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Business and Commercial Law Test Preparation - 4685 Verified Questions

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Business and Commercial Law

Test Preparation

Course Introduction

Business and Commercial Law explores the legal principles and frameworks that govern commercial transactions and business operations. The course covers key topics such as contract law, agency, business organizations (such as partnerships and corporations), sales of goods, negotiable instruments, and regulatory compliance. Students will analyze case studies to understand the roles of laws and regulations in resolving disputes and facilitating fair commerce. Emphasis is placed on understanding legal risks, the rights and obligations of businesses and their clients, and effective decision-making in the context of a rapidly changing business environment.

Recommended Textbook

Business Law 17th Edition by Arlen W Langvardt

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Page 2

Chapter 1: The Nature of Law

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Sample Questions

Q1) The Bill of Rights to the U.S.Constitution is an example of:

A)a prohibition of government action that would restrict certain individual rights.

B)a structured government.

C)a form of power given to Congress to make law.

D)federalism.

Answer: A

Q2) What do statutes and administrative regulations have in common?

Answer: Like statutes,administrative regulations appear in a precise form in one authoritative source.

Q3) What are courts and administrative agencies expected to do when they encounter ambiguously worded statutes while deciding a case?

A)Keep the particular statute aside

B)Fill in the details on a case-to-case basis

C)Refer to a different statute

D)Initiate a debate in the legislature

Answer: B

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Chapter 2: The Resolution of Private Disputes

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Sample Questions

Q1) Which of the following may contain an affirmative defense?

A)Summons

B)Interrogatory

C)Complaint

D)Answer

Answer: D

Q2) What was the Court's holding in the case in the text Tyson Foods,Inc.v.Bouaphakeo?

A)The granting of class certification was improper because the class members waited too long to bring their complaint.

B)The granting of class certification was improper because the class members did not perform similar work and their complaints did not arise out of the same matter.

C)The granting of class certification was proper because the class members worked for the defendant for a similar period of time and all were refused overtime.

D)The granting of class certification was proper because the class members worked in the same facility,did similar work,and were paid under the same policy.

Answer: D

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Chapter 3: Business and the Constitution

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Q1) The ________ Amendment says that no state shall "deny to any person ...the equal protection of the laws."

A)Fifth

B)Tenth

C)Fourteenth

D)Sixteenth

Answer: C

Q2) Which of the following statements about Article I of the Constitution is false?

A)Article I establishes a Congress composed of a Senate and a House of Representatives.

B)Article I gives Congress sole power to legislate at the federal level.

C)Article I sets out rules for the enactment of legislation.

D)Article I gives the judicial power of the United States to the Supreme Court and other federal courts later established by Congress.

Answer: D

Q3) The Takings Clause comes from the Fifth Amendment of the Constitution.

A)True

B)False

Answer: True

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Page 5

Chapter 4: Business Ethics, Corporate Social Responsibility,

Corporate Governance, and Critical Thinking

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Q1) The ________ of corporate social responsibility holds that rather than merely striving to maximize profits for its shareholders,a corporation should balance the interests of shareholders against the interests of employees,suppliers,customers,and the community.

A)deontological theory

B)Kantian theory

C)stakeholder theory

D)utilitarian theory

Q2) Guilt by association is a form of:

A)begging the question.

B)argumentum ad hominem.

C)argumentum ad populum.

D)gambler's fallacy.

Q3) ________ leads a person to be more confident than he should be about the extent of his knowledge and problem-solving skills.

A)Overconfidence bias

B)Confirmation bias

C)Appeals to ignorance

D)False dilemma

Q4) Explain the difference between shareholder theory and utilitarianism.

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Chapter 5: Criminal Law and Procedure

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Q1) Which of the following is guaranteed by the Sixth Amendment?

A)The right to remain silent

B)The right to a speedy trial by an impartial jury

C)The right to refuse custodial interrogation

D)The right to refuse unreasonable searches

Q2) ________ is the change in the attitudes or values of convicted offenders so that they are not inclined to commit future offenses.

A)Recidivism

B)Rehabilitation

C)Retribution

D)Probation

Q3) In Miranda v.Arizona,the United States Supreme Court mandated that police officers have to give suspects a warning about their rights.

A)True

B)False

Q4) Special deterrenceĀ occurs when punishment of a wrongdoer deters other persons from committing similar offenses.

A)True

B)False

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Chapter 6: Intentional Torts

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Sample Questions

Q1) Maria goes to Auto Mart to test drive a Corvette.While on the test drive,Maria is merely involved in a fender-bender.If Auto Mart sues Maria,what is the likely result?

A)Maria is liable for trespass to personal property and obligated to pay Auto Mart the reasonable value of the car.

B)Maria is liable for trespass to personal property and obligated to pay Auto Mart damages to compensate it for the loss in value of the car.

C)Maria is liable for conversion and obligated to pay Auto Mart damages to compensate it for its loss of use of the car.

D)Maria is liable for conversion and obligated to pay Auto Mart the reasonable value of the car.

Q2) The standard of proof in a tort case is the preponderance of the evidence standard. A)True B)False

Q3) A valid defense for battery is the free and intelligent consent given.

