Business Ethics and Law Exam Practice Tests
Course Introduction
Business Ethics and Law explores the foundational principles and practical applications of ethical decision-making and legal compliance in the business world. The course examines the intersection between ethical theories, corporate social responsibility, and legal frameworks that govern business operations both domestically and internationally. Students will analyze real-world case studies to understand how ethical and legal considerations impact management, stakeholder relations, and organizational strategy. Through critical discussion, the course equips students with the skills to identify ethical dilemmas, evaluate solutions, and make informed decisions that uphold both organizational integrity and legal standards.
Recommended Textbook
Legal Environment of Business A Managerial Approach 3rd Edition by Sean Melvin
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Page 2
Chapter 1: Legal Foundations
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Sample Questions
Q1) The state of Delaware has passed a new law banning cell phone use while driving a motor vehicle within the state.This law would be defined as
A) an ordinance.
B) a regulation.
C) a statute.
D) a common law.
Answer: C
Q2) Laws relating to contracts for the sale of goods are primarily found in the common law.
A)True
B)False
Answer: False
Q3) Trial lawyers from outside firms,often selected by general counsel when a particular field of expertise is needed,are referred to as _______ .
Answer: litigators
Q4) Measures of judicial action intended to compensate an injured party in a civil lawsuit are called _______.
Answer: remedies
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Page 3
Chapter 2: Business and the Constitution
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Sample Questions
Q1) Both commercial speech and corporate political speech are subject to intermediate scrutiny.
A)True
B)False
Answer: False
Q2) Kathy was returning to the United States after a vacation when the Customs Service confiscated some goods she had purchased abroad and brought back with her.The determination of whether the government acted properly and the type of hearing that she must be provided is an analysis of
A) procedural due process.
B) substantial due process.
C) the Equal Protection Clause.
D) the Commerce Clause.
Answer: A
Q3) The First Amendment prohibits individuals from encroaching on or prohibiting another person's freedom of speech.
A)True
B)False
Answer: False
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Page 4
Chapter 3: The American Judicial System, Jurisdiction and Venue
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Sample Questions
Q1) In Goodyear Dunlop Tires Operation v.Brown,the fact that a small percentage of tires manufactured by the foreign subsidiaries had entered the North Carolina market was not sufficient to show minimum contacts in North Carolina to establish personal jurisdiction.
A)True
B)False
Answer: True
Q2) The Federal Circuit Court of Appeals,located in Washington D.C.,has exclusive jurisdiction to hear appeals from federal courts of appeals throughout the country prior to their appeal to the U.S.Supreme Court.
A)True
B)False
Answer: False
Q3) If an Oregon corporation sues the Environmental Protection Agency,a federal administrative agency,it may sue in either an Oregon state court or a federal district court located in Oregon.
A)True
B)False
Answer: False
Page 5
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Chapter 4: Resolving Disputes: Litigation and Alternative Dispute
Resolution
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Q1) Voir dire
A) is a form of discovery.
B) is the process of choosing a jury.
C) is a motion made after trial seeking an appeal.
D) is the process of notifying a defendant that he or she has been sued.
Q2) The term litigation refers to the trial but does not include pretrial events as well.
A)True
B)False
Q3) The primary difference between arbitration and other forms of ADR is that arbitration is quicker.
A)True
B)False
Q4) Which of the following does not result in a decision rendered by a third party?
A) arbitration
B) mediation
C) summary jury trial
D) expert evaluation
Q5) In some special types of cases such as divorce,the defendant is instead called a ____.
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Chapter 5: Business, Societal, and Ethical Contexts of Law
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Q1) Social responsibility is at its highest when the moderate view,or government's hand theory,of corporate social responsibility is utilized.
A)True
B)False
Q2) Codes of ethics are insufficient and do not serve their proper purpose if they are intended only to ensure that company policies are legal.
A)True
B)False
Q3) Religious teachings and ethics are separate and distinct and rarely if ever overlap.
A)True
B)False
Q4) The triple bottom line in the perspective of corporate social responsibility emphasizes each of the following except
A) creation of profit.
B) creation or destruction of environmental value.
C) creation of social value.
D) creation of private value.
Q5) The notion of _______ is a central theme in Immanuel Kant's work.
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Chapter 6: Overview and Language of Contracts
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Q1) Void contracts are seemingly valid contracts that one party has the right to declare void.
