Business Law and Ethics
Test Preparation
Course Introduction
Business Law and Ethics provides an introduction to the legal and ethical frameworks that govern commercial activity. The course examines fundamental principles of contract law, agency, employment, and intellectual property, while also exploring the ethical responsibilities of organizations and professionals in the business world. Students will learn to analyze legal cases, identify ethical dilemmas, and apply decision-making models to resolve complex issues. Through case studies and real-world examples, the course emphasizes the importance of legal compliance and ethical conduct in building sustainable businesses and maintaining public trust.
Recommended Textbook
Business Law Today Text and Summarized Cases E Standard 9th Edition by Roger LeRoy Miller
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Page 2
Chapter 1: The Legal Environment
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Sample Questions
Q1) Stare decisis is a doctrine obligating judges to help persons who have failed to protect their own rights.
A)True
B)False
Answer: False
Q2) Judges use precedent when deciding a case in a common law legal system.
A)True
B)False
Answer: True
Q3) Equitable remedies include injunctions.
A)True
B)False
Answer: True
Q4) The U.S.Constitution is the supreme law of the United States.
A)True
B)False
Answer: True
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Chapter 2: Constitutional Law
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Q1) Serene City enacts an ordinance that bans the use of "sound amplifying systems" on public streets.Tyler wants to campaign for a seat on the city council by broadcasting his message through speakers mounted on a truck.In Tyler's suit against the city,a court would likely hold the ordinance to be
A) an unconstitutional restriction of speech.
B) constitutional under the First Amendment.
C) justified by the need to protect individual rights.
D) necessary to protect national interests.
Answer: B
Q2) Procedural due process requires that any taking of a person's life,liberty,or property by government must be made fairly.
A)True
B)False
Answer: True
Q3) Under the Constitution,the states retain all powers not specifically delegated to the federal government.
A)True
B)False
Answer: True
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Page 4
Chapter 3: Courts and Alternative Dispute Resolution
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Q1) Inferior Company sells products that are poorly made.Jack,who has never bought an Inferior product,files a suit against the company,alleging that its products are defective.The firm's best ground for dismissal of the suit is that Jack does not have A) certiorari.
B) jurisdiction.
C) standing.
D) sufficient minimum contacts.
Answer: C
Q2) During the trial phase of Fuel Corporation's suit against Gas Stations,Inc.,their attorneys engage in voir dire.This is
A) the assessment of the arguments on the issues.
B) the determination of the issues to be argued.
C) the litigation of the issues and arguments.
D) the selection of jurors.
Answer: D
Q3) The function of the courts is to interpret and apply the law.
A)True
B)False
Answer: True
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Page 5
Chapter 4: Torts and Cyber Torts
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Q1) Under a dram shop act,liability can be imposed without proof of negligence.
A)True
B)False
Q2) Self-defense is a defense to negligence.
A)True
B)False
Q3) Under the doctrine of comparative negligence,both the plaintiff's and the defendant's negligence are taken into consideration.
A)True
B)False
Q4) The extreme risk of an activity is a primary basis for imposing strict liability.
A)True
B)False
Q5) To determine whether a duty of care has been breached,a judge asks how he or she would have acted in the same circumstances.
A)True
B)False
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Page 6
Chapter 5: Intellectual Property and Internet Law
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Q1) A patent applicant must demonstrate that the invention,discovery,or design is commercially practicable to receive a patent.
A)True
B)False
Q2) It is possible to copyright an idea.
A)True
B)False
Q3) The graphics used in "Go!," a handheld video game featuring racecars,are protected by
A) copyright law.
B) patent law.
C) trademark law.
D) trade secrets law.
Q4) In 2010,Online Marketing Corporation registers its trademark as provided by federal law.After the first renewal,this registration
A) is renewable every ten years.
B) is renewable every twenty years.
C) runs for the life of the corporation plus seventy years.
D) runs forever.
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Chapter 6: Criminal Law
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Q1) Bob is arrested at his home,after the police search it and seize certain property to be used as evidence.A judge sets Bob's bail,as required by a state statute,and Bob is put on trial.The U.S.Constitution provides safeguards against all of the following except A) arrests without probable cause.
