and suburban voters. He notes that there are more rural voters than suburban or urban voters in the state. Paul should use ______ in this study.
a. simple random sampling
b. cluster sampling
c. proportional stratified sampling
d. systematic sampling

**15. Simon Cinema wants to know what the audience thought of tonight’s advanced screening of a heralded psychological thriller called “I Can’t Sleep.” He and his research assistants stand outside the theatre exit and ask every fifth person leaving the theatre to answer several questions about their impression of the movie. Simon is using:
a. systematic sampling.
b. stratified random sampling.
c. convenience sampling.
d. purposive sampling.

**16. Danny Drive wants to know the relationship between intrinsic motivation and course grade among math students. He contacts a local professor who teaches several general education math classes and asks about the possibility of gathering data in her classes. Danny is using:
a. simple random sampling.
b. cluster sampling.
c. convenience sampling.
d. systematic sampling

**17. Edward Ethics is studying public opinion regarding prayer in public schools. He plans to gather survey data from a number of churches on Sunday mornings. He also wants to include a number of people who are not associated with an organized religion in his sample. Edward is using:
a. stratified random sampling.
b. cluster sampling.
c. convenience sampling.
d. purposive sampling.

Essay Questions

18. Your chapter identifies several weaknesses related to survey data. Note one of these weaknesses and discuss the associated problems and possible ways to minimize them.

19. In writing the cover letter to accompany a mailed survey, novice researchers often stress the immediacy of their need for the data. Is this the best approach to take in the cover letter? If not, what do you recommend instead?

20. The authors of your textbook suggest that sampling bias is virtually unavoidable and that it is important to disclose and discuss possible sources of bias in the study report. Do you agree? Explain your position.

Chapter 10

EXPERIMENTAL AND EX POST FACTO DESIGNS

Multiple-Choice Questions

*1. Experimental research differs from descriptive research in that it:
a. is less sensitive to sampling bias.
b. employs statistical analyses.
c. attempts to determine causality.
d. is conducted in a laboratory.

*2. In experimental design, the variable that is manipulated is the:
a. dependent variable.
b. independent variable.
c. confounding variable.
d. constant.

*3. In experimental design, the variable that reflects the outcome of the treatment is the:
a. dependent variable.
b. independent variable.
c. confounding variable.
d. constant.

**4. “There will be gender differences in degree of mood elevation seen in depressed clients after receiving cognitive-behavioral therapy.”
In this hypothesis, gender is the:
a. dependent variable.
b. independent variable.
c. confounding variable.
d. constant.

**5. “There will be differences in degree of mood elevation seen in depressed clients after receiving either cognitive-behavioral or psychoanalytic therapy.”
In this hypothesis, mood elevation is the:
a. dependent variable.
b. independent variable.
c. confounding variable.
d. constant.

**6. “There will be differences in degree of mood elevation seen in depressed clients after receiving either cognitive-behavioral or psychoanalytic therapy.”
In this hypothesis, type of therapy is the:
a. dependent variable.
b. confounding variable.
c. independent variable.
d. constant.

**7. “There will be differences in degree of mood elevation seen in depressed clients after receiving either cognitive-behavioral or psychoanalytic therapy.”
During a test of this hypothesis, it was discovered that some of the participants lived with family members and others lived alone. This variable, living situation, is a/an _____.
a. independent variable.
b. dependent variable.
c. constant.
d. confounding variable.

**8. Dr. Dow Jones wants to know whether a problem-based approach to teaching economics will result in higher academic performance than his traditional method. Of the six sections of Economics 101 at his university, Dr. Jones randomly assigns three sections to the traditional method and three sections to the problem-based method. At the end of the semester, all students complete the same final exam. In this design, students studying under the traditional method constitute the:
a. placebo group.
b. treatment group.
c. sample.
d. control group.

**9. Dr. Dow Jones wants to know whether a problem-based approach to teaching economics will result in higher academic performance than his traditional method. Of the six sections of Economics 101 at his university, Dr. Jones randomly assigns three sections to the traditional method and three sections to the problem-based method. At the end of semester all students complete the same final exam. In this design, students studying under the problem-based method constitute the:
a. placebo group.
b. treatment group.
c. sample.
d. control group.

**10. Dr. Dow Jones wants to know whether a problem-based approach to teaching economics will result in higher academic performance than his traditional method. Of the six sections of Economics 101 at his university, Dr. Jones randomly assigns three sections to the traditional method and three sections to the problem-based method for Unit 1 of the course. Then all sections switch instructional method for Unit 2. He plans to compare the performance of the two groups of sections on their Unit 1 and Unit 2 exams. This study employs a ______ design.
a. within subjects (repeated measures)
b. quasi-experimental
c. true experimental
d. ex post facto

**11. Penny Poodle wanted to know which dog obedience training program was more effective: Puppy Pride, the approach she has been using for many years, or Doggie Do-Right, a new approach. Penny convinced 50 human companions of untrained dogs to participate in her study. The dogs and their humans were randomly assigned to complete the Puppy Pride or Doggie Do-Right course. At the end of the training programs, all of the dogs were scored on their level of obedience on a standardized dog obedience checklist (scores could range from 10 to 100). In this study, ______ is the dependent variable.
a. Doggie Do-Right
b. type of dog training program
c. score on the dog obedience checklist
d. obedience training versus no training

**12. Penny Poodle wanted to know which dog obedience training program was more effective: Puppy Pride, the approach she has been using for any years, or Doggie Do-Right, a new approach. Penny convinced 50 human companions of untrained dogs to participate in her study. The dogs and their humans were randomly assigned to complete the Puppy Pride or Doggie Do-Right course. At the end of the training programs, all of the dogs were scored on their level of obedience on a standardized dog obedience checklist (scores could range from 10 to 100). In this study, ______ is the independent variable.
a. Doggie Do-Right
b. type of dog training program
c. score on the dog obedience checklist
d. obedience training versus no training

**13. Penny Poodle wanted to know which dog obedience training program was more effective: Puppy Pride, the approach she has been using for any years, or Doggie Do-Right, a new approach. Penny convinced 50 human companions of untrained dogs to participate in her study. The dogs and their humans were randomly assigned to complete the Puppy Pride or Doggie Do-Right course. At the end of the training programs, all of the dogs were scored on their level of obedience on a standardized dog obedience checklist (scores could range from 10 to 100). This study employed a/an ______ design.
a. one-shot experimental
b. ex post facto
c. posttest-only control group design
d. within subjects

**14. Dr. Robbins wants to know if there are different opinions regarding the value of public school education between Native Americans who have at least one relative who attended Indian Boarding School and Native Americans who have no family experience with Indian Boarding School. Dr. Robbins contacts 35 Native American participants in each group. He wants each group to include younger as well as older adults, and a mix of male and female participants. He asks each person to complete a survey about their attitudes toward public education. In this study, _____ is the independent variable.
a. score on the “attitude toward public schools” measure
b. experience with Indian boarding school
c. gender of participant
d. age of participant

**15. Dr. Robbins wants to know if there are different opinions regarding the value of public school education between Native Americans who have at least one relative who attended Indian Boarding School and Native Americans who have no family experience with Indian Boarding School. Dr. Robbins contacts 35 Native American participants in each group. He wants each group to include younger as well as older adults, and a mix of male and female participants. He asks each person to complete a survey about their attitudes toward public education. In this study, _____ is the dependent variable.
a. score on the “attitude toward public schools” measure
b. experience with Indian boarding school
c. gender of participant
d. age of participant

**16. Dr. Robbins wants to know if there are different opinions regarding the value of public school education between Native Americans who have at least one relative who attended Indian Boarding School and Native Americans who have no family experience with Indian Boarding School. Dr. Robbins contacts 35 Native American participants in each group. He wants each group to include younger as well as older adults, and a mix of male and female participants. He asks each person to complete a survey about their attitudes toward public education. This study employs a/an ______ design.
a. pre-experimental
b. factorial
c. true experimental
d. ex post facto

*17. Three of the following are examples of true experimental designs. Which one is NOT?
a. Multiple baseline design
b. Solomon four-group design
c. Within subjects design
d. Pretest–posttest control group design

*18. Three of the following are examples of quasi-experimental designs. Which one is NOT?
a. Nonrandomized pretest–posttest control group design
b. Control group time-series design
c. Single-subjects design
d. One-shot experimental design

*19. A meta-analysis is used when:
a. the researcher wishes to analyze the analyses of a number of existing studies.
b. there is little existing literature to use as a launching pad for a new study.
c. the researcher has no access to sophisticated statistical techniques.
d. several researchers jointly conduct a large-scale study.

Essay Questions

20. A researcher is studying the effectiveness of two different resident adolescent drug treatment programs. Program A is used at Summerhill adolescent facility. Program B is used at Winterdale adolescent facility. Because random assignment to treatments is not possible in this situation, what can the researcher do to minimize possible effects of sample bias?

21. Factorial designs allow researchers to study the effects of more than one independent variable simultaneously. Why is this advantageous? What information can factorial designs yield that nonfactorial designs cannot?

Chapter 11

STRATEGIES FOR ANALYZING QUANTITATIVE DATA

Multiple-Choice Questions

*1. How are inferential statistics different from descriptive statistics?
a. Descriptive statistics allow one to draw inferences from the sample to a target population.
b. Descriptive statistics verify the accuracy of the inferential statistics.
c. Inferential statistics describe the results of a study.
d. Inferential statistics allow one to draw inferences from the sample to a target population.

*2. ____ are characteristics of samples, wheras _______ are characteristics of populations.
a. Concepts; statistics
b. Parameters; statistics
c. Statistics; parameters
d. Parameters; estimations

*3. In a normal distribution, what percentage of scores falls between one standard deviation below the mean and one standard deviation above the mean?
a. 16%
b. 50%
c. 68%
d. 90%

*4. Dorothy has been surveying the Munchkins to determine their level of life satisfaction. The possible scores on the life satisfaction questionnaire range from 0 to 100. If Dorothy decides to statistically compare the male and female Munchkins on their level of satisfaction, she should use a _______ test.
a. parametric
b. nonparametric

**5. Here is a set of scores: 5, 3, 7, 3, 6, 2, 5, 3. The mean of this set of scores is ______.
a. 3
b. 4
c. 4.25
d. 4.5

**6. Here is a set of scores: 5, 3, 7, 3, 6, 2, 5, 3. The median of this set of scores is ______.
a. 2
b. 3
c. 4
d. 4.5
**7. Here is a set of scores: 5, 3, 7, 3, 6, 2, 5, 3. The mode of this set of scores is ______.
a. 3
b. 4
c. 4.22
d. 4.5

*8. The measure(s) of central tendency that is/are appropriate for use with nominal data is/are:
a. the median only.
b. the mode only.
c. the median and the mean.
d. the median and the mode.

*9. When summarizing ordinal data, the ______ is the most useful measure of central tendency.
a. arithmetic mean
b. mode
c. median
d. geometric mean

*10. When reporting growth data, the ______ is the most useful measure of central tendency.
a. arithmetic mean
b. mode
c. median
d. geometric mean

*11. When the ____ is the measure of central tendency, the _____ is the most appropriate and informative measure of dispersion.
a. median; standard deviation
b. median; interquartile range
c. mean; interquartile range
d. mean; range

**12. An exam was given to two sections of the same course. In Section 1, the exam mean was 51 and the standard deviation was 7. In Section 2, the exam mean was 51 and the standard deviation was 13. Which of the following conclusions is accurate?
a. Section 1 did better on the exam than Section 2.
b. Section 1 scores were more variable than Section 2.
c. Section 1 scores were less variable than Section 2.
d. Section 1 did less well on the exam than Section 2.

*13. The z-score, or standard score, allows the research to determine:
a. how far a target individual’s score is from the group mean.
b. what percentage of individuals in the sample scored above the target individual.
c. the mean for the population based on the mean for the sample.
d. what percentage of individuals in the sample scored below the target individual.
*14. The percentile rank allows the researcher to determine:
a. how far a target individual’s score is from the group mean.
b. what percentage of individuals in the sample scored above the target individual.
c. the mean for the population based on the mean for the sample.
d. what percentage of individuals in the sample scored below the target individual.

**15. Danzell is a purchasing agent for a major grocery store chain. He has noticed over the years that the higher the outdoor temperature, the more likely people are to buy fresh fruit. Based on Danzell’s observations, we would say there is ______ relationship between outdoor temperature and buying of fresh fruit.
a. a positive
b. a negative
c. a causal
d. no

**16. Frank Fitness found a correlation coefficient of –.74 between hours of strenuous exercise each week and a standard measure of body mass. He interprets this to mean that there is a ______ and ______ relationship between hours of strenuous exercise and body mass.
a. strong; positive
b. strong; negative
c. weak; positive
d. weak; negative

*17. Three of the following factors are associated with a relatively small standard error of the mean. Which one is NOT?
a. Sample size is relatively large.
b. Sample standard deviation is relatively small.
c. The variance in the sample is relatively large.
d. The sample is highly representative of the population.

**18. Seamus has determined that there is a 95% chance that the number of people visiting the Blarney Stone in the month of June will be between 1,760 and 2,025. This is a/an ______ estimate.
a. point
b. interval

*19. Statistical hypothesis testing involves testing the:
a. research hypothesis.
b. probability level.
c. significance level.
d. null hypothesis.

**20. On the basis of statistical findings, Ron determines that the differences between males and females on a test of spatial reasoning are not due merely to chance. If, in fact, there are no gender differences in the population, Ron will have made a:
a. Type I error.
b. Type II error.

**21. On the basis of statistical findings, Becky determines that the difference between males and females on a test of abstract mathematical reasoning is merely due to chance. If, in fact, there are gender differences in the population, Becky will have made a:
a. Type I error.
b. Type II error.

Essay Questions

22. A medical researcher is concerned about mistakenly concluding that a new medication is effective when it really is not. What type of error is the researcher concerned about making (Type I or Type II)? Describe what the researcher might do to decrease the likelihood of making that type of error. Discuss ramifications of your suggested approach for other types of error in the study.

23. Note several steps researchers can take to optimize the power of their statistical tests.

24. After completing planned analyses, the researcher must interpret the results of statistical tests. Note several steps that are involved in such interpretation.

Chapter 12

TECHNICAL DETAILS: STYLE, FORMAT, AND ORGANIZATION
OF THE RESEARCH REPORT

Multiple-Choice Questions

*1. When writing the research report, the findings of statistical analyses are typically reported in the ______ section.
a. review of literature
b. method
c. results
d. discussion

*2. When writing the research report, the descriptions of instruments used for data gathering are typically included in the ______ section.
a. introduction
b. method
c. results
d. discussion

*3. When writing the research report, the interpretation of study findings is typically included in the ______ section.
a. introduction
b. method
c. results
d. discussion

*4. When writing the research report, the research problem is typically described in the ______ section.
a. introduction
b. review of literature
c. method
d. results

*5. When writing the research report, information regarding the study design is typically included in the ______ section.
a. introduction
b. review of literature
c. method
d. results

*6. The reference list is included in the:
a. front matter.
b. end matter.
c. appendices.
d. body of the report.

*7. Copies of the survey instruments are included in the:
a. front matter.
b. end matter.
c. appendices.
d. body of the report.

*8. The abstract is included in the:
a. front matter.
b. end matter.
c. appendices.
d. body of the report.

*9. In a quantitative study, the description of participants (subjects) is included in the:
a. front matter.
b. end matter.
c. appendices.
d. method section.

*10. The acknowledgments are included in the:
a. front matter.
b. end matter.
c. appendices.
d. body of the report.

**11. “Johnson eliminated three interviews from the data set due to noncompliance on the part of the respondents.”
This sentence is an example of:
a. active voice.
b. passive voice.

**12. “The third subscale was dropped from further consideration due to problems with internal consistency.”
This sentence is an example of:
a. active voice.
b. passive voice.

*13. The style manual of the American Psychological Association (APA) suggests that ____ tense be used when writing the method section and ______ tense be used when presenting conclusions.
a. present; present
b. past; past
c. present; past
d. past; present

Essay Questions

14. Throughout your textbook the authors return to the importance of interpreting the findings of a research project. Explain why this is an essential element in a high-quality research report.

15. Imagine that you just completed a research project in which the data failed to support your chief hypothesis. Why might this have happened? Discuss several possibilities.

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Chapters 7 Through 12

Chapter 7

1. Expert power usually stems from
a. a superior’s credibility with his or her subordinates.
b. the belief that a certain person has the right to exert influence and that certain others have an obligation to accept it.
c. a person’s ability to influence the behavior of others by offering them something desirable. d. a person’s ability to penalize the actions or behavior of another.
e. a person’s perceptions that his or her goals or objectives are similar to another’s.

2. Which of the following statements about power is true?
a. The five bases of power are mutually exclusive.
b. People generally use only one base of power to effect change in others.
c. Expert power exists when one person takes actions that will lead that person and others to achieve their mutual objectives.
d. Power can be used to motivate individuals ethically or unethically. e. The use of power is unethical.

3. An organization that delegates decision-making authority as far down the chain of command as possible and has relatively few formal rules is
a. centralized.
b. decentralized. c. flat.
d. tall.
e. ethical.

4. Which of the following is not a characteristic of an ethical corporate culture?
a. Management and the board demonstrate their commitment to strong controls through their communications and actions.
b. Every employee is encouraged and required to have hands-on involvement in the internal control system. c. Management conducts itself in a way that is not consistent with the code of conduct.
d. Employees are expected to be in the communication loop through resolutions and corrective actions.
e. Employees have the ability to report policy exceptions anonymously to any member of the organization.

5. Although both structures can create opportunities for unethical conduct, which organizational structure tends to be more ethical?
a. Tall b. Flat
c. Centralized
d. Decentralized
e. All organizational structures are equally ethical.

6. The ability to influence the behavior of others by offering them something desirable is best described as a. coercive power.
b. reward power. c. expert power.
d. legitimate power. e. referent power.

7. An advantage of the decentralized organization is that
a. the focus is on formal rules, policies, and procedures backed up with elaborate control systems. b. there is a high level of bureaucracy.
c. each worker knows his or her job and what is specifically expected as well as how to carry out designated tasks.
d. it is adaptable and can quickly respond to external change. e. there is minimal upward communication.

8. When developing an ethical culture, there has to be a(n)

element because every organization has employees

that will try to take advantage if there is an opportunity for misconduct. a. rules-based
b. statement of mission c. ethical
d. compliance e. punitive

9. The apathetic organizational culture exhibits
a. high concern for people but minimal concern for performance. b. little concern for people but a high concern for performance.
c. minimal concern for people and performance. d. high concern for people and performance.
e. no concern for maintaining a cohesive organizational culture.

10. The exacting organizational culture is interested in
a. performance but has little concern for employees. b. investors’ impressions of profitability.
c. maintaining a strong corporate culture. d. employees and performance.
e. employees’ impressions.

11. Associating with others who are unethical and who have the opportunity to act unethically can lead to a learning process known as
a. compliance. b. misconduct. c. opportunity.
d. differential equations.
e. differential association.

12. Which of the following statements about corporate culture is false?
a. Corporate culture refers to the patterns and rules that govern the behavior of an organization and its employees, particularly the shared values, beliefs, and customs.
b. The values and ethical beliefs that actually guide the firm’s employees tend not to be the same ones that management states as defining the firm’s culture.
c. Corporate culture includes the behavioral patterns, concepts, values, ceremonies, and rituals that take place in an organization.
d. The culture of an organization may be explicitly stated or unspoken.
e. Failure to monitor or manage an organization’s culture may foster unethical behavior.

13. No formal dress codes, working late, participation in extracurricular activities, gestures, and legends represent a. a complacent workplace.
b. codes of ethics.
c. a firm’s organizational chart.
d. formal expressions of an organization’s culture.
e. informal expressions of an organization’s culture.

14. A cultural audit may be used to identify a. how cultured a firm’s employees are. b. unethical employees.
c. unethical organizations.
d. an organization’s culture. e. organizational structure.

15. The 2010 passage of the Dodd-Frank Act proposed additional monetary incentives for whistle-blowers. A primary concern about these new incentives is
a. they will encourage too many employees to attempt to blow the whistle on firms, even those that have done nothing wrong.
b. people do not generally respond at all to monetary incentives.
c. whistle-blowers might be tempted to report to the SEC with their reports and not report the misconduct to the
company’s internal compliance program.
d. people may exaggerate their claims in order to get a reward.
e. the funds paid out to whistle-blower might bankrupt companies.

16. Marcus is the top-performing development director his non-profit organization has ever had. He possesses countless tricks and tips to continue to bring in donations, positive publicity, and supporters. Marcus would likely have
over new development department staff. a. coercive power
b. group power
c. legitimate power d. expert power
e. democratic power

17.

bring together the functional expertise of employees from several different areas of the organization on a single project.
a. Quality circles
b. Informal groups c. Teams
d. Work groups e. Committees

18. Individuals, often from the same department, who band together for purposes that may or may not be relevant to the organization are called
a. quality circles.
b. informal groups. c. teams.
d. work groups. e. committees.

19. In order for whistle-blowing to be effective, a. financial compensation must be very high.
b. employees must wish ill on the organization for which they work.
c. lawmakers must make an effort to force employees to discuss details about the misconduct.
d. it requires that the individual have adequate knowledge of wrongdoing that could damage society. e. it must occur at a very large multinational corporation.

20. Which of the following statements about group norms is false?
a. Group norms define the limit on deviation from group expectations.
b. Group norms have the power to force a strong degree of conformity among group members.
c. Management must carefully monitor the norms of all the various groups within the organization, as well as the organization’s corporate culture.
d. Sanctions may be necessary to bring in line a group whose norms deviate sharply from the overall culture. e. Group norms never conflict with the overall organization’s culture.

21. Management’s sense of the organization’s culture a. is always the same as employees’ perceptions. b. is usually easily adopted by employees.
c. is always readily evident to employees.
d. may be quite different from employees’ perceptions. e. is always different from employees’ perceptions.

22. Motivation is defined as
a. a person’s incentive or drive to work.
b. a force within the individual that focuses his or her behavior on achieving a goal. c. personal ambition without regard to the impact on others.
d. a desire to be finished with a project. e. individual goals.

23. When a foreman orders an assembly-line employee to carry out a task, which the employee perceives as unethical yet the employee feels compelled to complete, the foreman is exercising
a. legitimate power. b. expert power.
c. reward power.
d. contingent punishment power.
e. noncontingent reward behavior.

24. To motivate employees, an organization offers to employees to work toward organizational objectives. a. punishment; force
b. peer pressure; guilt
c. incentives; encourage d. rewards; bribe
e. threats; frighten

25. Which of the following cultures combines high levels of concern for people and performance?
a. Apathetic culture b. Caring culture
c. Integrative culture d. Exacting culture
e. Cooperative culture

26. Ethical concerns in centralized structures can occur because of very little a. mobility.
b. upward communication. c. scapegoating.
d. downward communication. e. communication rigidity.

27. A high concern for people but minimal concern for performance can best describe the culture. a. caring
b. apathetic c. exacting
d. shareholder e. employee

28. The establishment of an ethics committee within an organization a. is usually highly informal.
b. is usually organized around general business topics.
c. might raise ethical concerns or resolve ethical dilemmas. d. usually always succeeds.
e. usually increases ethical tension.

29. Which of the following is not a form of retaliation commonly experienced by whistle-blowers?
a. Relocation or reassignment b. No promotion or raises
c. The cold shoulder by coworkers d. Exclusion from work activities
e. Praise by supervisors for their honesty

30. are used to subdivide duties within functional areas of a company. a. Work groups
b. Individuals c. Experts
d. Consultants e. Committees

31. The

leader demands instantaneous obedience and focuses on punishing wrong behavior, achievement,

initiative, and self-control. a. democratic
b. coaching c. affiliative d. coercive
e. pacesetting

32. Melinda is a very popular executive. She inspires her employees to follow a common vision, facilitates change, and creates a strongly positive climate, all while stressing performance. Melinda has helped to create a(n) culture. a. authoritative
b. caring
c. integrative d. exacting
e. affiliative

33.

are satisfied by social and interpersonal relationships, and activities.
a. Growth needs; relatedness needs b. Personal needs; group needs
c. Coercive needs; ethical needs
d. Relatedness needs; growth needs e. Group needs; personal needs

are satisfied by creative or productive

34. Over the years, scholars have developed more than 100 definitions of culture. According to the text, all have the following common elements:
a. Culture is shared, relatively stable, and is formed over a long period of time. b. Culture is not shared, stable, and is formed over a long period of time.
c. Culture is shared, not stable, and is formed over a long period of time. d. Culture is shared, stable, and is formed over a short period of time.
e. Culture is man-made, shared, not stable, and is formed over a short period of time.

35. Because researchers have defined culture so many different ways, interchangeably.
a. cultural cues; management
b. cultural values; anthropology c. cultural values; culture
d. cultural cues; laws
e. cultural cues; management

and

are often used

36. Both individual ethics and organizational ethics have an impact on an employee’s
a. productivity.
b. personal happiness. c. compensation.
d. fitness level.
e. ethical intention.

37. A values-based ethics approach to ethical corporate cultures relies on a(n)
how customers and employees should be treated a. set of laws
b. explicit mission statement c. strong CEO
d. ethical audit
e. relaxed corporate culture

that defines the firm as well as

38. The idea that people learn ethical or unethical behavior while interacting with others who are a part of their role-sets is referred to as
a. differential dissonance.
b. cognitive memory dissonance. c. cognitive association.
d. differential association. e. casual interaction.

39. The Sarbanes-Oxley Act
a. only applies to firms with over 50 employees. b. has institutionalized internal whistle-blowing.
c. has placed more power under the Securities and Exchange Commission. d. requires all organizations to make their financial information public.
e. involves too many complicated steps for it to be feasible for most organizations.

40. The

rule explains variation in employee conduct through generalizing on the percentage of employees in any

given organization who will seek to do right versus how many will be indifferent. a. 10-30-40-20
b. 20-30-30-20 c. 40-10-10-40 d. 10-40-40-10 e. 80-20

41. Why do centralized organizations tend to be more ethical than decentralized ones? Can you think of a situation or example in which a decentralized organization might be more ethical than a centralized one?

42. How do societal expectations affect corporations and their ethical initiatives? Give an example of a company that
had to alter a product or service because of society’s concerns about its health, moral, or social impacts.

43. Describe the four organizational cultures and provide a company example of each organizational culture.

44. Describe the different kinds of power. Are some types of power more likely to result in ethical behavior than others?

45. How do group norms influence the ethical behavior of an organization? What happens when the norms of a particular group conflict with the organization’s corporate culture or objectives?

Chapter 8

1. Fostering ethical decision making within an organization requires improving the firm’s ethical standards and a. not doing business with suppliers.
b. implementing a hiring freeze.
c. training the “bad apples” so they are not bad anymore.
d. terminating ethical persons.
e. terminating the “bad apples” in the organization.

2. Which of the following statements about codes of conduct is false?
a. They are formal statements of what an organization expects of its employees. b. They guarantee an ethical business climate.
c. They help employees determine what behaviors are acceptable. d. They provide rules and guidelines for employees to follow.
e. They should be specific enough to be reasonably capable of preventing misconduct.

3. A strong ethics program includes all of the following elements except
a. a clause promising good stock market performance. b. a written code of conduct or ethics.
c. formal ethics training.
d. auditing, monitoring, enforcement, and revision of standards. e. an ethics officer to oversee the program.

4. In the absence of ethics programs, employees are likely to make decisions based on a. their observations of how their coworkers and superiors behave.
b. how they and their family members behave at home. c. their conscience.
d. their religious values. e. their family values.

5. are formal statements that describe what an organization expects of its employees in terms of ethical behavior.
a. Mission statements b. Codes of conduct
c. Policies on confidentiality d. Environmental policies
e. The Federal Sentencing Guidelines for Organizations

6. What is not a common mistake when designing and implementing an ethics program?
a. Failing to fully understand the goals of the program b. Not setting realistic or measurable goals
c. Having top management take ownership of the ethics program
d. Developing materials that do not address the needs of the average employee
e. Transferring a program between countries and cultures without making adjustments

7. A(n)

orientation creates order by requiring that employees identify with and commit to specific required

conduct, whereas a(n)
a. obedience; values b. compliance; values c. legal; values
d. values; compliance
e. values; obedience

orientation strives to develop shared standards.

8. For an ethical compliance program to properly function,
a. consistent enforcement and disciplinary action are essential. b. employees must be monitored using any means necessary. c. it is not necessary to set measurable program objectives.
d. the same program should be used in all countries of operation, regardless of cultural differences. e. the company must wait until after misconduct occurs to develop a means of preventing it.

9. Which of the following is the most comprehensive?
a. Code of values
b. Code of conduct c. Code of ethics
d. Statement of values
e. Statement of principles

10. At the heart of the Federal Sentencing Guidelines for Organizations is a a. “tit-for-tat” philosophy that punishes wrongdoing.
b. Golden Rule philosophy.
c. Iron Fist philosophy severely punishes wrongdoing.
d. carrot-and-stick philosophy that rewards efforts to improve ethics. e. utilitarian philosophy of the greatest good for the greatest number.

11. The Federal Sentencing Guidelines for Organizations require federal judges to increase fines for organizations that continually
a. improve their ethics programs. b. eliminate misconduct.
c. fail to install a Federal Sentencing Guidelines program. d. fail to report ethics program activities.
e. tolerate misconduct.

12. Which of the following legislation has increased the responsibilities on ethics officers and boards of directors to monitor financial reporting?
a. Sarbanes-Oxley Act
b. Robinson Patman Act
c. Ethics Officer Responsibility Act d. Sherman Antitrust Act
e. Enron Financial Responsibility Act

13.

may be more inclined to engage in unethical organizational conduct because of social isolation that creates insensitivity and a lower level of motivation to regulate ethical decision making.
a. Low-level employees
b. International managers c. Top managers
d. Government officials
e. Fortune 500 companies

14. Top managers tend to focus on returns.
a. financial performance b. employee satisfaction
c. ethical performance

because their jobs and personal identity are often connected to quarterly

d. the board of directors’ recommendations
e. adherence to the code of conduct

15. All of the following are useful in monitoring ethical conduct and measuring the effectiveness of the ethical program
except
a. observation of employees. b. internal audits.
c. firing.
d. surveys.
e. reporting systems.

16. A code of ethics that does not address specific high-risk activities within the scope of daily activities is a. sufficient.
b. inadequate. c. satisfactory.
d. acceptable as long as individual values prevent misconduct.
e. acceptable according to the Federal Sentencing Guidelines for Organizations.

17. Organizational can contribute to diminished employee trust and increased employee turnover. a. leadership succession
b. compensation policies c. ethics programs
d. rules
e. misconduct

18. Most executives feel that which of the following is the primary reason for much of the unchecked misconduct in business?
a. Bad employees
b. An inattentive board of directors c. Customer pressures
d. Financial performance pressures
e. Inadequate ethics and compliance programs

19. Which of the following is an advantage of a values-based ethics program over a compliance-based one?
a. Employees learn to make decisions based on values such as fairness, compassion, respect, and transparency. b. Diverse employees have differing values.
c. It requires employees to identify with and commit to specific required conduct.
d. A values orientation uses legal terms, statutes, and contracts that teach employees the rules and penalties for noncompliance.
e. Values and compliance programs both take basically the same approach.

20. Which of the following is a common mistake made in implementing an ethics program?
a. Setting realistic and measurable program objectives
b. Developing materials that do not address the needs of the average employee c. Adapting a firm’s ethics program to its international operations
d. Allowing employees to practice the skills they learn in ethics training through case studies and/or group exercises
e. Management taking ownership of the ethics program

21. Aurico is a company that offers ethics hotline maintenance and monitoring services for organizations. Which component of the Federal Sentencing Guidelines for Organizations compliance program does this service help organizations to satisfy?
a. Code of conduct
b. Enforcement of standards, codes, and rules c. Delegation of authority to ethical persons
d. Systems for monitoring, auditing, and reporting misconduct e. Ethics training

22. Organizations can become “bad barrels” not because of unethical individuals but because a. the pressure to succeed creates opportunities that reward unethical decisions.
b. the pressure to succeed creates opportunities that punish unethical decisions. c. they lack leadership.
d. they lack values.
e. they have no “bad apples.”

23. Which of the following statements about training is false?
a. It can educate employees about the firm’s policies and expectations, as well as about relevant laws and regulations and general social standards.
b. It can dictate personal ethics on the job.
c. It can make employees aware of available resources, support systems, and designated personnel who can assist them with ethical and legal advice.
d. It can empower employees to ask tough questions and make ethical decisions.
e. It can affect the influence of organizational culture, coworkers and superiors, and opportunity.

24. Which of the following is not an advantage of having a comprehensive code of conduct?
a. To guide employees in situations where the ethical course of action is not obvious. b. To help a company remain in compliance with complex government regulations.
c. To help employees fight for satisfactory levels of compensation and benefits.
d. To help promote constructive social change by raising awareness of the community’s needs and encouraging
employees and other stakeholders to help.
e. To build public trust and enhance business reputations.

25. A

generates an ethical program that creates order by requiring that employees identify with and commit to

specific required conduct using legal terms and statutes. a. values orientation
b. code of conduct
c. statement of values d. code of ethics
e. compliance orientation

26. In the long run, a(n)

orientation may be better for companies, perhaps because it increases employees’

awareness of ethics issues at work. a. code
b. obedience c. compliance d. values
e. individual

27. Which of the following is not a main goal of successful ethics programs?
a. Identify key risk areas that employees will face.
b. Align employee conduct with organizational reputation and branding.
c. Provide a hierarchy of leadership for employees to contact when they are faced with an ethical dilemma that they do not know how to resolve.
d. Allow employees to solve ethical issues themselves using their best judgment.
e. Allow a mechanism for employees to voice their concerns that is anonymous, but allows for the provision of feedback to key questions.

28. The individual responsible for implementing disciplinary action for violation of a firm’s ethics standards is usually the a. CEO.
b. president.
c. immediate supervisor. d. ethics officer.
e. Chairman of the board.

29. To ensure that an ethics program addresses the needs of the average employee, it should include all of the following
except
a. feedback from employees across the firm. b. a question-and-answer section.
c. additional resources for guidance. d. lengthy legal documents.
e. checklists, illustrations, and cartoons where appropriate.

30.

serve as a central contact point where critical comments, dilemmas, and advice can be assigned to the person most appropriate for handling a specific case.
a. Training programs b. Mission statements c. Codes of conduct
d. Hotlines
e. Boards of directors

31. One of the main reasons employees do not report observed misconduct is a. apathy.
b. most employees do not observe any misconduct. c. fear of retaliation.
d. laws and regulations protect the employee committing the misconduct. e. hotlines do not work well.

32. The ultimate “stick” associated with the FSGO is fines or probation, which involves on-site observation by consultants, monitoring of the company’s ethical compliance efforts, and
a. reporting to the U.S. Sentencing Commission on the company’s progress in avoiding misconduct. b. installation of an ethics hotline.
c. payment of any penalties levied.
d. appointment of an appropriate high-level manager to oversee the company’s program. e. divestiture of all assets.

33. Which of the following strives to create order by requiring that employees identify with and commit to specific required conduct?
a. Conduct orientation b. Values orientation
c. Coercive orientation
d. Obedience orientation e. Compliance orientation

34. Because top managers may be more insensitive to ethical issues due to their focus on financial performance, the
FSGO guidelines suggest that ethics officers report to the instead. a. stock market
b. board of directors c. middle managers d. customers
e. stakeholders

35. With regard to ethics, training and communication initiatives should reflect a. the structure of the board of directors.
b. the organization’s stock performance. c. the organization’s size.
d. the unique characteristics of an organization. e. the self-interest of the CEO.

36. What are some of the ways that organizations can develop effective ethics programs?

ANSWER: Refer to Table 8-1, Minimum Requirements for Ethics and Compliance Programs.
1. Standards and procedures, such as codes of ethics, that are reasonably capable of detecting and preventing misconduct
2. High-level personnel who are responsible for an ethics and compliance program
3. No substantial discretionary authority given to individuals with a propensity for misconduct
4. Standards and procedures communicated effectively via ethics training programs
5. Systems to monitor, audit, and report misconduct
6. Consistent enforcement of standards, codes, and punishment
7. Continuous improvement of the ethics and compliance program

37. How can ethical dilemmas and behavioral simulations help employees make more ethical decisions?

ANSWER: Many feel “hands on” training when employees are forced to confront actual or hypothetical ethical dilemmas helps them understand how their organization would like them to deal with potential problems. Lockheed Martin, for example, developed training games that include dilemmas that can be resolved in teams. Each team member offers his or her perspective, thereby helping other team members fully understand the ramifications of a decision for coworkers and the organization.

38. What are the major features of a successful ethics training program and communication systems? Think of an example of a company with strong employee ethics training.

39. What is the role of an ethics officer within an organization? What are his or her duties? To whom does the FSGO
guidelines recommend that the ethics officer report?

40. Discuss the advantages and disadvantages of implementing an ethics program with a compliance orientation versus one with a values orientation. Is one better than the other at maintaining an ethical organization?

Chapter 9

1. Which of the following does not have a significant impact on the success of an ethics program?
a. Senior management’s ability to successfully incorporate ethics into the organization
b. The quality of communication c. The size of the company
d. The content of the company’s code of ethics
e. The frequency of communication regarding the ethical code and program

2. Which of the following statements about ethics audits is false?
a. They provide an opportunity to measure conformity to the firm’s desired ethical standards.
b. Social audits and ethics audits perform basically the same function, so organizations can use them interchangeably.
c. They provide an objective method for demonstrating a company’s commitment to improving strategic planning, including its compliance with legal and ethical standards and social responsibility.
d. They can be a component of social audits.
e. They are systematic evaluations of an organization’s ethics program and performance to determine whether it is effective.

3. Which of the following is a possible unintended consequence of an organization’s focusing more on ethics planning
than on implementation?
a. Unethical conduct is viewed as acceptable behavior. b. The government implements its own audits.
c. The ethics program is poorly designed. d. Employees become annoyed.
e. The implementation process incurs large costs for the organization.

4. A(n) is a tool that companies can employ to identify and measure their ethical commitment to stakeholders. a. ethics audit
b. social audit
c. financial audit
d. performance audit e. external audit

5. Which of the following is not a step in the ethics auditing process?
a. Secure commitment of top executives and directors.
b. Review organizational mission, goals, values and policies, and define ethical priorities. c. Report the results to the U.S. Sentencing Commission.
d. Collect and analyze relevant information. e. Verify the results.

6. Which of the following is a statement that attests that the financial statements made in an audit are fairly stated, without limitations?
a. Adverse opinion b. Qualified opinion
c. Unqualified opinion d. Favorable opinion
e. Disclaimer of opinion

7. Under the statements.

, CEOs and CFOs may be criminally prosecuted if they knowingly certify misleading financial

a. Sherman Antitrust Act b. Ethical Compliance Act c. Robinson-Patman Act
d. Sarbanes-Oxley Act
e. Sherman Antitrust Act

8. During which of the following steps of the ethics auditing process does an organization identify the tools or methods
for measuring progress in improving employees’ ethical decisions and conduct?
a. Secure commitment of top managers and directors b. Establish a committee to oversee the audit
c. Define the scope of the audit
d. Collect and analyze relevant information e. Verify the results

9. Any attempt to verify outcomes and to compare them with standards can be considered a(n)
although many smaller firms do not use this word. a. ethical
b. auditing c. formal
d. informal
e. accounting

activity,

10.

are a primary stakeholder group and should be included in the ethics auditing process because their loyalty determines an organization’s success.
a. Customers b. Employees
c. Special interest groups d. Competitors
e. Legislators

11. The concept of ethics auditing emerged from the movement to audit and report on companies’ broader initiatives.
a. product development b. legal compliance
c. risk management d. public relations
e. social responsibility

12. Which of the following is probably the best way for a manager to provide good ethics leadership?
a. Hire an ethics officer
b. Write a code of conduct c. Conduct ethics audits
d. Set a good example
e. Only hire good employees

13. Which of the following is not a benefit of ethics auditing? a. It can improve a firm’s performance and effectiveness. b. It can increase a firm’s attractiveness to investors.
c. It can identify potential risks.
d. It can harm relationships with stakeholders.
e. It can reduce the risks associated with misconduct.

14. The word

implies a balanced organization that makes ethical financial decisions and also is ethical in more

subjective matters of corporate culture. a. compliance
b. integrity
c. financial management d. corporate culture
e. transparency

15. Which of the following is not a measure of ethical climate?
a. Collective skill
b. Collective ethical sensitivity c. Collective character
d. Collective judgment
e. Collective moral motivation

16. During which step of the auditing process should a firm examine all documents that make explicit commitments to ethical, legal, or social responsibility?
a. Secure commitment of top managers and directors. b. Establish a committee to oversee the audit.
c. Define the scope of the audit process.
d. Review organizational mission, goals, values, and policies. e. Verify the results.

17. A(n)

is a financial accounting firm that offers social auditing services or a nonprofit special interest group

with auditing experience that verifies the results of ethics auditing data analysis a. stakeholder
b. ethics audit consultant c. best practices expert d. financial consultant
e. board of directors

18. The process of verifying the results of an audit should involve standard procedures that control the information.
a. completeness
b. effectiveness and efficiency c. reliability and validity
d. independence
e. veracity

of the

19. Which of the following is not one of the top challenges facing CEOs today? . a. Keeping pace with regulation
b. Protecting against risks
c. Managing and utilizing social media d. Gaining adequate compensation
e. Managing reputation

20. Two useful indicators for assessing employee issues are a. staff turnover and stock price.
b. staff turnover and employee satisfaction. c. staff turnover and honesty.
d. employee satisfaction and attendance. e. employee satisfaction and productivity.

21. At which stage of the ethics auditing process would a hospital conduct focus groups with management, doctors, nurses, related health professionals, support staff, and patients?
a. Collect and analyze relevant information
b. Review organizational mission, goals, values, and policies c. Identify stakeholders
d. Report the results e. Verify the results

22. While ideally the board of directors financial audit committee conducts ethics audits, in most firms they are conducted by
a. managers or ethics officers. b. executive officers.
c. the CEO.
d. outside consultants.
e. secondary stakeholders.

23. Because ethics and social audits are

, there are few standards that a company can apply with regard to

reporting frequency, disclosure requirements, and remedial actions that it should take in response to results. a. not necessary
b. expensive
c. required by law d. mandatory
e. voluntary

24. What are the three Triple Bottom Line factors incorporated into the Global Reporting Initiative framework?
a. Economic, social, personal indicators
b. Political, social, and environmental indicators
c. Economic, social, and environmental indicators
d. Political, individual, and environmental indicators e. Political, individual, and personal indicators

25. What should be the first step in the auditing process?
a. Secure the commitment of top executives and directors b. Define the scope of the audit
c. Establish a committee to oversee the audit d. Collect and analyze data
e. Review organizational mission, goals, values, and policies

26. Retaliation against employees that report misconduct is a problem in cultures. a. weak ethical
b. strong ethical
c. high power distance d. diverse
e. international

27. Which of the following is not a phase of escalation during an ethical disaster?
a. The firm’s discovery of the misconduct b. Ethical issue recognition
c. The firm’s response to the misconduct d. The decision to act unethically
e. The firm’s decision to conduct an ethics audit

28. Which of the following is not a technique for collecting evidence during the ethics audit?
a. Ratio analysis
b. Observing the data-collection process c. Publishing the results of the audit
d. Examining internal and external documents
e. Confirming information in the firm’s accounting records

29.

report.

is an independent assessment of the quality, accuracy, and completeness of a company’s social or ethics

a. Publication b. Verification c. Auditing
d. Analysis
e. Validation

30. What should be the final step in the ethics auditing process?
a. Define the scope of the audit
b. Secure the commitment of top managers and directors c. Collect and analyze data
d. Report the findings e. Verify the results

31. Ethics audits can help companies identify potential before they reach crisis dimensions.
a. competitive advantages b. risks and liabilities
c. productivity issues
d. technological glitches e. market opportunities

so they can implement plans to eliminate or reduce them

32. During the data-collection phase of the audit, the primary objective is to generate a variety of opinions about how the company is perceived and whether it is
a. fulfilling employee benefits commitments. b. bringing in new customers.
c. meeting profit projections.
d. meeting earnings projections.
e. fulfilling stakeholders’ expectations.

33. Independent verification of the ethics audit is important because it lends the report a. credibility and formality.
b. credibility and reliability. c. credibility and objectivity. d. objectivity and civility.
e. objectivity and reliability.

34. When The Gap posts the results of its ethics audit on its web site, it is engaged in which of the following steps of the ethics auditing process?
a. Submit the results to the U.S. Sentencing Commission b. Define the scope of the audit
c. Collect and analyze relevant information d. Verify the results
e. Report the results

35. While social reports often discuss issues related to a firm’s performance in the four dimensions of social responsibility, as well as to specific social responsibility and ethical issues, ethics audits have a narrower focus on assessing and reporting on a firm’s performance in terms of
a. ethical and legal conduct.
b. environmental performance. c. financial performance.
d. customer satisfaction. e. ethical misconduct.

36. Compare and contrast ethics auditing and financial auditing. How can the tools of financial auditing be applied to ethics audits?

37. Explain the benefits and risks of ethics auditing.

38. How can companies secure stakeholder input during an ethics audit? Why is it important to do so?

39. Describe the process of conducting an ethics audit in detail.

40. What is the Global Reporting Initiative? What is its goal? Why has it grown in importance?

Chapter 10

1. identified four cultural dimensions that can have a profound impact on the business environment:
individualism/collectivism, power distance, uncertainty avoidance, and masculinity/femininity. a. Milton Friedman
b. Abraham Maslow c. Adam Smith
d. Geert Hofstede
e. John Maynard Keynes

2. products encourage consumers to return and buy more. This approach is also known as planned obsolescence.
a. Laissez-faire b. Dumping
c. Collectivistic
d. Made-to-break e. Multinational

3. is a term used by Adam Smith to explain the inherent mechanisms at work in free market systems that keep
commerce in equilibrium. It is also known as the “invisible hand.”
a. Consumerism
b. Cultural relativism c. Social democracy d. Laissez-fair
e. Bimodal wealth distribution

4. assumes that humans may not act rationally because of genetics, learned behavior, and rules of thumb. a. Rational economics
b. Socialism
c. Cultural relativism d. National culture
e. Behavioral economics

5. Which of the following statements about multinational corporations (MNCs) is false?
a. MNCs are corporate organizations that operate on a global scale without significant ties to any one nation or region.
b. MNCs are inherently unethical and always do harm in the countries in which they operate.
c. MNCs are characterized by a global strategy of focusing on opportunities throughout the world.
d. Some MNCs are so large and powerful that their revenues are greater than the gross domestic products of many countries.
e. Because of their size and power, MNCs have been the subject of much criticism and the source of a number of ethical issues.

6. Increasing the wealth gap between nations and misusing and misallocating scarce resources are ethical issue accusations related to
a. cultural differences.
b. multinational corporations. c. consumerism.
d. legal differences.
e. international negotiations.

7. Which of the following is not a criticism of or charge against multinational corporations (MNCs)?
a. They transfer jobs overseas, where wage rates are lower b. They increase the gap between rich and poor nations
c. They pay excessively high taxes everywhere
d. They exploit the labor markets of host countries
e. They have an unfair advantage when competing with local businesses

8. Which of the following is a measure taken by governments to curtail MNC practices that create ethical issues?
a. Levying import taxes to lower the prices MNCs charge for their products b. Halting the establishment of minimum wage laws
c. Avoiding the United Nations’ monitoring efforts d. Preventing the formation of labor unions
e. Imposing export taxes to force MNCs to share more of their profits

9. occurs when the middle class shrinks, resulting in highly concentrated wealth amongst the rich and a large number of poor people with very few resources.
a. Communism b. Socialism
c. Bimodal wealth distribution d. A two-class social structure e. Laissez-faire capitalism

10. An unconscious reference to one’s own cultural values, experiences, and knowledge is referred to as the a. cultural reference criterion.
b. unconscious cultural criterion. c. cultural-self criterion.
d. self-reference criterion.
e. unconscious cultural-self criterion.

11. When in Rome, do as the Romans do, or you must adapt to the cultural practices of the country in which you are operating are rationalizations businesspeople sometimes offer for straying from their own ethical values when doing business abroad. This practice is called
a. self-reference criterion. b. country cultural values. c. consumerism.
d. cultural relativism. e. dumping.

12.

involves transactions across national boundaries. It is a practice that brings together people who have different cultures, values, laws, and ethical standards.
a. Global business
b. Country cultural values c. Social democracy
d. Cultural relativism
e. Bimodal wealth distribution

13. What concept refers to economic theories advocating the creation of a society where wealth and power are distributed evenly, relative to the amount of work expended in production?
a. Rational economics b. Socialism
c. Capitalism
d. Rational capitalism e. Fascism

14. Risk compartmentalization occurs when
a. companies place their most problematic employees into separate profit centers so that they cannot influence one another to act unethically.
b. all profit centers within a corporation are aware of the code of ethics.
c. all profit centers within an organization become aware of the consequences of competitors’ actions.
d. various profit centers within an organization become unaware of the consequences of their actions on the firm as a whole.
e. ethics and compliance programs reduce the risk of misconduct.