A)True
B)False
Q2) In general,contracts for the sale of goods are governed by:
A) state common law.
B) state statutory law based on the Uniform Commercial Code.
C) federal regulations.
D) the Uniform Commercial Code.
Q3) Mike is walking through a parking lot and finds Kathy lying unconscious.He puts her in his car and takes her to the hospital.The hospital saves her life,and when she becomes conscious,it presents her with a bill.
A) Kathy has to pay based on a unilateral contract.
B) Kathy has to pay based on an implied contract.
C) Kathy has to pay based on a quasi-contract.
D) Mike has to pay because he brought her to the hospital.
Q4) To have _______ assent,there must be an offer and agreement between the parties.
Q5) When a contract is formed from a party's actions rather than the party's words,it is called a[n] _______ contract.
Page 8
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Chapter 7: Contract Enforceability and Performance
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Q1) What is an anticipatory repudiation,and what must be shown for it to be enforced?
Q2) Burt and Mel have entered into a contract in which Burt agrees to put a concrete driveway on Mel's property.If Burt delegates the duty of laying the driveway to Chuck and Chuck does an unacceptable job,Mel may sue Burt for damages.
A)True
B)False
Q3) An event that occurs after the performance under a contract and discharges the parties' contractual obligations is best referred to as a(n)
A) condition prerequisite.
B) condition antecedent.
C) condition subsequent.
D) condition precedent.
Q4) Incidental beneficiaries are identified during the formation of the contract and known to the parties.
A)True
B)False
Q5) In some states,another name for a "statute of limitations" is a "statute of _______."
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9
Chapter 8: Contracts for the Sale of Goods
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Q1) Jones Corp.is set to deliver goods ordered by Smith,Inc.and calls to confirm that the goods will be delivered the next day.Smith,Inc.on the phone,notifies Jones Corp.that it has found the same goods available cheaper from another seller and will not accept delivery.In order for Smith,Inc.to officially be in breach of contract,Jones Corp.must deliver and tender conforming goods and have Smith,Inc.wrongfully reject them.
A)True
B)False
Q2) Abbreviations published by the International Chamber of Commerce that are meant to avoid confusion in international business transactions are called _______.
Q3) For a writing to satisfy statute of frauds requirements under the UCC,it must include each of the following except A) price.
B) quantity.
C) the signature of the party against whom enforcement is sought.
D) language that a reasonable person would believe constitutes an intent to form a contract.
Q4) What is the underlying goal and function of the UCC,and why is it crucial to business?
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Page 10
Chapter 9: Torts and Products Liability
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Q1) Jonah wants to propose to Rhonda and goes to a jewelry store to purchase an engagement ring.After college,Jonah had worked as a jeweler while going to law school,and he is now an attorney.He still remains knowledgeable regarding the jewelry industry.In the jewelry store the owner listens to what Jonah wants,and he takes a diamond ring from a showcase.The jeweler tells Jonah that it's a class AAA perfect blue-white stone in a platinum setting and the price is $5,000.Jonah,without indicating his jewelry knowledge,asks to use the jeweler's loupe (eyepiece)and,upon inspection,sees that it's a class AA yellow-white diamond with three minor flaws.He furthermore realizes that the ring is worth only $4,000.The ring is beautiful,so he decides he'd like to buy it.He asks if the price is negotiable,and the jeweler offers a sale at $4,500.They settle on $4,300.When Jonah proposes,his girlfriend says no.Dejected,Jonah seeks to return the diamond ring but the jeweler refuses,so Jonah sues the jeweler for fraudulent misrepresentation.Who wins and why?
Q2) Inducing someone to break a contract with a third party is tortious conduct. A)True B)False
Q3) Laws that impose liability on liquor stores and bars are called _______ laws.
Q4) Store management may temporarily detain a suspected shoplifter without liability for false imprisonment based on the concept of _______.
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Chapter 10: Agency
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Q1) Explain the doctrine of respondeat superior and how it applies to a principal's liability.
Q2) In which of the following situations is the agent not liable should the principal breach a contract with a third party?
A) None (agents are liable in all agency situations).
B) Partially disclosed agency.
C) Undisclosed agency.
D) Disclosed agency.
Q3) Which of the following is an example of terminating the agency relationship by an express act?
A) The principal calls the agent and tells her to stop working.
B) The principal dies.
C) The principal files for bankruptcy.
D) The thing the agent was hired to work on is destroyed in a fire.
