Business Ethics and Law Exam Review
Course Introduction
Business Ethics and Law explores the principles and frameworks that guide ethical decision-making and legal compliance in the business environment. The course examines topics such as corporate social responsibility, stakeholder management, ethical theories, and the impact of legal standards on business operations. Students will analyze real-world cases to understand how ethical considerations and legal regulations shape corporate governance, contracts, employment law, consumer protection, and environmental policies. By integrating ethical reasoning with legal knowledge, learners are prepared to address complex dilemmas and make responsible choices in professional practice.
Recommended Textbook
Business Law and the Legal Environment 7th Edition by Jeffrey
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Page 2
F. Beatty
Chapter 1: Introduction to Law
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Q1) A rule that establishes maximum length of work shifts for air traffic controllers demonstrates an agency imposing a regulation.
A)True
B)False
Answer: True
Q2) Which of the following would be an example of a civil lawsuit?
A)George is being prosecuted for bank fraud.
B)The government has initiated an action against Jeff for operating a motor vehicle under the influence of alcohol.
C)Gretta hit Rita in a bar during happy hour. Rita is now suing for her injuries.
D)The district attorney is bringing Ali to court for violating the city's keg ordinance.
Answer: C
Q3) Under the natural law theory of jurisprudence,an unjust law is no law at all.
A)True
B)False
Answer: True
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Chapter 2: Business Ethics and Corporate Social Responsibility
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Q1) Does ethical behavior maximize profitability?
A)Yes, there is concrete evidence that ethical behavior will always maximize profitability.
B)No, there is concrete evidence that unethical companies will always outperform ethical companies.
C)Although there is no guarantee that ethical behavior pays in the short or long run, there is evidence that the ethical company is more likely to win financially.
D)There is strong evidence that ethical behavior pays financially in the long run, but not in the short run.
Answer: C
Q2) How does unethical behavior in an organization affect its workforce?
A)It instills fear in employees making them more productive.
B)It helps workers focus on the goal of profitability.
C)It creates a workforce that is more informed and therefore, motivated.
D)It creates a workforce that is cynical and resentful.
Answer: D
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Chapter 3: International Law
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Sample Questions
Q1) A binding process of resolving legal disputes by submitting them to a neutral third party is called
A)mediation.
B)arbitration.
C)investigation.
D)enforcement.
Answer: B
Q2) Which of the following is not a lawmaking body but is so influential that many of its voluntary rules,such as the Incoterms,are accepted as the global standard in international business?
A)International Chamber of Commerce
B)International Court of Justice
C)The United Nation's General Assembly
D)The World Trade Organization
Answer: A
Q3) The Foreign Corrupt Practices Act prohibits bribery abroad.
A)True
B)False
Answer: True
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Page 5
Chapter 4: Common Law, Statutory Law, and Administrative
Law
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Q1) Bert had his driver's license suspended by the state department of transportation.He believes his constitutional due process rights were violated by the administrative agency.Can he immediately file a court action to have agency's actions reviewed?
A)Yes.A court has the jurisdiction to immediately review an agency's alleged unconstitutional action.
B)Yes. Bert must specifically allege his constitutional rights have been violated and file a court action in federal court - not a state court.
C)No. Bert must first exhaust all possible appeals within the agency itself before he seeks judicial review by a court.
D)No. A court of law does not have jurisdiction to review an administrative agency's actions.
Q2) The majority of work done by legislative bodies is performed in committees. A)True B)False
Q3) Discuss the four most important limitations on the power of federal administrative agencies.
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6
Chapter 5: Constitutional Law
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Q1) Tim received a letter from his state college stating that he had been expelled from the school.The letter stated his finance professor reported him to the Dean's office for cheating and that a committee had decided to expel him.He was reminded in the letter he had been disciplined earlier that same year for plagiarizing a term paper.Tim believes his due process rights have been violated by the college.Discuss what factors should be considered to determine the validity of Tim's claim.
Q2) Ikerd was entering the United States from a trip abroad when the Customs Service confiscated some goods she had purchased and brought back with her.The determination of whether the government is attempting to take property and what type of hearing the Customs Service must offer Ikerd is an analysis of
A)substantive due process.
B)procedural due process.
C)the Takings Clause.
D)eminent domain.
Q3) Identify the basic job of a President of the United States,the source of executive power,and three key powers associated with the position of President.
Q4) Discuss the Miller test to determine if a creative work is obscene.
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Chapter 6: Dispute Resolution
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Q1) According to your text,the biggest change in litigation in the last decade has been
A)an explosive rise of electronic discovery.
B)a decrease in the use of discovery.
