Business Organization and Regulation
Exam Answer Key
Course Introduction
This course examines the foundational structures and legal principles governing modern business organizations, including sole proprietorships, partnerships, corporations, and limited liability entities. Students will explore how laws and regulations influence business formation, management, and operations, with emphasis on the roles and responsibilities of owners, directors, and officers. Topics include corporate governance, fiduciary duties, liability issues, compliance with federal and state regulations, and the impact of regulatory bodies on business practices. Through case studies and real-world examples, the course provides practical knowledge of how businesses are organized and regulated in today's economy.
Recommended Textbook
Business Law Today Comprehensive 9th Edition by Roger LeRoy
Miller
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45 Chapters
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Chapter 1: The Legal Environment
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Q1) As a judge,Potter applies common law rules.These rules develop from A)administrative regulations.
B)court decisions.
C)federal and state statutes.
D)proposed uniform laws.
Answer: B
Q2) Beth is a victim of Carl's violation of a criminal law.Criminal law is concerned with
A)the prosecution of private individuals by other private individuals.
B)the prosecution of public officials by private individuals.
C)the relief available when a person's rights are violated.
D)wrongs committed against the public as a whole.
Answer: D
Q3) In an action against Elin,Frank obtains a remedy.This is
A)an administrative agency's enforcement of its rule.
B)a principle of the law derived from earlier court cases.
C)a statute enacted by a state legislature or Congress.
D)the legal means to recover a right or to redress a wrong.
Answer: D
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3
Chapter 2: Constitutional Law
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Q1) Beachside City enacts an ordinance that bans the distribution of all printed materials on city streets.Carl opposes the city's latest "revenue-enhancing" measure and wants to protest by distributing handbills.In his suit against the city,a court would likely hold the printed-materials ban 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: A
Q2) The First Amendment requires a complete separation of church and state.
A)True
B)False
Answer: False
Q3) The terms "procedural due process" and "equal protection" mean the same thing.
A)True
B)False
Answer: False
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Page 4
Chapter 3: Courts and Alternative Dispute Resolution
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Q1) National Consumer Goods Corporation and Paula Purchaser agree to resolve their dispute in arbitration.The arbitrator's decision is called
A)a conclusion of law.
B)a finding of fact.
C)an award.
D)a verdict.
Answer: C
Q2) Kit loses her suit against Lou in a Minnesota state trial court.Kit appeals to the state court of appeals and loses again.Kit would appeal next to
A)a U.S.district court.
B)the Minnesota Supreme Court.
C)the United States Supreme Court.
D)the U.S.Court of Appeals for the Eighth Circuit.
Answer: B
Q3) A federal case typically originates in a federal district court.
A)True
B)False
Answer: True
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Chapter 4: Torts and Cyber Torts
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Q1) If it can be shown that a trespass to personal property was warranted,a complete defense exists.
A)True
B)False
Q2) A state statute requires machinery in industrial plants to include automatic shut-off switches accessible to each employee working on the machine.Steel Company's (SC's)equipment does not have the switches.Trudy,an SC employee,suffers an injury that an accessible shut-off switch would have prevented.Trudy's best theory for recovery against SC is
A)assumption of risk.
B)negligence per se.
C)res ipsa loquitur.
D)strict liability.
Q3) For purposes of establishing negligence,causation in fact exists if an injury would have occurred even without the defendant's act.
A)True
B)False
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6
Chapter 5: Intellectual Property and Internet Law
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Q1) Ellen publishes a book titled First Place,which includes a chapter from Frank's copyrighted book Great Racecar Drivers.Ellen's use of the chapter is actionable provided A)consumers are confused.
B)Ellen's use is intentional.
C)Ellen's use reproduces Frank's chapter exactly.
D)Ellen does not have Frank's permission.
Q2) Mace copies Nick's book,Off the Beaten Path,in its entirety and sells it to Parkland Books,Inc.,without Nick's permission.Parkland publishes it under Mace's name.This is A)copyright infringement.
B)fair use.
C)licensing.
D)protected expression.
Q3) Ernie's Good Eatin' Cafe uses a distinctive decor,layout,menu,and style of service.This restaurant's image and overall appearance is
A)a certification mark.
B)a collective mark.
C)a service mark.
D)trade dress.
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Chapter 6: Criminal Law
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Q1) Under the Fourth Amendment,a general search warrant and a general search through a person's belongings are permitted.