A)True

B)False

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Chapter 7: Negligence and Strict Liability

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Q1) Which of the following statements about Currie v.Chevron U.S.A. ,Inc. ,the case in the text,is true?

A)The gas station attendant committed her own affirmative negligent act separate from her employment with Chevron.

B)There was a sufficient conflict in the evidence for reasonable minds to differ as to whether the circumstances of that morning would have put the gas station attendant on notice that activating the gas pump would pose an unreasonable risk of harm.

C)Muhammad's attack was unforeseeable because the Chevron station was in a low crime area and had not been the site of any criminal activity in previous years.

D)There was no evidence from which the jury could have found that Shukla was aware that Muhammad and Antoine were involved in a serious fight at the Chevron station before she activated the gas pump for Muhammad.

Q2) Which of the following is not an example of a licensee?

A)Door-to-door salespeople

B)Attendees of church services

C)Solicitors of money for charity

D)Persons taking shortcuts across the property

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Page 9

Chapter 8: Intellectual Property and Unfair Competition

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Sample Questions

Q1) Which of the following gives certain exclusive rights to creators of original works of authorship?

A)Patent law

B)Trademark law

C)Trade secrets law

D)Copyright law

Q2) Which of the following allows a defendant to be held liable for infringement even though the subject matter he used contained elements that were not identical to those described in the patentee's claims of invention,but nonetheless,may be seen as equivalent to those of the patented invention?

A)Literal infringement

B)Double jeopardy clause

C)Strict liability

D)Doctrine of equivalents

Q3) Which of the following is not likely to be considered a trade secret?

A)Famous cookbook recipes

B)Chemical formulas

C)Computer software

D)Detailed customer lists

Q4) Why does the law disfavor noncompetition agreements?

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Chapter 9: Introduction to Contracts

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Q1) ________ is the idea that contracts should be enforced because they are the products of the free wills of their creators,who should,within broad limits,be free to determine the extent of their obligations.

A)Quasi-contract

B)Promissory estoppel

C)Capacity

D)Freedom of contract

Q2) An otherwise valid contract whose enforcement is barred by the applicable statute of limitations is an example of a(n):

A)voidable contract.

B)quasi-contract.

C)bilateral contract.

D)unenforceable contract.

Q3) The UCC imposes a duty of good faith in the performance and enforcement of every contract it covers.

A)True

B)False

Q4) What is the main difference between a void contract and a voidable contract? Give examples of each.

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Chapter 10: The Agreement: Offer

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Sample

Questions

Q1) Which of the following statements about the objective theory of contracts is false?

A)The objective standard looks to the offeror's words,acts,and the circumstances signifying about his intent.

B)If a reasonable person familiar with the circumstances would be justified in believing that the offeror intended to contract,the intent requirement is satisfied.

C)The objective standard is often unpredictable and creates inconsistent results.

D)A court could find that intent existed even if the offeror says that he did not intend to contract.

Q2) To meet the requirements to form a contract,the parties must have future intent to agree and form a contract.

A)True

B)False

Q3) Generally speaking,advertisements for the sale of goods at specified prices are considered to be offers.

A)True

B)False

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Chapter 11: The Agreement: Acceptance

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Sample Questions

Q1) Mr.White contracts with Mr.Green for 100 black coffee mugs.Mr.White decides he needs the mugs faster than the time allotted in the contract and asks for a rush shipment.Mr.Green notifies Mr.White that he will ship 100 coffee mugs but that the only ones available are red.A court will find that the shipment of red mugs under the UCC is not a breach of the original agreement.

A)True

B)False

Q2) Why is an offeree's silence not considered to be acceptance of an offer?

Q3) Which of the following describes the effect of the knock-out rule?

A)The contract will consist of those terms on which the parties' writings agree plus any different terms that are reasonable under the circumstances.

B)The contract will include the different terms and any appropriate gap-filling presumptions in the Code.

C)The contract will consist of those terms on which the parties' writings agree plus any appropriate gap-filling presumptions of the Code.

D)No contract exists.

Q4) Why is the mirror image rule not strictly applied to modern commercial transactions?

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Page 13

Chapter 12: Consideration

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Sample Questions

Q1) As discussed in the case in the text,McLellan v.Charly,promissory estoppel:

A)applies only when the promisee relied on the promise,even if the reliance was not reasonably expected.

B)is used as a consideration substitute.

C)is used when there was consideration that was later destroyed.

D)applies whether or not the promisee relied on the promise.

Q2) In Welsh v.Lithia Vaudm,Inc. ,the case in the text,the court held that:

A)written agreements,such as an invoice,are presumed to be supported by consideration.

B)there was adequate consideration,making the arbitration clause enforceable.

C)no additional consideration existed where Lithia had a preexisting duty under the oral contract.

D)Lithia's modification was a pre-performance,bilateral demand.

Q3) A promise not to sue another party is not consideration because the promise does not convey any legal value to the other party.

A)True

B)False

Q4) Why are "disguised gift" promises involving nominal consideration nonbinding because of the absence of consideration? Explain with one example.

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Chapter 13: Reality of Consent

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Sample Questions

Q1) Which tort involves misrepresentation or cheating by means of some device?