15.

has been codified in a United Nations document and is defined as an inherent dignity with equal and inalienable rights as the foundation of freedom, justice, and peace in the world.
a. Cultural relativism b. Human rights
c. Consumerism d. Dumping
e. Health care

16. Power distance dimension refers to the “power inequality” between superiors and subordinates. Which of the
following countries probably ranks high on the power distance scale?
a. Saudi Arabia b. Austria
c. England d. Denmark e. Sweden

17. Who argued during the 1930s that the state could stimulate economic growth and improve stability in the private sector?
a. Adam Smith
b. John Maynard Keynes c. Milton Friedman
d. Herbert Hoover e. Geert Hofstede

18. The practice of charging high prices for products sold in home markets while selling the same products in foreign markets at low prices, which do not cover the costs of exporting, is known as
a. price discrimination. b. price gouging.
c. dumping. d. skimming. e. loading.

19. assume(s) that a the market, through its own inherent mechanisms, will keep commerce in equilibrium. a. Social democracy
b. Laissez-faire economics c. Economics
d. Multinational corporations e. Rational economics

20. Those who ascribe to consumerism
a. believe that consumers should purchase everything they can afford. b. do not believe in taxes on locally made products.
c. believe that consumers should own the means of production.
d. believe that consumers, not producers, should dictate the economic structure of a society. e. believe that corporations should have the freedom to do whatever they want.

21.

is based upon the assumption that people are predictable and will maximize the utility of their choices relative to their needs and wants.
a. Rational economics b. Socialism
c. Capitalism
d. Behavioral economics e. Consumerism

22.

allows for private ownership of property and features a large government equipped to offer such services as education and health care to its citizens
a. Democracy b. Communism c. Socialism
d. Capitalism
e. Social democracy.

23. assumes that economic decisions are influenced by human behavior. a. Rational economics
b. Socialism c. Capitalism
d. Rational capitalism
e. Behavioral economics

24.

refers to how members of a society respond to ambiguity. A high score means that a culture tends to minimize risk-taking.
a. Rational economics b. National culture
c. Bimodal wealth distribution d. Power distance
e. Uncertainty avoidance

25. The

formed in 1995 and administers its own trade agreements, facilitates future trade negotiations, settles

trade disputes, and monitors the trade policies of member nations a. International Monetary Fund
b. United Nations
c. World Trade Organization
d. North American Free Trade Act e. European Union

26. What is a major role of the International Monetary Fund (IMF)?
a. It determines the credit ratings of countries.
b. It is the lender of last resort for individuals who cannot secure other types of loans. c. It functions as a collection agent for global banks.
d. It makes short-term loans to member countries that have deficits and provides foreign currencies for its members.
e. It provides mortgage loans to international home buyers.

27. Which of the following organizations emerged from the Bretton Woods agreement of 1944, where a group of international leaders decided that the primary responsibility for the regulation of monetary relationships among national economies should rest in an extra-national body?
a. International Monetary Fund b. United Nations
c. World Trade Organization
d. North American Free Trade Act e. European Union

28. These values were developed by a reverend and the UN Secretary General. They express support for universal human rights.
a. The Global Sullivan Principles b. Sarbanes-Oxley Act
c. FSGO
d. Global common values e. UN Global Compact

29. What is the purpose of the UN Global Compact?
a. To promote free trade around the world
b. To support international banking institutions c. To uphold the principle of consumerism
d. To provide legal representation to international corporations facing lawsuits e. To promote human rights, sustainability, and eradicate corruption

30. What is the AACSB?
a. A major international institution regulating banks around the world b. An accrediting institution for organizational ethics
c. A non-political international governing body
d. An international organization that promotes a set of principles promoting the teaching of responsible management in business schools
e. A group that promotes sustainability and environmental awareness

31. As business facilitates exchanges, consumption beyond basic needs will increase globally. The important issues related to consumerism include all but which of the following?
a. What are the impacts of production on the environment, on society, and on individuals?
b. What are the impacts of certain forms of consumerism on the environment, on society, and on individuals?
c. How much of what we deem necessary for consumption is influenced by corporations?
d. What are necessities and what are luxuries?
e. What are the impacts of poor countries’ consumption patterns on wealthy countries?

32. Which two developing countries are expected to generate some of the largest increases in consumption in the future?
a. The United States and Russia b. Russia and China
c. China and United States d. Brazil and Russia
e. China and India

33. According to the World Trade Organization, which of the following products and services are most vulnerable to protectionism?
a. Textbooks and other school supplies b. Travel agencies
c. Music and dance
d. Intellectual property
e. Shoes, cars, and steel

34. Which of the following is not an article in the UN Human Rights Declaration?
a. Freedom of religion
b. The right to work in favorable conditions c. The right to electricity and running water
d. The right to a home adequate for health and well-being
e. Mothers and children being entitled to a special level of care

35. The growth of the Internet and differing security laws between countries has led to an increase in concern for the human right of
a. religion.
b. a secure job. c. healthcare.
d. privacy.
e. freedom of speech.

36. Which of the following is not a key area of global ethical risk, as outlined by the Eurasia Group?
a. Political instability
b. Strained relations with China
c. Instability in emerging markets
d. Unequal levels of child labor laws
e. Outlook for Euro-zone countries remains weak

37. What is a living wage?
a. The minimum wage that a worker requires to meet basic needs. b. The wage at which the average worker can live really well.
c. It is a synonym for minimum wage.
d. The wage received by child workers in order to stay alive. e. A wage given to workers entirely in the form of food.

38. The benefit of healthcare is being debated as to whether it is a right or privilege. Which of the following countries does not consider health care to be a right?
a. The United States b. France
c. Sweden d. Germany e. Canada

39. The

was a result of a meeting in which international leaders decided that primary responsibility for the

regulation of monetary relationships among nations should rest in an external body. a. United Nations
b. North American Free Trade Agreement c. World Trade Agreement
d. World Bank
e. International Monetary Fund

40. Which of the following has the power to enact legally binding ground rules for international commerce and trade policy?
a. Global Sullivan Principles b. World Trade Organization
c. Global Sullivan Organization d. Federal Trade Commission
e. Global Commerce Association

41. Why are many international business ethics issues different from domestic ethical issues?

global firm cannot succeed simply by applying its domestic ethical programs to other global environments. Although ethical issues such as honesty and integrity are common to most countries, differences in laws, political systems, and cultures require a more targeted approach to ethical decision making. Global ethics is not a “one size fits all” concept.

42. How can differences in two countries’ cultures create ethical issues in business?

43. Discuss the ethical issues associated with multinational corporations.

44. What are the roles of the IMF and the WTO in encouraging, monitoring, and regulating international trade?

45. What is dumping and why is it considered anticompetitive? Does the United States allow dumping?

Chapter 11

1. The leader demands instantaneous obedience and focuses on achievement, initiative, and self-control. a. democratic
b. coaching c. affiliative d. coercive
e. pacesetting

2. Which of the following types of leaders attempts to create employee satisfaction through bartering or negotiating for desired behaviors or level of performance?
a. Pacesetting leaders b. Coercive leaders
c. Transactional leaders
d. Transformational leaders e. Transmogrified leaders

3. Which of the following is not a habit of ethical leaders?
a. They are primarily concerned with themselves. b. They are proactive.
c. They have a passion to do right.
d. They are concerned with stakeholders’ interests. e. They are role models for organizational values.

4. Which of the following leadership types has a strong influence on coworker support and building an ethical culture through increasing employee commitment and fostering motivation?
a. Transformational leaders b. Transactional leaders
c. Coercive leaders
d. Pacesetting leaders e. Authoritative leaders

5. A coaching leader builds a positive climate by
a. valuing people, their emotions, and their needs.
b. focusing on communication across all layers of the organization.
c. inspiring employees to follow their departmental leaders without question. d. focusing on achievement, initiative, and self-control.
e. developing skills for success, delegating responsibility, and issuing challenging assignments.

6. Which leadership type values people, their emotions, and their needs and relies on friendship and trust to promote flexibility, innovation, and risk taking?
a. Authoritative leadership b. Coaching leadership
c. Pacesetting leadership d. Coercive leadership
e. Affiliative leadership

7. Sherry’s leadership style often creates a negative working climate because of the high standards she sets. Sherry is most likely a(n) leader.
a. autocratic b. democratic c. pacesetting d. empathetic e. coercive

8. are a primary influence on employee’s ethical behavior because they are role models for the organization’s
values.
a. Friends b. Parents c. Peers
d. Coworkers e. Leaders

9. As one of the seven habits of strong ethical leaders,

is “the glue that holds ethical concepts together.” This

trait can be developed early in life or developed over time through experience. a. adequate compensation
b. good employees
c. the passion to do right d. charisma
e. a great education

10. The

leader can create a negative climate because of the high standards that he or she sets. This style works

best for attaining quick results from highly motivated individuals who value achievement and take initiative. a. authoritative
b. affiliative
c. democratic d. coaching
e. pacesetting

11. The

of an organization can influence the acceptance of, adherence to, transmittal, and monitoring of

organizational norms, values, and codes of ethics. a. nation of origin
b. locus of control c. leadership style
d. production methods e. opportunity

12. Ethical leadership should be based on
a. holistic thinking that embraces the complex issues facing firms every day. b. a strong shareholder desire for profits.
c. the opinions of a leader who defines success in terms of group gratification. d. short­term thinking that looks at the firm’s health on a day­to­day basis.
e. people who embrace a transactional style of leadership.

13. A fundamental problem in traditional personal character development is that specific vales are used to teach about a philosophy, which may be inappropriate where cultural diversity and privacy must be respected. A solution is
a. to teach more general values to develop a set of basic beliefs.
b. to ignore moral philosophies and to train solely based on the organization’s code of conduct.
c. to teach completely different values and skills in different cultural environments.
d. to teach individuals intellectual skills that address the complexities of ethical issues in business.
e. to teach individuals the literary canons of the major philosophers from both western and eastern religions.

14. Strong ethical leaders have a passion for all of the following except to a. do the right thing.
b. be proactive
c. consider stakeholder interests
d. be role models for the organization and its employees. e. satisfy shareholders before other stakeholder groups.

15. Leaders whose decisions and actions are contrary to the firm’s values send a signal a. that the firm’s values are trivial or irrelevant.
b. that they are providing a good example of what not to do. c. that the firm’s corporate culture is highly important.
d. that they are working toward improving the ethical culture of the firm. e. that they care about the environment.

16. Which attribute of ethical leaders will not be effective unless the leader is personally involved in the organization’s
key ethical decisions?
a. Stakeholder compassion b. Proactive leadership
c. Transparency
d. Moral philosophy e. Compensation

17. Which type of leader relies on participation and teamwork to reach collaborative decisions?
a. Transformational b. Coercive
c. Democratic d. Coaching
e. Pacesetting

18. What is not a necessity for strong ethical leaders to make good decisions?
a. Complete information b. Courage
c. Experience making the right decisions d. Knowledge
e. The ability to coerce subordinates

19. Which of the following is not a way to avoid groupthink in small-group decision making?
a. Express the need to examine all alternatives. b. Assign one person to be “Devil’s advocate”.
c. Discourage team members from discussing the group’s ideas with people outside the group. d. Set up a number of independent groups to work on the same issue.
e. Emphasize to each team member that he or she is a “critical evaluator” with the responsibility to express opinions and objections freely.

20. is the ability or authority to guide and direct others toward a goal. a. Leadership
b. Collaboration c. Democracy
d. Transparency e. Pacesetting

21. These leaders are characterized as having superficial charm, no conscience, grandiose self-worth, little or no empathy, and enjoy flouting rules.
a. Unethical leaders
b. Psychopathic leaders c. Apathetic leaders
d. Ethical leaders
e. Charismatic leaders

22. This occurs when there are two or more positions on an ethical decision. a. Ethical leadership
b. Competing leadership c. Ethical conflicts
d. Empowerment
e. Interpersonal communication

23. Leaders having a(n) conflict management style are highly assertive and not very cooperative. a. Accommodating
b. Avoiding
c. Collaborating d. Competing
e. Compromising

24. Leaders having an accommodating conflict management style are a. Highly assertive and not very cooperative.
b. Not effective because they avoid conflict at any costs – even if it leads to misconduct. c. Highly cooperative but non-assertive.
d. In between the assertiveness and cooperativeness dimensions. e. Cooperative and assertive.

25. Leaders with a(n)

conflict management style desire to meet the needs of stakeholders and strongly adhere to

organizational values and principles. a. Avoiding
b. Competing
c. Compromising
d. Accommodating e. Collaborating

26. A

-based culture encourages employees to express concerns, bring up ethical issues, and take a proactive

approach toward resolving conflicts. a. Values
b. Profits
c. Consumers
d. Shareholders e. Stakeholders

27. and reporting are two major dimensions of ethical communication. a. Collaboration
b. Transparency c. Recognition
d. Listening
e. Compromising

28. is a two-way process in which the communicator communicates with superiors and subordinates. a. Cooperation
b. Transparency
c. Leader-follower congruence d. Reporting
e. Collaboration

29. The four categories of communication include all of the following except a. Reporting
b. Small group communication c. Nonverbal communication
d. Interpersonal communication e. Listening

30.

occurs when one or more group members feel pressured to conform to the group’s decision even if they personally disagree.
a. Group polarization
b. Leader-follower congruence c. Groupthink
d. Competition e. Conflict

31. When a group is more likely to move toward a more extreme position than the group members might have done individually, this is referred to as
a. Leader-follower congruence b. Groupthink
c. Values-based culture d. Ethical leadership
e. Group polarization

32. This occurs when leaders and followers share the same vision, ethical expectations, and objectives for the company. a. Groupthink
b. Leader-follower congruence c. Group polarization
d. Values-based culture e. Ethical leadership

33. provide(s) important guidelines for employees on how to act in different situations. a. Leader-exchange theory
b. Small group communication c. Interpersonal communication d. Codes of ethics
e. Leader-follower congruence

34. Gossip, manipulation, playing favorites, and taking credit for another’s work are all examples commonly associated with
a. Organizational politics b. Political skills
c. Competitiveness d. Groupthink
e. Ethical conflict

35. can be used to promote organizational goals and help rather than hinder other employees. a. Office politics
b. Political skills
c. Ethical conflict d. Democracy
e. Coercion

36.

leaders are passionate about the company, live out corporate values daily in their behavior in the workplace, and form long-term relationships with employees and other stakeholders.
a. Authentic b. Coaching
c. Transformational d. Transactional
e. Pacesetter

37. All of these are true about feedback except
a. Most companies recognize the need for organizational leaders to provide feedback to employees.
b. Most companies recognize the need for organizational leaders to get feedback from their employees.
c. Feedback can occur through informal methods like a simple conversation or through more formal systems such as employee performance evaluations.
d. Employee feedback can be generated in many different ways, including interviews, anonymous surveys, ethical audits, and websites.
e. Negative feedback is important to inform employees of weaknesses and provide constructive ways for improving them.

38.

leaders communicate a sense of mission, stimulate new ways of thinking, and enhance as well as generate new learning experiences.
a. Authentic
b. Democratic
c. Transformational d. Transactional
e. Cooperative

39. The most effective leaders possess the ability to manage themselves and their relationships with others effectively, a skill known as
a. Conflict management b. Group theory
c. Collaboration
d. Emotional intelligence
e. Leader-follower theory

40. These leaders are passionate about the company, live out corporate values daily in their behavior in the workplace, and form long-term relationships with employees and other stakeholders.
a. Transactional b. Compromising
c. Transformational d. quantitative
e. Authentic

41. The acronym RADAR stands for
a. Recognize, Answer, Discourage, Avoid, & Recover b. Recognize, Answer, Detect, Avoid, & Recover
c. Recover, Answer, Discourage, Avoid, & Recognize d. Recognize, Avoid, Detect, Answer, & Recover
e. Recover, Avoid, Detect, Answer, & Recognize

42. From an ethical standpoint, leaders should take time during this step of the RADAR model to fix any weaknesses in the ethics program and develop improved ways of detecting misconduct.
a. Detect b. Answer
c. Recovery d. Avoid
e. Recognize

43. This step of the RADAR model involves responding to the discovery of an ethical dilemma through communication both internally and externally.
a. answer b. recover
c. recognize d. avoid
e. detect

44. Which two steps of the RADAR model occur when a firm is faced with an ethical conflict or dilemma. a. recognize & avoid
b. answer & recover c. detect & avoid
d. answer & detect
e. recover and detect

45. Many managers are reluctant to engage in this step of the RADAR model because they fear doing so will uncover questionable conduct that could put the firm in an unfavorable light.
a. avoid
b. recover c. answer d. detect
e. recognize

Essay
46. Discuss the role of leadership in understanding and executing ethical decision making in organizations.

47. Describe the RADAR model, discussing key objectives needed to be obtained for each step of the model.

48. Discuss the differences between the five styles of conflict management and provide an example for each conflict management style.

49. Discuss the differences between groupthink and group polarization, providing examples of each.

50. Describe and differentiate between a compliance-based approach and an integrity-based approach to leadership.
Which approach is preferred, justify your response.

Chapter 12

1. All of the following are facts about water pollution, except:
a. Projected increases in fertilizer use suggest there will be a 10% – 20% global increase in nitrogen water contamination.
b. Up to 90% of wastewater in developing countries flow untreated into rivers, lakes, and coastal zones. c. In developing countries, 70% of industrial waste is dumped untreated into water sources.
d. Every day, 2 million tons of untreated human waste is put into some water source. e. Water use is projected to decrease by 50% within 20 years.

2. Trying to pinpoint who is responsible for environmental degradation is not always easy, especially when it involves
__________ .
a. different countries b. several managers
c. more than one CEO
d. differing regulatory agencies
e. both federal and local governments

3. One of the biggest factors in land pollution is the dumping of waste into landfills.
world’s biggest wasters.
a. European b. Chinese
c. Russian
d. American e. Canadian

consumers are by far the

4. The world’s forests are being destroyed at a rate of nearly 50,000 square miles annually. The reasons for this wide­
scale destruction are varied and include all except:
a. The boom in biofuels
b. The soil is great for farming c. Logging profits
d. Cycle of poverty
e. Converting land to other use

5. Although limiting urban sprawl creates disadvantages for renewal movements that reduce sprawl.
a. car and oil companies b. the airline industry
c. the railroad industry
d. service oriented companies e. humans and animals

, many businesses can benefit from urban

6. Because genetically modified seeds are

, farmers cannot keep any of the seed themselves but must

purchase seeds each year from companies such as Monsanto. a. so small
b. worthless
c. uncollectable d. invisible
e. patented

7. The first Earth Day, increasing stakeholder awareness of environmental concerns and the creation of the
Environmental Protection Agency brought to the forefront. a. corporate social responsibility
b. alternative energy sources c. diversity
d. sustainability e. competition

8. All of the following are goals of the Environmental Protection Agency, except:
a. Focus on the activities of business b. Protecting America’s water
c. Cleaning up communities and advancing sustainable development d. Taking action on climate change and improving air quality
e. Ensuring the safety of chemicals and preventing pollution

9. The Clean Air Act:
a. Allowed the EPA to track industrial chemicals
b. Focuses on promoting alternative forms of energy c. Established national air quality standards
d. Provides tax benefits to consumers who purchase hybrid cars e. Focuses on reducing pollution through cost-effective change

10. The Clean Water Act makes it illegal for anyone to discharge any pollutant from a point source directly into navigable waters without a .
a. good reason b. direct order c. permit
d. inspector present e. limit

11. The
raw materials use.

focuses on reducing pollution through cost-effective changes in production, operation, and

a. Pollution Prevention Act
b. Toxic Substances Control Act c. Clean Air Act
d. Energy Policy Act e. Oil Pollution Act

12. All of these are ways of reducing pollution, except:
a. Designing environmentally friendly buildings b. Recycling
c. Greenwashing
d. Source reduction
e. Sustainable agriculture

13. Congress passed the

to empower the EPA with the ability to track the 75,000 industrial chemicals

currently produced or imported into the United States. a. Federal Water Pollution Control Act
b. Federal Insecticide, Fungicide and Rodenticide Act c. Safe Drinking Water Act
d. Toxic Substances Control Act e. Food Quality Protection Act

14. Wind power holds great promise for the United States because of the energy could meet as much as 20 percent of the nation’s energy needs. a. Rocky Mountains
b. Everglades c. Great Lakes d. Pacific Rim
e. Great Plains

, and experts believe wind

15. Geothermal energy provides alternative energy.
a. heat from the sun b. a radiated heat
c. heat from steam
d. a constant source of heat e. a dry heat

and is a more dependable energy source than some other forms of

16. Critics of nuclear power are concerned about all of the following, except:
a. Reduced emissions b. Worker safety
c. The transport of nuclear waste
d. Damage to plants from natural disasters e. Nuclear meltdowns

17. Perhaps the most controversial form of alternative energy after nuclear power is . a. hydopower
b. geothermal power c. solar power
d. wind power e. ethanol

18. in the United States,

provides only 7% of total output but provides 19% of total electricity

production worldwide, making it the largest form of renewable energy. a. wind power
b. geothermal power
c. hydroelectric power d. solar power
e. nuclear power

19. Many businesses responded to sustainability by adopting a triple-bottom line approach; taking into consideration social and environmental performance variables in addition to .
a. managerial performance b. economic performance
c. board of directors performance d. customer focus
e. stakeholder focus

20. A

business attempts to avoid dealing with environmental issues and hopes nothing bad happens or no

one ever finds out about an environmental accident or abuse. a. newly established
b. socially responsible c. low-commitment
d. bankrupt
e. law-abiding

21. is one of the country’s greatest sustainability success stories.
a. Water conservation b. Pollution control
c. Manufacturing d. Composting
e. Recycling

22. Stakeholder assessment is an important part of a approach to environmental issues. a. low-commitment
b. medium-commitment c. high-commitment
d. hands-off e. hands-on

23. Through

, it is possible to quantify the trade-offs to determine whether to accept or reject

environmentally-related activities and programs. a. risk management
b. management voting c. board directives
d. legal requirements e. customer input

24. Organizations highly committed to environmental responsibility may conduct an audit of their efforts and report the results to all interested .
a. agencies b. countries
c. stakeholders d. individuals
e. suppliers

25. Which option includes the assessment and improvement of business strategies, economic ectors, work practices, technologies, and lifestyles while maintaining the natural environment?
a. Competitive advantage b. Marketing
c. Sustainability d. Greenwashing e. Risk analysis

26. Sustainability is the long-term well-being of the natural environment and the mutually beneficial interactions among
_____.
a. customers, investors, managers, and policies
b. board members, presidents, managers, and nonprofit organizations c. investors, creditors, suppliers, and the marketing department
d. nature, individuals, organizations, and business strategies e. managers, boards, CEO’s, and stakeholder strategies

27. Which industry invests the most in alternative clean energy sources?
a. The automobile industry b. The clothing industry
c. The airline industry
d. The federal government e. The oil and gas industry

28. All of these are examples of social responsibility concerns, except:
a. Product price
b. Consumer protection c. Employee well-being d. Sustainability
e. Legal responsibilities

29. The protection of air, water, land, biodiversity, and emerged as a major issue in the twentieth century. a. employee relations
b. renewable natural resources
c. environmental legal regulations d. consumer protection
e. air pollution

30. can cause markedly shorter life spans, along with chronic respiratory problems in humans and animals. a. Water pollution
b. Air pollution
c. Global warming d. Deforestation
e. Acid rain

31. The Kyoto Protocol created in 1997 is an international treaty meant to curb global . a. natural resource use
b. greenwashing activities c. water pollution
d. greenhouse gas emissions e. competition

Essay
32. How does sustainability relate to ethical decision making and social responsibility?

33. Discuss the benefits of green marketing and the long-term pitfalls of greenwashing.

34. Why is the Environmental Protection Agency (EPA) said to be the most influential regulatory agency?

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Chapters 8 Through 19

CHAPTER 8 AFFIRMATIVE ACTION
Online Quiz Questions

MULTIPLE CHOICE QUESTIONS

1. Affirmative action is:
a. a quota system for minorities to overcome past discrimination
b. illegal
c. legal only if court ordered
d. none of these

2. Executive Order 11246 requires:
a. compliance with all other Executive Orders
b. inclusion of an anti-discrimination clause in a contractor’s contract
c. that publicly-traded companies hire women and persons of color
d. none of these

3. If the parties to a discrimination suit agree to settle, they may enter into:
a. a long term supplier contract
b. a court battle
c. conciliation services
d. a consent decree

4. Regarding “reverse” discrimination, it is correct to say that:
a. It is a controversial subject.
b. Usually a white person believes he was passed over because of affirmative action.
c. It has been the subject of lawsuits.
d. All of these

5. According to the EEOC guidelines, a good Affirmative Action Plan requires all of these EXCEPT:
a. a reasonable basis for concluding that action is appropriate
b. a reasonable self-analysis
c. reasonable action
d. a reasonable review of applicant files

6. Match each term to its correct definition.

Affirmative action a management tool designed to ensure equal employment opportunity
Strict scrutiny the most stringent form of judicial review of government actions
Self-analysis analyzing one’s workforce and identifying problem areas
Compelling governmental interest an abiding interest which stands as a defense to a constitutional challenge
Underutilization this is demonstrated when the percentage of women and minorities in the employer’s workforce is less than the percentage of such persons with the necessary skills for the job

CHAPTER 8
AFFIRMATIVE ACTION
MULTIPLE CHOICE QUESTIONS

1. When individual job titles are listed for each department in order of pay level and demographic information is provided for each job, this is called a/an:
a. workforce analysis
b. organizational profile
c. job group analysis
d. organizational display

2. Affirmative action:
a. is primarily applied to hiring decisions
b. is limited to African-Americans and women
c. includes any formal or informal efforts to improve the employment opportunities of African-Americans and women
d. all of the above
e. none of the above

3. Written affirmative action plans, submitted to the OFCCP, are required of contractors or
subcontractors:
a. with 10 employees and $10,000 in federal contracts
b. with 25 employees and $25,000 in federal contracts
c. with 50 employees and $50,000 in federal contracts
d. with 100 employees and $100,000 in federal contracts
e. none of the above, all companies doing federal contract work must have written affirmative action plan that is submitted to the OFCCP

4. Which of the following is a law requiring certain employers to engage in affirmative action?
a. Title VII of the Civil Rights Act
b. The Rehabilitation Act
c. California’s Proposition 209
d. all of the above
e. none of the above

5. Which of the following is not considered to be a reasonable part of a valid affirmative
action plan?
a. all employment test scores are validated
b. a stated plan to hire a particular number of black, white, male, female…etc. employees in order to remedy an existing imbalance or injustice
c. wide communication of job availability
d. active enforcement of anti-discrimination policies
e. active enforcement of anti-harassment policies

6. Consent decrees:
a. sometimes require affirmative action as a part of the settlement in a discrimination case
b. are issued by judges after a jury verdict following a lawsuit
c. require employers to agree to hire specified numbers of women and/or persons of color
d. all of the above
e. none of the above

7. In Johnson v. Transportation Agency, Santa Clara County, a female employee was promoted to the position of road dispatcher, despite the fact that a male candidate had scored two points higher on an interview. The county had an affirmative action plan and the plan was taken into account in making the promotion decision. The Supreme Court ruled that:
a. the employer did not violate Title VII because it had an affirmative action plan requiring it to hire a woman for the position
b. the employer did not violate Title VII because it had an affirmative action plan that addressed the proven underutilization of women in a moderate, flexible way
c. the employer violated Title VII because, despite its affirmative action plan, it was not free to hire a less qualified candidate because of her sex
d. the employer violated Title VII because there was no evidence of underutilization of women in the county workforce, requiring affirmative action
e. none of the above

8. A school district had to decide which of two equally qualified, equally senior employees to lay off. Invoking its affirmative action plan, the district retained an African-American and laid off the white teacher. The court would rule that:
a. Title VII was violated because there was no evidence that African-Americans were underutilized as teachers and affirmative action cannot be used to make layoff decisions
b. Title VII was violated because diversity is not a compelling government interest necessitating consideration of race
c. Title VII was not violated because using race as a “tie-breaker” is a lawful form of affirmative action
d. Title VII was not violated because the school district demonstrated that the layoff was the only way to maintain a faculty that reflected the racial composition of the student body
e. Title VII was not violated because the layoff was only temporary and did not excessively burden the white teacher

9. To survive a constitutional challenge, a public employer’s affirmative action plan that uses racial preferences must:
a. explain why the racial inequities occurred
b. be permanently implemented
c. be narrowly tailored
d. be approved by Congress
e. all of the above

10. In order to prove that underutilization exists, it must be shown:
a. by the four-fifths rule, that women or persons of color are disproportionately absent from a position
b. that women or persons of color are underrepresented in the employer’s workforce relative to their availability in the relevant labor market
c. that intentional discrimination is the reason that women and persons of color are not adequately represented in the employer’s workforce
d. all of the above
e. none of the above

11. Vietnam era veterans are included as a protected group under affirmative action:
a. when employers enter into federal contracts or subcontracts worth $10,000 or more
b. when employers enter into federal contracts or subcontracts worth $25,000 or more
c. when employers enter into federal contracts or subcontracts worth $50,000 or more
d. automatically in any federal contract regardless of size

12. In Lomack v. City of Newark, the newly elected mayor decided to eliminate all single-race fire companies to improve morale. Dozens of firefighers were involuntarily transferred based on their race, and several sued, alleging a violation of Title VII. At the time, the city was operating under a consent decree requiring that it undertake certain measures to hire minority firefighters. What did the court decide, and what was its reasoning?
a. because of the consent decree, the city was compelled to diversify its fire companies, so the transfers complied with affirmative action, and did not violate Title VII
b. because its overall goal was to treat all firefighters equally, the transfers did not violate Title VII
c. even though the consent decree required certain affirmative steps to hire minority firefighters, it was permissible under Title VII
d. the decisions to transfer were based on race, in violation of Title VII, and the consent decree did not require or condone such transfers

13. In Reilly v. TXU Corp, an employee sought promotion to manager. Requirements for the job included a graduate business degree and 5 to 7 years of sourcing-related experience. The employee met the requirements, and received the highest score on a panel interview. Shortly after, the promoting manager received an inquiry from an African American woman. The HR Department determined that the woman was qualified, even though she did not have 5 years of sourcing experience. She received the promotion, and the employee sued. Which of the following statements is true?
a. the African-American woman was qualified, and met the requirements for the position
b. the hiring manager’s decision may have been influenced by the fact that she was in charge of the firm’s diversity program, but had no minority employees working for her
c. the employee and the African-American woman scored similarly on the interview
d. all of the above
e. none of the above
f. b and c only

14. Your company sells office supplies, and your CEO has finally succeeded in acquiring a contract to provide supplies to the federal government for the next year. This is a huge client for your company, worth in excess of $3 million dollars. Aside from increasing purchasing and production, what does your company need to do?
a. agree to hire a certain percentage of persons of color and women before the contract takes effect
b. prepare an affirmative action plan
c. not discriminate in your workplace
d. all of these
e. b and c

15. Court-imposed affirmative action is:
a. common
b. uncommon
c. non-existent; all affirmative action is voluntary
d. none of these

16. “Reverse” discrimination means:
a. establishing quotas for the hiring of women and persons of color
b. disparate treatment
c. disparate impact
d. none of these

17. Your firm’s contract to sell office supplies to the federal government requires that you hire only subcontractors who agree not to discriminate, and include a nondiscrimination clause in their contracts with you. You’ve done a thorough investigation of the firms out there who could fulfill your needs for particular office supplies, and there is one who is significantly less expensive than all of the others. However, that firm has a well-known reputation for discriminating against African-Americans. Your profit margin is already quite small for this project, and you worry about making any money at all. Which of the following is/are acceptable option(s), and why?
a. hire the firm that’s cheaper, even though they discriminate, because they’ll agree to put the clause in their contract, and that’s all you need; besides, you can’t afford to lose the government business
b. don’t hire the firm that’s cheaper, because it would disqualify your firm from the government contract if the government found out
c. talk to the firm that’s cheaper, and try to persuade them to actually comply with a non-discrimination standard; then monitor the situation to ensure that they do, because its in both your interests
d. negotiate with other, non-discriminating suppliers on their prices to see if you can match the price of the discriminating supplier
e. b, c and d

18. Your friend and former college roommate, David, has just been hired to manage a small, family-owned business because the owner has fallen ill, and none of his children are yet ready to assume leadership of the business. David has hiring and firing authority (except for the owner’s children), and wants to expand and diversify the sales staff, by hiring women and persons of color. There are 3 openings. What would be your best advice to him to accomplish his goals?
a. David should hire the only qualified women and/or persons of color, in order to achieve diversity
b. David should prepare an affirmative action plan, after doing a self-analysis which establishes an underutilization of women and persons of color in the relevant labor market, and then advertise the open positions
c. David should hire the first qualified candidates he finds, regardless of gender or race
d. none of these would be good advice

19. Affirmative action may be used on behalf of all of the following groups EXCEPT:
a. African-Americans
b. women
c. Pacific Islanders
d. disabled persons
e. none; affirmative action may be used for all of these groups

20. Regarding Affirmative Action plans, which of the following is true?
a. it may be used to remedy a “manifest imbalance”
b. the imbalance must meet the four-fifths rule
c. the imbalance must have resulted from past discrimination
d. all of these are true

ESSAY QUESTIONS

1. Why is each of the following good legal advice?

a. Federal contractors and sub-contractors with at least 50 employees and contracts worth at least $50,000 must develop written affirmative action plans addressing employment of women and minorities and submit them to the OFCCP within 120 days of their contracts commencing.

.

b. Employers wishing to consider protected class characteristics in order to enhance the utilization of women and persons of color must have valid affirmative action plans in place.

c. Employers should maximize the use of improvements in recruitment, selection, training, development, and organizational climate before considering hiring and promotion preferences.

d. Affirmative action must never be used as a basis for making discipline and termination decisions.

e. All affirmative action plans should include the results of a reasonable self-study, an analysis of underutilization establishing the basis for affirmative action, and reasonable actions to improve the utilization of women and persons of color.

2. There is a perception among some that affirmative action results in quotas and reverse discrimination. Discuss the justification for affirmative action and whether affirmative action indeed results in quotas and reverse discrimination.

CHAPTER 9 HARASSMENT
Online Quiz Questions

MULTIPLE CHOICE QUESTIONS

1. Regarding harassment, which of the following statements is true?
a. Sexual harassment is the only kind of harassment.
b. Sexual harassment is the most common type of harassment.
c. The liability of the employer is the same no matter the type of harassment.
d. b and c

2. The necessary elements to establish a claim of harassment include all of the following EXCEPT:
a. The harassment was based on a protected class characteristic.
b. The harassment resulted in tangible employment action or created a hostile environment.
c. The harassment was welcome.
d. All of these are necessary elements of the claim.

3. Hostile environment claims can result from:
a. verbal conduct
b. physical conduct
c. displays of images
d. all of these

4. Employer liability for harassment may be avoided if:
a. The harassment resulted in a tangible employment action.
b. The employer took reasonable care to prevent and correct harassment.
c. The employee did not take advantage of corrective opportunities.
d. b and c

5. An employer’s remedies for a claim of harassment may include all of these EXCEPT:
a. immediate temporary action on receipt of a complaint of harassment
b. long-term remedial measures depending on the outcome of the investigation
c. a fair investigation, not one with a pre-determined outcome
d. a transfer of the harassed employee

6. Match each term to its correct definition.

severe or pervasive a hostile environment created by a serious one-time event or a frequent, continuing series of events at work
unwelcome not solicited or provoked
hostile environment this interferes with a person’s work performance
vicarious liability pursuant to this principle, the employer is liable for the acts of a harassing employee
investigation an examination of the circumstances surrounding events described in an harassment complaint

CHAPTER 9
HARASSMENT

MULTIPLE CHOICE QUESTIONS

1. Which of the following is true of harassment?
a. almost all harassment cases involve sexual harassment
b. harassment is legally actionable because it is a form of discrimination
c. harassment claims are rarely brought by men
d. a and b
e. all of the above

2. Which of the following is a necessary element of a sexual harassment claim?
a. the harasser intended to inflict emotional distress and embarrassment on the victim
b. the sex of the harasser differed from the sex of the victim
c. the harassment was unwelcome
d. the harasser made a sexual advance or requested a sexual favor
e. all of the above

3. In the case of “equal opportunity harassers” who harass both men and women, the courts tend to rule:
a. for the harasser, because the harassment is not because of sex
b. for the harasser, because harassment is not proven in that circumstance
c. for the victim of the harassment, because the harassment is because of sex
d. for the victim of the harassment, because harassment is proven generally

4. In the case in which a woman ended an affair with her male supervisor, and began to receive poor performance appraisals from him, the court ruled on her Title VII harassment claim:
a. for the woman, based on sexual harassment
b. for the woman, because of the affair
c. for the employer and supervisor because the poor performance appraisals were not the result of harassment, but of the relationship having gone sour
d. for the employer and supervisor because the poor performance appraisals were the result of the woman’s poor work performance

5. Regarding the “severe” or “pervasive” standard for assessing harassment cases, which of the following statements is NOT true?
a. to prove harassment, the plaintiff must show that the conduct complained of was both severe and pervasive, unless it occurred outside work
b. to prove harassment, the plaintiff must show that the conduct complained of was severe or pervasive
c. the degree of severity required is in inverse proportion to its pervasiveness
d. none of these

6. Which of the following is true regarding the role of conduct outside of the workplace in harassment cases?
a. employers cannot be held liable based on harassing conduct that occurs outside of the workplace
b. the sexual activities of persons who allege harassment will be examined in order to determine whether the treatment received was unwelcome
c. the marital statuses of the plaintiff and the alleged harasser will be taken into account in determining whether harassment occurred
d. all of the above
e. none of the above

7. Employers are vicariously liable for harassment when:
a. a hostile environment is created by a top official
b. harassment by a supervisor results in a tangible employment action
c. a supervisor creates a hostile environment and the employer does not have a sexual harassment policy or reporting procedure
d. all of the above
e. none of the above

8. Which of the following is part of the “affirmative defense” available to employers in certain hostile environment cases
a. the employer exercised reasonable care to prevent and correct promptly any harassment
b. the employer knew or should have known about the harassment
c. the employee failed to take advantage of preventive or corrective measures provided by the employer
d. a and c
e. b and c

9. The primary difference between harassment that results in tangible employment action and harassment that creates a hostile working environment is:
a. the level of proof required in the prima facie case for harassment that results in tangible employment action
b. the availability of a rebuttal to the plaintiff if the employer proves a reason for the hostile environment
c. the criteria for proving harassment that results in a tangible employment action is less stringent
d. the criteria for finding employers liable differs depending on the outcome of the harassment
e. none of the above

10. Which of the following should be included in an employer’s policy prohibiting harassment?
a. assurance that employees reporting harassment will be protected from retaliation
b. assurance of strict confidentiality in handling harassment complaints
c. a clear and accessible procedure for reporting harassment
d. a and c
e. all of the above

11. Regarding harassment, which of the following statements is NOT true?
a. harassment is a serious problem in the workplace
b. the definition of harassment under Title VII includes mistreatment and abuse of employees generally
c. the definition of harassment under Title VII does not include workplace bullying
d. all of these are true

12. If an employee is subject to severe harassment, and quits his position to escape it, the court will likely rule:
a. that because he quit, no tangible employment action can be proven
b. that the quit is a constructive discharge, which constitutes a tangible employment action if it results from a demotion or pay cut
c. that a hostile environment is presumed, but that the employee waived the right to sue when he left
d. none of these

13. In a case in which the employee claimed harassment by her supervisor in which he altered her work her work hours with the knowledge that doing so would adversely affect her hypoglycemia; frequently stood at her desk and stared angrily at her; startled her by pounding on her desk with his fist; criticized her work unfairly; and yelled at her in front of co-workers, the court ruled that:
a. no sexual harassment was proven, because no demand for sexual favors was made
b. no sexual harassment was proven, because no hostile environment was created
c. a hostile environment was created by the supervisor’s conduct
d. no harassment could be proven without verbal or physical conduct of a sexual nature

14. The plaintiff in a harassment case must prove:
a. the harassment was because of sex
b. the harassment was directed toward a protected class
c. the harassment was unwelcome
d. all of these
e. only b and c

15. When a female supervisor demands sexual favors from a male employee so that he can keep his job or get a raise, it is called this:
a. same sex harassment
b. quid pro quo harassment
c. severe or pervasive harassment
d. cruel and unusual harassment

16. As the Assistant Human Resources Manager, you have learned from another employee that a co-worker is being harassed by her supervisor. Assuming your firm has no anti-harassment policy, what should you do?
a. nothing unless the victim herself files a claim, because there is no anti-harassment policy, so you have no authority in the matter
b. investigate the claim and report the harassment to your superiors
c. create and enforce an anti-harassment policy for your firm
d. offer to transfer the employee to another job
e. b and c
f. b, c and d

17. Your co-worker, a new employee, is painfully shy. She works, as you do, as a clerical assistant to an architect in the firm you both work for. Her architect, a boorish male with a foul mouth and grabby hands, has had trouble keeping an assistant, and you know why. But even though this fellow has continued in his usual behavior, applying it now to her, she seems to be unable to decide what to do, and seeks your advice. Knowing how these cases are decided, what would be the best advice you could give her?
a. she should say nothing; just keep working, and do a good job
b. she should act friendly, but refuse his advances
c. she should tell him she’s not interested, and just wants to work
d. the next time he tries something, she should just punch him in the eye

18. You are a salesperson for a pharmaceutical company, a job it was difficult to get. After you’d been there a while, there was another opening, and you recommended your friend, Paul. He was hired, and the two of you have enjoyed working together ever since. Recently, the secretary for the sales team has confided in you that Paul has been acting inappropriately, and most recently, cornered her in the supply room, and pushed her up against the wall with his body, and caressed her with his hands. She does not know that you recommended Paul to the firm. Of the following choices, what should you do?
a. tell her not to worry, that it will pass, because Paul is not normally like this
b. tell her not to worry, that you’ll talk to Paul, and tell him to stop it
c. tell her to report Paul to Human Resources, and you’ll tell them you saw it
d. talk to Paul, and tell him that if he doesn’t stop it immediately, and apologize, you will report him to Human Resources

19. Imagine that you are the judge hearing a case for sexual harassment filed by a woman who reports that she was forced to have sex in the workplace with her supervisor. She admits that for some months prior to the event, she displayed her body through seminude photos, lifted her skirt to verify an absence of undergarments, made highly salacious comments, and offered sexual gratification “to employees, customers, and competitors alike.” Knowing what you know about harassment, what should you decide?
a. for the woman, because the forced sex proves harassment
b. for the woman, because her flirting did not justify the forced sex
c. for the employer, because the harassment was not unwelcome
d. for the employer, because she had a reputation for being “easy”

20. A male customer of a sports bar has taken a particular liking to one of the waitresses, and always asks to be seated at her station, so that she will wait on him. He has spoken to the manager of the bar, and generously tipped him to insure that he will get her station. But the waitress does not want to wait on the customer, because he grabs and pinches her rear, tries to tuck money down her top, and frequently pulls her down onto his lap. She asks the bar manager not to let him sit at her station any more, but the manager tells her it’s good money (he does tip her well), and she should be nice to him. If she files suit for harassment, what will the court most likely rule?
a. for the employer, because the customer does not have the power to affect her employment status, so that his conduct cannot result in a tangible employment action against her
b. for the employer, because the customer has not committed harassment
c. for the employee, because the customer has committed harassment
d. for the employee, because the customer has committed harassment, the employer knew about it, and did nothing

ESSAY QUESTIONS

1. Why is each of the following good legal advice?

a. Employers are strongly advised to establish, communicate, and enforce policies prohibiting harassment.

b. Complaint procedures should provide employees with multiple, accessible parties to whom reports of harassment can be made.

c. Employers must respond to complaints of harassment promptly and in a manner reasonably calculated to end the harassment.

d. Terminations or other discipline imposed against harassers must be conducted in the same careful manner as any other terminations or disciplinary actions.

e. Care should be exercised in using transfers or reassignments to deal with harassment.

2. How does employer liability for harassment by a co-worker or third party compare or differ with the company’s liability for harassment by supervisors, managers or other top officials?

CHAPTER 10
REASONABLY ACCOMMODATING DISABILITY & RELIGION
Online Quiz Questions

MULTIPLE CHOICE QUESTIONS

1. An employer’s obligation to “reasonably accommodate” is unique to which protected classes?
a. gender and age
b. national origin and color
c. disability and religion
d. disability and race

2. The disability law which applies to private employers and state and local governments is:
a. The Rehabilitation Act of 1973
b. The Americans with Disabilities Act of 1990
c. The Private Employer Disability Act of 1988
d. none of these

3. Regarding disability claims, which of the following statements is NOT true?
a. The ADA applies to someone who is not disabled, but is perceived as disabled.
b. The ADA applies to someone who is not disabled, but has a record of a disability.
c. The ADA applies to someone who is currently disabled.
d. The ADA does not apply to someone who is not disabled, but is perceived as disabled.