C)the replacement of interrogatories with depositions.
D)the use of juries in appellate courts.
Q2) Which of the following statements is most accurate regarding appellate courts?
A)Appellate courts often hear new evidence and testimony.
B)Appellate courts generally accept the factual findings of the trial court.
C)Only the federal court system has appellate courts.
D)Appellate courts hear only criminal cases.
Q3) Summary judgment is appropriate when there are no essential facts in dispute. A)True
B)False
Q4) Briefly describe the process of jury selection.
Q5) A summons is a paper ordering a defendant to appear in court at a certain time.
A)True
B)False
Q6) What are the advantages and disadvantages of using arbitration rather than litigation?
Page 8
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Chapter 7: Crime
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Q1) List and discuss the protections afforded criminal defendants by the Bill of Rights.
Q2) What is the exclusionary rule and what are the three exceptions to the rule?
Q3) The Federal sentencing guidelines are just guidelines.Judges do not have to follow them.
A)True
B)False
Q4) Entrapment can be a valid defense to a criminal act.
A)True
B)False
Q5) An email scam that involves personalized messages sent from someone the victim knows is called
A)larceny.
B)shilling.
C)hacking.
D)spear phishing.
Q6) A crime is a violation of statutory law.
A)True
B)False
Q7) Compare and contrast money laundering and embezzlement.Give an example of each.
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Chapter 8: Intentional Torts and Business Torts
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Q1) A national magazine published an article about a famous television star.The television personality is upset because the information contained in the story is not correct.If the actress sues the magazine,
A)she will need to show that the magazine has a history of being "reckless" with facts on a regular basis.
B)she will need to show that the magazine either knew the story was false or acted with reckless disregard of the facts.
C)she will need to show that the magazine failed to attempt to verify the story by trying to contact her or her agent before the story was printed.
D)she will need to show that the magazine could have discovered that the story was false but failed to do so.
Q2) If Gloria threw a rock that hit Merle,she is liable for an intentional tort of battery only if she intended to injure or harm Merle.
A)True
B)False
Q3) Wilma's arm is broken when Paula knocks her down during an argument.If Wilma sues Paula for battery,what damages is Wilma likely to receive?
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Page 10
Chapter 9: Negligence, Strict Liability, and Product Liability
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Q1) Discuss the concepts of contributory negligence and comparative negligence.
Q2) Kelley went ice skating on a neighbor's pond,but she fell through a thin area into icy waters.Kelley did not have permission to be on the property,and the neighbor did not even know that she was there.Is the neighbor liable for Kelley's injuries?
A)Yes.The neighbor should have posted "thin ice" notices.
B)No. Kelley was a trespasser and the neighbor can only be held liable for intentionally injuring her or for gross misconduct.
C)It may depend on Kelley's age.
D)Yes, the neighbor is strictly liable.
Q3) A landowner's highest duty is owed to licensees.
A)True
B)False
Q4) A customer in a restaurant would be considered ________ to whom the restaurant owner owes a duty ________.
A)a licensee; to warn of known dangers.
B)an invitee; of reasonable care.
C)a social guest; only to avoid intentionally injuring him.
D)a licensee; of strict liability
Q5) List and discuss the elements necessary to establish negligence.
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Chapter 10: Cyberlaw and Privacy
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Q1) Which of the following is a true statement regardingthe European Union's Privacy Directive?
A)It requires an "opt-out" system under which tracking tools can be used unless the consumer specifically "opts-out" of the program.
B)The directive establishes data protection for Europeans' commercial transactions that take place in EU member countries only.
C)It requires an "opt-in" system under which tracking tools cannot be used unless the consumer specifically grants permission for their use.
D)The directive does not recognize that privacy can exist in public places.
Q2) As it pertains to the Electronic Communications Privacy Act,all of the following are considered electronic communication EXCEPT
A)websites
B)email
C)cell phones
D)social media
Q3) What provisions is commercial email subjected to under the CAN-SPAM Act?
Q4) Explain data mining,how it takes place,and how it relates to behavioral marketing.
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Page 12
Chapter 11: Introduction to Contracts
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Q1) List and briefly describe the seven key characteristics that must be present for a contract to be enforceable.
Q2) Jerry offers to shovel the snow from Ben's driveway for $35.Ben replies "OK." This is an example of
A)an implied, unilateral contract.
B)an express, unilateral contract.
C)an implied, bilateral contract.
D)an express, bilateral contract.
Q3) Contracts for the sale of fabric,automobiles,computers,furniture,and paper clips would all be governed by Article 2 of the Uniform Commercial Code.