B) excessive bail.
C) trying someone for a criminal offense.
D) unreasonable searches and seizures.
Q2) Briana,an employee of Cotillion Bank,is charged with embezzlement,which requires A) fraudulently appropriating another's property.
B) obtaining lawful possession of property.
C) physically taking property from its owner.
D) the use of force or fear.
Q3) Mike is arrested at a warehouse in North Industrial Park.A government prosecutor issues a formal charge against Mike for receiving stolen property.This charge is A) an arraignment.
B) an indictment.
C) an information.
D) an inquisition.
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Chapter 7: Cyber Crime
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Q1) A business takes a risk by electronically storing its customers' credit account numbers.
A)True
B)False
Q2) Federal law encourages the use of electronic payments at Internet gambling sites.
A)True
B)False
Q3) Via the Internet,Rocky sabotages the computer system of Quik Chik'n Company,a food manufacturer,with the purpose of altering the levels of ingredients of the company's products so that consumers of the food become ill.Rocky is
A) a cyberterrorist.
B) a botnet.
C) a virus.
D) a worm.
Q4) Because embezzlement is considered a white-collar crime,it cannot be considered a computer crime.
A)True
B)False
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Page 9
Chapter 8: Ethics and Business Decision Making
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Q1) Bribery of foreign government officials is both an ethical and a legal issue.
A)True
B)False
Q2) Bilt-Well Construction Corporation makes a side payment to a government official in Nigeria to obtain a contract.In the United States,this is
A) illegal and unethical.
B) illegal but not unethical.
C) unethical but not illegal.
D) legal and ethical.
Q3) According to utilitarianism,it does not matter how many people suffer a negative effect from an act.
A)True
B)False
Q4) Setting realistic workplace goals can reduce the probability that employees will act unethically.
A)True
B)False
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Chapter 9: Nature and Classification
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Q1) Resolving whether a promise should be enforced is the essence of contract law.
A)True
B)False
Q2) Expert Pavers,Inc.,contracts with Fabricated Building Corporation to repave Fabricated's parking lot for which Fabricated agrees to pay.The requirements of this,and any other,contract do not include
A) consideration.
B) capacity.
C) legality.
D) practicality.
Q3) Ed,a businessperson,is a friend of Fran,the owner of a candy store.Every day,Ed spends five minutes in Fran's candy store,looking at the candy and usually buying one or two candy bars.One afternoon,Ed goes into the store,looks at the candy,and picks up a $1 candy bar.Ed waves the candy at Fran without saying a word and walks out.Is there a contract? If so,how would it be classified in terms of formation,performance,and enforceability?
Q4) Parties can form a contract without putting the terms in writing.
A)True
B)False
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Chapter 10: Agreement in Traditional and E-Contracts
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Q1) Order Processing Corporation and Pinpoint Data,Inc.,enter into a contract online in a state that has enacted an unmodified version of the UETA.With regard to the E-SIGN Act
A) the E-SIGN Act does not preempt this version of the UETA.
B) the E-SIGN Act preempts this version of the UETA.
C) the "fit" between the acts is an issue for a court to determine.
D) the two acts "cancel" each other's application.
Q2) Bret enters into a contract with Collegiate University over the Internet to take an online course titled "Internet Law." This is an e-contract because
A) the contract was entered into over the Internet.
B) the contract was formed between a student and a university.
C) the contract will be performed online.
D) the subject matter of the contract is "Internet Law."
Q3) Yvon asks Zac,"Do you want to buy one of my fishing rods?" This is A) a valid offer.
B) not a valid offer because the terms are not definite.
C) not a valid offer because Yvon did not state an intent.
D) not a valid offer because Zack did not respond.
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Chapter 11: Consideration, capacity, and Legality
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Q1) A promise to pay for an act that has already occurred is enforceable because the event is certain.
A)True
B)False
Q2) A covenant not to compete in the sale of an ongoing business is unenforceable.
A)True
B)False
Q3) A covenant not to sue is against public policy.