A)True
B)False
Q2) A criminal case must be proved beyond a reasonable doubt.
A)True
B)False
Q3) Herb,a computer programmer for Inventory Control Corporation,is arrested in his employer's parking lot on suspicion of larceny.Herb must be informed of his right to A)a trial by jury.
B)punishment.
C)question witnesses.
D)remain silent.
Q4) Ludwig receives from Milo a marimba stolen from Nadine.To be criminally liable,Ludwig must know A)Milo.
B)Nadine.
C)that the marimba is stolen.
D)what a marimba is.
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Chapter 7: Cyber Crime
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Q1) Rossi uses cyber tools to steal the personal information of unsuspecting consumers online.Like other cyber thieves,Rossi is most likely to
A)sell the data to other thieves online.
B)use the data to make purchases online.
C)use the data in retail outlets in the "real" world.
D)sell the data on a street corner in the "real" world.
Q2) Nestor establishes a phony account in Meet+Greet,a social network,and creates a fictitious persona to cyberbully Leona.This is A)cyber stalking.
B)employment fraud.
C)phishing.
D)vishing.
Q3) A cyberstalker must act from a location near the victim.
A)True
B)False
Q4) Federal law encourages the use of electronic payments at Internet gambling sites.
A)True
B)False
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9
Chapter 8: Ethics and Business Decision Making
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Q1) According to utilitarianism,it does not matter how many people suffer a negative effect from an act.
A)True
B)False
Q2) Business ethics focuses on ethical behavior in the business world.
A)True
B)False
Q3) According to utilitarianism,an action that affects the majority adversely is morally wrong.
A)True
B)False
Q4) Dion,an accountant for Entertainment Sports,Inc.,attempts to apply a duty-based approach to ethical reasoning in conflicts that occur on the job.This approach is based on the idea that a person must
A)achieve the greatest good for the most people.
B)avoid unethical behavior regardless of the consequences.
C)conform to society's ethical standards.
D)place his or her employer's interest first.
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Page 10
Chapter 9: Nature and Classification
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Q1) Holiday Sales Company and Global Distributors,Inc.,enter into an express contract for the delivery of imported specialty goods.Express contract terms are given
A)less priority than the parties' prior dealing.
B)less priority than the trade usage in the parties' industry.
C)less priority than the parties' course of performance.
D)more priority than the prior dealing,course of performance,and trade usage.
Q2) An offer to form a bilateral contract is accepted only by completing the contract performance.
A)True
B)False
Q3) Tania promises to buy Saki's handheld game-player for $75.Saki is A)an executee.
B)an offeror.
C)a promisee.
D)a promisor.
Q4) The doctrine of quasi contract applies only if there is an actual contract.
A)True
B)False
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11
Chapter 10: Agreement in Traditional and E-Contracts
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Q1) An offer may invite an acceptance to be worded in such specific terms that the contract is made definite.
A)True
B)False
Q2) Kim sends an offer to Leo to cut down and remove a tree for $200.Kim says,"If you say nothing,I will consider you to have accepted my offer." If Leo does not respond,he will be deemed to
A)accept the offer.
B)make a counteroffer.
C)reject the offer.
D)none of the choices.
Q3) Elmore offers to sell a Ford F-150 for $7,500 to Grace.Before Grace can respond,Elmore refers to the prices for similar Fords and says,"Forget it.I changed my mind." Elmore's offer was terminated by A)Elmore.
B)Ford.
C)Grace.
D)no one-Elmore's offer is still open.
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12
Chapter 11: Consideration
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Q1) In contract law,"consideration" refers to the courtesy that one party shows another in negotiating a deal.
A)True
B)False
Q2) Refer to Fact Pattern 11-2.A court is most likely to evaluate the adequacy of consideration if
A)a thing exchanged has no intangible value to one of the parties.
B)something exchanged is not of direct economic or financial value.
C)the items exchanged were of unequal value.
D)there is a gross disparity in the value of the consideration exchanged.
Q3) Risks ordinarily assumed in business do not constitute consideration for the modification of a contract.
A)True B)False
Q4) A promise to do something that one has a prior legal duty to do is not consideration. A)True B)False
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Page 13
Chapter 12: Capacity and Legality
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Q1) A minor may accept and validate a contract with an adult.