4. Under the Title VII definition of religious beliefs, all of these are true EXCEPT:
a. a belief in God or other deity is required
b. a belief in atheism and agnosticism is protected
c. the religion need not be popular or organized
d. b and c

5. If an employee states a prima facie case of failure to reasonably accommodate religion, then the employer must prove:
a. that a reasonable accommodation was offered, but refused
b. that the accommodation would impose an undue hardship on the business
c. that the employee does not really believe in the religion
d. a or b

6. Match each term to its correct definition.

Americans with Disabilities Act the disability law that applies to private employers
The Rehabilitation Act the disability law that applies to federal public employers
major life activities for example, seeing, speaking, breathing, lifting
essential functions the core duties which few others can perform
religious organization exemption this permits a church to hire only members of its faith

CHAPTER 10
REASONABLY ACCOMMODATING DISABILITY AND RELIGION

MULTIPLE CHOICE QUESTIONS

1. The American’s with Disabilities Act (ADA):
a. applies to private sector employers with 15 or more employees
b. amends and supercedes the Rehabilitation Act
c. protects all disabled persons against discrimination in employment by covered employers
d. all of the above
e. none of the above

2. Which of the following is necessary to establish the existence of a disability under the ADA?
a. having a physical basis for one’s impairment
b. being diagnosed with an impairment that is included on the ADA’s list of recognized disabilities
c. receiving regular medical treatment for one’s condition
d. all of the above
e. none of the above

3. In Ekstrand v School District of Somerset, a teacher who taught kindergarten successfully for 5 years was assigned to a classroom without windows. She advised the principal that she suffered from seasonal affective disorder, a form of depression, and that she needed the natural light from a window to counteract the disorder. She submitted a letter from her psychologist advising of the condition and the need for natural light, but the school refused. There was an empty classroom with a window, and another teacher had offered to switch classrooms since she had one with a window, but the school would not allow it. The District Court granted summary judgment to the school district, and the teacher appealed. The Appellate Court ruled:
a. for the school district, since the teacher had not documented her need for an accommodation.
b. for the school district, since the school district had no accommodation to offer which did not involve an undue hardship
c. for the teacher, because she had documented her need for an accommodation, and the school district could have made a reasonable accommodation
d. for the teacher, because she suffered severe consequences as a result of the school district’s failure to accommodate her disability

4. In Cloutier v. Costco, Cloutier was fired for violation of a no facial jewelry (other than earrings) provision of the dress code. Costco was successful because:
a. Costco had no duty to accommodate because it could not do so without undue hardship
b. Costco made an offer to accommodate after Cloutier’s adverse employment action and was therefore shielded from liability under Title VII
c. the Church of Body Modification was not a recognized church so Cloutier’s beliefs did not fall under religious discrimination requiring accommodation
d. Cloutier’s beliefs did not include worship or recognition of a supreme being or deity so they could not be considered religious thereby requiring accommodation
e. none of the above

5. An employee can be considered disabled under the ADA if:
a. she has an existing disability
b. she is erroneously regarded as being disabled
c. she is not currently disabled, but has a record of a prior disability
d. a and b
e. all of the above

6. In order to be a “qualified individual with a disability,” a disabled person must:
a. meet the same, job-related education, skill, and background requirements as other job candidates or employees
b. not pose a direct threat others but may pose a threat to his or her own health
c. be able to satisfactorily perform all of the functions of a job
d. all of the above
e. none the above

7. Under the ADA, it is important that job descriptions:
a. clearly identify the essential functions of jobs
b. clearly specify how job tasks are to be carried out
c. list reasonable accommodations that are available to an employee in this job
d. all of the above
e. none of the above

8. Which of the following would usually be considered a reasonable accommodation of disability?
a. providing a part-time or modified work schedule
b. relaxing a production
c. relaxing a performance standard
d. transferring essential job functions to others

9. In responding to requests for reasonable accommodation, employers should NOT:
a. engage in an interactive process with disabled employees
b. limit medical inquiries to information needed to assess functional limitations
c. discuss the disabled employee’s need for accommodation with other employees
d. all of the above
e. none of the above

10. In order to be substantially limiting, a condition must:
a. render an employee unable to perform her previous job
b. be chronic or expected to have a long-term impact on functioning
c. without the aid of any corrective devices used by the employee, make it impossible to perform one or more major life activities
d. all of the above
e. none of the above

11. In order to conclude that a proposed accommodation of disability would impose undue hardship on an employer, it must be shown that:
a. the proposed accommodation would not be a reasonable one
b. the cost of the accommodation exceeds the benefits it would produce
c. the cost exceeds the general $2000 threshold specified in the ADA
d. a and c
e. none of the above

12. Under Title VII, the concept of “religion” is limited to:
a. membership in or affiliation with an established church or denomination
b. beliefs or practices that a church or denomination requires of its members
c. beliefs or practices centering on the worship of a God or other deity
d. all of the above
e. none of the above

13. As the new Human Resources Manager for Bell’s Dollar Store, you are still getting to know your employees. One in particular has come to your attention, because he always seems to be out in the aisles of the store, rather than at the cashier’s desk or in the stockroom. During a routine cleaning of lockers, you discover that several small items from store inventory were in his locker. The items were of little value. After considering the matter, you correctly conclude:
a. the employee has been guilty of theft, and should be fired immediately
b. the employee probably has a disorder known as kleptomania, which compels him to take and hoard small objects; since this is a disability under the Americans with Disabilities Act, you must decide whether you can make a reasonable accommodation
c. the employee probably has a disorder known as kleptomania, which compels him to take and hoard small objects; you decide to speak to him privately, tell him he is fired, and urge him to seek help for his condition
d. none of the above

14. Which of the following laws applies to federal employees?
a. The Disability Act
b. The Protection of Major Life Activities Act
c. The Americans with Disabilities Act
d. The Rehabilitation Act

15. Which of the following is an element of a prima facie case of failure to reasonably accommodate religion?
a. that a specific reasonable accommodation was requested by the plaintiff
b. that a conflict exists between a sincere religious belief or practice and an employment requirement
c. that the requested accommodation would not impose undue hardship
d. all of the above
e. none of the above

16. Title VII’s religious organization exemption:
a. requires religious organizations to establish BFOQs based on religion
b. exempts religious organizations from all of Title VII’s requirements
c. allows religious organizations to favor persons of the same faith for positions that have clear spiritual functions, but not for secular activities
d. allows religious organizations to favor persons of the same faith for secular activities, but not for positions that have clear spiritual functions
e. none of the above

17. You’ve been attending the same Presbyterian Church for the last 11 years, and the Pastor has asked you to serve as Church Secretary and manage the office. One of your tasks will be to put together the bulletin for services each Sunday, but you’d also like to create a website for the church. When you tell the Pastor, he thinks it’s a wonderful idea, and sets aside some money to pay for the creation of the church’s website. After a diligent search for qualified candidates, you’ve come up with two. The only trouble is that the best candidate is not Presbyterian, but Anglican. Can you hire her?
a. no; because this is a Presbyterian Church, you must hire a Presbyterian
b. yes; Title VII contains an exemption for religious bodies who hire for secular positions
c. yes; Title VII is not relevant. Although most churches prefer to hire members of their own flock even for secular positions, there is no requirement to do so.
d. none of these

18. Regarding the HIV status of employees in most jobs, which of the following is NOT correct:
a. an employee who is HIV positive is a direct threat to himself
b. an employee who is HIV positive is a direct threat to others
c. an employee who is HIV positive is owed a reasonable accommodation
d. a and b are not correct
e. none of these is correct

19. Regarding an employer’s obligation to accommodate disability and religion, it can be said that:
a. the obligation to accommodate in these areas is consistent with the employer’s obligation to accommodate in other areas of the employment relationship
b. the obligation to accommodate in the areas of disability and religion is unique to those areas of the employment relationship
c. the obligation to accommodate is voluntary, except for federal employers
d. b and c only

20. As the Assistant Human Resources Manager, you have access to the employment files of all of the employees, including management. You have inadvertently learned that the Vice President of Sales has tested positive for the HIV virus. You know that he is married, but doubt that he’s told his wife. What should you do?
a. call his wife, and tell her that you regret you must give her some bad news; then, simply tell her
b. call his wife, but ask to come and see her in person; this is not the sort of news that one should deliver by telephone
c. talk to the Human Resources Manager, and ask her advice
d. nothing

ESSAY QUESTIONS

1. Why is each of the following good legal advice?

a. Employers must reasonably accommodate qualified disabled persons unless doing so would impose undue hardship.

b. It is critical that employers engage in an interactive process with their disabled employees.

c. Accommodations cannot be dismissed as too costly without considering the availability of external funding and offering disabled employees the opportunity to pay for the portion of the cost that would create undue hardship.

d. Workplace policies should be made as flexible and religiously neutral as possible.

e. Employers should attempt to accommodate religious advocacy by providing forums for such communication that allow other employees to choose whether they wish to listen.

2. The ADA creates a protected class called “qualified individuals with disabilities”. Discuss what this phrase means and how one qualifies for protection.

CHAPTER 11
WORK-LIFE CONFLICTS & OTHER DIVERSITY ISSUES
Online Quiz Questions

MULTIPLE CHOICE QUESTIONS

1. The Family and Medical Leave Act applies to which of the following employers?
a. a government agency
b. a private company with at least 50 employees
c. a private company with at least 25 employees
d. a and b only

2. Which of the following would constitute a “qualifying event” under the Family and Medical Leave Act?
a. birth of a son or daughter
b. a serious health condition of the employee’s spouse
c. placement of a son or daughter of the employee by adoption
d. a and b only
e. a, b & c

3. Which of the following is NOT required of employers under the FMLA?
a. up to 12 workweeks of leave over a 12-month period
b. up to 12 workweeks of paid leave over a 12-month period
c. maintenance of health insurance under the same conditions as employment
d. a return to the employee’s job or an equivalent position with the same pay

4. A person’s accent may legally be taken into consideration in hiring for a particular position when:
a. the employer does not want someone who is “foreign-sounding”
b. a significant part of the job requires communication, and the applicant’s heavy accent would interfere with the ability to communicate
c. the employer’s entire workforce is composed of people who speak English as a first language
d. any of these

5. Gays are protected from discrimination in employment by:
a. Title VII
b. some state laws
c. city or other local laws
d. all of these
e. b and c only

6. Match each term to its correct definition.

Family & Medical Leave Act the principal federal law affecting leave for parental and medical reasons
Serious health conditions either inpatient care or continuing treatment by a medical provider
Qualifying event circumstances under which eligible employees are entitled to take leave
Pregnancy Discrimination Act prohibits discrimination based on pregnancy, childbirth and related medical conditions
English only rules may be evidence of harassment or disparate treatment

CHAPTER 11
WORK-LIFE CONFLICTS AND OTHER DIVERSITY ISSUES

MULTIPLE CHOICE QUESTIONS

1. To qualify for leave under the Family and Medical Leave Act (FMLA), an employee must have worked:
a. at least 1250 hours during the previous 12 months
b. at least 625 hours during the previous 6 months
c. at least 2080 hours during the previous 12 months
d. at least 1040 hours during the previous 6 months

2. Which of the following is a “qualifying event” under the FMLA?
a. birth of a child
b. death of a parent
c. serious health condition of an employee’s grandparent
d. all of the above
e. none of the above

3. “Serious health conditions” include:
a. pregnancy, when it results in a period of incapacity
b. all conditions that require hospitalization
c. all conditions that require treatment by a health care provider
d. all of the above
e. a and b

4. Under the FMLA, employers have the right to:
a. require that employees provide documentation of any serious health condition prior to being granted leave
b. cancel the leave of “key employees”
c. delay the start of leave for employees who fail to provide 30 days notice when the need for leave is foreseeable
d. all of the above
e. none of the above

5. Under the FMLA, employees are entitled to:
a. have all benefits maintained under the same conditions as if the employee had not taken leave
b. have only health benefits maintained under the same conditions as if the employee had not taken leave
c. be restored to the exact same position they left if they are deemed a “key employee”
d. a minimum of ½ salary during their leave

6. In Bachelder v. America West Airlines, an employee who had taken periods of FMLA leave in the previous two years was terminated for poor attendance. The court ruled that:
a. the employer did not violate the FMLA because the employee had already exhausted her eligibility for leave under the “rolling 12 month period” used by the employer
b. the employer did not violate the FMLA because she was terminated for her absences and not for having requested or taken FMLA leave
c. the employer violated the FMLA because all employees become eligible for up to 12 weeks of leave at the start of each new calendar year
d. the employer violated the FMLA because the employee was terminated based on absences that qualified as FMLA leave

7. Under the FMLA:
a. employers may require that any paid leave available to an employee be used and counted toward an employee’s FMLA leave
b. employers may require that the employee stay on leave longer than they need if it satisfies an administrative purpose or convenience for the employer
c. employers may contact the employee at home by phone or e-mail with company question but cannot require the employee to physically come to the premises
d. during a valid leave, the employee is protected or shielded from layoffs or termination that would have occurred anyway
e. none of the above

8. Under the Pregnancy Discrimination Act (PDA):
a. employers are required to provide leave for childbirth and medical problems related to pregnancy
b. employers are required to restore employees returning from pregnancy leave to their former jobs or equivalent positions
c. employers are prohibited from establishing uniform requirements for when pregnancy leave must begin or end
d. all of the above
e. none of the above

9. The Uniformed Services Employment and Reemployment Rights Act (USERRA)
requires that:
a. all persons returning from military service must be reemployed
b. employers must attempt to reinstate persons returning from military service into the positions that they would have attained absent service, including any promotions
c. employers continue to provide at least partial pay to employees serving in the military for up to 24 months
d. all of the above
e. none of the above

10. In Scobey v Nucor Steel-Arkansas., employee Scobey had 4 unexcused absences from April 10-13, 2005. On April 9, he called to ask his supervisor to call him, but did not say why. They finally spoke on April 11, but Scobey was intoxicated, and said he was having a nervous breakdown. They spoke again during this period, and Scobey was again intoxicated, saying he was through with his job. He returned to work, was demoted, and eventually stopped coming to work. He was terminated, and sued, alleging he should have been granted FMLA leave, but the trial court granted summary judgment for his employer. The Appellate Court ruled:
a. for the employer, because Scobey did not have a “serious health condition” as required for leave under the FMLA
b. for the employer, because Scobey had not given adequate notice of his need for leave, as required under the FMLA
c. for Scobey, because a reasonable jury could conclude that his drunkenness gave the employer constructive notice of his need for leave under the FMLA
d. for Scobey, because he was entitled to leave under the FMLA for his nervous breakdown

11. Legal protection against discrimination based on sexual orientation is found in:
a. Title VII of the Civil Rights Act
b. statutes in about a dozen states
c. the U.S. Constitution, under which public employers must show that a “compelling governmental interest” is served by the discrimination
d. Executive Order 11246
e. all of the above

12. “Hopalong” Jones was a cowboy working on a cattle ranch out west. He has worked at
the ranch for three years and done an excellent job. He is also a two time bull riding
champion at the state rodeo competition. He is fired when he admits to being gay.
a. Hopalong is protected under the protected sex classification under Title VII
b. since being a cowboy is such a macho job, being heterosexual is considered a
BFOQ
c. sexual orientation is a protected class in some states but not in others
d. Hopalong has no federal or state protection regarding his sexual orientation

13. The EEOC’s guidelines hold that broad English-only rules applied at all times are:
a. presumptively discriminatory
b. presumptively non-discriminatory
c. valid, if an employer can show a business necessity for a broad-cased, all-time ban on other languages
d. invalid, because the employer can never show a business necessity for a broad-based, all-time ban on other languages

14. The accent of an employee or job applicant can lawfully be taken into consideration when:
a. the firm is using its affirmative action program to diversify its workforce
b. when few English-speaking applicants or employees are available
c. when communications are a significant part of the job in question, and the person’s accent substantially interferes with the ability to communicate
d. when communications are a significant part of the job in question, and the person’s accent interferes in some degree with the ability to communicate

15. The federal Jury System Improvements Act:
a. protects persons who serve on federal juries from discharge, intimidation or coercion by their employers because of their jury service
b. applies a Title VII approach to selection of jurors
c. reduces the number of jurors on a standard jury from 12 to 6
d. requires that employers pay their employees at their regular rate of pay for the time spent serving on a federal jury

16. Under the FMLA:
a. pregnancy is a “serious health condition” triggering the right to FMLA leave
b. pregnancy is not a “serious health condition” triggering the right to FMLA leave unless there are complications
c. only a pregnant employee may receive leave under the FMLA
d. none of these

17. The Uniformed Services Employment and Reemployment Rights Act (USERRA) requires that:
a. an employer must maintain the health insurance for an employee reporting to military service for short stints of service (less than 31 days)
b. an employer must maintain the health insurance for an employee who serves in the military for up to 24 months, if the employee pays the full cost of group coverage
c. employers are not required to maintain health insurance coverage for their employees in military service beyond a period of 30 days
d. all of these
e. a and b

18. In Reynolds v. Inter-Industry Conference on Auto Collision Repair, Reynolds began work for his employer on August 25, 2005. On August 8, 2006, his child was born prematurely. He requested time off, which was granted. He requested further leave for November, 2005, when the child would be released from the hospital, and was terminated, the employer saying he was not entitled to FMLA leave because he had not been an employee for 12 months. The court ruled:
a. for Reynolds, since the birth of a child is a qualifying event under the FMLA
b. for Reynolds, since he notified his employer at least 30 days in advance of the need for leave, by which time, he would be an eligible employee
c. for the employer, because the employee failed to provide sufficient notice that he was requesting leave for a potentially FMLA-qualifying reason
d. for the employer, because the employee was not an eligible employee, entitled to FMLA leave

19. You need to hire a new medical technician for the emergency room of your hospital. The technician must have a thorough knowledge of medical terms and procedures, and will be interviewing patients to determine the nature and extent of their problems before they are routed to a doctor or to the waiting room. Most of the qualified candidates will be those who comes from Asian countries, who have studied medicine in their home countries, but whose MD degrees are not recognized by the U.S. Can you require that only English-speaking candidates need apply?
a. yes, because most of the patients will be English speaking
b. yes, because communication will be an integral part of the job, and most often communication will be required in an emergency situation
c. no, because under Title VII, English-only speaking requirements are presumptively discriminatory
d. no, because most of the qualified candidates will be from countries for which the first language spoken is not English

20. A very troublesome employee has just told you that he wants to apply for FMLA leave because his wife is seriously ill. He has taken leave before because of her illness, and depending upon how you calculate it, may have already taken the maximum amount for the year. You know that if you use a “rolling 12 month period,” he will not qualify, and if he is denied leave, he may actually quit, which would make many people happy. However, your firm’s leave policy does not specify how leave taken will be calculated, which means that if he sued and the case went to litigation, the court would apply a “calendar year” calculation for the leave requested, since you’ve just begun a new calendar year, and under that calculation, he would be entitled to leave. Of the following choices, what should you do?
a. deny the leave, and take your chances; tell him that he’s already had the maximum leave under the “rolling 12 month” calculation. He’s been far too troublesome for the firm, and his leaving would be a good outcome
b. deny the leave, but tell him that it’s because has not been a productive employee, and when he improves, you’ll consider more leave
c. grant the leave, and take your chances; maybe he’ll straighten out when he comes back
d. grant the leave, and ask how he’s doing; tell him that when he comes back, you’d like to sit down with him and see if you can help him resolve the trouble he’s been having at work

ESSAY QUESTIONS

1. Why is each of the following good legal advice?

a. Employers must not attempt to discourage eligible employees from taking FMLA leave or attempt to delay the taking of leave.

b. “No fault” attendance policies must be either discontinued or exceptions must be made for employees on FMLA leave.

c. Employees should be notified promptly and in writing whether their leave qualifies as FMLA leave.

d. Employer’s should consider an employee’s or applicant’s accent only to the extent that communication is a significant part of the job in question and the individual’s accent impedes communication.

e. Employers should generally refrain from adopting English-only rules. If they are used, employees should be clearly informed that they are in effect, the rules should be no broader than necessary to accomplish necessary business purposes, and enforcement should not be rigid.

2. A major University has advertised for a non-research lecturer position in its Economics Department. When they evaluate the applicants, one resume clearly stands out as excellently qualified. When the applicant came in for an interview, she is asked to
complete a questionnaire with a number of open ended questions prior to the actual
interview. The questionnaire was extremely well answered and evidenced perfect
grammar, perfect penmanship and perfect spelling. The answers were lucid and well
thought out. Unfortunately, during the interview most in the department had trouble
understanding the candidate due to her extremely heavy Nigerian accent. If the
university hires someone else, has the university violated any discrimination laws?

CHAPTER 12
WAGES, HOURS & PAY EQUITY
Online Quiz Questions

MULTIPLE CHOICE QUESTIONS

1. The Fair Labor Standards Act does which of the following?
a. establishes a minimum wage
b. establishes the rate of overtime pay
c. places certain restrictions on work by minors
d. all of these

2. Regarding overtime pay, which of the following statements is NOT true?
a. overtime pay is due for hours worked per week in excess of 40
b. overtime pay is due for hours worked per day in excess of 8
c. the rate of overtime pay is 1 ½ times the regular hourly rate of pay
d. all of these are true

3. “Tipped” employees are those who:
a. share tips at work
b. earn at least $30/month in tips
c. work in the restaurant industry
d. none of these

4. Which of the following categories of employees is generally exempt from overtime pay?
a. executives
b. administrative employees
c. professional employees
d. all of these are exempt

5. The Equal Pay Act generally requires employers to:
a. pay the same wage to men and women doing substantially the same work at different companies
b. pay the same wage to men and women doing substantially the same work at the same company
c. establish equivalencies for various jobs traditionally held by men and women
d. all of these

6. Match each term to its correct definition.

Fair Labor Standards Act a federal law that establishes overtime pay requirements, and limitations on the work of minors
Minimum wage the lowest wage employers are permitted to pay employees for each hour of work
Duties test a test to determine whether an employee is really exempt from overtime pay

Migrant & Seasonal Agricultural
Worker Protection Act a federal law covering most seasonal agricultural workers providing some basic safeguards related to pay, housing and transportation
Overtime pay 1 ½ times the regular rate of pay

CHAPTER 12
WAGES, HOURS, AND PAY EQUITY
MULTIPLE CHOICE QUESTIONS

1. Which of the following is true regarding overtime pay under the Fair Labor Standards Act?
a. employees who work more than 8 hours in a work day must be compensated with overtime pay
b. employees are entitled to twice their regular rate of pay for overtime hours
c. private sector employers can pay for overtime required under the FLSA with compensatory time off in the future, whereas government agencies may not do so
d. all of the above
e. none of the above

2. “Tipped employees” can be paid less than the minimum wage provided:
a. they agree to a reduced minimum wage salary, however, if they don’t agree they must be paid the full minimum wage and any tips are forfeited to the employer or the other employees
b. they retain on an individual basis all tips that are earned; pooling of tips is not permitted
c. their total pay in wages and tips equals at least the minimum wage
d. the employee customarily and regularly receives at least $30 per week in tips

3. The maximum number of hours that an employee can work in a workweek under the Fair Labor Standards Act is:
a. not limited for employees 16 years of age and over
b. limited to forty hours per week for employees under 16 years of age while school is in session
c. not limited for employees 16 years and over, but it must equal no more than 40 hours a week when averaged across any two work weeks
d. limited to 50 hours per week for employees who are non-exempt, but there is no limit for exempt managers and professionals.
e. none of the above

4. Under the Fair Labor Standards Act, a “workweek”:
a. is any fixed and reoccurring period of 5 consecutive days
b. is any fixed and reoccurring period of 7 consecutive days
c. is the same as a calendar week
d. includes all the days during a calendar week on which any work is performed

5. A non-exempt employee’s usual pay is $800/wk, based on a 40/hr week. This week he works 50/hrs. His regular hourly rate of pay is ______. His total pay for this week should be _______.
a. $800/wk; $800
b. $16/hr; $1100
c. $20/hr; $1000
d. $20/hr; $1100
e. $16/hr; $1040

6. Which of the following is true regarding compensatory (“comp”) time?
a. employers can require employees to use up their accrued comp time, regardless of whether employees wish to do so
b. the maximum amount of comp time that can be banked is capped at 240 hours for most employees
c. acceptance of comp time can be made a condition for receiving overtime work
d. b and c
e. all of the above

7. In Chao v Gotham Registry, a temporary employment agency for nurses placed them at various hospitals. Despite a rule forbidding overtime, nurses frequently worked overtime at the hospitals’ request, as Gotham knew, but refused to pay overtime. When the nurses sued for overtime pay, the court determined that:
a. because they knew of the rule forbidding overtime, the nurses had volunteered their time, and were not entitled to overtime pay
b. because the hospitals had asked them to work overtime, the hospital was required to pay the overtime pay
c. because the agency knew that nurses frequently worked overtime at the hospitals’ request, and did nothing to enforce its rule against overtime, the agency was responsible to pay overtime
d. none of the above

8. Which of the following is generally compensable time under the FLSA?
a. meetings during work hours concerning employee grievances
b. meal periods of any length
c. periods spent waiting to start work
d. time spent traveling to and from work in a private car
e. all of the above

9. The Migrant & Seasonal Protection Worker Act (MSPA) provides all of these requirements EXCEPT:
a. a minimum wage and overtime
b. disclosure of working terms and conditions at the time of hire
c. safe and sanitary housing and transportation
d. maintenance of wage and hour records

10. The Migrant and Seasonal Agricultural Worker Protection Act requires that:
a. migrant agricultural workers must be paid no less than the prevailing wage for farm laborers in the geographic region
b. migrant agricultural workers must be provided with housing and the housing must be safe and sanitary
c. migrant agricultural workers must receive overtime pay of one and a half times their regular rate of pay for all work hours in excess of 50 in a week
d. all of the above
e. none of the above

11. Which of the following activities is compensable time for which an employee must be paid?
a. time spent taking pre-employment tests
b. time spent traveling to and from work
c. time spent waiting to start work
d. rest periods of up to 20 minutes

12. Under the duties test, in order to be classified as exempt, an employee:
a. must perform the duties of an executive, administrator, or professional
b. must work in an office setting
c. must have a job title that includes the word executive, administrator, or professional in the title
d. all of the above

13. Under the Department of Labor’s “pay docking rule”:
a. wages withheld for disciplinary purposes are not counted as compensation when determining compliance with minimum wage and overtime requirements
b. it violates the FLSA for employers to make deductions from the pay of salaried employees for partial day absences
c. certain deductions from the pay of salaried employees can lead to the finding that these employees are non-exempt
d. a and b
e. none of the above

14. Under the FLSA, minors under 16 years of age:
a. are allowed to work at any job provided that they have obtained working papers
b. are allowed to work no more than 18 hours per week while school is in session
c. are allowed to work no more than 8 hours per day while school is in session
d. b and c
e. all of the above

15. Which of the following is among the things that must be shown in order for two jobs to be considered “equal work”?
a. they must have the same or very similar job titles
b. the jobs must be of comparable worth to the employer
c. there must be substantial overlap in the duties and tasks performed
d. they must have the same or very pay rates
e. all of the above

16. If employees come in to start work early, or stay beyond scheduled hours, or come in to work on days off,
a. the extra time put in on the job could be used to re-classify those employees from non-exempt to exempt
b. the extra time put in on the job could qualify those employees for overtime pay
c. under the FLSA, they have volunteered their services for that extra time
d. none of these

17. Employers should maintain accurate and up-to-date job descriptions because they will help establish:
a. the essential functions of the job
b. the exempt status of the employee, if exempt
c. that an employment requirement is job-related
d. the similarity or non-similarity between two different jobs
e. all of these
f none of these

18. Which of the following statements is NOT true?
a. US employees have the dubious distinction of working the longest hours among industrialized nations
b. job stress is related to such maladies as high blood pressure and coronary heart disease
c. longer workdays are associated with increases in injuries
d. all of these
e. none of these

19. In the U.S., more and more workers are working:
a. around the clock
b. off the clock
c. on the clock
d. none of these

20. As the new Assistant Human Resources Manager, you now have access to the salaries of all of the staff at your firm, and discover that the sole female salesperson on the staff is being paid significantly less than her male counterparts, although she has the same educational background and experience. Within about 6 months, you are to replace the current Human Resources Manager, an “old school” kind of fellow who is retiring. But since you are newly hired, you are reluctant to “make waves.” Considering your duties and also the protection of your career, which of the following options would NOT be advisable?
a. Tell the current “old school” HR Manager that the lower salary of the female salesperson is illegal, and that he must immediately raise her pay, or you will tell the salesperson that she should file an EEOC claim
b. Ask the current HR Manager if he is aware that the female salesperson is receiving a lower salary for the same work, which could cause a claim to be filed against the firm, and ask what he thinks should be done
c. Do and say nothing yet, awaiting the day when you assume the role of HR Manager; then take steps to raise the saleswoman’s pay to compare with that of her male colleagues, without telling her why

ESSAY QUESTIONS

1. Why is each of the following good legal advice?

a. Employers should not ignore employees starting work early, staying beyond scheduled hours, or coming in to work on days off.

b. Employers should maintain accurate and up-to-date job descriptions

c. Employers should not make deductions from the pay of exempt employees for partial day absences or require that the time off be made up.

d. Employers should refrain from establishing and enforcing pay secrecy policies.

e. Employers should be prepared to account for disparities in the pay of men and women performing similar jobs in the same workplace.

2. An employer of an emergency response service required its service employees to be on call every weekend, as they might be called to report within 10 minutes. While on call, employees were not permitted to leave their homes, as the employer’s contact was to their home phones. Also, employees were not permitted to drink alcohol on the weekends, because of their potential on-call duties. The employer did not pay for on-call weekends, and the employees sued. What are the issues, and what should the court decide?

3. What could the employer in number 2 above have done differently to avoid incurring liability for compensable time and perhaps overtime?

CHAPTER 13 BENEFITS
Online Quiz Questions

MULTIPLE CHOICE QUESTIONS

1. The Employee Retirement Income Security Act (ERISA) governs which of the following?
a. retirement and pension plans
b. health insurance
c. childcare subsidies
d. all of these
e. a and b only

2. Under ERISA, employers are required to do all of the following EXCEPT:
a. inform employees about their benefits
b. actually deliver promised benefits
c. pay for either a defined benefit or a defined contribution pension plan
d. all of these are true

3. The purpose of Consolidated Omnibus Budget Reconciliation Act (COBRA) generally is:
a. to regulate pension plans
b. to provide for the continuation of health insurance coverage
c. to prevent disqualification in health insurance coverage because of pre-existing conditions
d. none of these

4. Regarding discrimination older workers with regard to benefits, it is correct to say that:
a. employers may discriminate against older employees in offered benefits because their benefits cost more
b. employers may provide less extensive health care coverage to older workers as long as the employer spends the same amount of money as for younger workers
c. an employer can force older workers to retire, to avoid providing health care benefits to them
d. none of these is correct

5. The Pregnancy Discrimination Act generally requires employers to:
a. provide pregnancy health care benefits to pregnant employees
b. provide pregnancy health care benefits to women, but not to men
c. treat pregnant employees the same as non-pregnant employees with similar ability to work
d. none of these

6. Match each term to its correct definition.

ERISA the principal federal law regulating benefit plans of private employers
Defined benefit plan pays a specific pension benefit to the employee upon retirement
Defined contribution plan a pension plan to which the employer makes contributions, and the employee invests, the benefit being determined by the success of the investment
fiduciary one who exercises discretionary authority and control over the administration of pension funds
vesting based on years of service, an employee’s achievement of an nonforfeitable right to receive a pension

CHAPTER 13
BENEFITS

MULTIPLE CHOICE QUESTIONS

1. Defined benefit pension plans:
a. promise a specific pension benefit upon retirement
b. are insured through the Pension Benefit Guaranty Corporation (PBGC)
c. all of the above
d. none of the above

2. Summary plan descriptions (SPDs):
a. must be provided to new employees before they begin their employment
b. provide a brief overview of the terms of employee benefit plans
c. can be the basis for claims that employees did not receive promised benefits
d. all of the above
e. none of the above

3. Regarding the Pension Benefit Guarantee Corporation (PBGC), which of the following statements is true?
a. The PBGC is an agency that insures defined benefit pension plans.
b. The PBGC is an agency that insures defined contribution pension plans.
c. The PBGC’s fund is running out of money, due to the increase in the failure of the pension plans it insures.
d. a and c only
e. b and c only

4. Which of the following is a fiduciary duty under ERISA?
a. ensuring that plans operate in accordance with plan documents and ERISA
b. diversifying pension fund assets to minimize the risk of large losses
c. managing benefit plans and funds solely in the interest of plan beneficiaries
d. all of the above
e. none of the above

5. In Fought v. UNUM Life Insurance Company of America, Fought underwent surgery for coronary artery disease, a pre-existing condition at the time she qualified for her employer’s disability policy. Weeks after the surgery, she developed a staph infection, became disabled, and applied for coverage under her company’s disability insurance. The insurer denied coverage on the basis of a pre-existing condition, her coronary artery disease, and Fought sued. As to the issue of causation, the court ruled:
a. for the insurer, since Fought would not have had surgery which resulted in the infection but for the pre-existing coronary artery disease
b. for the insurer, since the staph infection was a previously undiscovered pre-existing condition
c. for Fought, since the staph infection was not a pre-existing condition, and was not a necessary consequence of her coronary artery disease
d. for Fought, because the insurer had a conflict of interest

6. Which of the following is true regarding vesting requirements under ERISA?
a. once pension rights vest, employees are entitled to receive full pensions upon leaving employment
b. once pension rights vest, employees’ pension plans cannot be discontinued or changed
c. vesting usually occurs after five or seven years of service
d. vesting is never required but is purely a contractual provision negotiated between the employer and employee

7. Which of the following is true of the Employee Retirement Income Security Act (ERISA)?
a. it requires employers to provide pensions for most of their employees
b. it is superseded by state laws that relate to employee benefit plans
c. it does not apply to benefit plans administered by public employers
d. it requires that once a plan is in place, it can not be changed or modified without the employees consent
e. all of the above

8. Defined contribution pension plans:
a. are insured by the Pension Benefit Guaranty Corporation (PBGC)
b. are prone to under-diversification of investments
c. are not subject to ERISA vesting requirements
d. guarantee specific pension benefits to the employee when the plan is entered into

9. Which of the following is NOT a part of the Patient Protection & Affordable Care Act?
a. a temporary insurance program for high-risk individuals with pre-existing conditions and no health insurance
b. a prohibition against denying coverage to children based on pre-existing conditions
c. a requirement that plans cover all immunizations and routine health care
d a prohibition against requiring pre-authorization for emergency care

10. Which of the following is a qualifying event necessitating an offer of COBRA continuation coverage?
a. an employee quits his job
b. an employee’s hours are cut
c. a spouse and an employee get divorced
d. all of the above
e. none of the above

11. An employee is terminated for poor attendance. The employer sends a letter on May 1 notifying him of his right to receive continuation health insurance coverage. The letter states that the former employee must respond by May 30 to be eligible for up to 6 months of continuation coverage. The employer’s letter:
a. accurately states the former employee’s rights under COBRA
b. should state that the employee has 45 days to decide on coverage that would last up to 3 years
c. should state that the employee has 60 days to decide on coverage that would last up to 3 years
d. should state that the employee has 60 days to decide on coverage that would last up to 18 months
e. should not have been sent since a termination for poor attendance is not a qualifying event under COBRA

12. Which of the following is one of HIPAA’s requirements regarding pre-existing condition exclusions in group health plans?
a. exclusionary periods can last no longer than 6 months
b. exclusionary periods must be reduced by any periods of prior coverage under a group health plan, as long as the break in coverage was no more than 63 days.
c. certificates of creditable coverage are used to document that employees have pre-existing conditions to which exclusionary periods would apply
d. prior coverage under a group health plan does not include any period of continuation coverage under COBRA
e. none of the above

13. Regarding the topic of employment benefits, it is correct to say that:
a. both employment and tax laws affect employment benefits
b. the law on this topic has been very much in flux
c. the law on this topic has largely been settled
d. public policy debates concerning this topic have occurred in recent years
e. a, b and d
f. a, c and d

14. The Pregnancy Discrimination Act provides for each of the following EXCEPT:
a. health plans must cover expenses for pregnancy-related medical care on the same basis as for other medical conditions
b. because of the extreme costs and because men do not avail themselves of pregnancy benefits, larger deductibles or co-pays may be charged
c. both married and unmarried employees must be covered
d. the same level of coverage must be provided for the spouses of male employees as is provided for the spouses of female employees

15. Regarding employment benefits, the general rule is that:
a. employers are legally required to provide employment benefits in the form of basic health care, vacation pay, and pension or profit sharing plans
b. employers are legally required to provide basic health care, but no other benefits, although they may do so voluntarily
c. only employers with 50 or more employees are legally required to provide basic health care, but no other benefits, although they may do so voluntarily
d. none of these

16. In McDowell vs. Krawchison, an employee whose wife suffered from breast cancer was terminated after a change of ownership of the company. He asked whether their health insurance would continue, and was told verbally that it would. Nine months later when his wife sought treatment, she was advised the policy had been terminated. He and his wife sued for a violation of COBRA. The court ruled:
a. for the employer, since it was a new owner, and not the employer of the employee.
b. for the employer, since the employee never requested in writing that their insurance be continued
c. for the employee, since he was not given notice of his COBRA rights in writing
d. for the employee’s wife, because she was also an insured, but was given no notice of her COBRA rights

17. You have just been hired as the new Human Resources Manager for your firm. On your second day, an employee filed for disability benefits due to a recent injury. Not knowing about a disability policy through this firm, you search the files and discover that the firm cancelled a long term disability on the employee without notifying him. What should you do?
a. nothing; maybe the employee will withdraw his claim for disability benefits
b. send official notice that the disability policy had previously been cancelled
c. call the employee to tell him that the disability policy had previously been cancelled
d. b and c
e. none of these

18. About ERISA, the Employee Retirement Income Security Act, it is correct to say that:
a. the law governs only pension plans
b. the law governs benefit plans broadly, not just pension plans
c. the law only applies to “welfare” plans
d. none of these

19. The problem with a Cash Balance or Hybrid pension plan is:
a. that the employee bears the risk of loss of the investment
b. that because of the way benefits are calculated, older employees receive less than younger employees
c. that they are not covered by ERISA
d. none of these

20. HIPAA, the Health Insurance Portability and Accountability Act provides all of these EXCEPT:
a. it greatly restricts the use of the pre-existing exclusion
b. it provides that exclusionary periods can be no longer than 30 days
c. it provides that pregnancy cannot be deemed a pre-existing condition
d. it provides that a certificate of creditable coverage reduces the exclusionary time period for a pre-existing condition

ESSAY QUESTIONS

1. Why is each of the following good legal advice?

a. Benefit plan administrators must base their decisions about eligibility for benefits on plan documents, have reasons for their decisions, and use all of the current, relevant information available to them.

b. Health insurance plans must cover medical expenses related to childbirth and not impose deductibles or co-payments for such treatment that exceed those required for other medical treatments.

c. Group health plans must not limit eligibility based on health status, medical condition, claims experience, medical history, genetic information, or the disability of an employee or dependent.

d. With just a few exceptions, employers must not establish mandatory retirement ages.

e. Employers should be careful in advising employees about their benefits and refer them back to SPD’s and other plan documents.

2. There is no question that health care and other benefits often become available to family members without question. How does the law currently look at the extension of benefits to domestic partners?

CHAPTER 14
UNIONS AND COLLECTIVE BARGAINING
Online Quiz Questions

MULTIPLE CHOICE QUESTIONS

1. Labor laws:
a. require job security after five years
b. regulate the hours and rates of pay of various industries
c. protect the rights of employees to join together for collective bargaining
d. none of these

2. Under the National Labor Relations Act (NLRA), employees have the right to:
a. engage in “protected concerted activities”
b. to bargain with employers through representatives
c. to refrain from all of these activities
d. a and b only
e. a through c

3. An example of an unfair labor practice would be:
a. employers discriminating against employees who wish to unionize
b. employers refusing to engage in collective bargaining
c. employees going on strike because an employer refused to engage in collective bargaining
d. all of these
e. a and b only

4. When the employees vote by secret ballot on whether or not to form a union, the percentage vote that is required is:
a. 90%
b. 75%
c. just over 50%
d. 30%

5. Typically, collective bargaining agreements provide that disputes will be resolved by:
a. lawsuits
b. grievance procedures
c. arbitration
d. b and c

6. Match each term to its correct definition.

National Labor Relations Board the federal agency that administers the National Labor Relations Act, including holding elections to determine whether employees want union representation
Card check procedure a majority of employees sign cards indicating their preference to join a union
Good faith bargaining the obligation of both employer and union to confer in good faith, to meet at reasonable times, and to sign a contract
Mandatory topic an issue that, if raised by either party, must be the subject of bargaining in good faith
lockout the employer’s preventing employees from working after their labor agreement expires, although they are willing to continue to work and negotiate

CHAPTER 14
UNIONS AND COLLECTIVE BARGAINING
MULTIPLE CHOICE QUESTIONS

1. Which of the following is the agency responsible for administering and enforcing the National Labor Relations Act?
a. Federal Mediation and Conciliation Service (FMCS)
b. Federal Labor Relations Authority (FLRA)
c. National Labor Relations Board (NLRB)
d. National Mediation Board (NMB)
e. National Collective Bargaining Commission (NCBC)

2. Which of the following is not a fundamental right conferred on employees by the National Labor Relations Act (“Sec. 7 rights”)?
a. the right to self-organization
b. the right to fair pay and benefits
c. the right to strike
d. the right to assist labor unions

3. Protected concerted activities:
a. are engaged in with or on the authority of other employees
b. must be related to wages, hours, terms or conditions of employment
c. must not be extreme or abusive
d. apply to unionized workers but not to non-unionized workers
e. all of the above

4. Which of the following is an unfair labor practice (ULP) under the National Labor Relations Act?
a. discriminating against an employee based on her race
b. violating the terms of a labor agreement
c. retaliating against an employee who has filed charges with the NLRB
d. after an agreement has expired and while the new one is being negotiated, locking out employees willing to continue working

5. Which of the following employee rights is NOT protected by the NLRA?
a. to engage in self-organization
b. to go on strike
c. to engage in other concerted activities
d. to refrain from such activities
e. all of the above employee rights are protected by the NLRA

6. In Mastec Advanced Technologies, 26 service technicians were fired after appearing on a television news show to complain about their employer’s instructions about how to persuade customers to install phone connections for their satellite television service, and the charge-backs to employees’ pay if they did not procure such connections. Phone connections were not necessary for the service to work, but the company earned more money if phone connections were installed. Regarding the terminations, the court ruled:
a. for the employer, since it is not a protected concerted activity for an employee to make disparaging remarks to 3rd parties, since it shows disloyalty
b. for the employer, because its business policies were within its discretion
c. for the employees, because they did not speak disparagingly about their employer
d. for the employees, because they spoke truthfully about an ongoing labor dispute
e. c and d

7. Which of the following would NOT be considered a concerted activity?
a. members of a union that meet to discuss problems with working conditions at their workplace
b. employees who are not members of a union that meet to discuss problems with working conditions at their workplace
c. a single employee that writes to a supervisor complaining about the refusal to grant her vacation time for the exact period of time she requested
d. a single employee that writes to a supervisor complaining about the frequently malfunctioning air conditioning and extreme indoor heat at an assembly plant
e. c and d

8. In Northeast Beverage Corp v. NLRB, an employer announced that it was going to close a union facility, and entered into negotiations with the union. Six drivers learned of an upcoming meeting, met over coffee to formulate their questions, and went to the site of the meeting. A union official told them to return to work, but the drivers insisted, and eventually were able to introduce themselves to the management representatives. They returned to work after having been gone for 3 hours, but were fired for being absent without authorization. The NLRB ruled in favor of the drivers, and the employer appealed. On appeal, the court ruled:
a. for the employer, since the employees essentially walked off the job during working hours without authorization, which is not a protected concerted activity
b. for the employer, since its representatives had met with the employees, so they had complied with their obligations
c. for the drivers, since they had a right under the NLRA to engage in protected concerted activity
d. for the drivers, because although they were able to introduce themselves to the management representatives, no actual discussion or negotiation took place

9. Non-employee organizers:
a. have no rights under the NLRA and can be barred from entering workplaces
b. must be allowed to speak with employees during non-work times and in non-work areas
c. must be allowed into workplaces if the majority of employees desire their presence
d. can be barred from workplaces if a valid non-solicitation policy is in place and other reasonable means of communication exist
e. none of the above

10. Which of the following is a criterion used by the NLRB to determine that an appropriate bargaining unit exists?
a. the percentage of employees who have signed authorization cards
b. whether employees are paid at the same rate and/or under a reasonable and logical pay scale
c. whether professional employees would be mixed with non-professional employees against their will
d. all of the above
e. none of the above

11. Which of the following is true regarding NLRB representation election procedures?
a. the NLRB will not order an election unless at least 50 percent of employees have signed authorization cards
b. no more than two elections will be held in the same year for the same group of employees
c. if an employer commits an unfair labor practice within the week before an election is held, the NLRB will certify the union, regardless of whether it receives a majority of votes
d. if an election is ordered, the employer is required to provide the NLRB, within seven days, a list of names and addresses of all employees in the bargaining unit
e. none of the above

12. Which of the following is true regarding grievances?
a. they can be filed by individual employees and may be pursued by the individual
b. they can only be filed by the union on behalf of the individual
c. if the grievance cannot be resolved, either the union or the individual can decide to take the case to arbitration
d. if the grievance cannot be resolved, either the union or the individual can decide to take the case to mediation

13. Union security provisions:
a. are unlawful under the NLRA because they require employers to discriminate against employees who do not support their unions
b. are unlawful in states that have “right to work” laws
c. require that employers recognize and negotiate with the unions chosen by their employees
d. require that employees financially support all union activities, regardless of any objections the employees might have to doing so
e. none of the above

14. The duty to bargain in good faith:
a. requires both employers and unions to eventually reach agreement in their negotiations
b. requires that any issue raised by either the employer or union must be negotiated
c. requires that employers supply unions with information relevant and necessary to bargaining effectively
d. all of the above
e. none of the above

15. Under the NLRA, employees who go on strike:
a. can be terminated, but only after they are given an adequate opportunity to return to work
b. can be terminated, but only if the strike is an economic strike
c. can be permanently replaced, but only if the strike is an unfair labor practice strike
d. can picket their employer and any other firms that do business with the employer
e. none of the above

16. Protection of concerted activity may be lost if which of the following occurs?
a. insubordination which is grounds for discharge
b. the number of employees is reduced so that the NLRA no longer applies
c. a serious disagreement between labor and management
d. none of these
e. all of these

17. Regarding the Employee Free Choice Act, it is correct to say:
a. that the law has the support of both labor and management
b. that the law has the support of management, but not labor
c. that the law is unlikely to pass
d. none of these

18. You have just been hired as the new Assistant Human Resources Manager at your firm, having worked your way up from the factory floor to the administrative suite. During your briefing for the new job, you are told that the firm has learned that its employees are attempting to unionize, a move which the firm has vowed to fight. As part of that effort, your boss, the HR Manager, has asked you to privately talk to some of your former co-workers on the factory floor to see what their thinking is, to learn about how many are in favor of unionizing, who, specifically, is supporting it, and what might make them change their minds. Among the things they want to know is what would work better – threats of reprisals against those supporting a union, or promises of benefits to those who oppose it. You are eager to do well at your new job, but you see some problems with these requests. Of the following choices, what should you do?
a. do as they ask; none of it is illegal
b. tell them you can’t do what they ask because it is illegal
c. tell them you would be glad to talk informally with your former co-workers to find out their attitudes about unionization and why this has come up, but that speaking about reprisals and benefits would be an unfair labor practice

19. Which of the following factors is relevant to a determination of an “appropriate bargaining unit?”
a. similarity of skill
b. interrelationship of tasks
c. common supervision
d. common salaries
e. all of these are relevant
f. a through c only

20. Regarding representation election procedures, which of the following statements is/are true?
a. at least 50% of the employees in a bargaining unit must sign authorization cards
b. an employer may recognize a union only if at least 50% of the employees in a bargaining unit have signed authorization cards
c. if an election is ordered, the employer must provide to the union names and addresses of employees within 7 days
d. the time between when an election is ordered and when it takes place is the time of least scrutiny of the activities of the employer and the union

ESSAY QUESTIONS

1. Why is each of the following good legal advice?

a. Employers must not create or control “company unions.”

b. Employers should not respond to union organizing efforts by raising wages or making other unscheduled changes in employment benefits.

c. Employers must abide by the terms of labor agreements when making human resource decisions regarding their unionized employees.

d. Employers should not establish informal practices of conferring benefits and privileges not specified in labor agreements.

e. If individual employees wish to present their own grievances, their union must be notified and given the opportunity to be present at any meetings about the grievances.

