Commercial Law Practice Exam
Course Introduction
Commercial Law explores the legal principles and regulations governing business transactions and commercial entities. This course examines topics such as contracts, the sale of goods, negotiable instruments, consumer protection, agency, and the legal structures of businesses including partnerships and corporations. Through case studies and statutory analysis, students will gain an understanding of how commercial law operates in both national and international contexts, preparing them to identify legal risks, draft basic contracts, and understand commercial dispute resolution mechanisms relevant to business practice.
Recommended Textbook Law Business and Society 11th Edition by Tony McAdams
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Chapter 1: Capitalism and the Role of Government
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Q1) Which of the following statements about socialists is true?
A)Socialists feel that the economy must be directed toward the welfare of the successful capitalists.
B)Socialists reserve much of their concern for the condition of the higher class.
C)The harshness of working life is not objected by socialists.
D)Class distinctions are anathema to socialists.
Answer: D
Q2) The American financial community's near collapse in late 2008 had been most directly ignited by the subprime mortgage crisis.
A)True
B)False
Answer: True
Q3) Privatization often brings substantially reduced costs and improved expertise. A)True
B)False
Answer: True
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Chapter 2: Business Ethics
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Q1) Wright Corp.,an American firm,is establishing an office in Africa with Mary as the manager.After two months of endless efforts,Mary is informed that in order to get utilities for its African branch,she must give some money to the government-based electric company agent as an "encouragement," just as all the other businesses have done.Under the Foreign Corrupt Practices Act,which of the following statements about the payment is true?
A)The payment is illegal since it is a bribe to a foreign government official.
B)The payment is legal as long as all other businesses do the same thing.
C)The payment is legal since that is the only way she can get utilities.
D)The payment is legal since it is merely "grease" money to expedite routine action.
Answer: D
Q2) Moral identity involves the degree to which moral concerns are central to our sense of self.
A)True
B)False
Answer: True
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Chapter 3: The Corporation and Public Policy: Expanding Responsibilities
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Q1) Which of the following statements is true of shared value advocates?
A)They believe that an entrepreneurial,profit-seeking,and capitalist approach is the most beneficial way to correct social problems.
B)They expect businesses to recognize that their goal must be creating shared value rather than profit per se.
C)They believe that nonprofit organizations are the most powerful institutions for creating shared value among the members of the society.
D)They expect businesses to focus on maximization of profit and to propagate the shared values of the immediate shareholders.
Answer: B
Q2) The outsourcing of good,high-paid factory jobs from the United States to less developed nations has fundamentally challenged and changed life in the country.
A)True
B)False
Answer: True
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Chapter 4: The American Legal System
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Q1) Compare and contrast mediation with arbitration as alternative dispute resolution processes.
Q2) In the context of the civil trial process,a counterclaim is the defendant's assertion of a claim of action against a codefendant.
A)True
B)False
Q3) Identify the true statement about felonies.
A)They include crimes such as petty theft and disorderly conduct.
B)They are typically punishable by fine or by imprisonment for no more than one year.
C)They are special situations in which one levies war against the United States or gives aid and comfort to its enemies.
D)They are typically punishable by death or by imprisonment in a federal or state penitentiary for more than one year.
Q4) Generally,after a judgment is rendered,the appeals court tries a case again and hears new evidence.
A)True
B)False
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Chapter 5: Constitutional Law and the Bill of Rights
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Q1) The Supreme Court has the power to veto acts of Congress.
A)True
B)False
Q2) Which of the following statements about the Constitution is true?
A)The Constitution prohibits Congress from regulating commerce.
B)The Constitution's protections are not applicable for corporations.
C)The Constitution protects the citizens from public and private concentrations of power.
D)The Constitution was formed with an intent to protect the citizenry from the government.
Q3) Article I provides in Clause 3 for the supremacy of federal law over state law.
A)True
B)False
Q4) Congressional authority is formally limited to certain enumerated powers.
A)True
B)False
Q5) Explain the purposes of the U.S.Constitution.
Q6) Briefly explain the role of the Equal Protection Clause.
Q7) Explain in detail the three broad classes of regulatory takings.
Q8) Give a brief account of the creation of the Constitution of the United States.
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Chapter 6: Contracts
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Q1) A person offers a $100 reward to anyone who finds his lost dog.This is an example of a(n) _____ contract.
A)bilateral
B)unilateral
C)express
D)implied-in-fact
Q2) Describe the purpose of the doctrine of promissory estoppel and list the three elements required to prove it in court.Give an example to illustrate the use of a promissory estoppel.
Q3) A contract is labeled executory when all parties have completed their performances. A)True
B)False
Q4) Which of the following refers to the term blue laws?
A)They are laws forbidding the practice of certain professions without a license.
B)They are laws forbidding usury.
C)They are laws forbidding the conduct of certain kinds of business on Sundays.