A)True
B)False
Q4) Refer to Fact Pattern 11-3.In Carmen's suit against Dex to recover her repair and medical expenses,Carmen will most likely recover
A) half the amount to pay the costs over what Dex already paid Carmen. B) nothing.
C) the estimated amount to pay those costs and any other liability.
D) the exact amount to pay those costs and no more.
Q5) Adhesion contracts are often held to be contrary to public policy.
A)True
B)False
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Chapter 12: Defenses to Contract Enforceability
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Q1) Century Properties.Inc.,and Broadview Capital Corporation enter into a contract for a sale of land.To be enforceable,the contract must be in writing if the land is valued at
A) $50.
B) $500.
C) $5,000.
D) any price.
Q2) Under the Statute of Frauds,all contracts induced by fraud must be in writing to be enforceable.
A)True
B)False
Q3) Under the Statute of Frauds,oral contracts are void.
A)True
B)False
Q4) Oral evidence of otherwise clear terms in a contract can be introduced at a trial to contradict those terms.
A)True
B)False
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14
Chapter 13: Third Party Rights and Discharge
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Q1) Nick and Roberta contract for the sale of computer equipment,reserving the right to alter a particular provision in the contract.The rights of any third party beneficiary of that contract are
A) not affected by the reservation.
B) limited to the extent of the reservation.
C) limited only if the beneficiary agrees to the reservation.
D) none of the choices.
Q2) Sam contracts to harvest Tina's crop on August 1.Due to an unexpected regional fuel shortage,Sam cannot perform on the specified date.This
A) breaches the contract.
B) discharges the contract.
C) has no effect on the contract.
D) suspends the contract.
Q3) Anything less than substantial performance is a material breach of contract.
A)True
B)False
Q4) The person to whom rights in a contract are assigned is the assignor.
A)True
B)False
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Chapter 14: Breach and Remedies
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Q1) National Drilling Company ships its only pump to American Hydraulics Corporation,the manufacturer,for repair.National hires Overland Transport,Inc.,to take the pump to American Hydraulics and to return it to National as soon as the repair is complete.National is forced to suspend operations without a pump,but Overland does not know this.National expects to be without the pump for five days and to lose profits of $5,000.When the pump is not returned by the end of the fifth day,National rents a pump at a cost of $100 per day.Overland delays five more days before returning the pump.National files a suit against Overland,asking for compensatory,consequential,and punitive damages.Will National recover?
Q2) Rig Heli-Pads,Inc.,enters into a contract to employ Scott as an on-site project manager for two years.If Rig breaches the contract,Scott has a duty to A) do nothing.
B) reduce the damages that Scott might otherwise suffer.
C) rescind the contract with Rig.
D) punish Rig and set an example to deter others from similar acts.
Q3) The four broad types of damages in contract law are conciliatory,consecutive,punctual,and nominative.
A)True
B)False
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Page 16
Chapter 15: The Formation of Sales and Lease Contracts
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Sample Questions
Q1) The rules governing firm offers apply to all merchants.
A)True
B)False
Q2) EZ Equipment Corporation leases six forklifts to Fresco Refining Company,but as the forklifts are delivered,they are lost in an explosion.Under the UCC,the parties' rights and obligations with respect to the loss depend on the concept of
A) physical possession.
B) product liability.
C) risk of loss.
D) title.
Q3) If a contract for a sale of goods does not include a quantity term,it is a requirements contract.
A)True
B)False
Q4) Identification takes place when specific goods are designated as the subject matter of a sales or lease contract.
A)True
B)False
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Chapter 16: Performance Breach of Sales Lease Contracts
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Q1) A buyer may reject a seller's goods under any circumstances.
A)True
B)False
Q2) A buyer has no right to accept goods that fail in any respect to conform to the terms of a contract in every detail.
A)True
B)False
Q3) In general,a buyer's duty to pay for tendered goods becomes absolute before the buyer has had an opportunity to inspect the goods.
A)True
B)False
Q4) If the parties to a sales contract state that a certain remedy is exclusive,then it is the sole remedy.