2. What must be proven in order to establish a prima facie case of discrimination by the NLRB?

CHAPTER 15
OCCUPATIONAL SAFETY AND HEALTH
Online Quiz Questions

MULTIPLE CHOICE QUESTIONS

1. The minimum level of safety that employers are required to provide is defined through:
a. standards created by OSHA
b. standards created by employers
c. the general duty clause
d. a and c

2. To prove a violation of an OSHA safety standard, the claimant must establish that:
a. an applicable standard exists
b. the standard was not complied with
c. one or more employees were exposed to the hazard
d. the employer knew or should have known of the hazard
e. all of these

3. The general duty clause covers:
a. an employer’s duty to act carefully in structuring the workplace
b. an employer’s duty to be free from negligence
c. hazards for which no specific standard exists
d. all of these
e. a and b only

4. OSHA prioritizes inspections, recognizing that this situation is most urgent:
a. the aftermath of serious accidents
b. situations where there is imminent risk of serious harm or death
c. responses to employee complaints
d. all of these

5. State workers’ compensation laws:
a. apply to injuries that occur in the course of employment
b. provide medical care and rehabilitation, and partial replacement of income
c. are the exclusive remedy for employees injured on the job
d. b and c

6. Match each term to its correct definition.

The OSH Act governs safety in private sector workplaces
Permissible exposure limit the maximum exposure to a hazard allowable under the OSH Act
Cost-benefit analysis an examination of the cost to employers to comply with ah OSH safety standard compared to the economic value of expected improvement in worker health
Experience rating an employer’s track record regarding the number of injuries that have occurred in its workplace
Arising out of employment a requirement for worker’s compensation that refers to the job-related activities leading to an employee’s injury or illness

CHAPTER 15
OCCUPATIONAL SAFETY AND HEALTH
MULTIPLE CHOICE

1. A principal objective of the Occupational Safety and Health Act is ____________:
a. compensating employees for injuries and illnesses that occur on the job
b. preventing injuries and illnesses on the job
c. promoting healthier life styles for employees
d. all of the above
e. none of the above

2. By law, employers must arrange workers’ compensation coverage for their employees.
They may do this by any of the following except:
a. contributing to state workers’ compensation funds
b. contributing to federal workers’ compensation funds
c. self insuring
d. purchasing coverage from private insurers
e. any of the above methods would be acceptable

3. Which of the following is true of OSHA’s permanent standards?
a. they must be followed without exception
b. they apply to firms in all industries
c. they are adopted only after a lengthy process of public hearings and documentation
d. all of the above
e. none of the above

4. Which of the following is NOT true regarding the enforcement process under OSHA (the
Act)?
a. inspectors do not issue citations to employers when they find violations
b. copies of citations received must be posted in the workplace near the sites of the violations
c. employers are not required to correct violations until after their appeals have been decided
d. OSHA inspections are generally unannounced and the employer is required to allow the inspector access as long as the inspector shows proper credentials

5. Which of the following is an element needed to establish a violation of the general duty clause?
a. a potential hazard exists which was known in the industry
b. the employer acted with intent in allowing the hazard to exist
c. feasible means exist to abate the hazard
d. all of the above
e. none of the above

6. In R. Williams Construction Co. v OSHRC, a trench collapsed at a construction site, killing one worker, and severely injuring another. A hydraulic jack supporting the wall had been removed, and the walls of the trench were not sloped, as required by OSHA regulations. The construction firm argued that, although it did not know what the OSHA requirements were, its employees had much work experience and common sense, and they talked about safety “all the time.” The OSHRC ruled:
a. for the employer, because of the several years of experience of its workers
b. for the employer, because the employees frequently talked about safety
c. for the workers, because there was a death and a serious injury
d. for the workers, because OSHA regulations applied, and it is not a defense that the firm did not know about OSHA regulations

7. Ergonomic hazards _______________:
a. are partially addressed by OSHA’s ergonomics standard
b. have been addressed under the general duty clause
c. are not currently regulated due to inadequate knowledge of their causes
d. are not currently regulated because ergonomics is not a recognized and authoritative field
e. none of the above

8. Which of the following is true regarding safety and health inspections?
a. inspection sites are always chosen at random
b. OSHA has the authority to enter and inspect all workplaces, regardless of employer objections
c. in about half of the states, inspections are conducted by state agencies rather than by OSHA
d. all of the above
e. none of the above

9. Regarding Workers’ Compensation, which of the following statements is correct:
a. generally, workers’ compensation is an injured employee’s exclusive remedy
b. pursuant to workers’ compensation, the employer gives up its right to defend against liability for employee injuries with the Fellow Servant Rule
c. pursuant to workers’ compensation, the employer gives up its right to defend against liability for employee injuries with assumption of the risk
d. none of the above is correct
e. all of the above are correct

10. Employees who walk off the job due to dangerous conditions may be protected under OSHA (the Act) if:
a. there has been an inspection and OSHA has validated the claim that dangerous conditions exist
b. the employer has been informed of the hazard and does not correct it
c. there is a specific OSHA standard that applies to the hazard
d. all of the above
e. none of the above

11. Which of the following is true of OSHA reporting and recording requirements?
a. employers with fewer than 50 employees are generally exempt from recording injuries and illnesses
b. all injuries or illnesses must be reported to OSHA within 6 days of their occurrence
c. injuries that result in death or the hospitalization of three or more employees must be reported to OSHA within 8 hours of their occurrence
d. all of the above
e. none of the above

12. Which of the following is true of workers’ compensation?
a. employees are compensated for workplace injuries and illnesses as long as the employer’s negligence played a part
b. experience rating provides employers with a strong incentive to prevent injuries by making the workplace safer
c. because employees are hurt through no fault of their own, workers’ compensation is designed to replace all of the income lost due to inability to work
d. employers can always avoid paying workers’ compensation if it can be shown that the employee’s own careless actions contributed to the injury
e. none of the above

13. Which of the following agencies was NOT created by the Occupational Safety and Health Act?
a. The Occupational Safety & Health Administration
b. The Occupational Safety & Health Review Commission
c. The National Institute of Occupational Safety & Health
d. The National Institute of Mental Health

14. Regarding OSHA inspections, which of the following statements is NOT correct?
a. most enforcement actions derive from employee complaints and OSHA inspections
b. most inspections are unannounced
c. if an emergency exists, OSHA has the right to enter a workplace without a warrant
d. OSHA routinely visits each workplace annually
e. none of the above

15. A woman wrenched her back participating in a limbo contest on the weekend. Feeling better, she went to work at her job as a secretary on Monday. Lifting a box of copier paper, she experienced severe back pain and needed immediate medical attention. She was off from work for two weeks due to the injury and filed a claim for workers’ compensation. If her employer contested the claim, the most likely outcome of the case would be:
a. denial of the claim because the injury did not occur in the course of employment
b. denial of the claim because, under the usual exertion rule, the injury did not arise out of employment
c. granting of benefits because, under the usual exertion rule, the injury arose out of employment
d. granting of partial benefits due to the pre-existing injury

16. The best thing an employer can do to avoid OSHA violations is:
a. take steps to prevent workplace injuries
b. create a comprehensive workplace safety program
c. be proactive in assessing workplace hazards
d. all of these

17. You are an administrative clerk in the Human Resources Department of a construction firm. You are aware that there have been several injuries on the job site in the past two months, some of them serious, and know that reports are supposed to be filed with OSHA reporting serious injuries. The HR manager has been complaining bitterly about OSHA, especially since they have done inspections at your firm’s job sites twice in the last year, and has made comments like, “It’s none of their damned business if one of our guys is stupid enough to get hurt.” It is one of the tasks of the Assistant HR Manager to file reports of serious job accidents, but she has suddenly resigned. You are asked to temporarily take her place. You do so, and discover in her desk drawer, paper-clipped together, the reports of serious injury which have been prepared over the past 3 months, but not sent to OSHA. Considering your duties and your legal protections, which of the following would be your best option?
a. send them in an overnight package to OSHA immediately, but say nothing; (maybe they’ll think she sent them in)
b. send them in an overnight package to OSHA immediately, but tell the HR Manager that you have sent in the reports so as to comply with the law
c. tell the HR Manager that you found the reports, and ask what he wants you to do; (you know what answer you’ll get)

18. You work in a large office in the “bullpen,” a large open area of desks, chairs and computers, where about 50 people work, separated only by low-level cubicle walls. In this area, several teams of people work together on different projects. Lately, there have been a lot of pranks played by one rowdy team upon another team (not yours), which have escalated. Yesterday, someone lowered the seat of a worker’s chair while he was out of his cubicle, and when he returned and attempted to sit down, he fell and injured his back. You believe this conduct needs to stop, but management has so far ignored the situation. What should you do and why?
a. do nothing; if you report this conduct, you’ll be ostracized by your co-workers; besides, its harmless horseplay
b. report the behavior to management, telling them about the potential for more serious injuries, and asking them to take steps to stop it
c. report the behavior to OSHA, and ask for an inspection; OSHA can’t reveal your name, so no one will know (though the company may get in trouble)

19. Your office is being expanded, which is good, but the noise of construction is bothering some workers. Some complain of headaches, others of hearing problems. If you are the Safety Director for the firm, which of the following would you recommend as the best remedy?
a. the firm should supply earplugs to the office staff, and try other means to reduce noise from the construction site
b. the construction firm should be ordered to work more quietly
c. those who are suffering from hearing problems and headaches should go home
d. all of these

20. The elements of a specific violation of OSHA regulations include all of the following EXCEPT:
a. an applicable standard exists
b. the standard was not complied with
c. one or more employees were injured by the hazard
d. the employer knew or should have known of the hazard

ESSAY QUESTIONS

1. Why is each of the following good legal advice?

a. Employers must provide employees with employment and places of employment free from recognized hazards that are causing or likely to cause death or serious physical harm to employees

b. Employers must allow OSHA inspectors to enter the workplace and conduct inspections, but can insist that the agency first obtain a warrant

c. Firms using workers from contract companies should ensure that those companies have provided workers’ compensation for those workers

d. Employers should require that employees report all injuries that occur in the workplace as soon after they occur as possible

e. Light duty assignments should be available and considered for employees who have been injured on the job and who are not yet capable of performing their regular jobs

2. Workers’ compensation requires that for an injured employee to be eligible for benefits,
they must be injured arising out of and in the course of employment. Questions
frequently arise when the injury is caused by the employee’s misconduct or the misconduct of a fellow worker. Discuss how employee misconduct is looked at when
determining whether an injured employee is eligible for benefits.

CHAPTER 16
PERFORMANCE, TRAINING, APPRAISALS AND DEVELOPMENT
Online Quiz Questions

MULTIPLE CHOICE QUESTIONS

1. Regarding performance appraisals, it is correct to say that:
a. employers have a duty to conduct performance appraisals
b. employers do not have a duty to conduct performance appraisals
c. courts will not recognize a claim for a negative appraisal which was deserved
d. b and c

2. When an employee suffers the loss of an employment opportunity and alleges discrimination, but the employer alleges poor performance, these become important:
a. performance appraisals
b. hazard communication standards
c. apprenticeship programs
d. development

3. Employers must provide training to:
a. all employees
b. al employees who are exposed to certain hazards
c. new employees
d. all of these
e. a and b only

4. If an employer fails to train an employee, knowing that he is without necessary skills and may injure others, and someone is injured, that person states a claim for:
a. negligent hiring
b. negligent background check
c. negligent training
d. none of these

5. Under the Fair Labor Standards Act, most training must be:
a. held on site
b. compensated
c. uncompensated
d. none of these

6. Match each term to its correct definition.

Performance appraisal a review of an employee’s performance
Performance criteria standards used to judge an employee’s performance
Training programs that teach employees how to do their jobs, or improve their skills
Right to know the idea that employees have the right to receive information about the dangerous chemicals they encounter on the job
Apprenticeship program it typically combines classroom instruction with work under the guidance of an experienced co-worker

CHAPTER 16
PERFORMANCE APPRAISALS, TRAINING, AND DEVELOPMENT
MULTIPLE CHOICE

1. Which of the following is true regarding performance appraisals?
a. most employers are legally required to conduct performance appraisals
b. employers may appraise some employees randomly and not others
c. performance appraisals are key pieces of evidence in many discrimination cases
d. an inaccurate performance appraisal, standing alone, always creates liability for the employer

2. Under the ADA, performance appraisals for disabled persons:
a. cannot hold disabled persons to the same standards of performance as non-disabled persons
b. cannot consider any difficulties performing non-essential job functions
c. should assess job performance both with and without any reasonable accommodations
d. are not permitted because of the inherent disadvantage that certain disabled employees have when compared to non-disabled employees

3. You are the judge hearing a Motion for Summary judgment filed by an employer in the case of an employee who has been terminated. The employee was the sole African-American customer service representative at the firm, who had a lengthy record of good evaluations. However, she received more negative evaluations over a period of three years after a new supervisor was hired, though the more stringent requirements applied to her were not applied to white employees. After 3 years, the employee was then selected for termination in a downsizing based on the previous 3 years’ evaluations. Based on this evidence, what should you decide?
a. you should grant summary judgment for the employer because the termination was based on performance appraisals rather than race
b. you should grant summary judgment for the employer because a discrimination claim based on performance appraisals going back three years was no longer timely
c. you should allow the employee to go to trial because African-Americans disproportionately received low performance ratings in this company
d. you should allow the employee to go to trial because the termination was based on performance appraisals that were tainted by consideration of the employee’s race
e. none of the above

4. In question # 3 above, evidence is introduced that the statute of limitations for filing an EEOC claim is 300 days in the state where the case was filed. Since the performance appraisals which were allegedly tainted by race were issued more than 300 years before the case was filed, the employer moves to dismiss the case, arguing that the statute of limitations has passed, the case has been filed too late. Based on this evidence, what should you decide?
a. the case should be dismissed because the statute of limitations has passed, and the case was filed too late
b. the case should be dismissed because the tainted evaluations triggered the employee’s right to file a cause of action, and the case should have been filed within 300 days of the first tainted performance appraisal
c. the Motion to Dismiss should be denied because the employee’s right to file a cause of action accrued when she was terminated, and not when a tainted performance evaluation was created
d. the Motion to Dismiss should be denied because the case of a termination based on tainted performance evaluations may be filed at any time

5. Performance appraisals:
a. should cite specific instances of good or bad performance
b. should never contain language strongly criticizing an employee’s performance
c. should consist primarily of numerical ratings because these are more objective
d. all of the above
e. none of the above

6. OSHA’s hazard communication standard requires:
a. specific content and methodology regarding the training of employees in hazards that they might reasonably encounter on the job
b. that employers maintain material safety data sheets for all hazardous chemicals used in the workplace
c. that employers provide employees with information about evacuation routes and other emergency procedures
d. all of the above
e. none of the above

7. The forced distribution method regarding performance appraisals consists of:
a. setting a schedule mandating when particular departments or divisions would be evaluated over an extended period of time
b. evaluating protected classes within departments separately so that consistency within these groups can be maintained
c. requiring that predetermined percentages of employees be placed into particular performance categories
d. banding of performance appraisal results to create equality and negate the effect of statistical inconsistencies in the evaluation itself which might have led to potential discrimination

8. In Hoffman v. Caterpillar, a disabled employee was refused the opportunity to train on a new machine because her supervisor believed that her disability would make it impossible to operate the machine with acceptable speed. The court held:
a. Under the ADA, failure to train is a materially adverse employment action that can be challenged as discriminatory
b. The employer engaged in disparate treatment, provided the employee can prove that she is able to operate the machine
c. The employer is not obligated to reasonably accommodate the employee in the training process because operating the machine is not required for her current job
d. all of the above
e. none of the above

9. Under Title VII, in cases of discrimination, punitive damages are:
a. available for intentional or unintentional discrimination resulting from ordinary negligence when an employer has violated an employee’s federally protected right
b. available only for intentional discrimination resulting from mere indifference when an employer has violated an employees federally protected right
c. available only for intentional discrimination resulting from malice or reckless indifference when an employer has violated an employees federally protected right
d. not allowed or available

10. Regarding performance appraisals, which of the following statements is NOT true?
a. courts will review contested performance appraisals to determine whether or not they are correct
b. negative performance appraisals, by themselves, do not prove discrimination
c. employees who conduct performance appraisals should be trained in how to conduct them
d. a biased negative appraisal may constitute disparate treatment
e. none of the above

11. Which of the following is NOT true regarding performance criteria and standards?
a. There is no requirement that they be communicated to employees prior to the appraisal of their performance if a job description is available
b. They must be applied consistently regarding employees, department and sections within the organization
c. They must be job related
d. They must be specific and objective

12. A 360 degree appraisal:
a. is conducted by the employee’s superior and that superior’s superior
b. is comprehensive and appraises performance, attitude and potential in a single evaluation
c. is conducted by other employees, at various organizational levels, as well as customers or other stakeholders that deal with the employee being appraised
d. is an appraisal that consists of a required number of positive and negative performance ratings (i.e. – three best and three worst attributes) in various performance proficiencies

13. The most common performance criteria used includes all of these EXCEPT:
a. punctuality
b. quality of work
c. willingness to work two jobs
d. leadership
e. all of these are commonly used

14. Which of the following statements regarding the timing of performance appraisals is true?
a. a negative performance appraisal given shortly before layoffs or terminations appears to be pretext
b. a negative performance appraisal given shortly after an employee has filed a charge against the employer appears to be retaliation
c. a positive performance appraisal given just prior to salary review may be grounds for raising an employee’s salary
d. all of these are true

15. Regarding the language to be used in performance appraisals:
a. the language, if negative, should be as forceful as possible to convey the negative evaluation
b. should be measured and professional, whether conveying a positive or negative appraisal
c. should use common terms, and pleasant language, so as to avoid claims of defamation
d. none of these

16. In Metty v Motorola,, a high-level manager consistently received positive performance reviews from her immediate supervisor for four years. She earned bonuses, salary increases, and was promoted to the senior leadership team. Some criticisms were made of her interpersonal relations with others, but these were not emphasized. After a change in management, top managers grew more critical of her. She was passed over for promotion, the promotion being given to a male with less experience. Responsibilities were taken away, and she was dropped from the senior leadership team. A new (never-again used) 9-point rating system was used, on which she earned the lowest possible score. The CEO said he wanted her out “legally,” and asked “How do we explain this to a jury?” Managers explained there was little support for her among them, and she did not “fit.” She sued for sex discrimination. On appeal, the court ruled:
a. for the employer, finding that the employee had failed to meet performance requirements
b. for the employer, finding that the employee was not discriminated against
c. for the employee, finding that she had met all performance standards, while the complaints against her were mostly subjective
d. for the employee, finding that she was entitled to the promotion she had sought

17. The “forced distribution method” of performance appraisals:
a. require that predetermined percentages of employees be placed into particular performance categories
b. often require that employees in the lower performance categories are subject to termination or are ineligible for bonuses and raises
c. may lead to claims of age, race or sex discrimination
d. all of these

18. As a new manager, you are delighted with your new job (and higher pay), but now it’s time for the annual performance appraisals of the staff you supervise. Worse, you have been directed to downsize your department by 10%. Many of your colleagues have offered you advice as to how to proceed. Among the following, which would NOT be good advice?
a. use a forced distribution method of performance appraisal, which will help you achieve a 10% cut in department staff easily, and avoid legal claims
b. as you conduct the performance appraisals, speak gruffly to each employee, in order to prepare them for possible termination
c. make clear that no matter how well they have done their jobs, it is no guarantee that they will survive the cut; don’t allow or answer any questions
d. none of these would be good advice
e. all of these would be good advice

19. You are the crew supervisor of a group of men and women who clean offices for commercial office buildings in downtown Manhattan. Few of them speak or read English, and part of your job is to give them their instructions in Polish and Spanish, as the case may be. Your Spanish is pretty good, but your Polish is rudimentary at best. The firm you work for, Commercial Cleaning, LLC, has just switched cleaning agents to a highly effective, but highly toxic cleaning agent for marble floors which is dangerous to humans and to the environment, and requires complex and special handling. You’re not even sure you could explain the instructions to the Spanish-speaking employees, let alone the Polish employees. You’ve raised the issue with your boss, who tells you not to worry about it. He said that even if the employees became ill by using the product, the illness would not show up for a long time, so there’s no way to connect it with the firm. He refuses to provide instructions translated into Spanish and Polish, or latex gloves which are required for its handling. You have a choice. You know that some actions would put your employer first, some would put yourself first, and some your crew. Of the following actions, which would put your crew first?
a. Do nothing. The decision is out of your hands.
b. Try the best you can to explain to your crew, using gestures and pantomiming, how to use the new cleaning agent, and recommend that they get gloves. Hope that no one becomes ill.
c. Get a translation into Spanish and Polish of the complex instructions. Pay for it yourself. You don’t want the consequences that might befall your crew on your conscience.
d. Report the firm anonymously using the OSHA hotline. Quit and get another job.

20. Regarding the Drug-Free Workplace Act, which of the following is NOT true? The Act requires that:
a. all employers adopt a drug-free workplace policy
b. employers with drug policies inform their employees about the dangerous associated with drug use
c. employers with drug policies provide counseling and rehabilitation
d. employers with drug policies advise employees about the potential penalties for drug violations

ESSAY QUESTIONS

1. Why is each of the following good legal advice?

a. It is highly advisable for employers to conduct performance appraisals and to maintain credible, written documentation of performance

b. Global performance ratings should be avoided, unless they are derived by combining ratings on more specific criteria

c. Employers should be cautious in deciding whether to used forced distribution methods of performance appraisal

d. Time spent in training, even outside normal work hours, will usually have to be compensated

e. Employers that have contracts with the federal government must create and maintain drug awareness programs for their employees

rug Free Workplace Act – Makes this a requirement.

2. Professor Jonathan has applied for promotion and tenure at a local university. He is
required to compile a portfolio, evidencing his accomplishments and qualifications. This
portfolio is then evaluated by his Departmental Promotion & Tenure Committee, consisting of tenured departmental members, who makes a recommendation to the Department Chair. The Chair makes a recommendation to the Dean, who then makes a recommendation to the University wide P & T Committee. The University Committee is made up of various faculty members from throughout the university, some of whom know Jonathan and some of whom don’t. This committee makes their recommendation to the Provost who in turn makes a recommendation to the University President. The process ends when the President makes a recommendation to the Board of Trustees. Jonathan’s portfolio travels from level to level and is reviewed prior to each recommendation. However, Jonathan is not permitted to address any of the decision makers during their review. Assuming that you can’t change the number or order of steps in the review process, what are some of the concerns that need to be addressed in order to keep this system free from discrimination or question?

CHAPTER 17
PRIVACY ON THE JOB
Online Quiz Questions

MULTIPLE CHOICE QUESTIONS

1. Regarding public employees and privacy, which of the following is NOT true?
a. they are protected from unreasonable searches and seizures by the 4th Amendment
b. they have a reasonable expectation of privacy at work
c. warrants are not required for workplace searches
d. all of these are true

2. Under common law, four different types of privacy torts are recognized. They include all of these EXCEPT:
a. intrusion upon seclusion
b. public disclosure of private facts
c. placement in a fraud light
d. appropriation of name or likeness

3. The Privacy Act applies to:
a. all employees
b. all federal employees
c. private employees
d. all of these

4. Regarding the Employee Polygraph Protection Act (EPPA), which of the following statements is NOT true?
a. the Act prohibits most polygraph testing by private employers
b. polygraphs can be used for ongoing investigations of theft
c. in the case of an ongoing investigation, all employees must take the polygraph
d. all of these are true

5. If an employee is falsely accused of wrongdoing, and that accusation is communicated to others, the employee may:
a. have a cause of action for intrusion upon seclusion
b. have a cause of action for discrimination
c. have a cause of action for defamation
d. none of these

6. Match each term to its correct definition.

Reasonable expectation of privacy whether, under the circumstances, a reasonable person would expect to enjoy privacy
Public disclosure of private facts a privacy tort claim in which plaintiffs must show that private facts of their lives of no legitimate concern to the public were widely publicized in a highly offensive way
Privacy Act regulates the handling of personnel records by agencies of the federal government and allows federal employees access
Ordinary course of business routine business activities, performed for legitimate business purposes, about which employees are notified
Intentional infliction of
Emotional distress a common law tort claim in which claimant must show an intent to harm, shocking or outrageous behavior not tolerable in a civilized society, and severe emotional harm

CHAPTER 17
PRIVACY ON THE JOB: INFORMATION, MONITORING, AND INVESTIGATION
MULTIPLE CHOICE QUESTIONS

1. A department store clerk learns that her employer has placed a hidden video camera in the employee changing room. If she sues, the claim would most likely be for:
a. violation of her 4th Amendment right to be free from unreasonable search or seizure
b. intrusion upon seclusion
c. public disclosure of private facts
d. false imprisonment
e. appropriation of a name or likeness

2. Regarding surveillance and video monitoring of employees, it is correct to say all of the following EXCEPT:
a. before surveillance or video monitoring of employees can take place, a search warrant must be obtained
b. surveillance and video monitoring of employees can take place in all places open to public view, without the need for a search warrant
c. all employees, public and private, have some reasonable expectation of privacy at work
d. none of these is true

3. Which of the following is an element of an intrusion upon seclusion privacy tort claim?
a. one party intentionally pries into the private affairs of another
b. the broad disclosure of private information to others
c. the use of private information by others for their own benefit
d. all of the above
e. none of the above

4. Conduct that is “outrageous” is required to establish:
a. a privacy tort claim
b. infliction of emotional distress
c. false imprisonment
d. malicious prosecution
e. none of the above

5. The Privacy Act requires:
a. that covered employers adopt written workplace privacy policies
b. that employees be informed if they are subject to monitoring or surveillance in the workplace
c. that medical records must be kept confidential and separate from personnel files
d. all of the above
e. none of the above

6. In Dietz v. Finlay Fine Jewelry, a store clerk who gave an unauthorized discount to a customer was interrogated by security personnel. The court held that:
a. her false imprisonment claim was properly dismissed because the employer had proof that she gave the unauthorized discount
b. she could go to trial on her defamation claim because false, damaging accusations were made in the presence of others
c. she could go to trial on her malicious prosecution claim because the employer pressed criminal charges against her
d. she could go to trial on her infliction of emotional distress claim because she was very upset by the interrogator’s questioning of her
e. none of the above

7. Regarding the right to privacy:
a. employees have a 4th amendment right to be free from unreasonable searches and seizures of their workplaces
b. common law privacy protections apply to public, but not private employees
c. whether an employee has a reasonable expectation of privacy is determined on a case-by-case basis
d. constitutional rights to privacy apply to private, but not public employees

8. Employers may conduct hidden video surveillance of employees:
a. in bathrooms and locker rooms if the employer suspects drug use or other illegal activities
b. in private offices because the office is part of the employer’s property
c. in the company parking lot
d. all of the above
e. none of the above

9 Amanda is an employee at a high end department store in the HR department and has
been in her office all day. After a pair of diamond earrings are found missing from the
jewelry department, Mike, the store manager has every employee in the store brought
together pursuant to an investigation. Which of the following is true?
a. because the missing items are extremely small, Mike can order Amanda into a room to be strip searched by Hilda, the head of security
b. Mike can go through the contents of Amanda’s purse as long as he doesn’t touch her physically
c. Mike can search Amanda’s desk
d. all of the above
e. none of the above

10. Under the Employee Polygraph Protection Act:
a. employees have a right to review all questions before the test begins
b. employees can be disciplined or discharged for refusal to submit to a polygraph
c. employees cannot terminate a polygraph exam once it has begun if they have voluntarily consented to the exam
d. all of the above
e. none of the above

11. The Electronic Communications Privacy Act:
a. prohibits the intentional interception of electronic communications
b. prohibits the monitoring of computer use by employers
c. prohibits the accessing of stored e-mail messages by employers
d. all of the above
e. none of the above

12. In Stengart v Loving Care Agency, the employee used a company laptop to communicate with her lawyer by means of a web-based, password-protected personal email program. She left the firm, returned the laptop, and sued for discrimination. Forensic experts recovered her emails from the laptop for the company, and its attorneys used the emails in discovery, telling no one what they had found. Plaintiff’s attorney discovered this, and demanded that these privileged communications be returned, which was refused. The trial court found that Plaintiff had waived her attorney-client privilege. The appellate court reversed, finding that the employer’s lawyers were guilty of misconduct. The Supreme court ruled:
a. for the employer, because the employee had waived her right to attorney-client privilege because of the company’s privacy policy, and the use of the company laptop
b. for the employer because the employee was not permitted to send personal emails on company time
c. for the employee, because the company’s attorneys had acted improperly
d. for the employee, because she had not waived her right to attorney-client privilege, and the company privacy policy did not address the use of personal web-based email programs

13. Which of the following torts has as a required element of proof, an intent to harm.
a. intrusion upon seclusion
b. public disclosure of private facts
c. placement in a false light
d. intentional infliction of emotional distress

14. Which of the following torts has as a required element of proof, the matter is not of legitimate concern to the public.
a. intrusion upon seclusion
b. public disclosure of private facts
c. placement in a false light
d. intentional infliction of emotional distress

15. Which of the following laws mandates that medical information obtained from current employees must be job-related and consistent with business necessity?
a. The Privacy Act
b. The Americans with Disabilities Act
c. The National Labor Relations Act
d. The Occupational Safety and Health Act

16. Under the OSH Act, records of an employee’s exposure to toxins must be kept for:
a. 5 years
b. 10 years
c. 20 years
d. 30 years

17. HIPAA applies primarily to:
a. health care providers
b. hospitals receiving Medicare payments
c. self-insured companies
d. all firms contracting with the federal government
e. a and c
f. none of these

18. Regarding the monitoring and surveillance of employees, an employer could legally place video cameras in which of the following locations?
a. employee rest rooms
b. at an employee’s computer workstation
c. at the front entry to the office
d. none of these

19. Your boss has told you that he suspects that his wife (whose desk is next to yours) is cheating on him, and having an affair with another man. Because your desk is next to hers, he has asked you to check her computer for evidence of this when she steps away from her desk, which she frequently must do. In the past, she has asked you to watch for urgent emails from customers and others while she was gone, and to page her, which you have done. So even if she came back unexpectedly and found you at her computer, it would probably not arouse her suspicion. Although you are reluctant to do this, he is your boss, and could make things difficult for you. What should you do?
a. Do it even though you’re reluctant to do so. You have nothing to lose and everything to gain. If it turns out she is having an affair, he needs to know, and if there’s no evidence of it, he will be relieved – and grateful.
b. Don’t do it, even though your boss will may not understand. Tell him that if the situation were reversed, that is, if she was asking you to spy on him, you wouldn’t do that, either. Tell him that this is a private matter, between him and her. Hope that he understands.

20. Regarding employer searches of employees at the workplace, which of the following is true?
a. generally, employers may conduct searches of employee workplaces, although obtaining consent is best
b. all such searches should be conducted in a reasonable manner
c. evidence obtained through searches must be handled carefully
d. all of these are true

ESSAY QUESTIONS

1. Why is each of the following good legal advice?

a. Employers should adopt workplace privacy policies

b. Employers should generally allow employees access to their personnel files and obtain their consent before disclosing information about employees.

c. Searches should be no more extensive or intrusive than necessary

d. Interrogations of employees suspected of wrongdoing should be kept as brief as possible

e. Employers should carefully consider whether or how to use third parties in workplace investigations

f. Information about employee misconduct derived from investigations should be treated as confidential and shared only with those who have a legitimate need to know

2. Jordan has just graduated and has started a new job as an investment banker. After her conditional offer of employment, she took a company required medical exam and then when she applied for company life insurance coverage, she was required to take a second medical exam. Although she is currently an avid cyclist and very healthy, in the past she had experienced certain problems. In her freshman year, she suffered through a problem pregnancy and a resultant still birth. As a result, she underwent an involuntary hysterectomy to save her life. She was devastated that at 19 years old she would never be able to have a child and suffered from depression. She underwent intensive psychological counseling for six months and is currently very well adjusted and other than some regret, she has accepted her fate. Both her demeanor and appearance are both normal and fit. She is however, a very private person and is concerned that her personal information could become public. What would you tell her about the laws that protect her?

CHAPTER 18
TERMINATING INDIVIDUAL EMPLOYEES
Online Quiz Questions

MULTIPLE CHOICE QUESTIONS

1. The legal framework governing the termination of most private-sector non-union employees can best be described as:
a. employment at will
b. employment at will with exceptions
c. just cause, due process
d. none of these

2. The right of employers to terminate employees may be limited by which of the following?
a. employer policies
b. managers’ statements
c. handbook provisions
d. the right may be limited by all of these

3. Public policy would protect an employee fired for any of the following reasons EXCEPT:
a. an employee’s refusing to engage in illegal activity
b. an employee’s exercising a legal right
c. an employee’s reporting of illegal activity
d. an employee’s refusing to work overtime

4. The just cause/due process standard applies to:
a. public sector employees
b. most unionized employees
c. employees residing in Montana
d. all of these are true
e. a and b only

5. The human resource decision most likely to result in legal action is:
a. failure to hire
b. demotion
c. termination
d. none of these

6. Match each term to its correct definition.

Employment at will an employment relationship in which either party may sever the employment relationship at any time, for any reason not specifically prohibited by law
Constructive discharge an employer creates intolerable working conditions with the intention of forcing an employee to quit
Public policy exception an exception that allows an arbitrator’s decision to be overturned if it is contrary to a well-defined public policy
Performing a public duty actions taken in the public interest, though not specifically required
Progressive discipline a system in which successive violations earn increasingly more severe discipline

CHAPTER 18
TERMINATING INDIVIDUAL EMPLOYEES
MULTIPLE CHOICE QUESTIONS

1. In Dillon v. Champion Jogbra, Dillon claimed a wrongful discharge maintaining that
modifications of the employee manual created an implied contract negating the
employer’s claim that she was an at-will employee. The court said:
a. when the terms of a manual are ambiguous…or send mixed messages regarding an employee’s status, the question of whether the presumptive at-will status has been modified results in a presumption in favor of the employer
b. when the terms of a manual are ambiguous…or send mixed messages regarding an employee’s status, the question of whether the presumptive at-will status has been modified results in a presumption in favor of the employee
c. an employer may modify an at-will employment agreement unilaterally
d. an employer may only modify an at-will employment agreement bilaterally in agreement with the employee

2. Which of the following is a circumstance under which the public policy exception to employment at will is recognized?
a. termination for reporting illegal activity
b. termination for refusing to commit an illegal act
c. termination for exercising a legal right
d. all of the above
e. none of the above

3. Just cause is required for the discipline or discharge of unionized employees because:
a. the Constitution requires it
b. labor agreements require it
c. the National Labor Relations Act requires it
d. arbitrators prefer the just cause standard to employment at will
e. none of the above

4. The Montana Wrongful Discharge from Employment Act (WDEA):
a. requires the arbitration of all wrongful discharge claims
b. prohibits discharges that are not for good cause
c. requires that employers provide due process before discharging employees
d. all of the above
e. none of the above

5. The legal environment for public employees differs from private sector employment because public employees:
a. are covered by civil service laws
b. generally enjoy a property interest in their jobs
c. have speech and other substantive constitutional rights
d. all of the above
e. none of the above

6. An employment manual contains a notice and disclaimer that the employment is entirely “at will,” and also contains a progressive discipline system which recites an escalating series of notices and warnings before termination. If an employee is terminated immediately, and the progressive discipline system is not followed:
a. the termination is justified because the manual contains an “employment at will” disclaimer
b. the termination is not subject to legal redress because the manual contains an “employment at will” disclaimer, so the employer had a right to terminate employment without conditions
c. the termination is suspect because the progressive discipline system was not followed
d. the termination is suspect because the employment manual is ambiguous
e. two of the above

7. In a constructive discharge:
a. the employer provides feedback on performance problems that will help the employee in a future job
b. a quit is treated as a termination because circumstances forced the employee to leave
c. the employee will be able to sue for the tort of constructive discharge
d. the employee is fired after the employer has built or constructed a prima facie case for the employee’s dismissal

8. Which of the following is generally required to establish just cause for a termination?
a. due process
b. proof that a known rule was violated
c. consistent enforcement of the relevant rule or standard
d. all of the above
e. none of the above

9. Which of the following is required for a successful implied contract wrongful discharge claim?
a. a written contract signed by both the employer and the employee
b. a specific oral promise limiting employment at will
c. a clear and prominent written disclaimer
d. all of the above
e. none of the above

10. Over lunch, a manager at Microsoft says to another manager, “You know, just between you and me, it might not have been the worst thing in the world if the court had ordered the company to break-up. We really are too big.” The comment was overheard by another employee at the next table and passed on to higher-level managers. If the manager is fired for making the statement and she sues Microsoft, a court would most likely rule:
a. For the employee because she would be covered under whistleblower protection laws
b. For the employee because the company would be violating her First Amendment right of free speech
c. For the employee because her speech constituted protected concerted activity under the National Labor Relations Act
d. For the employer because her statements showed disloyalty to the company, for which she could lawfully be terminated
e. For the employer because she is employed at will and none of the exceptions to employment at will apply in this case

11. Due process includes:
a. a clear statement of charges by the employer
b. an opportunity for the employee to respond to those charges
c. an investigation into the facts of the case
d. all of the above
e. none of the above

12. Regarding the termination of individual employees, it is NOT correct to say that:
a. the rights of the employee will depend upon whether she works in the private sector or the public sector
b employers can effective avoid the legal consequences of termination by effectively (but not officially) discharging employees
c. the rights of the employee will depend upon whether he works in a facility that is unionized
d. the employer must follow the procedure for termination set down in the employee handbook

13. A salesperson makes a large sale for which she is entitled to a commission. To avoid making the payment, the employer terminates the employee. The legal claim that best applies to this termination is:
a. breach of the covenant of good faith and fair dealing
b. promissory estoppel
c. intentional interference with a contractual relationship
d. implied contract
e. infliction of emotional distress

14. Among the factors considered by the courts in determining whether a quit was actually a constructive discharge are all of these EXCEPT:
a. demotions
b. reductions in job responsibilities
c. reassignment to greater responsibility
d. badgering
e. reassignment to work under a younger supervisor
Answer: C

15. After a troublesome time with a new manager, an employee who had always had highly positive reviews returned from vacation to find that her desk had been cleared out, all of her belongings were in boxes, and her office was being used for storage. While she was on vacation, her new supervisor had called, asking where certain documents were located. When he found the employee’s answer unsatisfactory, the supervisor said, “Well, this is the last straw.” What is the best assessment of this situation?
a. the employee has suffered discrimination
b. the employee has suffered a constructive discharge
c. the employee has quit
d. none of these

16. A veteran teacher was told by a school superintendent that he would recommend that the school district not renew her contract at the end of the school year. Rather than contest the recommendation, the school teacher retired. What is the best assessment of this situation?
a. the employee has suffered discrimination
b. the employee has suffered a constructive discharge
c. the employee has quit
d. none of these

17. You are the HR Manager for your company. One of your employees has been actively involved in demonstrations at City Hall, protesting the city’s refusal to adopt any environmentally-friendly ordinances or practices. While at these protests, he is often wearing a company T-shirt, and you are concerned that news reports of the demonstrations will lead people to conclude that your company is protesting the city’s environmental policies, something which your Board of Directors has not authorized. You should:
a. give the employee a “warning,” the firs step in your employee handbook’s progressive discipline process, warning him that he must stop protesting
b. tell the employee that you do not approve of his conduct, and that it will be taken into account when he comes up for a raise of promotion
c. ask the employee to wear some other shirt while protesting, so that people don’t think your company is also protesting
d. terminate the employee
e. a and b

18. You have just been hired as the new HR Director of your firm, and have received a complaint and summons served by the sheriff, relaying the lawsuit filed by a former employee. As you read through the complaint, you can see that the employee himself wrote it (and not a lawyer), but think you recognize what your predecessor did wrong. It was this:
a. The employee alleges that he was offered a month’s severance pay in exchange for a release of claims against the company.
b. The employee alleges he was never told why he was being fired, and thinks it was because he is Irish. He claims discrimination based on national origin.
c. The employee alleges he was only given 2 hours to clean out his desk, while a security guard watched.
d. The employee alleges he was called into the HR manager’s office 4 times over the past 6 months, and given warnings that he was not performing satisfactorily. He alleges that this constitutes harassment.

19. An employee of a family-owned car dealership suffered an injury while lifting computer equipment on the job. The employee reported the injury to the HR department, and sought worker’s compensation benefits. The owner of the car dealership was convinced that the injury was actually incurred in a stockcar accident, and told a supervisor to get the employee to sign a form waiving his right to receive worker’s compensation for the injury. The supervisor (a brother of the owner) was told that if he didn’t get the employee (who happened also to be his son) to sign the waiver, both of them would be fired. A waiver was never signed, and both employees were terminated. They sued. All of the following are most likely true, EXCEPT:
a. The employee who was injured is exercising a legal right, and may not legally be terminated for doing so, based on the public policy exception to employment at will.
b. The employee who was asked to get a signed release for an on-the-job injury is refusing to perform an illegal act, and may not legally be terminated for doing so, based on the public policy exception to employment at will.
c. The owner of the car dealership is within his rights to try to reduce the costs to his company by whatever means he can.
d. The owner’s dinner table this Thanksgiving will likely be missing the owner’s brother and nephew.
e. all of these are true

20. This occurs when a party takes action in reliance on the promise of another, who then breaks that promise.
a. promissory estoppel
b. intentional interference with a contractual relationship
c. retaliation for an act supporting public policy
d. none of these

ESSAY QUESTIONS

1. Why is each of the following good legal advice?

a. Resignations should be documented in written resignation agreements that stipulate the voluntary nature of the resignation

b. Terminated employees should be provided with a clear and succinct statement of the reasons for their termination

c. Discipline should be administered in a consistent fashion

d. Unionized employers must communicate any significant changes in rules to employees and their union before enforcing those new rules.

e. Prior to termination, public employers must provide employees with notice of the charges against them, an explanation of the evidence, and an opportunity to respond.

f. Employers should incorporate disclaimers into employee handbooks and other documents defining the employment relationship

2. You are the Director of Human Resources for a medium sized company private company and have discharged Aimee, a 25 year old black at-will employee for poor work, constant tardiness, and taking longer breaks than authorized by company policy. She is not well liked by her fellow workers and her work is indeed slightly below satisfactory levels. Company files evidence numerous sub-standard reviews and that her conduct persisted despite numerous written warnings. You are confident that the company has proper cause to terminate Aimee whether she was at-will or not. When you call her into your office to notify her of her termination, she gets very indignant saying that her work is fine and that she’s not the only one late or abusive of break periods. She then asserts that she’s being singled out because of her sex and her race. She asks about severance pay and you notify her that there will not be any. Aimee then informs you that she is going to sue the company for wrongful termination based on discrimination and for severance pay. The company does not want Aimee to work there any more under any circumstances but does not want the cost or publicity that a law suit would bring. What would you suggest to possibly abate the law suit?

CHAPTER 19
DOWNSIZING AND POSTTERMINATION ISSUES
Online Quiz Questions

MULTIPLE CHOICE QUESTIONS

1. Which of the following is generally true?
a. employers may go out of business
b. employers may close facilities
c. employers may reduce the number of people they employ
d. all of these are true

2. Generally, which of the following is/are true? The Worker Adjustment and Retraining Notification (WARN) Act:
a. prohibits large employers from ordering plant closings
b. prohibits large employers from ordering mass layoffs without a 60 day notice
c. prohibits large employers from closing facilities
d. all of these are true

3. Downsizing and Reduction in Force cases typically result in claims of:
a. race discrimination
b. age discrimination
c. sex discrimination
d. none of these

4. Employees who quit their jobs are:
a. eligible for unemployment insurance
b. not eligible for unemployment insurance
c. entitled to help in finding another job
d. all of these are true

5. Employers sometimes use which of the following means to control a former employee’s actions?
a. a non-competition agreement
b. lawsuits against former employees for divulging trade secrets
c. lawsuits against former employees for defamation
d. all of these

6. Match each term to its correct definition.

availability for work a requirement for receiving unemployment insurance
downsizing terminations of employment based on the employer’s determination that the number of positions needs to be reduced
plant closing Under the WARN Act, a shutdown of a single site of employment for 30 days for 50 full time employees
mass layoff Under the WARN Act, a reduction in force not caused by a plant closing for 30 days for 500 employees or 1/3 of the workforce, if 50 or more
unemployment insurance insurance intended to partially replace lost earnings for those who have been in the workforce

CHAPTER 19
DOWNSIZING, UNEMPLOYMENT INSURANCE, AND OTHER POSTTERMINATION ISSUES

MULTIPLE CHOICE QUESTIONS

1. Which of the following is true of a trade secret?
a. it derives economic value from not being known to others
b. the owner must take steps to preserve its secrecy
c. it must be registered with the government
d. a and b
e. all of the above

2. In Roquet v. Arthur Anderson, the plaintiffs sued for an alleged violation of the WARN Act’s notification provisions. Arthur Anderson defended by saying that they should not be held to the 60 day requirement because of the particular business circumstances in this case. The court said that:
a. the 60 notice obligation is eliminated if the layoff is caused by business circumstances that were not probably foreseeable
b. the 60 notice obligation is eliminated if the layoff is caused by business circumstances that were not reasonably foreseeable
c. the moment the Department of Justice informed the defendant that they were considering an indictment, the defendant had the obligation to notify its employees of the inevitable layoffs
d. when a company’s felonious misconduct is the cause of its financial difficulties, this negates the exception to the WARN notification requirements, and the company cannot claim that they were trying to avoid layoffs or “fighting to stay afloat”

3. Non-competition agreements:
a. are almost always enforced by the courts
b. will be enforced unless former employees can show that the agreements are overly broad
c. will not be enforced unless the former employer can show that they are no more restrictive than necessary
d. are less commonly used now than in the past
e. none of the above

4. Which of the following is a type of restrictive covenant?
a. non-competition agreement
b. non-solicitation agreement
c. all of the above
d. none of the above

5. To be eligible for unemployment insurance:
a. the employee must be involuntarily unemployed
b. the employee must be willing to perform any work that is offered
c. the employee must be available to work within 90 days of becoming unemployed
d. all of the above
e. none of the above

6. Imagine that you are the judge hearing a Motion for Summary Judgment. The case before you concerns the former Vice-President of Marketing at May Department stores, who has recently been hired by Victoria’s Secret. May Department stores has sued to enforce the non-competition agreement in which the VP agreed not to work for firms competing directly against May Department store. Both parties agree that both stores sell women’s intimate apparel, but to different ages of women, and to different customer bases. They also agree that about 8% of May’s business is women’s intimate apparel, while 98% of Victoria’s business is women’s intimate apparel. What should you decide?
a. even though both companies sell women’s intimate apparel, there is no meaningful or material competition between them
b. when both companies sell the same category of products, in determining whether the companies are in competition, the sale of the products is important, not the percentages of overall sales of the product
c. when both companies sell the same category of products, the fact that they both sell these products to women is important in determining whether the companies are in competition, not the ages of the women, nor the typical customer base

7. Legal issues concerning downsizing include:
a. the decision to downsize
b. the manner in which downsizing is implemented
c. prior notification of downsizing
d. the decision about which individuals to downsize
e. all of these
f. none of these

8. Changes in benefit plans are under “serious consideration” when:
a. top managers meet to discuss implementation of a specific plan
b. the employer has firmly committed to offering the revised benefit plan
c. information has been gathered regarding alternative plan options
d. all of the above
e. none of the above

9. Which of the following employees is most likely eligible for unemployment insurance?
a. Joe is fired for continually refusing to wear a hard hat in a restricted area in violation of company policy
b. Kathy quits her job because of a pervasive and continuing hostile environment
c. Mike quits his job as an English professor because he’s insulted that a new hire in Management is getting a higher salary than he does
d. all of the above
e. none of the above

10. Under the WARN Act:
a. large employers are prohibited from closing plants or laying employees off for the purpose of defeating unionization
b. large employers must give their employees three months (90 days) advance notice of plant closings and mass layoffs
c. large employers must provide outplacement services to employees affected by plant closings and mass layoffs
d. all of the above
e. none of the above

11. An employer decides to downsize to cut costs. It plans to eliminate 100 jobs out of 250 total jobs. The employer notifies the employees’ union representative on May 15. The layoffs will be effective May 30. If the employer’s action is legally challenged, a court would most likely decide:
a. For the employer because it is not large enough to be covered under the WARN Act
b. For the employer because there is no plant closing or mass layoff that would trigger the WARN Act’s requirements
c. For the employees because they did not receive individual notification as required by the WARN Act
d. For the employees because they did not receive the amount of advance notice of a mass layoff required by the WARN Act
e. For the employees because they did not receive severance pay as required by the WARN Act

12. An employer who closes the business rather than deal with the union his employees have formed:
a. does not violate the National Labor Relations Act
b. violates the National Labor Relations Act if it can be proven that the motive was hostility toward unionization
c. must bargain in good faith with the union before deciding to go out of business
d. is required under the WARN Act to give the employees 60 days notice

13. A 55 year old supervisor who has always received good performance appraisals is downsized. Two younger (42 and 45 year old) supervisors from the same department, whose performance had been rated lower, were nonetheless retained. The employer says that it had to save money and that the older supervisor earned considerably more money (he did). If the termination is legally challenged, a court would most likely decide:
a. For the employer because employee could not establish a prima facie case of age discrimination under the ADEA
b. For the employer because the employees retained were also over 40 years of age
c. For the employer because it had a lawful, non-discriminatory motive for the termination
d. For the employee because the employer has engaged in disparate treatment based on age
e. For the employee because salary level is a neutral criterion that creates adverse impact against older employees

14. Which of the following laws has the most exacting requirements for a valid separation agreement?
a. The Age Discrimination in Employment Act
b. Title VII
c. The Older Workers Benefit Protection Act
d. The Americans with Disabilities Act

15. In Cotter v. Boeing, a 52 year old employee with 34 years on the job was downsized during a RIF. On a new performance scale prepared for the RIF, the one item at which she excelled was eliminated, and she scored badly, compared to a younger worker with less experience. The younger worker was retained. Earlier that same year, her supervisor had rated her as “doing a great job.” She sued under the ADEA, and the trial court entered Summary Judgment against her. On appeal, the court ruled:
a. for the employer, because the employee scored poorly on the performance scale
b. for the employer, because the employee had not conclusively proven that she was terminated because of her age
c. for the employee because she had proven age discrimination in her termination
d. for the employee, because she had raised material questions of fact, so that summary judgment was reversed, and the case remanded for trial

16. Regarding early retirement incentives, all of the following are true EXCEPT:
a. early retirement incentives are discriminatory if based on age
b. early retirement incentives may be offered to employees above a certain age, for example, age 55, but not, for example, also to those between 40 and 45
c. early retirement incentives are a legal way to reduce the workforce
d. early retirement incentive may be used to reduce the number of highly-paid employees

17. Regarding the bankruptcy filing of an employer, which of the following statements is NOT true?
a. employees are secured creditors
b. employees are unsecured creditors
c. employees as creditors stand high in priority in a Chapter 11 bankruptcy filing
d. none of these is true

18. With regard to unemployment insurance, which of the following statements is true?
a. only workers who have been fired are eligible for unemployment insurance
b. only workers who quit are eligible for unemployment insurance
c. only workers who are involuntarily terminated are eligible for unemployment insurance
d. employers should routinely context all claims for unemployment insurance

19. Because of the worsening economic situation, your firm needs to drastically cut back, and downsize up to 40% of its workers. The firm has a reputation and tradition of being a firm that rewards the good skills and loyalty of its workers, and many have been with your firm for more than 30 years. The firm has been in your family for more than 100 years, and you are the 3rd generation CEO. Frankly, what would help the most is to lay off all of those workers who are earning in excess of $80,000/year, retaining those who are earning between $40,000 and $50,000/year. That would reduce your overhead dramatically (and your health insurance costs). But almost all of the workers who earn in excess of $80,000 are age 50 or over, and unlikely to ever find comparable jobs elsewhere. Which of the following options would be consistent with your firm’s core values and its long-term survival?
a. downsize all workers making in excess of $80,000/year; since salary is the only consideration, the action is legal
b. offer significant early retirement packages in exchange for a waiver of claims to workers earning in excess of $80,000/year; it may cost you in the short term, but it is consistent with your family’s legacy and the firm’s core values, and ultimately will help the firm’s long-term survival
c. do a targeted review of the skill sets of all employees, including those earning less than $80,000/year, to determine where there is an overlap and you can afford to let people go without damaging the firm’s knowledge and skill base; downsize the people who are earning the most in each skill set, whatever their ages
d. either b or c might be consistent with your core values and long-term survival

20. Regarding restrictive covenants, which of the following statements is NOT correct?
a. restrictive covenants help protect an employer’s business assets
b. restrictive covenants are upheld only for top level managers and CEOs
c. restrictive covenants attempt to curtain many types of competitive conduct
d. all of these are true

ESSAY QUESTIONS

1. Why is each of the following good legal advice?

a. Before outsourcing or relocating work to another plant, unionized employers must negotiate with their employees’ unions

b. Employers should have clear, objective criteria for deciding which employees to downsize

c. Whenever possible, employers should offer employees selected for downsizing the opportunity to transfer to other facilities.

d. Employers should be careful when executing waivers of legal claims in exchange for early retirement offers.

2. On occasion, disgruntled former and current employees use various means to level criticism against, or create embarrassment, with regard to their former or current employer. Employers in turn will file law suits to stop the employee’s communications. What effect do these employer lawsuits have?

FIN 317 Week 11 Final Exam – Strayer University New

FIN/317 Week 11 Final Exam – Strayer

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Chapters 7 Through 15

Part 1: Chapters 7 Through 11
Part 2: Chapters 12 Through 15

CHAPTER 7

TYPES AND COSTS OF FINANCIAL CAPITAL

True-False Questions

1. The accounting emphasis on accrued revenue and expenses and depreciation is the same emphasis as that of finance managers.