A)True
B)False
Q2) Contractual capacity refers to the size or volume of a contract.
A)True
B)False
Q3) A minor's failure to perform an executory contract within a reasonable time after reaching the age of majority implies disaffirmance.
A)True
B)False
Q4) Bree is a real estate broker licensed only in Minnesota.She concludes a sale in North Dakota on O'Reilly's behalf.Bree's contract with O'Reilly to be paid a certain commission for the sale is
A)enforceable if O'Reilly comprehended the consequences.
B)enforceable if O'Reilly knew Bree was not licensed in North Dakota.
C)enforceable if the amount of her commission is reasonable.
D)unenforceable.
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14
Chapter 13: Voluntary Consent
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Q1) An expert's false statement to a naive buyer about a technical detail may entitle the buyer to rescind a contract.
A)True
B)False
Q2) All mistakes of fact are material.
A)True
B)False
Q3) A contract entered into under duress is voidable.
A)True
B)False
Q4) Forcing someone to enter into a contract through fear created by threats is duress.
A)True
B)False
Q5) Misrepresentation of a material fact can occur through silence.
A)True
B)False
Q6) Only a mistake in value will make a contract voidable. A)True
B)False
Page 15
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Chapter 14: The Statute of Fraudswriting Requirement
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Q1) Glen and Haj sign a written contract.Glen claims that the parties later orally agreed to modify the contract.Any oral modification is likely not enforceable if it falls under A)the doctrine of promissory estoppel.
B)the "main purpose" exception.
C)the "partial performance" exception.
D)the Statute of Frauds.
Q2) Delta,Inc.,agrees to assume a debt of Evenflo Company to First State Bank.The agreement is not in writing.To be enforceable,the promise must be for the benefit of A)any party.
B)Delta.
C)Evenflo.
D)First State.
Q3) A contract that by its own terms cannot be performed within a year must be in writing to be enforceable.
A)True
B)False
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16
Chapter 15: Performance and Discharge
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Q1) Refer to Fact Pattern 15-2.With respect to Mutual's duties,Neil's performance most likely
A)discharges Mutual from the contract.
B)has no effect on Mutual's performance.
C)increases Mutual's duties under the contract.
D)suspends Mutual's duty to perform.
Q2) A contract that involves mechanical fitness is a contract in which performance must personally satisfy the party to whom performance is owed.
A)True
B)False
Q3) Any breach of contract discharges the breaching party.
A)True
B)False
Q4) A condition precedent must be met before a party's performance can be required. A)True
B)False
Q5) Anticipatory repudiation discharges a contract.
A)True
B)False
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Chapter 16: Breach and Remedies
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Q1) To rescind a contract,each party essentially advances to the position he or she would have been in if the contract had been fully executed.
A)True
B)False
Q2) Expenses that are caused directly by a breach of contract-such as those incurred to obtain performance from another source-are incidental damages.
A)True
B)False
Q3) The measure of damages for breach of a construction contract depends on which party breaches and when.
A)True
B)False
Q4) Reformation allows a court to rewrite a contract to reflect the parties' true intentions. A)True
B)False
Q5) A breach of contract may entitle the innocent party to rescind the contract.
A)True B)False
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Chapter 17: Third Party Rights
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Q1) All rights can be assigned.
A)True
B)False
Q2) An "assignment of all rights" absolves the assignor of all liability under the contract that created the rights.
A)True
B)False
Q3) Phaedra and Raul contract with Sheldon to transfer the ownership of their lake cottage to him.This is
A)a delegation.
B)an assignment.
C)a third party beneficiary contract.
D)an alienation.
Q4) The rights of a third party beneficiary under a contract with two other parties vest when the conditions for vesting are satisfied.
A)True
B)False
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Chapter 18: The Formation of Sales and Lease Contracts
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Q1) Over the course of a year,Real Deal Corporation sells appliances to customers to whom it extends credit.Real Deal orders the appliances from Superior Appliance Company's warehouse,from which the items are shipped via common carrier to Real Deal's customers.Article 2 of the UCC governs
A)all of the parties' sales of the goods.
B)Real Deal's extension of credit.
C)Superior's storage of the goods.
D)the common carrier's delivery of the goods.