A)Tortious interference

B)Conversion

C)Deceit

D)Nuisance

Q2) Jim,the CEO of Maple,Inc. ,signed a few papers that Amanda,his secretary,presented to him.Unknown to Jim,Amanda had carefully slipped in a contract for the sale of Jim's home to her in the papers.If Amanda seeks to enforce the contract,Jim's best defense to have the contract declared void would be:

A)innocent misrepresentation.

B)fraud in the execution.

C)mistake.

D)duress.

Q3) A(n)________ misrepresentation is not intentionally deceptive.

A)harmless

B)innocent

C)unintentional

D)fraudulent

Q4) Give two reasons why the differences between fraud and misrepresentation are relevant.

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Chapter 14: Capacity to Contract

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Sample Questions

Q1) What was the procedural posture of the case in the text Rogers v.Household Life Insurance Co.?

A)The plaintiff appealed the district court's dismissal for lack of jurisdiction.

B)The plaintiff appealed the district court's granting of the defendant's motion for summary judgment.

C)The defendant appealed the district court's award of $250,000.

D)The defendant appealed the district court's denial of its motion for summary judgment.

Q2) A(n)________ is something that is essential for the minor's continued existence and general welfare that has not been provided by the minor's parents or guardian.

A)disaffirmance

B)necessary

C)estoppel

D)capacity

Q3) Courts may sometimes be sympathetic to an adult who has suffered losses due to a minor who misrepresented his age.How so?

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Page 16

Chapter 15: Illegality

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Sample Questions

Q1) Describe the three criteria that need to be fulfilled to enforce a noncompetition clause.

Q2) When a court says that an agreement is illegal,it most likely means that the agreement:

A)has not mentioned a time period for which the agreement is valid.

B)does not identify the parties involved in the agreement.

C)is related to buying and selling of trade secrets.

D)violates public policy.

Q3) Which of the following will not make an agreement illegal?

A)An agreement that violates a statute.

B)An agreement that violates public policy.

C)An agreement that is unconscionable.

D)An agreement that is not timely ratified.

Q4) A court will enforce a noncompetition clause even if its restraints are unduly burdensome either on the public or on the party whose ability to compete would be restrained.

A)True

B)False

Q5) What is an exculpatory clause?

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Chapter 16: Writing

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Q1) A bilateral contract is "taken out of the statute of frauds" when:

A)it is completed within a year from the day of its existence.

B)it is fully performed by at least one party.

C)it is put in writing.

D)it has strict rules of performance.

Q2) Mr.Green and Mr.Blue contract orally to transfer 500 widgets for $1,000.Mr.Blue sends Mr.Green a receipt one week after the agreement.If Mr.Green now refuses to recognize the agreement a court will find what?

A)That a memorandum of agreement was created by the receipt sent by Mr.Blue and an enforceable agreement exists

B)That no agreement exists because there is no typed agreement according to the statute of frauds

C)There is no enforceable agreement because the receipt was not sent at the same time as the agreement

D)The agreement is not enforceable because the Secretary of State did not approve the agreement

Q3) Arnold promised to sell his car to Adams in lieu of full payment of his debt.However,in the written contract,Adams had forgotten to specify which car he wants to sell.Is there any remedy?

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Page 18

Chapter 17: Rights of Third Parties

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Q1) Antiassignment clauses in contracts generally are:

A)enforceable but read narrowly.

B)enforceable but not covered by the UCC.

C)unenforceable because they are unconscionable.

D)unenforceable because they are void.

Q2) The assignor impliedly warrants to the assignee that the claim assigned is valid.

A)True

B)False

Q3) For a third person to have the right to enforce a contract,he/she must necessarily prove that:

A)he/she was the party to the contract.

B)he/she had been given a promise.

C)the contract was made to benefit him.

D)the contract provides him/her incidental benefit.

Q4) Why is it important for an assignee to immediately notify the obligor of the assignment?

Q5) Amelia contracts to have her portrait painted by Hamilton for $10,000.Hamilton assigns the contract to Drew,another artist.Has there been a valid delegation of duties here? Why or why not?

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Chapter 18: Performance and Remedies

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Q1) Which of the following characterizes the statute of limitations?

A)The time period fixed by the statute of limitations is uniform throughout the states.

B)The recording of the contract stops the running of the statute of limitations.

C)The time period fixed by the statute of limitations begins when the contract is recorded.

D)The time period for oral contracts is different from that of written ones.

Q2) What is an injunction?

A)The awarding of compensatory damages

B)A court's order requiring a person to do something or refrain from doing something

C)The cancellation of a contract regarding real estate

D)A lawsuit for damages brought by the nonbreaching party

Q3) An accountant who substantially performs her duties to her client triggers the client's duty to pay the contract price,less any damages resulting from defects in her performance.

A)True

B)False

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20

Chapter 19: Formation and Terms of Sales Contracts

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Q1) Sean goes to Pinnacle Corp. ,convinces the store manager that he is their loyal online customer Ryan and purchases a DVD credited to Ryan's account.He then sells the DVD to Jason for a higher price.When Ryan finds out,he wants the DVD back from Jason.Which of the following is true of the case?

A)Ryan is a good faith purchaser.

B)Pinnacle can get the DVD from Jason.