A)True
B)False
Q5) If a lessor's tender of delivery fails to conform to a contract in any way,the lessee can reject the goods.
A)True
B)False
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Chapter 17: Warranties and Product Liability
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Q1) Refer to Fact Pattern 17-1.Suppose that the court rules against Concrete.The manufacturer might have avoided that result by
A) making its cement fit for its particular purpose.
B) making its cement merchantable for its intended use.
C) not allowing Bret to express an opinion.
D) not permitting Bret to make an express warranty.
Q2) An express warranty cannot be limited.
A)True
B)False
Q3) A public policy underlying the imposition of strict product liability is that consumers should be protected against unsafe products.
A)True
B)False
Q4) A product is unmerchantable if an accident could arise in connection with the goods.
A)True
B)False
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Chapter 18: Negotiable Instrument: Transferability Liability
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Q1) A person who in good faith acquires a negotiable instrument from a thief cannot become an HDC.
A)True
B)False
Q2) Opal signs a promissory note payable to the order of Payday Loan Company.The note states that it is payable "with interest at the legal rate." This note is
A) negotiable.
B) nonnegotiable, because it does not specify a rate of interest.
C) nonnegotiable, because it is a promissory note.
D) nonnegotiable, because it is payable only with interest.
Q3) A drawer is primarily liable on an instrument.
A)True
B)False
Q4) A certificate of deposit may be negotiable even if it does not contain an express promise to pay.
A)True
B)False
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20
Chapter 19: Checks and Banking in the Digital Age
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Q1) A written stop payment order is valid for fourteen days.
A)True
B)False
Q2) Simon signs a check "pay to the order of Tilly" drawn on Simon's account in United Bank.Vela forges Tilly's indorsement,First Federal Bank cashes the check,and Vela disappears.United pays First Federal and debits Simon's account.Most likely,the ultimate loss will fall on
A) Simon.
B) Trudy.
C) United Bank.
D) First Federal Bank.
Q3) Kip writes a check for $1,000 drawn on Local Bank and presents it to Mira.Mira presents the check for payment to Local Bank,which dishonors it.The party most likely liable to Mira is
A) Kip in a civil suit.
B) Kip in a criminal prosecution.
C) Local Bank in an administrative proceeding.
D) neither Kip nor Local Bank.
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Chapter 20: Security Interests in Personal Property
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Q1) When a secured debt is paid,the secured party must file a termination statement regardless of the goods' classification.
A)True
B)False
Q2) A future advance against a line of credit must be of the same type as the original advance to be subject to the same collateral.
A)True
B)False
Q3) Refer to Fact Pattern 20-1.Holly,a professional driver,buys an Excel from Fine to drive in a Grand Prix race.Holly's Excel is A) a consumer good. B) an accession.
C) equipment. D) inventory.
Q4) A purchase-money security interest in consumer goods is perfected automatically at the time of a credit sale.
A)True
B)False
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Chapter 21: Creditors Rights and Bankruptcy
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Q1) Opie's debt to Pyle is past due.Pyle obtains a judgment against Opie to collect the debt,but Opie refuses to pay.Pyle asks the court to order the seizure and sale of Opie's property.This is a request for
A) a guaranty (or suretyship) contract.
B) an order that would violate most states' laws.
C) a writ of attachment.
D) a writ of execution.
Q2) Clothing is not included in state exemption statutes.
A)True
B)False
Q3) Ollie files a petition in bankruptcy.At the moment of filing
A) an automatic stay goes into effect.
B) Ollie's debts are discharged.
C) Ollie's petition is dismissed.
D) Ollie's property is distributed to Ollie's creditors.
Q4) Pola files a petition in bankruptcy.Pola's non-dischargeable debts include A) domestic-support obligations.
B) student loans if payment would impose undue hardship.
C) unpaid loans to finance home repairs.
D) unsecured credit-card debt.
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Chapter 22: International Law in a Global Economy
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Q1) Sam,or any U.S.citizen,can bring a civil suit in a U.S.court against a foreign entity for
A) a tort allegedly committed in the United States only.