A)True
B)False
Q4) Valerie promises Teresa that she will pay Teresa $75 if Teresa will clean Valerie's house by noon on Saturday.If Teresa cleans the house by noon on Saturday and Valerie pays the $75,then this is an implied,bilateral,executory contract.
A)True
B)False
Q5) Discuss the requirements of promissory estoppel.
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Chapter 12: Agreement
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Q1) A letter of intent summarizes progress made during business negotiations,but more importantly,it creates a binding contract.
A)True
B)False
Q2) Jaime offered to buy Kevin's bike.Jamie is the A)offeree.
B)offeror.
C)mortgagor.
D)trustee.
Q3) In an option contract,the offeror may not revoke an offer during the option period.
A)True
B)False
Q4) Which term refers to whether an offeree accepts an offer by promising,by making a down payment or by performing?
A)manner of acceptance
B)methodof acceptance
C)definiteness
D)intent
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Page 14
Chapter 13: Consideration
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Q1) "I'll sell you my car if I decide to sell it" is an example of A)a conditional offer.
B)an unliquidated offer.
C)a unilateral contract.
D)an illusory promise.
Q2) If someone provides a service that he or she is already obligated to do,it is an example of
A)a promissory estoppel.
B)a past consideration.
C)an illusory promise.
D)a preexisting duty.
Q3) An agreement between two parties to pay a lesser amount to settle an unliquidated debt is
A)enforceable, as there is consideration.
B)unenforceable, as there is no consideration.
C)enforceable in only some states.
D)unenforceable as a violation of public policy.
Q4) The two basic elements of consideration are intention and agreement.
A)True
B)False
15
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Chapter 14: Legality
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Q1) Barbara,a skilled welder,was hired at Mainco Enterprises for a welding position.She was asked to sign a noncompete clause limiting future employment if she left Mainco.A court would be very likely to enforce the noncompete clause unless the time or geographic restriction is unreasonable.
A)True
B)False
Q2) E-mation,Inc.hires Marvin to steal trade secrets from one of its competitors for $10,000.Marvin demands half of the money up front.E-mation pays Marvin $5000 but Marvin decides not to pursue theft of the trade secrets.E-mation sues Marvin for the return of the $5000.What will the court do with this contract?
A)The court will order Marvin to return the $5000.
B)The court will order Marvin to return the $5000 with interest.
C)The court will order Marvin to obtain the trade secrets.
D)The court will not do anything to help E-mation get its money back.
Q3) Discuss the pros and cons of gambling and state what the California Court of Appeals ruled regarding the treatment of gambling on credit.
Q4) Discuss exculpatory clauses,and designate when an exculpatory clause is unenforceable.
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Page 16
Chapter 15: Capacity and Consent
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Q1) A party injured by fraud generally has the choice of suing for damages or rescinding the contract.
A)True B)False
Q2) Fraudulent,but not innocent,misrepresentation permits the injured party to rescind a contract.
A)True B)False
Q3) If Jane persuades Linda to buy her horse by telling Linda that the horse runs "like the wind," then Jane's statement is A)fraud.
B)reckless misrepresentation.
C)a unilateral mistake.
D)puffery.
Q4) Which of the following is correct?
A)The contract is voidable by Marty.
B)The contract is void as soon as it is made.
C)The contract is voidable by Cream-of-the-Crop Cycles.
D)The contract is voidable by either Marty or Cream-of-the-Crop Cycles.
Q5) Discuss the meaning of "material fact" in fraud situations.
Page 17
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Chapter 16: Written Contracts
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Questions
Q1) Ramona,age 42,orally agreed to work for Brahma,Inc.for the rest of her life for $50,000 per year.This agreement would not be enforceable since it violates the one-year rule of the statute of frauds.
A)True
B)False
Q2) Explain the reason behind having a statute of frauds and give arguments for and against having such a statute.
Q3) Patrick owned an acre of land which was being divided into building lots.Nancy was interested in purchasing the corner lot.In a signed writing,Patrick stated "I will sell Nancy Grimes a lot on Route 70 for $5,500 cash,payable on April 30,2012." This writing is sufficient under the statute of frauds to make the contract enforceable.
A)True
B)False
Q4) Either party may demand rescission of a fully executed oral contract if it was required to have been in writing under the statute of frauds.
A)True
B)False
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Chapter 17: Third Parties
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Q1) A party may make either an assignment or a delegation,but cannot make both an assignment and a delegation simultaneously.
