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Select the true statement about the relationship between law, ethics, and business


Select the true statement about the relationship between law, ethics, and business.

  1. The law ensures ethical conduct in most areas of business.
  2. Abiding by the law is sufficient for businesses to earn a moral reputation.
  3. It is impossible for a business to behave unethically if it follows the law.
  4. What is ethical in business is not necessarily required by law.


A manufacturer of kitchen knives is sued for strict product liability by Jack, who cut himself with one of the knives and suffered permanent nerve damage and paralysis in three fingers on his left hand. Jack argues that the knives were overly sharp and, thus, defective in their manufacturing. The manufacturer defends against the claim by arguing that the risk to the consumer is outweighed by the utility of the knives.

How does Jack's claim stand up to the manufacturer's defense?

  1. Jack is likely to win, unless the manufacturer can prove that Jack was misusing or abusing the knife in some way.
  2. Jack is likely to lose, because the knife cannot function for its intended purpose unless it is sharp, and the risk to consumers is more than outweighed by the utility of a sharp kitchen knife.
  3. Jack is likely to lose, because the knife is clearly safe for its intended use.
  4. Jack is likely to win, because the risk-utility test is only applicable to strict product liability claims involving pharmaceuticals.


In most cases, an enforceable contract has to include consideration, which __________.

  1. must be morally or economically adequate to make the bargain a fair one
  2. means that both parties have full mental capacity to form an agreement
  3. must be an exchange of legal value between the parties to the agreement
  4. is defined as an offer extended from one party to the other


Cynthia orders 100 shirts in a variety of colors for her screenprinting business from Juan, a shirt supplier. After Juan ships the shirts, Cynthia calls him to inform him of her insolvency. The box of shirts is currently in transit and will be delivered by the postal service tomorrow.

What remedy does Juan have in this scenario?

  1. Juan has no recourse in this scenario, since Cynthia is insolvent.
  2. Juan may not stop delivery of the box by the postal service, but he may recover the funds owed to him by Cynthia.
  3. Juan may stop delivery of the box by the post service, upon which time he may pursue a variety of remedies to recover his damages.
  4. Juan may recover the contracted price of the shirts from Cynthia, and then he may resell the shirts to another buyer with no restrictions.


Although shareholders may receive profits from a corporation's business, __________.

  1. they share responsibility for the corporation's debts with the directors and officers
  2. they are generally not liable for the debts of the corporation
  3. they are liable for corporate debts if the assets of the corporation are insufficient
  4. they are only liable for the corporation's debts if they are also a member of the board of directors


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