C)Sean has voidable title to the DVD.

D)Jason needs to pay Sean and Pinnacle.

Q2) In a "mixed" contract for the sale of both goods and services,the court will apply the contract rules of the UCC or of the common law,depending on whether:

A)the contract price of the goods portion of the contract is $500 or more.

B)the contract is in writing.

C)the predominant purpose of the contract is goods or services.

D)the parties are both merchants.

Q3) The importance of the terms FOB and FAS in contracts for the sale of goods is that they obligate the buyer to pay immediately upon delivery of the goods.

A)True

B)False

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21

Chapter 20: Product Liability

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Sample Questions

Q1) Manufacturers who fail to inspect their products before being shipped can be liable for negligence.

A)True

B)False

Q2) A disclaimer of the implied warranty of merchantability can be oral.

A)True

B)False

Q3) In the case in the text,Bissinger v.New Country Buffet,what was one reason why the intermediate court held that the trial court's decision to grant the suppliers' motion for summary judgment was proper?

A)The suppliers' labels were insufficient because they failed to mention death as a potential risk.

B)The suppliers' labels were insufficient to meet the reasonable care standard.

C)The suppliers had no ability to directly warn customers of restaurants.

D)The suppliers were responsible because the object found in the food did not naturally occur in that food.

Q4) Punitive damages are awarded to compensate for the losses a person has suffered.

A)True

B)False

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Chapter 21: Performance of Sales Contracts

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Q1) If a buyer has a basis for rejecting a delivery of goods,the buyer:

A)should not ask the seller to reship conforming goods.

B)will still be liable to the seller for breach of the sales contract.

C)need not act within a specified amount of time.

D)must give the seller notice of the rejection.

Q2) Generally,the UCC uses the test of impossibility to determine if a person can be excused from performing his contractual obligations.

A)True

B)False

Q3) ________ is the standard used by the UCC that defines when a party is relieved of his or her contract obligations because of the occurrence of unforeseeable,external events beyond his or her control.

A)Commercial impracticability

B)Repudiation

C)Frustration of purpose

D)Impossibility

Q4) List a few scenarios under which sellers may be excused from performing contractual obligations.

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Chapter 22: Remedies for Breach of Sales Contracts

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Q1) Which of the following is a common way in which sellers breach contracts?

A)Indicating that he does not intend to fulfill the obligations under the contract

B)Failing to confirm their intent to accept the goods at least five days before the scheduled delivery

C)Agreeing to extended credit periods depending on the buyer's credit record

D)Failing to take delivery of the goods

Q2) Explain the concept of a buyer's right to cover.

Q3) In the eventuality of nondelivery by the seller,which of the following would be reduced from the amount of damages claimed from the seller?

A)The difference between the contract price of the goods and their market price at the time he learns of the seller's breach

B)Incidental damages

C)Expenses saved

D)Consequential damages

Q4) Under the UCC,an injured party in a contract dispute cannot recover punitive damages.

A)True

B)False

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Chapter 23: Personal Property and Bailments

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Q1) Which of the following is not an example of real property?

A)Land

B)Office building

C)Stock

D)House

Q2) When personal property is used in conjunction with real property in such a way as to be treated as part of the real property,it is known as a ________.

A)consideration

B)gift

C)fixture

D)bailment

Q3) ________ is the intermixing of different owners' goods in such a way that they cannot later be separated.

A)Confusion

B)Accession

C)Conversion

D)Bailment

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Chapter 24: Real Property

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Q1) Which of the following is the highest form of land ownership?

A)Life estate

B)Nonfreehold estate

C)Leasehold estate

D)Fee simple absolute

Q2) Which of the following is an article of personal property that has been annexed to real property leased by a tenant during the term of the lease that is necessary to the carrying on of a business?

A)Trade fixture

B)Commercial fixture

C)Leased fixture

D)Tenant fixture

Q3) ________ are ownership interests of uncertain duration.

A)Nonfreehold estates

B)Leasehold estates

C)Freehold estates

D)Assignments

Q4) Typically,landowners bring public nuisance actions.

A)True

B)False

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Chapter 25: Landlord and Tenant

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Q1) Jessica,a tenant,invited her friend Angelina for dinner at her house.Jessica's carpet that was on the kitchen floor was in a torn condition and Jessica has not done anything about it.As Angelina walked over it,her leg got trapped and she fell down.Her knee got dislocated.Angelina can sue:

A)neither Jessica nor the landlord.

B)only the landlord.

C)both Jessica and her landlord.

D)only Jessica.

Q2) Which of the following prematurely terminates a lease by mutual agreement?

A)An exculpatory agreement

B)Abandonment

C)Eviction

D)A surrender agreement

Q3) Which of the following is required for a lease for a term of more than one year to be enforceable?

A)It should be in writing.

B)It cannot be subleased.

C)It cannot be assigned.

D)It should at least be oral.

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Page 27

Chapter 26: Estates and Trusts

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Q1) Which of the following is true of a spendthrift trust?

A)The settlor can make himself the beneficiary.

B)It restricts the voluntary transfer of a beneficiary's interest.

C)Assignees can claim rights to it.

D)Creditors can claim rights to it.