Q2) Clean Machines Company makes washing machines.Over the phone,Clean offers to sell Dealers Appliance Outlet one hundred model EZ2000 washers at a price of $150 per unit.Clean says that it will keep the offer open for ninety days.Dealers responds that within two or three weeks it will decide whether to accept.One week later,Clean faxes,and Dealer receives,notice that the offer is withdrawn.Dealer immediately phones Clean to accept the $150-per-unit offer.When Clean refuses to deliver at that price,Dealer files a suit.Clean asserts,first,that there is no contract and,second,that if there is a contract,it is unenforceable.Discuss Clean's assertions.
Q3) The rules governing firm offers apply to all merchants.
A)True
B)False
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Page 20
Chapter 19: Title and Risk of Loss
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Q1) Alaskan salmon that fill the hold of Bill and Carla's fishing boat are fungible if the salmon are
A)alike naturally or by agreement or trade usage.
B)fundamentally different.
C)fun,good,and edible.
D)liable to deteriorate over time.
Q2) Tone Style Stores orders leather jackets from Universa Clothing Company.Universa mistakenly ships denim jackets,which Tone rejects and returns via Valu Transport,Inc.During the return,the jackets are lost.The loss is suffered by
A)Tone only.
B)Tone and Universa,but not Valu.
C)Tone,Universa,and Valu.
D)Universa only.
Q3) "Unless otherwise explicitly agreed," title passes to the buyer at the time and place at which the seller physically delivers the goods.
A)True
B)False
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Chapter 20: Performance Breach of Sales Lease Contracts
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Q1) If a buyer wrongfully refuses to accept goods that conform to a contract,the seller can maintain an action to recover the damages sustained.
A)True
B)False
Q2) 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
Q3) Business Rental Corporation (BRC)and Cartage Trucking Company enter into a contract for a lease of ten hydraulic lifts.Under the perfect tender rule,BRC must ship or tender goods to the lessee that
A)approximately conform to all of the details of the contract.
B)entirely conform to the contract except in one or two details.
C)exactly conform to the contract in every detail.
D)substantially conform to the contract in most details.
Q4) An installment contract is breached if a seller tenders any nonconforming goods.
A)True
B)False
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Page 22
Chapter 21: Warranties and Product Liability
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Q1) To succeed in a strict product liability suit,an injured plaintiff must show that a product's defect was the proximate cause of the injury.
A)True
B)False
Q2) To support the imposition of strict product liability,a product must be substantially changed from the time it is sold to the time an injury occurs.
A)True
B)False
Q3) Oven Products Company makes microwave ovens.Pico discovers that his Oven Products oven is defective and sues the maker for product liability based on strict liability.To win,Pico must show that
A)Oven Products sold the oven to Pico.
B)Pico knew and appreciated the risk caused by the defect.
C)Pico suffered an injury caused by the defect.
D)the "defect" was a commonly known danger.
Q4) A seller must provide a written warranty for consumer goods.
A)True
B)False
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Chapter 22: Negotiable Instruments: Transferability Liability
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Q1) A certificate of deposit is a type of draft.
A)True
B)False
Q2) A signature can consist of initials signed by a party.
A)True
B)False
Q3) Commercial Credit Company has in its possession an instrument dated May 1,2009.The instrument is payable to the order of Alpha Company "on June 1,2009," for $5,000.In the upper left corner is an address for Beta Corporation-10 Corporate Park Avenue,Chicago,Illinois-and in the lower right corner is the signature of "Delta,Inc.,By Eve,President." In the lower left corner is stamped "ACCEPTED: Beta Corporation by Frank,President,May 5,2009." On the back is the signature of "Alpha Company by Gail,President." What type of instrument is this Is it negotiable Who,if anyone,is primarily liable on this instrument on May 1 On May 5 Who,if anyone,is secondarily liable on this instrument
Q4) An instrument is not defective simply because it is overdue.
A)True
B)False
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Page 24
Chapter 23: Checks and Banking in the Digital Age
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Q1) Dru signs a check "pay to the order of Eppie" drawn on Dru's account in First Federal Bank.Greta forges Eppie's indorsement.First Federal pays the check.Most likely
A)Dru will be liable for the amount.
B)Eppie will have to pay Dru for the amount.
C)First Federal will have to recredit Dru's account.
D)the Federal Reserve will reimburse all parties for their costs.