D)They are laws forbidding gambling.
Q5) Describe some of the elements of a valid offer with examples.
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Chapter 7: Business Torts and Product Liability
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Q1) A description of goods which is made part of the basis of a bargain creates an express warranty that the goods shall conform to the description.
A)True
B)False
Q2) Under strict liability,coverage generally extends to only personal injuries and not property damage.
A)True
B)False
Q3) Explain the doctrine of res ipsa loquitur.What is required to invoke the doctrine and what is the result of its successful use?
Q4) Intentionally causing another to reasonably believe that he or she is about to be the victim of a battery is a(n) _____.
A)slander
B)libel
C)indictment
D)assault
Q5) Explain the Magnuson-Moss Warranty Act.
Q6) What are the four forms of invasion of privacy?
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Chapter 8: Government Regulation of Business
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Q1) Police power refers to the right of the state governments to promote the public health,safety,morals,and general welfare.
A)True
B)False
Q2) A(n) _____ is an economics argument claiming that an individual or business that is protected from risk will increase its risk-taking behavior in the future in the belief that a bailout will follow,if needed.
A)unjust enrichment
B)unconscionable contract
C)wrongful discharge
D)moral hazard
Q3) Adjudication ordinarily involves standards to be applied to the future conduct of a class of unspecified parties.
A)True
B)False
Q4) Agency commissioners are appointed typically for a life term.
A)True
B)False
Q5) Elaborate on the executive and congressional constraints on agencies.
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Chapter 9: Business Organizations and Securities Regulation
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Q1) List the potential problems with the partnership form of doing business.
Q2) Which of the following statements is true of the Securities Act of 1934?
A)It allows interstate offering of a new security until a registration statement has been filed with and approved by the Securities and Exchange Commission.
B)It ensures partial disclosure of material facts about the investment opportunity to offerees.
C)It guarantees the economic merits of any investment opportunity.
D)It gives the Securities and Exchange Commission the power to suspend trading if it suspects price manipulation.
Q3) Common stockholders share all three property rights associated with stock ownership in proportion to their holdings.
A)True
B)False
Q4) Define the term "initial public offering (IPO)."
Q5) Blue sky laws are primarily applicable to solely intrastate offerings.
A)True
B)False
Q6) Define and describe common stock,preferred stock,and debt.
Page 11
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Chapter 10: Antitrust Law-Restraints of Trade
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Q1) Define resale price maintenance.
Q2) Which of the following forbids price discrimination,tying arrangements,mergers restraining commerce or tending to create a monopoly,and interlocking directorates?
A)The Clayton Act
B)The Sherman Antitrust Act
C)The Robinson-Patman Act
D)The Sarbanes-Oxley Act
Q3) Section 2 of the Sherman Antitrust Act,1890 forbids:
A)price discrimination.
B)monopolization.
C)tying arrangements.
D)patents and copyrights.
Q4) Explain predatory pricing with examples.
Q5) Which of the following is a horizontal restraint of trade?
A)Tying arrangements
B)Resale price maintenance
C)Price fixing
D)Free riding
Q6) How is the presence of an unlawful price-fixing arrangement established?
Page 12
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Chapter 11: Antitrust Law-Monopolies and Mergers
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Q1) Which of the following is an advantage of mergers?
A)Mergers may improve credit access.
B)Mergers may lead to lower market concentration.
C)Mergers tend to reduce barriers to entry.
D)Mergers help shape political affairs.
Q2) High market concentration often promotes competition.
A)True
B)False
Q3) The failing company doctrine permits a merger to preserve the assets of a firm that would otherwise be lost to the market.
A)True
B)False
Q4) What is a monopoly? How is an unlawful monopoly determined?
Q5) Which of the following categories of mergers involves firms dealing in unrelated products?
A)Congeneric
B)Vertical
C)Horizontal
D)Conglomerate
Q6) List the potential benefits and hazards of mergers.
Page 13
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Chapter 12: Employment Law I: Employee Rights
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Q1) Independent contractors are protected by the Fair Labor Standards Act,that requires,among other things,the payment of the federal minimum wage and overtime pay.
A)True
B)False
Q2) A cash balance plan is a defined benefit plan that acts somewhat like a defined contribution plan.
A)True
B)False
Q3) Workers' compensation provides a form of no-fault protection in the workplace.
A)True
B)False
Q4) State two legal considerations that influence employer drug-testing practices in public-sector jobs.
Q5) A number of states forbid random drug testing or limit it to safety-sensitive situations.
A)True B)False
Q6) What are the legal requirements to claim workers' compensation?
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Q7) What is the difference between an employee and an independent contractor?
Chapter 13: Employment Law II: Discrimination
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Q1) Most federal courts to date have ruled that victims of sexual harassment seeking recovery under _____ cannot sue the person who actually committed the harassment.