Q4) The person from whom an agent has received instruction and authorization and to whose benefit the agent is expected to perform and make decisions pursuant to an agency relationship is called the _______.
Q5) Why is it important for agents to accurately define their role when signing contracts on behalf of a principal?
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Chapter 11: Employment Relationships and Labor Law
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Q1) In Whirlpool v.Marshall,what did the Supreme Court conclude about an employee's right to walk off the job when faced with a hazardous workplace condition?
A) If an employee walks off the job, he or she will be subject to immediate termination.
B) An employee must provide a written statement to the job foreman before walking off the job.
C) An employee will receive time-and-a-half pay for reporting the danger but staying on the job anyway.
D) Despite the lack of specific authorization in the OSHA statute, an employee may walk off the job when faced with a condition the employee reasonably believes will result in serious injury or death and the context makes it impractical for the employee to contact administration inspectors.
Q2) The Fair Labor Standards Act requires that all workers be paid a minimum wage.
A)True
B)False
Q3) Name and define three forms of illegal work stoppages that may be conducted by employees.
Q4) Expressly firing someone for whistle-blowing constitutes an act of _______.
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Chapter 12: Employment Discrimination
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Q1) Viro and Winona are both tenured associate professors in a school's English Department.Winona is constantly asking Viro out on dates,which he always refuses.He has asked her to stop.Furthermore,Winona is always making provocative comments to him,telling dirty jokes,and asking him about his preferences in women,which embarrasses him and has caused him to lose sleep.If Viro sues the school for permitting her behavior,
A) the school would win because a woman can't harass a man and he should be flattered rather than upset.
B) the school would win because Viro and Winona are on the same employment level and Viro can't be truly harassed unless Winona has the ability to affect his job status, which she doesn't have.
C) Viro would win if he had previously complained to the school and it had done nothing to stop the harassment.
D) Viro would win because, regardless of notice, the employer is automatically liable for any improper activity that occurs on the job, and it is the employer's responsibility to know what is happening on its premises.
Q2) The Americans with Disabilities Act does not require an employer to provide accommodations that constitute a(n) _______ on the employer.
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Chapter
13:
Choice of Business Entity, Sole Proprietorships, and Partnerships
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Q1) Describe the common terms of a franchise agreement that govern the relationship between franchisee and franchisor.
Q2) Business owners are also known as _______.
Q3) A general partner who rightfully dissociates from a partnership remains liable for predissociation debts of the partnership.
A)True
B)False
Q4) Principals generally have no personal liability for the business entity's debts regarding
A) limited partnerships.
B) limited liability partnerships.
C) corporations.
D) limited liability companies.
Q5) A _______ is a business entity that has a proven track record of success and sells the right to operate the business and use the business's trade secrets,trademarks,products,and so on.
Q6) How is the Revised Uniform Partnership Act similar to the Uniform Commercial Code in terms of gap filling?
Page 15
Q7) Business entities are sometimes referred to as business _______.
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Chapter 14: Limited Liability Companies and Limited Liability Partnerships
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Q1) The certificate of organization may restrict membership in an LLC to only those possessing a professional license in a named field.
A)True
B)False
Q2) Which of the following is not a characteristic of an LLC?
A) May elect to be taxed as a corporation.
B) Usually capitalized via debt.
C) Its members are not personally liable for any business debt or liability.
D) Only its managing members owe a fiduciary duty to other members.
Q3) A corporation may be a principal of an LLC.
A)True B)False
Q4) Both managing members and controlling members owe a fiduciary duty to other members.
A)True
B)False
Q5) An LLC can last until a specified term expires.
A)True
B)False
Page 16
Q6) Owners in an LLC are called _______.
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Page 17
Chapter 15: Corporations
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Q1) Which of the following is an incorrect statement regarding Subchapter S corporations?
A) Subchapter S corporations may issue only one class of stock.
B) Subchapter S corporations may be domestic or foreign, but they cannot be alien.
C) Taxation in Subchapter S corporations is pass-through, like partnership taxation.
D) Subchapter S corporations may not have more than 100 shareholders.
Q2) A person who performs pre-incorporation duties on behalf of the forming corporation is called a _______.
Q3) Any corporation that does not make money is classified as a nonprofit corporation.
A)True B)False
Q4) Once a corporation is recognized by the state,the corporation automatically becomes liable for all pre-incorporation contracts entered into by a promoter on behalf of the corporation.