Q2) Guaranty Bank receives a check drawn on the account of Get-Rich Industries,Inc.,one of the bank's customers,at 3 p.m.Friday.Garry,the presenter of the check,is not one of the bank's customers.The bank uses deferred posting with a 2 p.m.cutoff hour.If it decides to dishonor the check,it must do so by midnight
A)Saturday.
B)Sunday.
C)Monday.
D)Tuesday.
Q3) Currently,it is not clear which,if any,laws apply to the security of e-money payment information.
A)True
B)False
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Chapter 24: Security Interests in Personal Property
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Q1) Intermittent advances against a line of credit can be subject to the same collateral.
A)True
B)False
Q2) A security interest may attach to intangible collateral but cannot be perfected.
A)True
B)False
Q3) The payment of Eden's debt to Flem is guaranteed by Eden's personal property.This property is
A)a secured party.
B)a secured transaction.
C)a security interest.
D)collateral.
Q4) The payment of Mo's debt to Neil is guaranteed by Mo's personal property.This is
A)governed by Article 2 of the UCC.
B)governed by Article 3 of the UCC.
C)governed by Article 9 of the UCC.
D)not governed by the UCC.
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Chapter 25: Other Creditors Remedies and Suretyship
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Q1) If a debtor offers to pay a debt owed to a creditor but the creditor refuses the tender,the surety remains obligated on the debt.
A)True
B)False
Q2) A surety is released from his or her obligation if a debtor cannot pay a debt.
A)True
B)False
Q3) Refer to Fact Pattern 25-3.If Evermore insists that Dayna sign the loan application,making her personally liable for payment only if Chocolate! Chocolate! defaults,Dayna will be
A)a surety.
B)a lienor.
C)a garnishee.
D)a guarantor.
Q4) A debtor's car may be exempt from satisfaction of a judgment debt. A)True B)False
Q5) All of a debtor's pay can be garnished. A)True
B)False
27
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Chapter 26: Bankruptcy
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Q1) Bankruptcy law has one goal-to provide relief and protection for creditors who have "given too much credit."
A)True
B)False
Q2) Kipper files a petition in bankruptcy.Kipper's dischargeable debts include
A)domestic-support obligations.
B)student loans unless the lender would suffer undue hardship.
C)unpaid state and federal taxes.
D)unsecured credit-card debt.
Q3) Elise goes through an involuntary bankruptcy proceeding.An involuntary bankruptcy occurs when
A)creditors are forced to accept a discharge of a debtor's debts.
B)a debtor is unable to pay his or her debts as they come due.
C)a debtor's creditors force the debtor into bankruptcy proceedings.
D)a debtor's debts exceed the fair market value of his or her assets.
Q4) All student loans are dischargeable in bankruptcy.
A)True
B)False
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Chapter 27: International Law in a Global Economy
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Q1) Diners Corporation,a U.S.firm,signs a contract with Essen,A,G.,a German firm,to give Essen the right to use Diners' trademark in restaurants in Germany.This is
A)a distribution agreement.
B)a joint venture.
C)direct exporting.
D)licensing.
Q2) Confiscation occurs when a government seizes a private property for a proper public purpose and awards just compensation.
A)True
B)False
Q3) Force majeure clauses in international business contracts commonly set forth the major clauses of the contracts.
A)True
B)False
Q4) The United States taxes each barrel of imported oil at a flat rate.This is
A)an antidumping duty.
B)a dumping duty.
C)a quota.
D)a tariff.
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Chapter 28: Agency Relationships in Business
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Q1) In considering the scope of an agent's implied authority,the test is whether the agent reasonably believed that he or she had the authority.
A)True
B)False
Q2) Tire Manufacturing Company employs Uri as an agent.To terminate Uri's authority,Tire Manufacturing must notify A)only third parties who are aware of the agency relationship. B)the public generally.
C)Uri and any third parties who are aware of the agency relationship. D)Uri only.
Q3) An agency relationship may not occur by operation of law in a family. A)True
B)False
Q4) Clu serves in a representative capacity for Digger.Elmo is injured through Clu's negligence.Digger may be liable to Elmo if Clu's conduct occurred
A)due to a propensity Digger was not and could not have been aware of. B)during normal working hours.
C)in the course and scope of Clu's employment. D)outside the parties' employment relationship.