B) a tort allegedly committed in the United States or overseas.
C) a tort allegedly committed overseas only.
D) no purpose.
Q2) Yoko,Ltd.,and Zeno,S.A.,transact an international sale of goods.For these parties,and other international buyers and sellers,the United Nations Convention on Contracts for the International Sale of Goods spells out the duties that apply
A) if Article 2 of the Uniform Commercial Code does not apply.
B) if a dispute is submitted to the International Court of Justice.
C) if the parties have not agreed otherwise in their contracts.
D) under all circumstances.
Q3) The Association of Southeast Asian Nations is a regional trade association that was created through
A) a bilateral agreement.
B) a lateral agreement.
C) a multilateral agreement.
D) a unilateral agreement.
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24
Chapter 23: Agency Relationships in Business
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Q1) An agency relationship may not occur by operation of law in a family.
A)True
B)False
Q2) An agency relationship cannot exist in the absence of a formal agreement.
A)True
B)False
Q3) Building subcontractors are not independent contractors.
A)True
B)False
Q4) Jody is an agent for Insta Cross Country Trucking Inc.In the course of Jody's performance for the firm,Jody pays Heck for certain vehicle maintenance and repair services.Jody's right to obtain the amount of those payments from Insta arises under the principal's duty of
A) avoidance.
B) cooperation.
C) indemnification.
D) reimbursement.
Q5) A fiduciary relationship allows parties to avoid obligations without liability.
A)True
B)False
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Chapter 24: Employment,immigration,and Labor Law
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Q1) Over a forty-year period,Ewa worked in a variety of jobs.She was also occasionally unemployed,briefly hospitalized,and suffered a temporary disability.She retired last year.The key law on all of these subjects is
A) the Consolidated Omnibus Budget Reconciliation Act.
B) the Employee Retirement Income Security Act.
C) the Federal Insurance Contributions Act.
D) the Social Security Act.
Q2) Federal labor law protects employees' right to strike.
A)True
B)False
Q3) Federal law governs unions' internal business procedures.
A)True
B)False
Q4) Most employees can continue the group health benefits provided by their employers for a limited period of time after the loss of employment.
A)True
B)False
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Chapter 25: Employment Discrimination
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Q1) Rona is Stu's administrative assistant and both work for TriCounty Labor Inc.Stu tells Rona that for sexual favors,he will give her an excellent performance review and recommend a raise.This is
A) harassment on the basis of sexual orientation.
B) hostile-environment harassment.
C) not harassment.
D) quid pro quo harassment.
Q2) Refer to Fact Pattern 25-3.To succeed with an age-discrimination claim against CBC,Manny will have to show that
A) Lita is not qualified for Manny's job.
B) Manny is qualified for his job.
C) NBC's qualifications for Manny's job are too high.
D) no one could do Manny's job as well as he could.
Q3) An employer can be liable for an employee's sexual harassment of a member of the same gender.
A)True
B)False
Q4) Title VII does not cover employees' online activities.
A)True
B)False
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Chapter 26: Sole Proprietorships and Private Franchises
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Q1) Events Promotion Corporation licenses trademarks to Fandom Souvenirs,Inc.,to use in selling caps,sweatshirts,and similar goods.This is
A) a franchise.
B) an entrepreneur.
C) a principal-agent relationship.
D) a sole proprietorship.
Q2) Leigh wants to go into the business of construction contracting.Among the reasons that would probably convince Leigh to set up his business as a sole proprietorship would be
A) its greater organizational flexibility.
B) its limited liability.
C) its perpetual existence.
D) the ease of transferring the business to other family members.
Q3) Jack buys a Kitchens,Inc.,franchise,which the franchisor later terminates.In determining whether the termination was proper,a court will generally
A) balance the rights of both parties.
B) emphasize the right of Kitchens, Inc., to its business operation.
C) focus on the right of Jack to be dealt with fairly.
D) underscore the interest of consumers in affordability.
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Page 28
Chapter 27: All Forms of Partnerships
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Q1) An association cannot be a partnership without an express agreement.