A)True B)False
Q5) Officers,directors,and controlling shareholders are often called _______.
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18
Chapter 16: Regulation of Securities, Corporate
Governance, and Financial Markets
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Q1) One form of private placement exemption involves sales of securities
A) in limited dollar amounts to nonaccredited investors.
B) only to employees, officers, and board members of the issuing corporation.
C) to accredited investors.
D) to other corporations, with no sales to individuals permitted.
Q2) Annuities issued by insurance companies are exempt from full SEC registration requirements.
A)True
B)False
Q3) The SEC has the power to suspend or revoke the licenses of brokers that violate securities laws.
A)True
B)False
Q4) Issuing securities to the public markets for the first time is called an initial public offering.
A)True
B)False
Q5) On a bond,the face amount is also called the _______.
Page 19
Q6) Any officer,director,or shareholder who owns 10 percent or more of a company's stock is considered an _______.
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Page 20
Chapter 17: Administrative Law
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Q1) Which of the following is not a source of administrative law?
A) the Constitution
B) the Administrative Procedures Act
C) common law
D) treaties
Q2) Most agencies do not have an enforcement division to investigate violations of the regulations,and they rely on the Department of Justice for this function.
A)True
B)False
Q3) Administrative agencies are not empowered to hear cases of alleged violations of their regulations and must depend on the courts for adjudication.
A)True
B)False
Q4) The substantial evidence test is applied by the courts to determine whether the agency's actions were lawful with regard to investigations and licensing.
A)True
B)False
Q5) What are the four primary functions of administrative agencies?
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Chapter 18: Environmental Law
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Q1) Actions by which of the following would fall under the National Environmental Policy Act (NEPA)?
A) Joe Jackson, a private citizen.
B) Colorful Paint Company, a business.
C) New York's Department of Transportation.
D) Food and Drug Administration.
Q2) Who sets the water quality standards for the navigable waters in a state under the Clean Water Act (CWA)?
A) States.
B) Congress.
C) The Waterways Protection Agency.
D) The U.S. Army Corps of Engineers.
Q3) When is a categorical exclusion for an action available under the NEPA?
A) When the environmental impact is unknown.
B) When the environmental impact is significant.
C) When the environmental impact is small.
D) Never; NEPA procedures are required in all instances.
Q4) _______ provisions are part of many environmental statutes that allow third parties to file a lawsuit.
Q5) The _______ Act is the most important wildlife protection legislation.
Page 22
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Chapter 19: Antitrust and Regulation of Competition
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Q1) Adam Smith's book,The Wealth of Nations,is a source of support for some elements of antitrust law.
A)True
B)False
Q2) Give an example of a boycott that would not be a per se horizontal restraint.Be sure to explain why it is not a per se horizontal restraint in your response.
Q3) In _______,the Supreme Court held that a unilateral boycott does not fall under the Sherman Act.
A) Greyhound v. International Business Machines Corp.
B) United States v. Colgate
C) United States v. Grinnell
D) Covad Communications Co. v. BellSouth Corp.
Q4) Which act was designed to prevent monopolies from being created through mergers?
A) Clayton Act.
B) Celler-Kefauver Antimerger Act.
C) Sherman Act.
D) Federal Trade Commission Act.
Q5) Discuss the differences between the per se and rule of reason standards.
Q6) What constitutes a meeting of the minds for antitrust laws? Why is it important?
Page 23
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Chapter 20: Creditors Rights and Bankruptcy
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Q1) Becky wants to buy a car but cannot obtain a loan from the bank on her own.Lori agrees to be the co-signer on Becky's loan,on the condition that Lori would only be liable for the amount of the loan if Becky actually defaults on the loan.In this situation,Lori would best be described as a guarantor.
A)True
B)False
Q2) Chris wanted to get a loan from the bank,but he had bad credit.In order to get the money,he convinced Eric to cosign as a surety.Now Chris has stopped making the payments.When is Eric liable for repayment of the loan?
A) At any point.
B) When Chris stopped making payments.
C) Only after the bank attempts to recover the full amount from Chris.
D) Never, because Eric was not the one actually using the money.
Q3) One way a party may perfect a security interest is by filing a statement of notice with a state government.
A)True
B)False
Q4) Describe the role of a trustee in bankruptcy proceedings.