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Chapter 29: Employment, immigration, and Labor Law
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Q1) Fruits & Vegetables,Inc.,employs hundreds of seasonal and permanent workers,both skilled and unskilled,in seven states.Under the Immigration Act of 1990,Fruits & Vegetables can hire illegal immigrants
A)if either the employer or the immigrants file special forms.
B)only if the employer files a special form.
C)only if the immigrants file special forms.
D)under no circumstances.
Q2) Thalia is an employee of Universal Insurance Company.Universal's employee manual states that workers will be dismissed only for good cause.With respect to the employment-at-will doctrine,this is
A)an example of the doctrine.
B)an exception based on contract theory.
C)an exception based on public policy.
D)an exception based on tort theory.
Q3) No employee has a reasonable expectation of privacy in the workplace.
A)True
B)False
Q4) Federal labor law protects employees' right to join labor unions.
A)True
B)False
Page 31
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Chapter 30: Employment Discrimination
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Q1) Greta is the only female employee in the maintenance department of Hydraulics Inc.Greta's supervisor and co-workers tease and play tricks on her so relentlessly that she feels compelled to quit.This is
A)a constructive discharge on the basis of gender discrimination.
B)a harassing discharge on the basis of treatment discrimination.
C)a voluntary discharge on the basis of impact discrimination.
D)not a discharge or discrimination.
Q2) Gail is an employee of Home Appliances,Inc.,but is unable to perform her job because of her pregnancy.Gail is
A)entitled to disability leave only if Home treats other temporarily dis?abled employees similarly.
B)entitled to disability leave under any circumstances.
C)not entitled to disability leave because she cannot perform her job.
D)not entitled to disability leave under any circumstances.
Q3) Lack of discriminatory intent is a complete defense to a charge of unlawful employment discrimination.
A)True
B)False
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Chapter 31: Sole Proprietorships and Private Franchises
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Q1) The parties to a franchise agreement may determine what constitutes the grounds for the termination of their relationship.
A)True
B)False
Q2) A franchise exists when the owner of a copyright licenses its use to another party to sell goods or services.
A)True
B)False
Q3) Carl sells Direct Marketing Enterprises,a sole proprietorship,to Erv.This is a transfer of
A)a license.
B)a trade name.
C)the formula to make a product.
D)the ownership of the business.
Q4) Much franchise litigation involves claims of wrongful termination.
A)True
B)False
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Page 33
Chapter 32: All Forms of Partnerships
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Q1) Dave and Eiger are partners in First-Place Athletic Supplies,which sells sports equipment.Dave manages the business.Unless the partnership agreement states otherwise,Dave is
A)entitled to compensation in proportion to its effect on the business.
B)entitled to compensation in proportion to the effort expended.
C)entitled to compensation in proportion to the effort required.
D)not entitled to compensation for his effort.
Q2) A partnership dissolves if any partner ceases to "carry on" partnership business.
A)True
B)False
Q3) Connie,Drew,and Ellen are the general partners of Foreign Auto Repair,a limited partnership.Connie dies.The partnership can
A)continue only after a distribution of its assets.
B)continue only as a general partnership.
C)continue only if Drew and Ellen consent.
D)not continue because Connie's death dissolves the firm.
Q4) A limited liability partnership must be formed in compliance with state law.
A)True
B)False
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Chapter 33: Limited Liability Companies Special Business
Forms
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Q1) QuizBooks LLC is a limited liability company.Like any other LLC,unless QuizBooks chooses otherwise,the firm will be taxed as
A)a corporation.
B)a joint venture.
C)a partnership.
D)a sole proprietorship.
Q2) Most limited liability company statutes have strict provisions regulating members' meetings.
A)True
B)False
Q3) Drew is a beneficiary of a business trust.As a beneficiary,Drew is required to A)distribute the profits and manage the property.
B)distribute the profits only.
C)manage the property only.
D)neither distribute the profits nor manage the property.
Q4) The dissociation of a member of a limited liability company in violation of the operating agreement is legally wrongful.
A)True
B)False
35
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Chapter 34: Corporate Formation and Financing
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Q1) Eager Beaver Corporation fails to adopt bylaws.Under this circumstance,Eager Beaver is most likely
A)a corporation by estoppel.
B)a de facto corporation.
C)a de jure corporation.
D)ultra vires.
Q2) To qualify as a professional corporation,Medical Clinic,P.C.,
A)must be a corporation formed by professionals.
B)must grant all shareholders voting rights.