2. Traditional accounting does not focus on the implicit cost of equity that is the required capital gains to complement dividends. However, evaluation methods exist to determine this value by financial managers.

3. Formal historical accounting procedures include explicit records of debt (interest and principal) and dividend capital costs.

4. Public financial markets are markets for the creation, sale and trade of illiquid securities having less standardized negotiated features.

5. A venture’s “riskiness” in terms of poor performance or failure is usually very high during the maturity stage of its life cycle.

6. A venture’s “riskiness” in terms of poor performance or failure is usually high to moderate during the rapid-growth stage of its life cycle.

7. First-round financing during a venture’s survival stage comes primarily from venture capitalists and investment banks.

8. Startup financing usually comes from entrepreneurs, business angels, and investment bankers.

9. Commercial banks provide liquidity-stage financing for ventures in the rapid-growth stage of their life cycles.

10. A venture’s “riskiness” in terms of the likelihood of poor performance or failure decreases as it moves from its development stage through to its rapid-growth stage.

11. A nominal interest rate is an observed or stated interest rate.

12. The “real interest rate” (RR) is the interest one would face in the absence of inflation, risk, illiquidity, and any other factors determining the appropriate interest rate.

13. The risk-free interest rate is the interest rate on debt that is virtually free of inflation risk.

14. Inflation premium is the rising prices not offset by increasing quality of goods being purchased.

15. “Default-risk” is the risk that a borrower will not pay the interest and/or the principal on a loan.

16. The “prime rate” is the interest rate charged by banks to their highest default risk business customers.

17. Bond ratings reflect the inflation risk of a firm’s bonds.

18. The relationship between real interest rates and time to maturity when default risk is constant is called the term structure of interest rates.

19. The graph of the term structure of interest rates, which plots interest rates to time to maturity is called the yield curve.

20. Liquidity premiums reflect the risk associated with firms that possess few liquid assets.

21. Subordinated debt is secured by a venture’s assets, while senior debt has an inferior claim to a venture’s assets.

22. Early-stage ventures tend to have large amounts of senior debt relative to more mature ventures.

23. Investment risk is the chance or probability of financial loss on one’s venture investment, and can be assumed by debt, equity, and founding investors.

24. A venture with a higher expected return relative to other ventures will necessarily have a higher standard deviation or returns.

25. Historically, large-company stocks have averaged higher long-term returns than small-company stocks.

26. The coefficient of variation measures the standard deviation of a venture’s return relative to its expected return.

27. Closely held corporations are those companies whose stock is traded over-the-counter.

28. Typically, the stocks of closely held corporations aren’t publicly traded.

29. Organized exchanges have physical locations where trading takes place, while the over-the-counter market is comprised of a network of brokers and dealers that interact electronically.

30. Market cap is determined by multiplying a firm’s current stock price by the number of shares outstanding.

31. The excess average return of long-term government bonds over common stock is called the market risk premium.

32. The weighted average cost of capital is simply the blended, or weighted cost of raising equity and debt capital.

33. Venture capital holding period returns (all stages) for the 10-year period ending in 2012 were about the same as the returns on the S&P 500 stocks.

Multiple-Choice Questions

1. Which one of the following markets involve liquid securities with standardized contract features such as stocks and bonds?
a. private financial market
b. derivatives market
c. commodities market
d. real estate market
e. public financial market

2. Which of the following markets involve direct two-party negotiations over illiquid, non-standardized contracts such as bank loans and direct placement of debt?
a. primary market
b. secondary market
c. options market
d. private financial market
e. public financial market

3. Which of the following is an example of rent on financial capital?
a. interest on debt
b. dividends on stock
c. collateral on equity
d. a and b
e. a, b, and c

4. Which of the following describes the observed or stated interest rate?
a. real rate
b. nominal rate
c. risk-free rate
d. prime rate
e. inflation rate

5. Which of the following describes the interest rate in addition to the inflation rate expected on a risk-free loan?
a. real rate
b. nominal rate
c. risk-free rate
d. prime rate
e. inflation rate

6. Which of the following describes the interest rate on debt that is virtually free of default risk?
a. real rate
b. nominal rate
c. risk-free rate
d. prime rate
e. inflation rate

7. Which of the following describes the interest rate charged by banks to their highest quality customers?
a. real rate
b. nominal rate
c. risk-free rate
d. prime rate
e. inflation rate

8. Which of the following is not a component in determining the cost of debt?
a. inflation premium
b. default risk premium
c. liquidity premium
d. maturity premium
e. interest rate premium

9. The additional interest rate premium required to compensate the lender for the probability that a borrower will not be able to repay interest and principal on a loan is known as?
a. inflation premium
b. default risk premium
c. liquidity premium
d. maturity premium
e. investment risk premium

10. The additional premium added to the real interest rate by lenders to compensate them for a debt instrument which cannot be converted to cash quickly at its existing value is called?
a. inflation premium
b. default risk premium
c. liquidity premium
d. maturity premium
e. investment risk premium

11. The added interest rate charged due to the inherent increased risk in long-term debt is called?
a. inflation premium
b. default risk premium
c. liquidity premium
d. maturity premium
e. investment risk premium

12. Suppose the real risk free rate of interest is 4%, maturity risk premium is 2%, inflation premium is 6%, the default risk on similar debt is 3%, and the liquidity premium is 2%. What is the nominal interest rate on this venture’s debt capital?
a. 13%
b. 14%
c. 15%
d. 16%
e. 17%

13. A venture has raised $4,000 of debt and $6,000 of equity to finance its firm. Its cost of borrowing is 6%, its tax rate is 40%, and its cost of equity capital is 8%. What is the venture’s weighted average cost of capital?
a. 8.0%
b. 7.2%
c. 7.0%
d. 6.2%
e. 6.0%

14. Your venture has net income of $600, taxable income of $1,000, operating profit of $1,200, total financial capital including both debt and equity of $9,000, a tax rate of 40%, and a WACC of 10%. What is your venture’s EVA?
a. $400,000
b. $200,000
c. $ 0
d. ($180,000)
e. ($300,000)

15. The “risk-free” interest rate is the sum of:
a. a real rate of interest and an inflation premium
b. a real rate of interest and a default risk premium
c. an inflation premium and a default risk premium
d. a default risk premium and a liquidity premium
e. a liquidity premium and a maturity premium

16. Venture investors generally use which one of the following target rates to discount the projected cash flows of ventures in the “startup” stage of their life cycles:
a. 20%
b. 25%
c. 40%
d. 50%

17. Which one of the following components is not used when estimating the cost of risky debt capital?
a. real interest rate
b. inflation premium
c. default risk premium
d. market risk premium
e. liquidity premium

18. Which of the following components is not typically included in the rate on short-term U.S. treasuries?
a. liquidity premium
b. default risk premium
c. market risk premium
d. b and c
e. a, b, and c

19. The word “risk” developed from the early Italian word “risicare” and means:
a. don’t care
b. take a chance
c. to dare
d. to gamble

20. The difference between average annual returns on common stocks and returns on long-term government bonds is called a:
a. default risk premium
b. maturity premium
c. risk-free premium
d. liquidity premium
e. market risk premium

21. What has been the approximate average annual rate of return on publicly traded small company stocks since the mid-1920s?
a. 10%
b. 16%
c. 25%
d. 30%
e. 40%

22. Venture investors generally use which one of the following target rates to discount the projected cash flows of ventures in the “development” stage of their life cycles:
a. 15%
b. 20%
c. 25%
d. 40%
e. 50%

23. Corporate bonds might involve which of the following types of “premiums.”
a. inflation premium
b. default risk premium
c. liquidity premium
d. maturity premium
e. all of the above
none of the above

24. Which of the following venture life cycle stages would involve seasoned financing rather than venture financing?
a. Development stage
b. Startup stage
c. Survival stage
d. Rapid-growth stage
e. Maturity stage

25. A venture’s “riskiness” in terms of possible poor performance or failure would be considered to be “very high” in which of the following life cycle stages:
a. Startup stage
b. Survival stage
c. Rapid-growth stage
d. Maturity stage

26. Which of the following types of financing would be associated with the highest target compound rate of return?
a. public and seasoned financing
b. second-round and mezzanine financing
c. first-round financing
d. startup financing
e. seed financing

27. The cost of equity for a firm is 20%. If the real interest rate is 5%, the inflation premium is 3%, and the market risk premium is 2%, what is the investment risk premium for the firm?
a. 10%
b. 12%
c. 13%
d. 15%

28. Use the SML model to calculate the cost of equity for a firm based on the following information: the firm’s beta is 1.5; the risk free rate is 5%; the market risk premium is 2%.
a. 4.5%
b. 8.0%
c. 9.5%
d. 10.5%

29. Calculate the weighted average cost of capital (WACC) based on the following information: the capital structure weights are 50% debt and 50% equity; the interest rate on debt is 10%; the required return to equity holders is 20%; and the tax rate is 30%.
a. 7%
b. 10%
c. 13.5%
d. 17.5%
e. 20%

30. Calculate the weighted average cost of capital (WACC) based on the following information: the equity multiplier is 1.66; the interest rate on debt is 13%; the required return to equity holders is 22%; and the tax rate is 35%.
a. 11.5%
b. 13.9%
c. 15.0%
d. 16.6%

31. Calculate the after-tax WACC based on the following information: nominal interest rate on debt = 16%; cost of common equity = 30%; equity to value = 60%; debt to value = 40%; and a tax rate = 25%.
a. 10%
b. 16%
c. 19.8%
d. 22.8%
e. 30%

32. Calculate the after-tax WACC based on the following information: nominal interest rate on debt = 12%; cost of common equity = 25%; common equity = $700,000; interest-bearing debt = $300,000; and a tax rate = 25%.
a. 15%
b. 16.4%
c. 20.2%
d. 22.8%
e. 30%

33. Venture capital holding period returns (all stages) for the 20-year period ending in 2012, had a compound average return of approximately:
a. 35%
b. 28%
c. 21%
d. 14%
e. 7%

Supplemental Problems related to Chapter 7 Appendix A (and Chapter 4 Appendix A)

1. Estimate a firm’s NOPAT based on: Net sales = $2,000,000; EBIT = $600,000; Net income = $20,000; and Effective tax rate = 30%.
a. $600,000
b. $420,000
c. $150,000
d. $70,000
e. $40,000

2. Estimate a firm’s economic value added (EVA) based on: NOPAT = $400,000; amount of financial capital used = $1,600,000; and WACC = 19%.
a. $26,000
b. $36,000
c. $96,000
d. $54,000
e. $64,000

3. Find a venture’s “economic value added” (EVA) based on the following information: EBIT = $200,000; financial capital used = $500,000; WACC = 20%; effective tax rate = 30%.
a. $20,000
b. $25,000
c. $30,000
d. $40,000
e. $50,000

CHAPTER 8

SECURITIES LAW CONSIDERATIONS WHEN OBTAINING VENTURE FINANCING

True-False Questions

1. The securities Exchange act of 1934 provides for the regulation of securities exchanges and over-the-counter markets.

2. The Investment Company Act of 1940 defines investment companies and excludes them from using some of the registration exemptions originating in the 1933 Ac

3. The Investment Advisers Act of 1940 provides a definition of an investment company.

4. According to the Investment Advisers Act of 1940, a bank would not be classified as an “investment advisor”.

5. The Securities Act of 1933 is the main body of federal law governing the creation and sale of securities in the U.S.

6. The Securities Exchange Act was passed in 1933 and the Securities Act was passed in 1934.

7. The trading of securities is regulated under the Securities and Exchange Act of 1954.

8. Regulation of investment companies (including professional venture capital firms) is carried out under the Investment Company Act of 1940.

9. State laws designed to protect high net-worth investors from investing in fraudulent security offerings are known as blue-sky laws.

10. Offerings and sales of securities are regulated under the Securities Act of 1933 and state blue-sky laws.

11. Blue-sky laws are federal laws designed to protect individuals from investing in fraudulent security offerings.

12. The typical business organization for a venture in its rapid-growth stage is a partnership or LLC.

13. Investor liability in a limited liability company (LLC) is limited to the owners’ investments.

14. Investor liability in a proprietorship or corporation is unlimited.

15. The life of a proprietorship is determined by the owner.

16. It is usually easier to transfer ownership in a proprietorship relative to a corporation.

17. The two basic types of exemptions from having to register securities with the SEC are security and transaction exemptions.

18. The Securities Act of 1933 provides a very narrow definition as to what constitutes a security.

19. SEC Rule 147 provides guidance on the issuer’s diligent responsibilities in assuring that offerees are in-state and that securities don’t move across state lines.

20. A private placement, or transactions by an issuer not involving any public offering, is exempt from registering the security.

21. Accredited investors are specifically protected by the Securities Act of 1933 from investing in unregistered securities issues.

22. The typical business organization for a venture in its rapid-growth stage is a partnership or LLC.

23. In SEC v. Ralston Purina (1953), the U.S. Supreme Court took an important step toward defining a public offering for the purposes of Section 4(2) of the Securities Act of 1933.

24. SEC Regulation D requires the registration of securities with the SEC.

25. An early stage venture that is not an investment company and has written compensation agreements can structure compensation-related securities issues so they are exempt from SEC registration requirements.

26. SEC Regulation D took effect in 1932 and provides the basis for “safe harbor” as a private placemen

27. Rule 504 under Regulation D has a $2 million financing limit (i.e., applies to sales of securities not exceeding $2 million).

28. A Rule 504 exemption under Regulation D has no limit in terms of the number and qualifications of investors.

29. A Regulation D Rule 505 offering cannot exceed $5 million in a twelve-month period.

30. A Regulation D Rule 505 offering is limited to 35 accredited investors.

31. A Regulation D Rule 506 offering has no limit in terms of the dollar amount of the offering but is limited to 35 unaccredited investors.

32. Regulation A, while technically considered an exemption from registration, is a public offering rather than a private placemen

33. Regulation A allows for registration exemptions on private security offerings so long as all investors are considered to be financially sophisticated.

34. Regulation A issuers are allowed to “test the waters” before preparing the offering circular (unlike almost all other security offerings).

35. Regulation A offerings are allowed up $10 million and do not have limitations on the number or sophistication of offerees.

36. The objective of the Jumpstart Our Business Startups Act of 2012 is to stimulate the initiation, growth, and development of small business companies.

37. Title II of the JOBS Act of 2012 eliminates the general solicitation and advertising restriction for Regulation D 506 offerings.

Note: Following are true-false questions relating to materials presented in Appendix B of Chapter 8.

1. The definition of an “accredited investor,” initially defined in the Securities Act of 1933, was expanded in Rule 501 of Reg D.

2. One of the monetary requirements for individuals or natural persons as accredited investors as defined in Regulation D Rule 501 is a net worth greater than $1,000,000.

3. One of the monetary requirements for individuals or natural persons as accredited investors as defined in Regulation D Rule 501 is individual annual income greater than $500,000.

4. Regulation D Rule 502 focuses, in part, on resale restrictions imposed on privately-placed securities.

5. Rule 503 of Regulation D states that a Form D should be filed with the SEC within six months after the first sale of securities.

Multiple-Choice Questions

1. Which of the following is not true regarding the Securities Act of 1933?
a. it was passed in response to abuses thought to have contributed to the financial catastrophes of the Great Depression
b. it covers securities fraud
c. it requires securities to be registered formally with the federal government
d. it set of the nature and authority of the Securities and Exchange Commission
e. it focuses on those who provide investment advice

2. The U.S. federal law that impacts the creation and sales of securities is:
a. Securities Exchange Act of 1934
b. Securities Act of 1933
c. Investment Company Act of 1940
d. Investment Advisers Act of 1940

3. The efforts to regulate the trading of securities takes place under which of the following securities laws?
a. Securities Act of 1933
b. state “blue-sky” laws
c. Securities and Exchange Act of 1934
d. Investment Company Act of 1940
e. Investment Advisers Act of 1940

4. Efforts to regulate the offerings and sales of securities take place under which of the following securities laws?
a. Securities Act of 1933
b. state “blue-sky” laws
c. Securities and Exchange Act of 1934
d. Investment Company Act of 1940
e. Investment Advisers Act of 1940
Both a and b
g. Both a and c

5. In securities law, which of the following is (are) true?
a. ignorance is no defense
b. security regulators may alter your investment agreement to the benefit of the investors
c. Securities Act of 1933 gives the SEC broad civil procedures to use in enforcement
d. Securities Act of 1933 gives the SEC some criminal procedures to use in enforcement
e. a, b, and c above
a, b, c, and d above

6. Which of the following is not a security?
a. treasury stock
b. debenture
c. put option
d. real property
e. call option

7. State securities regulations are referred to as:
a. Regulation A legislation
b. “stormy day” laws
c. “blue sky” laws
d. SEC oversight legislation

8. Which of the following is not true about registering securities with the SEC?
a. it is a time consuming process
b. it required the disclosure of accounting information
c. it is usually done with the help of an investment bank
d. it is an inexpensive process
e. it provides information to prospective investors

9. All of the following do not create any securities registration responsibilities except?
a. Treasury securities
b. Municipal bonds
c. securities issued by publicly held companies
d. securities issued by banks
e. securities issued by the government

10. Ventures that reach their survival stage of their life cycles and seek first-round financing are typically organized as:
a. proprietorships or partnerships
b. LLCs or corporations
c. corporations
d. partnerships or LLCs
e. proprietorships or corporations

11. Investor liability is “unlimited” under which of the following types of business organizational forms?
a. proprietorship
b. limited liability company (LLC)
c. corporation
d. S corporation
e. S limited liability company (SLLC)

12. Which one of the following is not a requirement for registration of securities with the SEC?
a. the name under which the issuer is doing business
b. the name of the state where the issuer is organized
c. the names of all products sold by the issuer
d. the names and addresses of the directors
e. the names of the underwriters

13. The returning of all funds to equity investors as a common “remedy” for a “fouled up” securities offering is called:
a. just action
b. fraud
c. second round financing
d. a rescission
e. mezzanine financing

14. “Security” exemptions from registration with the SEC include which of the following:
a. securities issued by banks and thrift institutions
b. government securities
c. intrastate offerings
d. securities issued by large, high quality corporations
e. a, b, and c above
f. a, b, c, and d above

15. The basic types of “transaction” exemptions for registration with the SEC are:
a. private placement exemption
b. “too big to fail” exemption
c. accredited investor exemption
d. intrastate offering exemption
e. a and c above
b and d above

16. In the Ninth Circuit Court of Appeals decision on SEC v. Murphy, all of the following were considerations in determining an offering to be a private placement except:
a. there must be an arm’s length relationship between the issuer of the security and the prospective purchaser
b. the number of offerees must be limited
c. the size and the manner of the offering must not indicate widespread solicitation
d. the offerees must be sophisticated
e. some relationship between the offerees and the issuer must be present

17. Which SEC Regulation took effect in 1982 and provides the basis for “safe harbor” as a private placement?
a. Regulation A
b. Regulation B
c. Regulation C
d. Regulation D
e. Regulation E

18. Unless your security is exempted, what Section of the Securities Act of 1933 requires you to file a registration statement with the SEC?
a. Section 1
b. Section 2
c. Section 3
d. Section 4
e. Section 5

19. Which one of the following is not an exemption method for making an offering exempt from SEC registration?
a. 4(2) private offering
b. accredited investor
c. Regulation D
d. Regulation A
e. Regulation Z

20. Exemptions for private placement offerings and sales of securities in the amount of $2 million are handled under which one of the follow rules under Regulation D?
a. Rule 501
b. Rule 502
c. Rule 503
d. Rule 504
e. Rule 505

21. Which one of the following SEC registration exemptions has a financing limit in a 12-month period and permits a maximum of 35 unaccredited investors?
a. Section 4(2)
b. Reg D: Rule 504
c. Reg D: Rule 505
d. Reg D: Rule 506
e. Regulation A

22. Rule 504 of Regulation D limits the total number of investors to:
a. 35
b. 100
c. 35 unaccredited investors and any number of accredited investors
d. there is no limit on the number of accredited or unaccredited
investors

23. Offerings exempted from registration under rule 505 of Regulation D may raise up to $5 million in a:
a. 6-month period
b. 9-month period
c. 12-month period
d. 18-month period
e. 24-month period

24. Rule 506 of Regulation D is limited in terms of the number of unaccredited investors to:
a. 20
b. 25
c. 30
d. 35
e. 40

25. Which one of the following “rules” under Regulation D has a $5 million financing limit?
a. Rule 504
b. Rule 505
c. Rule 506
d. Rule 507
e. Rule 508

26. While Section 4(2) does not limit the dollar amount of an offering, the interpretation of the law has stipulated that:
a. the investors must be sophisticated
b the number of investors must be limited to 35
c. the funds must be raised within a 12-month period
d. the offering must be extended to the public, and not only investors
who have a relationship with the issuer

27. An offering that raises $2,500,000 over a 12-month period, involving 35 unaccredited investors and 5 accredited investors, might be exempt from registration under:
a. Section 4(6)
b. Regulation D: Rule 504
c. Regulation D: Rule 505
d. none of the above

28. Which one of the following is not a characteristic of Regulation A?
a. An offering is limited to $5 million
b. the number offerees or investors is limited to 35
c. the offering is a public offering
d. the securities issued can generally be freely resold

29. Of the following, which is not true about Regulation A?
a. it is shorter and simpler than the full registration
b. it does not have limitations on the number or sophistication of offerees.
c. it is a public offering rather than a private placement
d. it can generally be freely sold
e. it requires no offering statement be filed with the SEC

30. Which of the following exemptions involves a public, and not a private, offering?
a. Section 4(2)
b. Rule 501
c. Rule 505
d. Rule 506
e. Regulation A

31. Under Regulation A, which one of the following is not true?
a. issuers are allowed to test the waters prior to preparing the offering circular
b. after filing a SEC statement, the issuer can communicate with perspective investors orally, in writing, by advertising in newspapers, radio, television, or via the mail to determine investor interest
c. issuers can take commitments or funds
d. there is a formal delay of 20 calendar days before sales are made
e. if the interest level is insufficient, the issuer can drop Regulation A filing

32. The JOBS Act of 2012 provides for which of the following:
a. establishes a new business classification called “Emerging Growth Company”
b. lifts restrictions on general solicitation and advertising for Reg D 506 accredited investor offerings
c. establishes a small offering registration exemption and calls for SEC rules relating to the sales of securities to an Internet :crowd” (security crowd funding)
d. a and b above
e. a, b, and c

Note: Following are multiple-choice questions relating to materials presented in Appendix B of Chapter 8.

1. Rule 501 of Regulation D expands the categories of accredited investors. Which is not one of the categories?
a. any organization formed for the specific purpose of acquiring securities with assets in excess of $5 million
b. any director or executive officer of the issuer of securities being sold
c. any individual whose net worth exceeds $1 million
d. any partnership
e. any trust with total assets greater the $5 million

2. Which of the following is not a condition of a Regulation D offering under Rule 502?
a. integration
b. offering
c. information
d. solicitation
e. resale

3. Which of the following are requirements of natural persons to be accredited investors under Regulation D Rule 501?
a. net worth greater than $5 million
b. total assets greater than $1 million
c. individual (single) annual income greater than $200,000
d. stock market portfolio greater than $2 million
e. all of the above

4. Rule 502 of Regulation D deals with:
a. integration
f. information
g. solicitation
h. resale
i. a and b above
e. a, b, c, and d above

5. Rule 503 dictates that for all Reg D exemptions, a Form D should be filed within how many days after the first sale of securities?
a. 1 day
b. 15 days
c. 30 days
d. six months
e. one year

6. The primary exemption from the prohibition of resale of unregistered securities (including, but not limited to, securities safely harbored in Rules 505 and 506 offerings) is:
a. Rule 111
b. Rule 122
c. Rule 133
d. Rule 144
e. Rule 147

CHAPTER 9

PROJECTING FINANCIAL STATEMENTS

True-False Questions

1. Long-term financial planning begins with a forecast of annual working capital needs.

2. In a typical venture’s life cycle, the rapid-growth stage involves creating and building value, obtaining additional financing, and examining exit opportunities.

3. Forecasting for firms with operating histories is generally much easier than forecasting for early-stage ventures.

4. Sales forecasts usually are based on either a single specific scenario or weighted averages of several possible realizations.

5. The weighted average of a set of possible outcomes or scenarios is known as expected values.

6. A customer-driven or “bottom-up” approach to forecasting sales is used primarily to forecast industry sales growth rates.

7. Sales forecasting accuracy is usually highest during a venture’s startup stage in its life cycle.

5. “Public or seasoned financing” typically occurs during the survival stage of a venture’s life cycle.

8. The volatility of a firm’s cash balance will steadily decreases as the firm progresses from the survival stage to the rapid-growth stage.

9. “First-round financing” usually occurs during a venture’s rapid-growth life cycle stage.

10. Sales forecasting accuracy is usually lowest during a venture’s development stage in its life cycle.

11. “Internally generated funds” is the cash produced from operating a firm over a specified time period.

12. The rate at which a firm can grow sales based on the retention of business profits is known as sustainable sales growth rate.

13. A firm’s maximum sustainable sales growth rate occurs at a retention ratio of 100%.

14. When using the beginning of period equity base, the sustainable sales growth rate is equal to ROE times the retention ratio.

15. The sustainable sales growth rate is equal to ROA times the retention ratio.

16. “Financial capital needed” (FCN) is the amount of funds needed to acquire assets necessary to support a firm’s sales growth.

17. The cost of obtaining additional funds, such as additional interest expenses from borrowing funds, may be explicit and impact AFN.

18. The added costs associated with obtaining equity capital are based on investor expected rates of return and are explicit costs which affect AFN.

19. “Additional funds needed” (AFN) is the gap remaining between the financial capital needed and that funded by spontaneously generated funds and retained earnings.

20. Increases in accounts receivable and accounts payable that accompany sales increases are called “spontaneously generated funds”.

21. “Spontaneously generated funds” are increases in accounts receivable and accounts payable that accompany sales increases.

22. Increases in accounts payable and notes payable are examples of spontaneously generated funds.

23. A firm with a positive growth rate in sales will require some additional funds, assuming the existing ratios will not be changed.

24. An increase in accounts receivable will require additional financing unless the increase is offset by an equal decrease in another asset accoun

25. The percent of sales forecasting method must project all cost and balance sheet items at the same growth rate as sales.

26. The “constant-ratio forecasting method” is a variant of the “percent-of- sales forecasting method.”

27. The constant ratio forecasting method makes projections based on the assumption that certain costs and some balance sheet items are best expressed as a percentage of sales.

Multiple-Choice Questions

1. Which of the following is not a step in forecasting sales for a seasoned firm?
a. forecast future growth rates based on possible scenarios and the probabilities of those scenarios.
b. attempt to corroborate the projected sales growth rates analyzing both industry growth rates and the firm’s own past market share.
c. refine the sales forecast by using the sales force as a direct contact with both existing and potential customers.
d. take into consideration the likely impact of major operating changes within the firm on the sales forecas
e. consider the effects of changes in the firm’s debt/equity blend on the sales forecasts.

2. Which of the following statements is incorrect?
a. forecasting sales is the first step in creating projected financial
statements
b. financial forecasting tends to be more accurate for mature ventures
than for early-stage ventures
c. forecasting is relatively unimportant for early-stage ventures with
little historical financial data
d. a and b
e. a and c

3. During which round of financing is a venture typically most accurate in forecasting sales?
a. seasoned financing
b. mezzanine financing
c. first round financing
d. startup financing
e. seed financing

4. During which life cycle stage is a venture typically most accurate in forecasting sales?
a. rapid growth stage
b. startup stage
c. development stage
d. early-maturity stage
e. survival stage
5. Public or seasoned financing is generally associated with which one of the following life cycle stages:
a. development stage
b. startup stage
c. survival stage
d. rapid-growth stage
e. early-maturity stage

6. A “new” venture usually begins its sales forecast by first:
a. forecasting industry sales and expressing the venture’s sales as a percent of industry sales
b. using a “bottom-up” market-driven approach
c. extrapolating past sales
d. working with existing and potential customers

7. An “expected value” is:
a. a simple average of a set of scenarios or possible outcomes
b. a weighted average of a set of scenarios or possible outcomes
c. the highest scenario value or outcome
d. the lowest scenario value or outcome

8. Lola is in the process of forecasting the sales growth rate for an early-stage venture specializing in the production of durable running shoes. Lola predicts a .2 probability of an 80% growth in sales, a .3 probability of a 60% growth in sales, a .4 probability of a 40% growth in sales, and a .1 probability of a 10% decrease in sales. What is the expected sales growth rate of the venture?
a. 47%
b. 49%
c. 51%
d. 53%

9. Which one of the following life cycle stages would generally be associated with the second lowest sales forecasting accuracy?
a. early-maturity
b. rapid-growth
c. survival
d. start-up
e. development

10. Internally generated funds which are available for distribution to owners of for reinvestment back into the business to support future growth can be characterized by which of the following?
a. operating income
b. operating cash flow
c. net income
d. net cash flow
e. pre-tax income

11. Which of the following is not part of the financial forecasting process used to project financial statements?
a. forecast sales
b. forecast tax rates
c. project the income statement
d. project the balance sheet
e project the statement of cash flows

12. A firm projects net income to be $500,000, intends to pay out $125,000 in dividends, and had $2 million of equity at the beginning of the year. The firm’s sustainable growth rate is:
a. 5%
b. 18.75%
c. 6.25%
d. 4.69%
e. none of the above

13. A firm has net income of $320,000 on sales of $3,200,000. Its assets total $2,000,000; the equity at the beginning of the year was $1,600,000 and dividends paid were $80,000. What is the sustainable growth rate?
a. 5%
b. 15%
c. 6.25%
d. 4.69%
e. none of the above

14. A sales growth rate based on the retention of profits is referred to as the:
a. real sales growth rate
b. sustainable sales growth rate
c. spontaneous sales growth rate
d. nominal sales growth rate
e. weighted average sales growth rate

15. Which one of the following ratios is not part of the “standard” return on equity (ROE) model?
a. net profit margin
b. asset turnover
c. equity multiplier
d. retention rate

16. If beginning of period common equity is $200,000 and end of period common equity is $300,000, the sustainable growth rate is:
a. 33%
b. 40%
c. 50%
d. 67%
e. 75%

17. Use the following information to estimate a venture’s sustainable growth rate: Net income = $200,000; Total assets = $1,000,000; equity multiple based on beginning common equity = 2.0 times; and Retention rate = 25%.
a. 50%
b. 25%
c. 20%
d. 10%
e. 5%

18. If a venture has a return on assets (ROA) = 10%, an equity multiplier based on beginning equity = 3.5 times, and a retention rate = 50%, the sustainable growth rate would be:
a. 10%
b. 17.5%
c. 35%
d. 40%
e. 20.5%

19. If a venture has a return on assets (ROA) = 10%, an equity multiplier based on beginning equity = 4.0 times, and a dividend payout ratio of 60%, the sustainable growth rate would be:
a. 10%
b. 16%
c. 20%
d. 24%
e. 40%

20. If a venture has a return on assets (ROA) = 12%, an equity multiplier based on beginning equity = 3.0 times, and a sustainable growth rate of 18%, the retention rate would be:
a. 10%
b. 20%
c. 30%
d. 40%
e. 50%

21. A venture’s common equity was $50,000 at the end of last year. If the venture’s common equity at the end of this year was $60,000, what was its sustainable sales growth rate?
a. 5%
b. 10%
c. 15%
d. 20%
e. 25%

22. A venture’s common equity account increased by $100,000 the past year and ended the year at $500,000. What was its sustainable sales growth rate?
a. 5%
b. 10%
c. 15%
d. 20%
e. 25%

23. Determine a venture’s sustainable growth rate based on the following information: sales = $1,000,000; net income = $100,000; common equity at the beginning of the year = $500,000; and the retention rate = 50%.
a. 10%
b. 15%
c. 20%
d. 25%
e. 30%

24. Determine a venture’s sustainable growth rate based on the following information: sales = $1,000,000; net income = $150,000; common equity at the end of last year = $520,000; and the dividend payout percentage = 20%.
a. 10%
b. 16%
c. 20%
d. 24%
e. 30%

25. Determine a firm’s “financial policy” multiplier based on the following information: sustainable growth rate = 20%; net profit margin = 10%; and asset turnover = 2 times.
a. 1.00
b. 1.25
c. 1.50
d. 1.75
e. 2.00

26. Determine a firm’s “return on assets” percentage based on the following information: sustainable growth rate = 20%; total assets $500,000; beginning of year common equity $200,000; and dividend payout percentage = 60%.
a. 10.0%
b. 12.5%
c. 15.0%
d. 17.5%
e. 20.0%

27. The financial funds needed to acquire assets necessary to support a firm’s sales growth is called: a. spontaneously generated funds
b. additional funds needed
c. addition in retained earnings
d. financial capital needed

28. The increase in accounts payables and accruals that occur with a sales increase is called:
a. spontaneously generated funds
b. additional funds needed
c. addition in retained earnings
d. financial capital needed

29. The financial funds still needed to finance asset growth after using spontaneously generated funds and any increase in retained earnings is called:
a. spontaneously generated funds
b. additional funds needed
c. addition in retained earnings
d. financial capital needed

30. Which one of the following would increase a firm’s need for additional funds?
a. an increasing profit margin
b. a decreasing expected sales growth rate
c. an increase in accruals
d. an increasing dividend payout rate
e. a decrease in assets

31. Your firm recorded sales for the most recent year of $10 million generated from an asset base of $7 million, producing a $500,000 net income. Sales are projected to grow at 20%, causing spontaneous liabilities to increase by $200,000. In the most recent year, $200,000 was paid out as dividends, and the current payout ratio will continue in the upcoming years. What is your firm’s AFN?
a. $200,000
b. $600,000
c. $840,000
d. $960,000
e. $1,400,000

32. Which of the following is a forecasting method used to project financial statements?
a. percent-of-sales method
b. percent-of-expenses method
c. GNP-ratio method
d. a and b
e. a, b, and c

33. When projecting financial statements, one would first , and then proceed to :
a. project of the balance sheet, forecast sales.
b. forecast sales, project the income statement
c. forecast sales, project the balance sheet
d. forecast sales, project the statement of cash flows

CHAPTER 10

VALUING EARLY-STAGE VENTURES

True–False Questions

1. The valuation approach involving discounting present value cash flows for risk and delay is called discounted cash flow (DCF).

2. The stepping stone year is the first year before the explicit forecast period.

3. The terminal or horizon value is the value of a venture at the end of its explicit forecast period.

4. The “stepping stone” year is the second year after the explicit forecast period when valuing a venture.

5. The explicit forecast period is the two to ten year period in which the venture’s financial statements are explicitly forecas

6. The maximum dividend valuation method involves explicitly forecasted dividends to provide surplus cash which is positive.

7. The easiest way to value a venture is to discount the projected maximum dividend/issue stream.

8. The pseudo dividend method treats surplus cash as a free cash flow to equity.

9. The reversion value of a venture is the present value of the venture’s terminal value.

10. A venture’s reversion value is the present value of ongoing expenses.

11. The “reversion value” is the future value of the terminal value.

12. The “terminal” value is the value of the venture at the beginning of the explicit forecast period.

13. As used in this textbook, the “terminal” value is the same as the “horizon” value.

14. Finding the present value of the horizon value produces the venture’s reversion value.

15. Surplus cash is the cash remaining after required cash, all operating expenses, and reinvestments are made.

16. Surplus cash is the cash remaining after required cash, all operating expenses, reinvestments, and dividends payouts are made.

17. Required cash is the amount of cash required to operate a venture through its day-to-day business.

18. Surplus cash is the amount of cash required to pay scheduled dividends for next quarter.

19. The capitalization or “cap” rate is the spread between the discount rate and the growth rate of cash flow in the terminal value period.

20. Pre-money valuation is the present value of a venture prior to a new money investmen

21. Post-money valuation is the pre-money valuation of a venture plus all monies previously contributed by the venture’s founders.

22. “Net operating working capital” is current assets other than surplus cash less non-interest-bearing current liabilities.

23. “Equity valuation cash flow” is defined as: net sales + depreciation and amortization expense – change in net operating working capital (excluding surplus cash) – capital expenditures + net debt issues.

24. The “pseudo dividend method” (PDM) is a valuation method involving zero explicitly forecasted dividends and an adjustment to working capital to strip surplus cash.

25. A “post-money” valuation differs from a “pre-money” valuation by the cost of financial capital.

26. Applying the “maximum dividend method” (MDM) and the “pseudo dividend method” (PDM) result in different valuation estimates.

27. The “maximum dividend method” assumes that all surplus cash will be paid out as dividends.

28. A pseudo dividend involves excess cash that does not need to be invested in a venture’s assets or operations, and may be invested elsewhere for a period of time.

29. The pseudo dividend method treats equity infusions and withdrawals in a “just in time” fashion.

30. The pseudo dividend method treats surplus cash either as stripped out while not in use or as employed outside the venture and stored in a zero NPV investmen

31. The wider the capitalization or “cap” rate (i.e., the discount rate minus the growth rate in the terminal period), the higher the terminal value.

Multiple-Choice Questions

1. The present value of the venture’s expected future cash flows is called?
a. going-concern value
b. present value
c. terminal value
d. reversion value
e. net present value

2. The value today of all future cash flows discounted to the present at the investor’s required rate of return is called?
a. going-concern value
b. present value
c. terminal value
d. reversion value
e. net present value

3. The value of the venture at the end of the explicit forecast period is called the horizon value, or what?
a. going-concern value
b. present value
c. terminal value
d. reversion value
e. net present value

4. The present value of the terminal value is called?
a. going-concern value
b. present value
c. terminal value
d. reversion value
e. net present value

5. The present value of a set of future flows plus the current undiscounted flow is called?
a. going-concern value
b. present value
c. terminal value
d. reversion value
e. net present value

6. The calculation of equity valuation cash flows nets the cash impact of all other balance sheet and income accounts to focus on the ______ account as the repository of any remaining cash flow.
a. cash
b. debt
c. equity
d. non-interest-bearing liabilities
e. net income

7. Equity valuation cash flow = Net income plus
a. Depreciation and amortization expense minus the change in net operating working capital plus capital expenditures plus net debt issues
b. Depreciation and amortization expense plus the change in net operating working capital plus minus capital expenditures plus net debt issues
c. Depreciation and amortization expense minus the change in net operating working capital plus capital expenditures minus net debt issues
d. Depreciation and amortization expense minus the change in net operating working capital plus minus capital expenditures plus net debt issues
e. Depreciation and amortization expense minus the change in net operating working capital plus capital expenditures plus net debt issues

8. In a wildly successful first year in business that started and ended with no required cash, your firm has operating income of $989,000, net income of $637,000, current assets of $900,000, current liabilities of $659,000, net capital expenditures were $690,000, and depreciation was $460,000. The firm has never financed itself with deb What is your equity valuation cash flow?
a. $648,000
b. $900,000
c. $2,028,000
d. $166,000

9. Your firm has been in business for two years. In its first year, the firm ended with $227,000 of current assets, long-term assets of $143,000, $70,000 in surplus cash, current liabilities of $52,000, and long-term assets of $68,000. At the end of the second year, current assets were $279,000, long-term assets of $195,000, surplus cash of $90,000, current liabilities of $62,000, and long-term assets of $78,000. What is your firm’s change in net operating working capital?
a. $22,000
b. $62,000
c. $42,000
d. $244,000
e. $32,000

10. The equity valuation method involving explicitly forecasted dividends to provide surplus cash of zero is called?
a. maximum dividend method
b. pseudo dividend method
c. sustainable growth method
d. dividend payout method

11. The equity valuation method involving zero explicitly forecasted dividends and an adjustment to working capital to strip surplus cash is called?
a. maximum dividend method
b. pseudo dividend method
c. sustainable growth method
d. dividend payout method

12. “Just in time” capital injections by equity investors is a reference to
a. sustainable growth
b. the present value of the terminal value
c. equity investors’ providing money only when needed
d. dividend payout

13. The maximum dividend method is
a. the cleanest for valuing assets, but creates problems valuing surplus cash
b. the cleanest for valuation purposes but its dividend-laden financial statements can dramatically understate the firm’s cash position
c. the cleanest for cash planning, but creates problems valuing the venture by discounting the dividends
d. calculated by directly discounting the cash flow statement’s projected dividend flow to investors, but ignores risks associated with periodic gluts of surplus cash

14. The pseudo dividend method is
a. the cleanest for valuing assets, but creates problems valuing surplus cash
b. the cleanest for valuation purposes but its dividend-laden financial statements can dramatically understate the firm’s cash position
c. the cleanest for cash planning, but creates problems valuing the venture by discounting the dividends
d. calculated by directly discounting the cash flow statement’s projected dividend flow to investors, but ignores risks associated with periodic gluts of surplus cash

15. “Required cash” is?
a. the cash needed to pay interest expense
b. a valuation method for early stage ventures
c. cash needed to cover a venture’s day-to-day operations
d. cash available to pay as a dividend

16. Most discounted cash flow valuations involve using cash flows from an:
a. historical period, an explicit forecast period, and a terminal value
b. historical period and a terminal value
c. historical period and an explicit forecast period
d. explicit forecast period and a terminal value

17. Which one of the following equity valuation methods records surplus cash on the balance sheet but assumes that the surplus cash is paid out over time for valuation purposes?
a. maximum dividend method
b. pseudo dividend method
c. sustainable growth method
d. return on equity method

18. When estimating the terminal value of a venture using an equity valuation method, a perpetuity growth equation is often applied that uses the capitalization rate for discounting purposes. This “cap” rate is measured as the:
a. equity discount rate minus the perpetuity growth rate
b. equity discount rate plus the perpetuity growth rate
c. risk-free rate plus the perpetuity growth rate
d. risk-free rate minus the perpetuity growth rate

19. A venture’s going-concern value is the:
a. present value of the expected future cash flows
b. net present value of the current and expected future cash flows
c. future value of the expected cash flows
d. net future value of the current and expected cash flows

20. The purpose of the stepping stone year is?
a. to assure that there is sufficient required cash
b. to assure that future dividends are constant
c. to assure that investment flows are consistent with terminal growth rates
d. to allow for a final year of higher-than-sustainable growth

21. When estimating the terminal value of a cash flow perpetuity, which one of the following is not a component?
a. the next period’s cash flow
b. a constant discount rate
c. a constant growth rate
d. the payback period

22. Which one of the following components is not a component of the equity valuation cash flow?
a. NOPAT
b. depreciation and amortization expense
c. change in net operating working capital (without surplus cash)
d. capital expenditures
e. net debt issues

23. What is the difference between pre-money valuation and post-money valuation?
a. size of the capitalization rate
b. amount of money injected by new investors
c. revision value
d. amount of money previously contributed by founders
e. amount of money previously contributed by venture investors

24. To calculate a terminal value, one divides the next period’s cash flow by the:
a. constant discount rate plus a constant growth rate
b. constant discount rate plus a variable growth rate
c. constant discount rate minus a constant growth rate
d. constant growth rate minus constant discount rate
e. constant growth rate plus a variable discount rate

25. The MDM equity valuation method is an abbreviation for:
a. minimum dividend method
b. maximum discount method
c. maximum dividend method
d. minimum discount method
e. Montgomery design method

26. The PDM equity valuation method is an abbreviation for:
a. pseudo dividend method
b. proximate dividend method
c. pseudo discount method
d. proximate discount method
e. pre-money discount method

27. Estimate a venture’s equity valuation cash flow based on the following information: net income = $6,372; depreciation = $4,600; change in net operating working capital = $2,415; capital expenditures = $6,900; and new debt issues = $1,000.
a. $6,487
b. $5,487
c. $4,487
d. $3,787
e. $5,787

28. Estimate a venture’s terminal value based on the following information: current year’s net income = $20,000; next year’s expected cash flow = $26,000; constant future growth rate = 7%; and venture investors’ required rate of return = 20%.
a. $156,846
b. $285,714
c. $200,000
d. $150,000
e. $428,571

29. Estimate a venture’s required rate of return based on the following information: terminal value = $400,000; current year’s net income = $20,000; next year’s expected cash flow = $25,000; and a constant growth rate = 7%.
a. 6%
b. 7%
c. 8%
d. 9%
e. 10%

30. Estimate a venture’s constant growth rate (g) based on the following information: terminal value = $400,000; current year’s net income = $20,000; next year’s expected cash flow = $25,000; and a required rate of return of 20%.
a. 2%
b. 4%
c. 6%
d. 8%
e. 10%

31. Which one of the following components is not a component of the equity valuation cash flow calculation?
a. net income
b. depreciation and amortization expense
c. change in net operating working capital (without surplus cash)
d. capital expenditures
e. net equity repurchases

32. Estimate a venture’s terminal value based on the following information: current year’s net sales = $500,000; next year’s expected cash flow = $16,000; constant future growth rate = 10%; and venture investors’ required rate of return = 20%.
a. $156,846
b. $285,714
c. $200,000
d. $150,000
e. $160,000

33. Estimate a venture’s cash flow expected next year based on the following information: current year’s net sales = $400,000; terminal value = $500,000; constant future growth rate = 10%; and venture investors’ required rate of return = 20%.
a. $20,000
b. $40,000
c. $50,000
d. $60,000
e. $80,000

CHAPTER 11

VENTURE CAPITAL VALUATION METHODS

True–False Questions

1. The venture capital valuation method estimates the venture’s value by projecting both intermediate and terminal/exit flows to investors.

2. Venture investors returns depend on the venture’s ability to generate cash flows or to find an acquirer for the venture.

3. The value of the venture’s equity is equal to the value the financing contributed in the first venture capital round.

4. A direct application of the earnings-per-share ratio to venture earnings is known as the direct comparison valuation method.

5. The venture capital valuation method which capitalizes earnings using a cap rate implied by a comparable ratio is known as direct capitalization.

6. Failure to account for any additional rounds of financing and its accompanying dilution in order to meet projected earnings will result in the investor’s not receiving an adequate number of shares to ensure the required percent ownership at the time of exi

7. Almost without exception, professional venture investors demand that some equity or deferred equity compensation be structured into any valuation.

8. If a venture issues debt prior to the exit period, the initial equity investors will still receive first claims on the venture’s net worth at exit time.

9. The utopia discount process allows the venture investors to value their investment using only the business plan’s explicit forecasts, discounting it at a bank loan interest factor.

10. The internal rate of return is the simple (non-compounded) interest rate that equates the present value of the cash inflows received with the initial investmen

11. The basic venture capital method estimates a venture’s value using only terminal/exit flows to all the venture’s owners.

12. The basic venture capital method estimates a venture’s value using only terminal/exit flows to founders.

13. Post-money valuation of a venture is the pre-money valuation plus money injected by new investors.

14. Staged financing is financing provided in sequences of rounds rather than all at one time.

15. In staged financing, the expected effect of future dilution is borne by both founders and the investors currently seeking to inves

16. The capitalization rate is the sum of the discount rate and the growth rate of the cash flow in the terminal value period.

17. The internal rate of return (IRR) is the compound rate of return that equates the present value of the cash inflows received with the initial investmen

18. The discount rate that one applies in a multiple scenario valuation will usually be lower than the discount rate that would be applied to the business plan cash flows.

19. All of the scenarios in a multiple scenario analysis must have exit cash flows in the same year.

20. The discount rate applied in an Expected PV approach should be the same rate across scenarios.

21. The expected present value method incorporates the present values of different scenarios, as well as their probabilities, into the valuation process.

Note: The following TF questions relate to Learning Supplements 11A and 11B:

1. The return on book equity equals the sustainable growth rate when all earnings are paid out in the form of dividends.

2. A price-earnings ratio is related to the level and growth of earnings.

3. The Venture Capital ShortCut (VCSC) method is a post-money version of the Delayed Dividend Approximation (DDA).

4. The VSCS and DDA methods are “just-in-time” capital methods which do not assess capital charges for idle cash.

5. For the typical business plan having current and early cash outflows and later-stage cash inflows, the VCSC and DDA methods will typically give lower valuations than the MDM and PDM.

6. The VSCS is like a post-money version of the DDA.

7. For the typical business plan having current and early cash outflows and later-stage cash inflows, the VSCS will give a higher valuation than the DDA.

8. The DDA and VCSC methods give the same valuation.

Multiple-Choice Questions

1. The return to venture investors directly depends on which of the following?
a. venture’s ability to generate cash flows
b. ability to convince an acquirer to buy the firm
c. the amount of its short-term liabilities
d. both a and b
e. all of the above

2. To obtain the percent ownership to be sold in order to expect to provide the venture investor’s target return, one must consider the:
a. cash investment today and the cash return at exit multiplied by the venture investor’s target return, then divide today’s cash investment by the venture’s NPV
b. cash investment today and the cash return at exit discounted by the venture investor’s target return, then divide today’s cash investment by the venture’s NPV
c. cash investment today and the cash return at exit multiplied by the venture investor’s target return, then divide today’s cash investment by the venture’s NPV
d. cash investment today and the cash return at exit discounted by the venture investor’s target return, then multiply today’s cash investment by the venture’s NPV

3. The value of the existing venture without the proceeds from the potential new equity issue is known as?
a. pre-money valuation
b. post money valuation
c. staged financing
d. the capitalization rate

4. The value of the existing venture plus the proceeds from the potential new equity issue is known as?
a. pre-money valuation
b. post money valuation
c. staged financing
d . the capitalization rate

5. Financing provided in sequences of rounds rather than all at one time is
known as?
a. pre-money valuation
b. post money valuation
c. staged financing
d. the capitalization rate

[Note: Use the following information for Problems 6 through 11.]