Q2) A personal representative under a will is also known as the executor.

A)True

B)False

Q3) Which of the following is an agent who is given express,written authorization by his or her principal to do a particular act or series of acts on behalf of the principal?

A)Executor

B)Trustee

C)Devisee

D)Attorney-in-fact

Q4) If an individual dies without a will,then they are said to have died intestate.

A)True

B)False

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Chapter 27: Insurance Law

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Q1) With respect to property insurance,the insurable interest requirement:

A)need only be satisfied at the time the policy is issued.

B)must be satisfied both at the time the policy is issued and at the time of the loss.

C)will be satisfied only if the insured owns the property in fee simple absolute.

D)will be satisfied by an insured who possesses a lienhold interest in the property.

Q2) Consideration on an insurance contract is the premium paid by the individual being insured and the promise by theĀ insurer for future coverage in the event of a peril.

A)True

B)False

Q3) The term for the person who receives insurance proceeds paid to them is the beneficiary.

A)True

B)False

Q4) The insurance relationship is contractual.

A)True

B)False

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Chapter 28: Introduction to Credit and Secured Transactions

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Q1) The notice of lien typically must be filed within what period of time?

A)Within 24 hours

B)30 to 90 days after the last work is performed

C)136 days from when the last work is performed

D)365 days from when the last work is performed

Q2) Generally,purchases of farm property are financed through the use of land contracts.

A)True

B)False

Q3) The principal debtor's lack of capacity is a defense for both the principal debtor and the surety if they are sued by the creditor.

A)True

B)False

Q4) Explain why the surety-guarantor distinction is important.

Q5) To be relieved of obligations as surety,a compensated surety must show that:

A)he is secondarily liable for the payment of the debt.

B)a change in the contract was material and prejudicial to him.

C)he lacks the capacity to fulfill his promise.

D)he has provided adequate collateral to the creditor.

Q6) Explain the difference between an accommodation surety and a compensated surety. Page 30

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Chapter 29: Security Interests in Personal Property

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Q1) In Woven Treasures,Inc.v.Hudson Capital,L.L.C. ,the case in the text,the court held that Woven Treasures' security interest was unperfected because:

A)it did not pay value.

B)it never possessed the collateral.

C)it never filed a financing statement asserting its interest in the rugs.

D)the rugs were not consumer goods.

Q2) Which of the following statements about security agreements is false?

A)The security agreement must reasonably describe the collateral so that it can readily be identified.

B)The security agreement cannot require the debtor to insure the goods.

C)The security agreement usually contains a promise by the debtor to pay certain amounts of money in a certain way.

D)The security agreement usually specifies which events constitute a default.

Q3) Where the creditor has possession of the collateral,the security agreement may be oral.

A)True

B)False

Q4) Why is filing a financing statement the only practical way to perfect a security interest in equipment?

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Chapter 30: Bankruptcy

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Q1) To which of the following is Chapter 11 not available?

A)Manufacturing corporations

B)A sole proprietorship that sells used cars

C)A bank

D)A person in his or her individual capacity

Q2) Which of the following items of a debtor's property are exempt in a bankruptcy proceeding under the federal set of exemptions?

A)Life insurance contracts valued at $10,000.

B)Real or personal property valued at $50,000.

C)Jewelry with value exceeding $10,000.

D)Individual retirement account exceeding $2 million.

Q3) Bankruptcy judges are appointed by the president for a term of ________ years.

A)4

B)8

C)12

D)14

Q4) Chapter 13 bankruptcy petitions may be either voluntary or involuntary.

A)True

B)False

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Chapter 31: Negotiable Instruments

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Q1) Except for ________,to be negotiable an instrument must be "payable to order or to bearer."

A)promissory notes

B)bonds

C)checks

D)certificates of deposit

Q2) A check is NOT negotiable if it:

A)reads "Pay Kim Turner."

B)states that it is payable only on a certain condition.

C)is signed with a rubber-stamped signature.

D)is issued by a drawer who lacks capacity to contract.

Q3) Checks and drafts are:

A)documents required as evidence for shipment of goods.

B)documents that detail the transaction between a seller and a buyer.

C)orders to another person to pay money to a third person.

D)promises to pay another person money.

Q4) A promissory note is a credit instrument.

A)True

B)False

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Chapter 32: Negotiation and Holder in Due Course

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Q1) A bank or person who ________ an instrument in the regular course of trade has given value for it.

A)indorses

B)transfers

C)discounts

D)holds

Q2) Which of the following is NOT a defense specified in Revised Article 3?

A)Claims for damages

B)Real defenses

C)Claims to an instrument

D)Claims in recoupment

Q3) A ________ indorsement is one that specifies the purpose of the indorsement or specifies the use to be made of the instrument.

A)conditional

B)qualified

C)restrictive

D)special

Q4) What are the four categories of claims listed in Revised Article 3?

Q5) What is the shelter rule in Article 3?

Q6) What are the general requirements to become a holder in due course?

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Chapter 33: Liability of Parties

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Q1) What section of the UCC addresses enforcement of a negotiable interest that has been altered?