C)must have at least thirty-five shareholders.
D)all of the choices.
Q3) A state constitution may resolve a conflict among documents involving a corporation.
A)True
B)False
Q4) "Piercing the corporate veil" means revealing to shareholders the internal rules of corporate management.
A)True
B)False
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Chapter 35: Corporate Directors,officers, Shareholders
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Q1) A director usually serves on a corporation's board for a life term.
A)True
B)False
Q2) Shareholders have a right to inspect corporate books and records.
A)True
B)False
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) Shareholders own a corporation.
A)True
B)False
Q5) Incorporators appoint a corporation's first board of directors. A)True
B)False
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Page 37
Chapter 36: Corporate Acquisitions, takeovers, Termination
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Q1) A merger between Grain Mills Corporation and Farm2Fork Distribution Inc.can be expressed as Grain Mills + Farm2Fork = A)Farm2Fork.
B)Harvest Dining Corporation.
C)Harvest Dining Corporation + EZ Brewing Company.
D)EZ Brewing Company.
Q2) In a consolidation,the consolidating corporations become subsidiaries of the new corporation.
A)True
B)False
Q3) Firelite Corporation wants to purchase all of the assets of Glo Power Products,Inc.Hadji is an Firelite shareholder.The approval of Hadji and other Firelite shareholders is necessary
A)in all circumstances.
B)in no circumstances.
C)only if Firelite plans to pay with unauthorized,unissued stock.
D)only if the purchase extends Firelite's control over more assets.
Q4) Shareholder appraisal rights do not usually extend to short-form mergers.
A)True
B)False
Page 38
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Chapter 37: Investor Protection,insider Trading, Corp Gov
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Q1) Refer to Fact Pattern 37-1.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) Buying or selling securities on the basis of nonpublic information is illegal only if the profit from the transaction is unreasonable.
A)True
B)False
Q3) North American Properties,Inc.,and its officers,directors,and shareholders,buy and sell securities.Section 16(b)of the Securities Exchange Act of 1934 covers A)all purchases and sales of securities.
B)only purchases and sales of securities involving misappropriation.
C)only purchases and sales of securities involving short-swing profits.
D)only purchases and sales of securities involving tippers and tippees.
Q4) Private parties cannot sue violators of Section 10(b)and Rule 10b-5.
A)True
B)False
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Chapter 38: Administrative Law
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Q1) Labor Recruiters,Inc.,has been ordered to appear at a hearing before an administrative law judge of the National Labor Relations Board.A significant difference between a trial and an administrative hearing is that
A)attorneys are not allowed to attend administrative hearings.
B)clients are not allowed to communicate with their attorneys dur?ing adminis?trative hearings.
C)hearsay can be introduced as evidence in an administrative hearing.
D)the burden of proof is on the charged party to prove innocence.
Q2) Plastix Produx Company is subject to a decision by the Consumer Product Safety Commission.Opposed to the decision,Plastix Produx wants a court to review it.First,however,the firm must use all of the potential administrative remedies.This is A)an actual controversy at issue.
B)standing to sue.
C)the exhaustion doctrine.
D)the ripeness doctrine.
Q3) Like statutory law,administrative law is created by legislatures.
A)True
B)False
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Chapter 39: Promoting Competition
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Q1) Mango Corporation believes that Melon Corporation engages in anticompetitive behavior in an attempt to drive Mango and its other competitors out of the market.Antitrust laws can be enforced against Melon by
A)Mango and its competitors only.
B)Mango,its competitors,and the Federal Trade Commission only.
C)Mango,its competitors,the Federal Trade Commission,and the U.S.Department of Justice.
D)the Federal Trade Commission and U.S.Department of Justice only.
Q2) 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
Q3) Precision Press Corporation,a disk manufacturer,sells its DVDs in certain quantities to Quik Shows,a retailer,for $275 but charges Rite Views,a competitive retailer,$350.This is most likely a violation of
A)the Clayton Act.
B)the Federal Trade Commission Act.
C)the Sherman Act.
D)no antitrust law.
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Page 41
Chapter 40: Consumer Law
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Questions
Q1) Buyers of goods sold door to door can cancel their contracts within three business days.
A)True
B)False
Q2) Corner Market sells groceries.Delite Food & Drug Store sells groceries and fills prescriptions.The chief responsibility to prevent unsafe food and drugs from being sold rests with
A)Corner Market and Delite Food & Drug Store.