A)True
B)False
Q2) Shirley is an actress under contract with Twentieth Century.Shirley agreed to perform the lead role in a musical to be filmed in Hollywood by Twentieth Century.At the last minute,Twentieth Century decided to scrap the musical and assigned its rights in Shirley to MGM.MGM was planning to film a western in Australia requiring Shirley to spend six months filming in Australia.Can Shirley successfully prevent this assignment?
Q3) Contract prohibitions against assignments are invalid as a matter of public policy. A)True
B)False
Q4) If Casey assigns her rights to receive income from rental property to Errol,then Errol will legally acquire any rights to the income held by Casey.
A)True
B)False
Q5) Discuss the potential liability differences between a delegation and a novation.
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Page 19
Chapter 18: Performance, Breach and Discharge
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Q1) Al contracted to sell his house to Bev.Subsequently,they both changed their minds and agreed to cancel the contract.The contract between Al and Bev is discharged by A)full performance.
B)rescission.
C)accord and satisfaction.
D)novation.
Q2) Generally,neither a "time is of the essence" clause nor a "force majeure" clause will be recognized by the courts because these types of clauses are seen as a violation of public policy.
A)True
B)False
Q3) Ramon purchased 5,000 pounds of coffee from Quick Jump Coffee.The coffee was to be delivered on September 1.Since the contract included a date for performance,time is of the essence and the delivery date is strictly enforceable.
A)True
B)False
Q4) Identify four factors courts consider in deciding the validity of commercial impracticability and frustration of purpose claims.
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Page 20
Chapter 19: Remedies
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Q1) If a court awards nominal damages it will generally
A)award compensatory damages as well.
B)not make a determination as to whether there has been a breach of the contract.
C)award punitive damages for the intentional breach of the contract.
D)award a very small amount of money.
Q2) To win expectation damages,the injured party must prove the breach of contract caused damages that can be quantified with reasonable certainty.
A)True
B)False
Q3) Nominal damages are awarded in contract cases in which a damage amount was named in the contract.
A)True
B)False
Q4) Tess,a tenant,moves from her apartment in breach of the lease agreement.The landlord,Lenny,may not attempt to rent the apartment until the date of the lease expiration,and so has no recourse to minimize damages.
A)True
B)False
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21
Chapter 20: Practical Contracts
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Q1) Statements of fact about the past and present are called
A)provisions and terms.
B)promises and covenants.
C)representations and warranties.
D)damages and remedies.
Q2) Some contracting parties are intentionally vague in contract terms.
A)True
B)False
Q3) Bob,a house painter,contracts with Ollie to paint a rental house which Ollie owns.Bob hires Rob to take his place as the painter on this contract.What has Bob done?
A)Made a scrivener's error
B)Severed the contract
C)Delegated his duties
D)Assigned his rights
Q4) In a contract modification,the phrase "charged with such amendment" refers to
A)the party who suggested the change.
B)the party who will benefit from the change.
C)the party who will be adversely affected by the change.
D)the party who did NOT suggest the change.
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Chapter 21: Introduction to Sales
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Q1) Rachel Retailer sends a preprinted purchase order offering to buy goods from Snidley Supplier.Snidley acknowledges Rachel's offer with a preprinted acceptance form.The terms of the two forms do not mirror each other.To analyze whether an enforceable contract exists,one must first determine whether the new language in the acceptance is an additional term or a different term.
A)True
B)False
Q2) The UCC imposes a duty of good faith in the performance of all contracts.
A)True
B)False
Q3) The UCC does not apply to a contract for the sale of goods if the value of the goods is less than $500.
A)True
B)False
Q4) Jones contracts to buy a computer from Martin for $1500.The contract calls for Martin to service the computer quarterly for the first year and to tutor Jones on how to use the software.Is this contract covered by the UCC or common law?
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Chapter 22: Ownership, Risk and Warranties
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Q1) Which of the following statements could most likely create an express warranty?
A)"This is the best car available in town."
B)"This motorcycle will double in value in the next ten years."
C)"These tires have 10,000 miles on them."
D)"This antique is quite a bargain."
Q2) In a breach of warranty case,the buyer must
A)notify the seller of defects within a reasonable time.
B)bring any lawsuit no later than three years after the defect was discovered.
C)extend the statute of limitations in writing rather than orally if they choose to allow a longer time for bringing suit.
D)notify the seller of defects within six months of their discovery or they cannot bring a lawsuit.
Q3) The buyer of a product is located in Des Moines,Iowa and the seller is located in Sacramento,California.The contract specifies F.O.B.Des Moines.What type of contract is this?
A)A destination contract
B)A mixed contract
C)A shipment contract
D)A carrier contract
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Page 24
Chapter 23: Performance and Remedies
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Q1) A buyer who accepts nonconforming goods may revoke the acceptance under limited circumstances.
