Business Ethics Overview

Podcast

Play an AI-generated podcast conversation about this lesson

Questions and Answers

Which of the following characteristics is not associated with a monopoly?

Unique product

High barriers to entry

Single seller

Multiple sellers (correct)

What is a significant characteristic of an oligopoly?

Many small firms

No barriers to entry

Perfect information

Price rigidity (correct)

In perfect competition, firms can enter and exit the market easily. What is one ethical issue that may still arise?

Lack of substitutes

Monopolistic practices

Price wars

Exploitation of workers (correct)

Which market structure is characterized by interdependent decision-making between two firms?

Duopoly Signup and view all the answers

What is a common example of a market that operates under perfect competition?

Agricultural markets Signup and view all the answers

Which of the following best describes a key concern in a monopoly market structure?

Significant pricing power Signup and view all the answers

What ethical issue is most likely to arise in firms operating in a perfectly competitive market?

Poor environmental standards Signup and view all the answers

Which characteristic differentiates perfect competition from oligopoly?

Number of firms Signup and view all the answers

What is the primary focus of personal ethics at the individual level in business?

Values and principles individuals bring to their roles Signup and view all the answers

Which component is essential for establishing a strong ethical culture at the organizational level?

Formal code of ethics Signup and view all the answers

What aspect does the societal level of business ethics primarily consider?

Impact on communities and the environment Signup and view all the answers

Which of the following is a characteristic of perfect competition?

Identical products and many sellers Signup and view all the answers

Peer pressure at the industry level can result in which of the following outcomes?

Encouragement of unethical practices if the norm is lax Signup and view all the answers

Which of the following is NOT a factor at the organizational level of business ethics?

Personal integrity Signup and view all the answers

Which term describes the minimum standards businesses must follow due to regulations?

Legal framework Signup and view all the answers

What is often a consequence of a strong ethical corporate culture?

Higher levels of integrity and accountability Signup and view all the answers

What ethical issue arises when monopolistic firms set excessively high prices?

Price Gouging Signup and view all the answers

Which of the following is a potential consequence of a monopoly's lack of competition?

Decreased Consumer Choices Signup and view all the answers

In an oligopoly, what unethical practice involves firms working together to set prices?

Collusion Signup and view all the answers

Which characteristic is NOT a feature of perfect competition?

Market Price Setting Signup and view all the answers

What is a significant feature of a duopoly?

Only two firms in the market Signup and view all the answers

Which of the following issues is commonly associated with oligopolistic firms due to their interdependence?

Advertising and Misinformation Signup and view all the answers

What ethical issue can arise from monopolies using their market dominance?

Predatory Practices Signup and view all the answers

How do firms in an oligopoly often react to pricing decisions made by their competitors?

Price Rigidity Signup and view all the answers

Study Notes

Business Ethics

Involves principles and standards that guide behavior in business.
Applies to business decisions, corporate governance, employee relations, customer interactions, and supplier relationships.

Levels of Business Ethics

Individual Level:
- Focuses on personal ethics like integrity, beliefs, and character.
- Ethical decision-making based on individual morals.
Organizational Level:
- Corporate culture influences ethical climate.
- Codes of Ethics outline expected behaviors and ethical guidelines for employees.
Industry Level:
- Different industries have specific ethical standards.
- Peer pressure can influence either ethical or unethical behavior.
- Organizations adhere to industry standards for credibility and trust.
Societal Level:
- Businesses operate within a larger societal context.
- Ethical businesses focus on social responsibility.
- Legal framework sets minimum ethical standards.

Market Structures

Perfect Competition:
- Many sellers and buyers.
- Identical products (e.g. wheat, corn).
- Easy entry and exit for firms.
- Perfect information access for everyone.
- Example: Agricultural markets
Oligopoly:
- Few large firms dominate the market.
- Homogeneous or differentiated products (e.g. steel, cars).
- Significant barriers to entry.
- Prices are stable due to interdependence of firms.
- Example: Automotive industry
Monopoly:
- Single firm controls the entire market.
- Unique product with no substitutes.
- High barriers to entry prevent competition.
- Example: Local utility companies
Duopoly:
- Specific type of oligopoly with only two dominant firms.
- Firms make decisions based on each other's actions.
- Example: Boeing and Airbus in commercial aircraft market

Ethical Issues in Market Structures

Perfect Competition:
- Potential ethical issues:
  - Companies may cut corners on quality to lower costs.
  - Pressure on firms to exploit labor for cost reduction.
  - Neglecting environmental standards to maintain low prices.
Monopoly:
- Ethical issues:
  - Potential for price gouging.
  - Reduced innovation due to lack of competition.
  - Abuse of power through predatory practices to eliminate competition.
Oligopoly:
- Ethical issues:
  - Collusion to fix prices or divide markets.
  - Price rigidity artificially keeps prices high.
  - Misleading advertising to outcompete rivals.

Key Definitions

Perfect Competition: A market with many sellers and buyers, identical products, no barriers to entry/exit, and perfect information access.
Monopoly: A market dominated by a single firm with a unique product and high barriers to entry.
Oligopoly: A market with a few large firms that control a significant portion of the market.
Duopoly: A specific type of oligopoly with only two firms in the market.

Studying That Suits You

Use AI to generate personalized quizzes and flashcards to suit your learning preferences.

Description

This quiz delves into the principles and standards that guide ethical behavior in business. It covers various levels of business ethics including individual, organizational, industry, and societal aspects. Test your understanding of how ethics influence business decisions and corporate governance.