A)True
B)False
Q2) A partner may not pursue his or her own interest without violating the fiduciary duties that he or she owes to the firm.
A)True
B)False
Q3) A limited liability partnership can be formed in virtually any state.
A)True
B)False
Q4) A partner may use and possess partnership property for any purpose.
A)True
B)False
Q5) A general partner is personally liable for partnership debts if its assets are insufficient to pay its creditors.
A)True
B)False
Q6) The Uniform Commercial Code governs the operation of partnerships.
A)True
B)False
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Chapter 28: Limited Liability Companies Special Business
Forms
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Q1) Jin,Karlo,and other consumers form Metro Purchasing Cooperative.This form of business organization makes it possible for these individuals to
A) avoid personal liability for the acts of the cooperative.
B) obtain an exemption from state laws governing corporations.
C) pay no taxes on their business income.
D) pool their resources to gain an advantage in the market.
Q2) The beneficiaries of a business trust are personally liable for its obligations.
A)True
B)False
Q3) The participants in a joint venture have more implied and apparent authority than the partners in a partnership.
A)True
B)False
Q4) In some states,business trusts pay corporate taxes.
A)True
B)False
Q5) In a limited liability company,members cannot participate in its management.
A)True
B)False
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Chapter 29: Corporate Formation, merger, and Termination
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Q1) Realty Credit Company and Second Mortgage Corporation plan to consolidate.Most likely,the articles of consolidation will be filed with
A) the county recording office.
B) the Securities and Exchange Commission.
C) the state's secretary of state.
D) the U.S. Department of Justice.
Q2) Candy Corporation has a right of action against Dina.Candy merges with Eats,Inc.,with Eats absorbing Candy.After the merger,Candy's right of action against Dina can be exercised by
A) Candy.
B) Dina.
C) Eats.
D) no one.
Q3) A state constitution may resolve a conflict among documents involving a corporation.
A)True B)False
Q4) The choice of a corporate name is subject to state approval. A)True
B)False
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Chapter 30: Corporate Directors, officers, Shareholders
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Q1) A corporation cannot refuse a shareholder's request to inspect corporate records. A)True B)False
Q2) Reba is a director of Superb Performance Corporation.Reba's rights,as a director,do not include a right of A) indemnification. B) inspection of books. C) participation. D) preemption.
Q3) Clifton is a director of Dri-Cleaning Corporation.In this capacity,Clifton has a right of A) accounting. B) loyalty. C) participation. D) service.
Q4) In most states,a director cannot be removed from a corporate board without cause. A)True B)False
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Chapter 31: Investor Protection, insider Trading, Corp Gov
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Q1) Refer to Fact Pattern 31-1.If Fresh is exempt from the federal registration requirement,Fresh is
A) automatically exempt from any state registration requirement.
B) not subject to any state securities laws.
C) not necessarily exempt under a state registration requirement.
D) automatically subject to all state registration requirements.
Q2) Lexy,a salesperson for My-T-Fine Corporation,learns that My-T-Fine will increase the dividend it pays to shareholders.Lexy buys 10,000 shares of My-T-Fine stock.When the price increases,Lexy sells the shares for a profit.Lexy would not be liable for insider trading if the information about the dividend was
A) material when she sold the stock.
B) public after she bought the stock.
C) public before she bought the stock.
D) speculative when she bought the stock.
Q3) State securities laws apply only to interstate transactions.
A)True
B)False
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Chapter 32: Promoting Competition
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Q1) Master Manufacturing Corporation has exclusive control over the market for its product.Under the Sherman Act,this is
A) a per se violation.
B) a violation if it acquired this power through "business acumen."
C) a violation if it acquired this power through "anticompetitive means."
D) not a violation.
Q2) A group boycott against a supplier for political reasons can be legal.
A)True
B)False
Q3) Under an exclusive-dealing contract,a seller promises a buyer a certain territory in which the buyer will have no direct competition.
A)True
B)False
Q4) To violate antitrust law,an activity must involve two or more persons.
A)True
B)False
Q5) Only private individuals can enforce the antitrust laws.