A potential investor is seeking to invest $500,000 in a venture, which currently has 1,000,000 million shares held by its founders, and is targeting a 50% return five years from now. The venture is expected to produce half a million dollars in income per year at year 5. It is known that a similar venture recently produced $1,000,000 in income and sold shares to the public for $10,000,000.

6. What is the percent ownership of our venture that must be sold in order to provide the venture investor’s target return?
a. 33.33%
b. 75.94%
c. 12.76%
d. 15.00%

7. What is the number of shares that must be issued to the new investor in order for the investor to earn his target return?
a. 3,156,276
b. 1,578,138
c. 4,156,276
d. 2,578,138

8. What is the issue price per share?
a. $0.1939
b. $0.1203
c. $0.3168
d. $0.1584

9. What is the pre-money valuation?
a. $120,300
b. $316,800
c. $158,400
d. $193,900

10. What is the post-money valuation?
a. $658,354
b. $499,954
c. $408,377
d. $249,977

11. What is the value of the venture in year five using direct capitalization?
a. $500,000
b. $5,000,000
c. $1,000,000
d. $100,000

12. For early stage ventures, which of the following is a strong reason for having an equity component in employee compensation?
a. the expected deferred and tax-preferred compensation allows the venture to pay a lower current compensation to employees
b. as a way to motivate employees to strive for the same goal of high equity value
c. because any dividends received as part of the equity compensation reduces taxable income
d. both a and b
e. all of the above

13. During the exit period, which of the following will have last crack at the venture’s wealth?
a. banks giving loans to the venture
b. convertible debt holders of the venture
c. initial equity investors of the venture
d. participating preferred equity holders

14. Suppose your venture’s expected mean cash flows are $(85,000) initially, followed by expected mean cash flows at the end of the first, second, and third years of $40,000, $40,000, and $35,000. What is the internal rate of return?
a. 13.9%
b. 14.7%
c. 16.2%
d. 17.2%
e. 19.2%

15. A P/E multiple refers to:
a. price/expectations multiple
b. price/earnings multiple
c. profit/EBIT multiple
d. profit/earnings multiple
e. price/EBITDA multiple

16. Estimate the value of a privately-held firm based on the following information: stock price of a comparable firm = $20.00; net income of a comparable firm = $20,000; number of shares outstanding for the comparable firm = 10,000; and earnings per share for the target firm = $3.00.
a. $10.00
b. $20.00
c. $30.00
d. $40.00
e. $50.00

17. Estimate the value of a privately-held firm based on the following information: total market value (or capitalization value) of a comparable firm = $200,000; net income of a comparable firm = $40,000; number of shares outstanding for the comparable firm = 20,000; net income for the target firm = $15,000; and number of shares outstanding for the target firm = 10,000.
a. $5.00
b. $7.50
c. $10.00
d. $12.50
e. $15.00

18. Determine the market value of a “comparable” firm based on the following information: value of target firm = $4,000,000; net income of target firm = $200,000; and net income of “comparable” firm = $500,000.
a. $4 million
b. $7.5 million
c. $10 million
d. $12.5 million
e. $15 million

19. Determine the net income of a “comparable” firm based on the following information: value of target firm = $4,000,000; net income of target firm = $200,000; stock price of “comparable” firm = $30.00; and 300,000 shares of stock outstanding for the comparable firm.
a. $450,000
b. $500,000
c. $550,000
d. $600,000
e. $700,000

20. Determine the future value of a target venture which has net income expected to be $40,000 at the end of four years from now. A comparable firm currently has a stock price of $20.00 per shares; 100,000 shares outstanding; and net income of $50,000.
a. $1.0 million
b. $1.4 million
c. $1.6 million
d. $2.0 million

21. Which of the following financing rounds dilutes the ownership founders?
a. first-round
b. second-round
c. incentive ownership round
d. a and b
e. a, b, and c

22. The utopian approach to valuation ignores which of the following venture scenarios:
a. black hole scenarios
b. living dead scenarios
c. both a and b
d. neither a or b

23. Which of the following is not a variation of the venture capital valuation method?
a. venture capital method
b. expected present value
c. utopian discount process
d. none of the above

Following are MC questions relating to Learning Supplements 11A and 11B:

1. When a firm has growth that only meets, rather than exceeds, the cost of capital, we would expect its price-earnings multiple to be approximately equal to:
a. the reciprocal of its required return on equity
b. its earnings per share
c. its book-to-market ratio
d. its debt-to-value ratio

2. The two “just-in-time” capital methods are:
a. DDA and VCSC
b. DDA and PDM
c. VSCS and MDM
d. MDM and PDM

3. For the typical venture investing project, the valuation will be highest under:
a. DDA
b. PDM and MDM
c. VCSC
d. initial book value of equity

CHAPTER 12

PROFESSIONAL VENTURE CAPITAL

True–False Questions

1. In addition to having personal financial stakes in their portfolio of investments, professional venture capitalists have raised funds from other investors to invest in the portfolio.

2. The establishment of the Small Business Administration was the first major government foray into venture investing.

3. Created by the Small Business Administration, Small Business Investment Companies possess important tax advantages and were eligible to borrow amounts up to four times their equity base from the governmen

4. Initially, Small business Investment Companies access to borrowed funds appeared attractive. This was because venture investing and debt service commitments are an ideal mixture of financing for start-ups.

5. Professional venture capital, as we know it today, did not exist before World War II.

6. Most venture investing came from wealthy individuals and families prior to World War II.

7. The beginning of professional venture capitalists began with the formation of American Research and Development in 1966.

8. In 1958 the Small Business Administration created Small Business Investment Companies.

9. The first major government foray into venture investing came with the formation of the Small Business Administration (SBA) in 1947.

10. The American Research and Development (ARD) company was formed in 1946.

11. Internet financing led the record level of venture investing in the 1999-2000 time period.

12. The phrase “two and twenty shops” refers to investment management firms having a contract that gives them two percent carried interest and 20 percent of assets annual management fee.

13. When the venture fund calls upon the investors to deliver their investment funds, it reflects the deal flow.

14. The deal flow reflects the flow of business plans and term sheets involved in the venture capital investing process.

15. In the venture investing context, due diligence describes the process of investigating a potentially worthy concept or plan.

16. The summary of the investment terms and conditions accompanying an investment proposed by the venture capitalist is known as the statement of strengths and weaknesses.

17. “Carried interest” is the portion of profits paid to the professional venture capitalist as incentive compensation.

18. The term “capital call” refers to the flow of business plans and term sheets involved in the venture capital investing process.

19. Pension funds are the dominant source of funds for venture investing.

20. Individuals and families are more important suppliers of venture capital relative to finance and insurance firms.

21. Endowments and foundations are more important suppliers of venture capital relative to individuals and families.

22. “Due diligence,” in venture investing context, is the process of ascertaining the viability of a business plan.

23. When a syndicate of VCs invests in a venture, the investor in charge of organizing the due diligence process is known as the “lead investor.”

24. SLOR stands for “standard letter of recognition.”

25. SLOR stands for “standard letter of rejection.”

26. A “term sheet” is a summary of the investment terms and conditions accompanying an investment by venture capitalists.

27. Term sheets consist of the terms and conditions accompanying an investment, as stipulated by the founders of the venture.

28. Two typical issues addressed in a term sheet are valuation and the size and staging of financing.

29. Term sheets may contain demands regarding the voting rights of shares issued to venture investors.

30. Once the venture capital firm has received exit proceeds from a venture in the form of cash or securities, some method of returning the proceeds (less the carried interest) must be determined.

31. Annual VC investments, as indicated in Figure 12.1, reached an all-time high in the year 2000.

32. According to Figure 12.4, individuals and families were the largest supplier of venture capital in 2009.

Multiple-Choice Questions

1. The beginning of professional venture capitalists is considered to have occurred:
a. prior to World War II
b. 1946
c. 1956
d. 1966
e. after the Vietnam War

2. The beginning of professional venture capitalists is considered to have begun with the establishment or formation of:
a. Small Business Administration
b. Small Business Investment Companies
c. American Research and Development organization
d. Professional Venture Capitalists organization

3. Which of the following was the largest source of venture capital funds in 2009 (as reported in Figure 12.4)?
a. pension funds and corporations
b. individuals and families
c. endowments and foundations
d. finance and insurance

4. Venture Capital firms tend to specialize in publicly identified niches because of the potential for value-added investing by venture capitalists. Which is not one of these niches?
a. industry type
b. venture stage
c. size of investment
d. management style
e. geographic area

5. As venture firms attract money from investors, it is placed in a fund. Important issues that must be put in place with the establishment of the fund include all of the following except:
a. determine the general partners
b. establishing a fee structure
c. a profit sharing arrangement
d. establish its governance
e. the management team assigned to each borrower

6. All of the following are typically part of a venture fund’s typical compensation and incentive structure except:
a. some percent annual fee on invested capital
b. a percent share of any profits to the managing general partner
c. carried interest
d. salary for the general partners

7. When evaluating the prospects of a new venture, venture capital firms consider which of the following?
a. characteristics of the proposal
b. characteristics of the entrepreneur/team
c. nature of the proposed industry
d. both b and c
e. all of the above

8. When screening prospective new ventures, venture capital firms consider their own funds’ requirements. Which of the following is not one of the venture firm’s requirements relating to its own funds?
a. investor control
b. rate of return
c. size of investment
d. probable stock listing exchange for the mature venture
e. financial provisions for investors

9. When evaluating the prospects of a new venture, venture capital firms consider the characteristics of the entrepreneur and its team. Which of the following is not part of the review of the entrepreneur/team?
a. its background and experience
b. its managerial capabilities
c. management’s stake in the firm
d. the VC firms’ ability to cash out
e. the capability to sustain an effort

10. When screening prospective new ventures, venture capital firms must consider the nature of the proposed industry. Which of the following is not part of the screening of the proposed industry?
a. market attractiveness
b. managerial references
c. potential size
d. technology
e. threat resistance

11. Professional venture investing usually involves setting up a venture capital firm as a:
a. proprietorship
b. corporation
c. partnership
d. S corporation

12. After a new professional venture capital fund is organized, the fund managers:
a. conduct due diligence and actively invest
b. solicit investments and obtain commitments
c. arrange harvest or liquidation
d. identify prospective venture investments and then solicit investments

13. After determining the next fund’s objectives and policies, the “professional venture investing cycle’s” next step is:
a. solicit investments in new fund
b. organize the new fund
c. obtain commitments for a series of capital calls
d. conduct due diligence and actively invest
e. arrange harvest or liquidation

14. The term “carried interest” refers to:
a. interest not currently paid but which must be paid in the future by a professional venture capitalist
b. interest transported directly to a bank
c. interest owed on a loan in default
d. the portion of profits paid to the professional venture capitalist as incentive compensation

15. If an investment management firm is known to be a “two and twenty shop”, this implies that the firm:
a. receives an annual 2% fee on invested capital, and a 20% carried interest
b. receives an annual 20% fee on invested capital, and a 2% carried interest
c. receives an annual 2% fee on gross operating profits, and a 20% carried interest
d. receives an annual 20% fee on gross operating profits, and a 2% carried interest

16. A venture fund calls upon its investors to deliver their investment funds. This is known as:
a. due diligence
b. deal flow
c. a capital call
d. carried interest
e. a SLOR

17. All of the following are typical issues addressed in a term sheet except?
a. valuation
b. board structure
c. registration rights
d. management fees
e. employment contracts

18. Term sheets are usually drafted by:
a. the mangers of the venture seeking VC funding
b. the VC fund seeking to fund the venture
c. management and founders
d. it is usually done by an third party, in order to
ensure the fair treatment of both parties

19. In a syndicate of venture investors, the investor who is responsible for governing the process of due diligence is:
a. the primary investor
b. the lead investor
c. a small group of secondary investors
d. the investor in charge of issuing SLORs for the syndicate
e. it is a democratic process that is shared by all investors in the group

20. A summary of the investment terms and conditions accompanying an investment is referred to as a:
a. term sheet
b. business plan
c. fund created by professional venture capitalists
d. due diligence in venture investing
e. capital call

21. When screening possible investments, a venture capital firm might issue an SLOR which stands for:
a. standard letter of rejection
b. standing letter of reconciliation
c. standard letter of reassessment
d. senior letter of reference

22. Which of the following is not one of the four likely outcomes of the venture firm’s screening process?
a. seek the lead investor position
b. seek a non-lead investor position
c. close the capital fund
d. refer the venture to more appropriate financial market participants
e. issue a standard letter of rejection

Note: The following MC questions relate to Figure 12.3 Elements of a Venture Capital Fund Placement Memorandum

1. In a Venture Capital Fund Placement Memorandum, which of the following is not a front matter declaration?
a. description of limited manner of the offering
b. targeted fund size
c. imposition of confidentiality
d. notice of lack of SEC registration
e. declaration of the highly risky nature of investment

2. In a Venture Capital Fund Placement Memorandum, which of the following is not part of the offering summary?
a. objective of formation
b. declaration of general partner
c. management fee
d. minimum capital restrictions
e. targeted fund size

3. In a Venture Capital Fund Placement Memorandum, which of the following is not part of the fund overview?
a. fund size
b. investment focus
c. fund management
d. portfolio size
e. general partners’ capital contributions

4. In a Venture Capital Fund Placement Memorandum, all of the following are part of the executive summary except?
a. special limited partners
b. general partners’ capital contributions
c. limitation of liability
d. allocation of gains and losses
e. imposition of confidentiality

5. In a Venture Capital Fund Placement Memorandum, all of the following are included in the summary of terms except?
a. indemnification
b. objective
c. liquidation
d. valuation
e. expenses

CHAPTER 13

OTHER FINANCING ALTERNATIVES

True–False Questions

1. Despite the high risk and costs of using a facilitator or up-front fee solicitor to obtain financing, many start-ups never-the-less seek them as a source of funds due to the length of time it takes to raise new funds.

2. Collateral plays an important role in determining the willingness to lend and the amount and terms of the loan, making it the most important factor in the lending process.

3. Commercial loan officers have the expertise to project new venture’s business successes, and thus are as willing to make funds available to entrepreneurs on the same basis as other businesses.

4. Because investors and commercial lenders both seek returns on the funds given to start-up firms, entrepreneurs can obtain financing as easily from either source.

5. Because of loan restrictions, obtaining funding from commercial lenders is prohibitive for entrepreneurs.

6. Unlike traditional commercial banks, venture banks typically provide debt to start-ups that have already received equity financing from professional venture capital firms.

7. Among start-ups, it is widely understood that bank debt (outside of Small Business Administration loans), is not a very realistic source of financing for ventures with less than two years operating results.

8. Compensation received by commercial loan officers makes them more likely to finance early-stage ventures.

9. Warrants allow lenders to buy equity at a specified price.

10. Warrants are a debt instrument frequently used by commercial banks when financing entrepreneurial ventures.

11. Credit cards issued to start-ups have proven to be an alternative source of start-up financing.

12. The returns to venture bank lenders are generated solely from interest payments made by borrowers plus the return of the loan principal.

13. Commercial banks receive a portion of their returns from warrants in addition to the receipt of interest and the repayment of the principal that was len

14. By an act of Congress, the Small Business Administration (SBA) was created for the purpose of fostering the initiation and growth of small businesses.

15. The Small Business Administration was created by an Act of Congress in 2003.

16. Microloans in the SBA credit program are intended for very small businesses with a maximum amount of $35,000 to be used for general purposes.

17. The SBA’s role in its microloan credit program is to approve the loans and guarantee up to 85% of the loan value.

18. Microloans in the SBA credit program are made by not-for-profit or government-affiliated Community Development Financial Institutions (CDFIs).

19. The SBA’s venture capital credit program works through Community Development Financial Institutions (CDFIs).

20. The 7(a) loan traditionally has been the SBA’s primary loan program

21. SBA 7(a) loans are made usually for 1 to 3 years in amounts up to $5,000,000, require collateral, and can be used for most business purposes.

22. The SBA approves the standard 7(a) loan and guarantees up to 85% of the loan value.

23. For the 504 loan, the SBA approves and guarantees the development company’s portion of the debt but does not guaranteed the debt of the participating commercial bank.

24. Factoring is the sale of payables to a third party at a discount to their face value.

25. In a factoring arrangement, the third party makes its money by purchasing the receivables at a discount from the total amount due on the receivables.

26. With venture leasing, one component of the return to the lessor is the opportunity to take an equity interest in the venture.

27. Receivables lending is the use of receivables as collateral for an equity issue.

28. Factoring is the selling of receivables to a third party at a discount from their face value.

29. Direct public offerings have recently become a serious challenge to traditional venture capital firms.

30. The Immigration and Nationality Act (INA) of 1990 provided an opportunity for foreign nationals to obtain a “green card” through the EB-5 immigrant visas program.

31. A foreign national may seek Lawful Permanent Resident (LPR) status by investing $1 million in the U.S. that will preserve or create at least 100 jobs for U.S. workers.

Multiple-Choice Questions

1. When assessing the creditworthiness of new entrepreneurs, lending institutions review the “Five C’s”. The ability of the entrepreneur to repay borrowed funds is known as:
a. capacity
b. capital
c. collateral
d. conditions
e. character

2. When assessing the creditworthiness of new entrepreneurs, lending institutions review the “Five C’s”. The money the entrepreneur has invested in the business, which is an indication how much is at risk if the business should fail is known as:
a. capacity
b. capital
c. collateral
d. conditions
e. character

3. When assessing the creditworthiness of new entrepreneurs, lending institutions review the “Five C’s”. The guarantees, or additional forms of security (such as assets), the entrepreneur can provide the lender is known as:
a. capacity
b. capital
c. collateral
d. conditions
e. character

4. When assessing the creditworthiness of new entrepreneurs, lending institutions review the “Five C’s”. The focus on the intended purpose of the loan is known as:
a. capacity
b. capital
c. collateral
d. conditions
e. character

5. When assessing the creditworthiness of new entrepreneurs, lending institutions review the “Five C’s”. The general impression the entrepreneur makes on the potential lender or investor is known as:
a. capacity
b. capital
c. collateral
d. conditions
e. character

6. All of the following are common loan restrictions except?
a. limits on total debt
b. limits on total equity
c. restrictions on dividends or other payments to owners and/or investors
d. restrictions on additional capital expenditures
e. performance standards on financial ratios

7. Unlike traditional commercial banks, venture banks typically provide debt to start-ups that have already received equity financing from professional venture capital firms. In return for providing additional debt financing, these venture banks receive in return all of the following except?
a. interest payments
b. repayment of principal
c. implementation of loan restrictions
d. tax breaks on the interest
e. right to buy equity at a specific price

8. Bank debt is not a realistic source of financing for start-ups due to all of the following reasons except?
a. a large portion of the assets are intangible and provide no collateral
b. payables either don’t yet exist or its history is inadequate
c. the start-up’s dependence on a small number of irreplaceable people is not a good match to demand deposits or other bank liabilities
d. receivables collection track record is incomplete
e. in the event of a default, it is now plausible for the bank to install a management team to help right the operations

9. A provision that allows lenders to acquire equity at a specific price is known as a(n):
a. factor
b. warrant
c. venture lease
d. equity carve-out

10. Personal credit cards have proven to be a source of financing for start-up firms for all of the following reasons except?
a. credit card debt is not based on the firm’s ability to repay, but rather the individual card holder’s ability to repay
b. teaser rates afford initial low cost borrowing
c. balance transfer at below-prime rates
d. credit card debt can create problems if the firm doesn’t generate cash flows to cover credit card payments once low introductory rates expire

11. In the context of new ventures, what does SBA stand for?
a. Standard Business Arrangement
b. Small Business Association
c. Small Business Administration

12. By an act of Congress, the Small Business Administration (SBA) was created in which one of the following years?
a. 1953
b. 1968
c. 1973
d. 1985
e. 1993

13. Which is not a duty of the Small Business Administration?
a. provide capital and credit to entrepreneurial start-ups
b. guaranteeing general business loans
c. provide equity financing for start-ups
d. help create new jobs in small businesses
e. help small firms obtain Federal contracts

14. Which of the following is not a Small Business Administration program?
a. loan guaranty programs
b. certified and preferred lender programs
c. low documentation loan programs
d. energy and conservation loan programs
e. certified financial planner funding programs

15. Which of the following is not a source of debt funding for a start-up firm?
a. accounts payable
b. vendor financing
c. factoring
d. trade notes
e. leasing

16. Venture banks seek loan returns from:
a. interest received
b. principal repayments
c. warrants being exercised
d. all of the above
e. none of the above

17. Which one of the following is not a current Small Business Administration (SBA) credit program?
a. 7(a) loan
b. 504 loan
c. microloan
d. venture capital loan
e. credit card loan

18. In which of the following credit programs does the SBA approve and guarantee a not-for-profit Certified Development Company’s portion of the debt?
a. 7(a) loan
b. 504 loan
c. microloan
d. venture capital loan
e. credit card loan

19. In which of the following credit programs does the SBA approve a loan and guarantees up to 85% of loan value?
a. 7(a) loan
b. 504 loan
c. microloan
d. venture capital loan
e. credit card loan

20. In which of the following credit programs is the SBA role in the loan one of providing a direct loan to a community organization, which reloans the funds in small amounts?
a. 7(a) loan
b. 504 loan
c. microloan
d. venture capital loan
e. credit card loan

21. In which of the following credit programs does the SBA borrow money to be lent Small Business Investment Companies (SBICs) and guarantees payment to investors?
a. 7(a) loan
b. 504 loan
c. microloan
d. venture capital loan
e. credit card loan

22. Commercial banks, credit unions, and/or financial services firms are lenders in which of the following SBA credit programs?
a. 7(a) loan
b. 504 loan
c. microloan
d. venture capital loan
e. credit card loan

23. Commercial banks, jointly with not-for-profit Certified Development Companies, are lenders in which of the following SBA credit programs?
a. 7(a) loan
b. 504 loan
c. microloan
d. venture capital loan
e. credit card loan

24. Not-for-profit or government-affiliated Community Development Financial Institutions (CDFIs) are lenders in which of the following SBA credit programs?
a. 7(a) loan
b. 504 loan
c. microloan
d. venture capital loan
e. credit card loan

25. Small Business Investment Companies (SBICs) are lenders in which of the following SBA credit programs?
a. 7(a) loan
b. 504 loan
c. microloan
d. venture capital loan
e. credit card loan

26. Concerning factoring, all of the following are true except:
a. factors prefer business over consumer accounts
b. factoring is done at a discount to the third party purchaser
c. factoring discounts are often a function of the riskiness of the receivables
d. factoring speeds the inflow of cash to the seller of the receivables
e. receivable lending is the process of factoring

27. The use of receivables as collateral for a loan is known as:
a. capital leasing
b. warehouse financing
c. receivables lending
d. a microloan
e. venture leasing

28. Selling receivables to a third party at a discount from their face value is referred to as:
a. factoring
b. receivables lending
c. venture banking
d. vendor financing
e. mortgage lending

29. Which of the following is/are not a type of leasing arrangement?
a. factoring
b. capital lease
c. venture lease
d. mortgage lease
e. both a and d

30. Arranging for partial ownership as a component of the expected return to a lessor is known as:
a. venture leasing
b. capital leasing
c. investment leasing
d. none of the above

CHAPTER 14

SECURITY STRUCTURES AND DETERMINING ENTERPRISE VALUES

True–False Questions

1. Preferred stock is the equity claim senior to common stock providing preference on dividends but not liquidation proceeds.

2. For preferred noncumulative stock, all previously unpaid preferred dividends must be paid before any common stock dividend is paid.

3. Convertible preferred stockholders have the right to convert a preferred share into a specified number of common shares at any time after the expiration date.

4. If a share of preferred stock has a $10 par value, and the stock has a 2:1 conversion ratio, then the conversion price would be $5.

5. By issuing preferred stock, and thus forfeiting bankruptcy rights from the use of debt, the venture and its investors can benefit by committing to an internal reorganization as opposed to bankruptcy reorganization.

6. A call option is the obligation to purchase a specific asset at a pre-determined price.

7. Options generally have no effect on the value of a venture capital investmen

8. For American and Bermudan embedded options, the exercise price can change over time as specified in the security agreemen

9. An American-style option is an option that can be exercised only at the expiration date

10. A European-Style Option may only be exercised on a specific date.

11. A warrant is a call option issued by a company granting the holder the right to buy common stock at a specific price at a specific time.

12. An option granting the right to sell a stock at $10 when that stock currently has a market price $8 is “in the money.”

13. If a call option can be bought for $12 and the stock’s market value is $12, it’s said to be “at the money”.

14. As the underlying stock price increases in value, a put option to sell it becomes more valuable.

15. The value of a warrant can be directly derived from the value of a call option.

16. A preemptive right is a right for existing owners to buy sufficient shares to preserve their ownership share.

17. Convertible debt is debt that converts into preferred stock.

18. An option is a right to buy or sell additional shares of stock.

19. A warrant is a type of call option.

20. An option not currently worth exercising is said to be an out of the money option.

21. Owning a put option on a stock is the same as selling a call option on that same stock.

22. The enterprise method of valuation can be executed with either an after-tax or before-tax weighted cost of capital as long as the rate is applied to the appropriate enterprise cash flows.

23. Entity valuation allows us to answer the question of how much debt a venture needs to issue to achieve a target capital structure (D/V).

24. The concept of an enterprise value is that it is the combined value of all of venture’s financing, typically equity plus all of the deb

25. The enterprise value includes the value of the debt, equity, and warrant pieces of a venture.

Note: The following TF questions relate to Learning Supplements 14A and 14B:

1. An alternative approach to the Enterprise Valuation method adds the tax shield from paying interest back into the flows and discounts at a before-tax weighted average cost of capital.

2. Warrant valuation (as presented in this text) is similar to option valuation except that one applies a dilution factor to the option value to arrive at a warrant value.

3. The unadjusted Black and Scholes model is a model for determining the value of a warrant to buy a new share.

4. The Black and Scholes model requires the stock price as an inpu

5. The Black and Scholes model requires the inflation rate as an inpu

6. The Black and Scholes model requires an exercise price as an inpu

Multiple-Choice Questions

1. Which of the following have the least senior claim on a venture’s asset?
a. common Stock
b. preferred stock
c. convertible preferred stock
d. convertible debt
e. American-style option

2. The right for existing owners to maintain their ownership share by purchasing sufficient shares to keep their percentage share of the firm is called:
a. stock option
b. stock warrant
c. preemptive right
d. participating stock
e. paid-in-kind preferred stock

3. Which of the following stock can be structured to assure the shareholder that they will share in the payment of any dividends to common stockholders?
a. paid in kind preferred stock
b. cumulative preferred stock
c. participating preferred stock
d. convertible preferred stock
e. non-cumulative preferred stock

4. Which of the following provides the option to transform preferred stock into common stock?
a. paid in kind preferred stock
b. cumulative preferred stock
c. participating preferred stock
d. convertible preferred stock
e. non-cumulative preferred stock

5. Which of the following offers the option where the dividend obligation can be satisfied in cash or by issuing additional par amounts of the preferred security?
a. paid in kind preferred stock
b. cumulative preferred stock
c. participating preferred stock
d. convertible preferred stock
e. non-cumulative preferred stock

6. Which of the following requires that all previously unpaid preferred dividends must be paid prior to any common dividend?
a. paid in kind preferred stock
b. cumulative preferred stock
c. participating preferred stock
d. convertible preferred stock
e. non-cumulative preferred stock

7. Which of the following is never a component of a preferred stock’s security structure?
a. the right to participate in any dividends paid to common stock shareholders
b. payment of dividends in the form of additional shares of preferred stock
c. the option for the holder to convert preferred stock into common stock
d. the option for the venture to call outstanding preferred stock
e. none of the above; all of these may be included in the structure of
preferred stock

8. A round of financing where shares sell for a lower price than previous rounds is known as a:
a. down round
b. recessive round
c. reset round
d. a and c

9. Which of the following are components of common equity?
a. common stock
b. preferred stock
c. a and b
d. none of the above

10. Convertible debt has all of the following except:
a. bankruptcy rights
b. regular dividend payments
c. it can be structured to provide senior interest in specific assets
d. a tax shield due to interest expense
e. a security interest in the firms’ assets

11. Which of the following is not a type of option?
a. call option
b. put option
c. warrant
d. LBO

12. The right to buy a specified asset at a specified price on a specified date is called:
a. a forward contract
b. an American-style put option
c. an American-style call option
d. a European-style call option
e. a European style put option

13. The right to sell a specified asset at a specified price up until a specified date is called:
a. a forward contract
b. an American-style put option
c. an American-style call option
d. a European-style call option
e. a European style put option

14. An option that can be exercised at any time until its expiration is called a:
a. forward contract
b. lookback option
c. American-style option
d. European-style option
e. Bermuda-style option

15. An option that can be exercised only at its expiration date is called a:
a. forward contract
b. lookback option
c. American-Style option
d. European-Style option
e. Bermuda-Style option

16. An option that can be exercised only at a specific set of dates is called a:
a. forward contract
b. lookback option
c. American-Style option
d. European-Style option
e. Bermuda-Style option

17. Which of the following is an example of a call option which is out of the money?
a. The option to sell at $11, the stock is worth $12.
b. The option to buy at $13, the stock is worth $12.
c. The option to buy at $12, the stock is worth $12.
d. The option to sell at $13, the stock is worth $12.
e. The option to buy at $11, the stock is worth $12.

18. Which of the following is an example of a call option which is in the money?
a. The option to sell at $11, the stock is worth $12.
b. The option to buy at $13, the stock is worth $12.
c. The option to buy at $12, the stock is worth $12.
d. The option to sell at $13, the stock is worth $12.
e. The option to buy at $11, the stock is worth $12.

19. Which of the following is an example of a put option which is out of the money?
a. The option to sell at $11, the stock is worth $12.
b. The option to buy at $13, the stock is worth $12.
c. The option to buy at $12, the stock is worth $12.
d. The option to sell at $13, the stock is worth $12.
e. The option to buy at $11, the stock is worth $12.

20. Which of the following is an example of a put option which is in the money?
a. The option to sell at $11, the stock is worth $12.
b. The option to buy at $13, the stock is worth $12.
c. The option to buy at $12, the stock is worth $12.
d. The option to sell at $13, the stock is worth $12.
e. The option to buy at $11, the stock is worth $12.

21. Which of the following is an example of a put option which is at the money?
a. The option to sell at $11, the stock is worth $12.
b. The option to buy at $13, the stock is worth $12.
c. The option to sell at $12, the stock is worth $12.
d. The option to sell at $13, the stock is worth $12.
e. The option to buy at $11, the stock is worth $12

22. Generally speaking, warrants are call options that allow the holder to purchase what type of security at a specific price?
a. common stock
b. preferred stock
c. convertible debt
d. none of the above

23. To calculate the enterprise valuation cash flow, one begins with which of the following items from the income statement?
a. net sales
b. operating profit
c. (earnings before interest and taxes) × (1 – enterprise tax rate)
d. net income
e. net income times the enterprise tax rate

24. When consistent assumptions are used, we
a. get the same value for equity under the enterprise and equity methods of valuation
b. we get a higher value of equity under the equity method of valuation
c. we get a lower value of equity under the equity method of valuation
d. we get equity values that cannot be compared across the equity and enterprise methods of valuation

Note: The following MC questions relate to Learning Supplement 14B:

1. The Black and Scholes model is intended to be used to value
a. stocks
b. bonds
c. options
d. futures contracts

2. Which of the following is not an input to the Black and Scholes model?
a. earnings per share
b. stock price
c. risk free rate
d. volatility

3. N(h) in the Black and Scholes model involves the use of
a. the number of shares issued
b. the next time that a venture capitalist will invest money
c. the normal distribution cumulative density function
d. the number of times that the venture will have to raise money

CHAPTER 15

HARVESTING THE BUSINESS VENTURE INVESTMENT

True–False Questions

1. The process of exiting the privately held business venture to unlock the owners’ investment value is known as harvesting.

2. When harvesting a venture, the methodical distribution of assets directly to the owners is known as a systematic liquidation.

3. When harvesting a venture, the outright purchase of the going concern by managers, employees, or external buyers is known as going public.

4. When harvesting a venture, the two-step public equity registration and sale is known as an outright sale.

5. When an initial business plan is prepared, attention should be paid to the investors’ and founders’ desire for eventual liquidity by anticipating a harvest for the venture investors.

6. An advantage of an exit strategy that pays out the venture’s investment value over several years can make it more difficult for entrepreneurs to start a new venture because adequate capital has not been released from the existing venture.

7. When an industry is in decline, systematic liquidation is typically the most attractive harvest strategy.

8. Exit values for many mature ventures are usually determined by (1) discounted cash flow (DCF) methods or (2) relative valuation models based on some form of multiples analysis.

9. In determining a harvest value, non-monetary items such as culture, managerial succession, and employee retention are not factored in.

10. Harvesting is the process of exiting the privately held business venture to unlock the owners’ investment value.

11. Valuation methods that estimate a firm’s worth using value-related multiples of comparable firms are sometimes known as “relative value methods.”

12. The two discounted cash flow (DCF) methods covered in this text are the enterprise method and the debt funds method.

13. One method of harvesting a venture is through systematic distribution of assets directly to the owners.

14. One method of harvesting a successful venture is through systematic distribution of assets directly to lenders.

15. Other than when the venture is operating in a declining industry, it is difficult to think of cases where the disadvantages of liquidation outweigh the advantages.

16. A special type of harvesting process where the firm’s top management continues to run the firm and has a substantial equity position in the reorganized firm is known as a leveraged buyou

17. A leveraged buyout (LBO) takes place when the purchase price of a firm is financed largely with debt financial capital.

18. Ultimately for harvesting purposes, we need to decide on the venture’s value at exit and how that exit value pie will be divided up among investors.

19. An “initial public offering” is the only method used by entrepreneurs when exiting a venture.

20. A management buyout (MBO) is a special type of leveraged buyout (LBO).

21. A leveraged buyout (LBO) is a special type of management buyout (MBO).

22. ESOP stands for “employee stock ownership plan.”

23. An obligatory disclaimer disavowing any intent to act as an offer to sell, or solicit an offer to buy securities is known as a red herring.

24. The sale of new shares of common stock is a secondary offering.

25. The sale of used shares of common stock is a secondary market offering.

26. Most companies choose “best efforts” agreements in order to minimize the inherent risks of going public.

27. IPO underpricing results in a direct loss to the venture’s owners.

28. While not a direct loss to a venture, underpricing can represent a significant opportunity cost to the venture’s owners.

29. A “lockup provision” prohibits insiders from selling their existing shares for a specified period of time.

30. In a typical venture’s life cycle, the rapid-growth stage involves managing ongoing operations, maintaining and adding value, and obtaining seasoned financing.

31. In a typical venture’s life cycle, the examining of exit opportunities often occur during the rapid-growth stage.

Multiple-Choice Questions

1. Which of the following is not a way to harvest a venture?
a. systematic liquidation
b. outright sale
c. chapter 11 bankruptcy
d. going public

2. When registering equity and selling it via an IPO of new shares followed by a secondary offering of existing shares, this venture harvesting process is known as:
a. systematic liquidation
b. outright sale
c. chapter 11 bankruptcy
d. going public

3. The acquisition of the venture by family members, managers, or outside buyers is a venture harvesting process known as:
a. systematic liquidation
b. outright sale
c. chapter 11 bankruptcy
d. going public

4. The distribution of the venture’s cash flows directly to the owners is a venture harvesting process known as:
a. systematic liquidation
b. outright sale
c. chapter 11 bankruptcy
d. going public

5. Which of the following is not an advantage of a systematic liquidation?
a. maintaining control throughout the harvest period
b. harvesting of the investment value can be spread out over a number of years
c. the taxation treatment of liquidation proceeds as ordinary income
d. the time, effort, and costs of finding a buyer for the venture can be avoided

6. Which of the following is not a disadvantage of a systematic liquidation?
a. the treatment and taxation of liquidation proceeds as ordinary income rather than capital gains
b. the commitment of the entrepreneur’s resources and focus on a dying venture rather than on other more lucrative ventures
c. the harvesting of the investment gets spread out over a number of years
d. the acceleration of the venture’s rate of decline as other industry participants respond to the reduction in investment

7. A venture can be harvested in which of the following ways?
a.. systematic liquidation, outright sale, going public
b. outright sale, going public, acquisition
c. going public, acquisition
d. acquisition, systematic liquidation

8. Which of the following is not a candidate for a leveraged buyout?
a. a venture with stable and adequate operating cash flows
b. a venture with a high amount of equity relative to debt
c. a venture with the ability to protect market share
d. a venture with a high debt ratio

9. Which of the following is the premium that would be applied to venture valuation due to an investor’s majority ownership of a venture?
a. proxy premium
b. control premium
c. influence premium
d. liquidity premium
e. illiquidity premium

10. Shares registered with the Securities and Exchange Commission and state securities regulators and sold to the public are known as:
a. primary offering
b. secondary offering
c. initial public offering
d. shelf offering

11. In an outright sale of a venture, the venture can be sold to:
a. family members
b. managers
c. employees
d. outside (external) buyers
e. all of the above

12. The sale of new securities is known as:
a. primary offering
b. secondary offering
c. initial public offering
d. shelf offering

13. The sale of used shares is known as:
a. primary offering
b. secondary offering
c. initial public offering
d. shelf offering

14. The NYSE participates in:
a. the sale of new securities to private investors
b. primary offerings
c. secondary offerings
d. b and c

15. In the investment banking process, which of the following is a duty of the investment bank?
a. to be the targeted investors for a firm’s securities
b. to provide banking services such as checking accounts to firms
c. to find buyers for a firm’s securities
d. both a and b
e. all of the above

16. Based on the following information, estimate the percentage appreciation on stock bought by the venture investors: founders’ purchase price $.50; venture investors’ purchase price $2.00; current stock price $10.00; founders holding period = 5 years; venture investors holding period = 3 years.
a. 100%
b. 400%
c. 600%
d. 800%

17. Based on the following information, estimate the percentage appreciation on stock bought by the founders: founders’ purchase price $1.00; venture investors’ purchase price $2.00; current stock price $10.00; founders holding period = 5 years; venture investors holding period = 3 years.
a. 100%
b. 400%
c. 600%
d. 900%

18. Assume that a venture is expected to have an EBITDA of $1,500,000 at the end of five years from now. If the venture’s value is expected to be $12,000,000, what “valuation multiple” was being assumed?
a. 1 time
b. 4 times
c. 8 times
d. 10 times
e. 12 times

19. A venture is expected to have an exit value of $10,000,000 two years from now. If venture investors invest $2,000,000 now, and expect a 20% compounded rate of return on their investment, what portion of the exit value would they need?
a. 10%
b. 20.2%
c. 25%
d. 28.8%
e. 32%

20. A venture is expected to have an exit value of $10,000,000 five years from now. If venture investors invest $1,000,000 now, and expect a 20% compounded rate of return on their investment, what portion of the exit value would they need?
a. 10.5%
b. 20.1%
c. 24.9%
d. 28.8%
e. 32.5%

21. If venture investors invest $1,000,000 now, will receive 50% of the exit value, and expect a 20% compounded rate of return on their investment, what will be the amount of the exit value at the end of two years?
a. $1,000,000
b. $1,440,000
c. $2,880,000
d. $5,000,000
e. $5,760,000

22. If venture investors invest $1,000,000 now, will receive 25% of the exit value, and expect a 20% compounded rate of return on their investment, what is the approximate expected exit value at the end of five years?
a. $1,000,000
b. $2,490,000
c. $4,980,000
d. $7,470,000
e. $9,950,000

23. If venture investors invest $6,750,000 now, will receive 32% of the exit value, and expect a 22% compounded rate of return on their investment, what is the exit value at the end of seven years?
a. $27,153,298
b. $39,931,321
c. $69,552,505
d. $84,854,057
e. $103,521,949

24. The difference between what the investment bank gets from selling securities to public investors and what they pay to the issuing firm is known as:
a. IPO underpricing
b. due diligence
c. firm commitment
d. best efforts
e. underwriting spread

25. A type of agreement with an investment bank employing only marketing and distribution efforts without the actual transfer of securities ownership to the investment banking syndicate is called:
a. IPO underpricing
b. due diligence
c. firm commitment
d. best efforts
e. underwriting spread

26. An agreement with an investment bank that involves the purchase and distribution of new securities is known as:
a. IPO underpricing
b. due diligence
c. firm commitment
d. best efforts
e. underwriting spread

27. The investment banks process of ascertaining, to the extent possible, an issuing firm’s financial condition and investment intent is known as:
a. IPO underpricing
b. due diligence
c. firm commitment
d. best efforts
e. underwriting spread

28. The arrangement where an underwriter has the option of selling additional shares when the issue is heavily oversubscribed is known as
a. green shoe
b. red herring
c. best efforts
d. lockup

29. Which of the following describes when a syndicate’s offering price is less than the market price immediately following the offering?
a. IPO underpricing
b. due diligence
c. firm commitment
d. best efforts
e. underwriting spread

30. In the aftermarket trading for the venture’s securities, an order that is to be executed as soon as possible at the prevailing market price is known as a:
a. put order
b. market order
c. limit order
d. stop order

31. In the aftermarket trading for the venture’s securities, an order that converts to a market order once a certain price is achieved is known as a:
a. put order
b. market order
c. limit order
d. stop order

32. An order to purchase stock that can be executed only at a specified price or better is called a:
a. market order
b. limit order
c. stop order
d. stock order
e. private order

33. Which of the following is not a type of trading order?
a. market order
b. limit order
c. stop order
d. none of the above

34. The letters IPO stand for:
a. investment pricing organization
b. initial public offering
c. institutional pricing overhead
d. immediate pricing opportunity

35. The negotiated period around an equity securities offering during which insiders are prohibited from selling their existing shares is called:
a. a seasoned offering
b. an unseasoned offering
c. underpricing
d. an underwriting spread
e. a lockup provision

36. An initial public offering (IPO) involves:
a. sale of new securities to private investors
b. sale of used securities to the public
c. a venture’s first offering of SEC-registered securities to the public
d. all of the above
e. none of the above

37. The type of agreement with an investment bank involving the investment bank’s underwritten purchase and resale of securities is called:
a. firm commitment
b. best efforts commitment
c. due diligence
d. making a red herring disclaimer
e. a private placement

ECO 450 Week 11 Final Exam – Strayer University New

ECO/450 Week 11 Final Exam – Strayer

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Chapters 8 Through 18

ECO 450 Week 6 Quiz

CHAPTER 8
Social Security and
Social Insurance
TRUE/FALSE QUESTIONS
1. The Social Security pension system is a fully funded retirement plan.
2. Social Security pension benefits are transfers from workers to retirees.
3. Social Security pensions are financed by voluntary contributions by workers.
4. The gross replacement rate measures the ratio of taxes paid per year by workers to their annual Social Security pension when they retire.
5. In the year prior to retirement, a worker earned $20,000 and paid $5,000 in taxes on those earnings. His annual Social Security pension is $10,000 per year. Then it follows that his net replacement rate is 50 percent.
6. The gross replacement rate for Social Security pensions is the same for all workers independent of their preretirement earnings.
7. The annual growth in wages subject to Social Security taxes is 3 percent. Given the payroll tax rate, the growth in funds available to pay pension benefits is also 3 percent.
8. The asset-substitution effect of Social Security pensions discourages saving.
9. The availability of Social Security pensions to workers over normal retirement age results in an income effect unfavorable to work but no substitution effect.
10. The bequest effect of Social Security encourages workers to save less.
11. The normal retirement age for Social Security old-age pensions is 67 for people born in the United States in 1960 or later.
12. Workers in the United States can retire under Social Security at age 62 with lower pensions than they would receive at their normal retirement age.
13. As of 2009, retired workers between the ages of 62 and their normal retirement age were subject to an “earnings test” that reduced their pension by $1 for each $2 of earnings after a certain minimum level of earnings.
14. Reducing the replacement rate will have no effect on the tax rate necessary to finance pensions under a pay-as-you-go, tax-financed pension system.
15. Workers who quit their jobs are eligible for unemployment insurance benefits in the United States.
16. By 2050, the expected percentage of the U.S. population that is considered elderly will be less than 20%.
17. Social Security was created in 1965.
18. On average, the elderly are less likely to be poor when compared to the rest of the U.S. population.
MULTIPLE CHOICE QUESTIONS
1. The Social Security retirement system:
a. is a fully funded pension system.
b. is a tax-financed system that pays benefits from taxes that are invested to return principal and interest to workers when they retire.
c. is a tax-financed retirement system that finances pensions by taxing workers each year and transferring the bulk of revenues obtained directly to retirees.
d. does not use taxes on workers to pay pensions to retirees.
2. The gross replacement rate:
a. measures a worker’s monthly retirement benefit divided by monthly earnings before taxes in the year prior to retirement.
b. measures a worker’s monthly retirement benefit divided by monthly earnings after taxes in the year prior to retirement.
c. is an increasing function of gross monthly earnings prior to retirement.
d. is independent of gross monthly earnings prior to retirement.
3. A worker earns $2,000 per month before taxes. He pays $140 per month payroll tax on those wages. In addition, the income taxes on those wages are $360 per month. On retirement, the worker receives a Social Security pension of $750 per month. Which of the following statements is true?
a. The worker’s gross replacement rate is 50 percent.
b. The worker’s net replacement rate is 50 percent.
c. The worker’s net replacement rate is 38 percent.
d. The worker’s net replacement rate is 75 percent.
4. The growth in hourly wages over the past 50 years has averaged about 2 percent per year. How¬ever, the growth in Social Security pensions has far exceeded this 2-percent rate. The growth in tax revenue to finance Social Security benefits in excess of 2 percent per year can be accounted for by:
a. increases in payroll tax rates.
b. use of other taxes beside the payroll tax to pay Social Security benefits.
c. an increase in the number of workers paying Social Security taxes.
d. either (a) or (b)
e. either (a) or (c)
5. Given the structure and level of gross replacement rates and the expected future growth of labor earnings subject to the payroll tax, the tax rates used to tax payrolls were increased in the 1980s because:
a. the number of retirees per worker will increase.
b. the number of retirees per worker will decrease.
c. wages are expected to decline.
d. the size of the work force is expected to increase.
6. Which of the following is likely to increase the net federal debt as a share of GDP?
a. a federal budget surplus.
b. a federal budget deficit.
c. a recession.
d. either b or c.
7. The asset-substitution effect of the Social Security retirement system leads all workers to:
a. save more for retirement.
b. save less for retirement.
c. save absolutely nothing for retirement.
d. work more
8. Which of the following is a consequence of a growing federal budget deficit in the United States?
a. A decrease in the federal debt outstanding.
b. An increase in the federal debt outstanding.
c. A decrease in the portion share of federal government expenditures that must be allocated to interest in the future.
d. An increase in national saving.
9. The induced-retirement effect of the Social Security pension system induces workers to:
a. save less for retirement.
b. save more for retirement.
c. reduce savings for retirement to zero.
d. work more after retirement.
10. Unemployment insurance benefits are:
a. financed by payroll taxes levied on workers.
b. financed by payroll taxes levied on employers.
c. both (a) and (b)
d. financed by sales taxes.
11. Which of the following is true about the Social Security pension system in the United States?
a. Pensions received by retired workers are based entirely on their contributions to the Social Security pension trust fund and the investment return on that fund.
b. Pensions received by married retirees with dependents are greater than that received by those without dependents.
c. Gross replacement rates are inversely related to preretirement earnings.
d. both (b) and (c)
12. Which of the following can decrease tax rates necessary to pay pensions for a pay-as-you-go pension system?
a. an increase in replacement rates
b. a decrease in the retirement age
c. an increase in the size of the work force
d. an increase in the number of retirees
13. Unless legislation is introduced to change the normal retirement age, people born in 1960 or later will be able to retire with full Social Security benefits at age:
a. 62.
b. 65.
c. 66.
d. 67.
14. The earnings test for retirees:
a. increases their incentive to work.
b. is applied to all retirees.
c. is applied only to retirees below normal retirement age.
d. reduces pension benefits by $1 for each $2 of earnings.
e. both (c) and (d)
15. A nation has 40 million current retirees and a work force of 100 million. Which of the following is true?
a. The replacement rate is 40 percent.
b. The replacement is 2.5.
c. The dependency ratio is 0.4.
d. The dependency ratio is 2.5.
16. Social Security tax rates can be reduced if:
a. taxable wages decline.
b. the retirement age is lowered.
c. the retirement age is raised.
d. the work force decreases in size.
17. A retiree subject to the earnings test under Social Security:
a. can earn as much as he or she chooses without losing Social Security pension benefits.
b. has his or her Social Security pension benefits reduced by one dollar for each dollar of labor earnings.
c. has his or her Social Security pension benefits reduced immediately by one dollar for each three dollars of labor earnings.
d. has his or her Social Security pension benefits reduced by one dollar for each two dollars of earnings after a certain minimum amount per year.
18. A pay-as-you-go social security retirement system is:
a. exemplified by the current U.S. social security system.
b. exemplified by the current Chilean social security system.
c. designed to have retirees set aside a contribution specifically for themselves during their earlier working life.
d. both (a) and (b).
19. Approximately, what percentage of beneficiaries of U.S. Social Security are retired workers?
a. 50%
b. 60%
c. 70%
d. 80%
20. The Social Security Act was implemented in the United States in:
a. 1927.
b. 1935.
c. 1947.
d. 1965.