Q5) Discuss the differences between Chapters 7 and 11 bankruptcy proceedings.
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Chapter 21: Warranties and Consumer Protection Law
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Q1) If a credit card is issued to a consumer under the age of 21,the credit card company is required to
A) obtain the signature of a cosigner who has the means to repay any debt.
B) give a 60-day notice before making any rate hikes.
C) notify the cardholder's parents so they can monitor their child.
D) set reasonable spending limits.
Q2) Credit card companies may give out free umbrellas on campus when a student completes an application for a card.
A)True
B)False
Q3) Expressly false statements can result in breach-of-warranty lawsuits.
A)True
B)False
Q4) The _______ Commission is responsible for preventing unfair and deceptive acts or practices in commercial transactions.
Q5) FDA regulations do not apply to the labeling of food packages.
A)True
B)False
Q6) Name and discuss the two categories of warranties.
Page 25
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Chapter 22: Criminal Law and Procedure in Business
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Q1) Which of the following statements is false with regard to the 2008 discovery of Bernard Madoff's Ponzi scheme?
A) He preserved an element of secrecy by claiming his investment strategy to be a trade secret.
B) The scheme lasted over 20 years and cost his clients billions of dollars.
C) Obtaining investment funds from charities and nonprofits was an essential part of his strategy.
D) To keep multiple authorities and governments from examining his operation, he restricted the scheme to U.S. investors and U.S. business entities only.
Q2) The adjudicative phase of the criminal justice process includes each of the following components except
A) setting bail.
B) entry of plea by the defendant.
C) the filing of an indictment or information.
D) sentencing.
Q3) What effect have mandatory sentencing guidelines had on the judiciary and criminal punishment in general?
Q4) What are the three purposes or aims of imposing punishment for criminal acts?
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Chapter 23: Personal Property, Real Property, and Land Use Law
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Q1) In Fontainebleau Hotel v.Eden Roc,the Eden Roc Hotel sued the Fontainebleau Hotel when Fontainebleau began erecting a 14-story addition to its premises that Eden Roc claimed blocked air and sunlight from its pool and sunbathing areas.The court determined that
A) blocking the air and sunlight constituted a nuisance, so the building could be stopped.
B) the English law doctrine of "ancient lights" applied only if the building caused a dangerous circumstance to occur but not if the building caused only a nuisance.
C) the building could be erected if it could be shown to be useful and beneficial as long as there was no evidence that it was being erected out of spite to knowingly harm the plaintiff.
D) the building could be erected if it could be shown to be useful and beneficial even if it may have been erected partly for spite to knowingly harm the plaintiff.
Q2) The power of a municipality to pass zoning ordinances stems from A) common law.
B) federal statutes passed by Congress.
C) statutes passed by the state legislature.
D) police powers.
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Chapter 24: Intellectual Property
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Q1) The doctrine of equivalence will negate the effect of the doctrine of omission if the new item performs substantially the same function as the already patented item.
A)True
B)False
Q2) All trade secrets are protectable by either patent or copyright laws.
A)True
B)False
Q3) Your school or college has just received a specialized accreditation for which a lot of work has been done.This specialized accreditation is a great achievement.If the accrediting body takes a picture from your school or college's website and publishes the picture as a thumbnail,along with a hyperlink to your school or college's website,on its site to advertise or announce the accomplishment,the accrediting body is infringing on the picture's copyright.
A)True
B)False
Q4) Why does Xerox Corporation take out full-page ads in national publications stressing that it is improper to use the word Xeroxing when referring to making a photocopy?
Q5) "Under Armour" is an example of a[n] _______ trademark.
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Chapter 25: International Law and Global Commerce
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Q1) As long as there is proof that the parties intended to form a contract for the sale of goods and there is mention of the goods,quantity,and price,there is a valid offer under the CISG.
A)True
B)False
Q2) Countries that follow the common law system include the United States,Canada,Australia,and most of Latin America.
A)True
B)False
Q3) Under the Foreign Sovereign Immunities Act (FSIA)a foreign country is not under the jurisdiction of U.S.courts if the foreign nation
A) is engaged in some commercial enterprise on U.S. soil.
B) takes actions that have a direct effect on U.S. interests.
C) files a lawsuit in its own courts against a U.S.-based business.
D) waived immunity, explicitly or by implication.
Q4) The common law legal system allows judges to fill in gaps in the law that are not covered by a statute.
A)True
B)False
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