A)True
B)False
Q2) A buyer who accepts goods but notifies the seller the goods are non-conforming
A)cannot recover any damages.
B)can recover the difference between the goods as promised and as delivered, plus incidental and consequential damages.
C)cannot recover incidental damages.
D)cannot recover consequential damages.
Q3) The UCC's requirement of good faith in the performance and enforcement of every contract imposes
A)a greater duty on merchants than consumers.
B)a greater duty on consumers than merchants.
C)the same duty on both consumers and merchants.
D)a greater duty on parties to a sales contract with the purchase price over $500.
Q4) Define these terms: usage of trade,course of dealing,and course of performance and identify how they are used according to the UCC.
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Chapter 24: Secured Transactions
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Q1) Ken decided to open a retail boat dealership.He expects that many of his sales will be credit sales.What should Ken do to protect his interests in the collateral in the credit sales that he makes?
Q2) Wanderlust gave a security interest in his Conestoga wagon to Iowa Bank who perfected its security interest by filing a financing statement with the appropriate officials in Iowa.Five months later,Wanderlust hit the trail again,moving to Montana.If Iowa Bank wants to continue its perfected interest in the Conestoga wagon,it should A)file a continuation statement for another five years in Iowa before Wanderlust moves on.
B)re-perfect by filing a financing statement in the appropriate place in Montana, according to Montana law, within four months of Wanderlust's entering Montana. C)repossess the Conestoga wagon.
D)file a continuation statement for another four months in Iowa before Wanderlust moves on.
Q3) Fowler Bros.has applied to Gibralter Bank for a $50,000 loan for its business expansion.If Fowler Bros.plans to use its account at Gibralter Bank as collateral,discuss what the bank needs to do for a security interest to attach.
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Chapter 25: Creating a Negotiable Instrument
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Q1) In good faith,Clinton gave Jane $500 for a negotiable promissory note made out to Jane for $550.She needed some money before the due date on the note,and Clinton had no notice of outstanding claims or other defects of the note.Clinton
A)has more rights than Jane.
B)has the same rights as Jane.
C)has only conditional rights because they depend on Jane's rights. D)cannot transfer the note to anyone else.
Q2) Tyron purchased a $2900 promissory note from Jared for the discounted amount of $2500.Tyron paid value,in good faith and without notice of any outstanding claims against this promissory note that read,"Pay to the order of Jared $2900 on July 1,2009,for the purchase of a 2001 Ford Taurus provided no major problems with the car arise prior to said payment date." Tyron is a holder in due course of a negotiable note.
A)True
B)False
Q3) A possessor of non-negotiable commercial paper has the same rights as the person who made the original contract.
A)True
B)False
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27
Chapter 26: Liability for Negotiable Instruments
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Q1) What term is used to indicate the termination of liability on an instrument?
A)Collection
B)Discharge
C)Accommodation
D)Conversion
Q2) An accommodation party and a co-maker of a note have the same liability on an instrument.
A)True
B)False
Q3) An accommodation party on a negotiable instrument
A)typically receives a direct benefit from the instrument.
B)is always primarily liable for the instrument
C)is the same as a "guarantor" under the UCC.
D)has the same liability to a holder as the person for whom he signed.
Q4) Nelson writes Leah a check for mowing his lawn.Leah deposits the check in her bank,but it is not paid by Nelson's bank.Leah calls Nelson to notify him that her bank returned his check to her unpaid.Leah's notice of the dishonor is insufficient;she must provide written notice.
A)True
B)False
Page 28
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Chapter 27: Accountants' Liability
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Q1) One of the accountant's most important roles is to serve as an independent evaluator of the financial statements issued by management to investors and creditors.
A)True
B)False
Q2) To verify transactions,accountants use two mirror-image processes: vouching and tracing.Tracing is a process where the accountant begins with an item of original data and checks out all the activity that has occurred from beginning to end to make sure it has been properly recorded throughout the bookkeeping process.
A)True
B)False
Q3) Teresa is suing her accountant for fraud.To win,Teresa must show that she justifiably relied on the accountant's fraudulent statement.
A)True
B)False
Q4) Discuss the advantages and disadvantages of using IFRS.
Q5) Discuss how SEC rules affect the legal and the ethical relationship between accountants and the companies they audit.
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29
Chapter 28: Agency Law
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Q1) Which of the following persons is NOT an agent?
A)Diane, a shoe salesperson for a retail store.
B)Tim, a real estate broker for a large real estate company.
C)Craig, a telephone marketing employee.