CHAPTER 9
Government and Health Care

TRUE/FALSE QUESTIONS
1. In the United States the government pays the health bills of 90 percent of the population.
2. The American system of health care is financed by a mix of private and government insurance programs that pay over 80 percent of the health care bills for U.S. citizens.
3. Spending per person on health care in the United States is less than in the United Kingdom where national health insurance finances health expenditures.
4. Government spending on health care is declining as a percent of total government spending.
5. Medicare is a government program of health insurance for the elderly.
6. Exclusion of employer-provided health insurance to employees is an indirect subsidy to private provision of health insurance.
7. Third-party payments for health care services increase the quantity of health care demanded by reducing out-of-pocket costs to patients.
8. An increase in coinsurance and deductibles for health insurance can contribute to a reduction in expenditures on health care.
9. Half of Americans do not have health insurance coverage.
10. Under national health insurance in Great Britain, the price system is used to ration health care.
11. Approximately 16 percent of GDP was allocated to provision of health care in the United States as of 2006.
12. Individuals in the United States, on average, pay 50 percent of their health care costs out-of-pocket, and the remaining 50 percent is paid by insurance, governments, and charity.
13. Asymmetric information in the market for health care occurs when sellers of medical care are better informed about cost and quality of care than buyers.
14. Because of third-party payment for services in the market for health care, the price paid by buyers is less than the payment sellers receive, and the marginal social cost of health care exceeds its mar¬ginal social benefit.
15. Medicaid costs are paid entirely by the federal government.
16. Healthcare expenditures in the U.S. are projected to be 20% of GDP by 2017.
17. Asymmetric information can occur when the provider of a service is better informed than the consumer of the service.
18. A risk averse individual prefers to pay certain modest costs in exchange for possible unforeseen high costs.
MULTIPLE CHOICE QUESTIONS
1. Most of the medical bills of Americans in the United States are paid by:
a. the patients.
b. private and government health insurance.
c. charities.
d. Medicaid.
2. Since 1960, expenditures on health care as a percent of GDP has:
a. been cut in half.
b. nearly tripled.
c. remained the same.
d. doubled.
3. The government program that provides the health insurance to the poor in the United States is called:
a. national health insurance.
b. Medicare.
c. Medicaid.
d. employer-provided health insurance.
4. Which of the following programs accounts for the greatest amount of government expenditures on public health in the United States?
a. Medicare
b. worker’s compensation
c. the Public Health Service
d. medical research
5. Which of the following subsidizes private provision of health insurance?
a. Medicare
b. Medicaid
c. the Public Health Service
d. tax exclusion of the value of employer-provided health insurance to workers
6. Which of the following could help decrease the rate of increase of spending on health care in the United States?
a. a reduction in the deductibles on private health insurance policies
b. an increase in the coinsurance rate on health insurance and subjecting a larger volume of ser¬vices to coinsurance
c. extension of Medicaid insurance to all persons who are poor
d. a reduction in the coinsurance rate on health insurance and subjecting a smaller volume of ser¬vices to coinsurance
7. Which of the following is an example of the “moral hazard of health insurance”?
a. an increase in the number of surgeries prescribed for benign prostate disease beyond the point at which the marginal benefit equals the marginal cost
b. a decreased willingness of individuals to go to the doctor for minor ailments because of increases in coinsurance rates
c. an underallocation of resources to medical care because of monopoly power of hospitals
d. experience rating of health insurance groups by health insurers
8. A third-party payment system for health care:
a. results because of externalities in the production of health care services.
b. encourages more than the efficient amount of resources to be allocated to health care.
c. encourages patients and health care providers to economize on the use of health care resources.
d. means that patients pay the full price for health care services they consume.
9. Which of the following services is typically not covered under private health insurance and Medicare in the United States?
a. treatment for heart attack
b. surgery
c. office visits to physicians
d. long-term care services
10. Under national health insurance as operated in Great Britain,
a. the British system pays fees equal to half of the costs of services provided to them.
b. general practice physicians are paid on a per-patient rather than on a per-unit-of-service basis.
c. patients requiring surgery can pick their surgeons and can usually obtain the surgery in a matter of days, even if it is not an emergency.
d. there are no government limits on health care spending by hospitals.
11. Which of the following is true about the Medicaid program in the United States?
a. It is a program of health insurance for the elderly.
b. Its costs are paid entirely by the federal government.
c. It is a program of health insurance for the poor.
d. Its costs have been declining in recent years.
12. In the United States, individuals pay approximately what percent of the cost of their medical care directly to providers?
a. 100 percent
b. 50 percent
c. 15 percent
d. zero
13. The percent of total health care costs in the United States paid for by governments is approximately:
a. 90 percent.
b. 45 percent.
c. 25 percent.
d. 10 percent.
14. The system of third-party payment for medical care in the United States has which of the following effects in the market for health care?
a. It improves efficiency in the market.
b. It causes the marginal social benefit of health care to exceed its marginal social cost.
c. It causes the marginal social cost of health care to exceed its marginal social benefit.
d. It results in less than the efficient quantity of health care services.
15. Which of the following is true about the Medicare program in the United States?
a. It is only available to those who pass a means test.
b. It is available to all citizens over the age of 65.
c. The costs are completely financed by fees paid by insurees.
d. It places no limits on reimbursement to medical care providers.
16. What would be the effect of having no health insurance available?
a. The quantity of healthcare would be set at where the marginal benefit and marginal cost are equal.
b. Excess demand for healthcare would be the result because the quantity supplied would be at a level where the marginal benefit exceeds the marginal cost.
c. Excess supply for healthcare would be the result because the quantity supplied would be at a level where the marginal benefit would be below the marginal cost.
d. the quantity of healthcare would be at an inefficient level.
17. The elderly are what proportion of beneficiaries of Medicare?
a. 95%
b. 85%
c. 77%
d. 70%
18. What is the moral hazard associated with third party payment for health services?
a. The recipient of the service is not as informed as the provider of the service.
b. The recipient of services tends to decline more services than they should.
c. The recipient of services tends to have more services than what is needed relative to the efficient level of services.
d. There is no moral hazard.
19. Which is not reason for excalating healthcare costs in the U.S.?
a. Increase in malpractice insurance.
b. Cross-subsidization of patients who cannot pay for healthcare or insurance.
c. Overuse of new technology.
d. Both (b) and (c).
20. If the quantity of healthcare is more than the efficient quantity, what is the consequence?
a. Some will not have access to healthcare that would have access at the efficient level.
b. The healthcare will suffer in quality.
c. Capital could be more efficiently spent elsewhere leading to less overall productivity.
d. Lower marginal costs and marginal benefits.

ECO 450 Week 7 Quiz

CHAPTER 10
Introduction to
Government Finance
TRUE/FALSE QUESTIONS
1. Taxes simultaneously ration and finance government goods and services.
2. The federal government finances only half of its expenditures with taxes.
3. The benefit principle argues that the means of financing government goods and services should be linked to the benefits received from those goods and services.
4. Horizontal equity is achieved when individuals of the same economic capacity pay the same amount of taxes over a given period.
5. A flat-rate income tax is a proportional tax on an income base.
6. The marginal tax rate will eventually exceed the average tax rate if the tax rate structure is propor¬tional.
7. The marginal tax rate for a payroll tax is 7 percent on all wages up to $60,000 per year. The marginal tax rate for wages in excess of $60,000 per year is zero. The payroll tax is therefore a regressive tax.
8. Tax evasion would be less of a problem if tax rates were lowered.
9. The user charge for a congestible public good should be zero at all times.
10. Zero prices for price-excludable government services provide benefits only to the poor.
11. The gasoline tax is an example of a general tax on consumption.
12. For a proportional tax, the marginal tax rate is always equal to the average tax rate.
13. Tax avoidance is an illegal activity in the United States.
14. An increase in marginal tax rates is likely to increase tax evasion.
15. Most studies indicate that state-run lotteries are equivalent to a progressive tax on gambling.
16. Government activity requires the reallocation of resources from government to private use.
17. A flat income tax (i.e. a fixed amount paid by every taxpayer) is an example of a selective tax.
18. The average tax rate and marginal tax rate are the same under a progressive tax rate structure.
MULTIPLE CHOICE QUESTIONS
1. According to the benefit principle,
a. taxes should be distributed according to ability to pay.
b. user charges are an ideal source of finance for government goods and services.
c. the progressive income tax represents the ideal way of distributing taxes among citizens.
d. flat-rate taxes are always the best kind.
2. If horizontal equity is achieved in taxation,
a. vertical equity will also be achieved.
b. individuals of equal economic capacity will pay equal taxes.
c. a flat-rate tax will be used.
d. the tax system will not result in losses in efficiency in markets.
3. The tax base of a payroll tax is:
a. consumer expenditures.
b. interest income.
c. labor income.
d. both (b) and (c)
4. A 5-percent retail sales tax on all consumer purchases in a state is imposed. The sales tax is:
a. a flat-rate tax.
b. a tax with a regressive rate structure.
c. levied on an income base.
d. all of the above
5. A tax on the value of real estate holdings is a:
a. selective tax on wealth.
b. general tax on wealth.
c. general tax on income.
d. selective tax on income.
6. An excise tax is a:
a. general consumption tax.
b. selective consumption tax.
c. general wealth tax.
d. selective tax on wealth.

7. A proportional income tax has an average tax rate that:
a. always is less than the marginal tax rate.
b. always exceeds the marginal tax rate.
c. equals the marginal tax rate at first and then becomes less than the marginal tax rate.
d. always equals the marginal tax rate.
8. A payroll tax taxes a worker’s wages at 14 percent until the worker earns $60,000 per year. All labor earnings in excess of $60,000 are not subject to tax. The tax rate structure of the payroll tax is therefore:
a. proportional.
b. progressive.
c. regressive.
d. flat-rate.
9. A bridge becomes congested after 100 vehicles per hour use it on any day. To achieve efficiency, a toll:
a. that charges all users of the bridge, no matter how many vehicles use it per hour, should be imposed.
b. on additional users in excess of 100 per hour should be imposed.
c. on all users should be imposed, if more than 100 users per hour are expected.
d. is not required.
10. A government prints money to finance its expenditures. As a result,
a. the economy can operate at a point outside its production possibility curve.
b. inflation will occur.
c. consumers will give up private goods to finance the increased government expenditures.
d. both (b) and (c)
11. Taxes are likely to affect:
a. market equilibrium.
b. political equilibrium.
c. the distribution of income.
d. all of the above
12. Taxes:
a. are voluntary payments to governments.
b. are unlikely to affect market supply and demand.
c. never affect efficiency in the allocation of resources.
d. are compulsory payments associated with certain activities.
13. A tax on real estate is a:
a. general wealth tax.
b. general consumption tax.
c. selective wealth tax.
d. selective income tax.
14. The marginal tax rate will eventually exceed the average tax rate for a:
a. proportional tax.
b. regressive tax.
c. progressive tax.
d. flat-rate tax.
15. Marginal tax rates were reduced in 2001. Other things being equal, this is likely to:
a. increase tax evasion.
b. decrease tax evasion.
c. have no effect on tax evasion.
d. increase tax avoidance.

16. What is an example of a normative criterion that a government must trade-off in its method of
taxation?
a. Equity
b. Efficiency
c. Administrative ease
d. all of the above
17. Tax avoidance is:
a. a means of tax evasion.
b. a means of decreasing taxes paid by adjusting behavior.
c. a political process explicitly for the reduction of taxation.
d. a means to avoid tax owed.
18. If the marginal tax rate is 20% under a proportional tax rate structure, the average tax rate:
a. should be 20%.
b. should be above 20%.
c. should be below 20%.
d. cannot be determined.
19. If the average tax rate under a progressive tax rate structure is 35%, a possible marginal tax rate is:
a. 30%.
b. 25%.
c. 42%.
d. not able to be determined.
20. Which of the following countries has the highest average tax rate relative to GDP?
a. Japan
b. Sweden
c. Iceland
d. United Kingdom

ECO 450 Week 8 Quiz

CHAPTER 11
Taxation, Prices, Efficiency,
and the Distribution of Income
TRUE/FALSE QUESTIONS
1. A lump-sum tax results in both income and substitution effects.
2. A consumer currently pays $500 a year retail sales taxes. She would be better off if she paid the same amount annually as a lump-sum tax.
3. Clothing is sold in perfectly competitive markets where no externalities prevail. An excise tax on clothing will result in a market price for clothing that equals the marginal social benefit and mar¬ginal social cost of service.
4. Assuming that the income effects are negligible and that beer is sold in a competitive market, a 10 cent per can tax on beer that causes a 10,000 can per month decline in sales will result in an excess burden of $1,000 per month.
5. A tax on land results in an income effect on landlords but no substitution effect. Then it follows that the excess burden of a tax on land will be zero.
6. The excess burden of a tax on interest income is $5 billion per year. Total interest income per year is $50 billion. The tax currently collects $15 billion in revenue per year. The efficiency-loss ratio of the tax is therefore 0.33.
7. A payroll tax results in a difference between the gross wages paid by employers and the net wages received by workers.
8. If the market supply of labor services is perfectly inelastic, a tax on labor income will reduce the net wages received by workers by the full amount of the tax per labor hour.
9. If a $10 per unit tax is levied on the output of a monopolist, more of that tax will be shifted to con¬sumers than would be the case if the same good were produced by a competitive industry.
10. A study indicates that taxes in the United States reduce the Gini coefficient for the nation by 10 percent. This implies that taxes make the income distribution more equal.
11. A lump-sum tax only results in income effects.
12. An income tax is an example of a price-distorting tax.
13. The more price-elastic the demand of a taxed item, the lower the excess burden of a tax on the sale of that item.
14. If the tax on the sale of gasoline is doubled from 20 cents per gallon to 40 cents per gallon, the excess burden of the tax will quadruple.
15. If the compensated elasticity of supply of labor is zero, then a tax on labor earnings will have zero excess burden.
16. Lump-sum taxes do not prevent prices from equaling the marginal social cost and benefit of any goods and services.
17. Lump-sum taxes can vary in amount based on income level.
18. A lump-sum tax can distort prices and affect consumption behavior.
MULTIPLE CHOICE QUESTIONS
1. A lump-sum tax:
a. distorts market prices so that they do not simultaneously equal MSB and MSC.
b. can result in price changes but does not prevent prices from simultaneously being equal to MSB and MSC.
c. results in substitution effects that change prices.
d. results in both substitution effects and income effects that change prices.
2. The current price of compact discs, which are traded in perfectly competitive markets, is $10. A $1 per unit tax is levied on the discs. Annual record sales decline from five million to four million as a result of the tax. Assuming that the income effect of the tax-induced price change is negligible, the excess burden of the tax will be:
a. $500,000 per year.
b. $1 million per year.
c. $2 million per year.
d. $2.5 million per year.
3. The elasticity of supply of land is zero. A tax on land results only in an income effect to landlords. Then it follows that a 10-percent tax on land rents will:
a. have a positive excess burden.
b. be shifted forward to tenants.
c. be paid entirely by landlords.
d. have zero excess burden.
e. both (c) and (d)
4. Currently, a 10-cent per gallon tax is levied on gasoline consumption. The tax is increased to 20 cents per gallon. The excess burden of the tax will:
a. remain the same.
b. double.
c. increase four times.
d. decline.
5. The supply of new cars is perfectly elastic. A $400 per car tax is levied on buyers. As a result of the tax,
a. the price received by sellers will fall by $400.
b. the price paid by buyers, including the tax, will increase by $400.
c. the quantity of cars sold per year will be unchanged.
d. the excess burden of the tax will be zero.
e. both (c) and (d)
6. Other things being equal, the more inelastic the demand for a taxed good,
a. the greater the portion of the tax paid by sellers.
b. the greater the excess burden of the tax.
c. the greater the portion of the tax paid by buyers.
d. the less the portion of a tax on sellers that can be shifted to buyers.
7. The market supply of labor is perfectly inelastic. However, the income effect of tax-induced wage changes are believed to be substantial. Then it follows that a tax on labor income will:
a. have zero excess burden.
b. have positive excess burden.
c. be paid entirely by workers as a reduction in net wages.
d. both (a) and (c)
e. both (b) and (c)
8. Suppose an economy is comprised of only two markets: one for food and the other for housing. A tax on food used to finance transfer payments is likely to:
a. decrease the price of food.
b. increase the price of housing.
c. decrease the price of housing.
d. have no effect on either the price of food or housing.
9. Differential tax incidence measures the effect:
a. that a tax and the expenditures it finances have on the distribution of income.
b. that one tax alone has on the distribution of income.
c. on the distribution of income of substituting one tax for another while holding the size and composition of the budget fixed.
d. on the distribution of income of substituting one tax for another while changing the kinds of government services financed.
10. Most studies of tax incidence assume that taxes on labor income and other input services are borne entirely by the workers and other input owners that supply the services. This implies that the:
a. supply of those input services is very elastic.
b. supply of those input services is of unitary elasticity.
c. supply of those input services is perfectly inelastic.
d. demand for those input services is perfectly elastic.
11. Most studies show that the price elasticity of demand for gasoline is –0.2. If the price elasticity of supply is 2, then a tax on gasoline will:
a. have no effect on the market equilibrium price of gasoline.
b. cause the market equilibrium price of gasoline to fall.
c. cause the market equilibrium price paid by buyers to rise.
d. cause the net price received by sellers to fall.
e. both (c) and (d)
12. The demand for medical care is very inelastic. If a 10-percent tax is levied on the sale of medical services and is collected from medical-care providers, then:
a. the incidence of the tax is likely to be borne entirely by medical-care providers.
b. most of the tax is likely to be shifted to those who purchase medical care.
c. the market equilibrium price of medical care will fall.
d. the excess burden of the tax is likely to be very high.
13. Which of the following is true about a lump-sum tax?
a. It prevents efficiency from being attained in competitive markets.
b. It causes substitution effects.
c. It causes income effects.
d. It causes both income effects and substitution effects.
14. Housing construction is generally believed to be an industry of constant costs. In the long run, which of the following is true if a $10 per square foot tax on housing construction is collected directly from builders?
a. The incidence of the tax will be borne by builders.
b. The excess burden of the tax will be zero.
c. The quantity of new construction supplied will be unaffected.
d. The tax will be fully shifted to buyers of new construction.
15. If the price elasticity of supply of labor is equal to 0.5 and the price elasticity of demand for labor is –2, then which of the following is likely to result from a tax on labor earnings?
a. The tax will be fully borne by workers.
b. Some of the tax will be shifted to employers as market equilibrium wages increase.
c. Market equilibrium wages will decline.
d. There will be no effect on market equilibrium wages.
16. If a lump-sum tax is imposed, the slope of the new budget line relative to the budget line prior to the tax:
a. remains unchanged.
b. increases.
c. decrease.
d. can increase and decrease in different regions.
17. Viewed from origin a price distorting tax creates a new budget line with a ______ slope relative to the budget line without the tax.
a. less steep
b. more steep
c. similar
d. varying
18. A $0.30 per unit tax is imposed on a good that reduces the quantity supplied and demanded by 1000 units. What is the deadweight loss (ignore price elasticities)?
a. $300.00
b. $100.00
c. $150.00
d. Cannot be determined.
19. If a per unit tax is imposed, but the quantity supplied and demanded does not change then:
a. the demand is perfectly inelastic.
b. the supply is perfectly inelastic.
c. there is no deadweight loss.
d. All of the above.
20. The efficiency-loss ratio relative to tax is:
a. the deadweight loss less the tax revenue.
b. the deadweight loss divided by the tax revenue reduced by one.
c. the excess burden divided by the tax revenue.
d. None of the above.

CHAPTER 12
Budget Balance and
Government Debt
TRUE/FALSE QUESTIONS
1. From 1950 to 2009, the federal government budget has been in balance in most years.
2. The high employment budget deficit implies that increases in economic activity will not eliminate the actual deficit.
3. Other things being equal, an increase in government borrowing is likely to increase interest rates.
4. If taxpayers anticipate future tax increases when government borrows to finance deficits, increased government borrowing will increase interest rates.
5. As of 2008, the amount of federal debt outstanding was equal to twice the annual GDP.
6. From 1950 to 1980, the value of the federal debt as a percent of GDP declined.
7. More than 50 percent of the federal debt in recent years has been outside debt.
8. An increase in market rates of interest tends to decrease the market value of outstanding govern¬ment debt.
9. Deficit finance postpones taxation from the present to the future.
10. The burden of the debt is borne by those who purchase government bonds.
11. The federal government budget recorded surpluses between 1998 and 2001.
12. State and local governments are usually required by state law to keep the budgets in balance.
13. If business and personal saving are constant, then a federal budget deficit will have no impact on national saving.
14. Other things being equal, a government surplus increases the supply of loanable funds available for investment.
15. State revenue bonds are backed by the taxing power of state governments.
16. A federal budget surplus can lead to more credit being available for productive activity.
17. A federal budget deficit can strain credit markets forcing the real rate of interest to decrease.
18. The U.S. deficit in the 1980s was structural in the sense that federal spending would exceed federal revenue even at a level of full employment.
MULTIPLE CHOICE QUESTIONS
1. The outstanding federal debt will decline in value if:
a. budget deficits continue.
b. the government runs a budget surplus.
c. the market rate of interest increases.
d. either (b) or (c)
2. The federal budget has been in deficit:
a. for every year between 1970 and 1997.
b. for every year between 1950 and 1997.
c. only since 1980.
d. for every year between 1960 and 1997.
3. The high employment deficit is estimated at $100 billion. Assuming that the economy is operating below full employment and that it will not overheat during the year,
a. the actual budget is not in deficit.
b. increasing GDP will eliminate the deficit.
c. increasing GDP will not eliminate the deficit.
d. the actual budget is in surplus.
4. An increase in government borrowing has no effect on the willingness of citizens to save or on the demand for credit. Increased borrowing to cover deficits will therefore:
a. reduce interest rates.
b. increase interest rates.
c. have no effect on interest rates.
d. not require increased taxes in the future.
5. As a result of government borrowing to cover deficits, citizens increase the supply of savings to provide themselves with funds to pay anticipated increases in future taxes. Then it follows that increased government borrowing will:
a. reduce private investment.
b. increase private investment.
c. have no effect of private investment.
d. increase interest rates.
e. both (a) and (d)
6. The total dollar value of the federal debt outstanding is:
a. more than 50 percent of GDP.
b. more than 100 percent of GDP.
c. less than 50 percent of GDP.
d. less than 10 percent of GDP.
7. The federal government, its agencies, and the Federal Reserve System:
a. are not permitted to hold outstanding federal debt.
b. hold 50 percent of the outstanding federal debt.
c. hold between 15 and 25 percent of the outstanding federal debt.
d. hold 75 percent of the outstanding federal debt.
8. The largest portion of the net federal debt outstanding is owed to:
a. foreigners.
b. U.S. citizens and companies.
c. federal government agencies.
d. state and local governments.
9. The debt of state and local governments is mostly:
a. internal.
b. external.
c. owed to citizens of other nations.
d. worthless.
10. Government borrowing will:
a. postpone taxation to the future.
b. increase government interest cost.
c. both (a) and (b)
d. eliminate taxes.
11. Which of the following is true about the federal government budget balance in the United States?
a. The federal budget has never had a surplus.
b. The federal budget had a surplus every year from 1970 to 2008.
c. The federal budget had a surplus from 1998 until 2001.
d. The federal budget had a deficit from 1998 until 2001.
12. Which of the following can contribute to a decrease in national saving?
a. a federal budget deficit
b. an increase in the state and local government aggregate surplus
c. a federal budget surplus
d. an increase in personal saving
13. Other things being equal, a government budget surplus:
a. increases the demand for loanable funds.
b. increases the supply of loanable funds.
c. is likely to increase market equilibrium interest rates.
d. is unlikely to affect market equilibrium interest rates.
14. If the federal government runs a surplus consistently, then which of the following is likely to occur?
a. National saving will decline.
b. The gross federal debt will increase.
c. The gross federal debt will decrease.
d. Market equilibrium interest rates are likely to rise as a result of the surpluses.
15. General obligation bonds of state and local governments are:
a. backed by revenue from public facilities such as sports stadiums.
b. backed by the taxing power of state and local governments.
c. usually used to finance transfer payments.
d. usually used to finance capital expenditures.
e. both (b) and (d)
16. A bond that is backed by the tolls collected from a bridge to be constructed from the proceeds of the bond is an example of:
a. a general obligation bond.
b. a non-obligation bond.
c. a revenue bond.
d. none of the above.
17. Evidence of “crowding out” in the market for loanable funds at a rate of 8% could be:
a. private investors who will borrow only at a rate lower than 8%.
b. private investors who are willing to accept a rate higher than 8% for borrowing.
c. a government surplus.
d. a social security surplus.
18. High-employment deficit or surplus is:
a. an extreme economic situation requiring emergency measures.
b. the amount of deficit or surplus available assuming current employment levels.
c. the amount of deficit or surplus available when employment is at its approximately full capacity.
d. the amount of deficit or surplus available when unemployment is at a relatively high level.
19. A government’s internal debt is:
a. debt owed to other government agencies.
b. debt owed to other governments.
c. debt owed to its citizens.
d. both (a) and (c).
20. The National Income and Product Accounts budget balance reflects:
a. an inflation-adjusted budget balance less social security surplus.
b. new debt resulting from a federal budget deficit.
c. the real budget balance.
d. the nominal budget balance.

ECO 450 Week 9 Quiz

CHAPTER 13
The Theory of Income Taxation
TRUE/FALSE QUESTIONS
1. The actual federal income tax currently taxes all income irrespective of its source or use at the same tax rate.
2. Comprehensive income excludes unrealized capital gains.
3. Under a comprehensive income tax, transfer payments received by Social Security recipients would be fully taxable.
4. Homeowners earn rental income-in-kind from their home that would be taxable under a compre¬hensive income tax.
5. A comprehensive income tax is a lump-sum tax.
6. A comprehensive income tax will result in a divergence between gross wages paid by employers and net wages received by workers.
7. A comprehensive income tax will always reduce work effort by taxpayers.
8. The substitution effect of a tax-induced decline in wages always leads workers to work less.
9. The market wage elasticity of labor is zero. If this is the case, the excess burden of a tax on labor income will also be zero.
10. Points on a compensated labor supply curve are always more elastic than points for corresponding wage levels on a regular labor supply curve.
11. Comprehensive income is the sum of annual consumption and the change in net worth.
12. A tax on interest income does not prevent credit market from efficiently allocating resources.
13. If an individual is subject to a 30-percent income tax, then the net interest on a certificate of deposit yielding 5 percent would be 3.5 percent after taxes.
14. Because a tax on interest income results in income and substitution effects, it is not possible to pre¬dict the effect it will have on saving.
15. Most empirical studies indicate that the interest elasticity of supply of savings is close to zero.
16. Income tax became a permanent fixture in the United States starting in the early nineteenth century.
17. The Haig-Simons definition of income is different from comprehensive income.
18. Comprehensive income equals consumption plus the change in net worth.
MULTIPLE CHOICE QUESTIONS
1. Comprehensive income:
a. is the sum of annual consumption and realized capital gains.
b. is the sum of annual consumption and changes in net worth.
c. excludes corporation income.
d. is the sum of annual consumption and net worth.
2. A tax on labor income:
a. results only in an income effect that always decreases hours worked per year.
b. results in a substitution effect that always decreases hours worked per year.
c. results in an income effect that increases hours worked per year if leisure is a normal good.
d. both (a) and (b)
e. both (b) and (c)
3. The market supply of labor is perfectly inelastic. Then it follows that:
a. the substitution effect of wage changes is zero.
b. the income effect of wage changes is zero.
c. leisure is a normal good and the income effect of wage changes exactly offsets the substitution effect.
d. the excess burden of a tax on labor income will be zero.
4. The compensated labor supply curve:
a. will always be vertical.
b. will always be upward sloping.
c. will always be downward sloping.
d. reflects both the income and substitution effects of wage changes.
5. Using a regular labor supply curve instead of a compensated supply curve to calculate the excess burden of a tax on labor income will:
a. result in an accurate estimate of the excess burden.
b. overestimate the excess burden.
c. underestimate the excess burden.
d. accurately estimate the excess burden only if the market supply of labor is perfectly inelastic.
6. Most empirical research indicates that the market supply curve of labor hours by prime-age males is:
a. very elastic.
b. almost perfectly inelastic.
c. always upward sloping.
d. perfectly elastic.
7. A flat-rate tax on labor income will:
a. always reduce hours worked per year.
b. always increase hours worked per year.
c. either increase or decrease hours worked per year.
d. never have any effect on the amount of leisure hours per year.
8. A tax on interest income:
a. causes the gross interest rate paid by investors to exceed the net interest rate received by savers.
b. will always reduce saving.
c. will always increase saving.
d. is equivalent to a lump-sum tax.
9. If the market supply curve of savings is upward sloping, a tax on interest income will:
a. increase the amount of saving.
b. increase the market rate of interest.
c. decrease the market rate of interest.
d. have no effect on the market rate of interest.
10. If the supply of labor is perfectly inelastic, then the incidence of a payroll tax levied entirely on employers will be:
a. borne by employers as a reduction in profits.
b. split between workers and employers.
c. paid entirely by workers.
d. shifted forward to consumers.
11. Which of the following is true about comprehensive income?
a. Only labor income is included.
b. Only capital income is included.
c. Capital gains are not included.
d. Both realized and unrealized capital gains are included.
12. Which of the following will increase a person’s comprehensive income?
a. an increase in the market value of the person’s home
b. a decrease in the value of the person’s stock portfolio
c. a decrease in labor income
d. a decrease in consumption
13. A tax on labor income will:
a. increase the net wage received by workers.
b. decrease the net wage received by workers.
c. cause that net wage received by workers to decline below the gross wage paid by employers.
d. both (b) and (c)
14. If the return to savings, r, is subject to taxation at rate t, then in equilibrium a saver’s marginal rate of time preference will equal:
a. r
b. t
c. (1 + r)
d. [1 + r(1 – t)]
15. The higher the compensated elasticity of supply of savings,
a. the lower the excess burden of a tax on capital income.
b. the higher the excess burden of a tax on capital income.
c. the higher the excess burden of a tax on labor income.
d. both (b) and (c)
16. The Haig-Simons definition of income:
a. is the sum of annual consumption and realized capital gains.
b. is the sum of annual consumption and changes in net worth.
c. excludes corporation income.
d. is the sum of annual consumption and net worth.
17 Comprehensive income:
a. includes realized capital gains, but not unrealized capital gains
b. includes both realized and unrealized capital gains.
c. excludes cash from the sale of assets.
d. excludes increases in the value of assets.
18. Income-in-kind:
a. is exemplified by nonpecuniary returns.
b. is generally non-taxable because there is no monetary transaction.
c. is generally taxable.
d. both (a) and (b).
19. An example of a nonpecuniary return is:
a. job satisfaction.
b. unemployment benefits.
c. employer contributions to a retirement plan.
d. both (b) and (c).

20. Income from labor services (wages) account for what percentage of gross income in the U.S.?
a. 90%
b. 75%
c. 60%
d. 50%

CHAPTER 14
Taxation of Personal Income
in the United States
TRUE/FALSE QUESTIONS
1. Taxable income in the United States exceeds adjusted gross income.
2. Taxable income in the United States includes all capital gains earned, whether or not they are realized.
3. Taxable income in the United States amounts to less than 50 percent of personal income.
4. Tax preferences are really subsidies to certain activities.
5. A tax deduction allowed for an activity for which positive externalities are not likely to exist (such as home ownership) is likely to cause the marginal social cost of the activity to exceed its marginal social benefit.
6. The value of a personal exemption to a taxpayer varies with his or her marginal tax rate.
7. The U.S. personal income tax is not a progressive tax.
8. The highest statutory marginal tax rate under the federal personal income tax is 50 percent.
9. Under current rules, only real interest earned is subject to income tax.
10. Realized, long-term capital gains that reflect inflation are currently exempt from taxation.
11. The tax base under the personal income tax in the United States is the Haig-Simons definition of comprehensive income.
12. Tax credits vary with a person’s marginal tax rate.
13. The cuts in marginal tax rates initiated in 2001 are likely to reduce the excess burden of tax pref¬erences.
14. The earned income tax credit is a negative tax the subsidizes the earnings of low-income workers.
15. If a progressive income tax is replaced with an equal-yield, flat-rate tax, then work effort will unequivocally increase.
16. As of 2009, there is no marriage penalty for an adjusted gross income of $60,000.
17. Tax preferences are exclusions, exemptions, and deductions from the tax base.
18. Income-in-kind is not considered a tax preference.
MULTIPLE CHOICE QUESTIONS
1. Adjusted gross income, as defined by the United States Tax Code,
a. exceeds taxable income.
b. equals taxable income.
c. is less than taxable income.
d. is greater than comprehensive income.
2. Tax preferences:
a. are exclusions, exemptions, and deductions from the tax base.
b. are in the tax code by accident.
c. are extra taxes on certain taxpayers.
d. increase the amount of income that is taxable.
e. both (a) and (d)
3. Currently, the tax treatment of capital gains in the United States is such that:
a. all capital gains are taxed.
b. all realized capital gains are taxed.
c. most realized capital gains are taxed.
d. only capital gains adjusted for inflation are taxed.
4. The exclusion of interest of state and local bonds from taxation by the federal government:
a. decreases interest costs for state and local governments.
b. increases interest costs for state and local governments.
c. benefits lower-income taxpayers more than upper-income taxpayers.
d. discourages borrowing by local governments.
5. The value of personal exemptions in terms of taxes saved:
a. is the same for all taxpayers.
b. varies with family size.
c. varies with taxpayers’ marginal tax rates.
d. both (b) and (c)
6. A taxpayer is in a 33-percent tax bracket and itemizes deductions. He obtains a mortgage from a bank at 9-percent interest. The actual rate of interest he pays is:
a. 6 percent.
b. 9 percent.
c. 20 percent.
d. 25 percent.
7. Tax expenditures are:
a. expenditures made to collect taxes.
b. losses in revenue due to tax preferences.
c. less than 1 percent of tax revenue.
d. both (b) and (c)
8. Under the federal personal income tax rules prevailing as of 2009,
a. all interest expense is tax deductible.
b. the interest expense for mortgages on first and second homes is tax deductible.
c. the interest expense for mortgages only on first homes is tax deductible.
d. no interest is tax deductible.
9. The reduction in marginal tax rates will:
a. increase the excess burden of tax preferences.
b. increase tax expenditures.
c. decrease the excess burden of tax preferences.
d. have no effect of tax expenditures.
10. “Bracket creep” is no longer a problem in the United States because:
a. the tax brackets are indexed.
b. capital gains are now fully taxable.
c. only real interest is taxed.
d. capital gains are indexed.
11. Which of the following is true for the federal income tax in the United States?
a. All income irrespective of its source or use is taxed at the same rate.
b. Comprehensive income is the tax base.
c. The tax base is less than 50 percent of comprehensive income.
d. All realized and unrealized capital gains are included in the tax base.
12. Because of the Earned Income Tax Credit, the effective tax rate for the lowest-income taxpayers in the United States is:
a. only 15 percent.
b. higher than that paid by upper-income taxpayers.
c. zero.
d. negative.
13. The excess burden of tax preferences:
a. depends on average tax rates.
b. will be higher, the higher the marginal tax rate is.
c. will be lower, the higher the marginal tax rate is.
d. is independent of marginal tax rates.
14. A shift to an equal-yield, flat-rate personal income tax from the current progressive income tax rate structure will:
a. reduce the tax burden on upper-income groups.
b. increase the tax burden on upper-income groups.
c. increase the share of taxes paid by lower-income groups.
d. both (a) and (c)
15. Removing savings from the tax base of the personal income tax is likely to:
a. increase work effort.
b. decrease work effort.
c. lower market equilibrium interest rates by increasing the supply of loanable funds.
d. increase market equilibrium interest rates, thereby increasing the demand for loanable funds.
16. Which is a justification for tax preferences?
a. administrative difficulties
b. improving equity
c. encouraging private expenditures that create external benefits
d. all of the above
17. If the excess burden from tax is $10 million, lowering marginal tax rates should make the excess burden:
a. more than $10 million.
b. less than $10 million.
c. remain at $10 million.
d. none of the above is certain to occur
18. Which of the following is the result of The Economic Growth and Tax Relief Reconciliation Act enacted in 2001?
a. reduction of the highest marginal tax rate
b. increased the marriage penalty
c. created a new 40% tax bracket
d. both (a) and (c)
19. As of 2009, the highest marginal tax rate is:
a. 39.6%
b. 38%
c. 35%
d. 32.5%
20. Which is an example of an itemized deduction under the U.S. code as of 2009?
a. state and local income tax
b. state and local property tax
c. all medical expenses
d. both (a) and (b)

CHAPTER 17
Taxes on Wealth,
Property, and Estates
TRUE/FALSE QUESTIONS
1. Wealth is a flow.
2. A wealth tax is equivalent to a tax on the return to saving.
3. If the supply of savings is perfectly inelastic, a comprehensive wealth tax will increase the market rate of interest.
4. Assuming that the supply curve of savings is upward sloping, a comprehensive wealth tax will reduce annual investment.
5. As administered in the United States, the local property tax is mainly a tax on real estate.
6. The property tax in the United States is likely to reduce the equilibrium return to investment.
7. The town of Oz has raised its property tax rates considerably above the national average. Other things being equal, capital is likely to flow into Oz in the long run because of the tax.
8. If a real estate tax causes rents to rise, it cannot be fully capitalized.
9. A tax on the value of land is likely to be fully capitalized.
10. The local property tax is likely to result in less than the efficient amount of investment in real estate.
11. A general tax on wealth will cause efficiency loss in labor markets.
12. The local property tax, as administered in the United States, is a general tax on wealth.
13. The local property tax in the United States will reduce the return to real estate only in the long run.
14. Other things being equal, if the property tax rate is above the national average for a jurisdiction, capital can be expected to flow out of the region in that area.
15. If a local property tax increase is fully capitalized, property owners at the time of the increase can¬not shift any of the current or future tax increase to buyers if they sell the property.
16. A person who never saves any income and receives no gifts and inheritances will never accumulate wealth.
17. Wealth taxes are a relatively new form of taxation.
18. Total wealth definitions never include intangible personal property.
MULTIPLE CHOICE QUESTIONS
1. Wealth is:
a. a flow.
b. a stock.
c. the market value of accumulated assets.
d. both (b) and (c)
2. A comprehensive wealth tax base includes:
a. all real tangible, intangible, and human wealth, less any claims against those assets.
b. only real property.
c. only intangible assets.
d. only tangible assets.
3. If the interest elasticity of supply of savings is zero, a comprehensive wealth tax will:
a. increase the market rate of interest.
b. reduce the income of savers.
c. reduce the income of workers.
d. both (b) and (c)
4. If the supply curve of savings is upward sloping, a comprehensive wealth tax will:
a. increase the market rate of interest.
b. reduce the market rate of interest.
c. have zero excess burden.
d. have no effect on investment.
5. A comprehensive wealth tax will:
a. impair efficiency in labor markets.
b. impair efficiency in investment markets.
c. both (a) and (b)
d. have no excess burden.
6. Assuming that investors seek to maximize the return on their investment, the long-run effect of a national tax on real estate will be to:
a. reduce the return to investment in real estate only.
b. reduce the return to investment in all assets.
c. reduce wages only.
d. increase the return to all investors.
7. A local property tax, such as that used in the United States, is likely to:
a. increase investment in the economy.
b. cause a flow of investment among jurisdictions.
c. decrease the return to saving in all uses.
d. both (b) and (c)
8. If a property tax on real estate is capitalized,
a. the price of real estate will rise.
b. the price of real estate will fall.
c. the price of real estate will be unaffected.
d. the burden of the tax will be transferred to buyers of real estate.
e. both (b) and (d)
9. Suppose that the current market rate of interest is 10 percent. The market rent on a parcel of land is $6,000 per year. A 10-percent land tax is imposed. As a result of the tax, the price of the land parcel:
a. falls from $60,000 to $30,000.
b. increases from $30,000 to $60,000.
c. falls 10 percent.
d. falls 20 percent.
10. If a tax on real estate results in a decrease in the supply of housing, the tax will be:
a. fully capitalized.
b. only partially capitalized.
c. not capitalized at all.
d. borne entirely by renters.
11. If the supply of saving is not perfectly inelastic in the nation, then which of the following taxes will cause efficiency loss in capital markets?
a. a general wealth tax
b. a national tax on real estate
c. a consumption tax
d. both (a) and (b)
12. The local property tax in the United States is levied primarily on:
a. personal property.
b. intangible property.
c. business property.
d. real estate.
13. Which of the following would not be included in a comprehensive wealth tax base?
a. real estate
b. personal property
c. intangible assets
d. residential rents
14. If the supply of real estate is not perfectly inelastic, then the local real estate property tax differentials:
a. cannot be shifted to tenants.
b. can be shifted to tenants through increases in rents.
c. will be fully capitalized.
d. both (a) and (c)
15. If the supply of saving is not perfectly inelastic, then substituting a value-added tax for an equal-yield general wealth tax will:
a. decrease market equilibrium interest rates.
b. increase the efficiency loss in labor markets.
c. decrease the efficiency loss in labor markets.
d. decrease efficiency in capital markets.
e. both (a) and (b)
16. Intangible personal property includes:
a. stock in companies.
b. corporate bonds.
c. cash.
d. all of the above
17. If the annual amount of savings is $10 billion, what is the effect of a wealth tax assuming supply is perfectly inelastic?
a. annual savings remains $10 billion
b. annual savings increases above $10 billion
c. annual savings falls below $10 billion
d. no particular effect is guaranteed to happen
18. If the annual amount of savings is $10 billion, what is the effect of a wealth tax assuming supply is responsive?
a. annual savings remains $10 billion
b. annual savings increases above $10 billion
c. annual savings falls below $10 billion
d. no particular effect is guaranteed to happen
19. From the point of view of the locality, increasing property taxes:
a. increases the price of locally produced goods.
b. decreases income of owners of land in the associated community.
c. does not affect buyers of locally produced goods fro outside of the community.
d. both (a) and (b)
20. Tax capitalization is:
a. a decrease in the value of a taxed asset at a level related to the discounted value of the future tax liability.
b. partially recognized when the supply of taxed asset is perfectly inelastic.
c. only partially recognized on assets like land.
d. both (b) and (c)

CHAPTER 18
Fiscal Federalism and State and
Local Government Finance
TRUE/FALSE QUESTIONS
1. A federal system of government allows a wider diversity of preferences for government-provided services to be accommodated when compared to nonfederal, centralized government.
2. Income redistribution is a service likely to be most effectively administered by the federal govern¬ment.
3. Economic stabilization can be easily supplied to citizens by local governments.
4. When each local government supplies goods and services to its citizens, the political equilibrium in each jurisdiction corresponds to the median most-preferred outcome of all national voters.
5. A federal system of government allows both centralized and decentralized collective choices.
6. Local tax bases are less elastic than national tax bases.
7. Tax exporting occurs if the price of goods produced in the state and purchased by out-of-state residents rises as a result of in-state taxes.
8. Matching categorical grants can be used to internalize interjurisdictional positive externalities.
9. Matching grants only result in income effects.
10. A matching grant will increase local government expenditures by more than an equal-value, general purpose grant.
11. A federal system of government only has a central government that supplies all public goods and services.
12. According to the Tiebout model of fiscal federalism, a system of many local governments improves the efficiency of allocation of resources to and among public goods.
13. If a local jurisdiction’s tax base is elastic, an increase in tax rates will decrease tax revenue.
14. Taxing hotel rooms and restaurant meals in a city with lots of tourism is an example of tax exporting.
15. Financing local schooling with the local property tax can guarantee equality of opportunity in education.
16. According to Tiebout, individuals will self-select into communities where the government budget best satisfies their own personal preferences.
17. Mobility between communities is not critical to the Tiebout model.
18. Interjurisdictional externalities are costs or benefits of local government goods and services to residents in other political jurisdictions.
MULTIPLE CHOICE QUESTIONS
1. Under a federal system of government,
a. all government goods and services are supplied by a central government.
b. all government goods and services are supplied by local governments.
c. both central and noncentral governments supply goods and services.
d. all public choices are made nationally.
2. Economic stabilization is most effectively provided by:
a. a central government.
b. state governments.
c. local governments.
d. regional governments.
3. A decentralized system of government:
a. tends to result in uniformity in the quantity and quality of government services in all jurisdic¬tions.
b. allows diversity in the quantity and quality of government goods and services.
c. conducts national elections on all issues.
d. is undemocratic.
4. The political equilibrium in a local jurisdiction for a given public good corresponds to the median most-preferred outcome of:
a. all national voters.
b. the President.
c. local voters.
d. both (a) and (c)
5. In general, local tax bases tend to be:
a. less elastic than national tax bases.
b. more elastic than national tax bases.
c. equally elastic when compared with national tax bases.
d. very inelastic.
6. According to the Tiebout model of local government expenditure,
a. all local governments will supply the same kinds and amounts of services.
b. mobile citizens respond to differences in taxes and expenditures by moving to the jurisdiction that maximizes their well-being.
c. the average costs of government services is constant.
d. tax rates do not influence a citizen’s choice of residence.
7. A categorical grant:
a. does not restrict the use of transferred funds.
b. usually specifies the use to which the funds must be applied.
c. is used rarely in the United States.
d. is not used at all in the United States.
8. A federal highway grant will provide funds for roads supplied by state and local governments if these governments pay 50 percent of the cost of the roads. This grant is an example of:
a. revenue sharing.
b. a matching categorical grant.
c. a general purpose grant.
d. a nonmatching block grant.
9. A grant received by a local government will:
a. not affect the political equilibrium in that jurisdiction.
b. change the political equilibrium in that jurisdiction.
c. always increase government expenditures in the recipient jurisdiction by the amount of grant.
d. both (b) and (c)
10. Matching grants:
a. will not increase government spending in recipient jurisdictions.
b. increase government expenditures in recipient jurisdictions more than nonmatching grants of an equal amount.
c. increase government expenditures in recipient jurisdictions less than nonmatching grants of an equal amount.
d. increase tax rates in recipient jurisdictions.
11. Which of the following is true about a federal system of government?
a. There is only one level of government.
b. There are several levels of government.
c. A central government directs local governments to supply all public goods at levels determined nationally.
d. There are only local governments.
12. The central economic problem of fiscal federalism is:
a. the division of taxing and expenditure functions among different levels of government.
b. the choice of the collective choice rule for central governments only.
c. the level of public goods to be provided by a central government only.
d. how to achieve an equitable distribution of income.
13. Which of the following is best supplied by local governments?
a. national defense
b. income redistribution
c. money
d. fire protection
14. Local public goods:
a. are pure public goods for the entire nation.
b. are those whose benefits are nonrival only for the population of a particular geographical area.
c. have benefits that are subject to exclusion by pricing for local consumers.
d. are best provided by a central government.
15. An increase in the local retail sales tax rate will increase revenue collected by a local government:
a. if the tax base is elastic.
b. if the tax base is unit elastic.
c. if the tax base in inelastic.
d. no matter what the value of the elasticity of the tax base.
16. Which is an example of a interjurisdictional externality?
a. residential property tax
b. local sales tax
c. wage tax on all workers in a community
d. both (b) and (c)
17. Mobility:
a. is not essential to the Tiebout model.
b. can hamper a jurisdiction’s ability to raise revenues.
c. may be part of the reason for the reliance on local property taxes for the raising of local government revenue.
d. both (b) and (c)
18. A local wage tax can:
a. create tax competition if a neighboring jurisdiction does not have such a tax.
b. export tax onto workers in the local jurisdiction who live outside of the local jurisdiction.
c. prevent tax competition among other local jurisdictions.
d. both (a) and (b)
19. Fiscal capacity:
a. decreases with the ability of the jurisdiction to export tax.
b. is a measure of the ability of a jurisdiction to finance government-provided services.
c. is always enhanced by mobility.
d. is not dependent on the wealth of the community.
20. What is generally the best measure of fiscal capacity for local governments?
a. income per capita
b. per capita retail sales
c. assessed valuation per capita
d. per capita expenditure

ECO 305 Week 11 Quiz – Strayer University New

ECO/305 Week 11 Quiz – Strayer

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Quiz 10 Chapter 16 and 17

MACROECONOMIC POLICY IN AN OPEN ECONOMY

MULTIPLE CHOICE

1. A nation experiences internal balance if it achieves:
a. Full employment
b. Price stability
c. Full employment and price stability
d. Unemployment and price instability

2. A nation experiences external balance if it achieves:
a. No net changes in its international gold stocks
b. Productivity levels equal to those of its trading partners
c. An increase in its money supply equal to increases overseas
d. Equilibrium in its balance of payments

3. A nation experiences overall balance if it achieves:
a. Balance-of-payments equilibrium, full employment, and price stability
b. Balance-of-payments equilibrium, maximum productivity, and price stability
c. Full employment, price stability and no change in its money supply
d. Full employment, price stability, and maximum productivity