A)True
B)False
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Chapter 33: Consumer and Environmental Law
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Q1) Under the Resource Conservation and Recovery Act,before hazardous waste generated by Xtreme Industries,Inc.,can be transported,the waste must be properly labeled and packaged by
A) the federal Environmental Protection Agency.
B) the local Resource Conservation and Recovery Committee.
C) the state Environmental Regulatory Commission.
D) Xtreme Industries, Inc.
Q2) Orange Company makes computers.The company's ad states that "if you aren't eatin' an Orange,you aren't gettin' any 'C." The Federal Trade Commission would consider this ad
A) false and misleading.
B) false only.
C) misleading only.
D) neither false nor misleading.
Q3) Metro City operates its own municipal public drinking water system.With regard to pollutants,this system is primarily subject to
A) the migratory bird rule.
B) the Oil Pollution Act.
C) the Rivers and Harbors Appropriations Act.
D) the Safe Drinking Water Act.
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Chapter 34: Liability of Accountants Other Professionals
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Q1) A professional owes a duty to his or her client to honor the terms of their contract.
A)True
B)False
Q2) Lacy is an accountant who prepares her clients' tax returns.Muff is not an accountant,but he also prepares tax returns for clients.Under the Internal Revenue Code,liability for preparing a false return may be imposed on
A) Lacy and Muff.
B) Lacy only.
C) Muff only.
D) neither Lacy nor Muff.
Q3) An accountant's liability under the Section 10(b)and Rule 10b-5 of the Securities Exchange Act of 1934 requires privity of contract.
A)True
B)False
Q4) Accountants may be subject to criminal penalties for violations of federal securities laws.
A)True
B)False
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Chapter 35: Personal Property and Bailments
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Q1) During a storm on Blue Lake,a boat sinks,but its owner Cappy survives.Cappy plans to return to the site of wreck to salvage its equipment and his possessions,but he delays.Meanwhile,Dick,an amateur diver,discovers the wreck and strips it clean of useful items.Cappy learns of the recovery and files a suit against Dick,claiming that the items are his.Dick responds that the sunken boat was abandoned and therefore he has good title to everything to which he took possession.What is the court likely to rule,and why?
Q2) Fanny buys clay to throw pottery,which is glazed and fired in a kiln.The finished products are sold to Gifte Shoppe,which sells these items and others to customers who often present them as gifts.Thus,property can be acquired in various ways.The most common way to acquire personal property,however,is to A) buy it.
B) commingle it.
C) produce it.
D) receive it as a gift.
Q3) Common carriers are held to a standard of care based on strict liability in protecting bailed property in their possession.
A)True
B)False
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Chapter 36: Real Property and Landlord-Tenant Law
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Q1) Lucky owns Mud Flats Ranch,which is situated on certain Nevada acreage.The exterior boundaries of the land extend
A) 100 feet into the earth and 100 feet into the atmosphere.
B) one mile into the earth and one mile into the atmosphere.
C) to infinity and beyond.
D) to the center of the earth and up to the farthest reaches of the atmosphere.
Q2) In most states,the seller of a new house warrants that it is fit for habitation.
A)True
B)False
Q3) The holder of a life estate has the right to use property for whatever purpose he or she sees fit without regard to the rights of a fee simple owner.
A)True
B)False
Q4) An easement can be created by implication.
A)True
B)False
Q5) A warranty deed provides the most protection against defects of title.
A)True
B)False
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Chapter 37: Insurance, wills, and Trusts
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Q1) A constructive trust is "constructed" by a property owner to fulfill certain unique functions outside the usual bounds of a trust.
A)True
B)False
Q2) Isabel obtains a fire insurance policy on her home from Justice Insurance Company.The home is lost in a fire,but the parties dispute the amount of Justice's liability under an ambiguous clause in the policy.A court would most likely
A) interpret the clause against Isabel.
B) interpret the clause against Justice.
C) rewrite the clause and apply it as rewritten.
D) strike the clause from the policy.
Q3) An express trust is created or declared in explicit terms. A)True B)False
Q4) A will is probated in part to establish its validity. A)True B)False
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