A)a tort claim
B)a state statute
C)Title VII of the Civil Rights Act of 1964
D)Section 2-306 of the Uniform Commercial Code
Q2) Which of the following is a characteristic of the Equal Pay Act of 1963?
A)According to the act,unequal wage payments are lawful if paid pursuant to a differential based on any factor other than race.
B)It forbids discrimination on the basis of sex by paying wages to employees of one sex at a rate less than the rate paid to employees of the opposite sex for equal work.
C)An employer seeking to avoid a violation of the Equal Pay Act can adjust its wage structure by lowering the wages paid to the favored sex performing equal work.
D)Under the act,unequal wage payments based on a seniority system or a merit system are unlawful.
Q3) Define quid pro quo sexual harassment and hostile environment sexual harassment.
Q4) Briefly discuss the Civil Rights Act of 1866.
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Chapter 14: Employment Law III: Labor-Management Relations
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Q1) Which of the following statements about lockouts is true?
A)The National Labor Relations Board (NLRB) prohibits lockouts as defensive acts to protect businesses against sudden strikes.
B)Some court decisions have expanded lawful lockouts to include those of an offensive nature designed to improve management's bargaining position.
C)Lockouts are clearly lawful even if they are designed to interfere with union members' bargaining rights and other legitimate union activity.
D)The courts consider lockouts to be unfair labor practices,even if they are initiated to prevent sabotage or violence.
Q2) The _____ contains a set of provisions often referred to as the "Bill of Rights" for individual union members.
A)Norris-LaGuardia Act
B)Wagner Act
C)Sherman Antitrust Act
D)Landrum-Griffin Act
Q3) Identify the unfair labor practices by management and unions.
Q4) What are the implications of a union as an exclusive bargaining agent?
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Chapter 15: Consumer Protection
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Q1) Which of the following is true of credit reporting protections provided to consumers under the federal Fair Credit Reporting Act (FCRA)?
A)In case of inaccurate information in a credit file,the concerned credit reporting agency must make the correction,usually within 90 days.
B)If a person makes a request,the concerned credit reporting agency must give the person a list of all those who have recently sought information about him or her.
C)Credit reporting agencies do not need a written consent from a person to provide information to the person's employer or prospective employer.
D)Negative information more than two years old must not be reported in a consumer's credit file.
Q2) Under the Fair Credit Billing Act,a creditor must acknowledge receipt of a consumer complaint regarding an erroneous bill within 90 days.
A)True
B)False
Q3) Describe the requirements to prove that a vehicle is a "lemon" and the remedies generally provided under lemon laws.
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Chapter 16: International Ethics and Law
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Q1) Which of the following countries is one of the major emerging economies?
A)Zimbabwe
B)Ukraine
C)Brazil
D)Argentina
Q2) The doctrine of sovereign immunity is based on the concept that "the king can do no wrong."
A)True
B)False
Q3) The North American Free Trade Agreement exists among the United States,Canada and _____.
A)Mexico
B)Brazil
C)Cuba
D)Guatemala
Q4) Describe licensing and franchising.
Q5) Arbitration is never used in international trade disputes.
A)True
B)False
Q6) Describe in brief some of the challenges faced in enforcing foreign judgments.
Page 18
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Chapter 17: Environmental Protection
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Q1) What are the two national goals established by the Clean Water Act?
Q2) Which of the following countries is currently the largest emitter of greenhouse gases in the world?
A)China
B)India
C)The United Kingdom
D)The United States
Q3) Give some examples of environmental degradation in the United States and in the world.
Q4) Briefly explain nuisance,trespass,and strict liability.
Q5) A chemical plant has expanded with all the appropriate permits from related agencies.Since the expansion,people living within a few miles of the plant are awakened at night by the bright light and loud noise associated with flaring unused gas and chemicals from smokestacks.Assuming the flaring does not threaten the residents' safety,what common law claim would best address the citizens' complaints in this scenario?
A)A trespass claim
B)A negligence tort claim
C)A strict liability tort claim
D)A nuisance claim
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Chapter 18: Internet Law and Ethics
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Q1) Commercial speech has not been accorded any protection under the First Amendment of the U.S.Constitution.
A)True
B)False
Q2) In the context of the Internet,what is the reason for the access imbalance that exists in the United States?
A)Availability of service is a problem in the United States.
B)Digital literacy is an issue in the United States.
C)Security concern in the United States is high.
D)About 98 percent of American households are located where broadband is absent.
Q3) Which of the following statements is true of the Uniform Computer Information Transactions Act?
A)It has not been widely approved in the U.S.
B)It focuses on procedural aspects such as electronic signatures.
C)It has been amended once.
D)It has been adopted in 20 of the 50 states.
Q4) The United States has a comprehensive privacy law addressing the Internet environment.
A)True
B)False
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