4. Most industrial countries generally considered ____ as the most important economic goal.
a. External balance
b. Internal balance
c. Maximum efficiency for business
d. Maximum efficiency for labor

5. Which policies are expenditure-changing policies?
a. Currency devaluation and revaluation
b. Import quotas and tariffs
c. Monetary and fiscal policy
d. Wage and price controls

6. Which policy is an expenditure-switching policy?
a. Increase in the money supply
b. Decrease in government expenditures
c. Increase in business and household taxes
d. Decrease in import tariffs

7. An expenditure-increasing policy would consist of an increase in:
a. Import tariffs
b. Import quotas
c. Governmental taxes
d. The money supply

8. An expenditure-reducing policy would consist of a decrease in:
a. The par value of a currency
b. Government expenditures
c. Import duties
d. Business or household taxes

9. Given fixed exchange rates, assume Mexico initiates expansionary monetary and fiscal policies to combat recession. These policies will also:
a. Increase both imports and exports
b. Increase exports and reduce imports
c. Reduce a balance-of-payments surplus
d. Reduce a balance-of-payments deficit

10. Given fixed exchange rates, assume Mexico initiates contractionary monetary and fiscal policies to combat inflation. These policies will also:
a. Reduce a balance-of-payments surplus
b. Reduce a balance-of-payments deficit
c. Increases both imports and exports
d. Decrease both imports and exports

11. The appropriate expenditure-switching policy to correct a current account surplus is:
a. Currency revaluation
b. Currency devaluation
c. Expansionary monetary policy
d. Contractionary fiscal policy

12. The appropriate expenditure-switching policy to correct a current account deficit is:
a. Contractionary monetary policy
b. Expansionary fiscal policy
c. Currency devaluation
d. Currency revaluation

13. Suppose the United States faces domestic recession and a current account deficit. Should the United States devalue the dollar, one would expect the:
a. Recession to become less severe–deficit to become less severe
b. Recession to become more severe–deficit to become less severe
c. Recession to become less severe–deficit to become more severe
d. Recession to become more severe–deficit to become more severe

14. Suppose the United States faces domestic inflation and a current account surplus. Should the United States revalue the dollar, one would expect the:
a. Inflation to become more severe–surplus to become less severe
b. Inflation to become less severe–surplus to become less severe
c. Inflation to become less severe–surplus to become more severe
d. Inflation to become more severe–surplus to become more severe

15. Suppose Brazil faces domestic recession and a current account surplus. Should Brazil revalue its currency, one would expect the:
a. Recession to become less severe–surplus to become less severe
b. Recession to become more severe–surplus to become more severe
c. Recession to become more severe–surplus to become less severe
d. Recession to become less severe–surplus to become more severe

16. Suppose that Brazil faces domestic inflation and a current account deficit. Should Brazil devalue its currency, one would expect the:
a. Inflation to become more severe–deficit to become less severe
b. Inflation to become more severe–deficit to become more severe
c. Inflation to become less severe–deficit to become less severe
d. Inflation to become less severe–deficit to become more severe

17. In a closed economy, which of the following will cause the economy’s aggregate demand curve to shift to the right?
a. decreases and wages and salaries paid to employees
b. increases in the prices of oil and natural gas
c. decreases in income taxes for households
d. decreases in the productivity of labor

18. Given an open economy with high capital mobility and floating exchange rates, suppose an expansionary monetary policy is implemented to combat recession. The initial and secondary effects of the policy
a. cause aggregate demand to increase, thus strengthening the policy’s expansionary effect on real output
b. cause aggregate demand to decrease, thus eliminating the policy’s expansionary effect on real output
c. have conflicting effects on aggregate demand, thus weakening the policy’s expansionary effect on real output
d. have conflicting effects on aggregate demand, thus strengthening the policy’s expansionary effect on real output

19. A problem that economic policy makers confront when attempting to promote both internal and external balance for the nation is that monetary or fiscal policies aimed at the domestic sector also have impacts on:
a. Trade flows only
b. Capital flows only
c. both trade flows and capital flows
d. Neither trade flows nor capital flows

20. Given an open economy with high capital mobility and floating exchange rates, suppose an expansionary fiscal policy is implemented to combat recession. The initial and secondary effects of the policy
a. cause aggregate demand to increase, thus strengthening the policy’s expansionary effect on real output
b. cause aggregate demand to decrease, thus eliminating the policy’s expansionary effect on real output
c. have conflicting effects on aggregate demand, thus weakening the policy’s expansionary effect on real output
d. have conflicting effects on aggregate demand, thus strengthening the policy’s expansionary effect on real output

21. A system of fixed exchange rates and high capital mobility strengthens which policy in combating a recession:
a. Expansionary fiscal policy
b. Expansionary monetary policy
c. Contractionary fiscal policy
d. Contractionary monetary policy

22. A system of floating exchange rates and high capital mobility strengthens which policy in combating a recession:
a. Expansionary fiscal policy
b. Expansionary monetary policy
c. Contractionary fiscal policy
d. Contractionary monetary policy

23. Given an open economy with high capital mobility, all of the following statements are true except:
a. fiscal policy is strengthened under fixed exchange rates
b. monetary policy is weakened under fixed exchange rates
c. monetary policy is strengthened under floating exchange rates
d. fiscal policy is strengthened under floating exchange rates

24. Under a system of managed-floating exchange rates with heavy exchange rate intervention:
a. Fiscal policy is successful in promoting internal balance, while monetary policy is unsuccessful
b. Monetary policy is successful in promoting internal balance, while fiscal policy is unsuccessful
c. Both fiscal policy and monetary policy are successful in promoting internal balance
d. Neither fiscal policy nor monetary policy are successful in promoting internal balance

25. Given a system of floating exchange rates, an expansionary monetary policy by the Federal Reserve will cause
a. the dollar to appreciate and will decrease U.S. net exports
b. the dollar to appreciate and will increase U.S. net exports
c. the dollar to depreciate and will increase U.S. net exports
d. the dollar to depreciate and will decrease U.S. net exports

26. Given a system of floating exchange rates, a contractionary monetary policy by the Federal Reserve will cause
a. the dollar to appreciate and will decrease U.S. net exports
b. the dollar to appreciate and will increase U.S. net exports
c. the dollar to depreciate and will increase U.S. net exports
d. the dollar to depreciate and will decrease U.S. net exports

27. All of the following are obstacles to international economic policy coordination except:
a. Different national objectives and institutions
b. Different national political climates
c. Different phases in the business cycle
d. Different national currencies

28. Suppose a central bank prevents a depreciation of its currency by intervening in the foreign exchange market and buying its currency with foreign currency. This causes the
a. domestic money supply to decrease and a decline in aggregate demand
b. domestic money supply to increase and a decline in aggregate demand
c. domestic money supply to decrease and a rise in aggregate demand
d. domestic money supply to increase and a rise in aggregate demand

29. At the ____, the Group-of-Five nations agreed to intervene in the currency markets to promote a depreciation in the U.S. dollar’s exchange value.
a. Plaza Agreement of 1985
b. Louvre Accord of 1987
c. Bonn Summit of 1978
d. Tokyo Summit of 1962

30. The Plaza Agreement of 1985 and Louvre Accord of 1987 are examples of:
a. Tariff trade barrier formation
b. Nontariff trade barrier formation
c. International economic policy coordination
d. Beggar-thy-neighbor policies

Exhibit 16.1

At the Plaza Accord of 1985, the Group-of-Five nations agreed to drive the value of the dollar downward (i.e., depreciation) so as to help reduce the U.S. trade deficit. Answer the following question(s) on the basis of this information.

31. Refer to Exhibit 16.1. To help drive the dollar’s exchange value downward, the Federal Reserve would:
a. Reduce taxes
b. Increase taxes
c. Decrease the money supply
d. Increase the money supply

32. Refer to Exhibit 16.1. The Federal Reserve might refuse to support the accord on the grounds that when helping to drive the dollar’s exchange value downward, it promotes an increase in the U.S.:
a. Rate of inflation
b. Budget deficit
c. Unemployment level
d. Economic growth rate

33. Under a fixed exchange-rate system and high capital mobility, an expansion in the domestic money supply leads to:
a. Trade-account deficit and a capital-account surplus
b. Trade-account deficit and a capital-account deficit
c. Trade-account surplus and a capital-account surplus
d. Trade-account surplus and a capital-account deficit

34. Under a fixed exchange-rate system and high capital mobility, a contraction in the domestic money supply leads to a:
a. Trade-account deficit and a capital-account surplus
b. Trade-account deficit and a capital-account deficit
c. Trade-account surplus and a capital-account surplus
d. Trade-account surplus and a capital-account deficit

35. Under a fixed exchange-rate system and high capital mobility, an expansionary fiscal policy leads to a:
a. Trade-account deficit and a capital-account surplus
b. Trade-account deficit and a capital-account deficit
c. Trade-account surplus and a capital-account surplus
d. Trade-account surplus and a capital-account deficit

36. Under a fixed exchange-rate system and high capital mobility, a contractionary fiscal policy leads to a:
a. Trade-account deficit and a capital-account surplus
b. Trade-account deficit and a capital-account deficit
c. Trade-account surplus and a capital-account surplus
d. Trade-account surplus and a capital-account deficit

37. Suppose a central bank prevents a depreciation of its currency by intervening in the foreign exchange market and buying its currency with foreign currency. This causes the
a. domestic money supply to decrease and a decline in aggregate demand
b. domestic money supply to increase and a decline in aggregate demand
c. domestic money supply to decrease and a rise in aggregate demand
d. domestic money supply to increase and a fall in aggregate demand

38. Suppose a central bank prevents an appreciation of its currency by intervening in the foreign exchange market and selling its currency for foreign currency. This causes the
a. domestic money supply to decrease and a decline in aggregate demand
b. domestic money supply to increase and a decline in aggregate demand
c. domestic money supply to decrease and a rise in aggregate demand
d. domestic money supply to increase and a fall in aggregate demand

39. Assume a system of floating exchange rates. In response to relatively high interest rates abroad, suppose domestic investors place their funds in foreign capital markets. The result would be
a. a depreciation of the domestic currency and a rise in net exports
b. a depreciation of the domestic currency and a fall in net exports
c. an appreciation of the domestic currency and a rise in net exports
d. an appreciation of the domestic currency and a fall in net exports

40. Assume a system of floating exchange rates. In response to relatively high domestic interest rates, suppose that foreign investors place their funds in domestic capital markets. The result would be
a. a depreciation of the domestic currency and a rise in net exports
b. a depreciation of the domestic currency and a fall in net exports
c. an appreciation of the domestic currency and a rise in net exports
d. an appreciation of the domestic currency and a fall in net exports

41. When a nation realizes external balance
a. it can have a current account deficit
b. it can have a current account surplus
c. it has neither a current account deficit nor a current account surplus
d. Both a and b

42. Direct controls may take the form of
a. Tariffs
b. Export subsidies
c. Export quotas
d. All of the above

43. With a fixed exchange rate system, internal balance is most effectively achieved by using
a. Expansionary monetary policy to combat recession
b. Expansionary fiscal policy to combat inflation
c. Contractionary monetary policy to combat recession
d. Contractionary fiscal policy to combat recession

44. Policy coordination is complicated by
a. Different economic objectives
b. Different national institutions
c. Different phases in the business cycle
d. All of the above

TRUE/FALSE

1. A nation realizes internal balance if economy achieves full employment and price stability.

2. Nations have typically placed greater importance to the goal of internal balance than to the goal of external balance.

3. A nation realizes external balance when its current account is in equilibrium.

4. A nation realizes overall balance when it achieves full employment and current account equilibrium.

5. Expenditure-changing policies modify the direction of aggregate demand, shifting it between domestic output and imports.

6. Expenditure-switching policies include fiscal policy and monetary policy.

7. Economic policymakers have typically adopted expenditure-increasing policies to combat inflation and expenditure-reducing policies to combat recession.

8. Expenditure-switching policies alter the level of total spending (aggregate demand) for goods and services produced domestically and those imported.

9. Currency devaluation and revaluation are considered to be expenditure-changing policies since they alter a country’s aggregate demand for goods and services.

10. Expenditure-switching policies include currency revaluation, currency devaluation, and direct controls such as tariffs, quotas, and subsidies.

11. Given an open economy with high capital mobility and floating exchange rates, suppose an expansionary monetary policy is implemented to combat recession. The initial and secondary effects of the policy have conflicting effects on aggregate demand, thus weakening the policy’s expansionary effect.

12. Given an open economy with high capital mobility and fixed exchange rates, suppose an expansionary fiscal policy is implemented to combat recession. The initial and secondary effects of the policy cause aggregate demand to increase, thus strengthening the policy’s expansionary effect.

13. When the economy is in deep recession or depression, it is operating on that portion of its aggregate supply curve that is horizontal.

14. Changes in a country’s net exports, investment spending, or government spending will cause its aggregate demand curve to shift.

15. Given an open economy with high capital mobility, fiscal policy is strengthened under fixed exchange rates.

16. Given an open economy with high capital mobility, monetary policy is strengthened under fixed exchange rates.

17. Under floating exchange rates and high capital mobility, an expansionary monetary policy would help a country resolve a recession and a current account deficit.

18. Exchange rate management policies require international policy coordination because a depreciation of one nation’s currency implies an appreciation of its trading partner’s currency.

19. Currency devaluation and revaluation primarily affect the economy’s current account and have secondary effects on domestic employment and inflation.

20. Fiscal and monetary policies are generally used to combat domestic recession and inflation and have secondary effects on the balance of payments.

21. The Group of five (G-5) nations include Japan, Germany, China, and Australia.

22. The Bonn Summit of 1978 and Plaza Accord of 1985 are examples of international policy coordination.

23. International policy coordination is plagued by differing national economic objectives, institutions, political climates, and phases in the business cycle.

24. The goals of the Plaza Agreement of 1985 were to combat protectionism in the U.S. Congress, promote world economic expansion by stimulating demand in Germany and Japan, and to ease the burden of the U.S. debt service.

SHORT ANSWER

1. What policy instrument should be used when demand-pull inflation exists?

2. What happens to the balance of payments under a fixed exchange rate system, when expansionary or contractionary monetary policy is used?

ESSAY

1. Was the Plaza Agreement of 1985 a success?

2. What is international economic policy coordination?

CHAPTER 17—INTERNATIONAL BANKING: RESERVES, DEBT, AND RISK

MULTIPLE CHOICE

1. Which of the following assets makes use of the basket valuation technique?
a. Swap agreements
b. Oil facility
c. Buffer stock facility
d. Special drawing rights

2. Swap agreements are generally conducted by the:
a. Federal Reserve with foreign central banks
b. Federal Reserve with foreign commercial banks
c. U.S. Treasury with foreign central banks
d. U.S. Treasury with foreign commercial banks

3. Which of the following is a main central bank function of the International Monetary Fund?
a. The conduct of open market operations
b. The issuance of gold certificates
c. The provision of monetary policy for member nations
d. The granting of loans to member nations

4. The Federal Reserve’s swap network represents:
a. Efforts to stabilize only the value of the dollar
b. Efforts to stabilize only the value of foreign currencies
c. Long-term borrowing among countries
d. Short-term borrowing among countries

5. International trade and investment are most frequently financed by the U.S. dollar and the:
a. Japanese yen
b. British pound
c. Australian dollar
d. Swiss franc

6. The purpose of international reserves is to finance:
a. Short-term surpluses in the balance of payments
b. Long-term surpluses in the balance of payments
c. Short-term deficits in the balance of payments
d. Long-term deficits in the balance of payments

7. The currencies generally referred to as “reserve currencies” are the:
a. Japanese yen and U.S. dollar
b. Swiss franc and Japanese yen
c. British pound and U.S. dollar
d. Swiss franc and British pound

8. Which of the following does not represent a form of international liquidity?
a. IMF reserve positions
b. General arrangements to borrow
c. U.S. government securities
d. Reciprocal currency arrangements

9. Which of the following is not considered an “owned” reserve?
a. National currencies
b. Gold
c. Special drawing rights
d. Oil facility

10. Which of the following is not considered a “borrowed” reserve?
a. Special drawing rights
b. Oil facility
c. IMF drawings
d. Reciprocal currency arrangement

11. Eurodollars are:
a. Dollar-denominated deposits in overseas banks
b. European currencies used to finance transactions in the United States
c. Dollars that U.S. residents spend in Europe
d. European currencies used to finance imports from the United States

12. Which of the following is not a characteristic of the Eurodollar market? It:
a. Is mainly located in the United Kingdom and continental Europe
b. Operates as a financial intermediary, bringing together lenders and borrowers
c. Deals in interest-bearing time deposits and loans to governments
d. Grew in response to the deregulation of interest rate ceilings on U.S. savings accounts

13. Which of the following assets was (were) created in 1970 to provide additional international liquidity, in the belief that increasing world trade requires more liquidity for larger expected payments imbalances?
a. Eurodollar market
b. Special drawing rights
c. Reciprocal currency arrangements
d. General arrangements to borrow

14. Which of the following constitute(s) the largest component of the world’s international reserves?
a. Gold
b. Special drawing rights
c. IMF drawings
d. Foreign currencies

15. With an international gold standard, if a country ended up with a deficit from the balances on its current and capital accounts, it would:
a. Import gold to settle the balance
b. Export gold to settle the balance
c. Officially decrease the price of gold
d. Officially increase the price of gold

16. Which of the following is not a condition of the international gold standard? That a nation must:
a. Convert gold into paper currency, and vice versa, at a stipulated rate
b. Permit gold to be freely imported and exported
c. Tolerate wide fluctuations in its exchange rate
d. Define its monetary unit in terms of a stipulated amount of gold

17. All of the following exchange-rate systems require international reserves to finance balance-of-payments disequilibriums except:
a. Pegged or fixed exchange rates
b. Managed floating exchange rates
c. Adjustable pegged exchange rates
d. Freely floating exchange rates

18. A dollar shortage would indicate that the dollar is:
a. Undervalued in international markets
b. Overvalued in international markets
c. Overvalued in terms of gold
d. Overvalued in terms of special drawing rights

19. The U.S. gold outflow that began in the late 1940s and continued through the 1960s was due in part to:
a. Crawling pegged exchange rates
b. Freely floating exchange rates
c. An undervalued dollar
d. An overvalued dollar

20. The U.S. dollar glut of the 1960s was due in part to:
a. An undervalued dollar
b. An overvalued dollar
c. Freely floating exchange rates
d. Crawling pegged exchange rates

21. For developing countries such as Mexico and Brazil, severe economic problems in the 1980s were caused by:
a. A fall in the world demand for products produced by developing countries
b. High prices of basic raw materials and other commodities
c. Low real interest rates in the United States
d. High levels of income and imports for the United States

22. In response to the international debt problem, the United States set up a special fund in 1986 to help make up for lost oil revenues. Under the plan, the United States would make more money available as world oil prices fell. This plan was designed to help:
a. Argentina
b. Saudi Arabia
c. Mexico
d. Brazil

23. Which indicator of international debt burden schedules interest and principal payments on long-term debt as a percent of export earnings?
a. Debt service ratio
b. Debt-to-export ratio
c. Ratio of external debt to gross domestic product
d. Ratio of external debt to gross national product

24. Which term best describes the process in which the International Monetary Fund provides loans to countries facing balance-of-payments difficulties provided that they initiate programs holding promise of correcting these difficulties?
a. Conditionality
b. Debt service
c. Reciprocal currency arrangement
d. Swap agreement

25. All of the following are major goals of the International Monetary Fund except:
a. Promoting international cooperation among member countries
b. Fostering a multilateral system of international payments
c. Making long-term development and reconstruction loans
d. Promoting exchange-rate stability and the elimination of exchange restrictions

26. Which international reserve asset was officially phased out of the international monetary system by the United States in the early 1970s?
a. Special drawing rights
b. Swap agreements
c. General arrangements to borrow
d. Gold

27. Bilateral agreements between central banks, which provide for an exchange of currencies to help finance temporary balance-of-payments disequilibriums, are referred to as:
a. IMF drawings
b. Special drawing rights
c. Buffer stock facility
d. Swap agreements

28. Which organization is largely intended to make long-term reconstruction loans to developing nations?
a. Export-Import Bank
b. World Bank
c. International Monetary Fund
d. United Nations

29. “Owned” international reserves consist of:
a. Special drawing rights
b. Oil facility
c. IMF drawings
d. Reciprocal currency arrangements

30. “Borrowed” international reserves consist of:
a. IMF drawings
b. Foreign currencies
c. Gold
d. Special drawing rights

31. Concerning international lending risk of commercial banks, ____ refers to the probability that part/all of the interest/principal of a loan will not be repaid.
a. Country risk
b. Credit risk
c. Currency risk
d. Presidential risk

32. Concerning international lending risk of commercial banks, ____ is closely related to political developments in a borrowing country, especially the government’s views concerning international investments and loans.
a. Economic risk
b. Credit risk
c. Country risk
d. Currency risk

33. Concerning international lending risk of commercial banks, ____ is associated with possible changes in the exchange value of a nation’s currency.
a. Political risk
b. Country risk
c. Credit risk
d. Currency risk

34. To reduce their exposure to developing country debt, lending commercial banks have practiced all of the following except:
a. Making outright loan sales to other commercial banks
b. Reducing their capital base as a cushion against losses
c. Dealing in debt-for-debt swaps with foreign governments
d. Dealing in debt/equity swaps with foreign governments

35. To reduce losses on developing country loans, commercial banks sometimes sell their loans, at a discount, to a developing country government for local currency which is then used to finance purchases of ownership shares in developing country industries. This practice is known as:
a. Debt forgiveness
b. Debt buyback
c. Debt-for-debt swap
d. Debt/equity swap

36. Concerning international debt, ____ refers to a negotiated reduction in the contractual obligations of the debtor country and includes schemes such as markdowns and write-offs of debt.
a. Debt/equity swap
b. Debt-for-debt swap
c. Debt forgiveness
d. Debt sales

37. The exchange of borrowing country debt for an ownership position in the borrowing country is known as:
a. Debt forgiveness
b. Debt-for-debt swap
c. Debt reduction
d. Debt/equity swap

38. “Country risk” analysis is concerned with all of the following except:
a. Depreciation of the borrowing country’s currency
b. Political instability in the borrowing country
c. Economic growth in the borrowing country
d. External debt of the borrowing country

39. Debt reduction
a. Refers to any voluntary scheme that lessens the burden on the debtor nation
b. May be accomplished through debt rescheduling
c. May be achieved through debt/equity swaps
d. All of the above

40. Most analysts feel that the financial difficulties in East Asia were triggered by
a. Misallocation of investment
b. Unavailability of cheap foreign labor
c. Lack of alignment of the exchange rate with the dollar
d. Surpluses in the trade accounts of the Asian countries

41. A nation may experience debt-servicing problems because of
a. Pursuit of improper macroeconomic policies
b. Inadequate borrowing
c. Adverse economic events
d. Both a and c

42. Swap arrangements
a. Are agreements between governments
b. Require repayment within a stipulated period
c. Are usually multilateral agreements
d. Are never initiated by telephone

TRUE/FALSE

1. Under a system of fixed exchange rates, international reserves are needed to bridge the gap between monetary receipts and monetary payments.

2. International reserves allow a country to finance disequilibria in its balance-of-payments position.

3. An advantage of international reserves is that they allow countries to sustain temporary balance-of-payments deficits until acceptable adjustment measures can operate to correct the disequilibrium.

4. With floating exchange rates, countries require sizable amounts of international reserves for the stabilization of exchange rates.

5. When exchange rates are fixed by central bankers, the need for international reserves disappears.

6. When exchange rates are fixed by central bankers, international reserves are necessary for financing payments imbalances and the stabilization of exchange rates.

7. There exists a direct relationship between the degree of exchange rate flexibility and the need for international reserves.

8. With floating exchange rates, payments imbalances tend to be corrected by market-induced fluctuations in the exchange rate, and the need for exchange-rate stabilization and international reserves disappears.

The diagram below represents the exchange market position of the United States in trade with the United Kingdom. Starting at the equilibrium exchange rate of $3 per pound, suppose the demand for pounds rises from D0 to D1.

Figure 17.1 Foreign Exchange Market

9. Refer to Figure 17.1. Under a fixed exchange rate system, U.S. monetary authorities would have to supply 8 million pounds in exchange for dollars to keep the exchange rate at $3 per pound.

10. Refer to Figure 17.1. If the exchange rate was allowed to rise to $4 per pound, U.S. monetary authorities would have to supply 6 million pounds to the foreign exchange market in exchange for dollars to maintain this rate.

11. Refer to Figure 17.1. Under a floating exchange rate system, the exchange rate would rise to $4 and U.S. monetary authorities would have to supply 4 million pounds to the foreign exchange market in exchange for dollars to maintain this rate.

12. To the extent that adjustments in prices, interest rates, and income levels promote balance-of-payments equilibrium, the demand for international reserves decreases.

13. The greater a nation’s propensity to apply tariffs and quotas to key sectors, the greater will be the need for international reserves.

14. The demand for international reserves is negatively related to the level of world prices and income.

15. The demand for international reserves tend to increase with the level of world income and trade activity.

16. If a nation with a balance-of-payments deficit is willing and able to initiate quick actions to increase export receipts and decrease import payments, the amount of international reserves needed will be relatively large.

17. The supply of international reserves consists of owned reserves and borrowed reserves.

18. Foreign currencies constitute the smallest component of the world’s international reserves.

19. Gold constitutes the largest component of the world’s international reserves.

20. The U.S. dollar has been considered a reserve (key) currency because trading nations have been willing to hold it as an international reserve asset.

21. The U.S. dollar, Japanese yen, British pound, and Mexican peso are the major reserve currencies of the international monetary system.

22. By the 1990s, the British pound had replaced the U.S. dollar as the world’s key currency.

23. A goal of the International Monetary Fund is to make short-term loans to member nations so as to allow them to correct balance of payments disequilibriums without resorting to measures that would destroy national prosperity.

24. When granting loans to financially troubled nations, the International Monetary Fund requires some degree of conditionality, meaning that the borrowing nation must agree to implement economic policies as mandated by the IMF.

25. The International Monetary Fund has sometimes demanded that financially-troubled nations, that borrow from the IMF, undergo austerity programs including slashing of public spending and private consumption.

26. The main purpose of the International Monetary Fund is to grant long-term loans to developing nations to help them finance the development of infrastructure such as roads, dams, and bridges.

27. Gold is currently the most widely used asset in the international monetary system.

28. In 1974 the United States revoked a 41-year ban on U.S. citizen’s ownership of gold.

29. In 1975 the official price of gold was abolished as the unit of account for the international monetary system. As a result, gold was demonetized as an international reserve asset.

30. In the 1970s, the major industrial countries abandoned the managed-floating exchange rate system and adopted a system of fixed exchange rates tied to the price of gold.

31. Created by the International Monetary Fund, special drawing rights (SDRs) are unconditional rights to draw currencies of other nations, thus enabling countries to finance their current-account deficits.

32. The value of the SDR is tied to a currency basket consisting of the U.S. dollar, German mark, Japanese yen, French franc, and British pound.

33. The SDR has replaced the dollar, yen, and mark as the key asset of the international financial system.

34. Because the value of the SDR is tied directly to the value of the U.S. dollar, a 10 percent dollar depreciation would result in a 10 percent decrease in the SDR’s value.

35. A main purpose of the International Monetary Fund is to make loans of foreign currencies to member countries which are experiencing current-account surpluses.

36. When a deficit nation borrows from the International Monetary Fund, it purchases with its currency the foreign currency required to help finance the payments deficit.

37. The so-called General Arrangements to Borrow provide a permanent increase in the supply of international reserves.

38. Swap arrangements are bilateral agreements between central banks to allow countries to temporarily borrow funds to ease current-account deficits and discourage speculative capital flows.

39. IMF drawings, swap arrangements, buffer stock facility, and compensatory financing for exports are classified as owned reserves rather than borrowed reserves.

40. Concerning international lending risk, credit risk refers to the probability that part or all of the interest rate or principal of a loan will not be repaid.

41. Concerning international lending risk, country risk refers to the risk that part or all of the interest or principal of a loan will not be repaid.

42. Concerning international lending risk, currency risk is the risk of asset losses due to changing currency values.

43. A country with a high debt/export ratio and a high debt service/export ratio would likely be considered as an attractive place in which to invest by foreign residents.

44. A debt buyback is a debt-reduction technique in which a government of a debtor nation buys loans from commercial banks at a discount.

45. Under a debt-for-debt swap, a commercial bank sells its loans at a discount to a developing country government for local currency which it then uses to finance an equity investment in the debtor country.

46. A debt-equity swap results in a trade surplus nation forgiving the loans made to a trade-deficit nation.

47. Eurocurrencies are deposits, denominated and payable in dollars and other foreign currencies, in banks outside the United States, primarily in London, the market’s center.

SHORT ANSWER

1. Why do countries hold international reserves?

2. How can a bank reduce its exposure to the debt of developing nations?

ESSAY

1. Describe the eurocurrency market.

2. Are international reserve needs different for different exchange rate regimes?

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Quiz 8 Chapter 13

Sales, Digital, and Direct Marketing Strategies

True/False Questions

1. The final step in a salesforce strategy is designing the sales organizations.

3
2. Sales quotas are used to state the management’s expected sales results.

3

3. Transactional selling is not restricted to small, low-volume buyers.

3

4. The new business selling strategy is based on firms selling to an existing customer base and providing technical and application assistance.

3

5. Trade selling provides assistance and support to value chain members rather than obtaining sales.

3

6. If a customer base displays substantial differences in purchasing power and servicing requirements, then the use of a single salesforce channel is appropriate.

3

7. If the product or the customer base does not dominate design considerations, a geographical sales organization is used.

3

8. Single-factor models analyze the profit performance of accounts or trading areas as the basis to estimate the profit impact of adding more salespeople.

3

9. In social media–based positioning attempts, the goal is to create a community providing only functional benefits.

392

10. In direct marketing, accuracy of targeting is only as good as the lists used to access potential buyers.

400

Multiple Choice Questions

11. Which of the following initiatives of forming a salesforce strategy requires deciding how personal selling is expected to contribute to the marketing program?
A. Determining the role of the sales force in the promotion strategy
B. Selecting the selling process
C. Deciding if and how alternative sales channels will be utilized
D. Designing the sales

3

12. Which of the following initiatives is the second step in building a salesforce strategy?
A. Determining the role of the sales force in the promotion strategy
B. Select the selling process
C. Deciding if and how alternative sales channels will be utilized
D. Designing the sales organization

3

13. _____ selling involves obtaining sales from first-time buyers, who may be one-time purchasers or repeat buyers.
A. Missionary
B. Trade selling
C. New business
D. Consultative

3

14. _____ selling provides assistance and support to value chain members rather than obtaining sales. 
A. New business
B. Consultative/technical
C. Missionary
D. Trade

3
15. _____selling is a form of selling in which the salespeople work with the customers of a channel member to encourage them to purchase the producer’s product from the channel member. 
A. Missionary
B. Trade
C. New business
D. Consultative/technical

3

16. _____ is targeted at an existing customer base and provides technical and application assistance. These positions may involve the sales of complex equipment or services.
A. New business selling
B. Consultative selling
C. Missionary selling
D. Trade selling

3

17. Sales representatives of Oasis Travels collaborate with various hotels across the state to get customers to book package tours. Which of the following sales positions do the salespeople of Oasis Travels hold?
A. New business selling
B. Consultative selling
C. Missionary selling
D. Trade selling

3

18. Which of the following activities does a selling process include?
A. Advertising the product
B. Training the salespeople
C. Prospecting for suppliers
D. Presenting the sales message

3

19. Which of the following activities would most likely be the first in the selling process?
A. Prospecting for customers
B. Opening relationships
C. Presenting the sales message
D. Training salespeople

3

20.Which of the following sales organization designs is most appropriate when customer needs are different and the product offering is simple?
A. Product-driven
B. Market-driven
C. Geography-driven
D. Product/market-driven

3

21. Which of the following sales organization designs can be adopted when customer needs are similar and there is a complex range of products offered?
A. Geography-driven
B. Market-driven
C. Product-driven
D. Product/market-driven

3

22. If the product or the customer base does not dominate design considerations, a _____ sales organization is used.
A. market-driven
B. product-driven
C. product/market-driven
D. geography-driven

3

23. _____ require information on each salesperson’s sales and/or costs and can help spot high performing and unprofitable territories by comparing each salesperson to an average break-even sales level.
A. Revenue/cost analysis techniques
B. Single-factor models
C. Sales and effort response models
D. Portfolio deployment models

3

24. _____ for analyzing sales force assume that size of the sales force and/or effort deployment are determined by one factor, such as market potential or workload whose values can be used to determine required selling effort.
A. Revenue/cost analysis techniques
B. Single-factor models
C. Sales and effort response models
D. Portfolio deployment models

3
25. _____ for analyzing sales force size consider the impact of multiple influences like market potential, intensity of competition, and workload on market response that can improve salesperson deployment decisions.
A. Revenue/cost analysis techniques
B. Single-factor models
C. Sales and effort response models
D. Portfolio deployment models

3
26. Mark sees an ad in the newspaper of a new line of treadmills and orders for it by calling the number provided in the ad. Which of the following type of direct marketing methodology did the ad employ?
A. Direct response media
B. Direct mail
C. Catalog shopping
D. Kiosk shopping

399

27. Which of the following is a disadvantage of direct marketing?
A. Limited content support in direct-response advertising
B. Effectiveness of direct marketing cannot be measured
C. Restricts selective reach and segmentation opportunities
D. No flexibility provided in accessing potential buyers

400

28. Which of the following is an advantage of direct marketing?
A. Sufficient content support in direct-response advertising
B. Timing contact can be managed and personalized
C. Negative image factors are non-existent
D. Shipping and postal rates tend to decrease over time

400

29. Which of the following is true, with regard to an organizational buyer, of computer ordering?
A. It does not allow for direct purchase responses.
B. It makes it hard to monitor customer preferences.
C. It enables the buyer to lower inventory levels.
D. It increases the overall cost of inventory.

400

30. Which of the following types of networks is most likely to be present at a kiosk for customers to use?
A. Internet
B. Intraweb
C. Extranet
D. Intranet

400

Essay Questions

31. What are the major initiatives of a salesforce strategy?

32. Describe the different types of sales jobs.

33. List the activities that make up the selling process.

34. An important part of deciding the personal selling strategy is choice of the alternative channels to end-user customers. Explain the issues involved.

35. Explain the communications features of the Internet.

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CHAPTER 16
DRUG ABUSE AND ALCOHOL-RELATED CRIMES

MULTIPLE CHOICE

1. Which of the following is NOT generally one of the elements of the crime of possession with intent to deliver?
a. the accused possessed a large amount of an illegal drug
b. the accused possessed scales
c. the accused possessed a cellular phone
d. the accused possessed a counterfeit credit card

432

2. In Gonzales v. Raich, the court reasoned that the private use of marijuana might have
a. an adverse impact on federal drug laws
b. a positive impact on federal drug laws
c. an adverse impact on state drug laws
d. a positive impact on state drug laws

443

3. In Gonzales v. Raich, the court reasoned Congress had the power under the Commerce Clause to regulate
a. even purely intra-sate use of marijuana
b. only purely intra-sate use of marijuana
c. even purely inter-sate use of marijuana
d. only purely inter-sate use of marijuana

443

4. All of the following are crimes under the Uniform Controlled Substances Act EXCEPT
a. manufacture or delivery of an illegal drug
b. possession with intent to deliver an illegal drug
c. delivery or possession with intent to deliver a counterfeit substance
d. possession of alcohol by a minor

428

5. Medical use of marijuana is permitted in some states. Although medical users can be prosecuted under federal laws,
a. in 2010 the Justice Department said it would not prosecute medical users
b. in 2010 the Justice Department said it would prosecute medical users
c. in 2010 the U.S. Supreme Court said it would not prosecute medical users
d. in 2010 the U.S. Supreme Court said it would prosecute medical users

433

6. What is the most widely abused and misused drug in America and in many other countries?
a. alcohol
b. meth
c. marijuana
d. cocaine

438

7. The 2002 National Institutes of Health study surveyed drinking among the 8 million college and university students in the United States. What percentage of students were shown to drink in binges?
a. 44%
b. 55%
c. 40%
d. 30%

438

8. How many alcohol-related student deaths are there each year?
a. 1,445
b. 2,545
c. 3,645
d. 4,745

438

9. The federal government and all states have enacted some form of the Uniform
a. Narcotics Act
b. Illegal Drug Act
c. Dangerous Drug Act
d. Controlled Substances Act

428

10. The most common illegal drug charge is some form of
a. selling
b. buying
c. possession
d. trafficking

428

11. How many states currently have a “Compassionate Use Medical Marijuana” statute?
a. 14
b. 19
c. 20
d. 16

433

12. The Uniform Controlled Substances Act divides drugs into how many schedules?
a. 3
b. 5
c. 7
d. 9

428

13. A minority of states require that the defendant have possessed what minimum amount of the illegal substance to sustain a conviction?
a. a trace amount
b. a usable amount
c. a gram
d. a bindle

430

14. What is the minimum amount of the illegal substance required to sustain a drug conviction by a majority of states?
a. usable amount
b. trace amount
c. any amount
d. a gram

430

15. In fourteen states, doctors may prescribe the personal use of what drug for pain management for people with serious illnesses?
a. cocaine
b. marijuana
c. heroin
d. methamphetamine

433

16. Challengers of the Federal Controlled Substances Act alleged Congress has no constitutional authority to prohibit the medical use of marijuana based on the
a. due process clause
b. equal protection clause
c. interstate commerce clause
d. none of these answers are correct

433

17. A defendant arrested in possession of a large amount of an illegal drug would most likely have been charged with the offense of
a. possession of a controlled substance
b. delivery of a controlled substance
c. possession with intent to deliver
d. possession of stolen property

432

18. In New Jersey an individual who provides an illegal drug to another, and that person dies as a result of ingesting the drug,
a. cannot be held liable for the death
b. may be held strictly liable for the death
c. will be found guilty of premeditated murder
d. will be charged with a misdemeanor drug offense

435

19. Approximately what number of people are killed every day in the United States because of driving under the influence?
a. 50
b. 100
c. 25
d. 150

438

20. The National Highway Traffic Safety Administration estimates the yearly costs of drunk driving to be
a. $45 billion
b. $35 billion
c. $25 billion
d. $15 billion

438

21. Which of the following is a violation of the Uniform Controlled Substances Act?
a. possession of a controlled substance
b. deliver a counterfeit substance
c. manufacture a controlled substance
d. all of these answers are correct

428

22. What are the two types of possession?
a. actual and constructive
b. real and actual
c. real and constructive
d. actual and contractual

430

23. The “usable quantity” rule holds that a useless trace amount is not
a. a usable amount
b. a sufficient amount
c. a chargeable amount
d. a sufficient quantity

430

24. Delivery of an illegal drug can be either an actual delivery, or it could be the crime of possession of a controlled substance with
a. intent to deliver
b. sufficient amount to deliver
c. quantity of delivery
d. delivery potential

432

25. What drug is particularly dangerous because it is an unpredictable killer that can cause life-threatening complications that are not related to the dose taken, the length of use, or the manner in which the drug is taken?
a. cocaine
b. heroin
c. marijuana
d. meth

435

26. Laws that make people who illegally manufacture, distribute, or dispense illegal drugs strictly liable for a death that results from the using such drugs are often called
a. Len Bias laws
b. Terrance Bianchi laws
c. Lawrence Brewer laws
d. Stephen Breyer laws

435

27. Which of the following may qualify as delivery of an illegal drug?
a. all of these may qualify as delivery of an illegal drug
b. possession of a controlled substance with intent to deliver
c. possession of a controlled substance with intent to sell
d. possession of a controlled substance with intent to transfer

432

28. British and U.S. studies of accidental deaths in the 1980s and a National Institutes of Health study in 2002 showed that alcohol has a high relationship to deaths caused by which of the following?
a. drowning
b. choking
c. burns
d. all of these answers are correct

438

29. What percent of state prisoners were convicted of a violent crime while under the influence of alcohol alone?
a. 21%
b. 31%
c. 41%
d. 51%

438

30. Which of the following is NOT a field sobriety test?
a. the walk-and-turn test
b. the HGB test
c. the one-leg-stand test
d. all of these are field sobriety tests

439

TRUE/FALSE

1. A suspect cannot be found to have been operating a motor vehicle by being behind the wheel of a car with the keys in the ignition.

2. The Uniform Controlled Substances Act lists marijuana as a Schedule I drug with the highest abuse potential.

3. In a majority of states, even a “trace” amount of an illegal drug will sustain a conviction for possession of that drug.

4. All states have a uniform charge of possession of a small amount of marijuana.

5. Possession of marijuana for personal use is illegal throughout the U.S.

6. A defendant arrested in possession of a large amount of an illegal drug may be charged with possession with intent to deliver.

7. A person who claims to be selling cocaine, but delivers baking soda, cannot be charged with a drug crime.

8. People who illegally dispense illegal drugs will be held strictly liable in many states for a death that results from the ingestion of such a drug.

9. Criminal liability for drug induced death requires that the state must show only that the defendant provided the drugs to the victim, and that the victim died as a proximate result of the defendant’s actions.

10. Victims of drunk driving may be able to sue bars or individuals who furnished the alcoholic drinks.

COMPLETION

1. Intent to deliver illegal drugs can be proved by showing a “ connection” between the facts of possession, such as the large quantity of the drug, and an intent to sell the drugs.

2. The most common criminal illegal drug charge is that of _____________ of a controlled substance.

3. Two types of drug possession are “actual” and “___________.”

4. An amount of an illegal drug that is so small that it is unusable is referred to as a “________” amount.

5. Depending upon the jurisdiction, possession of a small amount of marijuana may be charged as either a criminal or a _________ offense.

6. In Gonzales v. the court reasoned that private use of marijuana might have an adverse impact on federal drug laws.

7. In a number of states, a person who dispenses an illegal drug will be held ________ liable for a death that results from ingestion of such drug.

8. Most students drink or not at all, but 44 percent of students drink in binges.

9. The most widely abused and misused drug in America is _________.

10. Nystagmus is a persistent, rapid, , side-to-side eye movement.

CHAPTER 17
TERRORISM

MULTIPLE CHOICE

1. Terrorists are willing to take innocent lives to
a. make money
b. make a political statement
c. satisfy their bloodlust
d. stimulate reprisals

450

2. Congress was required to clearly define the acts that constituted terrorism and condemned under the conventions because of the
a. vagueness limitation on statutes
b. void limitation on statutes
c. definition limitation on statutes
d. discreet

451

3. People who believe that organized government is evil may be referred to as
a. anarchists
b. agnostics
c. advocates
d. agents

451

4. Generally, terrorists differ from other criminals on the basis of their
a. psychological characteristics
b. mental illness
c. motive
d. physical characteristics

451

5. Which of the following statements regarding terrorism is FALSE?
a. Acts of terrorism may be sponsored by a nation or a group.
b. Terrorism is not a form of warfare.
c. Terrorism is a global problem.
d. The U.S. is a stated target of the terrorist group Al Qaeda.

451
6. Who is authorized to identify groups or organizations as terrorist organizations?
a. the State Department
b. the President
c. the Congress
d. the House of Representatives

452

7. The Alabama Criminal Code, Section 13-A-10-151, defines the crime of terrorism as an act or acts intended to
a. Intimidate or coerce a civilian population.
b. Influence the policy of a unit of government by intimidation or coercion.
c. Affect the conduct of a unit of government by murder, assassination, or kidnapping.
d. all of these

454

8. Most state statutes also make it a crime for a person to support a terrorist act or organization. Actions that could constitute support include which of the following?
a. providing financial support
b. providing lodging
c. providing training
d. all of these

454

9. Which of the following is the definition of a terrorist threat under state laws?
a. threatened violence against another
b. terrorizing a person
c. threatened violence against another with the purpose of terrorizing
d. none of these

454

10. Most of the money used to finance the 9/11 terrorist attack came from which of the following?
a. charitable organizations
b. private donors
c. foreign governments
d. drug dealers

461
11. Which of the following crimes are favored by terrorists to finance their terrorist activities?
a. theft
b. fraud
c. drug trafficking
d. all of these

461

12. According to the text, terrorists sometimes use which of the following to move funds in and out of the United States?
a. electronic wire transfers
b. television commercials
c. radio advertisements
d. none of these

462

13. One way in which terrorists move funds in and out of the United States is through the use of IVTS. What does IVTS stand for?
a. informal value transfer systems
b. international value transfer systems
c. informal value terrorist systems
d. international value terrorist systems

462

14. One example of a kind of IVTS is
a. Hawala
b. Farouq
c. Mandamus
d. Baksheesh

462

15. What is one advantage of using an IVTS?
a. no paper trail
b. it is faster than wire transfers
c. more money is available through IVTS
d. none of these answers is correct

462

16. An extraordinary rendition occurs when a person is seized in one country and then transported to another country for
a. interrogation
b. extradition
c. repatriation
d. mediation

462

17. Customs and practices followed by most nations in wartime and now the subject of international conventions are known as
a. rules of war
b. degrees of war
c. peace negotiations
d. contracts

460

18. Advocating the forceful overthrow of the U.S. government is the crime of
a. sedition
b. sabotage
c. terrorism
d. treason

454

19. Which of the following is NOT one of the classes of crimes created by rules of war?
a. government crimes
b. crimes against peace
c. crimes against humanity
d. traditional war crimes

460

20. The use of unlawful force to coerce or intimidate persons or governments in the pursuit of political, social, or religious goals is known as
a. terrorism
b. genocide
c. humanism
d. feticide

450

21. Many states have adopted a definition of the crime of terrorism closely modeled after the
a. federal definition
b. international definition
c. Supreme Court definition
d. Hague definition

454

22. Damaging or injuring national defense material or national defense utilities with the intent to obstruct the national defense is the crime of
a. sedition
b. sabotage
c. treason
d. aiding a terrorist

457

23. Customs, practices, treaties, and agreements that most nations subscribe to for the conduct of wars openly declared against sovereign nations are called
a. international conventions
b. treaties
c. international agreements concerning waging war
d. rules of war

460

24. Funds for terrorist activities are often transferred through
a. informal value transfer systems
b. human couriers
c. high-tech electronic wire transfers
d. all of these

462

25. A program whereby suspected terrorists are seized by U.S. agents and transported to another country for interrogation is known as
a. secret abduction
b. extraordinary rendition
c. international detention
d. terrorist detention

462

26. Which of the following are possible charges against terrorists?
a. treason
b. sedition
c. sabotage
d. all of these

453-457

27. Which of the following statements regarding the rules of war is FALSE?
a. President Lincoln began the codification of these rules in 1864.
b. Most nations subscribe to the rules of war.
c. Combatants in a war are liable for the violation of ordinary criminal laws.
d. President Eisenhower began the codification of these rules in 1953.

460

28. Which of the following laws forbids the planning, commencement, and conduct of an aggressive war?
a. Crimes Against Peace
b. Crimes Against Humanity
c. Traditional War Crimes
d. Antiterrorism Act of 1996

460

29. Which of the following laws forbids deportation based on race, religion or ethnic origin?
a. Crimes Against Peace
b. Crimes Against Humanity
c. Traditional War Crimes
d. Antiterrorism Act of 1996

460

30. Which of the following laws addresses conduct of combatants towards prisoners of war?
a. Crimes Against Peace
b. Crimes Against Humanity
c. Traditional War Crimes
d. Antiterrorism Act of 1996

460

TRUE/FALSE

1. Not all terrorists are sponsored or protected by a nation or a group.

2. Acts of terrorism may be considered a form of warfare.

3. The term “terrorist” is reserved for those who believe organized government is evil.

4. The State Department is authorized to identify groups or organizations as terrorist organizations.

5. Congress enacted the Federal Antiterrorism Law following the 1995 bombing of the Oklahoma City federal building.

6. The intention to intimidate or coerce a civilian population is one of the elements of the crime of terrorism.

7. A terrorist threat is a threat to commit a violent felony that is a danger to human life, and is made to intimidate only a military group.

8. Rules of war are customs and practices followed by most nations in wartime and now the subject of international conventions.

9. No countries contribute directly to terrorists organizations.

10. An extraordinary rendition occurs when a person is seized in one country and then transported to another country for torture.

COMPLETION

1. Terrorists are criminals who use force and violence in the pursuit of _________, ideological, or religious goals.

2. People who believe organized government is evil are called _________.

3. The State Department is authorized to groups or organizations as terrorist organizations.

4. One of the elements of the crime of terrorism under most state laws is to
or coerce a civilian population.

5. The Antiterrorism and Effective ________ Penalty Act makes it a crime to aid a terrorist organization in the U.S.

6. A terrorist threat is a threat to commit a violent felony that is a danger to human life, and is made to intimidate or coerce a civilian group or a .

7. Rules of are customs and practices followed by most nations in wartime.

8. The shortage of financial support can affect the scope of a terrorist .

9. Individuals contribute indirectly to terrorist organizations by giving money and support to phony “ ” groups that support terrorists.

10. An “extraordinary “ occurs when a person is seized in one country and then transported to another country for interrogation.