A)1-201

B)3-407

C)3-670

D)6-224

Q2) Able carefully drew a check for $10 on her checking account at ABC bank,payable to the order of Baker.Baker altered the check to read $100,and then negotiated it to Cain.Cain presented the check for payment to ABC bank,which paid Cain $100.The bank then deducted $100 from Able's account.When Able saw her bank statement she demanded that ABC credit her account for the altered check.ABC credited Able's account and then sued Cain.Is Cain liable?

A)Yes,because Cain violated a presentment warranty.

B)Yes,because Cain was a holder of the check.

C)No,Cain is not liable if Cain acted in good faith and was unaware of Baker's alteration.

D)No,because Cain is not holder in due course.

Q3) How can an indorser avoid secondary liability on the instrument? Can an indorser disclaim transfer warranty liability?

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Chapter 34: Checks and Electronic Transfers

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Q1) In the ________ Congress set out mandatory schedules limiting check holds and specifying when funds are to be made available to customers by depositary institutions.

A)Expedited Funds Availability Act

B)Electronic Fund Transfer Act

C)Electronic Banking Act

D)Federal Reserve Act

Q2) Which of the following do a certified check and a cashier's check have in common?

A)The bank is primarily liable on each.

B)The bank is secondarily liable on each.

C)Both are drawn by the bank on itself.

D)Technically,the bank is not liable to a holder of either kind of check.

Q3) How often must a bank send a statement listing the transactions in an account?

A)Annually

B)Every 60 days

C)Every four months

D)Quarterly

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Chapter 35: The Agency Relationship

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Q1) Which of the following best represents an agent's duty of segregation?

A)The agent should not deal with the principal's property so that it appears to be the agent's.

B)The agent should not profit or receive any other benefit from acting on behalf of the principal.

C)The agent has a duty to act within her actual authority and to obey the principal's reasonable instructions.

D)The agent may not use or communicate confidential information of the principal for the agent's own purpose.

Q2) Under the Restatement (Third)of Agency,the principal's death automatically terminates an agent's apparent authority.

A)True

B)False

Q3) Which of the following tasks can an agent perform on behalf of a principal?

A)Signing a will

B)Making statements under oath

C)Voting in public elections

D)Making a contract

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Chapter 36: Third-Party Relations of the Principal and the Agent

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Q1) Which of the following is true of implied authority?

A)It can contradict a principal's express statements.

B)It exists even when the principal has limited the agent's authority through clear instructions.

C)It is usually derived from a grant of express authority by the principal.

D)It exists only if there is a relevant grant of express authority.

Q2) Respondeat superior makes a principal liable for an employee's negligence but not for her intentional torts.

A)True

B)False

Q3) Maria authorizes Frederick to sell her Maria-branded tee-shirts for $20 or more.Frederick sells the tee-shirts for $25 each.What type of authority gives Frederick authority to sell the tee-shirts?

A)Express authority

B)Implied authority

C)Estoppel

D)Ratification

Q4) Why is it impossible for there to be apparent authority on behalf of an undisclosed principal?

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Chapter 37: Introduction to Forms of Business and Formation of Partnerships

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Q1) The equity of a partnership is called partnership capital.

A)True

B)False

Q2) Under the RUPA,a person will be a purported partner and have liability when three elements of section 308(a)are met.Which of the following is not one of those elements?

A)A person purports to be or consents to being represented as a partner of another person or partnership.

B)A third party relies on the representation.

C)A third party suffered actual,tangible harm.

D)A third party transacts with the actual or purported partnership.

Q3) A joint venture is a(n):

A)association limited to no more than two persons in business for profit.

B)enterprise of numerous co-owners in a nonprofit undertaking.

C)enterprise engaged in a single project.

D)association of persons engaged as co-owners in a single undertaking for profit.

Q4) Babs,Mindy,and Eric decide to leave a large accounting firm and start their own accounting business.What form of business should they elect?

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Chapter 38: Operation of Partnerships and Related Forms

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Q1) Modern criminal codes define a partnership as a(n)________ that may commit a crime when a partner,acting within the scope of his authority,engages in a criminal act.

A)thing

B)entity

C)person

D)object

Q2) Helen and Casey are partners.Helen contributes capital of $20,000 to the partnership and Casey contributes $10,000.They agree that Helen will receive 60 percent of all profits and that Casey will receive 40 percent.They have not decided how to share losses.The partnership makes a loss of $7,000.What is Helen's share of the loss?

A)$2,800

B)$4,200

C)$3,500

D)$5,500

Q3) A partner of a trading partnership ordinarily has implied authority to borrow money for the partnership.

A)True

B)False

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Chapter 39: Partners Dissociation and Partnerships

Dissolution and Winding up

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Q1) Which of the following is true about dissolution and winding up the partnership?

A)In liquidation,the assets may not be sold separately.

B)Winding up always requires the sale of assets.

C)During winding up,the partners continue as fiduciaries to each other.

D)Most firms provide the partners with the firms' assets rather than proceeds from the sale of the same.

Q2) Which of the following is true about asset distribution in an LLP?

A)If the LLP has been profitable,each partner will receive the net amount in his capital account.

B)The partners have liability for partnership obligations beyond the firms' assets.

C)An LLP partner has to contribute an amount equal to the negative balance in his account to pay creditors.