D)Harold, a trustee to the beneficiaries of an estate.
Q2) A principal is bound by contracts that an agent enters into with authority.Discuss the various types of contractual authority an agent may have.
Q3) An agency relationship can be created
A)by the conduct of the parties.
B)only by the meeting of all the standards of contract law.
C)only by a written agreement.
D)only if the agent is paid.
Q4) Betsy's elderly father gave her written authority her to sell the family house.Her father lived in Arizona and she lived in Minnesota.After about two months she found a buyer for the house and signed an acceptance of the offer on March 21.Later that same day she learned her father had died the day before (March 20).Other members of the family did not want the family house sold and claimed that the acceptance Betsy signed was void.The buyer of the house claims Betsy had the legal authority to sell the house and that the contract is binding.Who is right?
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Chapter 29: Employment and Labor Law
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Q1) The duty of fair representation created by the NLRA requires that
A)a union treat all members fairly, impartially and in good faith.
B)a union must pursue any member's grievance against the employer.
C)an employer, in communications with employees during a union organizing effort, must fairly represent the effects it believes a union will have on the company.
D)the NLRB certify only proposed bargaining units that it thinks the union can properly represent.
Q2) Rick and Allan want to start a union in the small factory where they work.Outline the basic procedures they will need to follow to get a union recognized as the exclusive bargaining unit for the company employees.
Q3) Under the Family and Medical Leave Act,an employee can take up to 12 weeks of paid leave each year for certain personal and family illness situations.
A)True
B)False
Q4) There is a higher percentage of workers in labor unions now than at any other point in history.
A)True
B)False
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Chapter 30: Employment Discrimination
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Q1) Brian is a police officer.He just turned 54 years old and is worried that he will be forced to retire next year when he turns 55.The Age Discrimination in Employment Act will protect him if his employer tries to force him to retire early.
A)True
B)False
Q2) Which of the following traits is NOT currently protected under Title VII?
A)National origin
B)Sexual orientation (homosexual vs. heterosexual)
C)Gender (male vs. female)
D)Family responsibility (mothers vs. fathers)
Q3) Which of the following is TRUE about Affirmative Action?
A)Affirmative action is required by Title VII.
B)Affirmative action is prohibited by Title VII.
C)Affirmative action is allowed in goverment contracts if it can show the programs are needed to overcome specific past discrimination.
D)Affirmative action programs are usually voluntary on the part of employers, since courts have no power to order remedies for past discrimination.
Q4) Discuss the two categories of sexual harassment.
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Chapter 31: Starting a Business: LLCs and Other Options
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Q1) The term "S Corporation" comes from
A)the Internal Revenue Code.
B)the FTC rules.
C)the Securities and Exchange Commission.
D)state corporation law.
Q2) The most common form of business ownership is the corporation.
A)True
B)False
Q3) Limited liability is a major advantage of a partnership as compared to a corporation. A)True B)False
Q4) An organization that does not pay income tax on its profits but passes them through to its owners who pay the tax at their individual rates is called a A)business corporation.
B)flow-through tax entity.
C)tax-free business venture.
D)professional corporation.
Q5) Briefly discuss the the major restrictions placed on an "S" corporation.
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Chapter 32: Partnerships
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Q1) Jeremiah was a partner in a partnership,but he quit unexpectedly when he got his feelings hurt over an internal decision.Dissociation has occurred.
A)True
B)False
Q2) Identify and briefly discuss the management rights and duties of a partner.
Q3) Astrid and Razi formed a partnership in which they agree to share profits 60 percent to Astrid and 40 percent to Razi.Losses will be shared
A)equally, unless otherwise agreed.
B)60 percent to Astrid and 40 percent to Razi, unless otherwise agreed.
C)according to their capital contributions to the partnership.
D)in whatever proportion provides the greatest tax advantage for the partners that year.
Q4) Common law plays an important role in regulating partnerships. A)True B)False
Q5) Elion was a partner in a partnership.Elion's death would be considered a wrongful dissociation.
A)True B)False
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Chapter 33: Life and Death of a Corporation
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Q1) Which of the following states that a corporation cannot undertake any transaction unless its charter permits it?
A)The ultra vires doctrine
B)The estoppel doctrine
C)The exculpatory clause
D)The indemnification clause
Q2) In incorporating E-prise,the promoter gave an incorrect ZIP Code for the registered agent.All of the other requirements for incorporation were met.E-prise is a(n)
A)de jure corporation.
B)de facto corporation.
C)corporation by estoppel.
D)indemnified corporation.
Q3) The officers of a corporation are
A)chosen by the board of directors.
B)appointed by the president of the company.