B)those who consume the products.
C)the Federal Trade Commission.
D)the Food and Drug Administration.
Q3) Bait-and-switch advertising occurs when an ad appears to be based on factual evidence but in fact is not reasonably supported by evidence.
A)True
B)False
Q4) Counteradvertising requires a company to advertise the products of its competitor to counter its own false claims.
A)True
B)False
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Chapter 41: Environmental Law
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Q1) Refer to Fact Pattern 41-1.The court is most likely to award Sid an injunction
A)if letting the pollution continue is equally as harmful as stopping it.
B)if letting the pollution continue is less harmful than stopping it.
C)if letting the pollution continue is more harmful than stopping it.
D)under no circumstances.
Q2) A barge owned by Oceanic Shipping Company accidentally runs aground,spilling the oil contained in its hold into the sea and onto the shore.Under the Clean Water Act,this is most likely A)a violation.
B)not a violation because an oil spill is an accident.
C)not a violation because a floating barge is not a stationary source.
D)not a violation because a ship's hold is not a point source.
Q3) Injured individuals can rely on the common law to obtain damages and injunctions against business polluters.
A)True
B)False
Q4) Cities and counties may not restrict emissions from motor vehicles.
A)True
B)False
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Chapter 42: Liability of Accountants Other Professionals
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Q1) Bowie,a certified public accountant,prepares and certifies Candy Products Corporation's financial statements.These statements are included in Candy's registration statement filed with the Securities and Exchange Commission before Candy's offering of securities.Dona buys a security covered by the registration statement.Based on this transaction,Dona files a suit against Bowie under Section 11 of the Securities Act of 1933 and Section 10(b)of the Securities Exchange Act of 1934.To succeed in the suit,what must Dona prove Bowie responds that Dona was not in privity with him and that even if she had been in privity,she cannot prove his lack of due diligence.Can Bowie prevail on these grounds Why or why not
Q2) Lebron,an attorney,allows a statute of limitations to lapse on a claim by Midwest Metal Fabrication Company,a client.Lebron
A)can be held liable for malpractice.
B)has violated an ethical standard but cannot be held liable.
C)is subject to criminal penalties under the statute of limitations.
D)will be automatically disbarred.
Q3) A professional cannot be liable for fraud in the absence of fraudulent intent.
A)True
B)False
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44
Chapter 43: Personal Property and Bailments
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Q1) A gift is effective whether or not it is accepted.
A)True
B)False
Q2) A person who holds all rights in property owns the property in fee simple.
A)True
B)False
Q3) Constructive delivery does not satisfy the delivery requirement for an effective bailment.
A)True
B)False
Q4) If property is owned as community property,each spouse owns an undivided one-half interest in it.
A)True
B)False
Q5) Property voluntarily placed by its owner and inadvertently forgotten is mislaid property.
A)True B)False
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Chapter 44: Real Property and Landlord-Tenant Law
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Q1) Adverse possession is a means of obtaining title to property without the delivery of a deed.
A)True
B)False
Q2) Oak Grove Residences,Inc.,owns apartment buildings.Pedro leases one of Oak Grove's apartments.Pedro's transfer of his interest in the lease to Quito for a period shorter than the lease term is
A)an assignment.
B)an eviction.
C)a right of entry.
D)a sublease.
Q3) A landlord is usually required to give some period of notice to terminate a periodic tenancy.
A)True
B)False
Q4) A tenant has a duty to maintain in a reasonably safe condition those areas under his or her control.
A)True
B)False
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Chapter 45: Insurance,wills,and Trusts
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Q1) Grace applies for a homeowners' insurance policy on her house with Heroic Insurance Company through Ian,a broker.In this transaction,Ian is
A)an agent for both parties.
B)Grace's agent,and not Heroic's agent.
C)Heroic's agent,and not Grace's agent.
D)not an agent.
Q2) A divorce occurring after the execution of a will revokes dispositions of property to the former spouse.
A)True
B)False
Q3) Gigi,a twenty-year-old,wants to execute a will before she undertakes a mountain-climbing trip on a peak in the Himalaya Mountains.In most states,the legal age for executing a will is
A)sixteen years of age.
B)eighteen years of age.
C)twenty-one years of age.
D)twenty-five years of age.
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