D)The creditors must sue the partner to force the partner to pay the debt.

Q3) Karla retires from Orton Associates,a partnership.The business is continued by the remaining partners and Wes,a new partner who has agreed to assume Karla's liability for partnership obligations.Creditors have not been notified of Karla's retirement.What areĀ Karla and Wes's liabilities to the creditors?

Q4) Discuss a partner's authority to borrow money during winding up.

Page 42

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Chapter 40: Limited Liability Companies, limited

Partnerships, and Limited Liability Limited Partnerships

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Q1) ________ is when the holder of preferred stock can convert their preferred shares into other stock of the corporation.

A)Merger

B)Transfiguration

C)Conversion

D)Floating rate

Q2) Which of the following statements about LLC members is false?

A)A member's liability is limited to her capital contribution to the LLC.

B)A member is liable for the torts she commits while acting for the LLC.

C)A member must make capital contributions to the LLC as she agreed.

D)A member can never be personally liable on an LLC contract.

Q3) Limited liability companies are formed under federal law for international commerce purposes.

A)True

B)False

Q4) A certificate of limited partnership must state the capital contributions of the limited partners.

A)True

B)False

Chapter 41: History and Nature of Corporations

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Q1) What was the name of the document given to early American corporations by state legislatures that permitted them to operate as a corporation?

A)Certificate of Corporation

B)Organization Agreement

C)Special Charter

D)Domestic Treaty

Q2) Shareholders have ________ liability.

A)strict

B)limited

C)absolute

D)vicarious

Q3) A state may impose its laws on a foreign corporation if such imposition does not violate the Constitution of the United States,notably the Due Process Clause of the Fourteenth Amendment and the Commerce Clause.The leading case in this area is the ________ case.

A)International Shoe

B)Katris v.Carroll

C)Ryan v.Cerullo

D)World-Wide Volkswagen Corp.v.Woodson

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Chapter 42: Organization and Financial Structure of Corporations

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Q1) Which of the following occurs at a corporation's organization meeting?

A)Adoption of preincorporation contracts.

B)Authentication of the articles of incorporation.

C)Adoption of bylaws to supplement the articles of incorporation.

D)Creation of preincorporation contracts.

Q2) A(n)________ requires a selling shareholder to obtain the consent of the corporation or the other shareholders before she may sell her shares.

A)buy-and-sell agreement

B)right of first refusal

C)option agreement

D)consent restraint

Q3) If repurchased shares are neither canceled nor restored to unissued status,they are called ________ shares.

A)preference

B)treasury

C)Golden

D)outstanding

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Chapter 43: Management of Corporations

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Q1) Directors must be shareholders of the corporation on whose board they serve.

A)True

B)False

Q2) Which of the following would not meet the requirements of a proper directors' meeting?

A)The board meets through an internet platform with audio and video.

B)The board meets by telephone.

C)Each director records himself or herself with the topics of concern and uses e-mail to provide it to the other directors.

D)The board meets by television.

Q3) In United States v.Jensen,the case in the text,which of the following was not considered in determining whether Jensen knowingly violated the law?

A)She concealed the way options were dated

B)She directed employees not to communicate about options over the phone or email

C)She attempted to minimize the obviousness of backdated options

D)She participated in prior corporate trainings on SEC reporting

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Chapter 44: Shareholders Rights and Liabilities

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Q1) If the board of directors refuses the shareholder's demand because it reasonably believes it would be improper to bring a lawsuit,the board of directors are protected:

A)from joint and several liability.

B)by indemnification.

C)from a court piercing the corporate veil.

D)by the business judgment rule.

Q2) Repurchase of ________ shares by a corporation is involuntary on the shareholder's part.

A)split

B)fractional

C)outstanding

D)preferred

Q3) In Zapata Corp.v.Maldonado,the case in the text,the court developed a rule that:

A)requires the balancing of many factors,including fiscal,legal,and ethical considerations.

B)courts should always give special consideration to public policy in addition to the corporation's best interests.

C)courts and not litigants should decide the merits of the litigation.

D)determines a party's burden based on whether directors are independent or not.

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Chapter 45: Securities Regulation

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Q1) Which of the following statements about an SEC no-action letter is false?

A)No-action letters state the SEC will not take legal action against the issuer if the issuer acts as indicated in the no-action letter.

B)No-action letters are binding on the SEC commissioners.

C)Issuers that comply with the no-action letters rarely face SEC action.

D)Issuers often seek no-action letters before making exempted offerings of securities and excluding shareholder proposals from their proxy statements.

Q2) ________ creates three important periods of time in the life of a securities offering:

(1)the pre-filing period,(2)the waiting period,and (3)the post-effective period.

A)Section 3 of the 1934 Act

B)Section 17 of the 1933 Act

C)Section 12 of the 1934 Act

D)Section 5 of the 1933 Act

Q3) The offering price of a tender offer is usually:

A)equal to the market price of the shares.

B)well below the market price of the shares.

C)slightly above the market price of the shares.

D)well above the market price of the shares.

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Chapter 46: Legal and Professional Responsibilities of Auditors,

Consultants, and Securities Professionals

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Q1) Professionals are sued under securities law usually by: A)clients.