C)elected by shareholders.
D)appointed by the Secretary of State.
Q4) What are some of the advantages for a business to incorporate in Delaware?
Q5) Discuss how a corporation is terminated.
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Chapter 34: Management Duties
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Q1) The Williams Act
A)is designed to regulate the conduct of those attempting to take over a company.
B)is designed to regulate the conduct of the target company subject to a takeover.
C)was established to prohibit corporate defensive tactics.
D)was established to resolve conflicts of interests between directors and stakeholders.
Q2) Which of the following is a fundamental goal of shareholders?
A)To have the business survive
B)To keep their jobs
C)To have an immediate increase in stock price
D)To have the business provide jobs
Q3) On the day a tender offer begins,
A)greenmail must be sent to the SEC.
B)a bidder must file a disclosure statement with the SEC.
C)assets of the target corporation must be locked up until an inventory is completed.
D)the SEC issues a binding order to the target company to file audited financial statements to the bidder.
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Chapter 35: Shareholder Rights
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Q1) Luella just purchased 5 shares of common stock in TriColor,Inc.for $250.Luella has the right to
A)manage the day-to-day business of the corporation.
B)set executive compensation.
C)require that a proposal be placed in the company's proxy statement to be voted on at the shareholder meeting.
D)vote to elect directors.
Q2) At least once every three years,companies must take a nonbinding shareholder vote on the compensation of the five highest-paid executives.This is referred to as
A)clawback pay action.
B)voting out the directors.
C)activist investing.
D)say-on-pay.
Q3) Kris,a shareholder of E-Max,Inc.,claimed that the business was being mismanaged.Kris notified the board of directors that the corporation has been wronged and asked the board to bring suit in the name of the corporation directly.In response to Kris' demand,what actions may the board take? What could Kris's response be to each alternative?
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Chapter 36: Bankruptcy
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Q1) Peggy's credit card debts are mounting as her costs of insurance and fuel have dramatically increased and her income,from sporadic free-lance jobs,has dropped.Chapter 13 of the Bankruptcy Code will allow her to reorganize her debt while she keeps most of her assets.
A)True
B)False
Q2) Which of the following is a requirement for an involuntary Chapter 7 bankruptcy petition?
A)The debtor must owe at least $150,000 in unsecured claims to the creditors who file.
B)The debtor must have at least three creditors sign the petition if the debtor has 12 or more creditors.
C)The creditors must have tried to help the debtor overcome the financial difficulties.
D)The debtor must have a majority of the creditors file the petition.
Q3) In Chapter 11 bankruptcy only the debtor may propose plans of reorganization.
A)True
B)False
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Chapter 37: Securities Regulation
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Q1) Which of the following states was not onlythe first state to regulate the sale of securities,but also has the term "blue sky laws" named after it?
A)Montana
B)Kansas
C)Wyoming
D)New York
Q2) Which of the following is a characteristic of a restricted security?
A)It is purchased in a private offering.
B)It cannot be sold at any time.
C)It is subject to reporting requirements.
D)After six months, it is classified as a control security.
Q3) To recover for an alleged violation of SEC Rule 10(b)-5,a plaintiff is required to prove reliance on a misstatement or omission relative to the purchase of the security.
A)True
B)False
Q4) Securities issued by banks are exempt from SEC registration.
A)True
B)False
Q5) Discuss the process an issuer follows for either an IPO or a secondary offering.
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Chapter 38: Antitrust
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Q1) A major motion picture distributor offers to provide a television station with three very popular,desirable films.However,as part of the agreement,the distributor requires that the television station also purchase four films that are not very desirable.This type of arrangement is called a
A)reciprocal dealing agreement.
B)reverter arrangement.
C)joint custody arrangement.
D)tying arrangement.
Q2) Cooperative strategies include all EXCEPT
A)horizontal agreements.
B)vertical agreements.
C)mergers.
D)spin-offs.
Q3) Companies with substantial assets must notify the FTC before consummating a merger.
A)True
B)False
Q4) Reciprocal dealing is a type of vertical cooperative strategy.
A)True
B)False
Page 40
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Chapter 39: Consumer Protection
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Q1) Tweeted ads must clearly indicate that they are,in fact,ads by including some equivalent of "ad" or "sponsored."
A)True
B)False
Q2) Under FTC rules,a customer can cancel a door-to-door sales contract within
A)three business days of the sale.
B)five business days of the sale.
C)one calendar week from the date the sale was made.
D)a "reasonable time" after the sale was made.
