Business Ethics Chapter 11 Glossary
Willingness to pay is the maximum amount of money that someone would be willing to exchange for an economic good or service.
A virtue is a stable character trait with positive moral significance. Examples are courage, generosity, benevolence, and fairness.
Transaction costs are the costs of reaching and enforcing an agreement between negotiating parties. They include the costs of researching information about the situation, negotiating the agreement, and legally enforcing the agreement.
The total utility of a group of economic goods or services is the sum of all the utility produced by the consumption of those goods or services.
A reservation price is the maximum amount of money that a consumer would be willing to exchange for one more unit of the commodity in the absence of a defined market price for that commodity.
Psychological egoism is the empirical theory that people always do act to maximize to their self-interest.
A positive right imposes a duty on others to assist the right bearer in some way.
An outcome is Pareto-efficient if no other outcome is possible that makes at least one person better off and no person worse off.
A person, organization, or nonhuman entity has moral standing if we must consider his, her, or its interests in making an ethical decision.
Conditions where the assumptions of perfect condition do not hold and markets are not efficient are market failures.
The marginal utility of an economic good or service is the additional utility gained through the consumption of one additional unit of that good or service.
Libertarianism holds that a distribution of rights and responsibilities is just if, and only if, it respects people’s natural rights to self-ownership.
The law of increasing marginal cost states that, in the short-run, the marginal cost of producing each additional item will tend to increase.
The law of factor-proportions says the owners of a country’s relatively abundant factors will gain from free trade, while the owners of a country’s relatively scarce factors will lose.
The law of diminishing marginal utility states that as the consumption of a given economic good increases, the marginal utility produced by the consumption of one additional unit of the good tends to decrease.
Ricardo’s law of comparative advantage states that there exist terms of trade under which two countries will both gain from trade if they specialize in producing goods in which they have a comparative, not an absolute, advantage.
Indirect utilitarianism treats utilitarian reasoning as a justification procedure, and advocates obedience to rules, respect for rights, inculcation of virtues, and the creation of whatever policies are necessary to produce maximum aggregate utility.
Ethical egoism is the ethical theory that agents ought always to maximize their own self-interest.
Economic utilitarianism is a form of preference-satisfaction utilitarianism where we measure the utility of a good or service to someone according to her willingness to pay for it.
Direct utilitarianism treats utilitarian reasoning as a decision procedure and judges each case according to a calculation of the utilities it causes.
The difference principle says a distribution of rights and responsibilities is just if, and only if, everyone receives the same resources unless an unequal distribution results in the least well-off receiving more than in the strictly equal distribution.
A contractarian ethical theory is a theory claiming that ethics consists in an enforced contract among ethical egoists designed to prevent dilemmas of cooperation, such as the Prisoner’s Dilemma situation.
One country has a comparative advantage over a second country in the production of a commodity if, and only if, the first country can produce that commodity more cheaply in terms of another commodity than the second country can.
One country has an absolute advantage over a second country in the production of a commodity if, and only if, the first country can produce that commodity more cheaply than the second country can.