B)brokers.

C)partners.

D)third parties.

Q2) An individual may be fined up to ________ and imprisoned for up to ________ for a criminal violation of the 1934 Act.

A)$15 million;10 years

B)$5 million;10 years

C)$15 million;20 years

D)$5 million;20 years

Q3) An accountant can be required to bring his/her working papers into court and to testify as to matters involving the client's tax records and discussions with the client regarding tax matters.

A)True

B)False

Q4) The duty of trust requires a professional to maintain confidentiality.

A)True

B)False

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Chapter 47: Administrative Law

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Q1) One of the founding principles of our government is separation of powers.How do administrative agencies tend to conform to,or violate this principle?

A)They raise concerns related to this principle because they perform all three functions of government.

B)They tend to conform to this principle because most commissioners or board members are appointed by the President.

C)They tend to conform to this principle because they only follow the law,and do not make any law.

D)They tend to violate this principle because they are created by Congress through passing of enabling legislations.

Q2) The courts exercise the greatest control over agency behavior because all agency actions are subject to judicial review.

A)True

B)False

Q3) The Securities and Exchange Commission (SEC)is an example of an independent agency.

A)True

B)False

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Chapter 48: The Federal Trade Commission Act and Consumer

Protection Laws

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Q1) The TILA's detailed disclosure provisions break down into three categories.One of those categories is that of:

A)open-end credit.

B)debit card applications.

C)mixed credit.

D)consumer loans.

Q2) European Union (EU)countries depend more on litigation instituted by private parties as the chief legal means of dealing with misleading advertising.In this sense,the approach taken by EU nations resembles advertising regulation in the United States under:

A)Section 5 of the FTC Act.

B)Section 4 of the Clayton Act.

C)Section 16(C)of the Sherman Act.

D)Section 43(a)of the Lanham Act.

Q3) The Fair Credit Reporting Act imposes disclosure duties on:

A)users of credit reports.

B)credit receivers.

C)users of debit services.

D)debit and credit receivers.

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Chapter 49: Antitrust: the Sherman Act

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Q1) Which of the following situations is most likely to be deemed in violation of Section 2 of the Sherman Act?

A)Intent to monopolize

B)Attempted monopolization

C)Misdirected monopolization

D)Conspiracy to monopolize

Q2) Foreign firms that are ________ in the U.S.domestic commerce are subject to federal antitrust jurisdiction.

A)"occasionally engaged"

B)"continuously engaged"

C)"even rarely engaged"

D)"engaged even once"

Q3) Chicago School advocates point out that concentration in a particular industry does not necessarily preclude:

A)interindustry competition.

B)intraindustry competition.

C)anticoncentration of economic power.

D)anticoncentration of political power.

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and Immunities

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Q1) The Foreign Sovereign Immunities Act (FSIA)provides that all commercial activities of foreign sovereigns and their agents are exempt from antitrust liability.

A)True

B)False

Q2) Section 8 of the Clayton Act,as modified by the Antitrust Amendments Act of 1990,prohibits the same individuals from controlling competing corporations when those individuals are:

A)shareholders.

B)directors or senior officers.

C)mid-level officers.

D)managerial employees.

Q3) Section 7 of the Clayton Act prohibits mergers of companies that would lessen competition in the market or create a monopoly.

A)True

B)False

Q4) There are no criminal penalties for violating the Clayton Act.

A)True

B)False

Page 53

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Chapter 51: Employment Law

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Q1) For an employee to recover under a workers' compensation system,what percentage of negligence must the employer be found guilty of?

A)The employee does not need to prove employer negligence

B)The employer must be 51% negligent for the injury

C)The employer must be more than 30% negligent for the injury

D)The employer must be more than 75% negligent for the injury

Q2) Joe Smith,a police patrolman,joins a new religious sect that renounces any real or threatened use of force against another human being for any reason.Thus,Joe refuses to employ or threaten any kind of physical force against anyone he encounters in his patrolman's job.Instead,he tries to reason with lawbreakers and to instruct them about God's will.For this reason,the city police force reassigns Joe from his patrolman's job to an office job.Joe sues for religious discrimination under Title VII.Can the city successfully argue that it is not discriminating against Joe's religion,just the way he does his job? If not,what else can the city argue? How successful is this argument likely to be?

Q3) An individual can sue a former employer for OSHA violations that the individual witnessed.

A)True

B)False

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Chapter 52: Environmental Regulation

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Q1) The Clean Water Act sets up a permit system for any dredging or filling activity in wetlands that is administered by the Army Corps of Engineers.

A)True

B)False

Q2) Which of the following is not responsible for regulating research and use of biotechnology?

A)the Environmental Protection Agency

B)the Department of Agriculture

C)the Food and Drug Administration

D)the individual states

Q3) The ________ was created in recognition that the problems of air and water pollution,solid waste disposal,water supply,and pesticide and radiation control were interrelated and required a consolidated approach.

A)Comprehensive Environmental Response Compensation and Liability Act

B)Toxic Substances Control Act

C)Environmental Protection Agency

D)Clean Air Act

Q4) How does the Clean Water Act regulate wetlands?

Q5) What is meant by the term "National Priority List"?

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