Q3) Prime Products,Inc.found out that it was going to take three weeks to ship the comforter Margaret ordered instead of the seven days it had originally promised her.Prime Products must cancel Margaret's order and notify her that it can deliver within three weeks if she wants to reorder.
A)True
B)False
Q4) Richard received his credit card bill and noticed an error.He wrote to the company the next week,pointing out the error in his bill.Under the law,what is the credit card's obligation once it receives Richard's letter?
Q5) Discuss the major provisions of the Credit CARD Act.
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Chapter 40: Environmental Law
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Q1) Sam,the chief executive officer of Boch Industries,was prosecuted for violating the Resource Conservation and Recovery Act.Which of the following is correct concerning the penalties?
A)Sam cannot be criminally prosecuted for violating this statue.
B)Sam faces criminal fines as well as imprisonment.
C)Sam faces only criminal fines.
D)The only remedy Sam faces is an injunction to prevent further violations.
Q2) The Environmental Protection Agency (EPA)was created by Congress to A)consolidate environmental regulations under one agency.
B)protect corporate investors.
C)prevent conflicts between the Departments of Commerce and Interior.
D)eliminate discrimination.
Q3) The cost-benefit trade-off is particularly complex in environmental issues because those who pay the cost often are not the ones who receive the benefit.
A)True
B)False
Q4) Trent was the production manager at HGB,Inc.Under his supervision,HGB filled in an area of wetlands on the company's property without a permit.Has Trent violated the law? What penalties might he face?
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Chapter 41: Intellectual Property
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Q1) A patent is available for an idea as well as a tangible application.
A)True
B)False
Q2) Identify the main provisions of the Digital Millennium Copyright Act and two arguments opponents of the Act raise.
Q3) Ernest invents a novel,useful,nonobvious product.He
A)must apply for a patent within one year of selling the product commercially.
B)is entitled to a patent over someone else who invents the same product if he is the first to invent it.
C)may receive patent protection for two years by filing a simpler, shorter, cheaper provisional patent application while he is working on his complex, regular patent application.
D)may sell his product for up to five years to see how well it sells before going through the complex process of filing a patent application with the PTO Office.
Q4) Under the fair use doctrine,instructors cannot be liable for copyright violations.
A)True
B)False
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Chapter 42: Real Property and Landlord Tenant
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Q1) If you grant a nonpossessory interest to Eagle Logging to enter your land and remove timber from ten acres,you have granted Eagle a profit.
A)True
B)False
Q2) Landlord-tenant relationships are governed by a mixture of property law,contract law,and negligence law.
A)True
B)False
Q3) You go to a theater to see a play one Saturday evening.You have A)purchased an interest called a "profit."
B)an easement by reservation.
C)a license to enter the theater.
D)no property right in the theater just by purchasing the ticket for the play.
Q4) Discuss the tenant's and the landlord's basic duties under a landlord-tenant relationship.
Q5) Owners in a joint tenancy with the right of survivorship cannot transfer their interest during their lifetime.
A)True
B)False
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Chapter 43: Personal Property and Bailment
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Q1) Dersett Trucking hauls granite for the major granite companies in Minnesota.Dersett Trucking does not make its trucking services available to the general public.Dersett Trucking is a contract carrier and does not incur strict liability.
A)True
B)False
Q2) Most of the goods contained in a freight train (a common carrier)were destroyed when a tornado wrecked the train.The carrier was sued for damages by all the shippers that had merchandise on the train.Is the carrier strictly liable for the damage done to the goods by the tornado?
Q3) If property is mislaid,the finder of the property will have a superior claim to possession of the property against everyone except the true owner.
A)True
B)False
Q4) Charles agrees to store Tuan's car in Charles's garage for the winter months while Tuan visits his grandmother in California.As a bailee,Charles is automatically entitled to use Tuan's car while Tuan is away.
A)True
B)False
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Chapter 44: Planning for the Future: Estates and Insurance
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Q1) Which of the following does NOTact as a revocation of a will?
A)Creating a codicil
B)The testator's putting an X through it
C)Physically destroying the will by intentionally shredding it
D)Signing a new will that expressly revokes prior wills
Q2) Discuss the differences between a will and a trust.
Q3) Legal requirements for a will depend on state law,but generally include all but which of the following?
A)A writing
B)Signatures of at least three witnesses
C)The testator's signature
D)Witnesses who will not inherit under the will
Q4) Lying on her hospital bed alone one night,Phyllis grabs a pen and paper.With the last of her strength,she wrote her last will and testament leaving all her worldly possessions to her next-door neighbor,Aaron.This type of will is
A)a nuncupative will.
B)a disinherited children's share will.
C)a holographic will.
D)illegal in all states.
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